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Property and Equipment is stated at cost and depreciated using thestraight-line method over estimated useful lives of the assets ranging from3 to 10 years. Leasehold improvements are amortized over the lesser ofthe asset’s useful life or the lease term.Fee Income — A securities lending program is managed by theFoundation’s investment custodian. This program permits the custodianto loan certain of the Foundation’s stocks and bonds included inits investment portfolio. The Foundation’s investment custodian hasindemnified the Foundation against the counterparty risk and theFoundation receives a fee from the custodian related to securities loanedunder the program.Grants are expensed when the unconditional promise to give is approvedby the Board of Directors. Conditional promises to give, consistingprimarily of grants with matching requirements, are recognized as grantexpense in the period in which the recipient meets the terms of thecondition. Such conditions may also include other requirements, such asthe requirement for a newly formed organization to successfully establishits 501(c)(3) status before the grant becomes unconditional. Grant refundsare recorded as a reduction of grant expense at the time the Foundationbecomes aware the grant will be refunded.Functional Expense Allocations — Expenses, such as salaries andpayroll taxes, travel and meeting expense, depreciation and amortization,and rent, are allocated among investment expenses and programadministration expenses based on employee ratios and estimates madeby the Foundation’s management.purchases of securities approximate fair value because of the shortmaturity of these financial instruments. Investments are held at estimatedfair value. The alternative investments represent investments in limitedpartnerships, hedge funds, and other non-public investments, whichinclude nonmarketable and restricted investment securities whose valueshave been estimated by the general partner of the limited partnershipor the managing member of the corporation in the absence of readilyascertainable market values. Because of the inherent uncertainty ofvaluation of nonmarketable and restricted investments, those estimatedvalues may differ significantly from the values that would have beenused had a ready market for the securities existed, and the differencescould be material. The carrying amount of grants payable approximatesfair value because such liabilities are recorded at estimated net presentvalue based on anticipated future cash flows.Concentrations of Credit Risk — Financial instruments, which potentiallysubject the Foundation to credit risk, consist primarily of cash, cashequivalents, and investments. The Foundation maintains cash and cashequivalents with major financial institutions. At times, such amounts mayexceed Federal Deposit Insurance Corporation limits. The Foundation’sinvestments have been placed with high-quality counter parties. TheFoundation closely monitors these investments and has not experiencedsignificant credit losses.Tax Exempt Status — The Foundation is a private foundation and isexempt from federal income taxes under Section 501(c)(3) of the Code andfrom California franchise and/or income taxes under Section 23701(d) ofthe Revenue and Taxation Code.Pension Plan — The Foundation provides a defined contribution pensionplan for all its employees. The plan is funded by the Foundation andmaintained by an independent trustee. Contributions to the plan wereapproximately $545,000 and $554,000 in 2004 and 2003, respectively.Estimated Fair Value of Financial Instruments — The carrying amountsof cash, receivable from sales of securities, interest and dividendsreceivable, accounts payable and other accrued liabilities, and payable for45