State of Israel Department of Justice

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State of Israel – Department of Justice Authority of Corporations Registrar of Non-Profit Societies

Name of the Registered Society: Pitchon Lev Registered Number: 58-032-883-9 ______

Protocol of the Auditing Body ______Please note that the details appearing on this form represent public information and there is the possibility that they will be published by various media including on the internet. Therefore, the publication of personal details aside from in those clauses that expressly required such must be avoided in order to protect the right to privacy. ______

We, the members of the auditing committee, have reviewed the propriety of the acts of the society and its institutions in accordance with its purpose as detailed in clause no. 30 of the Law of Registered Societies (1980) and have read the financial reports and the text reports for the year 2009 and hereunder are our comments:

Protocol of the Auditing Body

To the Executive Committee of Pitchon Lev Non-Profit Organization (R.S.) Zeev Schlang Street 4 Rishon Lezion

Re: Review of the Financial Statements for the year 2009 and our recommendation to the General Assembly to confirm them

1. In accordance with clauses 10 and 30 of the Law for Non-Profit Organizations, I have been appointed to serve as auditor in place of an auditing committee.

2. In light of the prevailing economic reality, poverty and financial distress, the organization "Pitchon Lev" was founded and these are its major goals:

a. to distribute of food and clothing to the needy b. to impart basic life skills to adults and teenagers in distress c. to motivate governmental institutions to act on behalf of the weak levels of society in Israel.

The organization relies primarily on donations from the public in the form of money and monetary equivalents and on a staff of volunteers, and operates two large aid centers, one in central Israel and another in the northern section of the country. The organization runs a college situated in its offices for the purpose of disseminating basic knowledge and teaching life skills to the weak. The organization has been in a state of growth since its establishment this in keeping with the promotion of its goals. In so doing it uses small teams of skilled and dedicated workers.

3. During my actual visits to the organization over the past year, I inspected its activities in its offices and in the central branch, and also examined all aspects of the financial reports, the general ledger and the manager's book-keepings for the fiscal year 2009. My inspection and review concerned: a. the legality of actions taken by the organization b. the question if its resources were used exclusively for the purpose of financing activities which conform to its goals c. the question of compliance with the organization's statutes

4. Analysis of the financial statements for the year 2009:

1. The organization's assets grew 0.05% and stand at NIS. 1,830,000. This growth stems essentially from a normal rate of activity despite the world economic crisis which did not fail to have an effect on Israel. This shows that the organization withstood the impact of the economic crisis. The long-term liabilities including employee retirement compensation decreased by 35% which shows that organization implemented the recommendations of the auditors from the previous year in this respect. Current liabilities increased 48% and stand at NIS. 1,284,000. Operating capital is NIS. 245,000 and the quick ratio is 1.19, which indicates that the organization has the capability of settling its debts. This parameter signifies the relatively strong solidity of the organization regarding cash flows.

In 2008 a new law regarding obligatory employee pension plans came into effect. The organization acts in compliance with this law and sets aside amounts for employees' retirement funds. High cash balances in the bank are security for the organization's operating cash flows and do not remain open for periods of more that one month. The organization deposits these funds in short-term cash deposits for periods of no more than one month. The current liabilities increased at a higher rate than that of the current assets. This stems from an increase in activity, but it is advisable that the increase in current assets will not decrease as opposed to current liabilities. In 2009 fixed assets were not acquired and no renovations were made in the organization's new offices.

2. Also in 2009, as in 2008, the year ended with an operational deficit, although the deficit was reduced and today it stands at an amount of NIS. 337,000, representing a decrease of 68% compared to that of 2008. This in itself testifies to the fact that the organization acted very well in 2009 and should be commended for its proper and efficient financial management. This year shows a decrease in marketing expenses as opposed to an increase in operational expenses.

3. Employees wages including those of the managing director are set by the executive committee and they stand on par with public standards. The managing director earns a salary equivalent to that of a senior state employee while taking into consideration the many working hours invested in the position and taking into account the level of achievements reached by the organization through his leadership. The managing director, who is the life and soul of the organization, has brought about its growth and steady durability. The organization has taken steps to cut costs and raise the level of efficiency. We are pleased that wages were decreased by 7.5% compared to those of 2008 despite that fact the organization's activities have increased by 5%. We recommend that management continues to cut back on salaried personnel.

General and administrative expenses decreased by 30% which is a welcomed trend. Managerial expenses in relation to turnover stands at 5.56% which is a positive parameter from the standpoint of the Registrar of Societies and the Income Tax Authorities. Rental expenses have played a role in decreasing expenses in relation to the previous year.

4. The organization complies with all the requirements of the Law for Non-Profit Societies as well as other laws which grant the organization certification for proper management. The organization keeps an accounting ledger and an efficient and proper administrative system. Its assets are carefully maintained and are inspected periodically.

5. The organization's finances are critically examined by management and every movement is checked several times. Most if not all of its funds are dedicated to public welfare.

6. After ensuring that the audit committee of the managing assembly took all the required steps and after receiving all the answers to my demands from the organization's management, and after perusal of the reports, I have decided:

To approve the activity of the organization and its financial statements for the year 2009, and I see no need for reservations or remarks concerning these reports.

Sincerely,

Haviv Dudai Accountant, Auditor