JEWISH NATIONAL FUND (KEREN KAYEMETH LEISRAEL), INC. AND RELATED ORGANIZATION CONSOLIDATED FINANCIAL STATEMENTS AND AUDITOR S REPORT

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1 CONSOLIDATED FINANCIAL STATEMENTS AND AUDITOR S REPORT

2 TABLE OF CONTENTS Independent Auditor s Report Exhibit A - Consolidated Balance Sheet B - Consolidated Statement of Activities C - Consolidated Statement of Functional Expenses D - Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements

3 Independent Auditor s Report Board of Trustees Jewish National Fund (Keren Kayemeth LeIsrael), Inc. and Related Organization Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Jewish National Fund (Keren Kayemeth LeIsrael), Inc. and Related Organization, which comprise the consolidated balance sheet as of September 30, 2014, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Auditors Auditors and Consultants and Consultants Serving Serving the Health the Health Care & Care Not for & Not Profit for Sectors Profit Sectors 655 Third 655 Avenue, Third Avenue, 12th Floor, 12th New Floor, York, New NY York, NY (212) (212) / Fax (212) / Fax (212) / /

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Basis for Qualified Opinion Generally accepted accounting principles dictate that all subsidiaries under Jewish National Fund (Keren Kayemeth LeIsrael), Inc. should be included in these consolidated financial statements. As stated in Note 1 to the financial statements, the net assets and activities of Alexander Muss Institute For Israel Education, Inc. (AMIIE) as of December 31, 2014 are not included in these financial statements. AMIIE s assets and revenues totaling $9,947,340 and $9,051,082 as of December 31, 2014 and for the year then ended, respectively, amounted to 4% and 8.8%, respectively of the total assets and revenues of Jewish National Fund (Keren Kayemeth LeIsrael), Inc. and Related Organizations. Qualified Opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Jewish National Fund (Keren Kayemeth LeIsrael), Inc. and Related Organization as of September 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Jewish National Fund (Keren Kayemeth LeIsrael), Inc. and Related Organization s September 30, 2013 consolidated financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated April 2, In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2013 is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The information in Note 15 is presented for the purposes of additional analysis and is not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion on the supplementary information referred to above. 2. May 5, 2015

5 EXHIBIT A CONSOLIDATED BALANCE SHEET (With Summarized Financial Information for the Year Ended September 30, 2013) ASSETS Cash and cash equivalents $ 13,589,245 $ 7,615,241 Contributions receivable - net (Note 5) 24,229,726 19,424,102 Prepaid expenses and other assets 593, ,968 Beneficial interest in trusts 184, ,252 Investments held under split-interest agreements (Notes 3 and 4) 70,741, ,742,824 Investments - other (Note 3) 116,737,793 47,376,437 Fixed assets - net (Note 6) 10,032,720 6,458,134 Total assets $ 236,108,961 $ 214,476,958 LIABILITIES AND NET ASSETS Accounts payable and accrued expenses $ 2,043,439 $ 1,798,251 Accrued payroll and related liabilities 754, ,619 Grants payable (Note 9) 22,457,893 21,564,423 Liabilities under split-interest agreements (Note 4) 36,983,503 47,264,947 Total liabilities 62,239,749 71,317,240 Net assets (Exhibit B) Unrestricted Operating 48,396,528 40,380,660 Boruchin Israel Education Advocacy Center 74,652,085 Building 7,313,095 13,208,666 Total unrestricted 130,361,708 53,589,326 Temporarily restricted (Note 10) 39,318,739 86,183,018 Permanently restricted (Note 11) 4,188,765 3,387,374 Total net assets 173,869, ,159,718 Total liabilities and net assets $ 236,108,961 $ 214,476,958 See independent auditor's report. The accompanying notes are an integral part of these statements.

6 EXHIBIT B CONSOLIDATED STATEMENT OF ACTIVITIES YEAR ENDED (With Summarized Financial Information for the Year Ended September 30, 2013) Unrestricted Total Boruchin Israel Education Building Temporarily Permanently Operating Advocacy Center Fund Total Restricted Restricted Revenues, gains, (losses) and other support Contributions $ 39,458,113 $ 1,500,000 $ 40,958,113 $ 11,336,739 $ 52,294,852 $ 29,926,793 Special events revenue $ 7,312,667 Less direct cost of special events (2,056,344) Net special events revenue 4,746,323 4,746, ,000 5,256,323 3,390,121 Bequests 10,627,854 10,627,854 $ 801,391 11,429,245 10,631,741 Contributions from split-interest agreements (Note 4) 5,585,523 5,585,523 57,639,448 Change in value of split-interest agreements (Note 4) 218, ,010 18,575,543 18,793,553 3,528,270 Investment income (Note 3) 925,991 $ 172,376 1,098,367 (628,724) 469,643 2,230,066 Miscellaneous income 444, , , ,966 Net assets released from restrictions (Note 10) 7,763,651 74,479,709 82,243,360 (82,243,360) Total revenues, gains, (losses) and other support 64,183,950 74,652,085 1,500, ,336,035 (46,864,279) 801,391 94,273, ,758,405 Expenses (Exhibit C) Program services Israel projects 41,602,338 41,602,338 41,602,338 28,870,952 Education 4,615,548 4,615,548 4,615,548 4,167,277 Missions and scholarships 6,992,273 6,992,273 6,992,273 5,972,650 Total program services 53,210,159 53,210,159 53,210,159 39,010,879 Supporting services Management and general 4,710,002 4,710,002 4,710,002 4,262,861 Donor development and fund raising 5,514,745 5,514,745 5,514,745 5,203,719 Total supporting services 10,224,747 10,224,747 10,224,747 9,466,580 Total expenses 63,434,906 63,434,906 63,434,906 48,477,459 Change in net assets before other changes 749,044 74,652,085 1,500,000 76,901,129 (46,864,279) 801,391 30,838,241 59,280,946 Transfer to building fund 7,395,571 (7,395,571) Gain (loss) on foreign currency translation (128,747) (128,747) (128,747) 17,537 Change in net assets (Exhibit D) 8,015,868 74,652,085 (5,895,571) 76,772,382 (46,864,279) 801,391 30,709,494 59,298,483 Net assets - beginning of year 40,380,660 13,208,666 53,589,326 86,183,018 3,387, ,159,718 83,861,235 Net assets - end of year (Exhibit A) $ 48,396,528 $ 74,652,085 $ 7,313,095 $ 130,361,708 $ 39,318,739 $ 4,188,765 $ 173,869,212 $ 143,159,718 See independent auditor's report. The accompanying notes are an integral part of these statements.

7 EXHIBIT C CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED (With Summarized Financial Information for the Year Ended September 30, 2013) Program Services Supporting Services Total Donor Missions Management Development Direct Cost Israel and and and Fund of Special Projects Education Scholarships Total General Raising Events Total Salaries $ 3,102,412 $ 1,620,019 $ 2,390,928 $ 7,113,359 $ 2,343,844 $ 2,521,224 $ 4,865,068 $ 11,978,427 $ 11,265,003 Employee benefits 997, , ,833 2,229, , ,197 1,461,707 3,690,739 3,473,407 Total salaries and benefits 4,100,110 2,113,520 3,128,761 9,342,391 3,027,354 3,299,421 6,326,775 15,669,166 14,738,410 Advertising 355, , , , , , , , ,732 Catering and facility rental $ 2,056,344 2,056,344 2,056,344 1,361,934 Conferences and education 10,285 29, , ,731 89,587 5,055 94, , ,418 Depreciation and amortization 317,595 47,051 41, ,815 64, , , , ,152 Dues and subscriptions 38,443 7,713 7,381 53,537 9,393 7,490 16,883 70,420 76,652 Equipment and leases 141,191 45,738 50, ,514 52,066 53, , , ,694 Insurance 129,359 57,622 17, ,821 26,000 14,468 40, , ,311 Investment fees 169, , , ,112 Meetings 70,812 52,105 72, ,105 42,831 63, , , ,673 Missions 89, ,315 1,151,044 1,692,931 94,573 5, ,374 1,793, ,433 Postage, delivery and messenger 503, , ,663 1,037, , , ,722 1,557,450 1,751,327 Printing 618, , ,417 1,465, , , ,993 2,143,890 1,803,378 Professional fees 1,740, , ,367 2,076, , , ,681 2,483,544 1,910,922 Real estate taxes, bank fees and miscellaneous 371,819 11,723 19, ,803 23,776 21,125 44, , ,596 Rent, security and maintenance 773, , ,908 1,285, , , ,966 1,842,982 1,322,153 Speaker/honorarium fees and promotions 126,499 70, , ,076 63, , , , ,761 Stipends and sponsorships 298,284 32,225 11, ,985 5,213 8,689 13, , ,770 Supplies 86,279 36,362 42, ,515 33,666 41,855 75, , ,001 Telephone 247,297 61, , ,508 74,714 78, , , ,066 Transfers for Israel projects 31,249,687 31,249,687 31,249,687 19,720,942 Travel 271, , , , , , , , ,915 Utilities 61,835 27,162 12, ,399 21,495 9,450 30, , ,153 Total expenses 41,602,338 4,615,548 6,992,273 53,210,159 4,879,284 5,514,745 2,056,344 12,450,373 65,660,532 49,990,505 Less expenses deducted from revenues on the statement of activities Investment fees (169,282) (169,282) (169,282) (151,112) Direct cost of special events (2,056,344) (2,056,344) (2,056,344) (1,361,934) Total expenses reported by function on the statement of activities (Exhibit B) $ 41,602,338 $ 4,615,548 $ 6,992,273 $ 53,210,159 $ 4,710,002 $ 5,514,745 $ - $ 10,224,747 $ 63,434,906 $ 48,477,459 See independent auditor's report. The accompanying notes are an integral part of these statements.

8 EXHIBIT D JEWISH NATIONAL FUND CONSOLIDATED STATEMENT OF CASH FLOWS YEARS ENDED AND Cash flows from operating activities Change in net assets (Exhibit B) $ 30,709,494 $ 59,298,483 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities Depreciation and amortization 593, ,152 Realized and unrealized (gain) loss on investments 572,821 (1,136,350) Realized and unrealized gain on investments for split-interest agreements (7,108,341) (1,093,716) Permanently restricted contributions and bequests (801,391) (251,100) Contributions from split-interest agreements (5,585,523) (57,639,448) Change in value of split-interest agreements (18,793,553) (3,528,270) Decrease (increase) in assets Contributions receivable (4,805,624) (489,021) Prepaid expenses and other assets 95, ,899 Beneficial interest in trusts (13,075) (3,992) Increase (decrease) in liabilities Accounts payable and accrued expenses 245, ,448 Accrued payroll and related liabilities 65,295 85,087 Refundable advances (20,140) Grants payable 893,470 1,489,572 Net cash provided (used) by operating activities (3,932,370) (1,597,396) Cash flows from investing activities Purchase of investments (73,151,818) (179,684,128) Proceeds from sale of investments 72,327, ,885,442 Fixed asset acquisitions (4,168,192) (2,653,952) Net cash used by investing activities (4,992,649) (70,452,638)

9 EXHIBIT D -2- CONSOLIDATED STATEMENT OF CASH FLOWS YEARS ENDED AND Cash flows from financing activities Proceeds from contributions restricted to long-term investments $ 801,391 $ 251,100 Proceeds from contributions restricted for split-interest agreements 12,198,078 75,992,076 Proceeds from investment income for split-interest agreements 10,300,850 4,741,219 Payments to annuitants of split-interest agreements (8,401,296) (7,160,579) Net cash provided by financing activities 14,899,023 73,823,816 Net change in cash and cash equivalents 5,974,004 1,773,782 Cash and cash equivalents - beginning of year 7,615,241 5,841,459 Cash and cash equivalents - end of year $ 13,589,245 $ 7,615,241 See independent auditor's report. The accompanying notes are an integral part of these statements.

10 NOTE 1 - NATURE OF ORGANIZATION Jewish National Fund (Keren Kayemeth LeIsrael), Inc. ( JNF ) is a not-for-profit corporation, founded in 1901 and incorporated in the United States in 1926, that is devoted to promoting and furthering the cultural, physical, social, medical, agricultural and general welfare of the people of Israel. JNF invests its efforts in seven action areas including forestry and ecology, water management, community development, security roads, education, research and development and tourism and recreation. JNF is also involved in Israel advocacy and education throughout the United States. Israeli projects are primarily carried out by our agent in Israel, Keren Kayemeth LeIsrael ( KKL ), and other JNF board-approved, select Israeli not-for-profit organizations. JNF consists of its national and zone offices throughout the country. The accompanying financial statements include the accounts of the national headquarters and all of the zone offices. JNF is funded primarily by contributions. JNF is a Section 501(c)(3) not-for-profit organization and is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code (the Code ). JNF has been classified as a publicly supported organization as described in Section 509(a)(1) of the Code. JNF is also exempt from state and local income taxes. Jewish National Fund and JNF are registered trademarks of the organization with the U.S. Patent and Trademark Office since April Beyachad Fund (R.A.) is an Israeli not-for-profit organization (Amuta) that is organized to provide support to and develop areas in Israel. JNF is related to the Beyachad Fund through board control. On January 30, 2014, Alexander Muss Institute for Israel Education, Inc. s ( AMIIE ) by-laws were amended and restated effective January 1, 2014 authorizing the JNF Board of Directors to appoint all members of the AMIIE Board. As per generally accepted accounting principles (GAAP), all subsidiaries under JNF should be included within these consolidated financial statements. However, these financial statements omit the activities of AMIIE. As of December 31, 2014 and for the year ending, AMIIE reported $9,947,340 of assets, $3,119,596 of liabilities, $6,827,744 of net assets, $9,051,082 of revenues, and $9,045,861 of expenses. The accompanying financial statements include the accounts of the national headquarters and all of the zone offices, and Beyachad Fund (R.A.) ( JNF ). All material interoffice and intercompany accounts and transactions have been eliminated in the accompanying financial statements.

11 2. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting - The financial statements are prepared on the accrual basis of accounting. Basis of consolidation - All material intercompany transactions and balances have been eliminated in the consolidation. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents - JNF considers highly liquid financial instruments purchased with maturities of three months or less, other than those held in JNF s investment portfolio, to be cash equivalents. Investments - Investments are stated at fair value. JNF invests in various investments. Investments in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of investments will occur in the near term, based on the markets fluctuations, and that such changes could materially affect the amounts reported in the financial statements. Contributions receivable and allowance for doubtful accounts - Unconditional promises to give are recorded as receivables and revenues and are recognized when the promises are made at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on these amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met. JNF s management determines whether an allowance for uncollectible accounts should be provided for contributions receivable. Such estimates are based on management s assessment of the aged basis of its receivables, current economic conditions, subsequent receipts and historical information. Receivables are charged to bad debt when they are deemed to be uncollectible based upon a periodic review of the accounts by management. Interest is not accrued or recorded on outstanding receivables.

12 3. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Beneficial interest in trusts - The value of the beneficial interest is estimated by discounting the estimated future cash flows using a risk-adjusted interest rate. Split-interest agreements - The contribution portion of a charitable gift annuity agreement is recognized as an unrestricted contribution if the donor does not restrict the use of the assets contributed to the organization. Adjustments to annuity liabilities to reflect the amortization of the discount and revaluation of expected future payments to beneficiaries based on changes in actuarial assumptions are made annually and recognized in revenue as changes in split-interest agreements. Fixed assets - Fixed assets are recorded at cost if purchased or, if donated, at the fair value on the date received. Acquisitions of property and equipment over $2,500 with a useful life of greater than one year are capitalized in the year acquired. Depreciation is provided on the straight-line basis over the estimated useful lives of the related assets. Grants (transfers for Israel projects) and grants payable - Grants are recorded as expenses in the year in which they are awarded, including multi-year awards, which are discounted to present value. The discounts on these amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are made. Refundable advances - On occasion, JNF may receive cash in advance of special events that are to be held after the balance sheet date. It is the policy of JNF to refund all cash received in advance of special events (both contribution and exchange portions) if the event is subsequently canceled. Foreign currency translation - The assets and liabilities of Beyachad Fund (R.A.), which are stated in New Israeli Shekels (NIS), are translated to U.S. Dollars (USD) using the exchange rate in effect at the date of the consolidated balance sheet. Revenues, expenses, gains and losses are translated using the average exchange rate for the year. Gains or losses on foreign currency translation are recognized in the accompanying consolidated financial statements.

13 4. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net assets - Unrestricted net assets include funds having no restriction as to use or purpose imposed by donors. Included in unrestricted net assets is the new board designated fund named The Boruchin Israel Education Advocacy Center (the Center) fund. The Center will provide programming, funding, and fundraising. Among other programs this will include scholarships, JNFuture Leadership Institute, Zionist teacher training programs, JNF Israel Advocacy Department activities including Spring Break, Birthright, and Caravan for Democracy, Faculty Fellowship, and additional educational initiatives. The Center will be created with a $100 million allocation from the John and Dora Boruchin Trust and will be structured in such a manner as to distribute no more than $5 million annually or 5% of the Center s assets, as revalued each year on January 1st, whichever is greater. Any use of the Center s core assets other than previously stated, or a change in its mission can only be determined and approved by a majority vote of JNFs Board of Directors. Temporarily restricted net assets are those whose use has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by JNF in perpetuity. To ensure observance of limitations and restrictions placed on the use of resources available to JNF, JNF s accounts are maintained in accordance with the principles of fund accounting. Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into three net asset classes: unrestricted, temporarily restricted and permanently restricted. Contributions - Unconditional contributions, including promises to give cash and other assets, are reported at fair value at the date the contribution is received. The gifts are reported as either temporarily restricted or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Investment income - Investment income is reflected net of investment fees. Rent - Rent is recorded on the straight-line basis over the term of the leases. Deferred rent is recorded where there are material differences between the fixed payment and the rent expense. Advertising expense - Advertising, consisting primarily of the cost of publications, public awareness and literature, is recorded as expense in the period incurred.

14 5. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Expense allocations - Direct expenses are assigned to the various programs and supporting services based upon actual costs incurred. Indirect expenses are allocated to the various programs and supporting services based upon various allocation factors, including square footage occupied, number of employees or salaries. Fair Value Measurements Fair Value Measurements establishes a framework for measuring fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below. Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that JNF has the ability to access. Level 2 inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

15 6. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurements (continued) The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at September 30, 2014 as compared to September 30, U.S. Government bonds, corporate bonds, municipal bonds and common and preferred stocks - Valued at the closing price reported on the active market on which the individual securities are traded. Certificates of deposit - Valued at fair value by discounting the related cash flow based on current yields of similar instruments and comparable durations, considering the creditworthiness of the issuer. Mutual funds - Valued at the net asset value (NAV) of shares held by JNF at year end. State of Israel bonds and annuities - Valued based on yields currently available on comparable securities of issuers with similar credit ratings. Limited partnerships and mortgages - Estimated fair values, in the absence of readily ascertainable market values, have been determined by the investment manager. The methods and procedures used to value these investments may include, but are not limited to: (1) performing comparisons with prices of comparable or similar securities; (2) obtaining valuation-related information from issuers; and/or (3) other analytical data relating to the investment and using other available indications of value. Real estate - Investments in real estate held by JNF are valued at their fair value, which is based on the latest appraised value available. Precious coins and medals - Investments in precious coins and medals held by JNF are valued at their fair value which is based on the latest appraised value available. Dividend and interest income is allocated to unrestricted net assets, unless otherwise restricted by the donative instrument.

16 7. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value Measurements (continued) The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while JNF believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Note 3 sets forth by level, within the fair value hierarchy, the assets at fair value as of September 30, Summarized financial information - The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the organization s financial statements for the year ended September 30, 2013, from which the summarized information was derived. Uncertainty in income taxes - JNF has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements. Periods ending September 30, 2011 and subsequent remain subject to examination by applicable taxing authorities. Subsequent events - Subsequent events have been evaluated through May 5, 2015, which is the date the financial statements were available to be issued.

17 8. NOTE 3 - INVESTMENTS The following table presents the investments measured at fair value by level as of September 30, 2014 (see Note 2): Level 1 Level 2 Level 3 Total Total U.S. Government bonds $ 4,740,612 $ 4,760,612 $ 6,183,988 State of Israel bonds $ 2,007,996 2,007,996 1,822,817 Corporate bonds Investment-grade taxable bonds $ 11,211,614 International emerging market bonds 760,173 Total corporate bonds 11,971,787 11,971,787 18,696,438 Common and preferred stocks Materials 1,237,916 Consumer discretionary 4,636,028 Consumer staples 3,221,467 Financial 3,318,164 Healthcare 4,780,049 Industrials 2,835,492 Energy 3,341,678 Information technology 6,492,470 Telecom 1,637,130 Utilities 1,506,112 Other 79,906 Total common and preferred stocks 33,086,412 33,086,412 27,179,862 Certificates of deposit 9,755,076 9,755,076 9,555,735 Municipal bonds 19,409,953 19,409,953 22,746,466 Annuities 872, , ,599 Mutual funds U.S. equities 25,258,693 Foreign equities 13,708,216 Fixed income 49,536,690 Total mutual funds 88,503,599 88,503,599 74,401,301 Precious coins and medals $ 193, , ,510 Mortgages 894, , ,005 Real estate 15,225,000 15,225,000 15,225,000 Limited partnerships 818, ,524 2,682,540 $157,712,363 $ 12,635,836 $ 17,131,039 $187,479,238 $180,119,261

18 9. NOTE 3 - INVESTMENTS (continued) The following table presents the Level 3 investments as of September 30, 2013: Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Precious coins and medals (a) $ 193,510 - Illiquid N/A Mortgages (b) 894,005 - Illiquid N/A Real estate (c) 15,225,000 - Illiquid N/A Limited partnerships (d) 818,524 - Monthly 60 days $ 17,131,039 (a) Precious coins and medals: Investment in 895 listings of Israeli and 211 listings of U.S. Coins and Medals whose valuation conforms with the Uniform Standards of Professional Appraisal Practice, using the market data approach to valuation. The format complies with current Procedures of the Internal Revenue Code. (b) Mortgages: Pooled investments in commercial and residential line of credit instruments, which indebtedness is evidenced by Deed of Trust or Borrower s Note or assignment of leases by qualified persons. These investments provide for monthly or annual installments of principal and/or interest. (c) Real estate: Investments in professionally managed commercial and residential buildings that seek to achieve a high rate of return relative to the 18-month U.S. Treasury yield. (d) Limited partnerships: Percentage ownership interest investments in real property that seek to achieve a high rate of return relative to the 18-month U.S. Treasury yield. The partnership invests in a diversified portfolio of domestic properties.

19 10. NOTE 3 - INVESTMENTS (continued) The table below sets forth a summary of changes in fair value of the Level 3 assets for the year ended September 30, 2013: Precious Coins and Medals Mortgages Real Estate Limited Partnerships Total Balance, beginning of year $ 298,510 $ 469,005 $ 15,225,000 $ 2,682,540 $ 18,675,055 Unrealized losses (105,000) (1,864,016) (1,969,016) Purchases 425, ,000 Balance, end of year $ 193,510 $ 894,005 $ 15,225,000 $ 818,524 $ 17,131,039 The amount of total gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) related to assets still held at the reporting date $ (1,969,016) Investment income consists of: Interest and dividends $ 1,211,746 $ 1,244,828 Realized and unrealized gain (loss) on investments (572,821) 1,136,350 Investment fees (169,282) (151,112) $ 469,643 $ 2,230,066

20 11. NOTE 4 - SPLIT-INTEREST AGREEMENTS JNF is the beneficiary or agent for a third-party beneficiary of a number of split-interest agreements with donors. Certain agreements provide that JNF hold the contributed assets as trustee, e.g., pooled income funds and charitable remainder trusts, while other agreements are part of the general assets of JNF, e.g., charitable gift annuities. Under both forms of agreement, JNF invests the donated assets and distributes to the donor or donor s designee income generated from those assets until such time as stated in the agreement (usually upon the death of the donor or donor s designee). JNF will be able to utilize that part of the gift in which it has an interest upon the death of the respective life income beneficiary and will distribute to any thirdparty beneficiaries their respective remainder interests. At the time of the gift, and adjusted annually, JNF records contribution income and a liability for amounts payable to annuitants and third-party beneficiaries using an actuarial calculation based on estimated mortality rates and other assumptions that could change in the near term. The discount rate used in the calculation is between 1.2% and 7.5%. At September 30, assets held for split-interest agreements are as follows: Charitable remainder unitrusts and annuity trusts $ 16,508,677 $ 84,633,169 Charitable gift annuities 53,177,446 47,130,383 Pooled income funds 1,055, ,272 $ 70,741,445 $ 132,742,824 At September 30, the liabilities for each respective form of split-interest agreement were as follows: Charitable remainder unitrusts and annuity trusts $ 8,388,179 $ 21,962,548 Charitable gift annuities 28,175,286 24,946,061 Pooled income funds 420, ,338 $ 36,983,503 $ 47,264,947

21 12. NOTE 5 - CONTRIBUTIONS RECEIVABLE Contributions receivable are due to be collected as follows: Less than one year $ 23,082,102 $ 17,157,436 One to five years 10,834,265 10,619,909 Five years and greater 752,903 2,230,908 34,669,270 30,008,253 Less allowance for doubtful accounts (10,000,000) (10,008,988) Less discount to present value (at a discount rate of approximately 1.03%-6%) (439,544) (575,163) $ 24,229,726 $ 19,424,102 NOTE 6 - FIXED ASSETS At September 30, fixed assets consisted of the following: Estimated Useful Lives Land $ 350,000 $ 350,000 Buildings and building improvements 9,687,742 5,904, years Furniture, fixtures, vehicles and computer equipment 8,016,461 7,631, years 18,054,203 13,886,011 Less accumulated depreciation (8,021,483) (7,427,877) $ 10,032,720 $ 6,458,134 Included in fixed assets is JNF s headquarters building located at 42 East 69th Street in Manhattan, New York, which was acquired in 1954.

22 13. NOTE 7 - COMMITMENTS AND CONTINGENCIES JNF occupies certain of its zone and community offices under sublease agreements that expire through May Under the terms of the subleases, JNF pays annual base rents and building operating expenses based on its pro rata share of the space occupied. At September 30, 2014, future minimum (base) lease payments, which exclude payments based on operating expenses and escalations under noncancelable operating leases for all of JNF s regions, are as follows: 2015 $ 533, , , , ,525 $ 1,229,748 JNF has entered into a contract to renovate their building located at 42 East 69th Street in New York to meet JNF s long term program and organizational requirements. In October 2012, JNF entered into a sublease agreement for temporary space located in Manhattan, New York for the period February 1, 2013 through March 30, JNF may cancel the lease any time after February 28, 2015 with proper notification and a one month termination fee. Future minimum lease payments are as follow: 2015 $ 373, ,415 $ 563,814 Total rent expense for the years ended September 30, 2014 and 2013 was approximately $968,000 and $737,000, respectively.

23 14. NOTE 8 - DEFINED CONTRIBUTION PLAN JNF sponsors a 403(b) plan which covers substantially all of its employees. The plan is funded through voluntary contributions by participants, JNF s matching contributions and/or a formulabased JNF contribution based on each eligible participant s compensation for the plan year. The pension expense for the years ended September 30, 2014 and 2013 was approximately $823,000 and $815,000, respectively. NOTE 9 - GRANTS PAYABLE Grants payable, net of discount to present value (at a discount rate of.57%-6%) are due to be paid as follows as of September 30, 2014: Less than one year $ 15,245,605 One to five years 7,586,119 22,831,724 Less discount to present value (373,831) $ 22,457,893 NOTE 10 - TEMPORARILY RESTRICTED NET ASSETS At September 30, temporarily restricted net assets were restricted for the following purposes or periods: Israel programs $ 14,631,545 $ 14,351,702 Time restricted under split-interest agreements 15,908,395 66,227,038 Time restricted - for periods after September 30 8,458,399 5,293,761 Other 320, ,517 $ 39,318,739 $ 86,183,018

24 15. NOTE 10 - TEMPORARILY RESTRICTED NET ASSETS (continued) Temporarily restricted net assets were released from restrictions as follows: Time restriction lapsed $ 2,961,454 $ 2,517,652 Israel programs 4,802,197 1,378,208 Split-interest agreements expired 74,479,709 9,566,690 $ 82,243,360 $ 13,462,550 NOTE 11 - ENDOWMENT FUNDS General JNF s endowments consist of individual donor-restricted endowment funds established to support activities of the organization. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence of donor-imposed restrictions. Interpretation of Relevant Law The Board of Directors of JNF has adopted the New York Prudent Management of Institutional Funds Act (NYPMIFA). NYPMIFA moves away from the historic dollar value standard, and permits charities to apply a spending policy to endowments based on certain specified standards of prudence. JNF is now governed by the NYPMIFA spending policy, which establishes a standard maximum prudent spending limit of 7% of the average of its previous five years balance. As a result of this interpretation, JNF 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 organization in a manner consistent with the standards of prudence prescribed by NYPMIFA.

25 16. NOTE 11 - ENDOWMENT FUNDS (continued) Return Objectives, Strategies Employed and Spending Policy The primary objective of the endowment in the near term is to preserve the nominal market value of its assets in order to limit realized and unrealized investment losses. The secondary objective of the endowment is to grow the value of its assets at a modest rate to allow for continued support of JNF s operations. Due to JNF s current financial circumstance, the first priority, in the near term, is to reduce the potential for short-term investment losses. The objective therefore prioritizes short-term stability, risk reduction, and liquidity over long-term capital appreciation. The current investment approach for the endowment is to prioritize capital preservation and liquidity and to limit losses within the portfolio by minimizing its exposure to equities and other investments with the potential for significant losses. With this investment approach, the majority of the endowment s assets are invested in investments that are expected to generate modest returns with lower risk. A smaller portion of the endowment may be invested in asset classes and investment strategies with a higher risk-return profile, as appropriate. During each fiscal year, JNF is permitted to spend interest and dividend income plus realized capital gains from the endowment s investments up to 7% of the average of its 5-year endowment balance. Funds with Deficiencies JNF does not have any funds with deficiencies. Endowment Net Asset Composition by Type of Fund as of September 30, 2014 The endowment net asset composition of $4,188,765 consists of following: Investment in perpetuity, the income from which is expendable to support activities of the organization $ 3,555,320 Scholarships 633,445 Total permanently restricted endowments $ 4,188,765

26 17. NOTE 11 - ENDOWMENT FUNDS (continued) Changes in Endowment Net Assets for the Year Ended September 30, 2014 Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year $ - $ 3,387,374 $ 3,387,374 Interest and dividends 43,300-43,300 Contributions and bequests 801, ,391 Appropriated for expenditure (43,300) - (43,300) Endowment net assets, end of year $ - $ 4,188,765 $ 4,188,765 NOTE 12 - CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject JNF to a concentration of credit risk are cash accounts with financial institutions in excess of FDIC insurance limits. NOTE 13 - BENEFICIAL INTEREST IN TRUSTS HELD BY A THIRD-PARTY JNF has a beneficial interest in trusts held by a third-party. The fair value of the fund at September 30, 2014 was $184,327. NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of financial instruments as reported on the balance sheet of JNF approximate their fair value.

27 18. NOTE 15 - CAMPAIGN 2014 (UNAUDITED) Total campaign (for internal purposes) $ 81,478,875 Less: Change in value of split-interest agreements 18,793,553 Actuarial discount on current year split-interest agreements (6,369,416) Change in discount on pledges (135,619) Direct costs of special events (2,056,344) Change in allowance on contribution receivable (8,988) Related party activity 4,675,264 Other miscellaneous items (2,104,178) Total revenues, gains and other support $ 94,273,147