Annual Report

Notes to Financial Statements
DECEMBER 31, 2006 AND 2005

1. Summary of Significant Accounting Policies
   

   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. Investments are stated at fair value. The fair values of all debt and equity securities with a readily determinable fair value are based on quotations obtained from national securities exchanges. The alternative investments, which are not readily marketable, are carried at estimated fair values as provided by the investment managers. The Foundation reviews and evaluates the values provided by the investment managers and agrees with the valuation methods and assumptions used in determining the fair value of the alternative investments. Those estimated fair values may differ significantly from the values that would have been used had a ready market for these securities existed.

2. Investments
   

   Investments at December 31, 2006 and 2005 are summarized as follows:

   		2006				2005
   		Cost		Fair value		Cost		Fair Value
   Equities:
   Large capitalization	$	227,016,783)		267,858,415)		261,477,002)		314,424,368)
   Small capitalization		47,000,000)		73,055,990)		47,000,000)		67,761,605)
   Equity hedge funds		92,283,000)		176,348,725)		92,000,000)		143,945,566)
   Absolute return strategies		235,424,780)		364,085,640)		236,970,589)		322,012,337)
   Non-US		181,401,905)		318,984,806)		154,289,717)		272,785,171)
   Pending equity
   transactions, net		25,125		25,125		(71,238)		(71,238)
   Fixed income:
   Bonds and notes		359,734,145)		377,658,756)		299,031,212)		298,369,678)
   Obligations to return collateral
   held under securities
   lending agreement		(50,587,626)		(50,587,626)		(43,836,604)		(43,836,604)
   Pending fixed income
   transactions, net		2,932,637		2,932,636		(3,473,983)		(3,473,983)
   Limited marketability:
   Real estate		33,986,748)		39,662,672)		26,832,958)		25,667,460)
   Private equity		221,460,262)		235,476,065)		215,275,143)		182,855,293)
   Total	$	1,354,677,759)		1,805,501,204)		1,285,494,796)		1,580,439,653)

   
   At December 31, 2006, the Foundation had unfunded commitments to limited partnerships of approximately $260 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. There were no forward foreign currency buy and sell contracts held as of December 31, 2006. As of December 31, 2005, forward foreign currency buy and sell contracts were valued at approximately $1,100 and $1,100, 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, 2006 and 2005 amounted to $51 million and $43 million, respectively. The Foundation holds collateral of 102 percent of the market value of the loaned 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 years ended December 31, 2006 and December 31, 2005. Therefore, current taxes are estimated at 2 percent of net investment income for 2006 and for 2005. Additionally, certain of the Foundation's investments give rise to unrelated business income tax liabilities. Such tax liabilities for 2006 and 2005 are not significant to the accompanying financial statements; however, the provision for taxes, as of December 31, 2006 and 2005, 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, 2006 and 2005.

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 $537,884 and $524,840 in 2006 and 2005, 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 $204,364 and $188,140 in 2006 and 2005, 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. Rent expense for 2006 and 2005, including escalations, was $953,863 and $859,757, respectively. On January 11, 2007, the Foundation renegotiated its lease for the period commencing on January 1, 2009 and expiring on December 31, 2016. As a result of the renegotiation, the fixed rent payable under the lease shall be an amount equal to (a) $1,270,335 per annum for the period commencing on January 1, 2007 and ending on December 31, 2011, and (b) $1,379,926 per annum for the period commencing on January 1, 2012 and ending on December 31, 2016.