YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY, YMCA FOUNDATION OF MID-AMERICA AND LINWOOD YMCA QALICB, INC.

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1 YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY, CONSOLIDATING FINANCIAL STATEMENTS For the years ended December 31, 2015 and 2014

2 Mayer Hoffman McCann P.C. An Independent CPA Firm 700 West 47th Street, Suite 1100 Kansas City, MO Main: Fax: Member of Kreston International a global network of independent accounting firms

3 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31, 2015 and 2014 A S S E T S CASH CASH EQUIVALENTS $ 13,103,309 $ 4,647,858 ACCOUNTS RECEIVABLE, net 1,179, ,030 UNCONDITIONAL PROMISES TO GIVE, net of allowance for uncollectible promises to give and present value discount 6,561,541 7,528,043 INVESTMENTS 4,480,603 5,406,084 PROPERTY EQUIPMENT, net 25,609,328 26,416,464 OTHER ASSETS, net 851, ,294 TOTAL ASSETS $ 51,785,443 $ 45,201,773 L I A B I L I T I E S ACCOUNTS PAYABLE ACCRUED EXPENSES $ 1,078,620 $ 1,658,667 ACCRUED SALARIES RELATED EXPENSES 989, ,284 DEFERRED FEES 524, ,699 DERIVATIVE LIABILITY 710,164 1,006,384 DEBT OBLIGATIONS 23,266,507 18,868,056 TOTAL LIABILITIES 26,568,893 22,556,090 N E T A S S E T S UNRESTRICTED NET ASSETS Undesignated 9,412,469 5,438,430 Funded reserves 881, ,024 Board designated 4,091,488 4,894,122 TOTAL UNRESTRICTED NET ASSETS 14,385,698 11,240,576 TEMPORARILY RESTRICTED NET ASSETS 10,830,852 11,405,107 TOTAL NET ASSETS 25,216,550 22,645,683 TOTAL LIABILITIES NET ASSETS $ 51,785,443 $ 45,201,773 See Notes to Consolidated Financial Statements - 2 -

4 CONSOLIDATED STATEMENTS OF ACTIVITIES CHANGES IN NET ASSETS Years Ended December 31, 2015 and UNRESTRICTED NET ASSETS SUPPORT Direct contributions $ 1,346,170 $ 2,068,454 Capital campaign contributions - 269,835 United Way 1,043,902 1,047,428 Total support 2,390,072 3,385,717 OTHER OPERATING REVENUE Membership dues 15,096,355 13,579,072 Program and use of facilities fees 16,939,240 16,582,713 Contract and grant revenues 8,577,483 8,232,141 Program management fee 838,940 - Investment income from operating investments 25,085 28,492 Net assets released from restrictions 3,707, ,809 Total other operating revenue 45,184,270 38,722,227 TOTAL SUPPORT OTHER OPERATING REVENUE 47,574,342 42,107,944 OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION Program services 36,505,447 35,199,410 Supporting services Fundraising 702, ,822 General and administrative 5,356,162 4,520,394 Total supporting services 6,058,245 5,318,216 TOTAL OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION 42,563,692 40,517,626 CHANGES IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE DEPRECIATION AMORTIZATION 5,010,650 1,590,318 Depreciation and amortization 2,020,315 2,033,006 CHANGES IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS 2,990,335 (442,688) OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS Investment income 8, ,112 Change in value of derivative 296, ,692 Bad debt expense - capital campaign, net 24,657 (130,313) Loss from property impairment - (1,019,276) Loss from discontinued operations (119,534) (122,902) Nonoperating property expense (55,262) - TOTAL OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS 154,787 (612,687) CHANGES IN UNRESTRICTED NET ASSETS 3,145,122 (1,055,375) TEMPORARILY RESTRICTED CONTRIBUTIONS Temporarily restricted contributions 3,132,912 7,259,020 Net assets released from restrictions (3,707,167) (299,809) CHANGES IN TEMPORARILY RESTRICTED NET ASSETS (574,255) 6,959,211 CHANGES IN NET ASSETS 2,570,867 5,903,836 NET ASSETS, BEGINNING OF YEAR 22,645,683 16,741,847 NET ASSETS, END OF YEAR $ 25,216,550 $ 22,645,683 See Notes to Combined Financial Statements - 3 -

5 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2015 Program Services Supporting Services General Healthy Youth Head and Living Development Start Total Administrative Fundraising Total Salaries $ 6,174,003 $ 8,718,642 $ 3,816,070 $ 18,708,715 $ 2,711,664 $ 264,224 $ 21,684,603 Employee benefits 573, , ,253 2,045, ,211 52,450 2,543,563 Payroll taxes and other benefits 377, , ,776 1,711, ,682 25,326 1,958,041 Professional fees and expenses 510, , ,853 1,357, , ,716 2,473,027 Supplies 881,541 1,277, ,001 2,669, ,732 46,503 2,832,907 Telephone 108, ,076 49, ,750 26, ,735 Postage and shipping 69,900 7,933 8,537 86,370 10,551 2,473 99,394 Rental of space 31,654 1,584, ,312 2,035, ,101 50,804 2,285,577 Utilities 2,148,646 7, ,698 2,343, ,343,479 Building maintenance 1,378,291 72, ,906 1,699,822 1,340-1,701,162 Interest 533, ,968-52, ,885 Insurance and property taxes 171, ,354 11, ,375 51, ,799 Equipment maintenance 189,693 46,629 35, ,205 96,441 4, ,888 Promotions and publications 504, ,820 2, , ,433 64, ,168 Local transportation 89, , , ,956 67,104 3, ,025 Conferences and meetings 35,584 77,241 43, , ,152 7, ,545 Dues and support payments 231, , ,450 27,218 2, ,147 Partnership reserve expenses 265, , ,747 Total operating expenses before depreciation and amortization 14,276,435 15,019,981 7,209,031 36,505,447 5,356, ,083 42,563,692 Depreciation and amortization 1,485, , ,778 1,924,635 95,680-2,020,315 Total expenses $ 15,762,414 $ 15,285,859 $ 7,381,809 $ 38,430,082 $ 5,451,842 $ 702,083 $ 44,584,007 Percentage of operating expenses before depreciation and amortization 33% 35% 17% 85% 13% 2% 100% Percentage of total expenses 35% 34% 17% 86% 12% 2% 100% See Notes to Consolidated Financial Statements - 4 -

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2014 Program Services Supporting Services General Healthy Youth Head and Living Development Start Total Administrative Fundraising Total Salaries $ 5,693,722 $ 8,794,288 $ 3,531,071 $ 18,019,081 $ 2,184,450 $ 376,155 $ 20,579,686 Employee benefits 479, , ,658 1,918, ,389 54,299 2,351,380 Payroll taxes and other benefits 354,795 1,004, ,800 1,735, ,220 31,439 1,981,337 Professional fees and expenses 475, , ,968 1,263, , ,974 2,419,908 Supplies 774,371 1,189, ,912 2,582,232 97,691 39,173 2,719,096 Telephone 105,861 92,058 35, ,539 23, ,702 Postage and shipping 80,250 5,557 7,113 92,920 8,431 2, ,660 Rental of space 41,195 1,644, ,746 2,088, ,167 14,237 2,282,665 Utilities 2,007,717 9, ,927 2,208, ,208,369 Building maintenance 1,132,741 58, ,462 1,439,343 4,679 1,904 1,445,926 Interest 604, , ,456 Insurance and property taxes 189, ,582 21, ,664 54, ,322 Equipment maintenance 245,402 74,776 42, ,796 78, ,057 Promotions and publications 441,025 73,741 4, , ,004 45, ,518 Local transportation 84, , , ,084 54,623 3, ,614 Conferences and meetings 40,094 57,497 94, , ,881 6, ,995 Dues and support payments 207, ,527 1, ,395 25,453 1, ,732 Partnership reserve expenses 292, , ,203 Total operating expenses before depreciation and amortization 13,250,856 14,869,990 7,078,564 35,199,410 4,520, ,822 40,517,626 Depreciation and amortization 1,530, , ,408 1,935,844 97,162-2,033,006 Total expenses $ 14,781,401 $ 15,138,881 $ 7,214,972 $ 37,135,254 $ 4,617,556 $ 797,822 $ 42,550,632 Percentage of operating expenses before depreciation and amortization 33% 37% 17% 87% 11% 2% 100% Percentage of total expenses 35% 35% 17% 87% 11% 2% 100% See Notes to Combined Financial Statements - 5 -

7 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2015 and CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets $ 2,570,867 $ 5,903,836 Adjustments to reconcile changes in net assets to net cash flows from operating activities: Depreciation and amortization 2,020,315 2,033,006 Loss from property impairment - 1,019,276 Gain on disposal of property and equipment (4,250) (24,326) Change in allowance for uncollectible promises to give and present value discount (29,685) 223,799 Unconditional promises to give for capital campaigns (2,343,615) (7,509,994) Write off of unconditional promises to give 6,075 7,500 Realized and unrealized (gain) loss on investments 245,986 (177,264) Change in derivative liability (296,220) (313,692) Changes in operating assets and liabilities: Accounts receivable (623,102) (207,495) Other assets 92,051 (20,724) Accounts payable and accrued expenses (580,047) (245,616) Accrued salaries and related expenses 307, ,824 Deferred fees 182,672 (177,542) NET CASH FLOWS FROM OPERATING ACTIVITIES 1,548, ,588 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property 1,188,526 35,050 Proceeds from sale and maturities of investments 926, ,788 Purchase of investments (247,343) (177,484) Purchase of property and equipment (2,333,387) (1,389,359) NET CASH FLOWS FROM INVESTING ACTIVITIES (465,366) (634,005) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds received from capital campaigns 3,333,727 3,397,088 Repayment of debt obligations (2,594,974) (1,031,506) Payment of loan costs (360,355) - Proceeds from issuance of debt obligations 6,993,425 - NET CASH FLOWS FROM FINANCING ACTIVITIES 7,371,823 2,365,582 NET CHANGES IN CASH CASH EQUIVALENTS 8,455,451 2,349,165 CASH CASH EQUIVALENTS, BEGINNING OF YEAR 4,647,858 2,298,693 CASH CASH EQUIVALENTS, END OF YEAR $ 13,103,309 $ 4,647,

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies Nature of operations - Young Men's Christian Association of Greater Kansas City (the Association ) is a nonprofit charitable corporation that has been serving the people of the Kansas City area for more than 150 years. With a focus on youth development, healthy living and social responsibility, the YMCA of Greater Kansas City is committed to strengthening communities. The Association engages men, women and children - regardless of age, income or background - to nurture the potential of children and teens, improve the nation s health and wellbeing, and provide opportunities to give back and support neighbors. With a history of serving the Kansas City area since 1860, the Association has the long-standing relationships and physical presence not just to promise, but to deliver, lasting personal and social change. YMCA Foundation of Mid-America (the Foundation ) is a nonprofit charitable corporation. The Foundation was organized to support the mission and operations of the Association. Both the income and principal of these board designated funds, which are included in unrestricted net assets in the combined statement of financial position, may be used by the Association with the Foundation's Board of Directors approval. Linwood YMCA QALICB, Inc. (the Linwood QALICB ) was organized as a public benefit corporation formed for the purpose of purchasing and renovating a building known as the Linwood YMCA James B. Nutter, Sr. Community Center ( Linwood YMCA ) located in Kansas City, Missouri. The Association is the sole member of Linwood QALICB. Linwood QALICB participates in transactions qualified under the Federal New Market Tax Credit ( NMTC ) program, pursuant to Section 45D of the Internal Revenue Code of 1986, as amended. Through Linwood QALICB s participation in the NMTC program, QALICB has secured financing related to eligible capital projects. See additional details related to the NMTC transaction at Note 6. Principals of consolidation - The consolidated financial statements include the accounts of the Young Men's Christian Association of Greater Kansas City, the YMCA Foundation of Mid- America, and Linwood YMCA QALICB, Inc. (the Organizations ). All inter-organizational accounts and transactions have been eliminated. Use of estimates - The preparation of consolidated 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 - For purposes of the statements of cash flows, cash and cash equivalents are considered to be cash on hand, bank checking accounts and investments with original maturities of three months or less

9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Accounts receivable - Accounts receivable consist of member dues and program and use of facility fees and are stated at unpaid principal balances, less any allowance for doubtful accounts. Each account is analyzed individually to evaluate collectability. Unconditional promises to give - Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows less any allowance for doubtful accounts. The discounts on those amounts are computed using interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Management periodically evaluates the collectability of these promises to give and adjusts the adequacy of the allowance based on the Organizations past bad debt experience, known and other risks inherent to the portfolio, specific impaired receivables, adverse situations that may affect the ability to pay, and current economic conditions. The allowance for uncollectible promises to give was $211,820 and $242,552 at December 31, 2015 and 2014, respectively. Investments - Investments are reported at their fair values in the combined statements of financial position. Unrealized gains and losses are included in the combined statements of activities. Investment income and gains are reported as increases in unrestricted net assets if the restrictions are met in the reporting period in which the income and gains are recognized. Property and equipment - Land, buildings and improvements, and equipment are stated on the basis of cost or fair value on the date of donation. Depreciation is computed by the straight-line method over the following useful lives: Estimated Assets Buildings and leasehold improvements Equipment Useful Lives 2-30 years 2-20 years Intangible assets - Bond costs and other intangible assets with a gross value of $1,576,846 and $1,216,491 as of December 31, 2015 and 2014, respectively, are recorded at cost and are being amortized over the life of the bonds, which is 16 years. Accumulated amortization totaled $899,005 and $834,937 as of December 31, 2015 and 2014, respectively. Amortization expense approximating $64,000 was recognized during both of the years ending December 31, 2015 and Amortization expense is anticipated to approximate $65,000 during each of the next five years. Intangible assets are included in other assets on the combined statements of financial position. Deferred fees - Income from membership dues and other program services are deferred and recognized over the periods to which the dues and fees relate. Contribution and grant revenue - All contributions, pledges, and grants are considered to be available for unrestricted use unless specifically restricted by the donor. Revenue that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. Temporarily restricted net assets consisted of contributions, pledges, and grants to the Association for specific projects and specific locations. Membership and program fee revenue - The Association charges membership fees and fees for sports and educational programs. This revenue is used for the Association s primary activity and general operations

10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Donated assets and services - Donated assets are reflected as contributions at their estimated fair value at the date of receipt. Donated assets and services amounting to $24,900 and $39,131 are reflected in the combined financial statements for the years ended December 31, 2015 and 2014, respectively. The Association pays for most services requiring specific expertise. A substantial number of volunteers have donated hundreds of hours during the years ended December 31, 2015 and 2014, which do not meet the requirements of the Not-For-Profit Topic of the FASB ASC related to revenue recognition of contributions received and, accordingly, are not recorded in these combined financial statements. Advertising - Advertising costs, which are principally included in promotions and publications expense, are expensed as incurred. Advertising expense was $800,168 and $896,603 for the years ended December 31, 2015 and 2014, respectively. Taxes - The Association and Foundation have been granted exemptions from income taxes by the Internal Revenue Service under the provisions of Section 501(c)(3) of the Internal Revenue Code and are not considered private foundations. Linwood QALICB has been granted exemptions from income taxes by the Internal Revenue Service under the provision of Section 501(c)(2) of the Internal Revenue Code. The Organizations follow the Income Taxes Topic of the FASB ASC related to uncertain tax positions. This Topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Organizations did not have any material uncertain tax positions at December 31, 2015 or Functional expenses - The Association, Foundation and Linwood QALICB allocate expenses on a functional basis among various programs and support services. Expenses that can be identified with a specific program and support service are allocated directly according to their natural expenditure classification. Other expenses that are common to several functions are allocated by management's estimate of resources devoted to the program or support service. Fair value of financial instruments - The Association applies the provision of the Fair Value Measurement and Disclosures Topic of the FASB ASC for its financial and non-financial assets and liabilities which the Association has recognized or disclosed at fair value on a recurring basis. This Topic, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements for financial assets and liabilities. This Topic also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows: Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement

11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, other assets, accounts payable, and accrued liabilities approximate fair value due to their short maturities. See Note 4 for the fair value disclosures on investments. See Note 7 for the fair value disclosures on debt obligations. (2) Unconditional promises to give Unconditional promises to give consist of promises to give from donors concentrated within the Kansas City area related to capital campaigns. December 31, Unconditional promises to give $ 7,011,865 $ 8,008,052 Less: Unamortized discount (238,504) (237,457) Subtotal 6,773,361 7,770,595 Less: Allowance for uncollectibles (211,820) (242,552) Net unconditional promises to give $ 6,561,541 $ 7,528,043 Amounts due in: Years ending December 31, 2016 $ 2,745, ,575, ,442, , ,000 Thereafter 278,000 Total unconditional promises to give $ 7,011,865 Discount rates applied to pledges during the years ended December 31, 2015 and 2014 ranged from 1.22% to 5.00%. (3) Conditional promises to give Conditional promises to give at December 31, 2014 totaled $790,000, which consisted of pledges that are conditional upon the Association achieving certain conditions related to the construction or renovation of certain building locations. Conditional promises to give represent promises to give which are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. As a result, conditional pledges are not recorded in the combined financial statements. No conditional promises to give were outstanding as of December 31,

12 (4) Investments YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of investments: December 31, Cost Fair Value Cost Fair Value Money market investments $ 219,003 $ 219,003 $ 144,836 $ 144,836 Equities: Direct ownership 279, ,466 1,411,563 1,809,807 Held in mutual funds 2,631,018 2,632,845 1,143,260 1,461,159 Fixed income mutual funds 1,502,959 1,328,289 1,999,263 1,990,282 Total $ 4,632,491 $ 4,480,603 $ 4,698,922 $ 5,406,084 The Association and Foundation have instituted guidelines for board designated investment income available for current use. Investment income in excess is classified as a non-operating activity in the accompanying combined statement of unrestricted activities. Investment income consists of the following: Years Ended December 31, Realized and unrealized gains $ (245,986) $ 177,264 Interest and dividends 279, ,340 Total $ 33,791 $ 374,604 The management of the Association and Foundation endeavor to utilize the best available information in measuring fair value. The following table summarizes the valuation of financial instruments by the fair value pricing levels summarized in Note 1 as of December 31, 2015: Quoted Significant prices in other Significant active observable unobservable Total fair markets inputs inputs value Level 1 Level 2 Level 3 Money market investments $ 219,003 $ 219,003 $ - $ - Equities 2,933,311 2,933, Fixed income mutual funds 1,328,289 1,328, Total $ 4,480,603 $ 4,480,603 $ - $

13 (4) Investments (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the valuation of financial instruments by the fair value pricing levels summarized in Note 1 as of December 31, 2014: Quoted Significant prices in other Significant active observable unobservable Total fair markets inputs inputs value Level 1 Level 2 Level 3 Money market investments $ 144,836 $ 144,836 $ - $ - Equities 3,270,966 3,270, Fixed income mutual funds 1,990,282 1,990, Total $ 5,406,084 $ 5,406,084 $ - $ - (5) Property and equipment December 31, Cost Land $ 1,632,680 $ 1,640,487 Buildings and improvements 45,107,478 51,721,660 Equipment 6,090,037 6,002,521 Construction in progress 821, ,143 Total cost 53,652,022 59,669,811 Accumulated depreciation (28,042,694) (33,253,347) Net property and equipment $ 25,609,328 $ 26,416,464 The aggregate depreciation charged to operations was $1,956,247 and $1,967,425 for the years ended December 31, 2015 and 2014, respectively. (6) New market tax credit financing transaction During 2015, the Association sponsored a financing of its Linwood Family YMCA under the NMTC program. NMTC financing allows organizations such as Linwood QALICB to receive low-interest loans or investment capital from certified community development entities ( CDEs ) which allows third-party investors to receive Federal income tax credits based upon the amount of total investment in projects in certain low income communities. As an inducement to such third-party tax credit investors and a CDE to invest in the project, the Association committed $6,968,000 via a leverage loan (Note A) to The Twain Investment Fund 105, LLC ( Twain Investment Fund ), a Missouri limited liability company. U.S. Bancorp Community Development Corporation ( U.S. Bancorp ), a Minnesota corporation, invested $3,237,000 in the Twain Investment Fund. Twain Investment Fund is a wholly owned subsidiary of U.S. Bancorp. The Twain Investment Fund then contributed $10,000,000 to KCMO CDE XVI, LLC ( KCMO SUB- CDE ), the entity having the authority to provide the Federal income tax credits to investors, as a capital contribution. KCMO SUB-CDE is 99.99% owned by Twain Investment Fund. The leverage loan of $6,968,000 is reflected as a note receivable on the Association s stand-alone statement of financial position as of December 31,

14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (6) New market tax credit financing transaction KCMO CDE made qualified low income community investments (the QLICIs ) in Linwood QALICB, a wholly owned subsidiary of the Association created to develop the Linwood facility, in the form of loans: (i) $6,968,000 (Note A) and (ii) $2,932,000 (Note B). Such loans are secured by substantially all assets of Linwood QALICB, which consists primarily of land, building and improvements financed by the loans under the program. As part of the financing, the Association sold the existing Linwood Family YMCA land and building to Linwood QALICB and agreed to lease the Linwood Family YMCA back from Linwood QALICB for a period of 30 years. Linwood QALICB engaged the Association to provide it with construction management services, including management of architectural, engineering and construction contracts. In exchange for the services rendered during the construction of the Linwood YMCA, the Association will earn $700,000 in construction management fees. During the year ended December 31, 2015, the Association earned $154,877 of this fee. These earnings were eliminated from the consolidated financial statements. The difference between the interest rate charged and collected by KCMO CDE on the $6,968,000 loan ( %) and the interest rate charged and collected by the Association from Twain Investment Fund on its $6,968,000 loan ( %), which is funded by proceeds passed through KCMO CDE to Twain Investment Fund, has been reflected, net, as interest income in these financial statements. The net interest totaled $32,189. The notes have been eliminated in these consolidated financial statements. The principal amount of the Note B was of December 31, 2015 was $2,932,000 and is expected to be the same at the end of the seven-year compliance period required under the Internal Revenue Code. At the end of the tax credit compliance period or in event of a NMTC recapture event, U.S. Bancorp has the option to put its ownership interest in Twain Investment Fund to the Association and the Association has the option to call for the sale of and then purchase the Twain Investment Fund. (7) Debt obligations Association note payable, collateralized by certain property and all equipment, furniture, and fixtures, with interest at BBA LIBOR plus 3.50%. Interest accrues and is paid monthly. Principal payments of $43,950 are made semi-annually with unpaid principal and any accrued interest due November 1, December 31, $ 1,728,437 $ 2,108,056 Association bridge loan payable, with interest at 5 year LIBOR Swap Rate plus 2.75% to be paid monthly. $1,000,000 minimum principal payments shall be paid annually on June 29. Linwood related pledge payments received shall be immediately paid towards the loan balance and applied to principal and unpaid accrued interest. All remaining principal and any unpaid accrued interest is due June 29, QALICB Note B payable, collateralized by certain property. Interest accrues annually at % and is paid quarterly with unpaid principal and any accrued interest due June 30, ,271,070-2,932,

15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) Debt obligations December 31, Note payable, collateralized by investments, with interest at BBA LIBOR plus 2.40%. Interest accrues and is paid monthly. Principal and any accrued interest is due November 1, ,500,000 1,500,000 The Industrial Development Authority of the County of Jackson, State of Missouri issued variable rate demand recreational facilities bonds (Series 2002A) and The City of Olathe, Kansas issued variable rate demand recreational facility bonds (Series 2002B) (collectively, the "Authorities") for the purpose of making a loan to the Association to provide funds to finance and refinance costs of certain recreational facilities of the Association. The bonds are secured by loan and security agreements between the Association and Foundation and the Authorities and from funds drawn on irrevocable direct pay letters of credit issued by a local bank. In addition, the loans are secured by all accounts receivable, including pledges, and real property. The bonds are payable in increasing annual increments of principal through November 2018, as disclosed in the schedule of maturities below, and monthly payments of interest. The bonds are subject to the Association and Foundation meeting, on a combined basis, certain covenants as defined in the agreement, as well as a requirement that certain nonfinancial covenants are met, among which include that the Association provides the bank, for the bank's written approval, plans for its downtown project and new site location (the Plans) no later than March 31, 2016 and obtain written approval of the plans by March 31, Also, the Association shall obtain written approval of a lease or deed of conveyance within a time period approved by the bank, which is anticipated to occur after the dates in the preceding sentence. The bonds have a base rate of prime plus 2.00% (5.5% and 5.25% as of December 31, 2015 and 2014, respectively) and a term loan rate of base plus 2.00% (7.5% and 7.25% as of December 31, 2015 and 2014, respectively). Fair value of the bonds, calculated using the present value of future payments, approximates book value. 13,835,000 15,260,000 Total debt obligations $ 23,266,507 $ 18,868,056 The Association entered into an interest rate swap agreement (the agreement ) with Bank of America to hedge cash flows against changes in interest rates on its variable rate long-term debt. The notional amount associated with the agreement totaled $13,835,000 and $15,260,000 for 2015 and 2014, respectively. The Association pays a fixed interest rate of 3.42% on the agreement, which matures in The fair value of the interest rate swap has been valued on a mark to market basis and has been recorded as a derivative liability in the combined statements of financial position. The change in the fair value of the interest rate swap has been reflected as a non-operating activity in the combined statements of activities

16 (7) Debt obligations (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth, by level within the fair value hierarchy, the Association s financial liabilities that were measured at fair value on a recurring basis as of December 31, 2015 and Level 1 Level 2 Level 3 December 31, 2015 Interest rate swap $ - $ (710,164) $ - December 31, 2014 Interest rate swap $ - $ (1,006,384) $ - Subsequent to December 31, 2015, the Association entered into a debt restructuring plan with a bank. This new debt restructuring plan includes the following four components: (1) and (2) the Series 2002A and 2002B will be reissued as two new bonds secured by real estate; (3) a loan will be taken that is secured by investments of the Foundation; (4) the final component of the plan will include an unsecured loan. Maturities for the restructured debt obligations are as follows: Years Ending December 31, 2016 $ 584, ,500, ,500, ,561, ,000 Thereafter 19,087,241 (8) Temporarily restricted net assets Total debt obligations $ 24,733,311 Temporarily restricted net assets are restricted for the following purposes: December 31, Healthy Living Programs $ 249,917 $ 240,560 Youth Development Programs 509, ,225 Capital Campaigns 10,071,088 10,847,322 Total temporarily restricted net assets $ 10,830,852 $ 11,405,107 Some of the capital campaign amounts reflected above also have time restrictions in addition to purpose restrictions. The amounts with time restrictions are reflected as unconditional promises to give on the statement of financial position

17 (9) Operating leases YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Association leases office facilities, program space, fitness equipment, and office equipment under agreements accounted for as operating leases. Total rent expense under these leases was $2,443,161 and $2,437,669 for the years ended December 31, 2015 and 2014, respectively. Future minimum payments under the operating lease agreements with fixed monthly fees consisted of the following at December 31, 2015: (10) Retirement plan Years Ending December 31, 2016 $ 829, , ,492 $ 1,186,079 The Association participates in the YMCA Retirement Fund Retirement Plan which is a defined contribution, money purchase, church plan that is intended to satisfy the qualification requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended, and the YMCA Retirement Fund Tax-Deferred Savings Plan which is a retirement income account plan as defined in section 403(b)(9) of the code. Both plans are sponsored by The Young Men s Christian Association Retirement Fund (Fund). The Fund is a not-for-profit, tax-exempt pension fund incorporated in the State of New York (1922) organized and operated for the purpose of providing retirement and other benefits for employees of YMCAs throughout the United States. The plans are operated as church pension plans. Participation is available to all duly organized and reorganized YMCAs and their eligible employees. As a defined contribution plan, the Retirement Plan and Tax-Deferred Savings Plan have no unfunded benefit obligations. In accordance with the agreement with the YMCA Retirement Fund, the Association contributions are 8% of the participating employees eligible salaries, and are remitted to the YMCA Retirement Fund monthly. Total retirement contributions charged to employee benefit expenses were $870,140 and $854,936 for the years ended December 31, 2015 and 2014, respectively. (11) Cash flow disclosures Cash and cash equivalents consist of cash on hand and demand deposits with financial institutions. At times, cash balances held at financial institutions are in excess of FDIC insurance limits. Management monitors the soundness of these financial institutions and believes the risk of loss to the Association and Foundation is negligible. The following is a summary of supplemental cash flow information: December 31, Cash paid for interest, inclusive of amounts associated with interest rate swap agreement $ 669,159 $ 604,

18 (12) Discontinued operations NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Due to several years of net operating losses at each facility, during the year ended December 31, 2013, management decided to discontinue the operations of the Raytown (Richard C. Green) and Independence Y facilities. The Raytown and Independence facilities were sold in April Total losses related to all discontinued operations totaling $119,534 and $122,902 for the years ended December 31, 2015 and 2014, respectively, are included on the statements of activities and changes in net assets. In addition, the Association reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Due to the discontinued operations discussed above, impairment was evaluated based on the costs associated with replacing the existing assets. An impairment of $1,019,276 has been reflected on the combined statements of activities and changes in net assets for the year ended December 31, 2014, in order to reduce the carrying value of the impaired asset to its estimated fair value. No impairment was considered necessary during the year ended December 31, (13) Subsequent events Management has performed an evaluation of events that have occurred subsequent to December 31, 2015, as of May 19, 2016, which is the date the financial statements were available to be issued. No significant matters were identified for disclosure during this evaluation other than as discussed within Note

19 SUPPLEMENTARY INFORMATION

20 SUPPLEMENTARY INFORMATION - CONSOLIDATING STATEMENT OF FINANCIAL POSITION December 31, 2015 A S S E T S Association Linwood QALICB Foundation Eliminations Total CASH CASH EQUIVALENTS $ 5,082,375 $ 8,020,934 $ - $ - $ 13,103,309 ACCOUNTS RECEIVABLE, net 1,179,132-1,500,225 (1,500,225) 1,179,132 UNCONDITIONAL PROMISES TO GIVE, net of allowance for uncollectible promises to give and present value discount 6,561, ,561,541 INVESTMENTS 486,742-3,993,861-4,480,603 PROPERTY EQUIPMENT, net 24,398,022 2,087,425 - (876,119) 25,609,328 NOTE RECEIVABLE 6,968, (6,968,000) - OTHER ASSETS, net 393, ,355 97, ,530 TOTAL ASSETS $ 45,069,585 $ 10,468,714 $ 5,591,488 $ (9,344,344) $ 51,785,443 L I A B I L I T I E S ACCOUNTS PAYABLE ACCRUED EXPENSES $ 2,409,570 $ 169,275 $ - $ (1,500,225) $ 1,078,620 ACCRUED SALARIES RELATED EXPENSES 989, ,231 DEFERRED FEES 524, ,371 DERIVATIVE LIABILITY 710, ,164 DEBT OBLIGATION 18,834,507 9,900,000 1,500,000 (6,968,000) 23,266,507 TOTAL LIABILITIES 23,467,843 10,069,275 1,500,000 (8,468,225) 26,568,893 N E T A S S E T S UNRESTRICTED NET ASSETS Undesignated 9,889, ,439 - (876,119) 9,412,469 Funded reserves 881, ,741 Board designated - - 4,091,488-4,091,488 TOTAL UNRESTRICTED NET ASSETS 10,770, ,439 4,091,488 (876,119) 14,385,698 TEMPORARILY RESTRICTED NET ASSETS 10,830, ,830,852 TOTAL NET ASSETS 21,601, ,439 4,091,488 (876,119) 25,216,550 TOTAL LIABILITIES NET ASSETS $ 45,069,585 $ 10,468,714 $ 5,591,488 $ (9,344,344) $ 51,785,443 See Notes to Supplementary Information - Consolidating Statements

21 SUPPLEMENTARY INFORMATION - CONSOLIDATING STATEMENT OF ACTIVITIES Year Ended December 31, 2015 Association UNRESTRICTED NET ASSETS SUPPORT Direct contributions 1,346,170 Linwood QALICB Foundation Eliminations Total $ $ - $ - $ - $ 1,346,170 Campaign contributions United Way 1,043, ,043,902 Total support 2,390, ,390,072 OTHER OPERATING REVENUE Membership dues 15,096, ,096,355 Program and use of facilities fees 17,094, (154,877) 16,939,240 Contract and grant revenues 8,577, ,577,483 Program management fee 838, ,940 Investment income 220, (195,529) 25,085 Net assets released from restrictions 3,707, ,707,167 Total other operating revenue 45,534, (350,406) 45,184,270 TOTAL SUPPORT OPERATING REVENUE 47,924, (350,406) 47,574,342 OPERATING EXPENSES BEFORE DEPRECIATION AMORTZATION Program services 36,480,447-25,000-36,505,447 Supporting services Fundraising 702, ,083 Management and general 5,311, ,190-5,356,162 Total supporting services 6,013, ,190-6,058,245 TOTAL OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION 42,493, ,190-42,563,692 CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE DEPRECIATION AMORTIZATION 5,430,807 (561) (69,190) (350,406) 5,010,650 Depreciation and amortization 2,020, ,020,315 CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS 3,410,492 (561) (69,190) (350,406) 2,990,335 OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS Investment income 529,963-4,456 (525,713) 8,706 Change in value of derivative 296, ,220 Bad debt expense - capital campaign, net 24, ,657 Loss from discontinued operations (119,534) (119,534) Nonoperating property expense (55,262) (55,262) TOTAL OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS 676,044-4,456 (525,713) 154,787 CHANGE IN UNRESTRICTED NET ASSETS 4,086,536 (561) (64,734) (876,119) 3,145,122 TEMPORARILY RESTRICTED CONTRIBUTIONS Temporarily restricted contributions 3,132, ,132,912 Net assets released from restrictions (3,707,167) (3,707,167) CHANGE IN TEMPORARILY RESTRICTED NET ASSETS (574,255) (574,255) CHANGE IN NET ASSETS BEFORE INTER-ORGANIZATIONAL CONTRIBUTION 3,512,281 (561) (64,734) (876,119) 2,570,867 NET ASSETS, BEGINNING OF YEAR 17,751,561-4,894,122-22,645,683 INTER-ORGANIZATIONAL CONTRIBUTION 337, ,000 (737,900) - - NET ASSETS, END OF YEAR $ 21,601,742 $ 399,439 $ 4,091,488 $ (876,119) $ 25,216,550 See Notes to Supplementary Information - Consolidating Statements

22 NOTES TO SUPPLEMENTARY INFORMATION - CONSOLIDATING STATEMENTS (1) Principals of consolidation The consolidated financial statements include the accounts of the Young Men's Christian Association of Greater Kansas City, the YMCA Foundation of Mid-America, and Linwood YMCA QALICB, Inc. (the Organizations ). All inter-organizational accounts and transactions have been eliminated. The Association and Linwood QALICB have entered into a lease agreement such that in exchange for lease payments the Association will obtain access to the premises and all current and future improvements owned by Linwood QALICB. The lease commenced on June 30, 2015 and expires on June 30, Rent payments shall commence on December 1, 2016 and cease at the end of the lease term. The premises being leased was under construction during As such, the lease falls under build-to-suit lease guidance. This guidance states if the lessee made maximum guarantee payments in excess of 90% of the total project cost, the lessee holds substantially all of the construction period risks and, therefore, should be considered the owner of the real estate project during the construction phase. Given that construction is anticipated to be substantially complete by December 31, 2016, this lease guidance only impacts the consolidating financial statements for the year ended December 31, Also, the cost of the premises reported within the consolidated financial statements is not impacted. As such, the ownership of the premises has been reflected within the property and equipment of Linwood QALICB at December 31, As construction was not completed as of December 31, 2015, the Association did not have possession or control of the premises; therefore, no lease payments were made during Lease expense will not be recorded until possession or control of the premises is obtained by the Association