THE LAKE MERRITT UPTOWN DISTRICT ASSOCIATION

Financial Statements For the year ended December 31, 2009

With Report of Independent Auditors

THE LAKE MERRITT UPTOWN DISTRICT ASSOCIATION

CONTENTS Page Report of Independent Auditors 1

Statements of Financial Position as of December 31, 2009

2

Statements of Activities for the year ended December 31, 2009

3

Statements of Cash Flows for the year ended December 31, 2009

4

Statements of Functional Expenses for the year ended December 31, 2009

5

Notes to the Financial Statements

6-10

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors, The Lake Merritt Uptown District Association Oakland, California We have audited the accompanying statement of financial position of The Lake Merritt Uptown District Association ( the Organization) as of December 31, 2009, and the related statements of activities, cash flows, and functional expenses for the year then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of The Lake Merritt Uptown District Association as of December 31, 2009 and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. PMB Helin Donovan LLP

San Francisco, California November 4, 2011

The Lake Merritt Uptown District Association Statement of Financial Position As of December 31, 2009 2009 ASSETS Current Assets: Cash and cash equivalents Business improvement district assessments receivable Deposits Total current assets LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses Deferred revenue Total current liabilities Net Assets Unrestricted net assets Total net assets Total liabilities and net assets $ 50,525 503,079 553,604 $ 790,827 20,805 1,100 812,732

$

$

259,128 259,128 812,732

The accompanying notes are an integral part of these financial statements. -2-

The Lake Merritt Uptown District Association Statement of Activities For the Year Ended December 31, 2009 2009 Unrestricted Revenue: Business improvement district assessments Total revenue Expenses: Program services Management and general Total Expenses Changes in net assets Net assets, beginning of year Net assets, end of year $ Total

$

1,060,315 1,060,315

$

1,060,315 1,060,315

549,044 252,143 801,187 259,128 259,128 $

549,044 252,143 801,187 259,128 259,128

The accompanying notes are an integral part of these financial statements. -3-

The Lake Merritt Uptown District Association Statement of Cash Flows For the Year Ended December 31, 2009 2009 CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets Adjustments to reconcile changes in net assets to net cash provided by operating activities: (Increase) / decrease in assets: Business improvement district assessments receivable Deposits Increase in liabilities: Accounts payable and accrued expenses Deferred revenue Net cash provided by operating activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year SUPPLEMENTAL INFORMATION Interest paid Taxes paid $ 259,128

(20,805) (1,100) 50,525 503,079 790,827 790,827 790,827

$

$ $

-

The accompanying notes are an integral part of these financial statements. -4-

The Lake Merritt Uptown District Association Statement of Functional Expenses For the Year Ended December 31, 2009 2009 Management and general $ 2,202 85,750 2,663 4,216 7,654 14,638 5,143 1,304 2,182 4,180 2,213 119,998 $ 252,143

Program services Advertising $ 15,800 Directors & Officers District Formation Costs General Liability insurance Legal & Accounting Maintenance 182,542 Miscellaneous expenses 482 Occupancy: rent, parking, other occupancy Office furniture & equipment Postage, shipping, delivery Printing & copying Public Relations 3,921 Security 320,091 Service Coordinator 3,000 Special Events 18,162 Supplies Telephone & telecommunications Third-party services Website 5,046 Total Expenses $ 549,044

Total $ 15,800 2,202 85,750 2,663 4,216 182,542 8,136 14,638 5,143 1,304 2,182 3,921 320,091 3,000 18,162 4,180 2,213 119,998 5,046 $ 801,187

The accompanying notes are an integral part of these financial statements. -5-

The Lake Merritt Uptown District Association Notes to Financial Statements For the year ended December 31, 2009 1. ORGANIZATION The Lake Merritt Uptown District Association (LMUDA) was incorporated in February 2008 in the state of California. LMUDA is a Community Benefit District (CBD) Management Corporation committed to revitalizing Oakland's historic downtown by maintaining cleanliness and order in the public rights-of-way, improving district identity, fostering cultural opportunities, creating and maintaining new public spaces, and advocating on behalf of the district stakeholders. LMUDA receives property tax assessment revenue from the city of Oakland. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Basis of Presentation The financial statements are presented in accordance with the provisions of Accounting Standards Codification 958, Financial Statements of Not-For-Profit Organizations. Under the provisions of Codification 958, net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of LMUDA and changes therein are classified and reported as follows: Unrestricted Net Assets – Net assets that are not subject to donor-imposed restrictions or otherwise limited by contractual arrangements with outside parties, but may be designated for specific purposes by action of the Board of Directors. Temporarily Restricted Net Assets – Net assets that are subject to donor-imposed restrictions that can be fulfilled either by actions of LMUDA pursuant to those stipulations and/or expire with the passage of time. At December 31, 2009, LMUDA had no temporarily restricted net assets. Permanently Restricted Net Assets – Net assets that are subject to donor-imposed restrictions that LMUDA maintains. At December 31, 2009, LMUDA had no permanently restricted net assets. Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents are defined as cash on hand, cash in demand deposit accounts at banks and investments with initial maturities of less than ninety days.

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The Lake Merritt Uptown District Association Notes to Financial Statements For the year ended December 31, 2009 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contributions Contribution revenue is recognized when a donor makes a promise to give that is, in substance, unconditional. Contributions of assets other than cash are recorded at fair value at the date of donation. In accordance with the provision of Accounting Standards Codification 958-605-25-2, Accounting for Contributions Received and Contributions Made, contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restriction expires in the fiscal year in which the contributions are recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. All unconditional promises to give, which are expected to be received beyond one year, are discounted to their net present value. Donated services Contribution of donated assets are recorded at fair value in the period received. Contributions of donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at fair value in the period received. Donated services amounted to $2,100 At December 31, 2009. Business Improvement District Assessments Receivable LMUDA’s primary source of revenue is from property tax assessments, which are billed on a semi-annual basis. LMUDA considers all receivables collectible as funds will eventually come through liens when the property is sold. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates include the fair value of donated services. Income Taxes The Internal Revenue Service and the California Franchise Tax Board have determined that LMUDA is exempt from federal and state income taxes under the Internal Revenue Code Section 501(c)(3) and the California Revenue and Taxation Code Section 23701d. Accordingly, there is no provision for income taxes in the financial statements.

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The Lake Merritt Uptown District Association Notes to Financial Statements For the year ended December 31, 2009 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value of Financial Instruments The carrying value of certain financial instruments, including cash and cash equivalents, assessments receivable, accounts payable and accrued expenses approximate fair value due to their short-term nature. LMUDA has adopted Accounting Standards Codification 820, Fair Value Measurements. This Standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Standard applies under other accounting pronouncements that require or permit fair value measurements. In February 2008, the FASB Staff Position (FSP) delayed the effective dates of Accounting Standards Codification 820 for all non-financial assets and non-financial liabilities, excluding those assets that are recognized or disclosed at fair value on a recurring basis for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. LMUDA has adopted Accounting Standards Codification 825, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of Accounting Standards Codification 320. A provision of Codification 825 permits an entity to measure financial instruments and certain other items at estimated fair value. Most of the provisions of Codification 825 are elective; however, the amendment to Accounting Standards Codification 320, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities that own trading and available-for-sale securities. The fair value option created by Accounting Standards Codification 825 permits an entity to measure eligible items at fair value as of specified election dates. The fair value option (a) may generally be applied instrument by instrument, (b) is irrevocable unless a new election date occurs, and (c) must be applied to the entire instrument and not to only a portion of the instrument. Revenue and Deferred Revenue LMUDA recognizes revenue from district assessments in the period in which it is measurable (earned) and available (cash received). If cash is received in advance before it is earned, LMUDA recognizes the amounts received as deferred revenue. Functional Classification of Expenses Costs are allocated between program services and management and general based on management’s evaluation of the related benefits.

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The Lake Merritt Uptown District Association Notes to Financial Statements For the year ended December 31, 2009 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncements In January 2010, the FASB issued guidance to improve disclosures about fair value measurements. The guidance provides amendments to require new disclosures regarding transfers in and out of Levels 1 and 2 of the fair value measurement hierarchy, and activity in Level 3, and to clarify existing disclosures regarding the level of disaggregation, inputs and valuation techniques. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. LMUDA does not expect this guidance to have a material impact on our financial statements. In June of 2009, the FASB issued guidance now codified as FASB ASC Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative nongovernmental U.S. GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the FASB Codification will be considered non-authoritative. These provisions of FASB ASC Topic 105 are effective for interim and annual periods ending after September 15, 2009 and, accordingly, are effective for LMUDA for the current fiscal reporting period. The adoption of this pronouncement did not have an impact on LMUDA’s financial condition or results of operations, but will impact the financial reporting process by eliminating all references to pre-codification standards. In May 2009, the FASB issued guidance on subsequent events. The guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In addition, under the guidance, an entity is required to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. The guidance does not apply to subsequent events or transactions that are within the scope of other applicable GAAP that provide different guidance on the accounting treatment for subsequent events or transactions. The guidance is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. LMUDA adopted the guidance as of December 31, 2009. The adoption of the guidance did not have a material impact on our financial statements.

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The Lake Merritt Uptown District Association Notes to Financial Statements For the year ended December 31, 2009 3. LEASE COMMITMENTS LMUDA association leases shared office space in Oakland under an operating lease agreement that expires on January 31, 2010. Rent expense amounted to $14,638 for the year ended December 31, 2009. Future minimum lease payments under the lease agreements as of December 31, 2009 are as follows: Year ending December 31, 2010 Total 4. CONCENTRATION LMUDA maintains its cash in one insured commercial accounts at a major financial institution. The Federal Deposit Insurance Corporation (FDIC) insures account balances up to $250,000. Under the FDIC Transaction Account Guarantee Program (TAGP), all non-interest bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under TAGP is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules. There were no amounts in excess of federal insurance at December 31, 2009. 5. SUBSEQUENT EVENTS On August 20, 2010, The LMUDA signed an amendment to its original lease that included an expansion to its existing office space in Oakland. The lease commences on February 1, 2010 and ends on January 31, 2012. The monthly base rent is as follows: $2,257 from February 1, 2010 to August 31, 2010; $3,182 from September 1, 2010 to January 31, 2011; $3,227 from February 1, 2011 to January 31, 2012. LMUDA has evaluated the existence of any other subsequent events through November 4, 2011 and has determined that there were no additional subsequent events to recognize or disclose in these financial statements. $ $ 1,100 1,100

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