OPERA AMERICA, INC. FINANCIAL STATEMENTS. JUNE 30, 2011 and 2010

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1 FINANCIAL STATEMENTS JUNE 30, 2011 and 2010

2 Contents Page Financial Statements Independent auditors' report 1 Statements of financial position as of June 30, 2011 and Statement of activities for the year ended June 30, 2011 (with summarized financial information for 2010) 3 Statement of activities for the year ended June 30, Statements of cash flows for the years ended June 30, 2011 and Notes to financial statements 6 Supplementary Information Independent auditors' report on supplementary information 16 Combining statement of activities for the year ended June 30, 2011 (with summarized information for 2010) 17

3 EisnerAmper LLP 750 Third Avenue New York, NY T F INDEPENDENT AUDITORS' REPORT Board of Directors OPERA America, Inc. New York, New York We have audited the accompanying statements of financial position of OPERA America, Inc. (the "Organization") as of June 30, 2011 and 2010, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of OPERA America, Inc. as of June 30, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. New York, New York October 6, 2011 New York New Jersey Pennsylvania Cayman Islands EisnerAmper is an independent member of PKF International Limited

4 Statements of Financial Position June 30, ASSETS Cash and cash equivalents (including funds held on behalf of others of $107,415 and $186,225 in 2011 and 2010, respectively) $ 1,950,065 $ 1,746,120 Investments 7,380,108 6,499,973 Other receivables, net 266, ,464 Contributions receivable, net 1,990, ,250 Prepaid expenses and other current assets 124,625 44,858 Property and equipment, net 379,338 59,996 Security deposit 131,670 65,835 $ 12,222,849 $ 8,969,496 LIABILITIES AND NET ASSETS Liabilities: Accounts payable and accrued expenses $ 183,540 $ 182,773 Grants payable 202,237 86,000 Deferred revenue 45, ,511 Funds held on behalf of others 107, ,225 Deferred rent 3,762 Total liabilities 539, ,271 Commitments (Note K) Net assets: Unrestricted 1,131,282 1,090,265 Temporarily restricted 5,163,518 1,893,928 Permanently restricted 5,389,032 5,389,032 Total net assets 11,683,832 8,373,225 $ 12,222,849 $ 8,969,496 See notes to financial statements 2

5 Statement of Activities Year Ended June 30, 2011 (with summarized financial information for 2010) Unrestricted Year Ended June 30, Temporarily Permanently Restricted Restricted Total Total Revenue: Contributed revenue $ 468,226 $ 3,364,310 $ 3,832,536 $ 1,883,192 Membership dues 715, , ,527 Seminars, workshops, registration and annual meeting 286, , ,773 Publications, advertising and world wide web 40,619 40,619 37,891 Investment income 174,771 1,182,532 1,357, ,019 Donated services 113, ,403 Miscellaneous income 48,494 48,494 17,223 Total revenue before net assets released from restrictions 1,847,395 4,546,842 6,394,237 3,704,625 Net assets released from restrictions 1,277,252 (1,277,252) 0 0 Total revenue 3,124,647 3,269,590 6,394,237 3,704,625 Expenses: Program services: Membership 289, , ,241 Public affairs 68,822 68,822 95,088 Public relations/marketing 50,247 50,247 43,375 NEA Opera Honors 152, , ,880 Information services/publications 288, , ,487 Education 123, , ,658 Annual conference 383, , ,655 Opera Fund program and artistic initiatives 478, , ,277 Total program services 1,835,326 1,835,326 1,995,661 Supporting services: General and finance administration 814, , ,061 Fund-raising activity 434, , ,964 Total supporting services 1,248,304 1,248, ,025 Total expenses 3,083,630 3,083,630 2,889,686 Increase in net assets 41,017 3,269,590 3,310, ,939 Net assets - beginning of year 1,090,265 1,893,928 $ 5,389,032 8,373,225 7,558,286 Net assets - end of year $ 1,131,282 $ 5,163,518 $ 5,389,032 $ 11,683,832 $ 8,373,225 See notes to financial statements 3

6 Statement of Activities Year Ended June 30, 2010 Unrestricted Temporarily Restricted Permanently Restricted Total 2010 Revenue: Contributed revenue $ 573,610 $ 1,279,582 $ 30,000 $ 1,883,192 Membership dues 741, ,527 Investment income 60, , ,019 Seminars, workshops, registration and annual meeting 293, ,773 Publications, advertising and world wide web 37,891 37,891 Miscellaneous income 17,223 17,223 Total revenue before net assets released from restrictions 1,724,428 1,950,197 30,000 3,704,625 Net assets released from restrictions 1,182,807 (1,182,807) 0 Total revenue 2,907, ,390 30,000 3,704,625 Expenses: Program services: Membership 308, ,241 Public affairs 95,088 95,088 Public relations/marketing 43,375 43,375 NEA Opera Honors 479, ,880 Information services/publications 401, ,487 Education 114, ,658 Conferences and meetings 337, ,655 Opera Fund program and artistic initiatives 215, ,277 Total program services 1,995,661 1,995,661 Supporting services: General and finance administration 650, ,061 Fund-raising activity 243, ,964 Total supporting services 894, ,025 Total expenses 2,889,686 2,889,686 Increase in net assets 17, ,390 30, ,939 Net assets - beginning of year 1,072,716 1,126,538 5,359,032 7,558,286 Net assets - end of year $ 1,090,265 $ 1,893,928 $ 5,389,032 $ 8,373,225 See notes to financial statements 4

7 Statements of Cash Flows Year Ended June 30, Cash flows from operating activities: Increase in net assets $ 3,310,607 $ 814,939 Adjustments to reconcile increase in net assets to net cash (used in) provided by operating activities: Depreciation and amortization 28,854 32,100 Net realized/unrealized gains on investments (1,200,953) (569,235) Contributions restricted for long-term investment (30,000) Donated equities (300,493) (102,216) Bad debt expense ,060 Changes in: Other receivables (48,866) (93,867) Contributions receivable (1,656,311) 732,395 Prepaid expenses and other current assets (79,767) 32,990 Security deposit (65,835) Accounts payable and accrued expenses ,594 Grants payable 116,237 (9,750) Deferred revenue (91,686) 7,155 Funds held on behalf of others (78,810) (17,098) Deferred rent (3,762) (7,524) Net cash (used in) provided by operating activities (69,170) 910,543 Cash flows from investing activities: Purchases of property and equipment (348,196) (51,714) Proceeds from sales of investments 2,671,586 3,210,540 Purchases of investments (2,050,275) (3,446,557) Net cash provided by (used in) investing activities 273,115 (287,731) Cash flows from financing activities: Contributions restricted for long-term investment 30,000 Increase in cash and cash equivalents 203, ,812 Cash and cash equivalents - beginning of year 1,746,120 1,093,308 Cash and cash equivalents - end of year $ 1,950,065 $ 1,746,120 See notes to financial statements 5

8 Notes to Financial Statements June 30, 2011 and 2010 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [1] Organization: OPERA America, Inc. (the "Organization"), originally incorporated in Delaware and then re-incorporated in New York, is a not-for-profit organization founded in 1970 to (i) promote growth and expansion of the operatic form; (ii) foster and improve the education, training and development of operatic composers, singers and allied talents; (iii) assist in developing resident professional opera companies through cooperative artistic and management services to its membership; (iv) encourage and assist in the improvement of quality of operatic presentation; and (v) encourage greater appreciation and enjoyment of opera by all segments of society. It is an organization of opera companies, affiliated organizations and individuals in the United States, Canada and a growing number of other countries. The Organization is exempt from federal taxes under Section 501(c)(3) of the Internal Revenue Code and from state and local taxes under comparable laws. [2] Basis of accounting: The accompanying financial statements of the Organization have been prepared using the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America, as applicable to not-for-profit organizations. [3] Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. [4] Functional allocation of expenses: The costs of providing the various programs and supporting services have been summarized on a functional basis in the accompanying statements of activities. Accordingly, certain expenses have been allocated among the programs and supporting services in reasonable ratios as determined by management. [5] Fair-value measurements: The Organization reports a fair-value measurement of all applicable financial assets and liabilities, including investments, contributions and other receivables and short-term payables (see Note B). [6] Applicability of NYPMIFA: In September 2010, New York State enacted the New York Prudent Management of Institutional Funds Act ("NYPMIFA"), the terms of which are applicable to the Organization. NYPMIFA principally addresses (i) the management and investment of all of a not-for-profit entity's "institutional funds" (which are mainly the financial assets of the entity and which exclude programmatic assets such as buildings or operating facilities), and (ii) the appropriations by the governing board of earnings derived from both donor-restricted and board-designated endowment funds. In essence, NYPMIFA requires all of the financial resources of the entity to be used in a "prudent" fashion, with the express approval and action of the governing board. [7] Cash and cash equivalents: For financial reporting purposes, the Organization considers highly liquid investments purchased with an original maturity of three months or less to be cash equivalents, except for the cash equivalents held as part of the investment portfolio. 6

9 Notes to Financial Statements June 30, 2011 and 2010 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [8] Investments: Investments are stated at their fair values and consist of equity securities, government and corporate obligations, and fixed-income and real estate investment mutual funds. Realized gains and losses on assets sold, and unrealized appreciation or depreciation on assets held, are reported in the accompanying statements of activities. Donated securities are recorded at their fair values on the date of the gifts and are generally sold immediately upon receipt by the Organization. [9] Allowance for uncollectible amounts: The Organization assesses periodically the financial strength of its trade partners and donors and provides allowances for anticipated losses on amounts due (see Note D). [10] Property and equipment: Property and equipment are stated at their costs at the dates of acquisition or at their fair values at the dates of donation. Minor costs of repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method, over the estimated useful lives of the assets, which range from 3 to 10 years. Amortization of leasehold improvements is provided using the straight-line method, applied over the estimated useful lives of the improvements or the remaining life of the lease, whichever is shorter. [11] Accrued vacation: Based on their tenure, the Organization's employees are entitled to be paid for unused vacation time, in accordance with the Organization's policies, if they leave the Organization's employ. Accordingly, at each fiscal year-end, the Organization must recognize a liability for the amount that would be incurred if employees with such unused vacation were to leave. At June 30, 2011 and 2010, this accrued vacation obligation was approximately $48,000 and $45,000, respectively. [12] Deferred rent liability: Rent expense is recognized using the straight-line method over the terms of the lease. The difference between rent expense incurred and the amount paid, which is attributable to scheduled rent increases, is reported as a deferred rent liability in the accompanying statements of financial position. [13] Net assets: The Organization's net assets and changes therein are classified and reported as follows: (i) Unrestricted: Unrestricted net assets represent those resources that have no donor restrictions as to their use. The Organization's Opera Center Fund represents an unrestricted operating reserve generated from surplus New York City relocation funds. This board-designated reserve, which is presented as unrestricted as there are no donor restrictions on the use of these assets, will be used to assist in funding the National Opera Center. (ii) Temporarily restricted: Temporarily restricted net assets represent those resources that are subject to the requirements of NYPMIFA and the use of which has been restricted by donors to specific purposes and/or the passage of time. When a donor's restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the accompanying statements of activities as net assets released from restrictions. 7

10 Notes to Financial Statements June 30, 2011 and 2010 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [13] Net assets: (continued) (iii) Permanently restricted: Permanently restricted net assets represent resources the principal of which is originally restricted into perpetuity by donors; the purposes for which the income and net capital appreciation arising from the underlying assets may be used depend on the wishes of those donors. Under the terms of NYPMIFA, those earnings are classified as temporarily restricted in the accompanying statements of activities, pending appropriation by the Board of Directors. [14] Endowment funds: The Organization is subject to the provisions of the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") 958, which provides guidance on the net-asset classification of donorrestricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act ("UPMIFA"). The State of New York's version of UPMIFA, NYPMIFA, was signed into law on September 17, 2010, with an immediate effective date. ASC 958 also requires additional disclosure about endowments for all organizations (see Note I). [15] Revenue and support: The Organization recognizes membership dues revenue from its professional companies during the period to which the membership relates, which coincides with the Organization's fiscal year. Those amounts received in advance are recorded as deferred revenue. Dues revenue in other membership categories is recognized as revenue when received. Contributions of assets and unconditional pledges to the Organization are recognized as revenue in the accompanying statements of activities when received. Contributions and pledges are considered available for unrestricted use, unless restricted on either a temporary or permanent basis. All contributions are recognized at fair value at the dates of pledge. Contributions to be received over periods longer than a single year are discounted at an interest rate commensurate with the risk involved. [16] Grants and grant commitments: Grants are recorded as expenses in the period the grants are approved. At June 30, 2011, grants payable are scheduled to be paid in fiscal-year [17] Income tax uncertainties: The Organization is subject to the provisions of ASC , relating to accounting and reporting for uncertainty in income taxes. For the Organization, these provisions could be applicable to the incurrence of unrelated business income tax ("UBIT") attributable to certain of the Organization's advertising revenues. Because of the Organization's general tax-exempt status, ASC has not had, and is not expected to have, a material impact on the Organization's financial statements. [18] Subsequent events: The Organization considers the accounting treatments, and the related disclosures in the current fiscal-year's financial statements, that may be required as the result of all events or transactions that occur after the fiscal year-end through the date of the independent auditors' report. 8

11 Notes to Financial Statements June 30, 2011 and 2010 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [19] Prior-year reclassification: Certain prior-year information has been reclassified to conform to the current year's presentation. NOTE B - INVESTMENTS At each fiscal year-end, investments consisted of the following: June 30, Fair Fair Value Cost Value Cost Cash and cash equivalents $ 325,827 $ 325,827 $ 552,738 $ 552,738 Equity securities 4,131,794 3,308,168 3,197,041 3,187,533 U.S. government obligations 1,062,881 1,040, , ,489 Corporate obligations 1,074, ,984 1,082,935 1,011,910 Mutual funds: Fixed-income funds 483, , , ,000 Real estate investment funds 301, , , ,430 During each fiscal year, investment earnings consisted of the following: $ 7,380,108 $ 6,329,632 $ 6,499,973 $ 6,365,100 June 30, Dividends and interest (net of investment fees of $77,535 and $65,424 in 2011 and 2010, respectively) $ 156,350 $ 161,784 Net realized gains on sale of investments 285,350 29,665 Change in unrealized gains on investments 915, ,570 $ 1,357,303 $ 731,019 ASC establishes a three-level valuation hierarchy of fair-value measurements. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. These two types of inputs create the following fair-value hierarchy: Level 1 - Valuations are based on observable inputs that reflect quoted market prices in active markets for identical assets and liabilities at the reporting date. The types of investments and other assets included in Level 1 are exchange-traded equity and debt securities, short-term money-market funds, and actively traded obligations issued by the U.S. government and government agencies. Level 2 - Valuations are based on (i) quoted prices for similar assets or liabilities in active markets, or (ii) quoted prices for identical or similar assets or liabilities in markets that are not active or (iii) pricing inputs other than quoted prices that are directly or indirectly observable at the reporting date. Level 2 assets include other U.S. government and agency securities and corporate debt securities that are redeemable at or near the balance sheet date and for which a model was derived for valuation. 9

12 Notes to Financial Statements June 30, 2011 and 2010 NOTE B - INVESTMENTS (CONTINUED) Level 3 - Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. Level 3 assets include securities in privately held companies, secured notes, private corporate bonds, and limited partnerships, the underlying investments of which could not be independently valued, or could not be immediately redeemed at or near the fiscal year-end. The following tables summarize the fair values of the Organization's assets at each fiscal year-end, in accordance with the ASC valuation levels: June 30, 2011 Level 1 Level 2 Total Cash and cash equivalents $ 325,827 $ 325,827 Equity securities 4,131,794 4,131,794 U.S. government obligations $ 1,062,881 1,062,881 Corporate obligations 1,074,876 1,074,876 Mutual funds: Fixed-income funds 483, ,295 Real estate investment funds 301, ,435 Total $ 5,242,351 $ 2,137,757 $ 7,380,108 June 30, 2010 Level 1 Level 2 Total Cash and cash equivalents $ 552,738 $ 552,738 Equity securities 3,197,041 3,197,041 U.S. government obligations $ 981, ,746 Corporate obligations 1,082,935 1,082,935 Mutual funds: Fixed-income funds 448, ,799 Real estate investment funds 236, ,714 Total $ 4,435,292 $ 2,064,681 $ 6,499,973 NOTE C - ACCOUNTS RECEIVABLE At each fiscal year-end, accounts receivable consisted of the following: June 30, Membership dues $ 116,344 $ 73,618 Other trade receivables 150, ,846 $ 266,482 $ 218,464 10

13 Notes to Financial Statements June 30, 2011 and 2010 NOTE D - GRANTS AND PLEDGES RECEIVABLE At each fiscal year-end, grants and pledges receivable were estimated to be due as follows: June 30, Less than one year $ 569,000 $ 286,540 One to five years 1,632,747 50,000 2,201, ,540 Allowance for uncollectible grants and pledges (102,275) Reduction of grants and pledges due in excess of one year to present value, at a discount rate ranging from 2.0% to 4.7% (108,911) (2,290) $ 1,990,561 $ 334,250 NOTE E - PROPERTY AND EQUIPMENT At each fiscal year-end, property and equipment consisted of the following: June 30, Furniture and equipment $ 232,777 $ 219,999 Leasehold improvements 15, , ,449 Less accumulated depreciation and amortization (188,857) (175,453) Construction in progress 335,418 43,920 59,996 $ 379,338 $ 59,996 During fiscal-year 2011, the Organization wrote-off fully depreciated leasehold improvements of $15,450. NOTE F - FUNDS HELD ON BEHALF OF OTHERS Funds held on behalf of others of $107,415 and $186,225 at June 30, 2011 and 2010, respectively, were held in relation to the annual National Performing Arts Convention and the National Music Leadership Coalition. 11

14 Notes to Financial Statements June 30, 2011 and 2010 NOTE G - DONATED SERVICES Those donated services that meet the requirements for recognition under generally accepted accounting principles are reported as both revenue and expense in the accompanying statements of activities, at amounts determined by management to be reasonable for obtaining such services. In fiscal-year 2011, donated services of $113,403 consisted primarily of donated legal fees provided to the Organization in conjunction with the National Opera Center. NOTE H - TEMPORARILY RESTRICTED NET ASSETS At each fiscal year-end, temporarily restricted net assets (including allocation of investment gains (losses)) were available for the following purposes: Time restricted: National Opera Center construction $ 2,158,929 Fidelity Foundation: general operations 50,000 Adams Family Foundation: general operations 15,000 June 30, 2,223,929 Purpose restricted: Elebash: National Opera Center Score Library 282,585 $ 245,490 Leirvik: National Opera Center conference room 276, ,102 Fidelity: National Opera Center IT Systems 75,000 Mellon Foundation: National Opera Center operations 500,517 Mellon Foundation: Learning Laboratory 399,000 Mellon Foundation: New Works Exploration Program 30,000 60,000 Opera Fund programs 1,530, ,336 William Penn Foundation: Annual Conference 150,000 NEA: Opera Field Access 110,000 NEA: Regional Programming 32,500 Amphion Foundation: Salon Series 2,500 Bank of America: Trustee recognition program 50,000 Deloitte: Trustee programs 12,500 Hearst Foundation: Music!Words!Opera! 23,500 MetLife Foundation: Music!Words!Opera 58, ,000 $ 5,163,518 $ 1,893,928 12

15 Notes to Financial Statements June 30, 2011 and 2010 NOTE H - TEMPORARILY RESTRICTED NET ASSETS (CONTINUED) During each fiscal year, net assets were released from temporary restrictions in fulfillment of the following programs: June 30, Program restrictions satisfied: NEA: Opera Honors $ 150,000 $ 435,611 NEA: Opera Field Information Access 110, ,000 NEA: Regional Programming 32,500 NEA: Recovery & Stabilization 25,000 NEA: Travel Assistance 13,466 Mellon Foundation: Learning Laboratory 399, ,000 Mellon Foundation: New Works Exploration 30,000 Mellon Foundation: Meeting facilitation 2,500 Opera Fund programs 239,150 William Penn Foundation: Annual Conference 137,294 33,530 Bank of America: Trustee recognition program 50,000 25,000 MetLife Foundation: Music!Words!Opera educational program 42,000 Hearst Foundation: Music!Words!Opera educational program 26,500 Tobin Theater Arts Fund: Director/Designer Showcase 30,000 Deloitte: Trustee programs 12,500 10,000 NYSCA: Regional programming upstate New York 8,308 5,000 Heinz Foundation: Pittsburgh area programming 7,500 Amphion Foundation: Salon Series 2,500 New York Relocation 125,000 NYDCA: Making Connections professional development program 11,700 Booth Ferris: Opera Center Planning 25,000 $ 1,277,252 $ 1,182,807 NOTE I - THE ENDOWMENT [1] The endowment: The Organization's endowment consists solely of various individual donor-restricted funds, established for a variety of purposes, in the amount of $5,389,032 at June 30, 2011 and 2010, respectively. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. [2] Interpretation of relevant law: As discussed in Note A[6], NYPMIFA is applicable to all of the Organization's institutional funds including its donor-restricted and board-designated endowment funds. The Board of Trustees will continue to adhere to NYPMIFA's requirements. [3] Return objectives and risk parameters: The Board of Directors evaluates its long-term asset allocation in order to meet its fiduciary responsibilities for funding programs, protect its endowment resources, and support future spending requirements. Accordingly, the Board has adopted investment policies for its endowment assets that seek to maintain the purchasing power of those assets, given an acceptable level of investment risk. 13

16 Notes to Financial Statements June 30, 2011 and 2010 NOTE I - THE ENDOWMENT (CONTINUED) [4] Strategies employed for achieving objectives: To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Management oversees the investment of a diversified asset base, within prudent risk constraints. [5] Spending policy and relation to the spending policy: The Organization evaluates its funding requirements on an annual basis and, accordingly, draws from its endowment appreciation on an as-needed basis for the purposes of the Opera Center Fund program. This is consistent with the Organization's objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term, as well as to provide additional real growth through new gifts and investment return. NOTE J - NATIONAL OPERA CENTER As part of the Organization's overall strategic plan, the Board of Directors approved the establishment of a National Opera Center in New York City that was considered essential to strengthen the identity of the art form and industry as a whole. The National Opera Center will (i) make possible more frequent and direct contact between members and Organization staff, (ii) encourage greater involvement of members in Organization activities, (iii) create the potential for broader and deeper collaboration among members, and (iv) facilitate work with traditional partners and a host of new allies. The total cost of the National Opera Center campaign will be approximately $12 million, including approximately $6 million to cover the costs of design and construction and approximately $6 million to fund a board-restricted endowment. Subsequent to year-end, the Organization has raised approximately $6,641,000 in cash and pledges, $2 million of which is restricted toward the operating endowment. NOTE K - COMMITMENTS [1] Lease obligations: The Organization was obligated under a lease for its office space that expired in May 2011, at which time it relocated to temporary space within the same building pending the construction of the National Opera Center. The expired lease was converted to a month to month arrangement, whereby it has provided the landlord with one month's prepaid rent which is reflected in the accompanying statements of financial position. Additionally, in February 2011, the Organization entered into an operating lease for 25,000 square feet on two floors in the same building that currently house the Organization's offices, to develop its National Opera Center (see Note J). The term of the lease will be 20 years, with the rent ranging from approximately $522,000 per annum in the first year, to approximately $940,000 per annum in the 20 th year. The lease will commence on the date the landlord delivers the space to the Organization with all agreed-upon landlord demolition substantially completed and ready for new construction to begin. This is expected to occur by November In connection with the anticipated construction of the National Opera Center, the Organization has incurred approximately $335,000 in "soft-costs", comprised primarily of architect and legal fees. Rent expense, including escalations and building operating charges, was approximately $224,000 and $217,000 for fiscal-years 2011 and 2010, respectively. [2] Employment agreement: The Organization is obliged under employment agreements with its President/Chief Executive Officer through June 30, 2016 and its Director of Finance and Operations through February 1,

17 Notes to Financial Statements June 30, 2011 and 2010 NOTE L - RETIREMENT PLAN SPONSORS The Organization has a defined-contribution 403(b) plan. Employees who have completed one year of service are eligible to participate. The Organization remits matching contributions up to 5% of the employee's salary after one year of full-time employment. The Organization's contribution for fiscal-years 2011 and 2010 was $39,000 and $35,000, respectively. NOTE M - SUBSEQUENT EVENT Subsequent to year-end, the Organization entered into an agreement with a bank for a standby letter of credit of up to $600,000, to provide capital during the construction of the National Opera Center. The letter of credit, which expires August 12, 2012, has not yet been drawn upon. NOTE N - CONCENTRATION OF CREDIT RISK The Organization maintains its cash in bank accounts in amounts which, at times, may exceed federally insured limits, and its investments are held at major financial institutions. Management believes that the Organization is not exposed to any significant risk of loss on these accounts. 15

18 SUPPLEMENTARY INFORMATION

19 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION Board of Directors OPERA America, Inc. New York, New York Our report on our audits of the financial statements of Opera America, Inc. ("Organization") for the years ended June 30, 2011 and 2010 appears on page 1. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying consolidating information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. New York, New York October 6,

20 Combining Statement of Activities Year Ended June 30, 2011 (with summarized financial information for 2010) Operating June 30, Unrestricted Temporarily Restricted National Opera Center Total Projects National Opera Center Total Permanently Restricted Total Total Revenue: Contributed revenue $ 468,226 $ 468,226 $ 628,091 $ 2,736,219 $ 3,364,310 $ 3,832,536 $ 1,883,192 Membership dues 715, , , ,527 Seminars, workshops, registration and annual meeting 286, , , ,773 Publications, advertising and world wide web 40,619 40,619 40,619 37,891 Investment income 5,938 $ 168, ,771 1,120,781 61,751 1,182,532 1,357, ,019 Donated services 7, , , ,403 Miscellaneous income 48,494 48,494 48,494 17,223 Total revenue before net assets released from restrictions 1,572, ,611 1,847,395 1,748,872 2,797,970 4,546,842 6,394,237 3,704,625 Net assets released from restrictions 1,277,252 1,277,252 (1,277,252) (1,277,252) 0 0 Total revenue 2,850, ,611 3,124, ,620 2,797,970 3,269,590 6,394,237 3,704,625 Expenses: Program services: Membership 289, , , ,241 Public affairs 68,822 68,822 68,822 95,088 Public relations/marketing 50,247 50,247 50,247 43,375 NEA Opera Honors 152, , , ,880 Information services/publications 288, , , ,487 Education 123, , , ,658 Annual conference 383, , , ,655 Opera Fund program and artistic initiatives 478, , , ,277 Total program services 1,835,326 1,835,326 1,835,326 1,995,661 Supporting services: General and finance administration: Operations 674, , , ,406 National Opera Center 139, , ,331 47, , , , , ,061 Fund-raising activity 334, , , , ,964 Total supporting services 1,008, ,540 1,248,304 1,248, ,025 Total expenses 2,844, ,540 3,083,630 3,083,630 2,889,686 Increase in net assets 5,946 35,071 41, ,620 2,797,970 3,269,590 3,310, ,939 Net assets - beginning of year 224, ,914 1,090,265 1,398, ,592 1,893,928 $ 5,389,032 8,373,225 7,558,286 Net assets - end of year $ 230,297 $ 900,985 $ 1,131,282 $ 1,869,956 $ 3,293,562 $ 5,163,518 $ 5,389,032 $ 11,683,832 $ 8,373,225 See notes to financial statements 17