Note 1:

In the fiscal year 1971 the Foundation changed its method of accounting for investments (other than Ford Motor Company Class A stock) from a cost basis to a market value basis. Unrealized and realized gains or losses are determined by comparison of cost to market value or proceeds, respectively, cost being determined on an identified lot basis. On an average cost basis, realized gains in 1971 would have been $1,739,809.

In the fiscal year 1971 the Foundation changed its method of accounting for Ford Motor Company Class A stock from an equity basis to a market value basis. Unrealized gains or losses are determined by comparison of the market values at the beginning and end of each fiscal year. Realized gains or losses are determined by a comparison of proceeds with the market value at the beginning of the year.

The Foundation believes that the market value basis more clearly presents its financial position and changes in fund balance.

The financial statements for fiscal 1970 have been restated to reflect the changes in accounting for investments. The effect of this change is a reduction of $75,059,550 in the "Decrease in fund balance during the year." Similarly the fund balance at October 1, 1969 has been reduced by $6,729,549. For statement presentation purposes appropriations and unexpended balances of Foundation managed charitable activities previously reported separately are now shown as appropriated fund balance.

Market values are based on quotations where available. Market values for securities purchased through direct negotiation, and thus with limited marketability, have been determined by the Foundation in the manner described below:

Fixed income securities are valued on the basis of a comparison of the instrument's yield with current bond market yields for industrial debt instruments.

Fixed income securities with equity participation are similarly valued and include a value for equity participation in limited instances.

All other securities for which quotations are not available, including certain equity securities purchased through direct negotiation, are valued at cost, which, in the aggregate, does not exceed estimated realizable value. Such securities amounted to $89,476,357 at September 30, 1971 and $70,112,831 at September 30, 1970. Aggregate cost and estimated market value for all securities purchased through direct negotiation are, respectively, $238,430,930 and $248,031,929 at September 30, 1971 and $349,040,619 and $336,531,746 at September 30, 1970.

Market value of investments and unrealized gains on investments have been reduced by $19,568,914, and amount equal to the applicable federal excise tax, should such gains ultimately be realized.

The cost of investments held at September 30, 1971 and 1970 is as follows:

In accordance with the policy of the Foundation and as required by the Tax Reform Act of 1969, the Foundation is reducing its holdings in Ford Motor Company Class A nonvoting stock. During the year ended September 30, 1971, 5, 698, 780 shares with a value of $348,909,924 were disposed of at a gain, net of expenses, of $53,998,059.

Included in this amount were 170,968 shares with a value of $10,397,805 transferred to grantees in payment of grants; a gain of $1,550,211 was recorded as a result of these transfers. Included in the disposition of the stock was the exchange with the Ford Motor Company of 2,354,239 shares for $150,000,000 of Ford Motor Company 7¼% Notes due July 15, 1977. Of this amount $50,000,000 remains in the investment portfolio at September 30, 1971.

Shares held by the Foundation in Ford Motor Company Class A nonvoting stock at September 30, 1971 and 1970 were 17,996,925 and 23,695,705, respectively. Class A stock is convertible or exchangeable, under limited conditions, into Ford Motor Company common stock. Market value per share of Ford Motor Company common stock, based on closing prices on the New York Stock Exchange, was $69½ at September 30, 1971, and $51¾ at September 30, 1970.

Note 2:

Receivables and accounts payable at September 30, 1971 and 1970 are comprised of the following: