CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC. AND ITS SUBSIDIARY AND AFFILIATE

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC. AND ITS SUBSIDIARY AND AFFILIATE Consolidated Financial Statements and Accompanying Information December 31, 2009 and 2008

Contents Page Report of Independent Auditors... 2 Consolidated Statements of Financial Position... 3 Consolidated Statements of Activities... 4 Consolidated Statements of Cash Flows... 5 Notes to Consolidated Financial Statements... 6-19 Accompanying Information Consolidating Statements of Financial Position... 20-21 Consolidating Statements of Activities... 22-23 Consolidating Statements of Cash Flows... 24-25

Report of Independent Auditors The Board of Directors Charlotte Regional REALTOR Association, Inc. and its Subsidiary and Affiliate Charlotte, North Carolina We have audited the accompanying consolidated statements of financial position of Charlotte Regional REALTOR Association, Inc. and its Subsidiary (Carolina Multiple Listing Services, Inc.) and Affiliate (Charlotte Regional REALTOR Association Housing Opportunity Foundation), collectively referred to as the Association, as of December 31, 2009 and 2008, and the related consolidated statements of activities and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Association s management. Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Charlotte Regional REALTOR Association, Inc. and its Subsidiary and Affiliate as of December 31, 2009 and 2008, and the changes in its consolidated net assets and its consolidated cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The accompanying consolidating statements listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. These consolidating statements are the responsibility of the Association s management. Such consolidating statements have been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic consolidated financial statements taken as a whole. Charlotte, North Carolina April 16, 2010

Consolidated Statements of Financial Position December 31, 2009 and 2008 Assets 2009 2008 Current assets Cash and cash equivalents $ 2,061,631 $ 1,925,295 Investments 6,994,243 6,878,466 Accounts receivable, net 51,935 95,945 Other receivables 43,500 276,535 Contributions receivable, current 17,000 15,450 Prepaid expenses 369,399 318,580 Inventories 190,740 321,310 Current deferred income tax asset, net 30,000 40,000 Total current assets 9,758,448 9,871,581 Property and equipment, net 6,441,788 6,748,926 Net contributions receivable, noncurrent 14,121 20,858 Noncurrent deferred income tax asset, net 93,200 79,700 Beneficial interest in trust 428,964 351,496 Total assets $ 16,736,521 $ 17,072,561 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 286,192 $ 122,608 Current portion of long-term debt 501,815 473,424 Deferred revenue 2,239,107 2,849,474 Grant payable, current - 50,000 Other liabilities 244,659 223,427 Total current liabilities 3,293,773 3,718,933 Long-term debt 2,093,841 2,593,788 Total liabilities 5,387,614 6,312,721 Net assets Unrestricted net assets: Unrestricted net assets, undesignated 10,905,822 10,382,486 Unrestricted net assets, board designated 428,964 351,496 11,334,786 10,733,982 Temporarily restricted net assets 14,121 25,858 Total net assets 11,348,907 10,759,840 Total liabilities and net assets $ 16,736,521 $ 17,072,561 The accompanying notes are an integral part of these consolidated financial statements. 3

Consolidated Statements of Activities 2009 2008 Unrestricted revenue and support Services fees $ 6,651,183 $ 7,716,160 Education income 832,389 1,034,096 Dues 974,354 1,111,185 REALTOR store income 183,679 349,640 Rental income 288,053 505,287 Initiation fees 332,549 508,432 Advertising 148,576 456,235 Lockbox and Supra key income 1,304,259 1,796,063 Investment income, net 166,433 59,508 Fees, fines and other 275,701 290,387 Contributions 22,123 29,698 Special events 89,109 228,371 Net assets released from restrictions 13,000 6,295 Total unrestricted revenue and support 11,281,408 14,091,357 Expenses Program expenses: MLS service fees and computer services 2,914,110 3,311,073 Education 751,220 912,677 REALTOR store 132,170 260,509 Conventions and meetings 165,225 284,525 Contributions 70,144 81,850 Marketing and REALTOR awareness 547,746 900,586 Lockbox costs and Supra key fees 609,403 824,381 Events/committees 435,307 703,272 Other 441,582 748,286 6,066,907 8,027,159 Management and administrative expenses 4,215,309 4,584,118 Fundraising expenses 2,142 95 Total expenses before income taxes 10,284,358 12,611,372 Change in unrestricted net assets before income taxes 997,050 1,479,985 Income tax expense 396,246 460,817 Change in unrestricted net assets 600,804 1,019,168 Temporarily restricted revenue and support Contribution revenue 1,263 5,000 Net assets released from restrictions (13,000) (6,295) Change in temporarily restricted net assets (11,737) (1,295) Change in total net assets 589,067 1,017,873 Total net assets, beginning of year 10,759,840 9,741,967 Total net assets, end of year $ 11,348,907 $ 10,759,840 The accompanying notes are an integral part of these consolidated financial statements. 4

Consolidated Statements of Cash Flows 2009 2008 Cash flows from operating activities Change in net assets $ 589,067 $ 1,017,873 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 331,931 278,161 Loss on disposal of fixed assets - 29 Deferred income taxes (3,500) 1,500 Realized and unrealized losses on investments 34,151 - Change in beneficial interest (77,468) 137,214 Changes in operating assets and liabilities: Receivables, net of bad debt expense 237,590 116,032 Contributions receivable 5,187 3,167 Prepaid expenses (50,819) 21,555 Inventories 130,570 (46,784) Income taxes refundable/payable 39,455 (528,545) Accounts payable and accrued expenses 185,584 (468,827) Deferred revenue (610,367) (531,260) Grant payable (50,000) (44,238) Other liabilities 21,232 (29,490) Net cash provided (used) by operating activities 782,613 (73,613) Cash from investing activities Purchases of property and equipment (24,793) (211,619) Proceeds from sales of investments - 499,365 Purchases of investments (149,928) (2,832,500) Net cash used by investing activities (174,721) (2,544,754) Cash flows from financing activities Proceeds from issuance of long-term debt - 1,600,000 Repayment of long-term debt (471,556) (1,990,774) Net cash used by financing activities (471,556) (390,774) Net change in cash and cash equivalents 136,336 (3,009,141) Cash and cash equivalents, beginning of year 1,925,295 4,934,436 Cash and cash equivalents, end of year $ 2,061,631 $ 1,925,295 Supplemental cash flow information: Income taxes paid $ 303,320 $ 701,365 Interest paid $ 169,352 $ 203,780 The accompanying notes are an integral part of these consolidated financial statements. 5

Note 1 - Summary of significant accounting policies Description of the business - Charlotte Regional REALTOR Association, Inc. (the Association ) is a non-profit corporation organized under the laws of North Carolina. The Association is a trade association for Charlotte, North Carolina area REALTORS. The Association provides support and information to REALTORS and the real estate community. The Association publishes Reflections, provides REALTOR continuing education and classes for those interested in real estate or becoming a REALTOR through its Mingle School of Real Estate, and provides resources for its members through its bookstore and computer lab. The consolidated financial statements include the accounts of the Association and its wholly-owned subsidiary, Carolina Multiple Listing Services, Inc. (the Company ), which is subject to income tax. The Company provides members of the Association and other associations access to a comprehensive database of local properties that are available for sale. The Company also provides certain Association members with the ability to purchase and lease unattended lockboxes and electronic keys to open the lockboxes. The consolidated statements also include the accounts of the Association s wholly controlled entity, Charlotte Regional REALTOR Association Housing Opportunity Foundation (the Foundation ), which is exempt from income tax. The Foundation s mission is to provide support, funding and education related to housing opportunities. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of presentation - The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( GAAP ). Net assets and revenue, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Unrestricted net assets - Net assets that are both undesignated and designated in nature. Undesignated, unrestricted net assets are those currently available for use in the day-to-day operation of the Association. From time to time, the Board of Directors may designate certain amounts to be utilized/invested to meet specific objectives of the Association. Such amounts are reflected as unrestricted, designated net assets. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by fulfillment of the donor-stipulated purpose and/or the passage of time. 6

Note 1 - Summary of significant accounting policies (continued) Temporarily restricted net assets (continued) - 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 statement of activities as net assets released from restrictions. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Association. Generally, the donors of these assets permit the Association to use all of, or part of, the income earned on the related investments for general or specific purpose. At December 31, 2009 and 2008, the Association did not have any permanently restricted net assets. Revenue is reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions of cash and other assets are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are restricted for future periods or are restricted by the donor for specific purposes are reported as temporarily restricted support. Unconditional promises to give due in the next year are recorded at their net realizable value. Unconditional promises to give due in subsequent years are recorded at the present value of their net realizable value, using risk-free interest rates applicable to the years in which the pledges are to be received. Amortization of the resulting discount is taken into income as a contribution in subsequent years. Revenue recognition - Service fees, dues and other revenues are recorded when earned (in the applicable membership period for dues). Revenue from the sale of lock boxes and Supra keys is recorded on the date of the sale. Amounts billed or collected in advance of being earned are recorded as deferred revenue. 7

Note 1 - Summary of significant accounting policies (continued) Income taxes - The Association and the Foundation are exempt from federal income taxes under Section 501(c)(6) and Section 501(c)(3), respectively, of the Internal Revenue Code (the Code ). The Association and Foundation are liable for federal and state taxes on any unrelated business income, as defined in the Code. The Company is subject to income tax. The Association accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and attributable to certain tax deduction carryforwards. During the year ended December 31, 2009, the Association adopted the Financial Accounting Standards Board ( FASB ) guidance on accounting for uncertainty in income taxes. The guidance clarifies the accounting for uncertainty in income taxes recognized in an entity s financial statements by prescribing 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 Association s policy is to record a liability for any tax position taken that is beneficial to the Association, including any related interest and penalties, when it is more likely than not the position taken by management with respect to a transaction or class of transactions will be overturned by a taxing authority upon examination. Management believes there are no such positions as of December 31, 2009 and, accordingly, no liability has been accrued Advertising expense - The Association expenses advertising costs as they are incurred. Total advertising costs for the years ended December 31, 2009 and 2008, were $167,266 and $257,225, respectively. Cash and cash equivalents - For purposes of the statements of cash flows, the Association considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Investments - Investments in marketable securities with readily determinable fair values are valued in the statement of financial position at their fair value. Fair value is determined by reference to exchange or dealer-quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar investment securities. Changes in the fair value of securities are reflected as investment gains or losses in the accompanying statements of activities. Accounts receivable - Accounts receivable consist of trade accounts receivable and are stated at cost less an allowance for doubtful accounts. Management s determination of the allowance for doubtful accounts is based on an evaluation of the accounts receivable, past experience, current economic conditions, and other risks inherent in the accounts receivable portfolio. Charge-offs are determined on a case-by-case basis. 8

Note 1 - Summary of significant accounting policies (continued) Inventories - Inventories, consisting of supplies used by real estate agents, are stated at lower of cost or market with cost based on the average cost method. Property and equipment - Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Expenditures for acquisitions, renewals and betterments are capitalized, whereas maintenance and repair costs are expensed as incurred. Expenditures paid to third parties for the development of computer software are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation thereon are removed from the accounts and any gains or loss are included in unrestricted revenue. These assets are reviewed for impairment whenever changes in circumstances indicate the carrying value of an asset may not be recoverable. The estimated useful lives of assets are as follows: Buildings Building improvements Leasehold improvements Furniture and equipment Systems development costs Computer equipment 40 years 7-27.5 years 10 years 7-10 years 10 years 3-5 years Beneficial interest in trust - The Foundation recognizes contribution revenue from assets held by a recipient organization for the sole benefit of the Foundation. Deferred revenues - Annual membership dues are billed during the last quarter of the calendar year. Dues received in advance are recorded as deferred revenue until earned in the next calendar year. Deferred revenue also includes fee income received for future periods. Functional allocation of expenses - The costs of providing the various programs and other activities have been summarized on a functional basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ( GAAP ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from management s estimates. 9

Note 1 - Summary of significant accounting policies (continued) Recent accounting pronouncement On July 1, 2009, the FASB issued the FASB Accounting Standards Codification (the Codification ). The Codification became the single source of authoritative non-governmental GAAP. The Codification eliminates the previous GAAP hierarchy and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. The Codification was effective for annual periods ending after September 15, 2009. The Association adopted the Codification for the year end December 31, 2009 and the principal impact is limited to disclosures as all future references to authoritative literature will be referenced in accordance with the Codification. Note 2 - Concentration of credit risk Financial instruments that potentially subject the Association to concentrations of credit risk consist principally of unsecured accounts receivable and cash and cash equivalents. The Association s revenues and membership dues are received principally from individuals and companies engaged in the service and sale of real estate. Membership and revenue sources are generally dispersed in Charlotte and the surrounding counties of Mecklenburg, Iredell, Gaston, Cabarrus, Lincoln, Union and Rowan. The Association s ability to collect on these accounts receivable is directly affected by economic conditions in these geographic regions. The Association places its cash and cash equivalents on deposit with financial institutions in the United States. In 2008, the Federal Deposit Insurance Corporation (FDIC) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited coverage for certain qualifying and participating non-interest bearing transaction accounts. The increased coverage is scheduled to expire on December 31, 2013, at which time it is anticipated the amounts insured by the FDIC will return to $100,000. The Association may from time to time have amounts on deposit in excess of the insured limits. Note 3- Accounts receivable Accounts receivable consists of the following at December 31: 2009 2008 MLS fees $ 53,783 $ 78,085 Supra key fees 31,405 60,170 Advertising, Mingle, events 19,474 55,704 104,662 193,959 Less allowance for doubtful accounts (52,727) (98,014) Accounts receivable, net $ 51,935 $ 95,945 10

Note 4- Contributions receivable Contributions receivable are summarized as follows as of December 31: 2009 2008 Receivable in less than one year $ 17,000 $ 15,450 Receivable in one to five years 16,000 24,000 Gross contributions receivable 33,000 39,450 Discount and allowance (1,879) (3,142) Net contributions receivable 31,121 36,308 Less: current portion (17,000) (15,450) Long-term portion $ 14,121 $ 20,858 Management periodically reviews contributions receivable and assesses their collectability. Contributions receivable are recorded at their net present value of future cash flows using a discount rate of 4.625%. Note 5 Investments and beneficial interest in trust The following is a summary of investments and beneficial interest in trust at December 31: 2009 2008 Investments: Money market funds $1,729,935 $6,878,466 Government bond mutual funds 5,264,308-6,994,243 6,878,466 Beneficial interest in trust 428,964 351,496 $7,423,207 $7,229,962 Investments are subject to fluctuations in market values and expose the Association to a certain degree of interest and credit risk. The beneficial interest in trust is held at the Foundation for the Carolinas and is invested in pooled funds of primarily common stock equities, bonds and fixed income investments. Investments include fund managers that invest in private investment funds as part of the asset allocation, as an alternative investment strategy with the purpose of increasing the diversity of the holdings and being consistent with the overall investment objectives. The private investment funds are not traded on an exchange, and accordingly, investments in such funds may not be as liquid as investments in marketable equity or debt securities. The private investment funds may invest in other private investment funds, equity or debt securities, which may or may not have readily available fair values, and foreign exchange or commodity forward contracts. 11

Note 5 Investments and beneficial interest in trust (continued) Management of the Foundation receives the estimates of fair value of these investments from Foundation for the Carolinas and relies on various factors, processes and procedures to determine if the estimate of value is reasonable. However, information used by Foundation for the Carolinas and by management is subject to change in the near term, and, accordingly, investment values and performance can be affected. The effect of these changes could be material to the financial statements. Investment income is comprised of the following for the years ended December 31: 2009 2008 Dividends and interest $ 123,116 $ 199,893 Unrealized losses (34,151) (3,171) Change in beneficial interest in trust 77,468 (137,214) $ 166,433 $ 59,508 Note 6- Property and equipment Property and equipment consists of the following at December 31: 2009 2008 Land and land improvements $4,808,752 $4,808,752 Buildings and building improvements 2,680,540 2,680,540 Furniture and equipment 440,575 440,575 Systems developments 612,421 612,421 Computer equipment 1,186,184 1,161,391 9,728,472 9,703,679 Less: accumulated depreciation (3,286,684) (2,954,753) $6,441,788 $6,748,926 Depreciation expense for the years ended December 31, 2009 and 2008 was $331,931 and $278,161, respectively. Note 7- Grant payable During the year ended December 31, 2005, the Association unconditionally promised to contribute $250,000 to the University of North Carolina at Charlotte for the establishment of the Center for Real Estate. The grant is payable in annual installments of $50,000. The final payment was paid in 2009. 12

Note 8 - Long-term debt Long-term debt consists of the following at December 31: 2009 2008 Note payable, unsecured term note with negative pledge on property, due in monthly principal and interest payments of $30,806 until March 2013. Note bears interest at 5.75%. $1,097,001 $1,393,418 Note payable, collateralized by a building and land (net book value of $2,970,712 at December 31, 2009), due in monthly principal and interest payments of $22,603 until August 2016. Note bears interest at 5.95%. 1,498,655 1,673,794 2,595,656 3,067,212 Less current portion (501,815) (473,424) $2,093,841 $2,593,788 Future minimum principal payments are as follows at December 31, 2009: 2010 $ 501,815 2011 531,909 2012 563,559 2013 317,787 2014 237,280 Thereafter 443,306 $ 2,595,656 Total interest expense for the year ended December 31, 2009 and 2008, was $169,352 and $203,780, respectively. The Association is subject to certain financial covenants under terms of these agreements and was in compliance with all such covenants as of December 31, 2009. Note 9 - Net assets The board of directors has designated $428,964 and $351,496 at December 31, 2009 and 2008, respectively, included in beneficial interest in trust, to establish an endowment fund for the continued support of Foundation operations. It is the intent of the board to accumulate earnings until the balance in the total fund reaches at least $1,000,000. 13

Note 9 - Net assets (continued) Temporarily restricted net assets at December 31, 2009 and 2008 represent future payments on contributions receivable. At December 31, 2008, temporarily restricted net assets also included a $5,000 contribution restricted for the 2009 Realtors Care Day. Note 10 Board designated endowment fund The Foundation s Board of Directors has designated a portion of unrestricted net assets as funds functioning as endowments. In 2003, these funds were transferred to the Foundation for the Carolinas, creating a trust in which the Foundation has a beneficial interest (see Note 5). As required by GAAP, net assets associated with this endowment fund, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donorimposed restrictions. As of December 31, 2009 and 2008, there were no donor-imposed restrictions on these endowment funds. The purpose of the endowment is to provide a method for funding of the Foundation to grow and allow the investment of these endowed funds for long-term projects. The funds are invested in the asset allocation strategy recommended by the Foundation for the Carolina s Investment Committee, longterm growth. This diverse mix of investments seeks to provide a predictable stream of funding to programs supported by the endowment while seeking to maintain the purchasing power of the endowment assets. Under this policy, the endowment assets are invested in a manner that is intended to produce results that provide an average annual real rate of return, net of fees, equal to or greater than spending, administrative fees, and inflation (Consumer Price Index). Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, it relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Accordingly, the investment allocation guidelines are as follows: Equities - US 22% 45% International 18% 27% Fixed income 16% 24% Hedge funds 10% - 20% Private capital 8% 12% Funds available for distribution from the fund are based upon a 5% spending plan using a three-year rolling average of fund assets. During 2009, the spending policy was amended to spend up to a maximum of 4% of the average fair value over the prior twelve quarters and will be evaluated on an annual basis for prudence. No funds were withdrawn from the fund for 2009 and 2008. 14

Note 10 Board designated endowment fund (continued) The following schedule represents changes in unrestricted, board designated endowment net assets for the years ended December 31: 2009 2008 Board designated endowment net $ 351,496 $ 488,710 assets, beginning of year Investment return: Investment income 2,856 1,306 Realized and unrealized gains (losses) 74,612 (138,520) Total investment return 77,468 (137,214) Contributions - - Board designated endowment net assets, end of year $ 428,964 $ 351,496 Note 11 - Fair value measurements of assets and liabilities The Association utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Under the fair value guidance, the Association groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1 Financial instruments with unadjusted, quoted prices listed on active market exchanges for identical investments at the reporting date. The Association s investments totaling $6,994,243 and $6,878,466 at December 31, 2009 and 2008 (see Note 5), respectively, are considered subject to Level 1 valuations. Level 2 Financial instruments valued using pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable at the reporting date. Fair value is determined through use of models or other valuation methodologies. The Association has no level 2 assets or liabilities at December 31, 2009 and 2008. Level 3 Financial instruments that are not actively traded on a market exchange and require use of significant unobservable inputs in determining fair value. The inputs into the determination of fair value require significant judgment or estimation by the Investment Manager. The Foundation s beneficial interest of $428,964 and $351,496 at December 31, 2009 and 2008, respectively (see Note 5), is considered subject to Level 3 valuations. 15

Note 11 - Fair value measurements of assets and liabilities (continued) As discussed in Note 5, Foundation for the Carolinas manages the administration of this trust and has determined the following approximate allocation of the underlying investments based on amounts at December 31: Level 1 70% Level 2 6% Level 3 24% 100% The changes in unrestricted, board designated net assets in Note 10 presents a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2009 and 2008. The beneficial interest is considered by the Association to be a Level 3 asset because it represents interests held in pooled investment funds, which include private investment funds. Note 12 - Employee benefit plans The Association maintains a defined contribution 401(k) Savings and Retirement Plan for all eligible employees. The Association matches employee contributions at 100% of such contributions up to 4% of pay and may make annual discretionary contributions, not to exceed 3.5% of the employee s gross current year earnings. The Association s contributions of $84,719 and $78,853 were charged to expense in 2009 and 2008, respectively. Note 13 - Income taxes Income tax expense for the Association, including the wholly-owned subsidiary, is comprised of the following components for the years ended December 31: 2009 2008 Current tax expense $ 399,746 $ 459,317 Deferred tax expense (benefit) (3,500) 1,500 Income tax expense $ 396,246 $ 460,817 A net deferred income tax asset or liability has been provided for the net income tax effect of temporary differences between the carrying amount of assets and liabilities for tax purposes over the amount for financial reporting purposes and also for net operating loss and charitable contributions available to offset future taxable income. 16

Note 13 - Income taxes (continued) Deferred income tax accounts for the Company are detailed as follows at December 31: Deferred income tax asset Deferred income tax liability Total deferred income tax asset (liability), net 2009 Benefit of carryforward of expenses available to offset future taxable income $ 133,200 $ - $ 133,200 Financial reporting net carrying value of property and equipment in excess of net carrying value for income tax purposes - (10,000) (10,000) Total deferred income tax asset (liability) $ 133,200 $ (10,000) $ 123,200 2008 Benefit of carryforward of expenses available to offset future taxable income $ 135,700 $ - $ 135,700 Net carrying value of intangibles for tax purposes in excess of net carrying value for financial reporting purposes 9,000-9,000 Financial reporting net carrying value of property and equipment in excess of net carrying value for income tax purposes - (25,000) (25,000) Total deferred income tax asset (liability) $ 144,700 $ (25,000) $ 119,700 The following carryforwards are available at December 31, 2009. Their future deductibility is subject to future year taxable income. Carryforward Amount Expiration Company charitable contributions 2008 $ 79,013 2013 2009 130,745 2014 17

Note 13 - Income taxes (continued) Carryforward Amount Expiration Association charitable contributions 2005 $ 164,018 2010 2006 163,403 2011 2007 188,683 2012 2008 147,301 2013 2009 110,576 2014 During the years ended December 31, 2009 and 2008, the Association, including the Company, had a change in the allowance for deferred income tax asset of $25,000 and $1,900, respectively. Note 14- Leases Future minimum lease payments under operating leases for office equipment have monthly required payments ranging from $277 to $2,118 with expiration dates through November 2014. At December 31, 2009, future minimum lease payments are as follows: 2010 $ 46,067 2011 22,765 2012 15,715 2013 5,844 2014 2,435 $ 92,826 Lease expense for operating leases during 2009 and 2008 was $67,248 and $80,336, respectively. Note 15 - Rental revenue The Association owns three office buildings in Charlotte, North Carolina. The Association occupies part of one building and leases out the remaining available space. The net book value of these buildings and associated land was $5,951,866 and $6,041,443 at December 31, 2009 and 2008, respectively. The Association has entered into lease agreements expiring in 2011. At December 31, 2009, future minimum rental revenue from third-party lessees is detailed as follows: 2010 $ 79,990 2011 5,227 $ 85,217 18

Note 16 Subsequent events The Association has evaluated subsequent events through April 16, 2010, in connection with the preparation of these financial statements which is the date the financial statements were available to be issued. 19

Accompanying Information

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Financial Position December 31, 2009 Assets Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Current assets Cash and cash equivalents $ 1,348,903 $ 616,152 $ 96,576 $ - $ 2,061,631 Investments 3,375,580 3,618,663 - - 6,994,243 Accounts receivable, net 19,190 32,685 60-51,935 Other receivables 43,500 - - - 43,500 Contributions receivable, current - - 17,000-17,000 Due from affiliate organizations 225,408 - - (225,408) - Prepaid expenses 68,921 300,478 - - 369,399 Inventories 145,932 44,808 - - 190,740 Current deferred income tax asset, net - 30,000 - - 30,000 Investment in subsidiary 3,118,970 - - (3,118,970) - Total current assets 8,346,404 4,642,786 113,636 (3,344,378) 9,758,448 Property and equipment 8,808,821 919,651 - - 9,728,472 Less accumulated depreciation (2,403,833) (882,851) - - (3,286,684) 6,404,988 36,800 - - 6,441,788 Net contributions receivable, noncurrent - - 14,121-14,121 Noncurrent deferred income tax asset, net 13,200 80,000 - - 93,200 Beneficial interest in trust - - 428,964-428,964 Total assets $ 14,764,592 $ 4,759,586 $ 556,721 $ (3,344,378) $ 16,736,521 20

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Financial Position (continued) December 31, 2009 Liabilities and Net Assets Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Current liabilities Accounts payable and accrued expenses $ 133,508 $ 145,599 $ 7,085 $ - $ 286,192 Income taxes payable - 22,000 - - 22,000 Current maturities of long-term debt 501,815 - - - 501,815 Deferred revenues 1,214,045 1,020,062 5,000-2,239,107 Other liabilities 850 243,809 - - 244,659 Due to affiliated organization 11,664 209,146 4,598 (225,408) - Total current liabilities 1,861,882 1,640,616 16,683 (225,408) 3,293,773 Long-term debt 2,093,841 - - - 2,093,841 Total liabilities 3,955,723 1,640,616 16,683 (225,408) 5,387,614 Net assets Unrestricted net assets: Unrestricted net assets, undesignated 10,808,869-96,953-10,905,822 Unrestricted net assets, designated - - 428,964-428,964 Temporarily restricted net assets - - 14,121-14,121 Common stock - 75,000 - (75,000) - Retained earnings - 3,043,970 - (3,043,970) - Total net assets 10,808,869 3,118,970 540,038 (3,118,970) 11,348,907 Total liabilities and net assets $ 14,764,592 $ 4,759,586 $ 556,721 $ (3,344,378) $ 16,736,521 21

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Activities Year Ended December 31, 2009 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Unrestricted revenue and support Services fees $ - $ 6,651,183 $ - $ - $ 6,651,183 Education income 832,389 - - - 832,389 Dues 974,354 - - - 974,354 REALTOR store income 183,679 - - - 183,679 Rental income 497,425 - - (209,372) 288,053 Initiation fees 95,024 237,525 - - 332,549 Advertising 148,576 - - - 148,576 Lockbox and Supra key income 544,455 1,304,259 - (544,455) 1,304,259 Investment income (loss) 559,275 40,966 77,468 (511,276) 166,433 Fees, fines and other 135,619 109,757 30,325-275,701 Contributions - - 241,444 (219,321) 22,123 Special events 42,800-46,309-89,109 Management fees 1,851,044 - - (1,851,044) - Net assets released from restrictions - - 13,000-13,000 Total unrestricted revenue and support 5,864,640 8,343,690 408,546 (3,335,468) 11,281,408 Expenses Program expenses: MLS expense - 827,357 - - 827,357 Computer services 35,768 2,050,985 - - 2,086,753 Education and training 699,386 51,834 - - 751,220 REALTOR store 132,170 - - - 132,170 Conventions and meeting 47,105 94,718 4,961-146,784 Luncheons and meetings 11,302 6,742 397-18,441 Contributions 114,668 140,872 33,925 (219,321) 70,144 Marketing 225,260 306,023 1,835 (63,968) 469,150 Supplies, printing, and postage 11,665 63,991 2,940-78,596 Lockbox costs and Supra key fees - 1,161,358 - (551,955) 609,403 Events 69,507 68,905 51,660-190,072 Committees and programs 109,965 135,259 11-245,235 Management fees - 1,650,379 170,714 (1,788,888) 32,205 Bad debt 1,145 52,504 - - 53,649 Banking fees 66,876 128,850 580-196,306 22

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Activities (continued) Year Ended December 31, 2009 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Expenses (continued) Program expenses (continued): Outlying counties $ - $ 97,410 $ - $ - $ 97,410 Miscellaneous 21,867 39,000 1,145-62,012 Total program expenses 1,546,684 6,876,187 268,168 (2,624,132) 6,066,907 Management and administrative expenses: Building rent and operations 350,950 196,196 3,168 (200,060) 350,254 Depreciation 172,446 141,329 - - 313,775 Interest 169,352 - - - 169,352 Legal and accounting 126,939 97,994 5,250-230,183 Payroll and employee benefits 2,750,802 13,264 - - 2,764,066 Taxes, other than income 273,529 5,568 - - 279,097 Utilities, maintenance and liability insurance 37,706 70,876 - - 108,582 Total management and administrative 3,881,724 525,227 8,418 (200,060) 4,215,309 Fundraising events - - 2,142-2,142 Total expenses before income taxes 5,428,408 7,401,414 278,728 (2,824,192) 10,284,358 Change in unrestricted net assets before income taxes 436,232 942,276 129,818 (511,276) 997,050 Income tax expense (34,754) 431,000 - - 396,246 Change in unrestricted net assets 470,986 511,276 129,818 (511,276) 600,804 Unrestricted net assets, beginning 10,337,883 2,532,694 396,099 (2,532,694) 10,733,982 Unrestricted net assets, ending 10,808,869 3,043,970 525,917 (3,043,970) 11,334,786 Temporarily restricted revenue and support: Contribution revenue - - 1,263-1,263 Net assets released from restrictions - - (13,000) - (13,000) Change in temporarily restricted net assets - - (11,737) - (11,737) Temporarily restricted net assets, beginning - - 25,858-25,858 Temporarily restricted net assets, ending - - 14,121-14,121 Change in total net assets $ 470,986 $ 511,276 $ 118,081 $ (511,276) $ 589,067 23

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Cash Flows Year Ended December 31, 2009 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Cash flows from operating activities Change in net assets $ 470,986 $ 511,276 $ 118,081 $ (511,276) $ 589,067 Adjustments to reconcile change in net assets to cash provided (used) by operating activities: Depreciation 289,868 42,063 - - 331,931 Loss on disposal of fixed assets - - - - - Deferred income tax expense 1,500 (5,000) - - (3,500) Reinvestment of investment income, net (511,276) - 511,276 - Realized and unrealized losses on investments 16,172 17,979 34,151 Change in beneficial interest - - (77,468) - (77,468) Changes in operating assets and liabilities: Receivables, net of bad debt expense 228,507 8,068 1,015-237,590 Contributions receivable - - 5,187-5,187 Prepaid expenses (3,895) (46,924) - - (50,819) Inventories 13,947 116,623 - - 130,570 Income taxes refundable/payable (114,545) 154,000 - - 39,455 Accounts payable and accrued expenses 27,612 150,887 7,085-185,584 Due to/from affiliates 127,423 (115,449) (11,974) - - Other liabilities (2,250) 23,482 - - 21,232 Deferred revenue (218,339) (397,028) 5,000 - (610,367) Grants payable (25,000) (25,000) - - (50,000) Net cash provided by operating activities 300,710 434,977 46,926-782,613 Cash from investing activities Purchases of property and equipment (23,766) (1,027) - - (24,793) Purchases of investments 208,657 (358,585) - - (149,928) Proceeds from sale of investments - - - - - Net cash provided (used) by investing activities 184,891 (359,612) - - (174,721) 24

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC Consolidating Statements of Cash Flows (continued) Year Ended December 31, 2009 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated Cash flows from financing activities Proceeds from issuance of long-term debt $ - $ - $ - $ - $ - Repayment of long-term debt (471,556) - - - (471,556) Net cash used by financing activities (471,556) - - - (471,556) Net change in cash and cash equivalents 14,045 75,365 46,926-136,336 Cash and cash equivalents, beginning of year 1,334,858 540,787 49,650-1,925,295 Cash and cash equivalents, end of year $ 1,348,903 $ 616,152 $ 96,576 $ - $ 2,061,631 Supplementary Information: Income taxes paid $ 43,320 $ 260,000 $ - $ - $ 303,320 Interest paid $ 169,352 $ - $ - $ - $ 169,352 25