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STUDEBAKER NATIONAL MUSEUM, INC. Notes to Financial Statements December 31, 2016 NOTE 4-MANAGEMENT AGREEMENT Effective January 1, 2011, the Museum entered into a five year management agreement with the City of South Bend. The agreement provides that the Museum shall have well and faithfully performed in a timely manner all of the terms, covenants and conditions under the ' Management Agreement and is not material default under the lease or Management Agreement, either on the date such rights are exercised or on the date of the renewal period, the Museum shall have the option to renew the term of the Management Agreement for up to six(6)renewal ' periods each of which shall be five (5) years in duration ending December, 2040. The second Management Agreement renewal period is effective January 1, 2016 through December 31, 2020. The original Management Agreement provided for monthly payments of$18,750 with a ' 2% increase per year for the Museum to maintain the City's collection of Studebaker vehicles, archives, and artifacts. For the years ended December 31,the Museum's management fees were $250,857-2016 and $245,938-2015. The future aggregate annual minimum Management Agreements commitments with initial agreement terms greater than one year, for the years ending December 31, 2016 over the next ' four years are as follows: 2017 $ 255,874 2018 260,992 2019 266,211 2020 271,536 S 1 054,613 ' NOTE 5-ASSETS HELD BY THE COMMUNITY FOUNDATION ' For the years ending December 31, 2016 and 2015, any donations received by the Community Foundation of St. Joseph County, Inc. (the Community Foundation) on behalf of the Museum from donors other than the Museum are not reflected as an asset on the Museum's financial statements as the donor granted the Community Foundation variance power, which precludes ' recognition of expected cash flows by the beneficiary. As of December 31, the fair value of donations received from other donors on behalf of the Museum were $0 - 2016 and $11,785 - 2015. The Community Foundation's spending policy is to distribute a percentage of each fund's market values. The objectives of the Community Foundation's spending policy are to allocate total earnings from the portfolio between current spending and reinvestment for future earnings, and to provide a predictable and growing stream of income to beneficiaries of Community Foundation grants. The Community Foundation's spending policy may be adjusted ' at their discretion depending upon market conditions. Distributions received during the years ended December 31 were $16,694 - 2016 and $16,632 - 2015, and are included in gifts and grants revenue on the Statement of Activities and Changes in Net Assets. 1 (See auditors' report.) ] l