HOUSTON

Educating Leaders of Faith and Character AN ACADEMIC The University of St. Thomas is a private institution committed to the liberal arts and to the religious, ethical and intellectual traditions of Catholic higher education. VILLAGE: FROM 3800 MONTROSE BOULEVARD VISION TO REALITY HOUSTON, TEXAS 77006-4626 713-525-3100 ANNUAL REPORT 2004/2005 www.stthom.edu BOARD OF DIRECTORS COMMITTEE VOLUNTEERS

PATRICK J. MORAN, CHAIR REV. JANUSZ A. IHNATOWICZ HEIDI BOLLICH Moran Resources Company University of St. Thomas GIORGIO BORLENGHI

GLORIA M. PORTELA, VICE CHAIR RAYMOND A. JEAN DRUCIE CHASE Seyfarth Shaw LLP Quanex Corporation HOLY CLAPHAM-ROSENOW

DR. ROBERT R. IVANY, PRESIDENT RAYMOND A. LEBLANC MICHAEL CORDUA University of St. Thomas Keystone International (Retired) JOHN DEL TATTO REV. DENNIS M. ANDREWS, CSB CORA SUE MACH POPPY DOYLE University of St. Thomas Mach Industrial Group BETSY EARTHMAN TOMMY BLACKBURN III MICHELE MALLOY ROBERT EARTHMAN Thomas Instrument Company & Inc. Marathon Oil Company JOHN ELSNER REV. PATRICK BRADEN, CSB TRINI MENDENHALL-SOSA University of St. Thomas Trini and O.C. Mendenhall Foundation DIEDRA FONTAINE JUAN GARCIA REV. DANIEL CALLAM, CSB TOM C. MESA, JR. University of St. Thomas Consultant MARGARET GUERRIERO

JIM HORSCH DR. DOROTHY E. F. CARAM EMIL NAKFOOR Retired, Administrator/Educator Retired NANCY JIRCIK

TAMMY CASEY REV. JOSEPH PILSNER, CSB GLORIA KALMAN Linbeck Group, LP University of St. Thomas JOHN KELLY

GERARDO CHAPA RAO RATNALA JAY LAYDEN Global Financial Services Ratnala & Bahl, Inc. THOMAS LOPEZ

REV. ROBERT W. CROOKER, CSB REV. RONALD G. SCHWENZER, CSB PAMELA H. LOVETT University of St. Thomas St. Thomas High School JOHN MAIETTA

LEE D. CUTRONE, JR. TOM STANDISH JACQUELINE MARTIN Trustmark National Bank CenterPoint Energy JAMES METZGER GEORGE A. DEMONTROND III THE HONORABLE MARTHA WONG FRANK MICHEL DeMontrond Automotive Group State Representative WILEY MOSSY BRUCE EARTHMAN REV. WILLIAM J. YOUNG, CSB DENISE O’CONNELL Earthman Capital, Ltd. University of St. Thomas PATRICK O’DONNELL DR. HERBERT P. EDMUNDSON, JR. JOSEPH G. ZARCARO Memorial Neurological Association Attorney at Law LOUISE PARSLEY JOHN ROCHA MADELYN FARRIS Community Volunteer JAMES SCHLINDWEIN

ROB SHAW MOST REV. JOSEPH A. FIORENZA Archbishop of Galveston-Houston WILLIAM SHIFFICK

MICHAEL P. FLEMING BENJAMIN SMITH CAPITAL CAMPAIGN COMMITTEE LGI Development Corporation RICHARD STORK

CAROLYNE FOX ROBERT SWEENEY CAMPAIGN LEADERSHIP HONORARY COMMITTEE CAMPAIGN CABINET Parents Business Consultant and Facilitator KITTSIE THOMAS Corporations ELIZABETH LYONS GHRIST STANFORD ALEXANDER CHARLIE THOMAS REV. ANTHONY GIAMPIETRO, CSB LORI THOMPSON Capital Campaign Chair THE HONORABLE BILL ARCHER DAVID MCCLANAHAN Board University of St. Thomas JACK BLANTON ROBERT MOSBACHER, JR. HECTOR VILLARREAL J. MICHAEL MILLER, CSB GIORGIO BORLENGHI Titular Archbishop of Vertara DRUCIE & JOHN CHASE Friends GLORIA PORTELA ROBERT GRAHAM MADELYN VON ESCHENBACH Vatican City MOST REV. JOSEPH A. FIORENZA GEORGE A. DEMONTROND III St. Thomas Gateway AIM Management Group, Inc. Honorary Campaign Chair HARRY GEE RAYE WHITE MICHAEL FLEMING MAUREEN & JIM HACKETT JOSEPH A. HAFNER, JR. DR. ROBERT R. IVANY Foundations Former Board Riviana Foods, Inc. President of the University MEREDITH LONG PATRICK MORAN BEN LOVE BILL SLICK JOHN E. HAGALE LEO LINBECK, JR. Religious CYNTHIA & GEORGE MITCHELL Campus Community The Methodist Hospital System GEORGE W. STRAKE, JR. JACK SWEENEY MOST REV. JAMES TAMAYO JOSEPH MCFADDEN ADÁN TREVIÑO Alumni DAVID UNDERWOOD Communications TOM C. MESA, JR. MARIE & WILLIAM WISE BARBARA HURWITZ IN MEMORIAM CHUCK CARLBERG NINFA LAURENZO GEORGE RIZZO A MESSAGE FROM THE PRESIDENT

So much has happened in only twelve months that my first year as praying . The throng poured into the new Campus Life Mall. TV cameras caught them walking by with the Chapel of St. Basil as a lovely backdrop. The students then settled down on the president of the University of St. Thomas seems to have passed in a lawn awaiting Pope John Paul’s 3 a.m. funeral Mass to be broadcast on big-screen TVs. blinding flash. I experienced a warm introduction to a Houston summer, Earlier I mentioned generosity, and I would be remiss not to thank Jim McIngvale, who a wet warm fall and several days of winter, and along the way I also got provided such valuable support. The vigil and the level of participation both indicate that we are educating leaders of faith and character. Our students – who exemplify these attributes – to know and work with the University’s faculty, staff, students and will remember this event for the rest of their lives. friends. The warmth and generosity of Houstonians and the University One of my most pleasant memories of our first year is the Presidential Inauguration. We wanted to use this festive event to showcase the University. Every component of the community continue to astonish Marianne and me. It is a pleasure to inauguration showed the Houston community a positive aspect of the University, and meet more and more graduates and supporters every day. generous Houstonians underwrote our costs. The inaugural week began with a reception celebrating faculty and student scholarship. Service projects engaged our students with The University’s students, however, have been the most enjoyable aspect of our first year. Habitat for Humanity, Houston Food Bank, the Houston Zoo and campus projects. Their enthusiasm for study, their faith and their honesty make my work very rewarding. Guest speaker Frances Hesselbein, who chairs the Leader to Leader Institute, addressed Building on excellent groundwork laid by former President Archbishop Michael Miller a capacity audience in Jones Auditorium, and Houston Chronicle Publisher Jack Sweeney and his predecessors has not been difficult because they had the University poised to march moderated a panel discussion with Archbishop Edward O’Brien, former Peace Corps head boldly into a new era of educating leaders of faith and character. We are dedicated to Kevin O’Donnell, and former Houston City Council member Graciela Saenz. The next day “The warmth and becoming one of the great Catholic universities in this country. We understand that this will be an Interfaith Dialogue brought together Sri Gauranghai Nanavaty (Hinduism), Dr. David challenging; change always is. Our goal is to preserve the values of our University while Gray (Buddhism), Rabbi Osadchey (Judaism), Dr. Mahmoud El-Gamal (Islam), and the generosity of Houstonians searching for new ways to advance every aspect of university life as we strive to improve the Rev. Donald Nesti, CSSp, (Christianity). and the University educational experience of each student. Fortunately, we have wonderful supporters to guide Later in the week, Archbishop Joseph A. Fiorenza presided over the inaugural Mass, and and encourage us on our journey. Archbishop Edwin O’Brien delivered the homily. We were honored to have former President community continue to Presently, we are wrapping up a successful Shining Star Capital Campaign. I don’t believe George H.W. Bush deliver the inaugural address and to have in attendance Fr. Kenneth John anyone ever questioned our resolve to achieve our $65 million goal; now the question is by Decker, CSB, superior general of the Congregation of St. Basil, and Dr. Gerardo Rocha Vera, astonish Marianne and how much will we surpass it. The present capital campaign is but Phase I of a long-range president of the Universidad de Santo Tomas in Santiago. me. It is a pleasure to strategic plan for academic and physical development of nearly 20 contiguous city blocks. Initially, one of St. Thomas’ major attractions for me was the knowledge that University The capital campaign has made the Campus Life Mall a reality. Since the mall’s dedication faculty, staff and students had collaborated on a comprehensive Strategic Plan. This told me meet more and more last January and its late April completion, the University of St. Thomas has come much closer that you knew where you had been; you knew where you were; and you knew where you to looking like a university, but, more importantly, our students have unrestricted access to an needed to go. The plan has been modified slightly by a committee representing the entire graduates and supporters outdoor area where they may think, pray, study, eat, toss a football or just plain hang out. The community, but it has largely remained on track. For example, we agreed on the need to grow every day.” Campus Life Mall promotes student engagement, which is integral to St. Thomas’ mission and our student population by about five percent each year while keeping our low student to essential to a complete education. teacher ratio of 14 to 1. The mall’s entrance from West Alabama Street was completed in April, and students soon I spent my first twelve months listening to students, faculty, staff, board members and put it to good use. A small group of students, seeking to honor the late Pope John Paul II, alumni, many of whom have devoted years of their lives to our University. They recounted to planned a candlelight vigil from the Sacred Heart Co-cathedral downtown to the campus. This me countless stories and memories of the commitment of this community to its students. It is event was significant for at least two reasons: It marked the first use of the mall for a major that personal, selfless and consistent dedication that distinguishes us from other institutions. I student event, and it showed the world what committed students we have. The students will continue to listen and do my best to contribute to the effort to educate leaders of faith and developed the idea on a Monday evening after a prayer service that honored the late pontiff. character who will make a positive impact on our world. On Tuesday, the students asked me if the administration could provide support in the form of Thank you for your continued support and encouragement. t-shirts, candles, a police escort and a parade permit. The idea moved like a whirlwind! The next day we discovered that through the support of Houston businessman Jim McIngvale and his advertisement in the Houston Chronicle, we could expect up to a thousand marchers. As it turned out, more than 2,000 people from UST, other universities and Robert Ivany Houston’s diverse neighborhoods marched through the new entrance while singing and President of the University

~ 2 3 ~ AN ACADEMIC VILLAGE The goal of the University’s Master Plan is to enhance the spirit of community and dialogue essential to intellectual and spiritual pursuits. Campus beautification initiatives have replaced streets and parking lots with green lawns, native trees and natural walkways.

An area that was once the largest concrete parking lot on campus in front of Crooker Center is now a Campus Life Mall, completed in the spring of 2005. The courtyard area on the north and east sides of Crooker boasts fixed carousel picnic tables and chairs for students to dine al fresco. Mt. Vernon Street is now closed to traffic. On one end, a curved driveway and formal signage greets visitors, and a serpentine sidewalk trails from the Campus Life Mall to West Main. The University Seal Plaza is located to the north of the Campus Life Mall. The Plaza offers a unique opportunity to support the University’s Annual Fund with a gift that celebrates the relationship of students, alumni and friends with the University and their commitment to its future. By contributing with personalized bricks, supporters may leave a mark that will last for generations. The Plaza is the only crosswalk on campus that will display the University seal. It was completed in the spring of 2005, and the installation of inscribed bricks began. Quiet retreats for students to study or relax alone or with friends are necessary features of a nurturing academic campus. The Earthman Family Garden is located near the center of the Campus Life Mall where the home of J.B. and Blanche Bastien Earthman once stood. The Earthmans arranged for the home to become a part of the University in 1959. The Samfield Study Garden, located on the west side of the Chapel of St. Basil, is named in honor of Edwin Samfield (deceased) and his wife, Lee Corsack Samfield.

The Shining Star Capital Campaign complete this transformation of has made possible the fulfillment the campus into a magnificent of the 2001-2005 building Academic Village in the heart program. The next phase will of Houston by 2020.

~ 4 5 ~ A CAPITAL V ISION With Liz Ghrist serving as campaign chair, the University of St. Thomas “Shining Star” capital campaign has received gifts and grants topping an unprecedented sum of $60 million. Under her guiding force, St. Thomas has erected Guinan residence hall and Moran Center. The Philip Johnson design for the Academic Mall is complete with the addition of Malloy Hall, and a Campus Life Mall continues to transform the landscape.

Within the boundaries of Montrose Boulevard, West Alabama, Richmond and the adjacent Menil property, the University of St. Thomas campus continues to acquire and build needed facilities according to the 2020 Master Plan. While the new buildings and landscaping capture the most attention, academic funds raised thanks to numerous gifts have added scholarships to benefit our students and create new chairs for outstanding faculty. The Dunn Foundation has modernized our science labs for our outstanding premed students. The Houston Endowment has provided more than $2 million to education programs that benefit teacher development in Houston area schools. Thanks to George and Cynthia Mitchell, UST now has the Mitchell Environment Sciences Fund for the benefit of Houston. Jack Blanton and Mike Stude have made magnificent sculpture gifts so appropriate to a university in the heart of Houston’s Museum District. Many benefactors drive the vision for making St. Thomas a magnificent academic village and one of the nation’s finest universities. The campaign is making great impact, but there are many more needs for which funds must be raised. We must look ahead to phase two as this campaign nears conclusion.

Top: Fred Burns, Wortham Center: George Mitchell and Bottom: Steve Dunn, Dunn Foundation chair, points out view Campaign Chair Liz Ghrist attend Foundation president, of campus from his office atop a campaign event. tours the UST campus with the Wortham Tower overlooking President Robert Ivany. downtown Houston. ~ 6 7 ~ AN ACADEMIC VISION Three dozen undergraduate majors offer St. Thomas students a breadth of learning opportunities in both classic subjects and modern academic studies. Preprofessional programs in health professions, law, and engineering are among our fastest growing course offerings.

This extensive undergraduate program prepares students to pursue any of 10 master’s degrees. As well, our doctorate in philosophy from the Center for Thomistic studies is among the most highly respected in the world. In addition, our Service Learning Program is an educational method that combines community service, academic study and structured reflection to offer students a multidimensional learning experience. The academic profile of the freshman class adds to a stellar student population. The average SAT score is 1157. The average high school class-rank percentile increased to the 73rd percentile; 58 percent graduated in the top quarter of their high school class; and 29 percent were in the top 10 percent. The most popular areas of intended study indicated by UST’s freshman class this fall are biology/premed, business administration, psychology and chemistry. These areas have consistently remained the most popular interests of incoming freshmen. In the fall of 2004, the University of St. Thomas became one of a few universities nationwide to offer an undergraduate degree in bioinformatics, which combines advanced skills from biology, management information science and mathematics, allowing graduates to perform research in various genome sequence projects around the world and develop molecular medicine based on genetics. Our professors have earned a reputation not only for their academic excellence but also for their special interest in our students. They have studied at institutions of higher learning around the world, and 88 percent of the full-time faculty possess the recognized terminal degree in their fields. Undergraduate class size is 20 students, and our student to faculty ratio remains 14 to 1.

Since 1994, St. Thomas has repeatedly ranked in the top tier received national accolades among Western universities by annually, including being U.S. News & World Report.

~ 8 9 ~ 2004-2005 IN R EVIEW

JULY 2004 The University dedicates The Irish Society honors Vietnamese scholars and activists Lenten Lecture Series highlights Dr. Robert Ivany takes office on the Campus Life Mall. UST alumnus Most Rev. John from the U.S. and other countries “The Sacrament of Matrimony.” July 1 as the eighth president of Archbishop J. Michael Miller, McCarthy, bishop emeritus participate in “Viet Nam 2005: CSB, travels from Rome of Austin, at its annual gala Development Futures and Global the University. Ivany succeeded MARCH 2005 Dr. Joseph M. McFadden, who to bless this new hub of benefiting the Center for Integration, a Symposium,” Barbara Hurwitz Lecture Series filled that position for a second campus activity. Irish Studies. sponsored by the UST Center hosts the Hon. Bill White, time after Pope John Paul II called for International Studies, the The Center for Faith and Culture Vietnamese Culture and Science mayor of Houston, speaking then-president Rev. J. Michael OCTOBER 2004 presents Jean Porter, PhD, John on “Leadership in the Miller, CSB, to serve in the Association and Ngay Nay The inaugural event of the A. O’Brien Professor of Theology Changing World.” Vatican in November 2003. newspaper. UST Women of the World at the University of Notre Dame, Lecture Series features Kuwaiti speaking on “Common Good B.K. Smith Lecture Series in JANUARY 2005 AUGUST 2004 musician and U.S. immigrant and Political Order: Medieval History hosts Dr. James H. Billington on “Russia in The University hosts former Lena Shammas. Perspectives on Contemporary UST hosts the inauguration of Search of Itself.” Spanish Minister of Foreign Debates.” Dr. Robert Ivany as its eighth Friends of Archaeology at St. Affairs Ana Palacio speaking president.Week-long activities Thomas and The Italy in America include community service, Sixth annual Archaeology Lecture on “The European Union NOVEMBER 2004 Association present the Ninth hosts Dr. J. Andrew Dearman Enlargement Challenges.” faculty and student displays, Annual Lecture on Roman The University celebrates the visual and performing arts, speaking on “Beyond the Jordan: Archaeology, “Pirates in Roman 50th anniversary of the Memorial athletic contests and lectures. Moab and the Moabites.” SEPTEMBER 2004 Cilicia (Turkey),” by Professor Library, now Murphy Hall. The People Speak, sponsored by Cheryl Ward. Aquinas Lecture features Professor APRIL 2005 the United Nations Foundation, UST Friends of Archaeology and Germain Grisez speaking on “The UST commemorates the Life of holds its Houston forum on the Lee Lecture Series in English the Hellenic Professional Society Restless-Heart Blunder.” Pope John Paul II. “All Roads St. Thomas campus on “Energy: presents Joseph Pearce, assistant of Texas present Dr. Kathleen M. Lead to Rome” procession, from How Far to the Last Drop?” In professor of literature at Ave Maria Lynch speaking on “At Home in The University launches Insights, Sacred Heart Co-Cathedral conjunction with the event, UST University, speaking on “The Archaic Athens” for the 14th a mentoring program that downtown to the campus, honors professors Linda Pett-Conklin, Unmasking of Oscar Wilde: A Annual Lecture on Greek matches UST seniors with alumni. Pope John Paul II, early Friday Jon Taylor and Ravi Srinivas Lecture on the 150th Anniversary Archaeology. of his Birth.” morning, April 8. staged three teach-ins on energy FEBRUARY 2005 The University of St. Thomas sustainability. hosts the first annual Charlie Annual Mardi Gras Gala at the The University hosts A Day Thomas Basketball Classic for River Oaks Country Club raises of Innovation and Creativity: private high schools. $370,000 for the Fr. Francis 2005 Research Symposium Monaghan Scholarship Fund. and FAMfest, a film, arts and Pax Christi and UST’s Residence Joe Hafner and his wife, Merrill, music festival. Life and Social Justice Committee chair the event. Honoree is present three-time Nobel Peace Trini Mendenhall. MAY 2005 Prize nominee and Pax Christi The Most Rev. Daniel N. DiNardo, Friends of Archaeology’s eighth JUNE 2005 A total of 29 teams play in USA Teacher of Peace Award Catholic Studies Program coadjutor archbishop of annual Schliemann Dinner is Center for Faith and Culture the University’s annual golf recipient Kathy Kelly. launches the Archbishop J. Galveston-Houston, addresses the followed by the “Daugherty presents its Second Annual tournament at BlackHorse Golf Michael Miller Lecture Series graduating class of 2005 at the Lecture: Mycenae and the Face Seminar on Spirituality, Club in Cypress, Texas. Lee Dr. Gerardo Rocha, president of featuring Dr. Robert George, George R. Brown Convention of Agamemnon: 130 Years Later” “...Wash in the Pool of Siloam.” UST-Santiago, Chile, and Cardinal McCormick Professor of Cutrone chaired the tournament, Center. He and Mrs. Raye White by Dr. Kim S. Shelton. H.E. Alexandre dos Santos, OFM, Jurisprudence, speaking on and Stewart Title was the lead receive honorary doctorates. UST-Mozambique, partner with “Public Morality Leaders of sponsor. The event raised $67,226 Tom Horan ’66 receives the Rev. the University to compile a library Character and Faith.” for the Fr. Francis E. Monaghan Vincent J. Guinan Distinguished collection of 900 books, all Scholarship Fund. Alumni Award. donated by faculty and staff.

Guinan Residence Hall was to beautifully landscaped completed in 2003. Its design courtyards, a view of campus includes balconies opening or the Rothko Chapel. 11 ~ ~ 10 The Kayser Foundation National Charity League - Kingwood Science Applications International Texas Independent College Fund John G. & Marie Stella Kenedy Memorial Chapter Corporation Texas Instruments Foundation INDEPENDENT AUDITORS’ REPORT Foundation National Education Loan Network, Inc. Scottish Brigade Alumnae Association Texas Interscholastic League Foundation Klotz Associates, Inc. National Merit Scholarship Corporation Scriptwriters/Houston Texas Society of Architects To the Board of Directors of the Knights of Columbus Ladies Auxiliary No. National Terrazzo, Tile & Marble, Inc. Scurlock Foundation Texas State Aquarium University of St. Thomas Board of Directors 9310 Neiman Marcus Sembradores de Amistad Education Thomas Instrument & Machine Co., Inc. Knights of Peter Claver, Council 72 Foundation, Inc. Network for Good J. W. Thompson Safety Equipment, Inc. We have audited the accompanying balance sheets of the University of St. Thomas (the “University”) as of June 30, 2005 and 2004, Krispen Inc. Shell Oil Company Foundation The Newman Circle Tindall & Foster, P.C. and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Lamar Consolidated Independent School The Samuel Roberts Noble Foundation, Inc. Sherwood Design Group University’s management. Our responsibility is to express an opinion on these financial statements based on our audits. District Tottenberry’s Private Preschool Northbrook Senior High School Budweiser/Silver Eagle Distributors, L.P. Lamar FFA Booster Club Trainer Family Foundation, Inc. Notsew Orm Sands Foundation The Simmons Foundation, Inc. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards The Laredo National Bank Trinity Petroleum Consultants, Ltd. O’Neill Foundation Sisters of Charity of the Incarnate Word require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material Laudadio Polymers, Inc. Trugreen Landcare Opex Energy, LLC Sisters of the Incarnate Word & Blessed misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that Leadership Consulting Group, Inc. Sacrament Trustmark Bank Organization of Chinese Americans, Inc. are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal Leadership Ford William T. and Sally Slick Foundation Turner Collie & Braden, Inc. Our Sunday Visitor control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence Joe Levit Family Foundation Alfred P. Sloan Foundation Tuscany In Town Papamarkou Asset Management supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates Linbeck Construction Corporation and The Slocomb Insurance Agency Inc. The Tuschman Foundation Pearland Physicians, Inc. Linbeck Foundation Slough Foundation U.S. Bank made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reason- Pepper-Lawson Construction Co. Lincoln Financial Group Foundation Smart Financial Credit Union Union Pacific Foundation able basis for our opinion. Peregrine Partners, LLC United Way of the Texas Gulf Coast Livingston Eye Center Ronnie Smith Plumbing Company, Inc. In our opinion, such financial statements present fairly, in all material respects, the financial position of the University at June 30, 2005 Locke Bryan Productions Inc. Phuongha Corporation Universal Shopping Center William A. & Madeline Welder Smith and 2004, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles gen- Locke Liddell & Sapp, L.L.P. The Pipeliners Association Foundation Up and Open Imaging Linda Lorelle Scholarship Fund U.A. Plumbers Local Union No. 68 Sociedad De Puertorriquenos En Houston, US Southern Homes, L.P. erally accepted in the United States of America. Market Value of LULAC National Scholarship Fund The Pogge Marketing Group Inc. Inc. USS Lexington Museum Pooled Endowment* Lyondell Chemical Company Polish National Alliance of the U.S. of N.A. Society of St. Vincent de Paul UST Alumni Association The Lyons Foundation G. E. Powell Family Charitable Fund South Belt Ellington Community Foundation Valero Scholarship Trust The Powell Foundation Southwestern Bell Corporation M. B. C. Foundation Veritas Catholic Books and Gifts September 19, 2005 PPCO Trustee Educational Scholarship Southwest Student Services Corporation Louis Macey Investments Wachovia Corporation and Wachovia 50 $ MILLIONS The Eugene and Felice Malloy Foundation Presidential Freedom Scholarship Spec’s Wines, Spirits & Finer Foods Foundation PricewaterhouseCoopers Spring Branch Independent School District The Iris & Lloyd Webre Foundation 45

Mani d’oro 2000 Marathon Oil Foundation Inc. Prince of Peace Catholic Church St. Anne Church Richard W. Weekley Family Foundation BALANCE SHEETS June 30, 2005 and 2004 40 Project GRAD St. Anthony of Padua Church The Robert A. Welch Foundation

George A. Martin Fund 2001 2005 Prosperity Bank St. Cyril of Alexandria Church Wells Fargo Bank (Texas), N.A. 2004 George and Kathryn Martinez Fund ASSETS 2005 2004 35

Quanex Corporation and Quanex Wells Fargo Foundation 2003 The May Department Stores Company St. Laurence Church 2002 Foundation Cash and cash equivalents $ 5,501,044 $ 3,842,658 McCoy Inc. St. Mary Magdalene Church West Oak Contracting 30 R & M Service Co., Inc. St. Maximilian Kolbe Church Westwood Golf Club Student accounts and other receivables, Net of allowance McDermott International, Inc. for doubtful accounts of $116,095 and $85,720 in 2005 Ranger-Ryan Scholarship Foundation St. Pius V Church WHR Architects, Inc. 25 Tillie and Tom McDonald Foundation and 2004, respectively 758,877 1,023,532 Reading For Pleasure Club McKee Educational Foundation St. Rose of Lima Church The Williams Companies Foundation, Inc. Relay Computer Systems Pledges receivable, Net 5,413,369 6,492,821 20 Amy Shelton McNutt Charitable Trust St. Theresa Catholic Church The Williams Companies-Transco River Oaks Bookstore Prepayments and other assets 2,577,392 2,279,899 Memorial Hall School St. Thomas More Church Williams & Fudge, Inc. 15 The RJ Fund Notes and loans receivable 560,809 542,427 Trini and O. C. Mendenhall Foundation St. Vincent de Paul Windsor Village Methodist Church The Robbins Foundation Marketable securities 41,015,685 40,038,912 10 Merrill Lynch & Co. Foundation, Inc. St. Vincent de Paul Church University of Wisconsin - Stevens Point Wilhelmina E. Robertson Fund Cash restricted under debt covenants 42,995 155,189 Metzger Construction Company Star Office Products Ltd. William and Marie Wise Family Foundation Cash restricted for investment in land, 05 Marie Roper Foundation Nelda C. & H. J. Lutcher Stark Foundation Woodforest National Bank The Milieu Corporation building and equipment 1,657,550 3,538,114 Royce Homes Foundation For Youth State Farm Companies Foundation Woodlands High School Mir, Fox & Rodriguez, P.C. Property, plant and equipment, Net 78,818,137 77,206,106 00 Rudolph Medical Associates, P.A. Sterling Bank World Reach, Inc. Missionary Catechists of Divine Providence Total $ 136,345,858 $ 135,119,658 Sacred Heart Church Stewart Title of Houston The Worth Collection, Ltd. The Moody Foundation * Sacred Heart Church of Crosby 2004-2005 Source of Operating Revenues W. T. and Louise J. Moran Foundation Strake Foundation The Wortham Foundation, Inc. LIABILITIES AND NET ASSETS Sacred Heart of Jesus Church Moran Resources Company The Sunshine Lady Foundation, Inc. John L. Wortham & Son, L.L.P. LIABILITIES: Safeway Inc. J.P. Morgan Chase Bank Sysco Corporation Worthing Scholarship Fund Accounts payable $2,655,215 $2,219,500 Tuition and fees, net Salient Partners, L.P. Morgan Stanley Teagle Foundation Scholarship C. J. Wrightsman Educational Fund, Inc. Accrued liabilities 2,373,302 2,886,535 Endowment earnings Sallie Mae, Inc. Government and private grants The Mosbacher Foundation Tejas Office Products, Inc. Zelle Hofmann Deferred revenues 250,554 300,118 San Antonio Livestock Exposition, Inc. The Zimmer Family Foundation Gifts and donations The Jane P. and Wiley L. Mossy, Jr. Terra Ventures Incorporated U.S. government grants refundable 563,948 563,948 Foundation San Jacinto Day Foundation Texas Comptroller of Public Accounts Auxiliary operations Bonds and loans payable 29,585,153 30,421,069 Motorola Foundation Fayez Sarofim & Co. The Texas Conference For Women Other income Total liabilities 35,428,172 36,391,170 Mu Phi Epsilon SBC Foundation Texas Division United Daughters of the Munoz Enterprises, Inc. Scanlan Foundation Confederacy COMMITMENTS AND CONTINGENCIES (Note 8) * Lynne Murray Educational Trust Scholarship America Texas Guaranteed Student Loan NET ASSETS: 2004-2005 Source of Operating Expenses Scholarship Program Administrators, Inc. Corporation Mutual of America Unrestricted 62,536,973 61,522,012 Instruction Temporarily restricted 8,192,510 7,791,805 Library Permanently restricted 30,188,203 29,414,671 Academic support Total net assets 100,917,686 98,728,488 Student services Total $ 136,345,858 $ 135,119,658 Institutional support † Deceased Institutional advancement See notes to the financial statements. Auxiliary operations Because gifts are made to many programs and in so many different ways, it is possible that we have omitted or incorrectly listed the name of a donor or the class year of an alumnus or alumna. Any omission is unintentional. The Office of Institutional Advancement (713-525-3100) would appreciate notification regarding errors or omissions. Thank you. *Graphs not audited STATEMENTS OF CASH FLOWS Year ended June 30, 2005 STATEMENT OF ACTIVITIES Years ended June 30, 2005 and 2004 Temporarily Permanently 2005 2004 Unrestricted Restricted Restricted Total Cash flows from operating activities: Operating revenues: Changes in net assets $ 2,189,198 $ 6,150,724 Tuition and fees $ 34,438,712 $ - $ - $ 34,438,712 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Less student aid (6,450,007) (6,450,007) Depreciation and amortization 3,880,409 3,420,442 Tuition and fees—net 27,988,705 - - 27,988,705 Bad debt expense 21,340 Endowment earnings used for current operations 1,674,431 1,674,431 Gifts and donations restricted for long-term purposes (772,497) (1,069,942) Government and private grants 1,683,433 530,956 2,214,389 Net realized and unrealized (gain) loss on investments (300,331) (2,640,955) Gifts and donations 3,093,080 1,417,447 4,510,527 Changes in operating assets and liabilities: Auxiliary operations 2,140,706 2,140,706 Student accounts and other receivables 243,315 247,175 Other income 473,475 473,475 Pledges receivable 1,079,453 393,744 Net assets released from restrictions 184,385 (184,385) - Prepayments and other assets (324,694) (235,712) Total operating revenues 37,238,215 1,764,018 - 39,002,233 Notes and loans receivable (18,382) 1,850 Operating expenses: Accounts payable and accrued liabilities (334,369) (3,553,225) Instruction 16,937,257 16,937,257 Deferred revenues (49,565) (110,544) Library 1,501,994 1,501,994 Net cash provided by operating activities 5,613,877 2,603,557 Academic support 929,052 929,052 Cash flows from investing activities: Student services 4,058,954 4,058,954 Proceeds from sale/maturities of investments 1,989,070 1,944,533 Institutional support 6,440,249 6,440,249 Purchases of investments (2,665,512) (2,358,888) Institutional advancement 2,274,929 2,274,929 Purchases of property, plant, and equipment (5,204,304) (13,557,554) Auxiliary operations 5,015,842 5,015,842 Change in cash restricted for investment in land, building, and equipment 1,880,564 1,959,981 Total operating expenses 37,158,277 - - 37,158,277 Net cash used in investing activities (4,000,182) (12,011,928) Changes in net assets from operating activities 79,938 1,764,018 1,843,956 Cash flows from financing activities Non-operating: Proceeds from debt issuance 2,500,000 Gifts and donations 565,753 565,753 Gifts and donations restricted for long-term purposes 772,497 1,069,942 Endowment losses in excess of amounts designated for current operations—net (427,254) (427,254) Repayment of bonds and loans payable (840,000) (384,000) Reinvestment of endowment earnings under terms of endowment 206,743 206,743 Change in cash restricted under debt covenants 112,194 (21,765) Net assets released from restrictions for long-term purposes 1,668,202 (1,668,202) Net cash provided by financing activities 44,691 3,164,177 Reclassification based on clarification of donor intent (305,925) 304,889 1,036 - Net increase (decrease) in cash and cash equivalents 1,658,386 (6,244,194) Changes in net assets from non-operating activities 935,023 (1,363,313) 773,532 345,242 Cash and cash equivalents, beginning of year 3,842,658 10,086,852 Changes in net assets 1,014,961 400,705 773,532 2,189,198 Cash and cash equivalents, end of year $ 5,501,044 $ 3,842,658 Net assets: Beginning of year 61,522,012 7,791,805 29,414,671 98,728,488 Cash paid for interest $ 1,643,999 $ 1,382,268 Net assets: End of year $ 62,536,973 $ 8,192,510 $ 30,188,203 $ 100,917,686 Noncash transactions—Property purchases in accounts payable $ 256,852 See notes to the financial statements. See notes to the financial statements.

STATEMENT OF ACTIVITIES Year ended June 30, 2004 NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2005 AND 2004

Temporarily Permanently 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES • Unrestricted—Unrestricted net assets are net assets that are not Contributions—Contributions received, including unconditional Unrestricted Restricted Restricted Total Organization—The University of St. Thomas (the “University”) subject to donor-imposed stipulations. Unrestricted net assets promises to give (pledges), are recorded as revenues in the peri- Operating revenues: was founded in 1947 by the Congregation of St. Basil (“Basilian may be designated for specific purposes by action of the Board of od received at their discounted present values and are amor- Tuition and fees $ 32,543,583 $ - $ - $ 32,543,583 Fathers”). The University is incorporated as a Texas nonprofit Directors or may otherwise be limited by contractual agreements tized into income on an effective yield basis. The University’s pol- Less student aid (6,523,616) - - (6,523,616) corporation and is governed by an independent Board of with outside parties. icy regarding the recording of pledges is to include all pledges Tuition and fees—net 26,019,967 - - 26,019,967 Directors. Today the University enjoys a national reputation for • Temporarily Restricted—Temporarily restricted net assets are greater than $10,000. Endowment earnings used for current operations 1,659,403 - - 1,659,403 academic excellence and the diversity of its student body. With net assets whose use by the University is subject to donor- Investments and Endowment Spending Policy—Marketable Government and private grants 1,800,333 418,894 - 2,219,227 an openness that transcends differences, the University is a wel- imposed stipulations that can be fulfilled by actions of the securities are stated at fair value. Endowment income, including Gifts and donations 3,398,469 2,265,357 - 5,663,826 University pursuant to those stipulations or that expire by the pas- realized and unrealized gains or losses on investments, is recog- Auxiliary operations 1,783,878 - - 1,783,878 coming place where students and faculty of all faiths can learn Other income 430,114 85,486 - 515,600 and strengthen their own religious convictions. The University sage of time. nized in the appropriate net asset category according to the exis- Net assets released from restrictions 469,756 (469,756) - - builds on the ancient Christian humanist values of intellectual • Permanently Restricted—Permanently restricted net assets are tence or absence of donor-imposed restrictions. Endowment Total operating revenues 35,561,920 2,299,981 - 37,861,901 development, moral responsibility, and the obligation of the net assets subject to donor-imposed stipulations that they be funds, which consist primarily of marketable securities, are Operating expenses: educated to serve others—principles that unite people in a maintained permanently by the University. Generally, the donors pooled for investment management purposes. Income from Instruction 16,419,802 16,419,802 world that frequently tries to divide them. of these assets permit the University to use all or part of the invest- investments is allocated to each endowment based upon the rel- Library 1,471,639 1,471,639 Located near Houston’s museum district, one of the city’s most ment return on these assets. In addition, some donors may require ative market value and the type of endowment. The endowment Academic support 872,917 872,917 attractive areas, and minutes from a thriving downtown cultural that all of the earnings be added to the corpus until certain stipu- spending policy provides for an endowment income distribution Student services 4,126,882 4,126,882 district, the University offers 30 undergraduate and 11 graduate lations are met. Such assets include the University’s permanent equal to 5.5% based on a three-year moving average of the Institutional support 7,048,496 7,048,496 degree programs with a focus on international studies, educa- endowment funds. endowment assets, excluding pledges receivable. Sources of this Institutional advancement 2,264,813 2,264,813 tion, political science, biology, management information sys- Expenses are generally reported as decreases in unrestricted net distribution for each restricted endowment fund, in the order uti- Auxiliary operations 2,957,523 2,957,523 tems, pre-engineering, pre-law, pre-medicine, finance, market- assets. Expirations of donor-imposed contribution stipulations lized, are (a) earned income as traditionally defined (interest and Total operating expenses 35,162,072 - - 35,162,072 ing, economics, communications, psychology, and liberal arts. that simultaneously increase unrestricted net assets and dividends), (b) reinvested earned income from prior years, and (c) Changes in net assets from operating activities 399,848 2,299,981 - 2,699,829 The highest number of degrees conferred are the Bachelor of decrease temporarily restricted net assets are reported as net capital gains where not prohibited by the gift document. Sources Non-operating: Arts and Master of Business Administration. Nearly 90% of the assets released from restrictions. Temporarily restricted contri- of this distribution for the unrestricted general endowment fund, Gifts and donations - - 1,521,986 1,521,986 faculty members hold the highest degree in their discipline. Our butions received and expended during the same fiscal year are in the order utilized, are (a) earned income as traditionally defined Endowment gains in excess of amounts designated for current operations–net 1,511,431 - - 1,511,431 students are predominantly Texan; however, many of them come recorded as unrestricted revenues and expenses in the state- (interest and dividends) and (b) capital gains. Reinvestment of endowment earnings under terms of endowment - - 417,478 417,478 from other states and from 50 foreign countries. ment of activities. The revenues from applying this endowment spending rate pol- Net assets released from restrictions for long-term purposes 2,446,805 (2,446,805) - - Basis of Accounting—The financial statements of the University Cash and Cash Equivalents—The University considers all highly icy are recorded in the operating revenues section in the state- Reclassification based on clarification of donor intent (25,000) 25,000 have been prepared on the accrual basis of accounting in accor- liquid short-term investments purchased with an original maturi- ments of activities. Any difference between actual total endow- Changes in net assets from non-operating activities 3,933,236 (2,446,805) 1,964,464 3,450,895 dance with accounting principles generally accepted in the ty of three months or less to be cash equivalents. Cash and cash ment return, including realized and unrealized gains and losses, Changes in net assets 4,333,084 (146,824) 1,964,464 6,150,724 United States of America. The University’s resources are report- equivalents invested for long-term purposes are included in mar- and the endowment spending rate is recorded in the non-oper- Net assets, beginning of year 57,188,928 7,938,629 27,450,207 92,577,764 ed for accounting purposes in separate classes of net assets ating section of the statements of activities. Net assets, end of year $ 61,522,012 $ 7,791,805 $ 29,414,671 $ 98,728,488 ketable securities. based on the existence or absence of donor-imposed restric- Cash Restricted Under Debt Covenants—Amounts held on Risks and Uncertainties—Investment securities are exposed to See notes to the financial statements. tions. In the accompanying financial statements, net assets that deposit with trustees as collateral for bonds are classified as cash various market and credit risks. Due to the level of risk associat- have similar characteristics have been combined into similar cat- restricted under debt covenants on the balance sheet. ed with certain investment securities, it is at least reasonably egories as follows: possible that changes in net values of investment securities will occur in the near term and that such changes could materially the University to generate a return that will support operations Compensated Absences—As of June 30, 2005, the University The following table is a summary of investments where cost basis exceeds fair market value at June 30, 2005, aggregated by investment category and length of time that individual securities affect the amounts recorded in the balance sheet. and release of temporary restrictions on net assets to be used for had an obligation relating to its employees’ rights to receive have been in a continuous unrealized loss position: Auxiliary Operations—Auxiliary operations consist primarily of long-term purposes. compensation for future absences. This obligation is attributable student housing facilities, dining services, and other student Use of Estimates in the Preparation of Financial Statements— to employees’ services already rendered. The employees are services. The preparation of financial statements in conformity with allowed to carry forward up to two years of compensated At June 30, 2005 Concentrations of Credit Risk—The University is subject to con- accounting principles generally accepted in the United States of absences earned but unused at the end of the fiscal year. The lia- Less than 12 months 12 months or more Total bility for compensated absences is included in accrued liabilities centrations of credit risk relating primarily to cash, marketable America requires management to make estimates and assump- Fair Unrealized Fair Unrealized Fair Unrealized securities, and receivables. The University’s cash deposits are tions that affect the reported amounts of assets and liabilities in the accompanying balance sheet. Value Losses Value Losses Value Losses held in major financial institutions. Marketable securities consist and disclosure of contingent assets and liabilities at the date of U.S. Government Grants Refundable—Advances made from primarily of domestic corporate stocks, which could subject the the financial statements and the reported amounts of revenues government agencies to the University are classified as refund- U.S. equities $ 2,310,135 $ 69,552 $ 2,591,782 $ 956,083 $ 4,901,917 $ 1,025,635 University to losses in the event of a general downturn in the and expenses during the reporting period. Actual results could able advances. Mortgage backed securities 2,520,898 45,185 2,520,898 45,185 stock market. The University has reduced its risk relating to com- differ from those estimates. Grants, Gifts, and Donations—Government grants and private Other 255,875 3,610 255,875 3,610 mon stock through diversification into investments in a variety of Property, Plant, and Equipment—Property, plant, and equip- gifts and donations include amounts received in the unrestricted Total $ 2,566,010 $ 73,162 $ 5,112,680 $ 1,001,268 $ 7,678,690 $ 1,074,430 industries. The University’s receivables from students are moni- ment are stated at cost at date of acquisition or fair value at date and temporarily restricted net asset categories. Upon expiration tored for potential losses, and an allowance for doubtful of donation, less accumulated depreciation. Plant and equip- of the restrictions, the applicable gift and grant revenue is reclas- At June 30, 2005, the University’s investment program contained 21 securities whose fair market value was below cost. Of these, five were fixed-income securities, including U.S. government accounts is established based on the age of unpaid accounts and ment are depreciated over the estimated useful lives of the sified from the temporarily restricted net asset category to the and agency obligations. The balance comprised primarily equity securities. The fair market value of these investments has declined due to a number of reasons, including changes in interest the University’s experience. Pledges receivable represent uncon- assets using the straight-line method ranging from 5 to 50 years. unrestricted net asset category. rates, changes in economic conditions, and changes in the market outlook for various industries. The University’s investment program holds a total of 67 securities, with a net unrealized gain ditional promises to give and are monitored by the University for Upon retirement or sale, the University removes the cost of the Functional Expenses—Costs related to the operation and main- position of approximately $17,242,000. potential losses. assets and the related accumulated depreciation from the tenance of physical plant, including depreciation of plant assets, Tax Status—The University has received from the Internal Revenue accounts and reflects any resulting gains or losses in income. are allocated to program and supporting activities based upon Service a determination letter of exemption from federal income Long-Lived Assets—At each balance sheet date, the University the square footage of utilized facilities. Interest costs are allocat- 4. PROPERTY, PLANT AND EQUIPMENT tax under Section 501 (c)(3) of the Internal Revenue Code, and evaluates the carrying amount of its long-lived assets. In the event ed to program and supporting activities based upon the use of Property, plant, and equipment at June 30, 2005 and 2004, consisted of the following: accordingly, no provision has been made for such taxes. that facts and circumstances indicate that the cost of long-lived the funds borrowed. 2005 2004 Operating Measure—The operating activities of the University assets may be impaired, an evaluation of recoverability would be Reclassifications—Certain amounts in the financial statements Buildings and improvements $ 68,976,496 $ 67,610,639 include all current income and expenses, including unrestricted performed. If an evaluation of impairment is required, the estimat- as of and for the year ended June 30, 2004, have been reclassi- Machinery and equipment 14,759,116 9,878,815 and temporarily restricted gifts and donations related to carrying ed future undiscounted cash flows associated with an asset would fied to conform with the June 30, 2005, presentation. Furniture and fixtures 1,084,335 1,040,025 out its mission of educating students. Non-operating activities be compared to the asset’s carrying amount to determine if a Library books 9,150,419 8,756,538 reflect gifts and donations of a permanent nature to be used by write-down to market value or cash flow value is required. Software 3,368,632 3,368,632 Total 97,338,998 90,654,649 Less accumulated depreciation (31,490,675) (27,641,552) 2. PLEDGES RECEIVABLE Net depreciable plant and equipment 65,848,323 63,013,097 Pledges receivable are expected to be realized at June 30, 2005 and 2004, in the following periods: Construction-in-progress 1,099,605 2,949,400 2005 2004 Land 11,870,209 11,243,609 Less than one year $ 819,203 $ 1,379,810 Property, plant and equipment–net $ 78,818,137 $77,206,106 Between one and five years 3,348,394 3,647,127 More than five years 1,915,417 2,343,449 5. BONDS PAYABLE Gross pledges 6,083,014 7,370,386 Bonds and loans payable at June 30, 2005 and 2004, consisted of the following: Less present value discount (669,645) (877,565) 2005 2004 Net pledges receivable $ 5,413,369 $ 6,492,821 Wallis County Higher Education Facilities Corporation revenue and refunding bonds, interest rates ranging from 6.120% to 8.930%, annual principal payments ranging from $190,000 to $750,000 with interest due semiannually, maturity dates from 2005 to 2021, collateralized by revenues $ 7,345,000 $ 7,560,000 Net pledges receivable at June 30, 2005 and 2004, included pledges with the following restrictions: Building bonds bearing interest at 3%, annual principal payments ranging from $26,000 to $42,000 with interest due semiannually, maturity dates 2005 2004 from 2005 to 2019, collateralized by first mortgages on buildings, first liens on net revenues from operation of the buildings, marketable securities, Gifts to the capital campaign for construction of plant $ 779,963 $ 1,812,228 and cash on deposit with trustees 520,000 580,000 Gifts to the capital campaign–undesignated 1,236,446 1,582,627 Crawford Educational Facilities Corporation Higher Education Revenue Bonds, interest rates ranging from 2.250% to 5.375%, annual principal Gifts restricted for nonoperating activities 2,305,308 1,198,127 payments ranging from $315,000 to $2,095,000 with interest due semiannually, maturity dates from 2005 to 2027, collateralized by revenues 19,685,000 20,000,000 Gifts to endowment for general and scholarship purposes 1,091,652 1,899,839 Milford Higher Education Facilities Corporation Tax Exempt Loan, quarterly interest payments at 3.09%, quarterly principal payments of $62,500 through 2013 2,125,000 2,375,000 Total $ 5,413,369 $ 6,492,821 Subtotal 29,675,000 30,515,000 Less discount on issuance of Crawford Educational Facilities Corporation Higher Education Revenue Bonds (89,847) (93,931) 3. MARKETABLE SECURITIES Total $ 29,585,153 $ 30,421,069 Marketable securities at June 30, 2005 and 2004, consisted of the following: 2005 2004 Total interest expense incurred on bonds and loans payable for the years ended June 30, 2005 and 2004, was $1,639,850 and $1,388,691, respectively. Market Value Cost Market Value Cost Future principal maturities of bonds and loans payable at June 30, 2005, were as follows: Equities $ 33,196,923 $ 15,542,042 $ 32,244,696 $ 13,984,597 U.S. government and agency securities 2006 $864,000 and corporate bonds 6,932,202 6,729,736 7,022,874 6,818,185 2007 894,000 Temporary cash investments 886,560 886,560 771,342 748,284 2008 924,000 Total $ 41,015,685 $ 23,158,338 $ 40,038,912 $ 21,551,066 2009 959,000 2010 992,000 Investment return and its classification in the statements of activities for the years ended June 30, 2005 and 2004, was as follows: 2005 Thereafter 25,042,000 Unrestricted Temporarily Permanently Total Total $ 29,675,000 Restricted Restricted Dividends and interest $ 842,018 $ - $ 206,743 $ 1,048,761 In June 2004, the University established a revolving credit line of $1,000,000 bearing an interest rate at prime minus 1% or adjusted LIBOR plus 2%. This credit line expired in June 2005 Net realized and unrealized gains 405,159 --405,159 and was subsequently reestablished. It will expire in June 2006. Endowment earnings used for current operations (1,674,431) - - (1,674,431) 6. NET ASSETS Endowment losses in excess of amounts Temporarily restricted net assets at June 30, 2005 and 2004, consisted of the following: designated for current operations–net $ (427,254) $ - $ 206,743 $ (220,511) 2005 2004 2004 Restricted for operating activities $ 4,565,899 $ 3,099,017 Unrestricted Temporarily Permanently Total Restricted for investment in land, building and equipment 3,626,611 4,692,788 Restricted Restricted Total temporarily restricted net assets $ 8,192,510 $ 7,791,805 Dividends and interest $ 529,880 $ - $ 417,478 $ 947,358 Net realized and unrealized gains 2,640,954 - - 2,640,954 Permanently restricted net assets consisted of endowment assets restricted for general and scholarship purposes of $30,188,203 and $29,414,671 as of June 30, 2005 and 2004, Endowment earnings used respectively. During 2005 and 2004, management reclassified net assets amounting to $305,925 and $25,000, respectively, based on clarification of donor intent. for current operations (1,659,403) - - (1,659,403) Endowment gains in excess of amounts designated for current operations–net $ 1,511,431 $ - $ 417,478 $ 1,928,909

Investment return was reported net of custodial and investment advisory fees of $179,580 and $171,554 for the years ended June 30, 2005 and 2004, respectively. 7. RETIREMENT BENEFITS 2005 VOLUNTEER LEADERSHIP The University has a defined contribution plan, which is available to all benefit eligible employees. Employees may contribute up to 25% (including University matching contributions, if any) of annual compensation, subject to statutory limitations, to (i) individual annuity plans from several insurance companies and (ii) a selected group of mutual funds managed by a third-party administrator. The University makes matching contributions equal to 6% of annual compensation for employees with at least one year of continuous service with the University. The University’s BILINGUAL JOURNALISM Mr. H.N. Myrick, ScD CENTER FOR Mr. William T. Slick, Jr. Ms. Janiece Longoria Facilities Environment Group, Inc. INTERNATIONAL STUDIES Ogden Gibson White contribution expense for fiscal year 2005 and 2004 was $766,764 and $741,533, respectively. Mr. Frank Castallanos Mr. Robert J. Young & Broocks LLP Radico Unica During 2004, the University implemented a retiree medical plan for retired employees with 20 years of service who have reached the age of 60 and are not yet eligible for Medicare. The Mr. Jack D. O’Connell Ms. Saba Abashawl Rev. William Young, CSB GES Exposition Services City of Houston Ms. Maconda Brown O’Connor monthly benefit is the current average employer cost for medical insurance. At June 30, 2005, one retired employee was enrolled in the plan. The University recorded expense of $125,530 University of St. Thomas Mr. & Mrs. William Esparza Brown Foundation for this plan during 2004, which was reduced by $86,275 in 2005 due to the 2004 actuary report. Expense of $61,804 was recorded for 2005. Que Onda Magazine Ms. Carmen Orta Mr. Jamil Al-Dandany American Communications Services, Inc. Aramco Services Company CENTER FOR Mr. John Phillips Mr. Benjamin Frieventh THOMISTIC STUDIES Texas State Bank 8. COMMITMENTS AND CONTINGENCIES Semana Newspaper Ms. Kathryn L. Patton Mr. Luis Benavides The University is subject to the oversight of the U.S. Department of Education relating to student financial aid and other agencies relating to grant programs. Management believes that Illinois Power Company Cementos de Mexico (CEMEX) Rev. Romanus Cessario, OP Mr. John Rossitto Ms. Lisa Garnica St. John’s Seminary the University is in substantial compliance with the terms of these programs and findings, if any, resulting from such oversight, would not have a material adverse impact on the University’s Trustmark National Bank Radico Unica Mr. Sylvan Schwartz, Jr. Mr. Renato Tadeu Bertani financial statements. Phoenix Advisors, LLC Petrobras Americas Inc. Dr. Jude P. Dougherty Mr. Sylvan Schwartz, Jr. Mr. Orlando Seoane Catholic University of America Phoenix Advisors, LLC 9. RELATED PARTY TRANSACTIONS La Voz de Houston Mr. Myron Steves, Jr. Mr. Ebrahim S. Delpassand Most Rev. Joseph A. Fiorenza Related party transactions include pledges receivable and other receivables due from the Basilian Fathers, who nominate at least one-third of the Board of Directors of the University. Myron F. Steves & Company Excel Diagnostics Imaging Clinics Mr. Robert Strudler Ms. Deanna Landron Archbishop of Galveston-Houston Lennar Corporation Included within pledges receivable is $350,000 and $400,000 due from them at June 30, 2005 and 2004, respectively. KXLN-TV Univision 45 Mr. Herbert Weiss Mr. Ken R. Evans ExxonMobil Francis Cardinal George, OMI Mr. Charles Thomas Ms. Patricia Montroft Archbishop of Chicago 10. FAIR VALUE OF FINANCIAL INSTRUMENTS SCHOOL OF EDUCATION Buena Suerte Mr. Harry Gee, Jr. Ms. Madelyn von Eschenbach Statement of Financial Accounting Standards (“SFAS”) No. 107, Disclosures about Fair Value of Financial Instruments, as amended by SFAS No. 126, Exemption from Certain Required The Honorable Eric Andell Most Rev. Wilton Gregory Attorney Dr. Richard E. Wainerdi Disclosures about Financial Instruments for Certain Nonpublic Entities, requires disclosure of fair value information about financial instruments for which it is practical to estimate that value. Ms. Frances Morua First Court of Appeals Bishop of Belleville Texas Medical Center As of June 30, 2005 and 2004, management estimates that (i) the carrying amounts of cash and cash equivalents, cash restricted under debt covenants, cash restricted for investment in land, La Prensa Dr. Gary Glober Ms. Ann Best UT-MD Anderson Cancer Center Dr. Russell Hittinger building, and equipment, student accounts and other receivables, prepayments, accounts payable, accrued liabilities, deferred revenues, and U.S. government grants refundable approximate Ms. Grace Oliveras Teach for America University of Tulsa Mr. Marty Wickliff Epstein Becker Green Wickliff fair values because of the short maturity of these instruments; (ii) the fair value of the University’s investments in marketable securities is based upon the quoted market price on the last busi- KXLN-TV Univision 45 Mr. J. Michael Hafner & Hall, P.C. ness day of the fiscal year; and (iii) based on borrowing rates currently available with similar terms and average maturities, bonds, and loans payable with carrying values of $29,675,000 have Ms. Theresa M. Campos Morgan Stanley Dr. Deal Hudson fair values of approximately $33,775,000 at June 30, 2005. Ms. Olga Ordonez Helms Community Learning Center Crisis Magazine La Voz de Houston Mr. Mont Hoyt PASTORS’ ADVISORY COUNCIL Ms. Linda Clarke Munsch Hardt Kopf & Harr, P.C. The Honorable Carolyn Dineen King Mr. Emiliano Martinez Paula Chief Judge, Fifth Circuit Court Rev. Msgr. Chester Borski Dr. Ellen de Kanter La Informacion His Eminence Oscar Rodriguez St. Martha Church Rev. Armand Maurer, CSB Ms. Rebecca Flores Cardinal of Honduras Rev. Terence P. Brinkman Mrs. Lina Koscak Martinez Greater Houston Partnership Pontifical Institute of La Informacion Mr. Keith Miceli Medieval Studies Sacred Heart Church Mr. Roberto Gonzalez Houston World Trade Center/GHP Rev. Brendan Cahill Ms. Raquel Rodriguez R. Gonzalez & Associates, Inc. Dr. Ralph McInerny La Prensa Mr. Victor Obadiah Jacques Maritain Center St. Mary’s Seminary Ms. Margaret Guerriero Total E&P New Ventures, Inc. Ms. Rose Mary Salum Rev. Richard John Neuhaus Rev. Paul Chovanec Visible Magazine Ms. Kathryn Hooper Mr. Bradley J. Richards Religion and Public Life Institute St. Christopher Church First Presbyterian School Haynes and Boone, LLP Mr. Orlando Seoane Mr. Robert Royal Rev. José Isidoro Garcia, OMI La Voz de Houston Ms. Barbara Hurwitz The Honorable Eduardo Rivoldi Faith and Reason Institute Blessed Sacrament Church Consul General, Republic of Peru Dr. Manuel Sosa Mr. Peter Linden Dr. Janet Smith Rev. Troy Gately University of St. Thomas Leadership Consulting Group Mr. Robert Smith III Sacred Heart Major Seminary Diocese of Galveston-Houston Federal Reserve Bank of Dallas-Houston Mr. Jesus Lopez Stapia Ms. Ginny Malloy Mr. Micajah S. Stude Rev. Msgr. James L. Golasinski Annunciation Church El Dia Ms. JoAnne McLaughlin Ms. Emily Untermeyer Brown Foundation Amigos de las Americas Very Rev. Kenneth J. Howard, SSJ CAMERON SCHOOL Sr. Jane Meyer, OP Dr. David Solomon St. Agnes Academy University of Notre Dame St. Francis Xavier OF BUSINESS Mr. Don J. Wang Metro Bank Rev. Hubert J. Kealy Mr. Ronald W. Adzgery Ms. Gayle Mouton Mr. George Weigel Ethics and Public Policy Center St. Pius V Church Fulbright & Jawoski Mr. Richard Nevle CENTER FOR IRISH STUDIES Strake Jesuit College Rev. Msgr. Adam S. McClosky Mr. Richard Bonneville, Retired Ms. Delia Cowles Mr. Kenneth Whitehead Preparatory School All Saints Church Santa Fe Energy Resources The Irish Society Former U.S. Assistant Secretary of Education for Postsecondary Ms. Gabrielle New-Seekely Rev. Thomas F. Rafferty Mr. Steve Bryant Ms. Mary Elizabeth Donovan Education St. Justin Martyr Bryant & Associates, PC Ms. Kim Ogg Mr. T.J. Horan Crime Stoppers PRESIDENT’S ADVISORY Rev. 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