National Nurses United

CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 8 - Mortgages & Loans Payable The Organization owns and occupies its four story Headquarters Building at 2000 Franklin Street, Oakland, and an adjacent parking lot known as 2002 Webster. The parking lot is for the sole use of CNA members, staff, and guests. During the year ended June 30, 2003 the property was subject to two non-recourse loans. The principal balances of $1,983,031 and $293,479 were refinanced in December 2003 into a new non-recourse loan for $3,200,000 payable over 15 years with a stated interest rate of six and two- thirds percent fixed over the term of the loan. As of June 30, 2004, the principal maturities are as follows: Year Ended Total June 30, 2005 $ 131,615 June 30, 2006 140,381 June 30, 2007 149,731 June 30, 2008 159,703 June 30, 2009 - & Thereafter 2,547,063 $ 3,128,493 At June 30, 2004, CNA had a $500,000 secured line of credit with a local financial institution to be drawn upon when needed through January 31, 2005, with an interest rate of .75% above prime. The line of credit is secured by the real property located in Oakland, CA. As of June 30, 2004 $500,000 had been drawn and was outstanding. Note 9 - Retirement Plan Effective May 1, 2001 for all permanent and probationary employees (Covered Participant) employed within the bargaining unit represented by the Staff Professional and Clerical Association (SPCA) the Organization agreed, under its collective bargaining agreement with SPCA, to contribute to the Steelworkers Pension Trust, a multiemployer defined benefit plan. Effective the same date CNA also elected to cover all permanent employees outside of SPCA's bargaining unit and to contribute to the Steelworkers Pension Trust. Starting from the day of employment CNA contributes a percentage of a Covered Participant's gross wages. The percentage increases upon completion of the Covered Participant's of six months employment. CNA also contributes a percentage of the gross wages of all permanent employees outside of the bargaining unit starting from the day of employment. Both Covered Participants and permanent employees outside of the bargaining unit may elect as a group to forego, if unanimous, certain other compensation in return for an increase in the percentage CNA contributes to the Steelworkers Pension Trust for the current and future years. The permanent employees outside of the bargaining unit as a group previously so elected. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 9 - Retirement Plan (Continued) Retirement plan expense under the Steelworkers Pension Trust amounted to $1,303,677 and $1,092,222 for the years ended June 30, 2004, and 2003, respectively. CNA also maintains a defined contribution pension plan, California Nurses Association 401(k) Retirement Plan for the benefit of all regular employees. Eligible employees are allowed to make elective pretax deferrals into the 401(k) Retirement Plan. Note 10 - Building Rental and Expenses As of April 10, 2003, CNA occupies all four floors of its Headquarters building located in Oakland, California. Prior to that date the first floor was leased to a local financial institution. The lease had an original term of five years ending on October 31, 2004 calling for a monthly base rent of $15,800 adjusted annually for any increase in the Consumer Price Index for all Urban Consumers plus additional rental payments for the tenant's share of annual operating expenses expended and incurred by CNA in owning and operating the 2000 Franklin Street property. By mutual agreement of both parties, CNA and the financial institution, the first floor lease was terminated early and the financial institution paid CNA a total of $287,000 in full settlement of the lease terms and release from any future obligations under the lease. Of this amount $45,000 represented payment of certain operating expenses previously incurred by CNA but not yet paid by the financial institution at the date the agreement was signed. Rental income, including $242,000 from the lease termination agreement, was $446,868 for the year ended June 30, 2003. The following schedule summarizes the expenses in connection with the entire building including the portion occupied by CNA. The interest expense is for the mortgages and the interest charges on the line of credit and margin loan. Depreciation expenses are for the original purchase of the property plus total improvements since the purchase. Other expenses represent the amortization of loan costs and fees incurred in connection with the two mortgages plus a lease commission incurred in connection with the first floor lease. The loan costs and fees on the two mortgages that were paid off during the year ended June 30, 2004 were fully amortized and the balance expensed during the same year. The lease commission was fully amortized and the balance expensed during the year ended June 30, 2003. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 11 - Affinity Program (Continued) CNA recognized $229,030 in royalties under the Addendum during the year ended June 30, 2004; and recognized $110,029 in royalties under the Addendum plus received and recognized an additional $222,186 in royalties under the initial terms of the Agreement for a total of $332,215 during the year ended June 30, 2003. CNA had $160,941 and $389,971 of deferred royalty income from the $500,000 advanced under the terms of the Addendum at June 30, 2004 and 2003, respectively. Note 12 - Regions The 12 regions are components of the California Nurses Association representing geographical groupings of CNA members based on CNA represented facilities. As of the date of the Statement of Financial Position two of the regions upon legal advice from CNA's counsel maintain a separate legal status as they are beneficiaries of certain scholarship funds held in trust intended for the members of that particular region. Each of the scholarship funds are to be transferred to the California Nurses Foundation, Inc., a 501(c)(3) charity under the Internal Revenue Code. When the transfer of funds is completed, the region will file the appropriate paperwork needed to dissolve their separate legal status. Acting in a fiduciary capacity CNA has custody of each region's funds. The balance of these funds consists of a monthly subsidy to each region less the cumulative expenditures of each region, including funds returned to the general fund. Since expenditures of region funds may only be made at the direction and authorization of that region, the regions' net assets are treated as temporarily restricted net assets in the financial statements. While a separate accounting for the change in net assets of each region is required, these funds are not required to be segregated from each other nor are they required to be segregated from CNA's regular funds. The following is a summary of the transactions handled by CNA during the year, including the balance of funds available for use by each region at the end of the year. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 10 - Building Rental and Expenses (Continued) Expenses 2004 2003 Interest $ 239,424 $ 207,537 Depreciation 133,150 105,239 Utilities 101,115 122,865 Repairs and Maintenance 14,901 23,421 Garbage 13,714 - Services Purchased 33,055 37,824 Janitorial and Supplies 31,790 21,064 Property Taxes 57,804 54,976 Insurance 24,206 32,203 Other 25,608 17,204 Total $ 674,767 $ 622,333 Note 11 - Affinity Program Effective January 1, 2003 CNA entered into a Term Extension Addendum (Addendum) that extended until December 31, 2007 an Amended and Restated Affinity Agreement (Agreement) with a national financial institution. Under the Agreement the financial institution provides certain services and benefits to certain persons included in certain lists provided to the institution by or on behalf of CNA. Under the terms of the Addendum and Agreement CNA receives royalties based upon various percentages or dollar amounts in relation to the services provided by the financial institution. During the initial term of the Agreement, which expired on December 31, 2002, CNA was guaranteed a total of $1,500,000 in royalties. Under terms of the Addendum CNA received a $500,000 advance against future royalties to be earned during the extended term of the Agreement. When and if royalties computed during the term of the Addendum exceed the $500,000 advance, CNA will begin receiving royalties at the end of each calendar quarter as computed under the terms of the addendum.

• Cover