If you have any questionsregarding this report,please contact Trisha Ball atstewardship@rice.eduor 713-348-4383.

CONTACT US

THE RICE UNIVERSITY ENDOWMENT

M.E. & Florrie Andrews Scholarship

Year endowment established 1969

Original gift amount $31,812

Cumulative earnings $1,598,000

Cumulative payouts $801,827

Ending value at 6/30/19 $827,985

Payout in fscal year 2020 $39,536

Earnings are 50x original gift.

Scholarships awarded are 25x original gift.

The payout in fscal year 2020 is larger than the original gift.

A GIFT WITH EXPONENTIAL IMPACT

THE RICE INVESTMENT:TALENT DESERVES OPPORTUNITYRice has always offered generous financial aid to low-income students. However, The Rice Investment, announced in 2018, reaffirms and deepens Rice’s commitment to making higher education affordable. For the academic year ending June 2019, 56% of Rice undergraduate students received some form of financial aid. Beginning in fall 2019 under The Rice Investment, middle-income families with typical assets will receive grant aid to cover at least full tuition if they earn up to $130,000 per year, and at least half tuition for families earning between $130,001-$200,000. In addition, students with family incomes below $65,000 will receive grant aid covering not only their full tuition, but also all of their mandatory fees and room and board. Students receiving aid under The Rice Investment will have all demonstrated need met without any loans. This is an investment in the promise of all students who demonstrate talent, initiative and drive to positively impact the world.

Currently, 28% of undergraduate financial aid awarded by Rice is supported by the annual distribution from endowment funds restricted to financial aid. The university is initially shouldering much of the immediate cost of The Rice Investment and is seeking to secure $150 million in need-based financial aid endowments by 2025 to support these financial aid policies in perpetuity. Over time, an endowed scholarship fund can have a significant impact on Rice and the students they benefit.

ASSET CLASS SPOTLIGHT: HEDGE FUNDS AND OPPORTUNISTICINVESTMENTSEquity investments serve as the growth engine of Rice’s endowment: approximately 70% ofRice’s endowment is in the form of equity ownership of public companies, private companies,real estate firms and firms engaged in natural resources — because equity investments havethe highest expected returns over long-time periods. This engine, however, provides returnsin a lumpy, sporadic fashion, as markets are difficult to time correctly. For example, over thepast 20 years, missing the 10 best-returning days in the U.S. stock market would have cut aninvestor’s return in half; missing the top 20 days would have resulted in an investment loss.Therefore, Rice allocates a significant amount to investments that provide more stable (andcommensurately lower) returns over time and that are less correlated to equity markets.These assets include cash, bonds and hedged strategies.

Hedged/opportunistic investments comprise 20% of Rice’s endowment and have providedannual returns of 6.5% over the past 10 years and 7.2% over the past 20 years. Importantly,during large downturns in equity markets (e.g., the dot-com crash in 2000 and the financialcrisis in 2008), hedged strategies have outperformed equity markets by a large margin,thereby providing ballast to Rice’s portfolio and RMC’s ability to maintain consistent andgrowing distributions over time.

FISCAL YEAR 2019 The Rice University

Endowment Dear Supporters and Friends,

Through your support of endowments at Rice, the university builds on its aspirations to provide a transformative undergraduate and graduate student education, to advance groundbreaking teaching and research, and to contribute effective solutions to global challenges. Whether by the creation of faculty chairs in engineering and the sciences, fellowships in the humanities, or scholarships that support our ambitious financial aid policy, The Rice Investment, you have a tremendous impact on Rice.

Endowments are a driving force behind the success of some of our most influential programs, including the Kinder Institute for Urban Research, which celebrates 10 years of work toward fostering vibrant communities. Significantly, the School of Social Sciences will mark its 40th anniversary with the completion of Kraft Hall, a critical component of Rice’s policy corridor, which also includes the Baker Institute and the Jones Graduate School of Business. Such funding allows these schools and institutes to collaborate with local governments and apply evidence-based research to influence policies that address pressing problems, such as equitable access to healthcare and housing. Endowment support has also enabled the creation of the Betty and Jacob Friedman Holistic Garden, a dynamic space for biosciences teaching and research, student learning outside the classroom and community involvement. These efforts, and many others made possible by endowments, enrich all facets of Rice’s educational mission.

In recognition of the people and programs that have contributed to Rice’s academic excellence, we are pleased to present this endowment report for fiscal year 2019 ( July 1, 2018–June 30, 2019). This year has seen continued growth in the endowment due to sound investments by the Rice Management Company, an accomplishment that also has increased opportunities for our students and faculty. We are, as always, deeply grateful for your continued support.

Sincerely,

Kathi Dantley Warren Allison Thacker Vice President for Development Chief Investment Ofcer and President, Rice Management Company and Alumni Relations Vice President for Investments and Treasurer, Rice University

THE IMPACT OF ENDOWMENT GIFTSThe endowment grows over time from two sources: investment returns and new gifts added to the endowment. In 1904, the Rice Institute (now Rice University) was founded with a gift of $4.6 million from the estate of William Marsh Rice. This founding gift was an endowment, meaning that it could never be spent, and only the earnings from this gift could be used to support the university. Rice has been fortunate over time to have many donors establish endowment funds for various purposes across campus. Today, the endowment stands at $6.5 billion and consists of a large unrestricted endowment (approximately 48% of the total or $3.1 billion) and over 1,900 individual funds with restricted purposes (approximately 52% of the total or $3.4 billion). The different types of purposes within the restricted endowment are shown below.

This fiscal year, 40% of operating expenses were funded by the annual distribution drawn from the endowment. This is the single largest revenue source for the university. Endowment gifts have given and will continue to give the university the ability to provide a world-class education to students, regardless of their ability to pay, and to help fund pathbreaking research performed by Rice’s outstanding faculty.

Chairs $1,275

Scholarships $619

Departmental$724

Maintenance$274

Residential Colleges - $189

Restricted Endowment: $3.4 Billion at 6/30/19($ Millions)

Fellowships - $145Athletics - $63

Library - $51

THE RICE UNIVERSITY ENDOWMENT

ENDOWMENT LIQUIDITY$299 million was withdrawn from the endowmentthis fiscal year to help fund the operations of theuniversity. This amount represents the largestrevenue source to Rice, with tuition and fees andgrants and contracts providing the next largestcontributions to operations. The ability to liquidateinvestment assets when needed to support theannual endowment withdrawal is in the forefrontwhen portfolio investment and asset allocationdecisions are made by RMC. Some investmentssuch as venture capital and private equity, energyand real estate often have longer-term time horizonsbefore returns are realized and funds are returnedto investors. While Rice does invest in theseaforementioned asset classes, the endowment doesmaintain an allocation to publicly traded equities,fixed income and cash, which can be liquidatedwhen needed.

$0

$1

$2

$3

$4

$5

$6

$7

Daily Monthly Quarterly Annual >1 Year

$ Bi

llion

s

$2.6$2.1

$3.8

$6.5

$1.2

Cumulative Liquidity of Rice EndowmentAs of June 30, 2019

CURRENT YEAR PERFORMANCE Rice University’s endowment returned 7.6% for the fiscal year ending June 30, 2019. The endowment ended the fiscal year with its highest ever value of $6.5 billion. The endowment recorded particularly strong contributions from venture capital, private equity and credit/distressed investments with annual returns of 22.7%, 21.3% and 21.4%, respectively. The endowment’s average annual return over the last five and 10 years is 7.5% and 10.4%, respectively.

($ millions)

Market value at June 30, 2018 $6,278

Endowment investment returns 454

Endowment gifts and transfers 48

Endowment spending (299)

Market value at June 30, 2019 $6,481

HISTORICAL ENDOWMENT PERFORMANCE The Rice Management Company’s (RMC) investment team seeks to establish deep-rooted partnerships with world-class investment managers who also share RMC’s long-term view of investing. It is important for the endowment to perform well to help support the university’s current operations, but it is equally important to plan and make investments that will continue to provide strong returns for future generations of students, faculty and staff. This long-term view and planning is paramount in every investment decision we make.

Over the long term, Rice expects that, collectively and net of fees, these managers will earn the endowment a return in excess of the return on passive investments in stocks and bonds. This chart shows how the endowment has performed over different time periods. In all longer-term periods, the endowment has been able to outperform the passive index and the policy portfolio benchmark.

Endowment Returns as of June 30, 2019 12%

10%

8%

6%

4%

2%

0% 1 Year 3 Years 5 Years 10 Years 20 Years

Rice University 35% U.S. Stocks / 35% Int'l Stocks / 30% Bonds Policy Portfolio

HISTORICAL ENDOWMENT PERFORMANCEThe Rice Management Company’s (RMC) investment team seeks to establish deep-rooted partnerships with world-class investment managers who also share RMC’s long-term view of investing. It is important for the endowment to perform well to help support the university’s current operations, but it is equally important to plan and make investments that will continue to provide strong returns for future generations of students, faculty and staff. This long-term view and planning is paramount in every investment decision we make.

Over the long term, Rice expects that, collectively and net of fees, these managers will earn the endowment a return in excess of the return on passive investments in stocks and bonds. This chart shows how the endowment has performed over different time periods. In all longer-term periods, the endowment has been able to outperform the passive index and the policy portfolio benchmark.

Rice University

0%

2%

4%

6%

8%

10%

12%

1 Year 3 Years 5 Years 10 Years 20 Years

Policy Portfolio35% U.S. Stocks / 35% Int'l Stocks / 30% Bonds

Endowment Returns as of June 30, 2019

CURRENT YEAR PERFORMANCERice University’s endowment returned 7.6% for the fiscal year ending June 30, 2019. The endowment ended the fiscal year with its highest ever value of $6.5 billion. The endowment recorded particularly strong contributions from venture capital, private equity and credit/distressed investments with annual returns of 22.7%, 21.3% and 21.4%, respectively. The endowment’s average annual return over the last five and 10 years is 7.5% and 10.4%, respectively.

($ millions)

Market value at June 30, 2018 $6,278

Endowment investment returns 454

Endowment gifts and transfers 48

Endowment spending (299)

Market value at June 30, 2019 $6,481

THE RICE UNIVERSITY ENDOWMENT

THE IMPACT OF ENDOWMENT GIFTS The endowment grows over time from two sources: investment returns and new gifts added to the endowment. In 1904, the Rice Institute (now Rice University) was founded with a gift of $4.6 million from the estate of William Marsh Rice. This founding gift was an endowment, meaning that it could never be spent, and only the earnings from this gift could be used to support the university. Rice has been fortunate over time to have many donors establish endowment funds for various purposes across campus. Today, the endowment stands at $6.5 billion and consists of a large unrestricted endowment (approximately 48% of the total or $3.1 billion) and over 1,900 individual funds with restricted purposes (approximately 52% of the total or $3.4 billion). The different types of purposes within the restricted endowment are shown below.

Restricted Endowment: $3.4 Billion at 6/30/19 ($ Millions)

Library - $51 Athletics - $63

Fellowships - $145 Residential

Colleges - $189 Maintenance

$274

Departmental $724

Chairs $1,275

Scholarships $619

This fiscal year, 40% of operating expenses were funded by the annual distribution drawn from the endowment. This is the single largest revenue source for the university. Endowment gifts have given and will continue to give the university the ability to provide a world-class education to students, regardless of their ability to pay, and to help fund pathbreaking research performed by Rice’s outstanding faculty.

ENDOWMENT LIQUIDITY $299 million was withdrawn from the endowment this fiscal year to help fund the operations of the university. This amount represents the largest revenue source to Rice, with tuition and fees and grants and contracts providing the next largest contributions to operations. The ability to liquidate investment assets when needed to support the annual endowment withdrawal is in the forefront when portfolio investment and asset allocation decisions are made by RMC. Some investments such as venture capital and private equity, energy and real estate often have longer-term time horizons before returns are realized and funds are returned to investors. While Rice does invest in these aforementioned asset classes, the endowment does maintain an allocation to publicly traded equities, fixed income and cash, which can be liquidated when needed.

Cumulative Liquidity of Rice Endowment As of June 30, 2019

$ Bi

llion

s

$7

$6

$5

$4

$3

$2

$1

$0

$6.5

$3.8

$2.6 $2.1

$1.2

Daily Monthly Quarterly Annual >1 Year

FISCAL YEAR 2019The Rice University

Endowment

Kathi Dantley WarrenVice President for Development and Alumni Relations

Allison ThackerChief Investment Ofcer and President, Rice Management CompanyVice President for Investments and Treasurer, Rice University

Dear Supporters and Friends,

Through your support of endowments at Rice, the university builds on its aspirations to provide a transformativeundergraduate and graduate student education, to advance groundbreaking teaching and research, and to contributeeffective solutions to global challenges. Whether by the creation of faculty chairs in engineering and the sciences, fellowshipsin the humanities, or scholarships that support our ambitious financial aid policy, The Rice Investment, you have atremendous impact on Rice.

Endowments are a driving force behind the success of some of our most influential programs, including the Kinder Institutefor Urban Research, which celebrates 10 years of work toward fostering vibrant communities. Significantly, the School ofSocial Sciences will mark its 40th anniversary with the completion of Kraft Hall, a critical component of Rice’s policycorridor, which also includes the Baker Institute and the Jones Graduate School of Business. Such funding allows theseschools and institutes to collaborate with local governments and apply evidence-based research to influence policies thataddress pressing problems, such as equitable access to healthcare and housing. Endowment support has also enabled thecreation of the Betty and Jacob Friedman Holistic Garden, a dynamic space for biosciences teaching and research, studentlearning outside the classroom and community involvement. These efforts, and many others made possible by endowments,enrich all facets of Rice’s educational mission.

In recognition of the people and programs that have contributed to Rice’s academic excellence, we are pleased to present thisendowment report for fiscal year 2019 ( July 1, 2018–June 30, 2019). This year has seen continued growth in the endowmentdue to sound investments by the Rice Management Company, an accomplishment that also has increased opportunities forour students and faculty. We are, as always, deeply grateful for your continued support.

Sincerely,

THE RICE UNIVERSITY ENDOWMENT

THE RICE INVESTMENT: TALENT DESERVES OPPORTUNITY Rice has always offered generous financial aid to low-income students. However, The Rice Investment, announced in 2018, reaffirms and deepens Rice’s commitment to making higher education affordable. For the academic year ending June 2019, 56% of Rice undergraduate students received some form of financial aid. Beginning in fall 2019 under The Rice Investment, middle-income families with typical assets will receive grant aid to cover at least full tuition if they earn up to $130,000 per year, and at least half tuition for families earning between $130,001-$200,000. In addition, students with family incomes below $65,000 will receive grant aid covering not only their full tuition, but also all of their mandatory fees and room and board. Students receiving aid under The Rice Investment will have all demonstrated need met without any loans. This is an investment in the promise of all students who demonstrate talent, initiative and drive to positively impact the world.

Currently, 28% of undergraduate financial aid awarded by Rice is supported by the annual distribution from endowment funds restricted to financial aid. The university is initially shouldering

M.E. & Florrie Andrews Scholarship

Year endowment established 1969

Original gift amount $31,812

Cumulative earnings $1,598,000

Cumulative payouts $801,827

Ending value at 6/30/19 $827,985

Payout in fscal year 2020 $39,536

Earnings are 50x original gift. much of the immediate cost of The Rice Investment and is seeking to secure $150 million in need-based financial aid endowments by 2025 Scholarships awarded are 25x original gift. to support these financial aid policies in perpetuity. Over time, an endowed scholarship fund can have a significant impact on Rice and The payout in fscal year 2020 is larger than the the students they benefit. original gift.

A GIFT WITH EXPONENTIAL IMPACT

ASSET CLASS SPOTLIGHT: HEDGE FUNDS AND OPPORTUNISTIC INVESTMENTS Equity investments serve as the growth engine of Rice’s endowment: approximately 70% of Rice’s endowment is in the form of equity ownership of public companies, private companies, real estate firms and firms engaged in natural resources — because equity investments have the highest expected returns over long-time periods. This engine, however, provides returns in a lumpy, sporadic fashion, as markets are difficult to time correctly. For example, over the past 20 years, missing the 10 best-returning days in the U.S. stock market would have cut an investor’s return in half; missing the top 20 days would have resulted in an investment loss. Therefore, Rice allocates a significant amount to investments that provide more stable (and commensurately lower) returns over time and that are less correlated to equity markets. These assets include cash, bonds and hedged strategies. CONTACT US Hedged/opportunistic investments comprise 20% of Rice’s endowment and have provided If you have any questions annual returns of 6.5% over the past 10 years and 7.2% over the past 20 years. Importantly, regarding this report, during large downturns in equity markets (e.g., the dot-com crash in 2000 and the financial

please contact Trisha Ball at crisis in 2008), hedged strategies have outperformed equity markets by a large margin, stewardship@rice.edu thereby providing ballast to Rice’s portfolio and RMC’s ability to maintain consistent and or 713-348-4383.growing distributions over time.