The Nature Conservancy

“During the tax year 11 easements were transferred or sold - all to qualified organizations as defined in IRC Sec. 170(h)(3) and the related regulations and all as required and consistent with the conservation action plan for the properties. Easements transferred or sold were: (1) Two Hearted River (Allen/Maynard) 11/9/2001; (2) Hoot Woods Conservation Easement 6/3/.1981; (3)Altamaha River (Sansavilla 3); (4) Agassiz Beach Ridges (Rogers) CE 3/2/2017; (5) Upper MN River Valley (Johnson) CE 3/13/2017; (6) Prairie Coteau (Williamson/Williamson 1) CE 4/26/2017; (7) Prairie Coteau (Williamson/Williamson 2) CE 4/26/2017; (8) Prairie Coteau (Delmuth) CE 9/26/2017; (9) Prairie Coteau (Johnson/Johnson) CE 11/7/2017; (10) Pilot Range (TL Bar - Della Ranches) (TNC CE); and (11) Grouse Creek (Della Ranches) (CE TNC). During the tax year 11 easements were amended. The amended easements were: (1) Pickerel Lake Fen (Emmerich 2)to add additional acres (15.5 to the original 7.5) and restrictions; (2) Silver Creek (Picabo Livestock/Purdy 1/12/1995 to resolve a boundary line agreement; (3) Saint Anthony's (Capital Region Water) 1/12/1995 to increase the number of acres under the easement as part of a phased acquisition; (4) Roanoke River/Cashie River (Jennette) 12/28/2016 to transfer 50% ownership of the easement to the US Air Force; (5) Lower Bianco River (Halifax Ranch, LLC) CE 12/29/2009 to adjust the boundary line by an even exchange of acres under easement; (6) Bandera Canyonlands (Dutch Royalty Investments/Mill Springs Ranch) CE 5/22/2012 to correct a clerical error and add the name of the Grantor; (7) Blood River Seeps/Winchester/Westvaco (Collins)(fka Fowler)(fka Jennings)(fka Merrit)(fka Reed) as a result of violation owner relinquishes any right to build on potential home sites; (8) Badlands National Park Complex (Conata Ranch 3, fka BY Sun Ranch 3) CE 4/24/2013 to increase the conservation restrictions; (9) Badlands National Park Complex (Conata Ranch, fka White East) CE 3/6/2013 to increase the conservation restrictions; (10) Badlands National Park Complex (Conata Ranch, fka Meckie 1 and 2) CE 3/6/2013 to increase the conservation restrictions; and (11) Gabilan CE to allow some limited access to OHV's.”

“The Nature Conservancy's written policy regarding the periodic monitoring, inspection, violations, and enforcement of the conservation easements it holds is governed by our Standard Operating Procedure, Conservation Easements and Deed Restrictions. Excerpts from the procedure follow. Each Business Unit will be responsible for monitoring compliance with the terms of all Conservation Interests for which it must prepare or obtain a Baseline. For purposes of this Standard Operating Procedure, "Business Unit" means the Conservancy business unit in which the Conservation Interest is located or, if different, the Conservancy Business Unit responsible for monitoring and enforcement of the Conservation Interest. A. Monitoring Team. Each Business Unit will establish a Monitoring Team which will consist of at least one staff member and may include third party volunteers or contractors. All members of the Monitoring Team must be trained on Conservancy procedures and practices for monitoring Conservation Interests. The Monitoring Team will be responsible for ensuring that monitoring is completed and documented in accordance with this SOP. B. Monitoring Frequency. Conservation Interests will be monitored at least once each calendar year beginning with the calendar year after the Conservation Interest was accepted or acquired. The first monitoring will occur no more than 15 months after the date the Conservation Interest was accepted or acquired. C. Time and Expense Reporting. To comply with Internal Revenue Service ("IRS") requirements use Activity Code 10000 (called "Easement Monitoring") to report all expenses incurred in inspecting, monitoring and enforcing Conservation Easements. Business Units must follow the Finance Department's guidance for reporting: 1. Staff hours (to be reported in bi-weekly time reports), 2. Volunteer hours (to the extent required by Finance Department guidance), 3. Contractor fees (including outside counsel fees), and 4. Travel and other related expenses. D. Monitoring Reports. Monitoring results must be documented contemporaneously (within two months after monitoring occurs) in a report that describes the condition of the property and the protected conservation values as defined in the Conservation Interest. The monitoring report must include the information described in Checklist of Required Fields for Compliance Monitoring Template. Business Units may modify the templates or create their own monitoring report form provided that it contains the required content. Business Units: 1. are encouraged to use the same form consistently for all Conservation Interests that the BU monitors and in all cases, all required fields must be completed; 2. are encouraged to provide the landowner with a copy of the monitoring report and request that it be signed and, if feasible, notarized to indicate landowner's agreement with its contents; and 3. must maintain monitoring reports in accordance with the Conservancy's Records Retention Schedule. 3 E. Compliance Status. The Monitoring Team, with approval of the Business Unit director or the director's designee, shall determine the compliance status of the Conservation Interest as one of the following: 1. In compliance 2. In review 3. In violation. If voluntary resolution of a violation is not possible (e.g., because the time period to bring a judicial action will end under applicable statutes of limitation), the Business Unit will proceed with formal enforcement. Formal enforcement action shall be taken in accordance with an enforcement plan to be developed by the Business Unit and assigned attorney and approved by the Regional Director or in the U.S., by the Division Director. If the enforcement plan includes litigation, approval of the responsible Associate General Counsel and General Counsel shall be obtained prior to initiation of litigation.”

“The Conservancy records land and land interests at cost if purchased or at fair value at the date of acquisition, if all or part of the land was received as a donation. Fair value is generally determined by appraisal at the time of acquisition and is not subsequently adjusted. Upon sale or gift, the book value of the land or land interest is reported as a program expense and the related proceeds, if any, are reported as revenue in the consolidated statement of activities. Conservation land is real property with significant ecological value. These properties are either managed in an effort to protect the natural biological diversity of the property, or transferred to other organizations who will manage the lands in a similar fashion. Conservation easements are comprised of listed rights and/or restrictions over the owned property that are conveyed by a property owner to the Conservancy, almost always in perpetuity, in order to protect the owned property as a significant natural area, as defined in federal tax regulations. These intangible assets may be sold or transferred to others so long as the assignee agrees to carry out, in perpetuity, the conservation purposes intended by the original grantor. Conservation easements, by their very nature, do not generate material amounts of cash inflow annually.”

“The Endowment includes approximately 770 individual endowment funds. The Endowment provides stable financial support to a wide variety of programs and activities in perpetuity, playing a critical role in enabling the Conservancy to achieve its mission. Programs supported by the Endowment include restoring, monitoring, and managing natural areas owned by the Conservancy and others, as well as, many other activities and actions vital to the preservation of natural diversity. The Endowment includes both donor-restricted endowment funds and funds designated by the Board of Directors (Board) to function as endowments. Net assets associated with endowment funds, including Board-designated endowment funds, are classified and reported based on the existence or absence of donor-imposed restrictions.”

“The Conservancy has been granted an exemption from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Internal Revenue Service has classified The Conservancy as other than a private foundation. The Conservancy pays a nominal amount of tax relating to several unrelated business income activities, primarily rental income from debt-financed property. The Conservancy takes no tax positions that it considers to be uncertain.”

“Costs of Goods Sold, Rental Related Expenses and Special Fundraising Expenses”

“Valuation Gain on Tradelands, Other Assets and Foreign Exchange, Revenues of Unconsolidated Subsidiaries”

“Cost of Goods Sold, Rental Related Expenses, Special Fundraising Expenses, Expenses of Consolidated Subsidiaries”