Hello!

Welcome to the sixth year of The Lawrence Foundation.

We received and reviewed 623 grant requests and letters of inquiry this year and made 32 grants. The 623 grant requests we received in 2006 represent a 10% increase over the 568 grant requests that we received in 2005. As we write this letter in early 2007 it appears that the number of grant requests that we will receive in 2007 will be higher than 2006. The distribution of the grant requests was 30% human services, 29% environment, 25% education, 11% health and 5% other in 2006. We were able to make 37 new grants with a value of over $175,500 to a mix of large and small organizations. Of the 32 new grants made in 2006, 19 or 59% were made to environmental causes, 6 or 19% were made to health causes, 4 or 13% were made to human services causes and the remainder were made to other causes. For each 20 or so letters of inquiry or grant requests that we received we were able to make 1 grant. The grant making pendulum has swung to emphasize environmental issues, but we'd still like it to swing back slightly to include other issues as well. Regular grants this year ranged in size from $500 to $50,000 with a typical size of $5,000. We have no geographic restrictions in our grant making. Since the foundation's inception we've made commitments and grants totaling over $2.7 million.

The asset value of the foundation increased about 7.45% 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 $5.1 million. The foundation's assets increased in value because of a strong equity market but this was countered by a decrease in assets because of the continued pay off the special and regular grants. We've gone over the hump of paying off the special grants (described in earlier year's annual letters) and we will finish paying them off in 2007. This should allow us to increase our regular grants in the future. 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. Our assets are currently allocated between U.S. equities and international equities (56 %), fixed income securities (24 %), alternative investments (16 %) and cash and cash equivalents (4 %). 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 2007 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. Towards each grant cycle deadline we became inundated in paper. We ve moved to a self developed online grant application. We used it for the first time during our December 2006 grant cycle. It has greatly improved the manner in which we manage grant applications. As we move forward we d like to make more operating grants and make more multi-year grants. Our early model of single year project grants isn t the most effective way to fund organizations. We d also like to fund an increasing number of grant requests that we explicitly solicit from organizations that we believe are pursuing issues important to us. We believe that the best thing we can do is support good people and good idea with grants that give people the flexibility they need to realize their ideas. This funding transition will not happen immediately and will probably take place over the next couple of years.

The foundation sponsored, organized and hosted, in association with the Natural Resources Defense Council (NRDC) and the Global Development and Environment Institute (GDAE) at Tufts University a workshop for environmental economics in March of 2005. The vision for the workshop was 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. The Center for the Applied Study of Economics and Environment (CASE&E) was formed as a result of this workshop. The foundation has committed to sponsor and host a follow-up workshop in March of 2007 to continue the discussion and development of CASE&E, a network of economists whose work supports an active agenda of climate mitigation and environmental protection in general.

Throughout the year we have received a number of visits from grant seekers at our office in Santa Monica. We've enjoyed all of the visits and appreciated the time they've all spent educating us on their issues of importance.

Our foundation was started in 2000 and since then has received over 2600 applications from grant seekers. These applications have been received by mail, email and the Web. During the years we have also spoken to many grant seekers and grant makers. This led us to the conclusion that the grant making process, for both grant seekers and grant makers, can be very inefficient, expensive and time consuming. It seems a lot of resources are being used to try and match those seeking money with those that have the money. We've found that our new online grant application has proven to be a very efficient way to receive and manage grant applications. We have provided the software that we developed to another entity so that it may be used as a base to develop a common grant application, which can be used by multiple grant seekers and multiple grant makers. The Common Grant Application is being developed to provide a method for grant seekers to maintain online information about their organization, its programs and its needs that can be easily shared to the public in general as well as submitted in the form of an online grant application to interested grant makers or associations of grant makers.

It is clear that the challenges the world faces are not going away. We hope that our activities, in some small way, will make the world a better place for future generations.

Respectfully Submitted,

Jeff Lawrence and Diane Troth
Trustees

Lori Mitchell
Executive Director

The Lawrence Foundation