F INANCIAL S TATEMENTS. Lutheran Community Foundation Years Ended December 31, 2013 and 2012 With Report of Independent Auditors.

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1 F INANCIAL S TATEMENTS Years Ended December 31, 2013 and 2012 With Report of Independent Auditors Ernst & Young LLP

2 Financial Statements Years Ended December 31, 2013 and 2012 Contents Report of Independent Auditors...1 Financial Statements Statements of Financial Position...3 Statements of Activity and Change in Net Assets...4 Statements of Cash Flows...6 Notes to Financial Statements

3 Ernst & Young LLP Suite South Sixth Street Minneapolis, MN Tel: Fax: ey.com The Board of Directors Report of Independent Auditors We have audited the accompanying financial statements of, which comprise the statements of financial position as of December 31, 2013 and 2012, and the related statements of activity and change in net assets and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion A member firm of Ernst & Young Global Limited

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of at December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. April 17, 2014 ey A member firm of Ernst & Young Global Limited

5 Statements of Financial Position December Assets Cash and cash equivalents $ 2,866,370 $ 2,064,779 Investments: Certificates of deposit 497, ,569 Mutual funds 170,107, ,392,097 Other investment funds 101,411,769 88,717,234 Common stocks 189, ,720 U.S. Treasury Notes 2,540,448 2,175,801 Life insurance and annuity contracts 40,599,181 37,964,820 Real assets 5,849,273 8,331, ,194, ,611,040 Due from brokers and others 1,003, ,015 Note receivable 80,002 Contributions and other receivables 195,297 4,106,103 Beneficial interests in trusts held by others 333, ,909 Property and equipment 2,391 4,654 Prepaid general expenses 30,236 27,105 Total assets $ 325,625,929 $ 287,070,607 Liabilities and net assets Liabilities: Accounts payable $ 165,367 $ 96,247 Amounts held for the benefit of others 40,256,717 35,300,962 Gift annuities 23,501,518 22,506,905 Charitable remainder trust agreements 24,338,191 24,673,400 Retained life estates 158, ,722 Total liabilities 88,420,410 82,800,236 Net assets: Unrestricted 210,005, ,838,422 Temporarily restricted 27,200,025 24,431,949 Total net assets 237,205, ,270,371 Total liabilities and net assets $ 325,625,929 $ 287,070,607 See accompanying notes

6 Statements of Activity and Change in Net Assets Year Ended December 31, 2013 Temporarily Unrestricted Restricted Total Revenue, gains, and other support: Contributions $ 20,220,040 $ 1,345,429 $ 21,565,469 Net investment income 22,501,667 3,150,918 25,652,585 Change in cash surrender value of life insurance contracts 3,041, ,892 3,167,204 Change in value of split-interest agreements (1,633,384) (737,838) (2,371,222) Miscellaneous income (loss) 798,646 (265,572) 533,074 Total revenue, gains, and other support 44,928,281 3,618,829 48,547,110 Expenses: Programs 10,117,813 10,117,813 Administrative 1,248,090 1,248,090 Fund-raising 972, ,113 Special projects Initiatives 318, ,545 Premiums on life insurance contracts 2,955,401 2,955,401 Total expenses 15,611,962 15,611,962 Change in net assets 29,316,319 3,618,829 32,935,148 Net assets released from restriction 850,753 (850,753) Net assets at beginning of year 179,838,422 24,431, ,270,371 Net assets at end of year $ 210,005,494 $ 27,200,025 $ 237,205,519 See accompanying notes

7 Statements of Activity and Change in Net Assets (continued) Year Ended December 31, 2012 Temporarily Unrestricted Restricted Total Revenue, gains, and other support: Contributions $ 18,681,325 $ 2,922,482 $ 21,603,807 Net investment income 16,996,759 4,364,475 21,361,234 Change in cash surrender value of life insurance contracts 4,074,168 92,599 4,166,767 Change in value of split-interest agreements (1,088,799) (2,071,877) (3,160,676) Miscellaneous income (loss) 710,772 (365,161) 345,611 Total revenue, gains, and other support 39,374,225 4,942,518 44,316,743 Expenses: Programs 8,898,156 8,898,156 Administrative 1,179,279 1,179,279 Fund-raising 922, ,650 Special projects 133, ,111 Initiatives 243, ,479 Premiums on life insurance contracts 2,960,356 2,960,356 Total expenses 14,337,031 14,337,031 Change in net assets 25,037,194 4,942,518 29,979,712 Net assets released from restriction 545,716 (545,716) Net assets at beginning of year 154,255,512 20,035, ,290,659 Net assets at end of year $ 179,838,422 $ 24,431,949 $ 204,270,371 See accompanying notes

8 Statements of Cash Flows Year Ended December Operating activities Change in net assets $ 32,935,148 $ 29,979,712 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 2,263 3,798 Net unrealized (appreciation) depreciation of investments (22,017,340) (15,911,467) Net realized losses on investments (1,715,310) (2,587,417) Contribution of investments (7,164,900) (12,735,133) Change in cash surrender value of life insurance contracts and annuities (2,634,361) (3,435,858) Changes in assets and liabilities: Due from brokers and others (203,463) (753,514) Note receivable 80,002 80,002 Contributions and other receivables 3,910,806 (3,564,741) Beneficial interest in trust held by others 43,354 42,588 Prepaid general expenses (3,131) 1,150 Accounts payable 69,120 47,800 Amounts held for the benefit of others 4,955,755 4,650,415 Gift annuities 994, ,553 Charitable remainder trust agreements (335,209) 5,748,133 Retained life estate (64,105) (84,076) Net cash provided by operating activities 8,853,242 1,707,945 Investing activities Purchase of investments (126,095,754) (71,314,614) Proceeds from sale of investments 118,044,103 63,845,865 Net cash (used in) provided by investing activities (8,051,651) (7,468,749) Net increase in cash and cash equivalents 801,591 (5,760,804) Cash and cash equivalents, beginning of year 2,064,779 7,825,583 Cash and cash equivalents, end of year $ 2,866,370 $ 2,064,779 See accompanying notes

9 Notes to Financial Statements December 31, Organization The (LCF) is a Minnesota nonprofit corporation operated for charitable purposes. The LCF is dedicated to supporting the charitable, religious, and educational purposes and activities of Lutheran congregations, institutions, and communities and benefiting society in general. The LCF was incorporated on December 22, 1994, was organized on April 1, 1995, and began operations on September 11, Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Subsequent Events The LCF evaluated events or transactions that may have occurred after December 31, 2013, that would merit recognition or disclosure in the financial statements. The LCF is not aware of any events subsequent to December 31, 2013, that would materially affect its financial condition. This evaluation was completed through April 17, 2014, the date the financial statements were available to be issued. Cash and Cash Equivalents The LCF considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Investments Certificates of Deposit (CD) have maturities ranging from six months to three years and are valued by discounting cash flows using current CD return rates

10 2. Summary of Significant Accounting Policies (continued) Investments in mutual and other investment funds and common stocks are carried at fair value, and realized and unrealized gains and losses are reflected in the statements of activity and change in net assets as a component of net investment income. Net realized capital gains and losses are determined on the average cost basis for mutual and other investment funds and the specific identification basis for stocks. U.S. Treasury Notes are carried at fair value and realized and unrealized gains and losses are reflected in the statements of activity and change in net assets as a component of net investment income. Net realized capital gains and losses are determined using the specific identification method. Contributed life insurance and annuity contracts are carried at cash surrender value and are reported as unrestricted contributions at the cash surrender value at the date of receipt. Cash surrender value is the amount available to the contract owner for withdrawal prior to the death of the insured and is valued after taking expense charges and investment credits into account. Investments in real assets consist of land and improvements in mineral royalty interests, which are carried at fair value as of the financial statement date. Contributions and Other Receivables Promises to make contributions to the LCF that are communicated to the LCF prior to December 31, but which are received after December 31, are recorded as contributions receivable at the cash value of the contribution. The LCF generally does not receive multi-year promises to give. Beneficial Interests in Trusts Held by Others Beneficial interests in trusts held by others represent resources neither in the possession nor under the control of the LCF, but held and administered by outside fiscal agents, with the LCF deriving income from such funds and are reported at fair value

11 2. Summary of Significant Accounting Policies (continued) Amounts Held for the Benefit of Others The LCF accepts cash and other financial assets from certain donors and agrees to use those assets on behalf of or transfer those assets to specified beneficiaries. Liabilities are recorded for amounts held for the benefit of others, which represent the fair value of underlying investments. Gift Annuities and Charitable Remainder Trust Agreements Liabilities for gift annuities and charitable remainder trust agreements represent the actuarial present value of amounts from contributed assets due to the donor. Liabilities are valued based on mortality and interest assumptions according to tables established by the Internal Revenue Service (IRS) and are calculated in a manner consistent with the assumptions underlying the American Council on Gift Annuities rates in effect at the time of issuance. The liabilities are revalued using updated IRS assumptions as of December 31 each year. The impact of the revaluation is reflected as a component of the change in value of split interest agreements on the statements of activity and change in net assets. Contributions Received Contributions received are recognized as support revenue in the period they are received at their fair value. Gifts of cash and other assets are reported as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are transferred to unrestricted net assets and are reported in the statements of activity and change in net assets as net assets released from restriction. Investment Income Net investment income is comprised of dividend and interest income and realized and unrealized gains and losses on investments. Dividend and interest income is recorded when earned, realized gains are recorded at the time of sale for the amount of the difference between the sale price and the cost basis of the investment and unrealized gains and losses are recorded for the change in the fair value of the securities which are still held as of year-end

12 2. Summary of Significant Accounting Policies (continued) Expense Recognition Grants made by the LCF are recorded as program expense at the time the grants are approved. Other expenses are recognized when incurred. Certain expenses, such as compensation, other employee benefits, and space rental, are allocated among program, administrative, and fundraising expenses, as they are not directly attributable to those functions. Premiums on Life Insurance Contracts Premiums on life insurance contracts relate to life insurance policies which have been absolutely assigned (donated) to the LCF. The LCF is the beneficiary of those policies and at the time of absolute assignment, the LCF becomes the owner of those policies. The insureds (donors) continue to make the policy premium payments. Income is recorded when the policy premiums are paid and a corresponding expense is recorded to premiums on life insurance contracts. Income Taxes The LCF has been recognized by the IRS as exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of There are no reserves held for uncertain tax positions at December 31, 2013 and Tax years 2010 through 2013 are open under the statute of limitations and remain subject to examination by the IRS. Contingencies The LCF evaluates matters as they are reported and records a liability when the outcome is both probable and estimable. The LCF is not a party to, or subject of, any pending legal, arbitration, or regulatory proceedings that would have a material adverse effect on its financial statements. No liability was recorded at December 31, 2013 and

13 3. Temporarily Restricted Net Assets Temporarily restricted net assets consist of the following at December 31, 2013 and 2012: Charitable remainder trust agreements $ 26,744,461 $ 23,945,023 Real estate remainder interest in trust 455, ,926 $ 27,200,025 $ 24,431,949 Temporarily restricted net assets are held in trust by the LCF. During the life of the trust, the LCF, as trustee, makes payments to the income beneficiary/beneficiaries. Trust termination occurs upon death of the income beneficiary/beneficiaries or in accordance with the trust agreement. Upon trust termination, the restriction is lifted on the LCF s use of principal and income remaining in accordance with the trust agreement. In each taxable year of the trusts until trust termination, the LCF will make payments to the income beneficiary/beneficiaries in an amount determined in accordance with the trust agreement, generally a percentage of the net fair market value of the assets of each trust valued as of the first day of each taxable year or the original date of the gift for unitrusts or annuity trusts, respectively. Temporarily restricted net assets shown in the statements of financial position and above are net of a related liability to income beneficiary/beneficiaries of $24,496,808 and $24,896,122 at December 31, 2013 and 2012, respectively

14 4. Investments Investments in mutual and other investment funds and publicly traded securities at December 31, 2013 and 2012, are comprised of the following: December 31, 2013 Fair Value Cost Unrealized Appreciation (Depreciation) Mutual funds: American Funds EuroPacific Growth $ 19,534,513 $ 15,333,662 $ 4,200,851 Calvert Equity Portfolio 1,029, , ,639 Calvert Global Alternative 157, ,846 (10,284) CRA Qualified Investment FD 521, ,791 (18,104) NFS Prime Money Market 8,347 8,347 Thrivent Government Bond 33,814,593 35,064,230 (1,249,637) Thrivent Income Fund 13,464,133 13,345, ,919 Thrivent Large Cap Growth Fund 21,544,808 14,069,821 7,474,987 Thrivent Large Cap Value 22,998,659 15,891,130 7,107,529 Thrivent Mid Cap Stock 15,436,284 10,954,422 4,481,862 Thrivent Money Market 1,537,838 1,537,838 Thrivent NFS Account 33,211 33,211 Thrivent Partner Worldwide Alloc. 16,199,602 14,356,171 1,843,431 Thrivent Small Cap Stock 5,807,120 4,676,487 1,130,633 Van Exk Global Hard Assets 5,915,780 5,351, ,626 Vanguard Money Market 20,914 20,914 Vanguard MSCI Emerging Markets 6,084,529 6,088,460 (3,931) Walden Small Cap Innovation 333, ,141 48,557 Wells Fargo Advantage 5,664,106 5,497, ,420 Total mutual funds 170,107, ,040,623 26,066,498 Other investment funds: Aberdeen DBT Emerging Fund 9,495,963 5,888,357 3,607,606 Boston Common Int l Fund 3,272,166 2,368, ,513 Chilton Global National Int l 3,168,373 4,091,941 (923,568) ETAP Class ,184,616 8,983,820 (1,799,204) Investment Escrow Deposits 2,500,000 2,500,000 Nyes Ledge Horizon 36,475,374 29,017,912 7,457,462 Program-related investments 544, ,998 Sanderson International Value 23,774,581 15,697,818 8,076,763 WGI Emerging Markets Smaller Co 4,312,800 4,000, ,800 Wellington Trust Company 10,682,898 11,859,429 (1,176,531) Total other investment funds 101,411,769 84,952,928 16,458,841 Publicly traded securities: Common stocks 189, ,270 (30) U.S. Treasury Notes 2,540,448 2,608,689 (68,241) Total publicly traded securities 2,729,688 2,797,959 (68,271) $ 274,248,578 $ 231,791,510 $ 42,457,

15 4. Investments (continued) December 31, 2012 Fair Value Cost Unrealized Appreciation (Depreciation) Mutual funds: American Funds EuroPacific Growth $ 16,950,199 $ 15,766,250 $ 1,183,949 Calvert Equity Portfolio 2,092,609 2,071,352 21,257 Calvert Global Alternative 117, ,846 (50,509) CRA Qualified Investment FD 538, ,106 13,699 NFS Prime Money Market 110, ,758 Tamarack Money Market 88,832 88,832 Thrivent Core Bond Fund 26,367,992 24,617,927 1,750,065 Thrivent Government Bond 26,714,494 26,421, ,789 Thrivent Large Cap Growth Fund 17,998,086 15,616,879 2,381,207 Thrivent Large Cap Value 18,530,719 16,150,630 2,380,089 Thrivent Mid Cap Stock 10,862,187 10,195, ,454 Thrivent Money Market 641, ,929 Thrivent Partner Worldwide Alloc. 13,590,463 13,421, ,896 Thrivent Small Cap Stock 5,468,833 5,651,615 (182,782) Vanguard MSCI Emerging Markets 1,065,172 1,000,247 64,925 Walden Small Cap Innovation 253, ,005 (9,323) Total mutual funds 141,392, ,711,381 8,680,716 Other investment funds: Aberdeen DBT Emerging Fund 10,189,693 5,888,357 4,301,336 Boston Common Int l Fund 2,317,805 1,948, ,154 Chilton Global National Int l 5,571,744 8,069,554 (2,497,810) ETAP Class ,914,286 8,983,820 (1,069,534) Nyes Ledge Horizon 29,573,586 27,017,912 2,555,674 Sanderson International Value 18,917,023 15,905,748 3,011,275 WGI Emerging Markets Smaller Co 4,345,497 4,000, ,497 Wellington Trust Company 9,887,600 10,461,738 (574,138) Total other investment funds 88,717,234 82,275,780 6,441,454 Publicly traded securities: Common stocks 531, ,560 (840) U.S. Treasury Notes 2,175,801 2,218,325 (42,524) Total publicly traded securities 2,707,521 2,750,885 (43,364) $ 232,816,852 $ 217,738,046 $ 15,078,

16 4. Investments (continued) Investments in mutual and other investment funds and publicly traded securities are shown below according to the types of agreements established between the LCF and donors at December 31, 2013 and 2012: Donor preference fund agreements $ 149,274,337 $ 123,391,455 Institution-advised fund agreements 40,225,699 35,220,033 Charitable remainder trust agreements 43,786,501 39,276,491 Gift annuity agreements 40,962,041 34,928,873 $ 274,248,578 $ 232,816,852 Investment income (loss) is comprised of the following for the years ended December 31: Temporarily Restricted Total Unrestricted Temporarily Restricted Unrestricted Total Dividends and interest income $ 1,537,835 $ 382,100 $ 1,919,935 $ 2,027,877 $ 564,473 $ 2,592,350 Net realized gain on investments 1,020, ,030 1,715,310 2,577, ,918 2,857,417 Net unrealized gain (loss) on investments 19,943,552 2,073,788 22,017,340 12,391,383 3,520,084 15,911,467 Total investment income (loss) $ 22,501,667 $ 3,150,918 $ 25,652,585 $ 16,996,759 $ 4,364,475 $ 21,361, Notes Receivable On December 18, 2003, the LCF entered into an agreement to sell closely held stock that was contributed to a charitable remainder trust. Part of the consideration received was a promissory note in the amount of $800,016. The note is payable in 10 annual installments of $80,000 plus accrued interest beginning on December 18, Interest is calculated using the prime rate minus 2% with a minimum rate of 3%. As of December 31, 2013, the note was paid in full

17 6. Management and Administrative Contracts and Others The LCF reimbursed Thrivent Financial for Lutherans for certain management and administrative services provided to the LCF, including marketing, accounting, payroll, rent, and other related expenses of $129,456 and $127,311 for the years ended December 31, 2013 and 2012, respectively. Additionally, the LCF invests approximately 48% of its investments in mutual and other investment funds advised by Thrivent Investment Management, Inc., a wholly owned subsidiary of Thrivent Financial for Lutherans, and financial associates of Thrivent Financial for Lutherans are involved in the generation of contributions to the LCF. 7. Fair Value of Financial Investments In estimating the fair values of financial instruments carried at fair value, the amount of observable and unobservable inputs used to determine fair value is taken into consideration. Each of the financial instruments has been classified into one of three categories based on that evaluation. Level 1 Fair value based on quoted prices for identical assets in active markets that are accessible. Level 2 Fair value based on quoted prices for similar instruments in active markets that are accessible; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations where the significant value driver inputs are observable. Level 3 Fair value based on significant value driver inputs that are not observable. Certificates of Deposit The fair values for certificates of deposit (CDs) are based on discounted cash flows using current CD return rates. Mutual and Other Investment Funds The fair values for investments in mutual and other investment funds are based on the quoted net asset value of the invested funds

18 7. Fair Value of Financial Investments (continued) Common Stocks and U.S. Treasury Notes The fair values for investments in common stocks and U.S. Treasury Notes are primarily based on quoted market prices in active markets where available, or are estimated using values obtained from independent pricing services that utilize market standard methodologies based on market observable inputs. Real Assets The fair values for real assets are based on estimates using values obtained from independent pricing services that utilize market standard methodologies. The fair values for mineral interests are based on estimates using values obtained from an independent appraisal service using the geosciences matrix approach, the royalty stream approach and the comparable sales approach. The carrying value and estimated fair value of the LCF s financial instruments carried at fair value as of December 31 were as follows: 2013 Estimated Fair Value Level 1 Level 2 Level 3 Total Financial instruments carried at fair value Assets: Certificates of deposit $ $ 497,569 $ $ 497,569 Common stocks 189, ,240 Mutual and other investment funds: Large cap equities 45,573,204 45,573,204 Mid cap equities 15,436,284 15,436,284 Small cap equities 6,140,818 6,140,818 Global equities 35,734,115 27,046,747 62,780,862 Emerging market equities 6,084,529 13,808,763 19,893,292 Marketable alternatives 11,737,448 23,535,887 36,475,374 71,748,709 Fixed income equities 49,945,721 49,945,721 U.S. Treasury Notes 2,540,448 2,540,448 Real assets 5,849,273 5,849,273 Total $ 173,381,807 $ 64,888,966 $ 42,324,647 $ 280,595,

19 7. Fair Value of Financial Investments (continued) 2012 Estimated Fair Value Level 1 Level 2 Level 3 Total Financial instruments carried at fair value Assets: Certificates of deposit $ $ 497,569 $ $ 497,569 Common stocks 531, ,720 Mutual and other investment funds: Large cap equities 38,621,414 38,621,414 Mid cap equities 10,862,187 10,862,187 Small cap equities 5,722,515 5,722,515 Global equities 30,657,999 21,234,828 51,892,827 Emerging market equities 1,065,172 14,535,190 15,600,362 Marketable alternatives 23,373,630 29,573,586 52,947,216 Fixed income equities 54,462,810 54,462,810 U.S. Treasury Notes 2,175,801 2,175,801 Real assets 8,331,799 8,331,799 Total $ 144,099,618 $ 59,641,217 $ 37,905,385 $ 241,646,220 For those financial instruments carried on the statements of financial position at fair value and whose fair value is categorized as Level 3, the following table shows the changes in fair value for the year ended December 31: Mutual and Other Investment Funds Real Assets Total Balance January 1, 2013 $ 29,573,586 $ 8,331,799 $ 37,905,385 Sales (1,138,226) (1,138,226) Contributions/purchases 2,000,000 1,144,920 3,144,920 Expenses (34,462) (34,462) Realized losses (198,922) (198,922) Unrealized gains (losses) 4,901,788 (2,255,836) 2,645,952 Balance December 31, 2013 $ 36,475,374 $ 5,849,273 $ 42,324,647 There were no significant transfers into or out of Level 1 or Level 2 in

20 7. Fair Value of Financial Investments (continued) Investments in other investments whose fair value is estimated using the net asset value are described below: As of December 31, 2013 Fair Value Redemption Frequency Redemption Notice (In Thousands) Global Equities: Boston Common Int l Fund (1) $ 3,272 Monthly 10 days Sanderson International Fund (2) 23,775 Monthly 6 days Emerging Market Equities: Aberdeen DBT Emerging Fund (3) 9,496 Monthly 30 days WGI Emerging Markets Smaller Co (4) 4,313 Monthly 30 days Marketable Alternatives: Chilton Global National Int l (5) 3,168 Quarterly 60 days ETAP Class (6) 7,185 Monthly 5 days Nyes Ledge Horizon (7) 36,475 Biennially 90 days Wellington Trust Company (8) 10,683 Monthly 8 days (1) The LCF has a noncontrolling equity interest in the Boston Common International Social Fund, which provides diversified exposure to mission-related, non-u.s. equities. The product s philosophy places equal emphasis on investment fundamentals and Environmental, Social, and Governance (ESG) factors with a bottom-up strategy to invest in socially-responsible, non-u.s. companies that appear undervalued relative to their long-term fundamental outlook. The fair value has been determined using the net asset value of the holdings of the fund. (2) (3) The LCF has a noncontrolling equity interest in the Sanderson International value Fund, which was formed for the purpose of achieving long-term growth principally by investing in a diversified portfolio of equity securities of companies ordinarily located in any country other than Canada and the United States. Sanderson provides relatively concentrated, diversified exposure to value stocks in the developed markets of Europe, Asia, and the Far East. It is combined with the LCF s other Global ex-u.s. equity managers to produce a diversified Global ex-u.s. equity portfolio. The fair value has been determined using the net asset value of the holdings of the fund. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees. The LCF has a noncontrolling equity interest in the Aberdeen DBT Emerging Markets Equity Fund, which invests primarily in the world s emerging stock markets as defined by the International Finance Corporation or companies with significant activities in emerging markets. Its investment objective is to achieve total return in excess of the Morgan Stanley Capital International Inc. Emerging Markets Index. The fair value has been determined using the net asset value of the limited partnership. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees

21 7. Fair Value of Financial Investments (continued) (4) The LCF has a noncontrolling equity interest in the WGI Emerging Markets Smaller Co Fund, which provides concentrated and differentiated exposure to emerging markets equities with a focus on smaller capitalization companies. It is combined with the LCF s other global ex-u.s. equity managers to produce a diversified global ex-u.s. equity portfolio. The fair value has been determined using the net asset value of the holdings of the fund. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees. (5) The LCF has a noncontrolling equity interest in the Chilton Global Natural Resources. Chilton provides diversified exposure to global natural resources stocks. It is combined with the LCF s other liquid real assets managers to produce a diversified liquid real asset portfolio. The fair value has been determined using the net asset value of the holdings of the fund. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees. (6) The LCF has a noncontrolling equity interest in the Gresham Tangible Asset Program (ETAP), which provides exposure to actively managed commodities futures. It is combined with the LCF s other liquid real asset managers to produce a diversified liquid real asset portfolio. The fair value has been determined using the net asset value of the holdings of the fund. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees. (7) The LCF has a noncontrolling equity interest in the Nyes Ledge Capital Horizon Fund (the Fund), which is an exempted fund under the laws of the Cayman Islands. The Fund s investment objective is to provide attractive absolute and relative returns that exhibit moderate volatility and a low correlation to overall stock and bond markets. The Fund provides relatively conservative, diversified exposure to hedge fund strategies. Its fund-of-funds structure allows the LCF to gain diversification across hedge fund strategies and managers and as such is the LCF s sole hedge fund investment. The fair value has been determined using the net asset value of the holdings of the Fund. Redemptions would occur estimated at the net asset value on the redemption date, less applicable management and performance fees. (8) The LCF has a noncontrolling equity interest in the Wellington Diversified Inflation Hedges (DIH) Fund, which provides diversified exposure to several sub-asset classes within real assets (long-only natural resources equities, commodities, and TIPS). It is combined with the LCF s other liquid real asset managers to produce a diversified liquid real asset portfolio. The LCF s liquid real asset portfolio plays an integral role in the LCF s long-term strategic asset allocation

22 7. Fair Value of Financial Investments (continued) Fair Value of Financial Instruments Not Carried at Fair Value The following methods and assumptions were used in estimating fair value disclosures for financial instruments not carried at fair value. Cash and Cash Equivalents The carrying amounts for these instruments approximate fair value. Life Insurance and Annuity Contracts The fair value of life insurance and annuity contracts are estimated using the cash surrender value of the contracts less surrender charges. Beneficial Interests in Trusts Held by Others Fair values for beneficial interests in trusts held by others are based on the net present value of the future stream of payments receivable from a charitable lead annuity trust. Due to the shortterm nature of the payments, the discount rate used is equal to the rate applicable on the date of the trust agreement. Other Assets Other assets are comprised primarily of short-term receivables arising in the normal course of the LCF s operations. Due to the short-term nature of these receivables, the carrying value approximates fair value. Other Liabilities Other liabilities consist of accounts payable and retained life estates. The carrying amount of accounts payable approximates fair value due to the short-term nature of those payables. Gift Annuities and Charitable Trusts The fair value of gift annuities, charitable remainder trust agreement, and retained life estate liabilities are estimated using actuarial calculations based on the fair value of the investments, the life expectancy of the beneficiary, and IRS-approved discount rates

23 7. Fair Value of Financial Investments (continued) Amounts Held for the Benefit of Others Liability Fair values for amounts held for the benefit of others are primarily based on quoted market prices in active markets where available or are estimated using values obtained from independent pricing services that utilize market standard methodologies based on market observable inputs. The carrying value and estimated fair value of the LCF s financial instruments not carried at fair value as of December 31, were as follows: Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Assets Cash and cash equivalents Level 1 $ 2,866,370 $ 2,866,370 $ 2,064,779 $ 2,064,779 Life insurance and annuity contracts Level 3 40,599,181 40,599,181 37,964,820 37,964,820 Beneficial interests in trust held by others Level 3 333, , , ,909 Other assets Level 1 1,003,479 1,003, , ,017 Liabilities Other Level 1 323, , , ,969 Gift annuities Level 3 23,501,518 23,501,518 22,506,905 22,506,905 Charitable remainder trust agreements Level 3 24,338,191 24,338,191 24,673,400 24,673,400 Amounts held for the benefit of others Level 3 40,256,717 40,256,717 35,300,962 35,300,

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