The accompanying financial statements have been prepared substantially on the accrual basis of accounting.  Investment income and investment and management expenses, including post-retirement benefit expense, are recorded on the cash basis, the effect of which on the accompanying financial statements is not materially different from the accrual basis.  Grants are accrued when authorized by the Trustees. Certain accounting estimates are a routine part of financial statements prepared by management and are based upon management’s current judgments. Actual results could differ from these estimates.

Gains or losses on disposal of investments are determined on the first-in, first-out basis. Fair value for public securities is based on quoted market prices.  Investments within equity hedge funds, focused equity strategies, and limited marketability are reported at estimated fair values based upon information provided by the investment managers.  The valuations may be subject to liquidity restrictions in the event of a sale.

2. Investments

Investments at December 31, 2004 and 2003 are summarized as follows:

				2004				2003
				Cost		Fair Value		Cost		Fair Value
Equities
	Large Capitalization		$	279,987,037	$	355,106,856	$	261,678,985	$	314,800,323
	Small Capitalization			70,527,746		116,147,579		105,744,163		133,279,754
	Equity Hedge Funds			106,662,409		162,175,101		84,021,837		122,200,582
	Focused Equity Strategies			138,453,568		194,019,547		149,506,576		197,564,987
	Non-US			182,954,787		278,002,123		163,656,032		226,707,292
	Pending equity
		transactions, net		64,211		64,211		9,852,644		9,852,644
Fixed Income
	Bonds and Notes			286,269,325		291,783,784		290,418,740		291,305,072
	Obligation to return collateral
		held under securities
		lending agreement		(46,506,399)		(46,506,399)		(43,186,802)		(43,186,802)
Limited Marketability
	Real Estate			15,140,377		13,488,251		5,865,265		3,596,209
	Private Equity			183,792,740		140,528,034		162,552,352		119,240,389
		Total	$	1,217,345,801	$	1,504,809,087	$	1,190,109,792	$	1,375,360,450

At December 31, 2004, the Foundation had unfunded commitments to limited partnerships of approximately $160 million.

3. Financial Instruments with Off-Balance-Sheet Credit or Market Risk

The Foundation's investment strategy incorporates certain financial instruments which involve, to varying degrees, elements of market risk and credit risk in excess of the amounts recorded in the financial statements.  These instruments include forward foreign currency contracts and loaned securities.

The Foundation purchases forward foreign currency contracts as a hedge against fluctuations in currency prices.  Forward foreign currency buy and sell contracts held as of December 31, 2004 were valued at approximately $1.6 million and $1.6 million, respectively, and, as of December 31, 2003, at approximately $6.4 million and $6.3 million, respectively.  Such contracts involve, to varying degrees, risk of loss arising from the possible inability of counterparties to meet the terms of the contract.

Through a securities lending program managed by a custodian firm, the Foundation loans certain stocks and bonds included in its investment portfolio. The custodian firm has indemnified the program. The Foundation’s gross securities loaned to certain borrowers at December 31, 2004 and 2003 amounted to $45 million and $42 million, respectively. The Foundation holds collateral of 103 percent of the market value of the lent securities.

Management does not anticipate that losses, if any, resulting from its market or credit risks would materially affect the financial position of the Foundation.

4. Taxes

The Foundation is liable for a federal excise tax of 2 percent of its net investment income, which includes realized capital gains.  However, this tax is reduced to 1 percent if certain conditions are met.  The Foundation did not meet the requirements for the 1 percent tax for the year ended December 31, 2004; however, it did meet the requirements for the 1 percent tax for the year ended December 31, 2003.  Therefore, current taxes are estimated at 2 percent of net investment income for 2004 and at 1 percent for 2003.  Additionally, certain of the Foundation’s investments give rise to unrelated business income tax liabilities.  Such tax liabilities for 2004 and 2003 are not significant to the accompanying financial statements; however, the provision for taxes, as of December 31, 2004 and 2003, includes an estimate of tax liabilities for unrelated business income.

Deferred taxes principally arise from differences between the cost value and fair value of investments. Since the qualification for the 1 percent tax is not determinable until the fiscal year in which net gains are realized, deferred taxes represent 2 percent of unrealized gains at December 31, 2004 and 2003.   

5. Retirement Plan

The Foundation has a defined contribution retirement plan covering substantially all employees under arrangements with Teachers Insurance and Annuity Association of America and College Retirement Equities Fund which provides for the purchase of annuities for employees.  Retirement plan expense was $506,320 and $475,430 in 2004 and 2003, respectively.  In addition, the Foundation provides certain health care and life insurance benefits to its retirees.  The cost of providing these benefits to retirees was $177,522 and $162,851 in 2004 and 2003, respectively, on a pay-as-you-go basis.

6. Lease

The Foundation entered into a ten-year lease effective January 1, 1999.  The lease contains an escalation clause which provides for rental increases resulting from increases in real estate taxes and certain operating expenses.  Annual base rent expense increased in 2004 to approximately $707,000 from approximately $652,000 in 2003. Rent expense for 2004 and 2003, including escalations, was $816,383 and $775,969, respectively.