THE MODEST NEEDS 2006 ANNUAL REPORT

Introduction

In keeping with our commitment to operational transparency, Modest Needs publishes an annual report which is freely accessible to the public at large both via our website or in hard-copy.

The purpose of this annual report is to update interested persons on our prior year's program service achievements and to report on other significant accomplishments by Modest Needs throughout 2006.

Our Mission Statement

At Modest Needs, we work:

• To prevent otherwise financially self-sufficient individuals and families from entering the cycle of poverty, when this might be avoided with a small amount of well-timed financial assistance;

• To restore the financial self-sufficiency of individuals who are willing to work but are temporarily unable to do so because they do not have the means to remit payment for a work-related expense; and

• To empower permanently disadvantaged individuals who otherwise live within their limited means to continue to live independently, despite a temporary, unexpected financial set-back.

The Impact of Modest Needs' 2006 Matching Grant Initiative

In December 2005, Modest Needs announced that it was the beneficiary of very generous Matching Grant Initiative, which was made possible through the support of a private foundation that has elected to remain anonymous at present.

The terms of this Matching Grant Initiative provided that all recurring donations (e.g. weekly, bi-weekly, or monthly pledges) to Modest Needs would be matched, dollar-for-dollar, each time the contribution was made in 2006, up to a total of $300,000.00 - the maximum value of the matching grant.

Public response to Modest Needs' matching grant initiative proved nothing short of overwhelming. By the close of 2006, Modest Needs had seen the number of individuals making recurring donations to Modest Needs increase by more than 260% - the largest increase of public participation in Modest Needs' programs in the five-year history of the organization.

Thanks to the generous support of hundreds of individuals throughout the United States, Canada, and other parts of the world, by December 2006, Modest Needs had claimed the entirety of the value of our 2006 Matching Grant Initiative.

More importantly, however, the anonymous foundation behind our 2006 Matching Grant Initiative was so impressed by the response of the general public to their matching grant incentive that they elected to renew their Matching Grant Initiative for 2007 - this time, with a maximum value of $500,000.00

Should Modest Needs qualify through its donors to receive the entirety of our 2007 Matching Grant Initiative, 2007 will mark Modest Needs' first million-dollar year. We are confident that, with the continued support of people just like you, we will reach this critical institutional milestone in 2007.

Effect of Enhanced Donor Support on Organizational Capacity and Efficiency

In terms of our program initiatives, 2006 was Modest Needs' most successful year to date, thanks primarily to the increased donor support triggered in large part by the 2006 Matching Grant Initiative discussed above.

2006 saw general contributions to Modest Needs increase by nearly 50%, from $545,203.00 in 2005 to $806,571.00 in 2006. But more remarkable than this dramatic increase in support of Modest Needs is the efficiency with which Modest Needs put these additional donor dollars to work for our applicants.

In 2006, even though overall revenue increased by 50%, through careful management of our resources, Modest Needs was able to increase program service spending by almost double that amount (98%), from $370,900.00 in 2005 to $746,832.00 in 2006.

During this same time period, Modest Needs was able to increase the number of grantees who benefited from our program services by 55%, from approximately 1,482 people in 2005 to approximately 2,295 people in 2006.

This increase in grantees affected by our programs in 2006 is especially striking when we consider that, last year, the cost of our average grant also increased substantially, from approximately $181.00 in 2005 to approximately $378.00 in 2006.

But it is perhaps most important that Modest Needs was able to post these impressive gains in program service capacity while actually DECREASING the management and general expenses necessary to support this work.

Our Independent Auditor's Report confirms that, in 2006, Modest Needs' Management and General expenses were only $32,256.00 (or 3.85% of overall expenses), down from $46,718.00 (or 10.76% of overall expenses) in 2005.

Thanks in large part to our ongoing commitment to both transparency and operational efficiency, in early 2007, Modest Needs earned the highest possible charity rating from the Better Business Bureau's Wise Giving Alliance.

To the best of our knowledge, we are the youngest AND 'smallest' charity ever to earn this coveted charity rating.

Hurricane Katrina and Gulf Coast Renewal

In 2006, and in response to overwhelming popular demand, Modest Needs launched Phase II of our Hurricane Katrina recovery effort, which we termed our 'Gulf Coast Renewal' program. The purposes of this grant program were:

• To assist those persons who required assistance to return to their homes in the Gulf Coast from a state to which they had been evacuated in the wake of Hurricane Katrina, and;
• To assist current Gulf Coast Residents with a small, generally unsupported expense that would allow them to complete construction on their homes, or to return to work in one of the states affected by Hurricane Katrina.

Modest Needs' individual donors contributed approximately $45,000.00 towards this initiative in 2006, $40,000.00 of which was matched by the Morton Meyerson FTF. As of March 2007, in keeping with our commitment to our donors, 100% of these funds had been disbursed to applicants who qualified for assistance under this special program.

Modest Needs remains committed to the Katrina recovery effort and continues to assist persons living in or returning to the areas hardest hit by Hurricane Katrina through our standing grant programs.

We are very happy to announce that, as of 2007, Modest Needs' donors have contributed nearly $200,000.00 through our special and other grant programs designed to aid those persons still struggling to recover from the effects of Hurricane Katrina.

Setting a New Standard in 2006

Since Modest Needs' inception in 2002, we have diligently sought to implement an operational model that would allow us to 'pass through' the highest possible percentage of contributions made by individual donors - people like you - directly to our qualified applicants.

In 2006, we finally achieved one of our longest-standing goals at Modest Needs. Our independent auditor's report confirms that in 2006, Modest Needs was able to 'pass through' a FULL 100% of every dollar contributed to Modest Needs by an individual person directly to one of our qualified applicants.

We were able to reach this goal by carefully controlling our costs while successfully pursuing grants from foundations sufficient to remit payment for the expenses associated with the day-to-day operation of Modest Needs Foundation.

We hope that each of you - our donors, our applicants, and members of the public at large - are as pleased with our past year's achievements as we have been, and that you will continue to generously support Modest Needs in 2007 and in the years to come.

Indeed, in 2006 as never before, we have proven that, together, we truly have the power to make a difference.

2006 Financial Information at a Glance

Income and Expense Categories	Amount
Income from Direct Public Support (Total Income)	$806,651.00
Program Service Expenses (89.21%)	$746,832.00
Management / Administrative Expenses (3.85%)	$32,256.00
Fundraising Expenses (6.58%)	$55,068.00
Total Expenses	$837,156.00
Expenses over Revenue for FY 2006 (representing a spend-down of grant dollars received in 2005)	($30,505.00)
Net Assets, Beginning of Year	$145,612.00
Net Assets, End of Year	$115,107.00

You may view a breakdown of the functional expenses listed above by accessing either our FY 2006 Form 990 or our 2006 Independent Auditor's Report. Links to both in PDF Format are below.

Supporting Financial Documents for 2006

Please note: all documents below are in PDF format and can be viewed via the free Adobe Acrobat Reader.

• View our 501 c 3 Determination Letter
• View our 2006 Form 990
• View our 2006 Independent Auditor's Report

Modest Needs Foundation - Roster of Board of Directors

Current as of 15 April 2007

• John Arenberg, Chair
• Elizabeth Kohen, Treasurer
• Dr. Keith P. Taylor, President and Secretary to the Board of Directors
• Thierry Mellon, Board Member
• Zachary Mannheimer, Board Member

Would you like a hard copy of our 2006 Annual Report?

If you do not have regular internet access but would like to receive a hard copy of the Annual Report above, along with accompanying materials, please send your request to:

Modest Needs Foundation
115 E 30th St, FL 1
New York NY 10016

Alternatively, you may request a hard copy of this report by calling us at (212) 463-7042, x11.