METROPOLITAN COUNCIL ON JEWISH POVERTY, INC. AND AFFILIATES. Combined Financial Statements and Supplemental Schedules

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1 Combined Financial Statements and Supplemental Schedules For the Years Ended June 30, 2009 and 2008 "'.,,..

2 For the Years Ended June 30, 2009 and 2008 INDEX Page Independent Auditor's Report 1 Financial Statements Combined Statements of Financial Position 2 Combined Statements of Activities 3-4 Combined Statements of Cash Flows 5-6 Combined Statements of Functional Expenses 7-8 Notes to Combined Financial Statements 9-31 Independent Auditor's Report on Supplemental Schedules 32 Supplemental Schedules Combining and Combined Statements of Financial Position' 33 Combining and Combined Statements of Activities2 34 Combining and Combined Statements of Functional Expenses2 35 Statements of Financial Position of Met Council' 36 Statements of Activities of Met Councii2 37 Combining and Combined Statements of Functional Expenses of Met Councii2 38 Combining and Combined Statements of Financial Position of Housing' 39 Combining and Combined Statements of Activities of Housing2 40 Combining and Combined Statements of Functional Expenses of Housing2 41 Combining and Combined Statements of Financial Position of Home Care' 42 Combining and Combined Statements of Activities of Home Care2 43 Combining and Combined Statements of Functional Expenses of Home Care2 44, As of June 30, 2009 (with comparative totals for June 30, 2008) 2 For the year ended June 30, 2009 (with comparative totals for June 30, 2008) "'.,,..

3 BTcc. CERTIFIED PUBLIC ACCOUNTANTS ONE PENNSYLVANIA PLAZA. SUITE NEW YORK, NY FAX INDEPENDENT AUDITOR'S REPORT To the Board of Directors Metropolitan Council on Jewish Poverty, Inc. and Affiliates We have audited the accompanying combined statements of financial position of Metropolitan Council on Jewish Poverty, Inc. ("Met Council") and affiliates as of June 30, 2009 and 2008, and the related combined statements of activities, cash flows, and functional expenses for the years then ended. These combined financial statements are the responsibility of Met Council's management. Our responsibilty is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Metropolitan Council on Jewish Poverty, Inc. and affiliates as of June 30, 2009 and 2008, and the changes in their net assets and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note 27 to the combined financial statements, the combined financial statements for the year ended June 30, 2008 have been restated to include the activities of 385 Third Avenue HDFC. Additionally, an adjustment has been made to net assets as of July 1, 2007 to reflect the restatement. 11::~i. ~~ ~~ up March 20, 2010 OFFICE IN : ROCKVillE, MARYLAND l&~28b

4 Combined Statements of Financial Position June 30, 2009 and Restated ASSETS Assets: Cash and cash equivalents $ 15,882,680 $ 9,767,067 Program grants and other receivables 18,792,731 17,203,703 Inventory 27,494 17,340 Security deposits and other assets 1,591, ,600 Investments held for deferred compensation plan 320, ,070 Fixed assets, net 101,558,663 92,226,397 Restricted deposits 6,113,350 4,424,988 Investments - restricted 1,721,876 2,495,986 Investments in limited partnerships and limited liabilty company 113, ,886 Investment in land 16,548,125 16,548,125 Total assets $ 162,670,394 $ 144,423,162 LIABILITIES AND NET ASSETS Liabilities: Accounts payable, accrued expenses and other payables $ 11,298,886 $ 9,818,794 Loans payable 125,000 95,000 Government advances payable 20,645,892 15,966,185 Mortgage payable - N.Y.S. Dormitory Authority 5,325,428 5,571,892 Operating reserve limited partnerships 564, ,581 Deferred compensation payable 320, ,070 HPD advances 600, ,000 HUD advances 48,150,914 48,150,914 HPD mortgage payable 4,620,895 Deferred rent from land lease 16,139,683 16,305,829 Total liabilities 107,791,926 97,083,265 Net assets: Unrestricted 54,543,174 47,099,797 Temporarily restricted 335, ,100 Total net assets 54,878,468 47,339,897 Total liabilities and net assets $ 162,670,394 $ 144,423,162 See notes to combined financial statements "'~,..

5 Combined Statement of Activities For the year ended June 30, 2009 See notes to combined financial statements Ø~288

6 Combined Statement of Activities For the year ended June 30, 2008 Temporarily Total Revenue: Public support: Unrestricted Restricted Restated Government grants $ 102,204,092 $ $ 102,204,092 Grants from UJAlFederation of New York 4,423,171 4,423,171 Grants from United Way 180, ,608 Private grants 3,197,790 3,197,790 Building contributions 13,986,169 13,986,169 Rental income - land lease 166, ,146 Contributions and donated services 1,865,071 1,865,071 Total public support 126,023, ,023,047 Special events revenue 677, ,300 Less: cost of direct benefits to donors 83,766 83,766 Net revenue from special events 593, ,534 Total public support and special events revenue 126,616, ,616,581 Other revenue: Interest 430, ,088 Program fees 1,807,810 1,807,810 Rental income 4,220,569 4,220,569 Other 462, ,083 Total other revenue 6,920,550 6,920,550 Total revenue 133,537, ,537,131 Expenses: Program services Supporting services: 115,674, ,674,728 Management and general 5,340,233 5,340,233 Fund-raising 281, ,319 Total functional expenses 121,296, ,296,280 Other expenses: Realized loss on investment (primarily Fund for the Jewish Poor) 1,430,724 1,430,724 Interest 296, ,956 Total other expenses 1,727,680 1,727,680 Total expenses 123,023, ,023,960 Changes in net assets from non housing operations (1,220,962) (1,220,962) Net assets released from restrictions 23,478 (23,478) Total changes in net assets from non housing operations (1,197,484) (23,478) (1,220,962) Changes in net assets from housing 11,734,133 11,734,133 Total changes in net assets from housing 11,734,133 11,734,133 Total changes in net assets 10,536,649 (23,478) 10,513,171 Net assets, beginning of year, as originally reported 36,486, ,578 36,750,576 Prior period adjustment 76,150 76,150 Net assets, beginning of year, as restated 36,563, ,578 36,826,726 Net assets, end of year, as restated $ 47,099,797 $ 240,100 $ 47,339,897 See notes to combined financial statements "'.,,..

7 , METROPOLITAN COUNCIL ON JEWISH POVERTY, INC. AND AFFILIATES Combined Statements of Cash Flows For the years ended June 30, 2009 and Restated Cash flows from operating activities: Changes in net assets $ 7,538,571 $ 10,513,171 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 3,489,906 3,172,061 Equity in net loss of limited partnerships' investments 6,013 6,842 Contribution of land and building (8,418,305) (13,880,911) Amortization of deferred rent from land lease (166,146) (166,146) Realized loss on investment 1,423,882 Changes in operating assets and liabilities: Program grants and other receivables (1,576,849) 303,911 Inventory (10,154) 1,405 Security deposits and other assets (14,371) (125,806) Accounts payable, accrued expenses, and other payables 1,300,211 83,986 Government advances payable 4,679,707 (720,350) Deferred compensation payable 71, ,818 Operating reserve limited partnerships (111,201) 18,445 Net cash provided by operating activities 6,789, ,308 Cash flows from investing activities: Purchase of fixed assets (471,357) (179,943) Redemption of investment - Fund for the Jewish Poor 949,125 Redemption of investment 774,110 38,396 Restricted deposits (1,038,192) (4,424,988) Investments held for deferred compensation plan (71,644) (194,818) Net cash (used in) investing activities (807,083) (3,812,228) Cash flows from financing activities: Proceeds (repayment) of loans payable 30,000 HUD advances 350,134 (145,500) (Repayment of) mortgage payable (246,464) (234,702) Net cash provided by (used in) financing activities 133,670 (380,202) Net increase (decrease) in cash and cash equivalents 6,115,613 (3,387,122) Cash and cash equivalents: Beginning of year 9,767,067 13,154,189 End of year $ 15,882,680 $ 9,767,067 See notes to combined financial statements "''''88

8 Combined Statements of Cash Flows (Continued) For the years ended June 30, 2009 and 2008 Supplemental disclosure of cash flows information: Interest paid Noncash investing and financing activities: Noncash contribution of land, building East 92nd Street Shorefront Housing Council Development Fund Corp.: Program grants and other receivables Security deposits and other assets Fixed assets Restricted deposits Accounts payable, accrued expenses and other payables HPD mortgage payable Investment in limited partnerships Increase in cash Noncash contribution of land, building East 77th Street Noncash contribution of land, building - 91 Carlton Avenue 385 Third Avenue Associates, LP: Investment in land Deferred rent from land lease Net assets Proceeds from sale of air rights contributed to 385 Third Avenue Associates, LP Sale of air rights Investment in 385 Third Avenue Associates, LP Impairment loss on investment Investment in 385 Third Avenue Associates, LP at June 30, 2009 See notes to combined financial statements "''',B8

9 Combined Statement of Functional Expenses For the year ended June 30, 2009 Met Council Home Care Housing Management Combined Program Services Program Services Program Services and General Fund-raising Total Salaries $ 7,726,110 $ 62,739,530 $ 695,284 $ 1,623,293 $ $ 72,784,217 Employee benefits 2,272,585 19,224, ,287 1,163,623 22,944,328 Total salaries and employee benefits expenses 9,998,695 81,964, ,571 2,786,916 95,728,545 Grants to aid individuals 2,093, , ,010 2,419,863 Rent and utilities 3,254, ,879 1,217, ,839 13,500 5,140,946 Contract services 2,143, , , ,764 2,022 3,831,544 Office expense 686,479 72,822 22,399 31,565 67, ,139 Postage 41,362 49,355 8, , ,646 Repairs and maintenance 140,154 2, ,864 4, ,674 Telephone 187,056 67,342 49,897 7, ,547 Furniture and equipment 414,419 20,830 54, ,842 Travel 227,286 39,469 52, ,497 Insurance 343,562 36, , ,879 1,085,659 Special events 166,856 16,266 39, ,343 Real estate taxes 451, ,501 Food 1,417, ,417,905 Administrative fee and overhead 450,155 47, ,760 1,100,915 Bank charges 27,357 26,347 53,704 Depreciation and amortization 198,232 3,258,670 33,004 3,489,906 Miscellaneous expenses 357, , , , ,181 Total functional expenses $ 22,120,810 $ 83,563,092 $ 8,505,479 $ 4,099,197 $ 298,779 $ 118,587,357 See notes to combined financial statements f)~288

10 Combined Statement of Functional Expenses For the year ended June 30,2008 Met Council Home Care Housing Management Program Services Program Services Program Services and General Fund-raising Combined Total Salaries $ 7,286,358 $ 60,933,869 $ 553,645 $ 2,517,081 $ $ 71,290,953 Employee benefits 2,168,821 24,607, ,859 1,102,384 28,105,773 Total salaries and employee benefits expenses 9,455,179 85,541, ,504 3,619,465 99,396,726 Grants to aid individuals 1,731, , ,336 2,044,863 Rent and utilities 2,888, , , ,625 4,725,097 Contract services 2,852, , , ,358 74,985 4,513,541 Office expense 467,353 78,810 10,681 50,939 37, ,635 Postage 325,036 63,558 65, , ,017 Repairs and maintenance 185,171 2, ,350 20, ,361 Telephone 168,034 64,904 46,612 49, ,232 Furniture and equipment 298,831 19,121 73, ,947 Travel 179,414 32, , ,317 Insurance 312,897 33, , , ,142 Special events 172,226 82,926 12, ,363 Real estate taxes 353, ,142 Food 1,354,566 2,590 1,357,156 Administrative fee and overhead 487,393 67, ,664 1,119,057 Bank charges 10,692 9,091 19,783 Depreciation and amortization 198,232 2,935,517 38,312 3,172,061 Miscellaneous expenses 193, , , , ,840 Total functional expenses $ 21,270,378 $ 87,125,977 $ 7,278,373 $ 5,340,233 $ 281,319 $ 121,296,280 See notes to combined financial statements CF~288

11 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 1 - Summary of Significant Accounting Policies Financial Reporting Entity The combined financial statements present the accounts of Metropolitan Council on Jewish Poverty, Inc. ("Met Council") and affiliates, including accounts of the local Jewish Community Councils for which Met Council acts as fiscal agent and the financial statements of those separately administered organizations where Met Council exercises oversight responsibility. All significant intercompany balances and transactions have been eliminated. Oversight responsibilities include: ~ Selection of governing authority, ~ Designation of management, ~ Ability to significantly influence operations, and ~ Accountability for fiscal matters. Those organizations and operating segments include the following: Home Care Jewish Community Council Services Commission ("JCCSC") Project OHR, Inc. ("OHR") Met Council Home Care Services, Inc. ("MCHCS") Housing - Year Ended December 31,2008 Council Towers Housing Development Fund Corp. Council Towers II Housing Development Fund Corp. Council Towers III Housing Development Fund Corp. Council Towers IV Housing Development Fund Corp. Council Towers V Housing Development Fund Corp. Council Towers Vi Housing Development Fund Corp. 141 East 23rd Street Housing Development Fund Corp. 351 East 61st Street Housing Development Fund Corp. East 54th Street HDFC Lexington Avenue HDFC Council Management Corp. 231 East 77th Street Housing Development Fund Corp. 91 Carlton Avenue Housing Development Fund Corp. 385 Third Avenue Housing Development Fund Corp. 334 East 92nd Street Housing Development Fund Corp. Shorefront Housing Council Development Fund Corp. Seaview Senior Living Corp "'.,,..

12 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Limited Partnership Housing - Year Ended December 31, 2008 Surfgate HDFC: G-P Surf Avenue Corp. Surfgate Limited Partnership Limited Liabilty Company Housing - Year Ended December 31, 2008 MC Caroline, LLC Met Council is the managing agent of Met Council's various housing partnerships and receives a management fee of 8% of rental income. Financial Statement Presentation The combined financial statements have been prepared on the accrual basis of accounting. The statements are presented in accordance with the provisions of Statement of Financial Accounting Standards No. 117 ("SFAS No. 117"), Financial Statements of Not-far-Profit Organizations. Under SFAS No. 117, Met Council is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Endowments In August 2008, the Financial Accounting Standards Board issued Staff Position ("FSP") No. FAS 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for all Endowment Funds. This FSP provides guidance on the net assets classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ("UPMIFA"). The FSP also improves disclosures about an organization's endowment funds (both donor-restricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIFA. The State of New York has not adopted UPMIFA. Met Council has adopted FSP for the year ended June 30, Met Council is subject to the New York Not-for-Profit Corporation Law. The Board of Directors, on the advice of legal counsel, has determined. that when Met Council receives a contribution and the donor restricts Met Council from spending the principal, New York law requires Met Council to maintain the original historical dollar value of the contribution received as an endowment. Such amount is recorded as permanently restricted and investment return is recorded as temporarily restricted or unrestricted based on the purpose for which the endowment was created. As of June 30, 2009 and 2008, Met Council's endowment funds were held in cash and cash equivalents "'.,,..

13 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of combined 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 liabilties at the date of the combined financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Investments - Restricted Investments consist of U.S. Treasury bills and are recorded at fair value as determined by quoted market prices. Investments held for the deferred compensation plan consist of mutual funds. Mutual funds are valued at the net asset value of the shares held by Met Council at year end. Program Grants and Other Receivables Program grants and other receivables consist principally of amounts due from Federal, State and local governmental agencies under contractual agreements. Met Council believes that grants will be fully collected within one year. Program grants receivable and other receivables are reported at net realizable amounts based upon management's expectation of collectabilty. Promises to Give Unconditional promises to give are recognized as revenue in the period received. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Inventory Inventory consists principally of new furniture and mattresses, and is stated at lower of cost or market value "'.,,..

14 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Fixed Assets Fixed assets are stated at cost. Depreciation is recorded on the straight-line method over the estimated useful lives of the assets, ranging from four to thirty-nine years. Amortization of leasehold improvements is recorded over the term of the lease. Capital grants from government agencies that have restrictions as to use imposed over periods greater than five years are expensed in the year the grant funds are recognized. Impairment of Long-lived Assets Met Council is subject to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets, which requires impairment losses to be recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets (excluding interest) are less than the carrying amount of the assets. In such cases, the carrying values of assets to be held and used are adjusted to their estimated fair value. Met Council reviews its investments in long-lived fixed assets for impairment events or when changes in circumstances indicate that the carrying values of such property may not be recoverable. No impairment losses were recognized in 2009 and Investments in Limited Partnerships and Limited Liability Company Met Council accounts for its general partner interests in limited partnerships and a membership interest in a limited liabilty company under the equity method of accounting. Under the equity method, the initial investment is recorded at cost, increased or decreased by Met Council's share of income or losses, and increased or decreased by contributions or distributions. If the investment account is reduced to zero, Met Council suspends the application of the equity method, as management believes Met Council will not be required to invest additional funds. Met Council's investment in 385 Third Avenue Associates, LP is recorded using the cost method of accounting "'.,,..

15 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Government Grants Government grant awards are classified as refundable advances until expended for the purposes of the grants because they are conditional. Medicaid and other government contract revenue is subject to audit and retroactive adjustment. Provisions for estimated settements are provided in the period the related services are rendered. Differences between the estimated amounts accrued and interim and final settlements are reported in operations in the year of settlement. Management is of the opinion that such settlements will not have a material adverse effect on the combined financial statements. Classification of Revenue, Support and Net Assets Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence and nature of donor restrictions. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions that are restricted by the donor for specific purposes or for future periods are reported as an increase in temporarily restricted or permanently restricted support. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the combined statements of activities as net assets released from restrictions. Support 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. As of June 30, 2009 and 2008, Met Council did not have any permanently restricted net assets. In-kind Revenue In-kind revenue is recognized if the services received: (a) create or enhance longlived assets, or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased, if not provided by donation. Donations of property and equipment are reported at their estimated fair value at the date of donation. Rental Income Rental income is recognized on a straight line-basis as rentals become due. Rental payments received in advance are deferred until earned. All leases between Met Council and the tenants of the property are operating leases "'.,,..

16 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Advertising Met Council expenses the production costs of advertising the first time advertising occurs. Advertising expense totaled $229,872 and $322,662 for the years ended June 30, 2009 and 2008, respectively. Functional Allocation of Expenses The costs of providing various programs and their administration have been summarized on a functional basis in the combined statements of functional expenses. Accordingly, certain costs have been allocated to direct programs or supporting services. The functional classifications are defined as follows: Program services expenses - consist of costs incurred in connection with provided services and conducting programs. General and administrative expenses - consist of costs incurred in connection with the overall activities of Met Council, which are not allocable to another functional expense category. Fund-raising expenses - consist of costs incurred in connection with activities related to obtaining grants and activities designed to generate revenue. Reclassification of Accounts Certain accounts in the prior year's combined financial statements have been reclassified to conform to the current year's presentation. These reclassifications had no effect on the previously reported results of operations or net assets. Income Taxes In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 that 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. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition "'.,,..

17 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 1 - Summary of Significant Accounting Policies (Continued) Income Taxes (Continued) In February 2008 and December 30, 2008, the FASB issued Staff Position ("FSP") FIN 48-2 and 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises, respectively, to defer the effective date of FIN 48 for certain nonpublic organizations to the annual financial statements for fiscal years beginning after December 15, Met Council will defer the adoption of FIN 48 and does not expect it to have a material impact on its combined financial statements. Audits by Government Agencies Financial awards from Federal, State, and Local governmental entities in the form of grants for the reimbursement of expenses and overhead applicable to various programs are subject to special audit. Such audits could result in claims against Met Council for disallowed costs or noncompliance with grantor restrictions. No provision has been made for any liabilties that may arise from such audits since the amounts, if any, cannot be determined at this date. Additionally, management is of the opinion that such audits, if performed, would not have a material effect on the accompanying combined statements of functional expenses. Subsequent Events In May 2009, the FASB issued SFAS No. 165 ("SFAS 165"), Subsequent Events. The objective of SFAS 165 is to establish general standards of accounting for and disclosure of events and transactions that occur after the combined statement of financial position date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. Met Council adopted SFAS 165 during the year ended June 30, Met Council has evaluated subsequent events and transactions through March 20, 2010, the date that Met Council's combined financial statements were available to be issued. Note 2 - Risks and Uncertainties Financial instruments that subject Met Council to concentrations of credit risk consist of cash and cash equivalents and contracts receivable. While Met Council and affliates attempt to limit their financial exposure, their deposit balances may, at times, exceed federally insured limits. Met Council and affiliates have not experienced any losses on such balances "'.,,..

18 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 2 - Risks and Uncertainties (Continued) Met Council has entered into service contracts and grant agreements with various governmental agencies that are subject to business risks associated with the economy and administrative directives, rules and regulations that are subject to change. A significant reduction in revenue from these various governmental agency contracts would have an adverse effect on Met Council's programs. Contracts receivable primarily represent receivables from the New York City Department of Housing Preservation and Development, and the New York City Department of Homeless Services. Any concentrations of credit risk related to contracts receivable is subject to the city's financial condition. Note 3 - Tax Status Met Council is a nonprofit organization, which is exempt from Federal income tax under Section 501 (c) 3 of the Internal Revenue Code. Note 4 - Fair Value Measurements Effective July 1, 2008, Met Council adopted Statement of Financial Accounting Standards 157 ("SFAS 157"), Fair Value Measurements, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. SFAS 157 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in Met Councils principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in SFAS 157 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity's own assumptions based on market data and the entity's judgments about the assumptions that market participants would use in pricing the asset or liability, and are to be developed based on the best information available in the circumstances. Met Council determines the fair market value of its investment in securities based on the fair value definition and hierarchy levels established in SFAS 157. SFAS 157 establishes three levels within its hierarchy that may be used to measure fair value: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilties. Level 2: Observable inputs, including Level 1 prices that have been adjusted; quoted prices for similar assets or liabilties; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be substantially corroborated by observable market data "'.,,..

19 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 4 - Fair Value Measurements (Continued) Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. Judgment is required in evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification. Level 3 amounts can include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation. In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurements determines the placement of the entire fair value measurement in the hierarchy. Met Council's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. The following table sets forth, by level, Met Council's assets that were accounted for at fair value on a recurring basis as of June 30, Investments in securities: Total Fair Value Quoted Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Significant Inputs (Level 3) Treasury securities restricted $ $ 1.721,876 $ - $ Investment held for deferred compensation plan $ 320,714 $ 243,986 $ 76,728 $ Restricted securities consist of reserves held for repairs, maintenance and unexpected operating expenditures. These reserves are held in separate accounts and are restricted in compliance with the U.S. Department of Housing and Urban Development "'~2"

20 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 5 - Restricted Deposits Restricted deposits consist of housing developer's contribution to an operating reserve with the New York City Department of Housing Preservation and Development ("HPD") in accordance with the Master Servicing Agreement for HPD's Section 421 (a) - "Affordable and Inclusionary Housing Program." These reserves are held in separate accounts and generally are not available for operating purposes. Uses of these reserves are contingent upon HPD's prior written approval. Note 6 - Fund for the Jewish Poor In January 2004, Met Council established the Fund for the Jewish Poor (the "Fund"), a board-designated fund. Decisions regarding investments on behalf of the Fund for the Jewish Poor are determined by a sub-committee of the board of directors. In April 2004, Met Council invested $1,050,000 of the Fund's assets in the Ascot Limited Partnership ("Ascot". On December 11, 2008, Ascot's general partner advised Met Council that substantially all of its assets had been entrusted to Bernard Madoff Investment Securities LLC and that Ascot would dissolve and utilize all remaining cash to wind down its operations. As of June 30, 2008, Met Council's investment had a carrying value of $1,423,882. Due to the nature and magnitude of the investment advisor's and custodian's fraud, and the decision of Ascot to liquidate, Met Council has written down the investment to zero as of June 30, 2008 and has reserved all its rights to recovery. In January 2009, a contribution of $1,000,000 was made to Met Council for the purpose of replenishing the Fund. Changes in net assets of the Fund for the years ended June 30, 2009 and 2008 are as follows: Fund for the Jewish Poor, beginning of year Investment return: Investment income Net depreciation (realized and unrealized) Total investment return Contributions Expenditure of funds 2009 $ 771,212 14,045 14,045 1,082,177 (447,420) 2008 $ 2,524,489 25,446 (1,423,882) (1,398,436) 141,100 (495,941) Fund for the Jewish Poor, end of year $ 648,802 1,420,014 (1,753,277) $ 771, "'.,,..

21 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 7 - Investment in Senior Health Partners Met Council, the Mount Sinai Hospital, and the Jewish Home and Hospital for the Aged have entered into a membership agreement to form Senior Health Partners. The membership agreement consists of two classes of members, Class A and Class B members. Met Council receives 15% of all cash distributions, as defined in the agreement. Note 8- Fixed Assets Fixed assets as of June 30, 2009 and 2008 consist of: Land $ 28,964,762 $ 21,609,826 Building 99,885,212 94,853,004 Equipment 420, ,170 Leasehold improvements 515, ,464 Automobile 40,871 40, ,827, ,485,335 Less: accumulated depreciation and amortization (30,517,739) (27,027,836) Construction in progress 2,249,317 1,768,898 Fixed assets, net $ 101,558,663 $ 92,226,397 Construction in progress consists of preliminary development cost of Council Towers V and Vi housing projects and Seaview Senior Living Corp. assisted living housing development. Note 9 - Investments in Limited Partnerships and Limited Liabilty Company Surfgate Limited Partnership Surfgate HDFC, a wholly owned subsidiary of Met Council, owns a 100% interest in G-P Surf Avenue Corp., the general partner of Surfgate Limited Partnership. G-P Surf Avenue Corp. owns a 1 % interest in Surfgate Limited Partnership. Met Council accounts for its investment in Surfgate Limited Partnership on the equity method of accounting ",~,..

22 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 9 - Investments in Limited Partnerships and Limited Liabilty Company (Continued) Seagate Limited Partnership Shorefront Housing Council Development Fund Corp. ("Shorefront HDFC"), a wholly owned subsidiary of Met Council, owns a 100% interest in Seagate Neptune Corp., the general partner of Seagate Limited Partnership. Seagate Neptune Corp. owns a 1 % interest in Seagate Limited Partnership. During the year ended June 30, 2008, Met Council accounted for its investment in Seagate Limited Partnership on the equity method of accounting. On May 29, 2009, Seagate Limited Partnership's limited partner, Corporate Housing Initiative Limited Partnership, transferred its 99% interest in Seagate Limited Partnership to Shorefront HDFC. On June 1, 2009, Seagate Neptune Corporation transferred its 1 % general partner interest in Seagate Limited Partnership to Shorefront HDFC. As a result, Shorefront HDFC assumed the operations of Seagate Limited Partnership. The accounts of Shorefront HDFC are included in the combined financial statements as of June 30, Third Avenue Associates, LP On July 1, 2006, 385 Third Avenue Housing Development Fund Corporation ("385 HDFC"), a wholly owned subsidiary of Met Council, entered into a limited partnership agreement as a Class B limited partner of 385 Third Avenue Associates, LP. The purpose of 385 Third Avenue Associates, LP is to develop and operate a low income residential housing project (the "Project" under the regulations of the New York State Housing Finance Agency (the "HFA"). The Project consists of 49 units located in New York, New York. 385 Third Avenue Associates, LP has a general partner, 385 Third Avenue GP, Inc., a special limited partner, MMA Special Limited Partner, Inc., and an investor limited partner MMA Financial Institutional Tax Credits XXiX, LP. 385 HDFC owns a.009% interest in 385 Third Avenue Associates, LP. Met Council accounts for its investment in 385 Third Avenue Associates, LP under the cost method of accounting. See Note 10. MC Caroline, LLC On July 1, 2008, MC Caroline, LLC entered into a membership agreement with Related Apartment Preservation, LLC to form Caroline Apartments Preservation GP, LLC. The purpose of Caroline Apartments Preservation GP, LLC is to acquire, construct, improve, operate and dispose of properties on such terms and conditions as Related Apartment Preservation, LLC, the managing member, shall determine. Met Council is the sole member of MC Caroline, LLC. As of June 30, 2009 Caroline Apartments Preservation GP, LLC had not commenced operations ",~,..

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24 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 10 - Investment in 385 Third Avenue Associates, LP 385 HDFC was assigned air rights from Atlantic Development Group, LLC in accordance with an Inclusionary Air Rights Purchase Agreement. Pursuant to a limited partnership agreement 385 HDFC was required to contribute the proceeds from the sale of the air rights to 385 Third Avenue Associates, LP ("385 LP"), a low income residential housing project, in exchange for a Class B limited partnership interest. During the year ended June 30, 2009, 385 HDFC sold the air rights for $32,910,672 and contributed the proceeds to 385 LP. Met Council has evaluated the recoverability of its investment in 385 LP as of June 30, 2009 and has determined that an other than temporary impairment exists. Met Council and the management of 385 LP do not expect the operations of 385 LP to generate sufficient cash flow that would allow for the full recovery of 385 HDFC's investment. Met Council's management has reviewed the carrying value of the investment in relation to the expected future cash flows to be received from 385 LP. As a result, an impairment loss of $32,810,672 was recorded during the year ended June 30, The carrying value of Met Council's investment in 385 LP was $100,000 as of June 30,2009. Note 11 - Deferred Rent from Land Lease On July 20, 2006, 385 HDFC entered into a land lease with 385 Third Avenue Associates, LP. The lease agreement calls for equal annual payments of approximately $166,146 for 99 years, or $16,548,125, which was prepaid by 385 Third Avenue Associates, LP in conjunction with the signing of the land lease. The land is recorded at cost and the prepaid rent is being amortized to rental income from land leases over the life of the lease "'.,,..

25 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 12 - Mortgage Payable - N.Y.S. Dormitory Authority New York State Dormitory Authority converted a $6,488,965 advance from New York State Office of Mental Health to a $6,911,000 mortgage loan. The semi-annual mortgage payments of $259,630 include interest at a rate of 4.95% through December 1, The loan is collateralized by a building located on East 96th Street. Mortgage payable maturities during the next five years and thereafter are tabulated as follows: Years Ending June 30, Thereafter Total Amount $ 259, , , , ,260 2,988,758 $ 5,325,428 Note 13 - Loans Payable As of June 30, 2009 and 2008, Met Council had the following outstanding loans: (1) On December 15, 2003, the UJA advanced $100,000 to be repaid over a fiveyear period, with the first payment of $20,000 due January 1, The loan was non-interest bearing and was not collateralized. The balance on the loan was paid during the year ended June 30, At June 30, 2008, the outstanding balance was $20,000. (2) On January 10, 2007, Met Council entered into an $800,000 unsecured predevelopment loan with Enterprise Community Loan Fund, Inc. relating to the proposed project consisting of the new construction of 515 units of housing located in Staten Island. The loan includes interest at 6.00% and is due nine months after the date of the note. At June 30, 2009 and 2008, the balance on the note was $25,000, respectively. The outstanding balance was paid in the subsequent period ~~288

26 Notes to Combined Financial Statements (Continued) June 30, 2009 and 2008 Note 13 - Loans Payable (Continued) (3) On August 18, 2006, Met Council entered into a $50,000 unsecured predevelopment loan with the Corporation for Supportive Housing relating to the construction of Council Towers V, a 70-unit HUD Section 202 senior housing project. The loan originally was to be repaid without interest at the earlier of the HUD Section 202 construction loan closing, or February 28, The maturity date was extended to December 31, The loan was paid in full in December (4) Met Council has a $1,000,000 line of credit available from a bank. Met Council had borrowings under this line of credit of $50,000 as of June 30, 2009 and no borrowings as of June 30, The line of credit bears interest at 5.25% and is collateralized by accounts receivable. (5) OHR has a $2,000,000 line of credit available from a bank. As of June 30, 2009 and 2008, OHR had no borrowings under this line of credit. The line of credit bears interest at 4.00% plus the prime rate, which is the interest rate announced by the bank. The note is collateralized by accounts receivable. (6) JCCSC has a $750,000 line of credit available from a bank. As of June 30, 2009 and 2008, JCCSC had no borrowings under this line of credit. The line of credit bears interest at 5.25% and is collateralized by accounts receivable. Interest has not been imputed on any of the above loans that carry below-market interest rates as they are payable to governmental entities and carry legal restrictions. The restrictions require Met Council to use the property for low income housing, as defined in the loans and mortgage regulatory agreements. Note 14 - Government Advances Government advances represent advances on contracts for program expenses to be expended in future periods. Note 15 - HPD Advances HPD advances represent monies advanced by a government agency in connection with repairs to some of the buildings. Note 16 - HPD Mortgage Payable The following loans of Seagate Limited Partnership were transferred to Shorefront HDFC on June 1, The interest rates and service fees on these loans were eliminated. All other terms of the loans remain the same "'.,,..

27 Notes to Combined Financial Statements (Continued) June 30,2009 and 2008 Note 16 - HPD Mortgage Payable (Continued) A mortgage in the amount of $3,560,895, dated December 29, 1989, payable to New York City and the City of New York Department of Housing Preservation and Development. The loan is collateralized by a mortgage on the building. The mortgage payable bears interest of 0% and 1.25% per annum as of June 1, 2009 and December 31,2008, respectively. The principal is due December 30,2021. The loan balance as of June 30, 2009 is $3,560,895. A mortgage in the amount of $425,000, dated May 13, 1999, payable to New York City Department of Housing Preservation and Development. The purpose of obtaining a construction loan was to renovate the property and to thereafter compare the same with a permanent project loan. The term of the loan is 30 years from the Debt Service Date which is defined as the 270th day after the date of substantial completion of the construction work. The mortgage note provides that interest accrues at a rate of 0% and 1 % as of June 1, 2009 and December 31, 2008, respectively. The interest was accrued per annum but is not payable from the first day of the first calendar month following the Debt Service Date. Under the terms of the loan, the City of New York has agreed that, after the 26th year of the loan, it would reduce and forgive the principal balance and any accrued interest in equal decrements of 20% of the balance so that by the 30th year there would be no interest or principal due. The balance of the construction loan was $425,000 as of June 30, A mortgage in the amount of $635,000, dated June 22,2004, payable to New York City Department of Housing Preservation and Development. The purpose of obtaining a construction loan was to renovate the property and to thereafter compare the same with a permanent project loan for a total amount of $635,000. The term of the loan is 15 years from the Debt Service Date which is defined as the 270th day after the date of substantial completion of the construction work. The mortgage note provides that no interest be accrued and that the note is forgiven after 15 years. The balance of the construction loan was $635,000 at June 30, Interest has not been imputed on the above loan which carries a below-market interest rate as it is payable to a governmental entity and carries legal restrictions. The restrictions require Shorefront HDFC to use the property for low income housing, as defined in the loan and mortgage regulatory agreement "'~2"