Hello!

Welcome to the fifth year of The Lawrence Foundation.

We received and reviewed over 395+ grant requests and letters of inquiry this year and made 28 grants and new commitments. The 395+ grant requests we received in 2004 represent a small increase over the 375 grant requests that we received in 2003. The distribution of the grant requests has shifted from 28%% environment, 33% education, 16% health, 15% human services and 8% other in 2003 to 34% environment, 28% education, 13% health, 23% human services and 3% other in 2004. This is now the third grant cycle in which we ve had our teenage children designate small grants representing their particular interests. We were able to make 28 new commitments and grants with a value of $131,000 to a mix of large and small organizations. Of the 28 new commitments and grants made in 2004, 21 or 75% were made to environmental causes and a few each were made to health and human services causes. For each 10 or so letters of inquiry or grant requests that we received we were able to make 1 grant. The grantmaking pendulum has swung to emphasize environmental issues, but we d like it to swing back slightly to include other issues as well. Regular grants this year ranged in size from $500 to $10,000 with a typical size of $5,000. We have no geographic restrictions in our grant making although in 2004 we made grants to projects focused (in decreasing order) on a state, national, international, regional and local level. Since the foundation s inception we ve made commitments and grants totaling about $2.4 million.

The asset value of the foundation decreased slightly this year. The foundation started the year with an asset value of about $4.8 million and ended the year ended with an asset value of about $4.4 million. The foundation s assets increased because of a strong equity market but they decreased because of the continued pay off the special grants. We ve gone over the hump of paying off the special grants (described in earlier year s annual letters) and the future pay off for the special grants will be decreasing until we are finished paying them off in 2007. This should allow us to somewhat increase our regular grants in the future. Diversification out of our concentrated equity position continued. Our primary investment objective remained unchanged and is to target a real rate of return of 4.5+% net of investment expenses with a conservative to moderate risk tolerance and a 10+ year time horizon. Another primary objective is capital preservation. Our assets are currently allocated between U.S. equities and international equities (46%), fixed income securities (33%), alternative investments (21%) and cash and cash equivalents (0%). Our asset value places us in the top 3,500 out of 25,000+ family foundations in the U.S.

Our new grant making budget for 2005 has been set and we look forward to the coming year. We will continue to spend more time understanding the most effective methods for choosing between the many grant requests we receive as well as evaluating the results and effectiveness of the grants we make. We also plan on taking a more methodical and critical look at potential grantees and establishing some threshold tests before making a grant.

Grantmaking has been a very satisfying experience but in an effort to increase our impact we are taking our first step into direct program involvement. The foundation will be sponsoring, hosting and organizing a workshop the first part of 2005 in Santa Monica to discuss environmental economics. The vision for the workshop is to identify, develop and engage a network of economic experts and others that share and support a common vision of developing, delivering and advocating credible and effective economic theories and arguments for environmental protection, stewardship, and investment.

We traveled to Washington, DC as part of an event called Foundations on the Hill to educate U.S. Senators and Congressman about the overall importance of non-profits and the significant contributions they make to society. We had some meetings with members and staff in the House but all of the Senate meetings were cancelled since we happened to arrive the day after Ricin was discovered in the Senate office buildings. Jeff went back to Washington, DC later in the year to do some personal lobbying for environmental issues and had a very different experience. Jeff went as part of a group of business people that met with over 50 Senate and House members and staff in a two day period. The difference in the organization and effectiveness of the experiences highlighted to us just how far the foundation world has to go to effectively represent its interests at the federal and state levels.

Issues of foundation ethics, transparency and governance have been in the news throughout the year. At a national foundation conference we were struck by how many foundation trustees simply don t get the significance of these issues. In many cases trustees didn t seem to understand why transparency was necessary and how that once a foundation has been funded its assets are there for the public benefit. To reinforce our commitment to operating with a high degree of transparency and integrity we ll be articulating formal conflict of interest and ethics policies in early 2005. American foundations have total endowments of $100 s of billions, much of it invested in the equities of U.S. companies. Foundations have a right and the responsibility to pay attention how the publicly traded companies in their portfolio are managed. As a steward of their endowments foundations can t ignore the economic value of the proxies, and therefore should vote them along the same set of values that the foundation is founded on. We ll be articulating and starting to operate to a proxy voting policy in early 2005. All of these policies will be available on our Web site after they have been written and reviewed.

Respectfully Submitted,

Jeff Lawrence and Diane Troth
Trustees

Lori Mitchell
Executive Director

The Lawrence Foundation