Jewish Community Federation Audit Report: FY Ended June 30, 2012

Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties Consolidated Financial Statements as of and for the Years Ended June 30, 2012 and 2011, and Independent Auditors’ Report

JEWISH COMMUNITY FEDERATION OF SAN FRANCISCO, THE PENINSULA, MARIN AND SONOMA COUNTIES

TABLE OF CONTENTS

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INDEPENDENT AUDITORS’ REPORT 1

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 2012 AND 2011: Statements of Financial Position 2–3 Statements of Activities and Changes in Net Assets 4–5 Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7–27

INDEPENDENT AUDITORS’ REPORT

To the Board of Trustees of Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties San Francisco, California

We have audited the accompanying consolidated statements of financial position of the Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties (the “Federation”) as of June 30, 2012 and 2011, and the related consolidated statements of activities and changes in net assets and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Federation’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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Federation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Federation as of June 30, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As explained in Notes 1 and 4 to the consolidated financial statements, the consolidated financial statements include nonmarketable investments valued at $344,493,000 (21% of total assets) and $329,302,000 (19% of total assets) as of June 30, 2012 and 2011, respectively, whose fair values have been estimated by the Federation in the absence of readily determinable fair values. Also discussed in Note 1 is the information used by the Federation in making these estimates.

January 9, 2013

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JEWISH COMMUNITY FEDERATION OF SAN FRANCISCO,THE PENINSULA, MARIN AND SONOMA COUNTIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAS OF JUNE 30, 2012 AND 2011(Rounded to thousands)

2012 2011ASSETS

CURRENT ASSETS: Cash and cash equivalents 149,429$ 212,135$ Pledges receivable — net 48,821 10,936 Other receivables 2,686 4,085 Prepaids and other assets 618 924

Total current assets 201,554 228,080

PLEDGES RECEIVABLE — Long term 13,870 12,798

LOANS RECEIVABLE — Long term 1,525 1,525

INVESTMENT SECURITIES — At fair value 1,384,176 1,453,348

REAL ESTATE ASSETS 869 2,494

OTHER ASSETS 10,443 9,742

PROPERTY, BUILDINGS, AND EQUIPMENT — Net 23,416 24,514

TOTAL 1,635,853$ 1,732,501$

(Continued)

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAS OF JUNE 30, 2012 AND 2011(Rounded to thousands)

2012 2011LIABILITIES AND NET ASSETS

CURRENT LIABILITIES: Accounts payable and accrued expenses 2,146$ 6,199$ Due to grant recipients 23,453 27,570 Notes payable — related party 36,077 24,772 Agency payables to OFJCC/899 Charleston 3,839 859

Total current liabilities 65,515 59,400

DUE TO GRANT RECIPIENTS — Long term 85,027 93,025

ANNUITY OBLIGATIONS 4,909 4,298

OTHER LIABILITIES 99,992 90,047

Total liabilities 255,443 246,770

NET ASSETS: Unrestricted — undesignated 61,773 83,395 Unrestricted — board designated 9,480 12,805 Donor-advised funds and supporting foundations 1,118,877 1,234,323

Total unrestricted net assets 1,190,130 1,330,523

TEMPORARILY RESTRICTED 148,647 119,998

PERMANENTLY RESTRICTED 41,633 35,210

Total net assets 1,380,410 1,485,731

TOTAL 1,635,853$ 1,732,501$

See notes to consolidated financial statements. (Concluded)

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CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETSFOR THE YEARS ENDED JUNE 30, 2012 AND 2011(Rounded to thousands)

2012 2011

CHANGES IN UNRESTRICTED NET ASSETS: Revenues (losses) and other support: Contributions 77,997$ 71,780$ Interest and dividends — net 22,929 19,439 Net realized and unrealized gain (loss) on investments (43,002) 220,753 Other revenue 3,710 2,824 Net assets released from restrictions 15,766 14,694

Total unrestricted revenues and other support 77,400 329,490

Expenses: Grants 172,717 175,778 Programs and community services 7,730 8,323 Management and general 7,891 6,962 Fundraising 8,131 6,762 Property expenses 3,430 2,760 Other expenses 1,180

Total expenses 199,899 201,765

Pension related changes other than net periodic cost (16,879) 7,129 Transfers (1,016) (3,243)

Increase (decrease) in unrestricted net assets (140,394) 131,611

(Continued)

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CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETSFOR THE YEARS ENDED JUNE 30, 2012 AND 2011(Rounded to thousands)

2012 2011

CHANGES IN TEMPORARILY RESTRICTED NET ASSETS: Revenues and other support: Contributions 44,863$ 5,457$ Interest and dividends — net 1,383 2,496 Net realized and unrealized gain (loss) on investments 842 20,530 Net assets released from restrictions (15,766) (14,694)

Total temporarily restricted revenues and other support 31,322 13,789

Transfers (2,672) 3,073

Increase in temporarily restricted net assets 28,650 16,862

CHANGES IN PERMANENTLY RESTRICTED NET ASSETS: Contributions 2,116 144 Transfers 4,307 170

Increase in permanently restricted net assets 6,423 314

INCREASE (DECREASE) IN NET ASSETS (105,321) 148,787

NET ASSETS — Beginning of year 1,485,731 1,336,944

NET ASSETS — End of year 1,380,410$ 1,485,731$

See notes to consolidated financial statements. (Concluded)

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CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED JUNE 30, 2012 AND 2011(Rounded to thousands)

2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES: Increase (decrease) in net assets (105,321)$ 148,787$ Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities: Net realized and unrealized (gain) loss on investments 42,160 (241,283) Undistributed (gain) loss from investments in partnerships - (1,769) Depreciation and amortization 1,365 1,400 Loss on disposal of property, buildings, and equipment - 3 Amortization of discount of notes payable 2,700 20 Change in discount and allowance related to pledge receivables (95) (148) Change in discount related to long-term due to grant recipients - 11,740 Other receivables — bad debt expense - 8 Donated investments, real estate assets, and other assets (1,676) (27,897) Changes in assets and liabilities: Pledges receivable (38,864) 9,227 Other receivables 1,399 479 Prepaids and other assets (398) 104 Accounts payable and accrued expenses (4,053) 757 Due to grant recipients (14,814) (31,722) Annuity obligations 611 (35) Other liabilities 12,925 (1,038)

Net cash provided by (used in) operating activities (104,061) (131,367)

CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, buildings, and equipment (264) (788) Purchases of investment securities (174,296) (310,498) Proceeds from sale of real estate assets - 94 Proceeds from sales and maturities of investment securities 205,110 350,254 Additions to loans receivable (500) -

Net cash provided by (used in) investing activities 30,050 39,062

CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 11,305 8,650 Payments on notes payable - (750)

Net cash provided by (used in) financing activities 11,305 7,900

NET DECREASE IN CASH AND CASH EQUIVALENTS (62,706) (84,405)

CASH AND CASH EQUIVALENTS — Beginning of year 212,135 296,540

CASH AND CASH EQUIVALENTS — End of year 149,429$ 212,135$

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION — Cash paid during the year for: Income taxes (21)$ (4)$

See notes to consolidated financial statements.

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JEWISH COMMUNITY FEDERATION OF SAN FRANCISCO, THE PENINSULA, MARIN AND SONOMA COUNTIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 2012 AND 2011 (Rounded to thousands)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization — The Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties (the “Federation”) is a not-for-profit corporation which serves to build, maintain, and strengthen Jewish identity, Jewish community, and Jewish life by investing strategically for high impact and enduring community; building the capacity of our community organizations to better fulfill their missions; and developing leaders and philanthropists committed to our collective Jewish future.

Basis of Presentation and Consolidation — The consolidated financial statements are presented on the basis of unrestricted, temporarily restricted, and permanently restricted net assets. The consolidated financial statements include the accounts and funds of the Federation, including 37 separately incorporated supporting foundations. Supporting foundations are separately incorporated not-for-profit organizations, organized to support the charitable purposes of the Federation. The supporting foundations are included within the Federation’s consolidated financial statements because the Federation has control through majority board representation; an economic interest; and their primary function is to support the charitable purposes of the Federation. There are two additional supporting foundations associated with the Federation, which are not included in the consolidated financial statements as the Federation does not have both control of and an economic interest in these supporting foundations. All material interfund transactions and balances have been eliminated. Management has evaluated subsequent events during the period from July 1, 2012 to January 9, 2013, the date the consolidated financial statements were available to be issued.

Transfers — Transfers primarily relate to changes in donor-imposed restrictions.

Unrestricted Net Assets — Unrestricted net assets represent unrestricted resources available to support the Federation’s operations and temporarily restricted resources which became available for use by the Federation in accordance with the intentions of donors.

Temporarily Restricted Net Assets — Temporarily restricted net assets represent contributions that are limited in use by the Federation in accordance with temporary donor-imposed restrictions. These restrictions may expire with time or may be satisfied and removed by the actions of the Federation according to the terms of the contribution. Upon satisfaction of such restrictions, the associated net assets are released from temporarily restricted net assets and recognized as unrestricted net assets.

Permanently Restricted Net Assets — Permanently restricted net assets represent contributions to be held as investments in perpetuity as directed by the original donor. The income from these contributions is primarily available to support activities of the Federation as directed by the donors.

Cash and Cash Equivalents — Cash and cash equivalents include cash and all highly liquid investments purchased with an original maturity of three months or less. As of June 30, 2012, cash and cash equivalents include $3,879 of investments in money market funds, which are considered to be Level I in the fair value hierarchy, held at U.S. financial institution.

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Pledges Receivable — Pledges receivable consist of unconditional promises to give. Unconditional promises to give that are expected to be collected in more than one year are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates applicable in the years in which those promises are received. Amortization of the discounts is included in contributions in the accompanying consolidated statements of activities and changes in net assets. Long-term pledges receivable of $3,397 and $6,839 at June 30, 2012 and 2011, respectively, have not been discounted, as such amounts are collected solely for transfer to agencies and not recorded as revenue of the Federation. Conditional promises to give are not included as contributions until the conditions are substantially met.

Investment Securities — All publicly traded debt and equity securities are carried at estimated fair value, using quoted market prices. Collective trust funds are carried at estimated fair value, using net asset value (NAV) provided by the fund’s trustee. The NAV is based on the fair value of the underlying assets owned by the funds, minus its liabilities, divided by the number of units outstanding at the valuation date. The funds are traded on a private market that is not active; however, the unit price is based on observable market data of the funds’ underlying assets. Private equity securities, including limited partnerships, are also carried at estimated fair value. Private equity securities include nonmarketable and restricted investment securities whose values have been estimated by management in the absence of readily determinable fair values. Management estimates of fair value of investments in limited partnerships are based on information provided by the fund managers or the general partners of the underlying limited partnerships. Management estimates of direct investments in private equity securities are based on a number of factors including the price at which the investment was acquired, the nature of the investment, trading value for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. Because of the inherent uncertainty of valuation of nonmarketable and restricted investments, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. Investments received through gifts are recorded at estimated fair value at the date of donation.

Gains and losses that result from market fluctuations are recognized in the period such fluctuations occur. Dividend and interest income are accrued when earned. Management fees of $1,081 and $1,673 were incurred for fiscal years 2012 and 2011, respectively.

State of Israel bonds are sometimes received by the Federation in satisfaction of pledges. Certain bonds can be transferred by the Federation to the Jewish Federations of North America (JFNA) in partial satisfaction of its allocation payable to that agency. JFNA accepts the bonds at par value in satisfaction of the Federation’s allocation. Accordingly, the bonds are recorded at par value.

Real Estate Assets — Real estate assets are stated at the lower of cost or estimated market value.

Property, Buildings, and Equipment — Property, buildings, and equipment are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which range from 3 to 39 years.

Impairment losses on long-lived assets used in operations and land and improvements are recorded when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. If an asset is considered to be impaired, a loss is provided to reduce the carrying value of the property to its estimated fair value.

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Charitable Gift Annuities, Pooled Income Funds, and Annuity Obligations — Assets contributed by donors under gift annuity agreements controlled by the Federation are recognized at fair value with a corresponding liability to beneficiaries of the annuity agreements. Such liability is calculated at the present value of the estimated future cash flows to be distributed to the income beneficiaries over their expected lives. The Federation has determined such liability using investment returns consistent with the composition of investment portfolios, single or joint life expectancies from the IRS Life Table 80CNSMT, and discount rates applicable in the years in which the agreements were established. The related assets are included in other assets in the accompanying consolidated financial statements.

Revenue Recognition — Contributions are recognized as revenue when received or unconditionally promised; or the conditions of a promise have been substantially met. The Federation reports gifts of cash and other assets as temporarily restricted support if such gifts are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported as net assets released from restrictions. Donor-restricted contributions whose restrictions are met in the same reporting period as the contribution is recorded are reported as temporarily restricted contributions and net assets released from restrictions in that period.

Rental revenue is recognized when earned on a straight-line basis over the terms of the respective leases. Included in rental revenue are certain tenant reimbursements and percentage rents earned in accordance with the terms of the lease agreements. Rental revenue is included in other revenue in the accompanying consolidated financial statements.

Grants — Grants are recorded upon approval by the Board of Trustees of the Federation (“The Board”). Grants approved for distribution in future fiscal years are recorded when unconditionally promised or when conditions are met by the grant recipients at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates applicable in the years in which those promises are made. Amortization of the discounts is included in grant expense in the accompanying consolidated statements of activities and changes in net assets. Conditional grants, although approved by the Board, depend on the occurrence of a specified future and uncertain event and are not recorded on the consolidated financial statements until such conditions have been met. As of June 30, 2012 and 2011, the Federation had conditional grants of $37,798 and $14,345, respectively.

Income Taxes — The Federation has received rulings from the Internal Revenue Service and the State of California Franchise Tax Board granting exemption from income taxation. To the extent the Federation carries out activities which are subject to the unrelated business income tax, it is subject to income taxation.

Use of Estimates — The preparation of consolidated 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 and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Functional Expense Allocation — Expenses applicable to more than one program or activity, such as depreciation, have been allocated among the programs and supporting services based on management estimates.

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Fair Value of Financial Instruments — Financial instruments included in the Federation’s consolidated statements of financial position include cash and cash equivalents, investments, pledges and other receivables, loans receivable, accounts payable and accrued expenses, amounts due to grant recipients, and notes payable. For cash and cash equivalents, other receivables, accounts payable and accrued expenses, and notes payable, the carrying amounts represent a reasonable estimate of the corresponding fair values. Investments, pledges receivable, and amounts due to grant recipients are reflected in the accompanying consolidated statements of financial position at their estimated fair values using methodologies described above. The carrying values of loans receivable represent reasonable estimates of the corresponding fair values based on the Federation’s discounted cash flow analyses and comparison with similar financial instruments in the marketplace having similar interest rate and maturity structures.

Concentrations of Credit Risk — Financial instruments which potentially subject the Federation to credit risk consist primarily of cash, cash equivalents, pledges and loans receivable, and investments. The Federation maintains cash and cash equivalents with various major financial institutions. Cash equivalents include investments in money market funds and short-term commercial paper. At times, such amounts may exceed Federal Deposit Insurance Corporation limits. The Federation’s investments have been placed with major counterparties. The Federation closely monitors the investments and pledges and loans receivable and has not experienced significant credit losses.

Gross pledges receivable at June 30, 2012 and 2011, include $1,646 and $299, respectively, from the Board of Trustees of the Federation

Derivative Financial Instruments — Included within the mutual funds investment securities balances are holdings of a professionally managed mutual fund that invests in derivative financial instruments. In accordance with the prospectus of the mutual fund, such derivative holdings are not to exceed 10% of the fund’s investment portfolio and are to be a vehicle for potential portfolio enhancement and for diversification. This fund is primarily composed of U.S. Treasury securities, corporate bonds (including below-investment grade bonds), mortgage-backed securities, dollar-denominated holdings of foreign bonds, options premiums, and other gross futures positions. The fair value of the Federation’s investment in this mutual fund was $24,621 and $23,820 at June 30, 2012 and 2011, respectively.

New Accounting Pronouncements — In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and the International Financial Reporting Standards (“IFRS”). ASU No. 2011-04 amends FASB Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. ASU No. 2011-04 amends guidance on fair value measurements to clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements (e. g., to require entities to disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level III of the fair value hierarchy) and to change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance also requires enhanced disclosures about fair value measurements, including, among other things, (a) for fair value measurements categorized within Level III of the fair value hierarchy, (1) quantitative information about the significant unobservable inputs used in the measurement, and (2) a description of the valuation processes used by the reporting entity, and (b) the categorization by level of the fair value hierarchy for items that are not measured at fair value in the balance sheet but for which the fair value is required to be disclosed. The amended guidance is to be applied prospectively and is effective for nonpublic entities (like the Federation) for annual periods beginning after December 15, 2011, with early application permitted (but not earlier than interim periods beginning after December 15, 2011). As the impact of the guidance is primarily limited to enhanced disclosures, adoption is not expected to have a material impact on the Federation’s financial statements.

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2. PLEDGES RECEIVABLE

Pledges receivable as of June 30, 2012 and 2011, are expected to be collected as follows:

2012 2011

Less than one year 46,313$ 12,049$ One to five years 13,192 7,232 More than five years 5,500 7,179

Total 65,005 26,460

Less discount for multi-year pledges receivable (1,407) (1,613) Less allowance for uncollectible pledges (907) (1,113)

Pledges receivable — net 62,691$ 23,734$

Pledges receivable at June 30, 2012 and 2011, include $6,686 and $7,699, respectively, of pledges to the Taube-Koret Campus for Jewish Life supporting foundation. Such amounts are collected solely for transfer to agencies and are not recorded as revenue of the Federation. See Note 5.

3. INVESTMENT SECURITIES

The fair value of the investment securities portfolio by asset type as of June 30, 2012 and 2011, is as follows:

2012 2011

Mutual funds 848,966$ 853,964$ Public equity securities 128,296 179,059 Corporate bonds 30,993 64,569 U.S. government securities 11,349 14,671 International government bonds 5,398 - Certificate of deposits 482 1,943 Money market funds 9,168 2,916 State of Israel bonds 5,031 6,924 Private equity/hedge funds 342,185 327,128 Direct private investments 2,308 2,174

Total 1,384,176$ 1,453,348$

As of June 30, 2012 and 2011, the Federation had commitments of $29,266 and $42,075, respectively, to make additional investments in private equity securities.

Investment securities at June 30, 2012 and 2011, included $56,136 and $56,949, respectively, in funds held and invested for other organizations and a corresponding liability is recorded in other liabilities in the accompanying consolidated statements of financial position.

The Chair of the Federation’s Investment Committee is an officer of an investment management firm for which the Federation has $2,131and $4,564 under management at June 30, 2012 and 2011, respectively.

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4. FAIR VALUE MEASUREMENTS

GAAP defines fair value as the amount that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Current guidance establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

In accordance with current guidance, the Federation’s investments are measured and reported at fair value and are classified and disclosed in one of the following categories.

Level I — Quoted prices are available in active markets for identical assets and liabilities as of the reporting date, without adjustments. Market price data is generally obtained from relevant exchanges or dealer markets.

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Inputs are obtained from various sources including market participants, dealers and brokers.

Level III — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes the valuation of the Federation’s investments by the fair value hierarchy levels as of June 30, 2012 and 2011:

Total Level I Level II Level III

Investments: Mutual funds 848,966$ 848,966$ - $ - $ Public equity securities 128,296 128,296 - Corporate bonds 30,993 - 30,993 - U.S. government securities 11,349 - 11,349 - International government bonds 5,398 - 5,398 - Certificates of deposits 482 482 - - Money market funds 9,168 9,168 - - State of Israel bonds 5,031 - 5,031 - Private equity/hedge funds 342,185 - - 342,185 Direct private investments 2,308 - - 2,308

Total investments 1,384,176$ 986,912$ 52,771$ 344,493$

Fair Value Measurements as of June 30, 2012

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Investments: Mutual funds 853,964$ 853,964$ - $ - $ Public equity securities 179,059 179,059 - Corporate bonds 64,569 - 64,569 - U.S. government securities 14,671 - 14,671 - Certificates of deposits 1,943 1,943 - - Money market funds 2,916 2,916 - - State of Israel bonds 6,924 - 6,924 - Private equity/hedge funds 327,128 - - 327,128 Direct private investments 2,174 - - 2,174

Total investments 1,453,348$ 1,037,882$ 86,164$ 329,302$


The changes in investments classified as Level III in 2012 and 2011 are as follows:

Private DirectEquity/Hedge Private

Funds Investments Total

Balance — June 30, 2011 327,128$ 2,174$ 329,302$ Total realized gains 2,267 - 2,267 Total unrealized gain (loss) 2,613 (8) 2,605 Purchases 48,794 142 48,936 Sales (38,617) - (38,617)

Balance — June 30, 2012 342,185$ 2,308$ 344,493$

Changes in unrealized gain (loss) included in earnings relating to investments still held at June 30, 2012 5,397$

The Federation’s policy is to recognize transfers in and out of Level III as ofthe actual date of the event or change in circumstances that caused the transfer.

2012

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Private DirectEquity/Hedge Private

Funds Investments Total

Balance — June 30, 2010 280,366$ 2,594$ 282,960$ Total realized gains 85 - 85 Total unrealized gain (loss) 39,493 88 39,581 Purchases 42,099 157 42,256 Sales (34,915) (665) (35,580)

Balance — June 30, 2011 327,128$ 2,174$ 329,302$

Changes in unrealized gain (loss) included in earnings relating to investments still held at June 30, 2011 37,684$

The Federation’s policy is to recognize transfers in and out of Level III as ofthe actual date of the event or change in circumstances that caused the transfer.

2011

Total realized and unrealized gains and losses recorded for Level III investments, if any, are reported in “Net realized and unrealized gain (loss) on investments in the Statement of Activities.”

The table below sets forth significant terms of the agreements with certain investment companies as of June 30, 2012.

Fair Redemption RedemptionAsset Class Value Terms Notice Period

Hedge funds: Event driven 7,420$ - $ Quarterly, semi-annually 65–90 days Equity hedge 18,652 - Quarterly, semi-annually, annually 0–90 days Emerging markets 5,165 - Monthly 30 days Fund of funds 69,959 - Quarterly, annually 30–120 days Macroeconomic 1,810 - Monthly, quarterly, annually 45–90 days Relative value 143,974 - Monthly, quarterly, annually 0–90 days Fixed income 212 - Monthly 30 daysPrivate equity funds 94,993 29,266 Not eligible for redemption Not redeemable

Total 342,185$

UnfundedCommitment

Investments in hedge funds have lock-up periods (generally one to two years) where the Federation is not allowed to make redemptions. After the initial lock up period, the funds have redemption windows (monthly, quarterly, etc.) where the Federation can redeem out of the funds.

As of June 30, 2012, the Federation has not been informed of any redemption restrictions for its investments.

5. TAUBE-KORET CAMPUS FOR JEWISH LIFE

On August 15, 2007, a Memorandum of Understanding was entered into by and among the Federation and the Oshman Family Jewish Community Center (OFJCC); 899 Charleston; and 899 Charleston, LLC (collectively, the “Parties”) related to pledge collection, transfer of assets, and fundraising until the conclusion of a capital campaign, which is targeted to raise approximately $140,000 for the development

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of a Jewish community center and a senior care center (the “Project”). OFJCC and 899 Charleston jointly determine the events that will constitute the conclusion of the capital campaign. The Parties agreed further that, in receiving any capital campaign monies following the closing of bond financings on August 16, 2007, the Federation will continue to act solely as collection agent for OFJCC and 899 Charleston. Upon the closing of bond financings, Taube-Koret Campus for Jewish Life supporting foundation transferred its assets and capital campaign monies at that time, less liabilities to which such assets were subject, to OFJCC and 899 Charleston.

Pledges receivable and agency payable to OFJCC/899 Charleston at June 30, 2012 and 2011, include $6,686 and $7,699, respectively, to be collected by the Federation for the benefit of the Project based on the Memorandum of Understanding discussed above.

6. OTHER ASSETS

Other assets at June 30, 2012 and 2011, consist of the following:

2012 2011

Charitable gift annuities 4,586$ 5,342$ Pooled income funds 1,291 1,525 Cash surrender value of life insurance policies 1,325 292 Other 3,241 2,583

Total 10,443$ 9,742$

7. PROPERTY, BUILDINGS, AND EQUIPMENT

The components of property, buildings, and equipment at June 30, 2012 and 2011, are as follows:

2012 2011

Land 3,106$ 3,106$ Buildings and improvements 36,447 36,854 Furniture, fixtures, and equipment 3,941 3,386

Total 43,494 43,346

Accumulated depreciation and amortization (20,078) (18,832)

Net 23,416$ 24,514$

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8. DUE TO GRANT RECIPIENTS

Amounts due to grant recipients at June 30, 2012 and 2011, are expected to be paid as follows:

2012 2011

Less than one year 23,453$ 27,570$ One to five years 29,614 38,312 More than five years 77,472 81,000 Less discount for multi-year grants (22,059) (26,287)

Total 108,480$ 120,595$

9. OTHER LIABILITIES

Other liabilities at June 30, 2012 and 2011, consist of the following:

2012 2011

Funds held for other organizations 56,136$ 56,949$ Agency payables to OFJCC/899 Charleston — long term 3,397 9,147 Pension liability 38,886 23,851 Other 1,573 100

Total 99,992$ 90,047$

10. NOTES PAYABLE

One of the Federation’s consolidated supporting foundations has promissory notes outstanding at June 30, 2012 and 2011, of $36,077 and $24,772, respectively, to a party related to the foundation. During the fiscal years ended June 30, 2012 and 2011, the foundation borrowed an additional $11,305 and $8,650, respectively, from the related party. The unpaid principal balance of the promissory note of $36,077 at June 30, 2012, is due on December 31, 2013 and bears no interest. The donor-directors of the supporting foundation have pledged $35,000 to the foundation for future repayment of the note.

11. COMMITMENTS AND CONTINGENCIES

One of the Federation’s consolidated supporting foundations has liabilities which exceed assets as of June 30, 2012 and 2011. Amounts due to grant recipients of $82,746 and $85,939 and promissory notes outstanding of $36,077 and $24,772 at June 30, 2012 and 2011, respectively, comprise the majority of the liabilities of the foundation. Donor directed funding of current liabilities is achieved through cash generated by promissory notes from a related party. See Note 10. Long-term fulfillment of liabilities is expected to occur through the sale of donor-director real estate assets.

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The net assets of this foundation as of June 30, 2012 and 2011, included in the accompanying consolidated financial statements, are as follows:

2012 2011

Total assets — primarily cash and real estate partnership 37,248$ 1,959$ Accounts payable and accrued expenses (16) - Due to grant recipients — discounted (82,746) (85,939) Notes payable (36,077) (24,772)

Unrestricted net assets (deficit) (81,591)$ (108,752)$

12. TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets as of June 30, 2012 and 2011, are available for the following purposes or periods:

2012 2011

Health and welfare 55,508$ 61,160$ Educational/vocational training 21,187 23,176 Support for the elderly 6,358 6,743 Local agency support 11,748 15,030 Overseas 6,653 7,399 Time restriction 5,608 649 Other 41,585 5,841

Total temporarily restricted net assets 148,647$ 119,998$

Net assets were released from donor restrictions by incurring expenses satisfying the purpose of the restriction, by the passage of time, or by the occurrence of other specific events for the years ended June 30, 2012 and 2011, as follows:

2012 2011

Health and welfare 6,633$ 5,553$ Educational/vocational training 3,759 3,128 Support for the elderly 539 439 Local agency support 759 2,304 Overseas 966 1,029 Passage of time 533 Other 3,110 1,708

Total temporarily restricted net assets released from restrictions 15,766$ 14,694$

13. ENDOWMENT FUNDS

The Federation’s endowment fund consists of individual donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. The net assets associated with endowment funds, including those funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.

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The State of California adopted a version of UPMIFA as its State Prudent Management of Investment Funds Act (SPMIFA); which is applicable to funds established on or after January 1, 2009, and funds established prior to January 1, 2009, only with respect to actions taken after January 1, 2009. The Board, on the advice of legal counsel, has determined that the Federation holds net assets that are endowment funds as defined under SPMIFA. The Board has interpreted the adopted SPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Federation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Federation in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Federation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund 2. The purposes of the Federation and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and appreciation of investments 6. Other resources of the Federation 7. The investment policies of the Federation

Where the Board designates unrestricted funds to function as endowments they are classified as unrestricted net assets. Where the Board designates donor-restricted nonendowment funds to function as endowments; they are classified as temporarily restricted net assets.

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The Federation’s endowment composition, changes, and net asset classifications as of and for the year ended June 30, 2012, are as follows:

Endowment Net AssetComposition by Type of Fund Temporarily Permanentlyas of June 30, 2012 Unrestricted Restricted Restricted Total

Donor-restricted endowment fund (660)$ 102,011$ 41,633$ 142,984$ Board-designated endowment fund 7,664 - - 7,664

Total funds 7,004$ 102,011$ 41,633$ 150,648$

Change in Endowment Net AssetComposition by Type of Fund Temporarily Permanentlyfor the Year Ended June 30, 2012 Unrestricted Restricted Restricted Total

Endowment net assets — June 30, 2011 16,124$ 115,030$ 35,210$ 166,364 Net realized and unrealized gain (loss) on investments 44 2,220 - 2,264 Additions from contributions 13 2,099 2,125 4,237 Appropriation of endowment assets for expenditure (2,238) (4,571) - (6,809) Other changes: Transfers to add to board-designated endowment funds - - - - Interfund transfers (6,939) (12,767) 4,298 (15,408)

Endowment net assets — June 30, 2012 7,004$ 102,011$ 41,633$ 150,648$

Description of Amounts Classified as Permanently Restricted Net Assets andTemporarily Restricted Net Assets (Endowment Only) as of June 30, 2012

Permanently restricted net assets — the portion of perpetual endowment funds that is required to be retained permanently either by explicit donor stipulation or SPMIFA 41,633$

Total endowment funds classified as permanently restricted net assets 41,633$

Temporarily restricted net assets — the portion of perpetual endowments subject to a time restriction under SPMIFA: Without purpose restrictions With purpose restrictions 102,011$

Total endowment funds classified as temporarily restricted net assets 102,011$

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The Federation’s endowment composition, changes, and net asset classifications as of and for the year ended June 30, 2011, are as follows:

Endowment Net AssetComposition by Type of Fund Temporarily Permanentlyas of June 30, 2011 Unrestricted Restricted Restricted Total

Donor-restricted endowment fund 1,764$ 115,030$ 35,210$ 152,004$ Board-designated endowment fund 14,360 - - 14,360

Total funds 16,124$ 115,030$ 35,210$ 166,364$

Change in Endowment Net AssetComposition by Type of Fund Temporarily Permanentlyfor the Year Ended June 30, 2011 Unrestricted Restricted Restricted Total

Endowment net assets — June 30, 2010 13,581$ 97,731$ 34,896$ 146,208$ Net realized and unrealized gain (loss) on investments 3,977 22,986 - 26,963 Additions from contributions 56 4,031 144 4,231 Appropriation of endowment assets for expenditure (1,281) (9,133) - (10,414) Other changes: Transfers to add to board-designated endowment funds - - - - Interfund transfers (209) (585) 170 (624)

Endowment net assets — June 30, 2011 16,124$ 115,030$ 35,210$ 166,364$

Description of Amounts Classified as Permanently Restricted Net Assets andTemporarily Restricted Net Assets (Endowment Only) as of June 30, 2011

Permanently restricted net assets — the portion of perpetual endowment funds that is required to be retained permanently either by explicit donor stipulation or SPMIFA 35,210$

Total endowment funds classified as permanently restricted net assets 35,210$

Temporarily restricted net assets — the portion of perpetual endowments subject to a time restriction under SPMIFA: Without purpose restrictions - $ With purpose restrictions 115,030

Total endowment funds classified as temporarily restricted net assets 115,030$

Endowment Funds with Deficits — From time to time, the fair value of assets associated with individual donor endowment funds may fall below the value of the initial and subsequent donor gift amounts (deficit). When donor endowment deficits exist, they are classified as a reduction of unrestricted net assets. Deficits associated with funds functioning as endowments, when they exist, are likewise classified as a reduction of unrestricted net assets. Deficits of this nature reported in

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unrestricted net assets were $660 and $25 as of June 30, 2012 and 2011, respectively. These deficits resulted from unfavorable market conditions and authorized appropriations and expenditures that were deemed prudent.

Return Objectives and Risk Parameters — The Federation has established an endowment investment policy that guides the management of endowment funds. As stated in this investment policy, the Federation seeks to earn a rate of return on the total endowment fund, net of fees, that meets the Federation’s established spending guidelines plus inflation. The Federation also acknowledges that adequate diversification of assets is a key factor in managing portfolio risk. The Federation believes a moderate level of risk is acceptable and necessary in order to meet the return objectives of the endowment fund. However, the Federation prefers (a) avoiding large risk with the result of possibly limiting large gains, and (b) consistent year-to-year results to large fluctuations in returns.

Strategies Employed for Achieving Investment Objectives — The Federation has determined that investing prudently across a diversified portfolio, using its target asset allocation, is the appropriate strategy for achieving the investment objectives stated above.

Relationship of Spending Policy to Investment Objectives — As required by SPMIFA, the Federation has, in consultation with its advisors, considered carefully the factors described in SPMIFA, and specifically has endeavored to balance prudently the needs of the Federation’s beneficiaries and the economic climate with the Federation’s obligation to steward its donor endowed funds in perpetuity, and has determined that a spending guideline ranging from five (5%) to six and one-half percent (6.5%) of the average of a fund’s value over 12 trailing quarters would be an appropriate general spending guideline.

14. BENEFIT PLANS

The Federation sponsors and administers a multiple employer defined benefit plan (the “Pension Plan”) covering substantially all of its employees and those of 13 beneficiary agencies. Actuarial information for individual agencies is not determined. The annual pension expense is based on projected benefits for all plan participants, and is allocated among the agencies on the basis of the employers’ payroll of covered participants without regard to the length of work experience of the participating employees. The Federation froze the plan during 2007.

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The change in benefit obligations and plan assets for the Pension Plan in the years ended June 30, 2012 and 2011, are as follows:

2012 2011

Change in benefit obligation: Projected benefit obligation — beginning of year 79,273$ 78,681$ Employer service cost 600 555 Interest cost 4,063 4,002 Actuarial (gain) loss 14,062 (305) Benefits paid from plan assets (3,367) (3,235) Administrative expenses paid (423) (425)

Projected benefit obligation — end of year 94,208 79,273

Change in plan assets: Fair value of plan assets — beginning of year 55,422 48,881 Actual return on plan assets (70) 8,313 Employer contributions 3,761 1,888 Benefits paid from plan assets (3,367) (3,235) Administrative expenses paid (424) (425)

Fair value of plan assets — end of year 55,322 55,422

Funded status (38,886)$ (23,851)$

The underfunded status of the Pension Plan, in the amount of $38,886 and $23,851, is included in other liabilities in the consolidated statements of financial position as of June 30, 2012 and 2011, respectively.

The components of the pension related changes other than net periodic cost reflected in the consolidated statements of activities and changes in net assets for the years ended June 30, 2012 and 2011, are as follows:

2012 2011

Net actuarial (gain) loss 18,295$ (5,071)$ Less amortization of prior service cost (172) (172) Less amortization of actuarial loss (1,244) (1,886)

Total 16,879$ (7,129)$

Amounts that have not yet been recognized as components of net periodic benefit cost as of June 30, 2012 and 2011, are as follows:

2012 2011

Net actuarial loss 37,013$ 19,963$ Prior service cost 1,131 1,303

Total amount not recognized 38,144$ 21,266$

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The estimated actuarial loss and prior service cost for the Pension Plan that will be amortized into net periodic benefit cost over the next fiscal year are $2,865 and $172, respectively.

Assumptions — The weighted-average assumptions used to determine benefit obligations and net period benefit costs as of June 30, 2012 and 2011, are as follows:

2012 2011

Weighted-average assumptions used to determine benefit obligations — discount rate 3.90 % 5.25 % Weighted-average assumptions used to determine net periodic benefit costs: Discount rate 5.25 5.2 Expected return on plan assets 7.5 7.5

Percentage

Plan Asset and Investment Strategy — As of June 30, 2012 and 2011, the valuation of the Pension Plan’s investments by the fair value hierarchy levels are summarized as follows:


Pension plan investments: Mutual funds 25,860$ 25,860$ - $ - $ Public equity securities 12,501 12,497 4 - Money market funds 1,636 1,636 - Private equity 3,799 - - 3,799 Alternative investments 11,526 - - 11,526

Total pension plan investments 55,322$ 39,993$ 4$ 15,325$



Pension plan investments: Mutual funds 23,692$ 23,692$ - $ - $ Public equity securities 14,111 14,110 1 - Money market funds 2,882 2,882 - Private equity 3,452 - - 3,452 Alternative investments 11,285 - - 11,285

Total pension plan investments 55,422$ 40,684$ 1$ 14,737$


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The changes in the Pension Plan’s investments classified as Level III in 2012 and 2011 are as follows:

2012

Balance — July 1, 2011 14,737$ Total realized gain (loss) 751 Total unrealized gain (loss) (784) Purchases and other acquisitions 3,477 Sales and other settlements (2,856)

Balance — June 30, 2012 15,325$

Changes in unrealized losses included in earnings relating to investments still held at June 30, 2012 (72)$

2011

Balance — July 1, 2010 14,863$ Total realized gain (loss) 247 Total unrealized gain (loss) 1,396 Purchases and other acquisitions 645 Sales and other settlements (2,414)

Balance — June 30, 2011 14,737$

Changes in unrealized gains included in earnings relating to investments still held at June 30, 2011 1,374$

As of June 30, 2012 and 2011, the targeted and actual asset allocation by asset category is as follows:

2012 2011 2012 2011

Cash and cash equivalents - % - % 3.0 % 4.5 % Fixed income 20.0 20.0 30.2 23.9 Equity securities 45.0 45.0 40.6 45.0 Alternative investments 35.0 35.0 26.2 26.6

Total 100.0 % 100.0 % 100.0 % 100.0 %

Target Allocation Actual Allocation

The Federation’s investment strategy for the assets of the Pension Plan is designed to preserve principal while earning returns relative to the overall market consistent with a prudent level of risk. The strategy balances the liquidity needs of the Pension Plan with the long-term return goals necessary to satisfy future obligations. The Federation has determined that investing prudently across a diversified portfolio, using its target asset allocation, is the appropriate strategy for achieving the investment objectives. Risk tolerance is established through consideration of plan liabilities, plan funded status, and financial condition. Period review of the market value and corresponding asset allocation percentages are performed to determine whether a rebalancing of the portfolio is necessary.

Expected Return on Plan Assets — The Pension Plan estimated long-term rate of return on pension assets is driven primarily by historical asset-class returns, an assessment of expected future performance,

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advice from external actuarial firms and the incorporation of specific asset-class risk factors. Asset allocations are periodically updated using pension plan asset/liabilities studies, and the Federation’s estimated long-term rates of return are consistent with these studies. At June 30, 2012 and 2011, the Pension Plan portfolio return assumption is 7.5%.

Cash Contribution and Benefit Payments — The Federation expects to contribute $3,226 to the Pension Plan in fiscal year ending June 30, 2013.

The following benefit payments are expected to be paid:

Years EndingJune 30

2013 4,012$ 2014 4,335 2015 4,711 2016 5,015 2017 5,246 Next five years 28,317

Effective April 1, 2007, the Federation created a 403(b) plan in response to the freezing of the defined benefit plan. Participating employees enter into salary-reduction arrangements with the trustee. The Federation may contribute between 3% and 9% of the participants’ salaries based on years of service. Contributions of $262 and $110 were made by the Federation to the new plan for the years ended June 30, 2012 and 2011, respectively. The Federation temporarily suspended the employer contribution to this plan for the fiscal year ended June 30, 2010 through December 31, 2010. The Federation resumed contributions at 3% of the participants’ salaries on January 1, 2011.

The Federation also sponsors a 457(b) plan. Participating employees do not contribute to this plan. The Federation contributes between 1% and 8.45% of the participants’ salaries. For the years ended June 30, 2012 and 2011, there were no contributions made by the Federation to the 457(b) plan. The Federation temporarily suspended the employer contribution to this plan for the fiscal year ended June 30, 2010. There were no participating employees for the fiscal year ended June 30, 2012.

15. RENTAL INCOME

The operations of one of the Federation’s consolidated supporting foundations consist primarily of leasing commercial office and retail space to tenants for various periods. Scheduled office and retail rent increases and various free-rent periods are provided for in the lease agreements. Rental income is recognized in an amount equal to minimum base rent, plus future fixed rental increases amortized on a straight-line basis over the terms of the leases. As of June 30, 2012 and 2011, four tenants accounted for approximately 65% and 39%, respectively, of rental income. Total income is $2,283 and $2,207 for the years ended June 30, 2012 and 2011, respectively, and is included within other revenue in the consolidated statements of activities and changes in net assets.

Another consolidated supporting foundation subleases office space to a local agency for social service activities.

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Future minimum lease payments to be received under noncancelable operating leases in effect as of June 30, 2012, are as follows:

Years EndingJune 30

2013 1,947$ 2014 1,736 2015 1,333 2016 1,234 2017 1,015 Thereafter 3,582

Total 10,847$

16. LEASE COMMITMENTS

Rental expense, which is recognized on a straight-line basis, amounted to $602 and $502 for the years ended June 30, 2012 and 2011, respectively.

Future minimum amounts payable under noncancelable operating leases as of June 30, 2012, are as follows:

Years EndingJune 30

2013 566$ 2014 522 2015 521 2016 521 2017 174

Total 2,304$

17. GUARANTEES

Pro Publica Inc., a grantee of one of the Federation’s consolidated supporting foundations, has entered into a lease with 55 Broadway LLC for the entire 23rd Floor (Suite 2301) at 55 Broadway, New York, New York pursuant to the lease dated November 29, 2007. The landlord required as a condition to the continuation of the lease, that Pro Publica Inc.’s obligations under the lease be supported by a guarantee and a letter of credit. The Board of the supporting foundation has determined that assisting Pro Publica, Inc. in meeting the landlord’s condition as described above is consistent with the purpose for which Pro Publica Inc. was organized and the supporting foundation’s decision to help launch Pro Publica and provide significant grant support to the organization. Thus, the Board of the supporting foundation authorized to guarantee the obligation of Pro Publica, Inc. to the landlord under the lease and to obtain and cause to be issued to the landlord a standby letter of credit in an amount up to the equivalent of four months’ rent, payable for the benefit of the Landlord. The foundation has guaranteed the payment of the rent payable of $1,951 and $2,644 as of June 30, 2012 and 2011, respectively.

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18. RELATED-PARTY TRANSACTIONS

Legal services of approximately $15 and $20 for the years ended June 30, 2012 and 2011, respectively, were provided by a related party.

19. SUBSEQUENT EVENTS

As of January 9, 2013, one foundation consolidated by the Federation granted their remaining assets to donor advised funds of the Federation. The foundation is in the process of filing their certificates of dissolution with the Secretary of State of California.

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Documents

Jewish Community Federation Audit Report: FY Ended June 30, 2012