HARVARD CLUB OF BOSTON FOUNDATION

Notes to Financial Statements

(See Independent Accountants’ Compilation Report)

Note 8 – Net assets with donor restrictions

Net assets with donor restrictions are restricted for the following purposes:

Subject to appropriation and expenditure for a specified purpose

Original gifts and required retained earnings (corpus)

Nathaniel J. Young, Jr. Scholarship Fund

The Fund is to be used “to support scholarships for men and women students at Harvard College from the City of Boston public high and Latin schools”.

Net assets released from donor restrictions by incurring expenses satisfying the restricted purpose or by occurrence of the passage of time or other events specified by the donors are as follows:

Notes to Financial Statements

(See Independent Accountants’ Compilation Report)

Note 9 – Endowment net assets

The Foundation’s endowment consists of approximately 15 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donorimposed restrictions.

The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a reasonable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. The endowment assets are invested in a manner intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a reasonable level of investment risk.

The Foundation has a policy for appropriating for distribution an amount that considers the distribution in relation to the total percentage of the endowment, as well as the long-term expected return on its endowment.

The Board of the Foundation has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donorrestricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as net assets with donor restrictions (a) the original value of gifts donated to the endowment in perpetuity, (b) the original value of subsequent gifts to the endowment in perpetuity, and (c) accumulations to the endowment in perpetuity made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. Donor-restricted amounts not retained in perpetuity are subject to appropriation for expenditure in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund

2. The purposes of the Foundation and the donor-restricted endowment fund

3. General economic conditions

4. The expected total return from income and the appreciation of investments

5. The investment policies of the Foundation

The following is the composition of endowment net assets by type of fund: