AMERICAN FRIENDS OF THE TEL AVIV UNIVERSITY, INC. FINANCIAL STATEMENTS AND AUDITOR S REPORT SEPTEMBER 30, 2016

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1 FINANCIAL STATEMENTS AND AUDITOR S REPORT

2 TABLE OF CONTENTS Page(s) Independent Auditor s Report 1-2 Exhibit A - Statement of Financial Position 3 B - Statement of Activities 4-5 C - Statement of Functional Expenses 6 D - Statement of Cash Flows 7 Notes to Financial Statements 8-19

3 1. Independent Auditor s Report Board of Directors American Friends of the Tel Aviv University, Inc. Report on the Financial Statements We have audited the accompanying financial statements of American Friends of the Tel Aviv University, Inc., which comprise the statement of financial position as of September 30, 2016, and the related statements of activities, functional expenses and cash flows for the year then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Auditors Auditors and Consultants and Consultants Serving Serving the Health the Health Care & Care Not for & Not Profit for Sectors Profit Sectors 655 Third 655 Avenue, Third Avenue, 12th Floor, 12th New Floor, York, New NY York, NY (212) (212) / Fax (212) / Fax (212) / /

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Friends of the Tel Aviv University, Inc. as of September 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited American Friends of the Tel Aviv University, Inc. s September 30, 2015 financial statements and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 21, In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. 2. March 15, 2017

5 3. EXHIBIT A STATEMENT OF FINANCIAL POSITION (With Summarized Financial Information for September 30, 2015) ASSETS Cash and cash equivalents $ 12,880,663 $ 15,277,618 Investments (Note 2) 39,951,238 37,581,023 Contributions receivable (net of $2,490,000 allowance for uncollectible accounts) (Note 3) 22,415,779 20,682,678 Security deposits and other receivables 9,493 18,432 Prepaid expenses 125, ,273 Donated real property - land (Note 2) 30,000 30,000 Fixed assets - net (Note 5) 124, ,597 Total assets $ 75,536,860 $ 73,874,621 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 393,614 $ 184,597 Deferred revenue 1,758,611 2,013,753 Deferred rent 42,679 29,926 Annuity obligations (Note 2) 2,954,077 3,079,999 Total liabilities 5,148,981 5,308,275 Net assets Unrestricted Operating 296, ,895 Student program 86,384 Total unrestricted 382, ,895 Temporarily restricted (Note 9) 42,487,416 41,885,795 Permanently restricted (Note 9) 27,517,547 26,277,656 Net assets (Exhibit B) 70,387,879 68,566,346 Total liabilities and net assets $ 75,536,860 $ 73,874,621 See independent auditor's report. The accompanying notes are an integral part of these statements.

6 4. EXHIBIT B STATEMENT OF ACTIVITIES YEAR ENDED (With Summarized Financial Information for the Year Ended September 30, 2015) Unrestricted Student Temporarily Permanently Total All Funds Operating Program Total Restricted Restricted Revenues, gains, (losses) and other support Legacies and bequests $ 833,039 $ 833,039 $ 719,980 $ 175,000 $ 1,728,019 $ 3,710,675 Contributions and grants 1,472,722 1,472,722 18,907,091 1,033,193 21,413,006 34,053,745 Fund-raising events Ticket sales 55,750 55,750 30,300 Direct cost of special events (157,474) (157,474) (72,888) Overseas students 8,177,701 8,177,701 8,177,701 8,236,410 Interest and dividends (net of investment fees of $241,734) (Note 4) 70,999 70, , , ,798 Realized and unrealized gains (losses) on investments (Note 4) 118, ,944 2,952,665 3,071,609 (2,221,413) Change in value of split-interest agreements (159,050) (159,050) 10,347 31,698 (117,005) (685,810) Other income 15,201 15,201 53,679 68,880 19,006 Bad debt loss (505,385) (505,385) (866,000) Net assets released from restrictions (Note 9) 22,196,755 22,196,755 (22,196,755) Total revenues, gains, losses and other support 24,548,610 8,177,701 32,726, ,621 1,239,891 34,567,823 42,894,823 Expenses (Exhibit C) Program services Student 7,861,921 7,861,921 7,861,921 8,074,767 Other projects 22,196,755 22,196,755 22,196,755 21,438,153 Management and general 1,386, ,396 1,615,978 1,615,978 1,622,673 Fund raising 3,871,636 3,871,636 3,871,636 3,734,622 Total expenses 27,454,973 8,091,317 35,546,290 35,546,290 34,870,215

7 5. EXHIBIT B -2- STATEMENT OF ACTIVITIES YEAR ENDED (With Summarized Financial Information for the Year Ended September 30, 2015) Unrestricted Student Temporarily Permanently Total All Funds Operating Program Total Restricted Restricted Change in net assets before assumption of supporting services by Tel Aviv University $ (2,906,363) $ 86,384 $ (2,819,979) $ 601,621 $ 1,239,891 $ (978,467) $ 8,024,608 Assumption of supporting services by Tel Aviv University (Note 7) 2,800,000 2,800,000 2,800,000 2,800,000 Change in net assets (Exhibit D) (106,363) 86,384 (19,979) 601,621 1,239,891 1,821,533 10,824,608 Net assets - beginning of year 402, ,895 41,885,795 26,277,656 68,566,346 57,741,738 Net assets - end of year (Exhibit A) $ 296,532 $ 86,384 $ 382,916 $ 42,487,416 $ 27,517,547 $ 70,387,879 $ 68,566,346 See independent auditor's report. The accompanying notes are an integral part of these statements.

8 6. EXHIBIT C STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED (With Summarized Financial Information for the Year Ended September 30, 2015) Program Services Supporting Services University Projects Management and General Total Other Other Fund Special Student Projects Total Student Projects Raising Total Events Salaries $ 250,634 $ 250,634 $ 834,480 $ 1,868,293 $ 2,702,773 $ 2,953,407 $ 2,762,152 Payroll taxes and employee benefits 75,675 75, , , , , ,054 Total salaries and related expenses 326, ,309 1,035,228 2,317,741 3,352,969 3,679,278 3,446,206 Transmissions to Tel Aviv University 7,366,495 $ 18,960,038 26,326,533 26,326,533 27,229,875 Office equipment and supplies 6,420 6,420 19,491 43,383 62,874 69,294 67,174 Grants and awards 3,236,717 3,236,717 3,236,717 1,811,158 Telecommunications 6,195 6,195 14,758 34,434 49,192 55,387 48,375 Postage and shipping 3,426 3,426 2,577 10,307 12,884 $ ,422 14,614 Occupancy (Note 6) 30,300 30,300 90, , , , ,018 Credit card processing and other fees $ 177, , , ,971 Conferences, conventions and meetings 7,387 7,387 15,242 86, , , ,143 IDEAS California Technology Conference 382, , , ,884 Publicity and public relations 167, ,645 2, , ,589 Travel and entertainment 50,717 50,717 18, , , , ,344 Advertising 52,345 29,585 81,930 81, ,556 Insurance 4,900 4,900 20,676 20,676 41,352 46,252 40,600 Professional fees 17,107 17,107 91,981 91, , ,642 Consultants 161, ,170 16, , ,779 Printing, brochures and production 17,311 17,311 10,005 10,005 19,075 46,391 30,936 Network and IT services 25,354 25,354 30,877 92, , , ,128 Direct mail campaign 201, , , ,794 Hotel food and entertainment 120, ,029 62,807 Depreciation and amortization 17,563 39,093 56,656 56,656 72,510 Investment fees 241, , , ,465 Total expenses 7,861,921 22,196,755 30,058, ,396 1,628,316 3,871,636 5,729, ,474 35,945,498 35,244,568 Less: Direct cost of special events (157,474) (157,474) (72,888) Investment fees (241,734) (241,734) (241,734) (301,465) Total expenses reported by function on the statement of activities (Exhibit B) $ 7,861,921 $ 22,196,755 $ 30,058,676 $ 229,396 $ 1,386,582 $ 3,871,636 $ 5,487,614 $ - $ 35,546,290 $ 34,870,215 See independent auditor's report. The accompanying notes are an integral part of these statements.

9 7. EXHIBIT D STATEMENT OF CASH FLOWS YEAR ENDED Cash flows from operating activities Change in net assets (Exhibit B) $ 1,821,533 Adjustments to reconcile change in net assets to net cash used by operating activities Depreciation and amortization 56,656 Realized and unrealized gain on investments - net (3,071,609) Change in value of split-interest agreements 117,005 Contributions restricted for long-term investment (1,208,193) Decrease (increase) in assets Contributions receivable (1,733,101) Security deposits and other receivables 8,939 Prepaid expenses (18,798) Increase (decrease) in liabilities Accounts payable and accrued expenses 209,017 Deferred revenue (255,142) Deferred rent 12,753 Net cash used by operating activities (4,060,940) Cash flows from investing activities Fixed assets acquisitions (2,675) Purchase of investments (38,234,675) Proceeds from sale of investments 38,936,069 Net cash provided by investing activities 698,719 Cash flows from financing activities Proceeds from contributions restricted for investment for endowment 1,208,193 Income on annuity obligation restricted for reinvestment 175,805 Payment of annuity obligations (418,732) Net cash provided by financing activities 965,266 Net change in cash and cash equivalents (2,396,955) Cash and cash equivalents - beginning of year 15,277,618 Cash and cash equivalents - end of year $ 12,880,663 See independent auditor's report. The accompanying notes are an integral part of these statements.

10 8. NOTE 1 - NATURE OF ORGANIZATION American Friends of the Tel Aviv University, Inc. (AFTAU) is a not-for-profit organization whose primary purpose, as stated in its bylaws, is to raise funds for the development and advancement of higher education, student programs, research and training in all branches of knowledge in Israel and elsewhere. In addition, AFTAU provides opportunities for American students to study at the University of Tel Aviv. AFTAU s primary sources of funding are contributions and grants, overseas students revenue, legacies and bequests and investment income. AFTAU is a not-for-profit organization exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and has been classified as an organization that is not a private foundation under Section 509(a). NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation - The financial statements are prepared on the accrual basis of accounting. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents - Cash and cash equivalents consist of cash and highly liquid investments with maturity dates, when acquired, of three months or less. Investments - Investments are stated at fair value. AFTAU invests in various investments. Investments in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of investments will occur in the near term, based on the markets fluctuations, and that such changes could materially affect the amounts reported in the financial statements. Contributions receivable - Unconditional promises to give that are expected to be collected within one year are recorded at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at fair value, which is measured as the present value of their future cash flows. The discounts on these amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met.

11 9. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Allowance for doubtful accounts - AFTAU determines whether an allowance for uncollectibles should be provided for contributions receivable. Such estimates are based on management s assessment of the aged basis of its contributions, current economic conditions, subsequent receipts and historical information. Contributions receivable are written off against the allowance for doubtful accounts when all reasonable collection efforts have been exhausted. Donated real property - land - Land held for investment consists of donated land, recorded at fair value at the date of donation. Fixed assets - Fixed assets, including leasehold improvements, are stated at cost. Individual items with a cost of $2,000 and a useful life exceeding one year are capitalized. Depreciation of furniture and equipment is recorded on the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Amortization of leasehold improvements is provided over the lesser of the term of the lease or their estimated useful lives, which range from five to seven years. Deferred revenue - The majority of deferred revenue represents funds collected for overseas students and not yet earned. Annuity obligations - Charitable remainder trusts are subject to the restrictions of gift instruments requiring AFTAU to pay stipulated amounts to beneficiaries. Such payments terminate at the time of the donor or beneficiary s death. AFTAU has used actuarial assumptions and discount rates to record the present value of estimated future payments to beneficiaries. At the time of the gift, AFTAU records contribution income net of a liability for amounts payable to annuitants and third-party beneficiaries using an actuarial calculation based on estimated mortality rates and other assumptions that could change in the near term. The annual adjustment is based on a Generally Accepted Accounting Policies Liabilities Report provided by Comerica, which administers AFTAU s Charitable Gift Annuity program. Unrestricted, temporarily restricted, and permanently restricted net assets - Unrestricted net assets are those whose use by AFTAU has not been restricted by donors. Temporarily restricted net assets are those whose use by AFTAU has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by AFTAU in perpetuity.

12 10. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Contributions and grants - Unconditional contributions and grants, including promises to give cash and other assets, are reported at fair value at the date the contribution and grants are received. The gifts are reported as either temporarily restricted or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Overseas student revenue - AFTAU charges tuition for American students attending the Tel Aviv University (University) and contracts with the University to provide educational and related services to these students. Revenue is recognized over the period the student is attending the University. Amounts received in advance of the student s attendance are recorded as deferred revenue. Summarized financial information - The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the organization s financial statements for the year ended September 30, 2015, from which the summarized information was derived. Rent - Rent expense is reflected on the straight-line basis over the term of the lease. Deferred rent is recorded when there is a material difference between the fixed payment and the rent expense. Advertising - Advertising costs are expensed in the year incurred. Functional allocation of expenses - The costs of providing services have been summarized on a functional basis. Accordingly, certain costs have been allocated among programs and supporting services benefited. Transmissions to Tel Aviv University and grants and awards - All transmissions to Tel Aviv University (TAU) or other educational and charitable institutions in Israel and the United States are recorded pursuant to authorization by the Board of Directors of AFTAU.

13 11. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurements Fair Value Measurements establishes a framework for measuring fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below. Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that AFTAU has the ability to access. Level 2 inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value or other methodologies. There have been no changes in the methodologies used at September 30, 2016 as compared to those used at September 30, Common stocks and U.S. Government agency obligations - Valued at the closing price reported on the active market on which the individual securities are traded. U.S. Corporate bonds - Valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations, considering the creditworthiness of the issuer. Mutual funds - Valued at the net asset value (NAV) of shares held at year end.

14 12. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurements (continued) State of Israel bonds - Valued based upon comparable securities of issuers with similar yields and similar credit ratings. Life insurance policy - Valued at cash surrender value. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while AFTAU believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the investments measured at fair value as of September 30, 2016: Level 1 Level 2 Total Common stock Banking and financial services $ 1,272,141 $ 1, Consumer services 547, ,243 Consumer staples 437, ,370 Conglomerates 216, ,213 Energy 359, ,608 Health care 1,377,852 1, Industrial/manufacturing 54,082 54,082 Technology 315, ,385 Utilities 223, ,720 Other 136, ,383 Total common stock 4,939,997 4,939,997

15 13. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurements (continued) Level 1 Level 2 Total Mutual funds Large Cap U.S. $ 12,085,156 $ 12,085,156 Mid Cap U.S. 2,254,997 2, Small Cap U.S. 2,018,112 2,018,112 Developed international 2,668,713 2,668,713 Emerging markets 917, ,454 Fixed income 11,332,156 11,332,156 Commodities - other 784, ,183 Growth 260, ,833 Value 307, ,120 Real estate 849, ,160 Total mutual funds 33,477,884 33,477,884 U.S. corporate bonds $ 444, ,359 U.S. Government agency obligations 190, ,323 State of Israel bonds 117, ,250 Life insurance policy 8,174 8,174 Total investments reported by level on the fair value hierarchy $ 38,608,204 $ 569,783 39,177,987 Cash and cash equivalents 773,251 Total investments $ 39,951,238 Uncertainty in income taxes - AFTAU has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements. Periods ending September 30, 2013 and subsequent remain subject to examination by applicable taxing authorities. Subsequent events - Subsequent events have been evaluated through March 15, 2017, which is the date the financial statements were available to be issued.

16 14. NOTE 3 - CONTRIBUTIONS RECEIVABLE All unconditional contributions receivable have been recorded at present value. Those receivables that are due in more than one year have been discounted to their present value using a discount rate of 3%. The receivables are recorded as follows: 2017 $ 7,833, ,210, ,183, ,302, ,231,520 Thereafter 5,710,343 20,471,919 Current (due by September 30, 2016) 6,216,681 26,688,600 Less discount to present value (1,782,821) 24,905,779 Less allowance for uncollectibles (2,490,000) Net $ 22,415,779 NOTE 4 - INVESTMENT INCOME Investment income consists of the following: Interest and dividends $ 1,074,456 Less investment fees (241,734) Net interest and dividends $ 832,722 Realized loss - net $ (274,932) Unrealized gain - net 3,346,541 Net realized and unrealized gain $ 3,071,609

17 15. NOTE 5 - FIXED ASSETS Leasehold improvements $ 142,571 Furniture and equipment 341, ,103 Accumulated depreciation and amortization (359,487) $ 124,616 NOTE 6 - LEASE COMMITMENTS AFTAU has entered into leases for rental of various offices. The rent expense for the year was $322,151. The following are the minimum noncancelable annual rental payments to be made (modified by escalation and tax increases): Year to End September 30, New York National Office Western Region Los Angeles Office Total 2017 $ 230,850 $ 43,197 $ 274, ,622 44, , ,537 50, , ,601 51, , ,531 53, , ,721 31,721 Total $ 1,021,141 $ 274,040 $ 1,295,181 The New York national office lease expires December 31, The Los Angeles office lease expires April 30, NOTE 7 - ASSUMPTION OF SUPPORTING SERVICES BY TEL AVIV UNIVERSITY By agreement between AFTAU and TAU, TAU provides for annual overhead to cover a portion of management and general and fund-raising expenses of AFTAU. For the year ended September 30, 2016, $2,800,000 has been reflected in these financial statements as assumption of supporting services by Tel Aviv University.

18 16. NOTE 8 - PENSION PLAN AFTAU has a defined contribution plan for all eligible employees. The complete summary plan description is available from the national office upon request. Pension expense for the year was $131,023. NOTE 9 - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: Research, fellowships, scholarships and chairs $ 42,487,416 Temporarily restricted net assets were released from donor restrictions by incurring expenses satisfying the following temporarily restricted purposes: Research, fellowships, scholarships and chairs $ 22,196,755 General AFTAU s endowment consists of 62 individual funds which are categorized as follows: Scholarship Endowment Funds Perpetual endowments, the income from which provides for scholarships. Other Endowment Funds Established with gifts and bequests made and accepted with the donor stipulation that the principal be maintained in perpetuity, and that only investment income may be used for donor-specified purposes. Investment income on endowments is classified as temporarily restricted, except where directed by the donor to be added to principal. As required by Generally Accepted Accounting Principles (GAAP), net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

19 17. NOTE 9 - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS (continued) Interpretation of Relevant Law The Board of Directors of AFTAU adopted the New York Prudent Management of Institutional Funds Act (NYPMIFA). NYPMIFA permits charities to apply a spending policy to endowments based on certain specified standards of prudence. AFTAU is governed by the NYPMIFA spending policy, which establishes a standard maximum prudent spending limit of 7% of the average of its previous five years balance. As a result of this interpretation, AFTAU classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donorrestricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standards of prudence prescribed by NYPMIFA. Return Objectives, Strategies Employed and Spending Policy The objective of AFTAU is to maintain the principal endowment funds at the original amount designated by the donors and to generate investment income to support the purposes designated by the donors. The investment policy to achieve this objective is to invest in a diversified portfolio of investments. Income earned in relation to the endowment funds is recorded as temporarily restricted income and released from restriction upon expenditure for the program for which the endowment fund was established. Certain endowment funds generate investment income and, as stipulated by the donor, is recorded as permanently restricted income. AFTAU s spending rate related to investment income is currently up to 3.75%. Funds with Deficiencies AFTAU has no funds with deficiencies in 2016.

20 18. NOTE 9 - TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS (continued) Endowment Net Asset Composition as of September 30, 2016 The endowment net asset composition comprises the following: Scholarships $ 12,283,209 Institutes 4,939,926 Centers 2,108,895 Research 1,059,185 Chairs 3,412,230 Other activities of the organization 3,714,102 Permanently restricted net assets generating available income $ 27,517,547 Changes in Endowment Net Assets for the Year Ended September 30, 2016 Temporarily Restricted Permanently Restricted Endowment net assets, beginning of year $ 26,277,656 Contributions, legacies, and bequests 1,208,193 Interest and dividends $ 148,270 Net realized/unrealized gain 616,730 Change in value of split-interest agreements 31,698 Appropriated for expenditures (765,000) Endowment net assets, end of year $ - $ 27,517,547

21 19. NOTE 10 - SPLIT-INTEREST AGREEMENTS AFTAU has numerous split-interest agreements which include trusts and charitable gift annuities. All split-interest agreements are discounted at 3%. As of September 30, 2016, the statement of activities and the statement of financial position of AFTAU include the various split-interest agreements as follows: Charitable Gift Annuities Unrestricted Temporarily Restricted Trusts Permanently Restricted Total Statement of activities Change in value of splitinterest agreements $ (159,050) $ 10,347 $ 31,698 $ (117,005) Statement of financial position Investments 3,102, , ,188 3,852,631 NOTE 11 - OVERHEAD CHARGES AFTAU charges an overhead of 15% on all designated gifts except those designated for research or endowment. The guidelines are available upon request. NOTE 12 - CONCENTRATIONS Financial instruments which potentially subject AFTAU to a concentration of credit risk are cash accounts with financial institutions in excess of FDIC insurance limits.