Notes to Financial Statements

2. Summary of Significant Accounting Policies

The accompanying financial statements are prepared on the accrual basis, which is in conformity with accounting principles generally accepted in the United States of America.

Cash and cash equivalents represent cash and short-term investments purchased with an original maturity of three months or less. The stated value approximates fair value. Book overdrafts, representing cash accounts with negative book balances, are considered current liabilities. In this regard, book overdrafts of $14.5 million at December 31, 2006 and $25.5 million at December 31, 2005 were included in accounts payable in the accompanying balance sheet.

Marketable securities are reported on the basis of quoted market value as reported on the last business day of the year on securities exchanges throughout the world. Purchases and sales of securities are recorded on a trade date basis. Realized gains and losses on investments in securities are calculated based on the first-in, first-out method, and are reflected in the Statement of Activities. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis.

Alternative investments include investments in limited partnership funds (hedge funds and private equity). Alternative investment interests are stated at fair value based on financial statements and other information received from the funds. Fair value is the estimated net realizable value of holdings priced at quoted market value (where market quotations are available), historical cost or other estimates including appraisals. The Foundation believes that the stated value of its alternative investments was a reasonable estimate of its fair value as of December 31, 2006 and 2005. However, alternative investments are not marketable and many alternative investments have underlying investments which do not have quoted market values. The estimated value is subject to uncertainty and could differ had a ready market existed. Such differences could be material. The amount of gain or loss associated with these investments is reflected in the accompanying financial statements using the equity method of accounting. Actual gains or losses are dependent upon the general partners’ distributions during the life of each partnership.

Property and equipment are capitalized and carried at cost. Maintenance and repairs are charged to expense as incurred. Depreciation of approximately $5.5 million in 2006 and $6.2 million in 2005 was calculated using the straight-line method over the estimated useful lives of the depreciable assets.

The Internal Revenue Service requires the Foundation to distribute within 12 months of the end of each year approximately 5 percent of the average fair value of its assets not used in carrying out the charitable purpose of the Foundation. The distribution requirement for 2005 has been met and the 2006 requirement is expected to be met during 2007.

Deferred federal excise taxes are the result of unrealized appreciation on investments being reported for financial statement purposes in different periods than for tax purposes.

Net Assets Accounting—The Foundation reports information regarding its financial position and activities according to the following two classes of net assets:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Foundation makes significant estimates regarding the value of limited partnership investments, discounts for contributions receivable and unpaid grants, and useful lives of property and equipment. Actual results could differ from these estimates.