To the International Executive Council of the
International Brotherhood of Electrical Workers

We have audited the accompanying consolidated statements of financial position of the International Brotherhood of Electrical Workers and subsidiaries (collectively the "International Union") as of June 30, 2010 and 2009, and the related consolidated statements of activities and of cash flows for the years then ended. These financial statements are the responsibility of the International Union’s management. Our responsibility is to express an opinion on these 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 an 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 International Union’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 the International Union’s 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the International Brotherhood of Electrical Workers and subsidiaries as of June 30, 2010 and 2009, and the consolidated changes in their net assets and their consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Washington, DC
September 2, 2010

Note 1. Summary of Significant Accounting Policies

Nature of Operations—The International Brotherhood of Electrical Workers is an international labor union established to organize all workers for the moral, economic and social advancement of their condition and status. The significant portion of the International Union’s revenue comes from per capita taxes of members paid by the local unions.

Basis of Presentation—The consolidated financial statements include the accounts of the International Brotherhood of Electrical Workers, its wholly-owned subsidiary, Headquarters Holding Company, Inc., and the IBEW Headquarters Building LLC, of which the International Brotherhood of Electrical Workers owns 99%. Headquarters Holding Company, Inc. held title to real estate that was sold during 2004. Headquarters Holding Company, Inc. had no activity during the years ended June 30, 2010 and 2009. The IBEW Headquarters Building LLC also holds title to real estate, an office building that was acquired in June 2004, which beginning late-January 2005 serves as the headquarters for the International Brotherhood of Electrical Workers. All inter-organization accounts and transactions have been eliminated in consolidation. The International Union maintains an appropriated fund designation for internal tracking of postretirement benefits.

Method of Accounting—The financial statements have been prepared using the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.

Investments—Generally, investments are carried at fair value. Changes in fair value of investments are recognized as unrealized gains and losses. For the purpose of recording realized gains or losses the average cost method is used. Purchases and sales are recorded on a trade-date basis. The purchases and sales pending settlement are recorded as either assets or liabilities in the consolidated statement of financial position. Pending sales represent amounts due from brokers while pending purchases represent amounts due to brokers for trades not settled. All pending transactions at June 30, 2010 and 2009 settled in July 2010 and July 2009, respectively.

Property and Equipment—Building, improvements, furniture and equipment are carried at cost. Major additions are capitalized. Replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which are as follows:

        Building and improvements   10-40 years
        Tenant improvements              Life of respective lease
        Furniture and equipment        2-10 years

Accounts Receivable—Trade accounts receivable are reported net of an allowance for expected losses. Based on management’s evaluation of receivables, the allowance account has a zero balance at June 30, 2010 and 2009.

Inventory—The International Union maintains an inventory of supplies for use and for resale to local unions and individual members. Inventory is stated at average inventory cost which approximates the selling price of items held.

Canadian Exchange—The International Union maintains assets and liabilities in Canada as well as the United States. It is the intent of the International Union to receive and expend Canadian dollars in Canada and not, on a regular basis, convert them to U.S. dollars. For financial statement purposes all assets and liabilities are expressed in U.S. dollar equivalents.
Canadian dollars included in the consolidated statement of financial position are translated at the appropriate year-end exchange rates. Canadian dollars included in the consolidated statement of activities are translated at the average exchange rates for the year. Unrealized increases and decreases due to fluctuations in exchange rates are included in "Currency translation adjustment" in the consolidated statement of activities.

Statement of Cash Flows—For purposes of the consolidated statement of cash flows, cash is considered to be amounts on hand and in demand deposit bank accounts subject to immediate withdrawal.

Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Subsequent Events Review—Subsequent events have been evaluated through September 2, 2010, which is the date the financial statements were available to be issued. This review and evaluation revealed no new material event or transaction which would require an additional adjustment to or disclosure in the accompanying financial statements.

Note 2. Tax Status

The Internal Revenue Service has advised that the International Union qualifies under Section 501(c)(5) of the Internal Revenue Code and is, therefore, not subject to tax under present income tax laws. Headquarters Holding Company, Inc. and IBEW Headquarters Building, LLC are not taxpaying entities for federal income tax purposes, and thus no income tax expense or deferred tax asset has been reported in the financial statements. Income of the Companies is taxed to the members in their respective returns.

Note 3. Investments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments which are listed below. For short-term cash investments, the cost approximates fair value because of the short maturity of the investments. Generally, government and government agency obligations, corporate bonds and notes, stocks, the AFL-CIO Housing Investment Trust, and mutual funds fair values are estimated using quoted market prices. For mortgage loans, the fair value is determined based on the discounted present value of future cash flows using the current quoted yields of similar securities.

The International Union uses generally accepted accounting standards related to Fair Value Measurements, for assets and liabilities measured at fair value on a recurring basis. These standards require quantitative disclosures about fair value measurements separately for each major category of assets and liabilities, clarify the definition of fair value for financial reporting, establish a hierarchal disclosure framework for measuring fair value, and require additional disclosures about the use of fair value measurements.

The three levels of the fair value hierarchy and their applicability to the International Union’s portfolio investments, are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to the security.

Level 3 – Pricing inputs are unobservable for the asset or liability, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Level 3 includes private portfolio investments that are supported by little or no market activity.

The following is a summary of the inputs used as of June 30, 2010, in valuing investments carried at fair value:

The following is a summary of the inputs used as of June 30, 2009, in valuing investments carried at fair value:

Net gains (losses) (realized /unrealized) reported above are included in net appreciation (depreciation) in fair value of investments on the statement of activities for the year ended June 30, 2010 and 2009. The amount of the net gains related to investments held at June 30, 2010 and 2009 was $1,698,658 and $3,747,400, respectively.

The Housing Investment Trust is a registered investment company which has a principal investment strategy that is to construct and manage a portfolio composed primarily of mortgage securities, with higher yield, higher credit quality and similar interest rate risk as the Barclays Capital Aggregate Bond index. The investee uses a variety of strategies to maintain a risk profile comparable to its benchmark index. These strategies include, but are not limited to, managing the duration (a measure of interest rate sensitivity) of the investee’s portfolio within a range comparable to the benchmark index, and managing prepayment risk by negotiating prepayment restrictions for mortgage securities backed by multi-family housing projects, including market-rate housing, low-income housing, housing for the elderly or handicapped, intermediate care facilities, assisted living facilities and nursing homes (collectively, "Multifamily Projects").

Note 4. Securities Lending Program

The International Union has entered into an agreement with the bank that acts as custodian for the International Union’s investments which authorizes the bank to lend securities held in the International Union’s accounts to third parties.

The International Union receives 70% of the net revenue derived from the securities lending activities, and the bank receives the remainder of the net revenue. "Interest" reported in the consolidated statements of activities includes $51,510 and $125,478 earned by the International Union during the years ended June 30, 2010 and 2009, respectively, in connection with the securities lending program.

Under this program, the bank must obtain collateral from the borrower in the form of cash, letters of credit issued by an entity other than the borrower, or acceptable securities. Both the collateral and the securities loaned are marked-to-market on a daily basis so that all loaned securities are fully collateralized at all times. In the event that the loaned securities are not returned by the borrower, the bank will, at its own expense, either replace the loaned securities or, if unable to purchase those securities on the open market, credit the International Union’s accounts with cash equal to the fair value of the loaned securities.

The International Union’s securities lending activities are collateralized as described above, and the terms of the securities lending agreement with the custodial bank require the bank to comply with government rules and regulations related to the lending of securities; however, the securities lending program involves both market and credit risk. In this context, market risk refers to the possibility that the borrower of securities will be unable to collateralize the loan upon a sudden material change in the fair value of the loaned securities or the collateral, or that the bank’s investment of cash collateral received from the borrowers of the International Union’s securities may be subject to unfavorable market fluctuations. Credit risk refers to the possibility that counterparties involved in the securities lending program may fail to perform in accordance with the terms of their contracts. To date, the International Union has experienced no realized losses in connection with the securities lending program. At June 30, 2010 and 2009, the fair value of the collateral held was as follows:

The fair value of securities loaned was $21,612,796 and 15,052,248, respectively. In accordance with current accounting standards the value of the cash collateral held and a corresponding liability to return the collateral have been reported in the accompanying statements of financial position.

Note 5. Pension Plans

The International Union maintains two defined benefit pension plans to cover all of its employees. Employer contributions to the plans are based on actuarial costs as calculated by the actuary. The actuarial valuations are based on the unit credit cost method as required under the Pension Protection Act of 2006.

The annual measurement date is June 30. The net periodic pension cost for the plans for the years ended June 30, 2010 and 2009 is summarized as follows:

The expected long-term rate of return on plan assets of 7% reflects the average rate of earnings expected on plan assets invested or to be invested to provide for the benefits included in the benefit obligations. The assumption has been determined by reflecting expectations regarding future rates of return for plan investments, with consideration given to the distribution of investments by asset class and historical rates of return for each individual asset class.

Total pension plan weighted-average asset allocations at June 30, 2010 and 2009, by asset category, are as follows:

The plans’ investment strategies are based on an expectation that equity securities will outperform debt securities over the long term, and that the plans should maximize investment return while minimizing investment risk through appropriate portfolio diversification. All investments are actively managed by a diversified group of professional investment managers, whose performance is routinely evaluated by a professional investment consultant. Target allocation percentages are 60% for equities, 25% for fixed income securities, 10% for real estate, and 5% for other investments (principally limited partnerships).

The International Union maintains a Supplemental Plan under Internal Revenue Code Section 457 to pay pension benefits required under its Constitution that cannot be paid from its qualified defined benefit plans. The liability for amounts due under the Supplemental Plan have been actuarially determined and total $431,919 and $433,112 as of June 30, 2010 and 2009, respectively. The International Union also contributes to a multiemployer defined benefit pension plan on behalf of its employees. Contributions to this plan were $811,039 and $832,722 for the years ended June 30, 2010 and 2009, respectively.

Note 6. Postretirement Benefits

In addition to providing pension benefits, the International Union provides certain health care, life insurance and legal benefits for substantially all employees who reach normal retirement age while working for the International Union.

Postretirement benefit costs for the years ended June 30, 2010 and 2009 include the following components:

The accumulated postretirement benefit obligation and funded status at June 30, 2010 and 2009 are as follows:

The above postretirement benefit cost does not represent the actual amount paid (net of estimated Medicare Part D subsidies) of $7,055,000 and $6,644,000 for the years ended June 30, 2010 and 2009, respectively. The net actuarial loss that will be amortized from unrestricted net assets into net periodic benefit cost during 2011 is $8,550,664.

Weighted-average assumptions used to determine net postretirement benefit cost at beginning of year:

Weighted-average assumptions used to determine benefit obligations at end of year:

The assumed health care cost trend rates used to measure the expected cost of benefits for the year ended June 30, 2010, were assumed to increase by 10% for medical, 9% for drugs, 9% for Medicare Part D subsidy, 5% for dental/vision, 6% for Medicare Part B premiums, and 3% for legal costs. Thereafter, rates for increases in medical, drug costs and the Medicare Part D subsidy were assumed to gradually decrease until they reach 5% in 2023. If the assumed rates increased by one percentage point it would increase the benefit obligation and net periodic benefit cost as of June 30, 2010 by $24,497,169 and $2,859,927, respectively. However, if the assumed rates decreased by one percentage point it would decrease the benefit obligation and net periodic benefit cost as of June 30, 2010 by $20,122,623 and $2,282,979, respectively.

Total expected benefit payments, net of Medicare Part D subsidies, for the next 10 fiscal years are as follows:

The International Union appropriated investments of $161,089,767 at June 30, 2010 to pay for future postretirement benefit costs.

Note 7. Mortgages Payable

The IBEW Headquarters Building LLC (the “Company”) has two mortgages payable, $40 million to Massachusetts Mutual Life Insurance Company and $40 million to New York Life Insurance Company, secured by substantially all of the Company’s assets. The mortgage loans bear interest at an annual rate of 5.63% and are payable in monthly installments of principal and interest totaling $529,108, and mature on July 1, 2019, at which time the remaining principal and interest amounts of $37,191,698 are due in full. Future minimum payments on the mortgage obligations are due as follows:

Note 8. Royalty Income

The International Union has entered into a multi-year License Agreement and a List Use Agreement with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) under which the AFL-CIO has obtained rights to use certain intangible property belonging to the International Union, including the rights to use the name, logo, trademarks and membership lists of the International Union, in exchange for specified royalty payments to be paid to the International Union by the AFL-CIO. In turn, the AFL-CIO has sub-licensed the rights to use the International Union intangible property to Household Bank Nevada, N.A., for use by the bank in connection with its marketing of credit card and certain other financial products to members of the International Union. These agreements commenced on March 1, 1997. For the years ended June 30, 2010 and 2009 the International Union recognized as revenue $1,645,915 and $2,673,447, respectively.

Note 9. Functional Expenses

Current accounting standards require that the International Union’s net assets and its revenues, expenses, gains and losses be classified between unrestricted, temporarily restricted, and permanently restricted based on the existence or absence of donor imposed restrictions. For the years ended June 30, 2010 and 2009 all of the net assets and activities of the International Union were classified as unrestricted due to the nonexistence of donor imposed restrictions. These standards also require that the International Union expenses be classified on a functional basis, that is, expenses broken down into classifications that reflect the purpose (or function) of the major services and activities conducted by the International Union.

Note 10. Litigation

The International Union is a party to a number of routine lawsuits, some involving substantial amounts. In all of the cases, the complaint is filed for damages against the International Union and one or more of its affiliated local unions. The General Counsel is of the opinion that these cases should be resolved without a material adverse effect on the financial condition of the International Union.

Note 11. Related Party Transactions

The IBEW provides certain administrative services to the International Brotherhood of Electrical Workers’ Pension Benefit Fund (Fund), for which the International Union is reimbursed. These services include salaries and benefits, rent, computer systems, and other administrative services. The amount reimbursed totaled $3,300,000 and $3,175,000, for the years ended June 30, 2010 and 2009, respectively.

In addition, the International Union collects and remits contributions received on behalf of the Fund from members.

The International Union also pays administrative services on behalf of the Pension Plan for the International Officers, Representatives and Assistants of the International Brotherhood of Electrical Workers, and the Pension Plan for Office Employees of the International Brotherhood of Electrical Workers. The administrative services include auditing, legal and actuarial services. The costs of the administrative services are not readily determinable.

Note 12. Operating Leases

The International Union, through its wholly-owned subsidiary IBEW Headquarters Building, LLC, has entered into agreements to lease space in its building. These leases, which expire at various dates through 2025, contain renewal options. Future minimum rental payments, excluding the lease payments due from the International Union, due under these agreements are as follows:

Note 13. Risks and Uncertainties

The International Union invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position.