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Financial Highlights The investment history of the PUF originated in 1923 with the discovery of oil and gas from the legendary Santa Rita No. 1 well. In 1926, the Texas Supreme Court ruled that the proceeds from the sale of mineral production from PUF Lands should be invested as endowment corpus. The investments of the PUF grew to $7.2 billion over the ensuing 80 years, as depicted in Figure A. Since 1923, a cumulative $6,371.8 million, or approximately 63.5% of cumulative investment return generated on PUF Investments, has been distributed to the AUF in support of the UT System and TAMU System. The mineral income contributed to the PUF investment portfolio 1923 has totaled $3,581.4 million. In more recent times, the PUF has continued to grow as depicted in Figure B. The PUF's net assets have grown from $6,517.1 million to $7,244.8 million, an increase of 11.2% after distributions over the past five years. After two years of negative investment returns, fiscal year 2003 generated positive results as more favorable financial markets prevailed. PUF Lands mineral income increased by 26.8% in fiscal year 2003, from $80.5 million to $102.1 million. The increase in mineral income is mainly due to overall increases in oil and gas prices. Oil and gas production remained relatively flat, with oil production increasing approxmately 1%. Despite production remaining relatively flat last year, we expect that the depletion of mineral resources on PUF Lands over time will result in declining contributions to the PUF. Therefore, growth of the PUF through PUF Lands' contributions alone will not be able to sustain the distributions needed to fund the many important programs earmarked by the institutions and agencies of UT System and TAMU System, and the balance of necessary funds must be provided by investment returns. The 2003 distribution of $363.0 million to the AUF was over three times the $102.1 million of mineral contributions received. Today, preservation of PUF endowment purchasing power is critically dependent on retained investment return as evidenced by examining the components of growth in the value of PUF Investments since 1975, as depicted in Figure C. |
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