WGBH Educational Foundation and Subsidiaries Consolidated Financial Statements Supplemental Consolidating Information June 30, 2016 and 2015

WGBH Educational Foundation and Subsidiaries Index June 30, 2016 and 2015 Page(s) Report of Independent Auditors ........................................................................................................... 1–2 Consolidated Financial Statements Statements of Financial Position .................................................................................................................. 3 Statements of Activities and Changes in Net Assets ................................................................................ 4-5 Statements of Cash Flows ........................................................................................................................... 6 Notes to Financial Statements ............................................................................................................... 7–32 Supplemental Consolidating Information as of and for the year ended June 30, 2016 Statement of Financial Position.................................................................................................................. 34 Statement of Activities ................................................................................................................................ 35 Statement of Changes in Net Assets ......................................................................................................... 36 Note to Supplemental Consolidating Information ...................................................................................... 37

Report of Independent Auditors

To the Board of Trustees of WGBH Educational Foundation and Subsidiaries

We have audited the accompanying consolidated financial statements of WGBH Educational Foundation and Subsidiaries (the “Foundation”), which comprise the consolidated statements of financial position as of June 30, 2016 and 2015, and the related consolidated statements of activities and changes in net assets, and of cash flows for the years then ended. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on the consolidated 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 the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Foundation’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Foundation’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WGBH Educational Foundation and Subsidiaries as of June 30, 2016 and 2015, and the results of their activities and changes in net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplemental consolidating information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The supplemental consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental consolidating information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. The supplemental consolidating information is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of activities, changes in net assets, and cash flows of the individual companies and is not a required part of the consolidated financial statements. Accordingly, we do not express an opinion on the financial position, results of activities, changes in net assets and cash flows of the individual companies.

November 10, 2016

2

WGBH Educational Foundation and Subsidiaries Consolidated Statements of Financial Position June 30, 2016 and 2015 2016 Assets Current assets Cash Accounts receivable (less allowance for uncollectible accounts of $1,266,000 and $1,017,000 for 2016 and 2015, respectively) Current portion of receivables for asset sales Grants receivable (less allowance for uncollectible grants of $90,000 and $386,000 for 2016 and 2015, respectively) Pledges receivable, net Prepaid expenses and other assets

$

Total current liabilities Long-term deferred revenue and other liabilities Long-term debt, net of unamortized discount and premium Accrued bond interest expense Total liabilities

21,734,367 10,592,320 5,517,482

85,903,607 4,854,131 1,731,849

94,182,354 3,091,960 1,462,467

127,853,959

136,580,950

5,980,589 23,648,926 135,663,446 16,868,713 10,256,074 15,746,148 87 79,803,682 166,589,356

4,130,508 31,898,582 132,772,837 16,868,713 9,182,126 16,998,827 87 81,767,380 169,576,356

$ 582,410,980

$ 599,776,366

$

$

Long-term pledges receivable, net Long-term grants receivable, net Long-term receivables for asset sales Radio licenses Other assets Equity investments Funds held under bond agreements - restricted Investments, at fair value Property, facilities and equipment, net

Liabilities Current liabilities Current maturities of debt Accounts payable Accrued expenses Royalties payable Accrued bond interest expense Deferred revenue and other liabilities

$

11,849,136 5,472,765

Total current assets

Total assets

18,042,471

2015

2,390,522 9,258,279 16,897,738 2,279,931 6,055,975 5,129,053

2,247,065 8,673,437 12,470,345 2,651,132 6,099,375 8,298,103

42,011,498

40,439,457

7,578,054 170,174,313 15,053,969

7,430,627 171,504,665 12,914,940

234,817,834

232,289,689

172,976,816 131,793,343 42,822,987

171,039,929 155,364,448 41,082,300

347,593,146

367,486,677

$ 582,410,980

$ 599,776,366

Commitments and contingencies (Note 11) Net assets Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets

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

WGBH Educational Foundation and Subsidiaries Consolidated Statements of Activities and Changes in Net Assets Year Ended June 30, 2016 Temporarily Restricted

Unrestricted Operating revenue Contributions, principally viewer and listener support Contributions for national programming Contributions for local corporate sponsorship Community service grants from Corporation for Public Broadcasting Royalty and licensing Captioning and ancillary services Planned giving Change in value of split interest agreements Accretion of interest and other income on long-term receivables Investment earnings authorized for operations In-kind contributions and donated services Affiliation fees Distribution fees Miscellaneous income Total operating revenue

$

Net assets released from restrictions Total operating revenue and other support Operating expenses Program services Programming and production Broadcasting Public information, guides and educational material Total program services Supporting services Fundraising and development Underwriting General and administrative Total supporting services Total operating expenses (Deficit) surplus of operating revenue over operating expenses Nonoperating gains (losses) Underwater endowment transfer Realized gains (losses) on investments Change in net unrealized losses on investments Investment income Gain on equity investments Other gains, net Nonoperating gains (losses), net Increase (decrease) in net assets Net assets, beginning of year Net assets, end of year

$

27,471,054 9,002,161 3,579,357 7,542,315 906,253 8,363,374 1,555,752 737,070 4,742,895 6,382,875 13,239,383 83,522,489

$

Permanently Restricted

9,017,126 $ 77,710,577 8,136,003 (190,038) (1,555,752) 93,117,916

115,602,354

(115,602,354)

199,124,843

(22,484,438)

Total

43,907 $ 2,775,607 (384,999) 2,434,515

36,532,087 77,710,577 8,136,003 9,002,161 3,579,357 7,542,315 3,681,860 (575,037) 8,363,374 737,070 4,742,895 6,382,875 13,239,383 179,074,920

-

-

2,434,515

179,074,920

141,351,626 19,249,702 7,026,907 167,628,235

-

-

141,351,626 19,249,702 7,026,907 167,628,235

21,354,209 7,386,111 20,683,107 49,423,427 217,051,662

-

-

21,354,209 7,386,111 20,683,107 49,423,427 217,051,662

(17,926,819)

(22,484,438)

(84,643) 368,083 (2,113,385) 504,441 15,113,161 6,076,049 19,863,706

84,643 51,494 (1,456,274) 233,470 (1,086,667)

1,936,887

(23,571,105)

171,039,929 172,976,816

$

155,364,448 131,793,343

2,434,515

(37,976,742)

(242,255) (451,573) (693,828)

177,322 (4,021,232) 737,911 15,113,161 6,076,049 18,083,211

1,740,687

$

41,082,300 42,822,987

(19,893,531)

$

367,486,677 347,593,146

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

WGBH Educational Foundation and Subsidiaries Consolidated Statements of Activities and Changes in Net Assets Year Ended June 30, 2015 Temporarily Restricted

Unrestricted Operating revenue Contributions, principally viewer and listener support Contributions for national programming Contributions for local corporate sponsorship Community service grants from Corporation for Public Broadcasting Royalty and licensing Captioning and ancillary services Planned giving Change in value of split interest agreements Accretion of interest and other income on long-term receivables Investment earnings authorized for operations In-kind contributions and donated services Affiliation fees Distribution fees Miscellaneous income Total operating revenue

$

Net assets released from restrictions Total operating revenue and other support Operating expenses Program services Programming and production Broadcasting Public information, guides and educational material Total program services Supporting services Fundraising and development Underwriting General and administrative Total supporting services Total operating expenses (Deficit) surplus of operating revenue over operating expenses

27,746,430 7,581,744 3,587,524 7,164,636 993,413 8,149,823 1,439,921 632,678 4,988,634 6,835,011 6,538,112 75,657,926

(103,126,631)

178,784,557

23,917,397

62,000 581,095 605,661 1,248,756

Total $

32,095,321 117,169,558 7,055,329 7,581,744 3,587,524 7,164,636 1,574,508 577,832 8,149,823 632,678 4,988,634 6,835,011 6,538,112 203,950,710

-

-

1,248,756

203,950,710

129,890,224 16,483,721 7,419,126 153,793,071

-

-

129,890,224 16,483,721 7,419,126 153,793,071

20,862,719 6,668,013 21,677,430 49,208,162 203,001,233

-

-

20,862,719 6,668,013 21,677,430 49,208,162 203,001,233 949,477

(24,216,676)

(230) 1,683,261 (1,536,367) 628,113 15,301,713 16,076,490

(Decrease) increase in net assets

(8,140,186)

$

4,286,891 $ 117,169,558 7,055,329 (27,829) (1,439,921) 127,044,028

103,126,631

Nonoperating gains (losses) Underwater endowment transfer Realized gains (losses) on investments Change in net unrealized (losses) on investments Investment income Gain on equity investments Other gains, net Nonoperating gains (losses), net

Net assets, beginning of year Net assets, end of year

$

Permanently Restricted

179,180,115 171,039,929

23,917,397

1,248,756

230 852,179 (974,628) 272,048 149,829 24,067,226

$

131,297,222 155,364,448

$

(71,749) (272,784) (344,533)

2,463,691 (2,783,779) 900,161 15,301,713 15,881,786

904,223

16,831,263

40,178,077 41,082,300

$

350,655,414 367,486,677

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

WGBH Educational Foundation and Subsidiaries Consolidated Statements of Cash Flows Years Ended June 30, 2016 and 2015

Cash flows from operating activities (Decrease) Increase in net assets Adjustments to reconcile increase in net assets to cash used in operating activities Change in unrealized losses on investments and beneficial interest in perpetual trust Realized gains on investments Depreciation and amortization Gain on equity investments Contributions of securities Proceeds from sale of contributed securities Contributions restricted for investment in facilities and endowment Accretion of interest on long-term receivables for asset sales Provision for bad debts Changes in operating assets and liabilities Accounts receivable Grants receivable Pledges receivable Prepaid expenses and other assets Receivables for asset sales Accounts payable Royalties payable Accrued expenses Accrued bond interest Deferred revenue and other liabilities

2016

2015

$ (19,893,531)

$ 16,831,263

Cash flows used in operating activities Cash flows from investing activities Purchases of property, facilities and equipment Distributions received from equity investments Purchases of marketable and alternative investments Proceeds from sales of marketable and alternative investments (Increase) in funds held under bond agreement Cash flows provided by investing activities Cash flows from financing activities Contributions restricted for investment in facilities and endowment Proceeds from the sale of contributed securities Line of credit advances Line of credit payments Debt principal payments Cash flows provided by financing activities Net (decrease) increase in cash and cash equivalents Cash Beginning of year End of year Supplemental cash flow information Interest paid Contributed services Property, facilities and equipment included accounts payable and accrued expenses

4,596,269 (177,322) 9,352,081 (15,113,161) (3,807,862) 362,096 (3,319,514) (8,363,374) 961,933

2,205,947 (2,463,691) 8,470,176 (15,301,713) (3,999,649) 674,178 (1,265,030) (8,149,823) 801,000

(1,947,071) 16,318,479 (4,192,946) (338,320) 5,517,482 522,432 (371,201) 4,427,393 2,095,629 (4,598,666)

412,744 (16,832,218) 476,410 (1,137,258) 5,560,896 71,044 1,385 606,475 2,115,157 4,239,972

(17,969,174)

(6,682,735)

(4,814,809) 15,503,600 (5,775,322) 3,705,072 -

(8,247,671) 12,128,074 (7,405,970) 12,890,660 (2)

8,618,541

9,365,091

3,319,514 3,445,766 9,263,716 (8,568,855) (1,801,404)

1,265,030 3,348,620 11,483,363 (11,579,548) (2,294,999)

5,658,737

2,222,466

(3,691,896)

4,904,822

21,734,367

16,829,545

$ 18,042,471

$ 21,734,367

$

$

7,472,501 737,070 152,000

7,485,688 632,678 89,590

The accompanying notes are an integral part of these consolidated financial statements. 6

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 1.

Summary of Significant Accounting Policies Basis of Financial Statement Presentation The consolidated financial statements of WGBH Educational Foundation and Subsidiaries (the “Foundation”) include the accounts of the Foundation, its wholly owned affiliated stations (WGBH-TV, WGBX-TV, WGBH-Radio, WGBY-TV Springfield, WCRB-Radio, WCAI-Radio, WNAN-Radio and Public Television Playhouse) and its wholly owned affiliate Public Radio International, Inc. (“PRI”). All significant intercompany accounts and transactions have been eliminated. The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Net assets are classified as either unrestricted, temporarily restricted or permanently restricted based on the existence or absence of donor-imposed restrictions. In the accompanying consolidated financial statements, net assets that have similar characteristics have been combined into similar categories as follows: Permanently Restricted Net Assets Include gifts of cash and other assets which are required to be permanently retained by the Foundation. Generally, the donors of these assets permit the Foundation to use all or part of the related investment income or appreciation earned on these assets for general or specific purposes. Such assets primarily include the Foundation’s permanent endowment funds. Temporarily Restricted Net Assets Include assets with restrictions on the expenditure or other use of the contributed funds and assets with restrictions imposed by donor stipulation or law, including realized and unrealized (losses) gains on temporarily and permanently restricted net assets available for appropriation, but not appropriated in the current period. Temporary restrictions may expire due to the passage of time or through actions of the Foundation pursuant to the stipulations of the donor. Unrestricted Net Assets Are those not subject to donor-imposed restrictions. Unrestricted net assets may be designated for specific purposes by action of the Board of Trustees. Revenues are reported as increases in unrestricted net assets unless restrictions are imposed by donor-imposed stipulations or law. Expenses are reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations that simultaneously increase one class of net assets and decrease another are reported as net assets released from restrictions. Upon approval by the Board of Trustees, transfers are made from undesignated, unrestricted net assets to board designated net assets. The Foundation receives capital contributions for long-lived assets and these contributions are reported as increases in temporarily restricted net assets upon receipt. The Foundation’s policy is to release the capital contributions into unrestricted net assets ratably over the estimated useful life of the long-lived asset. The Foundation released $571,000 in capital contributions in both 2016 and 2015, from temporarily restricted net assets to unrestricted net assets. Use of Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

7

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 consolidated financial statements and the revenues and expenses reported for the period. Significant estimates include radio licenses, royalties payable, and the valuation of alternative investments. Actual results could differ from those estimates. Related Parties The Foundation may procure from time to time certain services from business organizations that employ individuals that are also members of the Foundation’s Board of Trustees (“the Board”). The procurement of these services is performed in accordance with the Foundation’s established policies and procedures, and management and the Board report and monitor related party transactions in accordance with the Foundation’s Conflict of Interest Policy. The Chief Executive Officer is a Board member of Public Media Distribution LLC, which conducts business under the name PBS Distribution (“PBSd”), an affiliate in which the Foundation holds a 33% ownership interest at both June 30, 2016 and 2015. In 2016 and 2015, the Foundation provided rental space and administrative support services to PBSd. For the years ended June 30, 2016 and 2015, the Foundation earned $210,000 and $222,000, respectively, in rental income and has net receivables of $330,000 and $142,000 for administrative support services, respectively. The Chief Operating Officer of the Foundation serves as a nonpaid director on WGBH’s behalf on the board of RoundCorner, Inc. (“RoundCorner”). The Foundation has a minority equity investment in RoundCorner software. For the years ended June 30, 2016 and 2015, the Foundation utilized software created by RoundCorner and paid fees for software services received of $3,000 and $11,500, respectively. The transactions were at arm’s length and in the ordinary course of business. There were five members of PRI’s Board of Directors employed by PRI’s radio station affiliates as of June 30, 2016 and four members employed as of June 30, 2015. PRI paid approximately $2,795,000 and $3,208,000 to one of these affiliates for the production of programs for each of the years ended June 30, 2016 and 2015, respectively. These expenditures were incurred in the normal course of PRI’s operations. Revenue Recognition The Foundation recognizes revenue from a variety of sources, including but not limited to the following: Revenue from unconditional grants is recognized as temporarily restricted contribution revenue upon receipt of the grant. The revenue is then released when the actual expenses are incurred. The Foundation retains editorial control over programs produced with these grants. Revenue from local broadcast contracts and community service grants from the Corporation for Public Broadcasting are recognized as unrestricted revenue upon receipt of the grant. Revenue for conditional grants is recognized as the related conditions are met. Local corporate underwriting that involves sponsorship to be aired on Foundation broadcasts is recognized as temporarily restricted contribution revenue upon receipt of the unconditional promise to give. The revenue is then released when the related sponsorship credit is run on Foundation broadcasts. All other contributions that do not involve local corporate sponsorship airing on broadcasts are recognized upon notice of the donor’s unconditional promise to give. Auction revenue is recognized upon the sale of the donated merchandise to the winning bidders.

8

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Revenue from royalties is recognized, net of royalties payable, upon notification from the third party distributor. Captioning and ancillary services revenue is recognized when services are provided. Affiliation fees are charged based on the affiliation status, market size, and total station revenue of radio station affiliates. The Foundation recognizes revenue from these affiliation fees pro rata over the twelve-month period. Amounts received for future periods are recognized as deferred revenue. Distribution fees are charged for providing satellite distribution services to producers and are recognized as revenue and expense in the period the related services are performed. Pledges Unconditional promises to give are recorded as temporarily or permanently restricted revenues in the financial statements when the donor’s commitment is received. Unconditional promises to give that are expected to be fulfilled within one year are recorded at fair value. Multiyear unconditional promises are recognized at the present value of the future expected cash flows, less an appropriate reserve for uncollectible pledges. Discounts are calculated using the Foundation’s taxable unsecured borrowing rate. Conditional promises to give are recognized once the related conditions are met. Cash and Cash Equivalents Cash equivalents include investments in highly liquid instruments with an original maturity of three months or less from the date of purchase. The Foundation maintains its cash balance with two institutions of approximately $18,042,000 and $21,734,000 at June 30, 2016 and 2015, respectively.

9

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Investments Marketable securities are stated at fair value. Securities traded on a national securities exchange are valued at the last reported sales price on June 30, 2016 and 2015; investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask prices. Private equity and certain other nonmarketable securities, and certain of the Foundation’s investments in hard assets, are valued using current estimates of fair value obtained from the general partner or investment manager in the absence of readily determinable public market values. Such valuations may reflect discounts for liquidity and consider variables such as financial performance of investments, including comparison of comparable companies’ earning multiples, cash flow analysis, recent sales prices of investments, and other pertinent information. The Foundation reviews and evaluates the values provided by the investment managers and agrees with the valuation methods and assumptions used in determining the fair value of investments. Since there may be inherent uncertainty in valuing certain of these investments, the investment manager or general partner’s estimate may differ from the values that would have been used had a ready market existed and the differences could be significant. The agreements underlying participation in nonmarketable investment funds may limit the Foundation’s ability to liquidate its interest in such investments for a period of time. The Foundation believes that the carrying amount of its nonmarketable securities is a reasonable estimate of fair value as of June 30, 2016 and 2015. The carrying values of the investments in the limited partnerships are based on reports from each limited partnership. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Investment income or loss (including unrealized and realized gains and losses on investments, interest, and dividends) and unrealized changes in equity interests in limited partnerships are recorded as nonoperating gains (losses) unless the income is restricted by donor or law. If restricted by donor or law, they are reported as follows: 

As increases in permanently restricted net assets if the terms of the underlying gift require that they be added to the principal of a permanent endowment fund; and



As increases in temporarily restricted net assets if the terms of the underlying gift or relevant state law impose restrictions on the current use of the income or net gains. The Foundation has relied on the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) enacted by the Commonwealth of Massachusetts in July 2009 regarding relevant state law that unappropriated endowment gains should generally be classified as temporarily restricted net assets until appropriated by the Board of Trustees.

Annually, the Foundation reviews investments where the fair value is substantially below cost, and in cases where the decline is considered to be “other than temporary,” an adjustment is recorded as a realized loss, and a new cost basis is established. At June 30, 2016 and 2015, there were no investments that had fair values less than cost that were determined to be other than temporary. Property, Facilities and Equipment Property, facilities and equipment are reported at cost at the date of acquisition, or estimated fair value at the date of donation, in the case of gifts, less accumulated depreciation. For assets placed in service, depreciation is provided using the straight-line method over the estimated useful life of the asset (or for leasehold improvements over the related lease term, whichever is shorter) which range from 3 to 40 years.

10

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Maintenance and repairs are charged to expense as incurred; betterments are capitalized. Upon retirement or sale of property, facilities and equipment, the cost of the disposed assets and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to unrestricted net assets. Interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets. Radio Licenses The Foundation owns various radio licenses for five separate radio frequencies which cover Cape Cod, the islands of Martha’s Vineyard and Nantucket, Greater Boston and Southern New Hampshire. These radio licenses are indefinite lived assets and are subject to at least annual impairment testing. There was no impairment of radio licenses in 2016 or 2015. The combined value for these radio frequencies was approximately $16,869,000 at June 30, 2016 and 2015. Equity Investments In 2008, the Foundation acquired a 20% equity share in National Public Media LLC (“NPM”), a private marketing firm, for $1,600,000. In 2009, the members of NPM issued additional shares, which diluted the Foundation’s share of ownership of NPM to 18%. This investment is recorded using the equity method of accounting. The equity method has been chosen since the investment is not publicly traded and the Foundation has significant influence over the operations of NPM. The carrying amount of this investment was $500,000 and $537,000 at June 30, 2016 and 2015, respectively, with the corresponding income and losses included in the gain on equity investments in the consolidated statements of activities. Effective January 1, 2009, the Foundation entered into a joint venture with Public Broadcasting Service (“PBS”) to form PBSd (a Delaware Limited Liability Company). The purpose of PBSd is to further the educational mission of public broadcasting and other media through worldwide distribution of public television content and other high quality content as provided by and on behalf of its members. The Foundation’s initial capital contribution represented a 40% interest in PBSd. The investment is recorded using the equity method of accounting with net income allocated to the Foundation subject to certain revenue thresholds and consumer price index (“CPI”) escalators. The carrying amount of this investment was $15,065,000 and $15,419,000 at June 30, 2016 and 2015, respectively, with the corresponding gains included in the gain on equity investments in the consolidated statements of activities. Public Media Management In March 2015, the Foundation entered into a joint venture with Sony Electronics Inc. through its Professional Solutions of America Division (“Sony”). The Foundation’s agreement provides for the creation of Content Distribution Services (“CDS”) which utilizes Network Operations Centers (“NOC”) to provide an automated workflow to enable program content to flow from Sony’s Ci Cloud to others, without operator intervention. The agreement provides that Sony will share in expenses and revenue at 60% and the Foundation at 40%. Associated revenues and expenses have been recorded in the consolidated statements of activities and changes in net assets in accordance with ASC 808 Collaborative Arrangements accounting guidance. Other Assets Other assets consist of bond issuance costs, outside managed trusts and a beneficial interest in perpetual trust. The bond issuance costs are being amortized on a straight-line basis over the term of the applicable bonds issued, which approximates the effective interest rate method. Total

11

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 unamortized bond issuance costs were $5,395,000 and $5,479,000 as of June 30, 2016 and 2015, respectively. In-Kind Contributions and Donated Services In-kind contributions, donated services and educational materials which are significant to the operations of the Foundation, and whose value is measurable, are recorded at the estimated fair value of the related services or educational material as revenue and expense, or capitalized as assets, when received. The fair value is determined based on the donor’s usual and customary fees charged to paying customers for equivalent goods and services. Donated services and materials are received by the Foundation from various professional and educational organizations and relate principally to educational material promotion, advertising, and production in the support of national programming. The economic benefit and associated costs of these donated services and materials are recorded in the accompanying consolidated financial statements as revenue and expense at the estimated fair value of the services received to the extent that either the services require specialized skills, or would be purchased by the Foundation if not donated, or that the services create or enhance nonfinancial assets. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statements of activities. Accordingly, certain costs, such as salaries, benefits, depreciation and maintenance have been allocated among the respective program and support services benefited based on total personnel costs or other systematic methods. Split Interest Agreements Various benefactors have made contributions to the Pooled Life Income Fund (“PIF”) in the Foundation’s name. Upon donation, these amounts are recorded as contribution revenue at the estimated present value of the expected future cash flows, and are classified as temporarily restricted or permanently restricted according to the donor’s intent. These funds are divided into units and pooled and invested as a group. Donors are assigned a specific number of units based on the proportion of the fair value of their contributions to the total fair value of the pooled income fund on the date of the donor’s entry to the pooled fund. Until a donor’s death, the donor or donor’s named beneficiary is paid the income earned on the donor’s assigned units. Upon the death of the donors or their named beneficiaries, the value of these assigned units reverts to the Foundation. The Foundation has received contributions in the form of charitable gift annuities (“CGA”). The donor contributes assets to the Foundation in exchange for a promise by the Foundation to pay annuity payments based on the agreements between the donor and the Foundation. Gift annuity donations are recorded as permanently restricted revenue, net of the estimated liability to the donor, at the date of gift. The Foundation has also received contributions, mostly investment securities, of interests in irrevocable charitable remainder trusts (“CRT”) for which the Foundation serves as the trustee. The principal amounts of such gifts are established in trusts maintained by independent fiduciaries. Upon donation, the market value of these gifts are recorded as assets. Permanently restricted contribution revenue and support is recognized after recording a liability for the estimated present value of future annuity payments. The liabilities and revenue are adjusted during the term of the agreement for changes in the value of the assets and changes to estimates of future benefits to the donors or their named beneficiaries. Upon the death of the donors or their named beneficiaries, the remaining value of the fund reverts to the Foundation.

12

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 PIF, CGA and CRTs are recorded in investments on the statements of financial position. The Foundation also has received contributions of interests in irrevocable charitable remainder trusts for which the Foundation does not serve as the trustee. The Foundation records its beneficial interest in these assets as temporarily restricted or permanently restricted contribution revenue, as appropriate, and other assets at the estimated present value of the future distributions expected to be received over the term of the agreement. Adjustments to the beneficial interest, to reflect changes in the fair value, are recognized as changes in the value of split interest agreements. Upon the death of donors or their named beneficiaries, the assets received by the Foundation from the trust are recognized at fair value, and any difference is reported as a change in the value of split interest agreements in temporarily restricted or permanently restricted net assets, as appropriate. Beneficial Interest in Perpetual Trust The Foundation has a beneficial interest in the Ralph Lowell Fund (the “Fund”) held by the Boston Foundation (“TBF”). The annual distribution from the Fund is recorded as other income in the consolidated statements of activities and changes in net assets. The fair value of the Fund was $928,000 and $1,039,000 at June 30, 2016 and 2015, respectively. A grant distribution in the amount of $42,000 and $0 was made to the Foundation during the years ended June 30, 2016 and 2015, respectively, and was recorded as income in the consolidated statements of activities and changes in net assets. Royalties Payable The Foundation recognizes royalty revenue pursuant to terms outlined in the rights sales agreements. Royalty agreements exist with third-parties from which the third-party receives a percentage of net royalty revenue received by the Foundation. These amounts are accrued for and recorded as a royalty payable when the royalty revenue is recorded by the Foundation. Income Taxes The Foundation is exempt from federal income taxes under Section 501(c)(3) of the United States Internal Revenue Code. US GAAP requires the Foundation to evaluate tax positions taken by the Foundation and recognize a tax liability (or asset) if the Foundation has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Foundation has analyzed the tax positions taken and has concluded that as of June 30, 2016, there are no significant uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the consolidated financial statements. Fair Value of Financial Instruments The fair value of the Foundation’s financial instruments approximates the carrying amount reported in the consolidated statements of financial position for cash and cash equivalents, investments, split-interest agreements and payables. Health Insurance Plan WGBH Educational Foundation and its wholly owned affiliated stations are self-insured for all of its employee health insurance plans. Reclassifications Certain June 30, 2015 balances and amounts previously reported have been reclassified to conform to the June 30, 2016 presentation.

13

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 New Proposed Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09 - Revenue from Contracts with Customers at the conclusion of a joint effort with the International Accounting Standards Board to create common revenue recognition guidance for U.S. GAAP and international accounting standards. This framework ensures that entities appropriately reflect the consideration to which they expect to be entitled in exchange for goods and services, by allocating transaction price to identified performance obligations, and recognizing that revenue as performance obligations are satisfied. Qualitative and quantitative disclosures will be required to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The original standard was effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017 or fiscal year 2019 for the Foundation. The Foundation is evaluating the impact this will have on the consolidated financial statements. In April 2015, the FASB issued ASU 2015-03 - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, which requires all costs incurred to issue debt to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability. The Foundation is evaluating the impact this will have on the consolidated financial statements for the fiscal year ending June 30, 2017, the first year in which the standard is effective. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance allows an entity to choose, investment-by-investment, to report an equity investment that neither has a readily determinable fair value, nor qualifies for the practical expedient for fair value estimation using NAV, at its cost minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issue. Impairment of such investments must be assessed qualitatively at each reporting period. Entities must disclose their financial assets and liabilities by measurement category and form of asset either on the face of the statement of financial position or in the accompanying notes. The ASU is effective for annual reporting periods beginning after December 15, 2018 or fiscal year 2020 for the Foundation. The provision to eliminate the requirement to disclose the fair value of financial instruments measured at cost (such as the fair value of debt) may be early adopted. The Foundation is evaluating the impact of the new guidance on the consolidated financial statements. The Foundation has early adopted the provision permitting the omission of fair value disclosures for financial instruments at amortized cost. In February 2016, the FASB issued ASU 2016-02, Leases, which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The guidance also expands the required quantitative and qualitative disclosures surrounding leases. The ASU is effective for fiscal years beginning after December 15, 2018, or fiscal year 2020 for the Foundation. Early adoption is permitted. The Foundation is evaluating the impact of the new guidance on the consolidated financial statements.

14

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 In August 2016, the FASB issued ASU 2016-14, Presentation of Financial Statements for Not-forProfit Entities, which makes targeted changes to the not-for-profit financial reporting model. Under the new ASU, net asset reporting will be streamlined such that the existing three-category classification of net assets will be replaced with a model that combines temporarily restricted and permanently restricted into a single category called “net assets with donor restrictions.” The guidance for classifying deficiencies in endowment funds and on accounting for the lapsing of restrictions on gifts to acquire property, plant, and equipment have also been clarified. New disclosures will highlight restrictions on the use of resources that make otherwise liquid assets unavailable for meeting near-term financial requirements. Not-for-profits will continue to have flexibility to decide whether to report an operating subtotal and if so, to self-define what is included or excluded. However, if the operating subtotal includes internal transfers made by the governing board, transparent disclosure must be provided. The ASU also imposes several new requirements related to reporting expenses, including providing information about expenses by their natural classification. The ASU is effective for fiscal years beginning after December 15, 2017 or fiscal year 2019 for the Foundation and early adoption is permitted. The Foundation is evaluating the impact of the new guidance on the consolidated financial statements. 2.

Grants Receivable and Concentration of Credit Risk The Foundation’s grants receivable represent unconditional commitments from corporations, foundations and government agencies as follows (amounts below shown net of allowance for uncollectible grants and discounts):

Public Broadcasting Service Individual donors Corporations and co-productions Corporation for Public Broadcasting U.S. government agencies Others (subcontracts, non-profits, state colleges & universities, foundations, and public television entities) Total grants receivable, net

Short-Term

2016 Grant Source Long-Term

Total

$ 45,870,353 2,050,000 11,709,075 5,150,598 11,013,877

$ 11,316,709 7,270,736 1,004,224 407,976 -

$ 57,187,062 9,320,736 12,713,299 5,558,574 11,013,877

10,109,704

3,649,281

13,758,985

$ 85,903,607

$ 23,648,926

$ 109,552,533

15

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015

Public Broadcasting Service Individual donors Corporations and co-productions Corporation for Public Broadcasting U.S. government agencies Others (subcontracts, non-profits, state colleges & universities, foundations, and public television entities) Total grants receivable, net

Short-Term

2015 Grant Source Long-Term

Total

$ 54,046,152 1,150,000 17,010,914 4,552,858 8,827,279

$ 24,788,610 5,263,710 38,733 -

$ 78,834,762 1,150,000 22,274,624 4,591,591 8,827,279

8,595,151

1,807,529

10,402,680

$ 94,182,354

$ 31,898,582

$ 126,080,936

The Foundation’s long-term grant receivables are discounted using the Foundation’s taxable unsecured borrowing rate. The total discount was $1,433,000 and $1,690,000 at June 30, 2016 and 2015, respectively. The average discount rates were 2.07% and 2.69% at June 30, 2016 and 2015, respectively. 3.

Long-Term Receivables On December 31, 2001, the Foundation entered into an agreement to sell all assets, properties, rights and interests of every kind connected to “This Old House” for $132,090,000. At that time the Foundation recorded a noninterest-bearing note receivable of $120,614,000. The receivable is carried at its present value of approximately $40,031,000 and $37,049,000 in the consolidated statements of financial position at June 30, 2016 and 2015, respectively. The note matures in January 2018. On March 21, 2002, the Foundation sold certain real estate for $282,316,000. At that time, the Foundation recorded a noninterest-bearing note receivable of $282,316,000, which is carried at its present value of approximately $101,105,000 and $101,241,000 in the consolidated statements of financial position at June 30, 2016 and 2015, respectively. Under the contract terms, the Foundation received the first payment in December 2004 and is being paid in semiannual installments with a maturity date of December 2041. The Foundation assesses the collectability of the long-term receivables by considering factors such as the economic risk associated with the receivables and the financial condition and economic environment of the organization from which the receivables are due. There is no allowance for doubtful accounts associated with these receivables.

16

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 4.

Pledges Receivable Pledges receivable at June 30, 2016 and 2015:

2016 In less than one year Allowance for unfulfilled pledges

$

Pledges receivables, net Between one year and five years Less: Present value discount Long-term pledges receivable, net

$

4,946,437 (92,306)

2015 $

3,166,012 (74,052)

4,854,131

3,091,960

6,313,268 (332,679)

4,273,452 (142,944)

5,980,589

$

4,130,508

The Foundation had $1,000,000 in conditional pledges both at June 30, 2016 and 2015. These conditional pledges were not recorded and will be recorded when the conditions are satisfied. Five donors comprised 69% of the June 30, 2016 balance of pledges receivable. Three donors comprised 74% of the June 30, 2015 balance of pledges receivable. The total discount was $333,000 and $143,000 at June 30, 2016 and 2015, respectively. The average discount rates were 2.23% and 2.69% at June 30, 2016 and 2015, respectively.

17

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 5.

Investments Investments held by the Foundation are comprised of the following at June 30, 2016 and 2015: 2016 Cost Investments Money market funds Domestic equities Investments in funds externally managed Domestic equities Domestic bonds Foreign equities Foreign bonds Real assets Hedge funds Private equity Total investments Assets in PIF, CGA and CRT Money market funds Domestic equities Foreign equities Domestic bonds Investments in funds externally managed Total assets in PIF, CGA and CRT Total investments and assets in PIF, CGA and CRT

$

1,311 50,041

2015 Fair Value

$

1,311 50,450

Cost

$

2,543 25,744

Fair Value

$

2,543 25,591

5,190,601 3,005,976 11,443,950 2,375,263 3,317,375 25,052,188 1,103,214

8,415,431 3,017,339 12,122,968 2,194,666 2,553,823 35,644,931 1,574,498

5,207,852 10,043,239 1,333,212 3,379,461 27,374,205 1,222,714

8,335,742 11,794,208 1,242,667 2,937,082 40,063,306 1,805,557

51,539,919

65,575,417

48,588,970

66,206,696

160,238 576,113 114,576 160,666 11,218,673

160,238 1,193,481 133,213 160,471 12,580,862

101,933 581,783 154,528 147,490 11,501,484

101,933 1,209,089 188,981 148,778 13,911,903

12,230,266

14,228,265

12,487,218

15,560,684

$ 63,770,185

$ 79,803,682

$

61,076,188

$

81,767,380

For the years ended June 30, 2016 and 2015, the Foundation recorded net realized gains of $177,000 and $2,464,000, and dividend and interest income from investments of $738,000 and $900,000, respectively. The Foundation recognized changes in net unrealized (losses) of $(4,021,000) and $(2,784,000), for the years ended June 30, 2016 and 2015, respectively, on the above investments. The Foundation’s endowment and similar funds are invested to maintain the real value of the principal to be capable of supporting annual spending needs and are guided by the asset allocation policies established by the investment committee of the Board of Trustees and implemented primarily through external investment managers. Investments are managed to balance the short-term need for an annualized return in excess of 4.5% in order to support current operations as well as the long-term need to maintain the endowment’s purchasing power. To satisfy the longterm objectives of a diversified, volatility-managed portfolio, the Foundation targets an asset allocation of fixed income, global and domestic equities, marketable and nonmarketable alternative and real assets. The portfolio is expected to produce returns that meet or exceed long-term benchmarks. Hedge fund – This class includes investments in hedge funds that invest both long and short primarily in U.S. common stocks. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks, and from a

18

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 net long position to a net short position. The fair values of the investments in this class have been estimated using the net asset value per share of the investments. Real assets – This class includes several real estate funds that invest in U.S. commercial real estate and other hard asset investments. The fair values of the investments in this class have been estimated using the net asset value of the Foundation’s ownership interest in partners’ capital. The balances of the Pooled Life Income Funds, Gift Annuity Funds and Charitable Remainder Trusts for which the Foundation is the trustee are recorded as investments and the liabilities for future payments are recorded as accrued expenses or long-term deferred revenue and other liabilities. Split interest agreements held by third parties are valued at the present value of the future payments due from Trustees. These liabilities were calculated using discount factors based on the Foundation’s taxable unsecured borrowing rate. A summary of the investments and liabilities for future payments are as follows:

2016

6.

2015

Pooled Life Income Funds Fair value Liability for future payments

$

987,476 128,837

$

985,430 157,345

Gift Annuity Funds Fair value Liability for future payments

$

4,820,516 3,270,931

$

5,285,383 2,844,864

Charitable Remainder Trust, where Foundation is Trustee Fair value Liability for future payments

$

3,109,629 1,540,900

$

3,299,667 1,910,371

Fair Value of Investment Assets and Liabilities The Foundation values its investments at fair value in accordance with the Fair Value Measurements standard. Under this standard, fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The standard principally affects investments (unrestricted and restricted); however, other applicable fair value measurements include discounting multiyear pledges on the initial date of recognition, and applicable liabilities of pooled income fund and charitable gift annuities. Additionally, the standard establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

19

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Foundation. The Foundation considers observable data to be that market data which is readily available; regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Foundation’s perceived risk of that instrument. The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including for example, the type of product, whether the product is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Foundation in determining fair value is greatest for instruments categorized in Level 3. A description of the Foundation’s valuation methodologies for assets and liabilities measured at fair value is as follows: 

Fair value for Level 1 is based upon quoted prices in active markets that the Foundation has the ability to access for identical assets and liabilities. Market price data is generally obtained from exchange or dealer markets. The Foundation does not adjust the quoted price for such assets and liabilities.



Fair value for Level 2 is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and modelbased valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources including market participants, dealers, and brokers.



Fair value for Level 3 is typically based on unobservable inputs that are supported by little or no market activity and rely on assumptions and estimates about pricing derived from available information.

On July 1, 2014, the Foundation early adopted new guidance about Fair Value Measurement and Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This guidance requires the Foundation to show investments that use net asset value (“NAV”) as a practical expedient for valuation purposes, separately from other investments categorized in the fair value hierarchy. This disclosure change, which was applied retrospectively, can be seen in the investment leveling table for both fiscal years 2016 and 2015.

20

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 The NAV of the securities held by limited partnerships that do not have readily determinable fair values are determined by the general partner and are based on appraisals, or other estimates that require varying degrees of judgment. If no public market exists for the investment securities, the fair value is determined by the general partner taking into consideration, among other things, the cost of the securities, prices of recent placements of securities of the same issuer, and subsequent developments concerning the companies to which the securities relate. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Foundation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following table presents the financial instruments carried at fair value and is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position as of June 30, 2016: Assets and Liabilities at Fair Value as of June 30, 2016 Level 2 Level 3 Other Significant Significant Unobservable Level 1 Observable Inputs and/or Quoted Prices Inputs Restrictions NAV Investments Money market funds Domestic equities Investments in funds externally managed Domestic equities Domestic bonds Foreign equities Foreign bonds Real assets Hedge funds Private equity

$

Total investments

1,311 50,450

Total beneficial interest in perpetual trust

$

-

$

-

$

1,311 50,450

448,696 -

-

7,044,533 9,172,818 336,045 35,644,931 1,574,498

8,415,431 3,017,339 12,122,968 2,194,666 2,553,823 35,644,931 1,574,498

11,353,896

448,696

-

53,772,825

65,575,417

131,393 -

-

28,845 1,193,481 133,213 160,471 12,580,862

-

160,238 1,193,481 133,213 160,471 12,580,862

Total assets in PIF, CGA and CRT

Beneficial interest in perpetual trust Interest in investments held by trustee

-

1,370,898 3,017,339 2,501,454 2,194,666 2,217,778 -

Assets in PIF, CGA and CRT Money market funds Domestic equities Foreign equities Domestic bonds Investments in funds externally managed Total investments and assets in PIF, CGA and CRT

$

Total

-

14,096,872

-

14,228,265

$

11,485,289

131,393 $

448,696

$ 14,096,872

$ 53,772,825

$ 79,803,682

$

-

$

-

$

1,447,162

$

-

$

1,447,162

$

-

$

-

$

1,447,162

$

-

$

1,447,162

21

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 The following table presents the financial instruments carried at fair value and is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position as of June 30, 2015: Assets and Liabilities at Fair Value as of June 30, 2015 Level 2 Level 3 Other Significant Significant Unobservable Level 1 Observable Inputs and/or Quoted Prices Inputs Restrictions NAV Total Investments Money market funds Domestic equities Investments in funds externally managed Domestic equities Foreign equities Foreign bonds Real assets Hedge funds Private equity

$

Total investments

2,543 25,591

Total beneficial interest in perpetual trust

$

-

$

-

$

2,543 25,591

432,549 -

-

6,966,792 8,581,284 428,422 40,063,306 1,805,557

8,335,742 11,794,208 1,242,667 2,937,082 40,063,306 1,805,557

7,928,786

432,549

-

57,845,361

$ 66,206,696

66,523 -

-

35,410 1,209,089 188,981 148,778 13,911,903

-

101,933 1,209,089 188,981 148,778 13,911,903

Total assets in PIF, CGA and CRT

Beneficial interest in perpetual trust Interest in investments held by trustee

-

1,368,950 2,780,375 1,242,667 2,508,660 -

Assets in PIF, CGA and CRT Money market funds Domestic equities Foreign equities Domestic bonds Investments in funds externally managed Total investments and assets in PIF, CGA and CRT

$

-

15,494,161

-

15,560,684

$

7,995,309

66,523 $

432,549

$ 15,494,161

$ 57,845,361

$ 81,767,380

$

-

$

-

$

1,490,888

$

-

$

1,490,888

$

-

$

-

$

1,490,888

$

-

$

1,490,888

The beneficial interest in perpetual trust balance is included in other assets in the consolidated statement of financial position.

22

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 The following table includes a roll-forward of the amounts classified within Level 3 for the year ended June 30, 2016 and 2015:

Fair value at June 30, 2014

$

Realized gains Unrealized losses Purchases Sales Other

17,633,567 837,481 (854,416) 10,000 (2,163,496) 31,025

Fair value at June 30, 2015

$

Realized gains Unrealized losses Purchases Sales Other

15,494,161 110,700 (824,100) 10,000 (707,963) 14,073

Fair value at June 30, 2016

$

14,096,871

The Foundation uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs, including those obtained from external pricing sources, may be reduced for many instruments. The Foundation recognized changes in net unrealized (losses) and gains of $(44,000) and $105,000, for the years ended June 30, 2016 and 2015, respectively, for beneficial interest in perpetual trusts. There were no transfers between Level 1 and 2 for the year ended June 30, 2016. There was a transfer of $1,243,000 from an externally managed fund from Level 2 to Level 1 for the year ended June 30, 2015.

23

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 The following table includes a summary of fair values, redemption features and future commitments related to investments (excluding split interest agreements) for which estimated fair value was based upon NAV, capital account or other valuation procedures for the years ended June 30, 2016 and 2015: 2016

NAV Investments in funds externally managed Domestic equities Foreign equities Real assets

$

Hedge funds

7,044,533 9,172,818 336,045

Unfunded Commitments

$

35,644,931

Private equity

-

1,574,498 $ 53,772,825

2,500

187,739 $

Redemption Frequency

Daily, Quarterly Daily, monthly Daily, Monthly, quarterly, annually, at maturity Monthly, quarterly, annually At maturity

Redemption Notice Periods

1-60 days 1-30 days 1-60 days, at maturity 30-180 days n/a

190,239 2015

NAV Investments in funds externally managed Domestic equities Foreign equities Real assets

Hedge funds Private equity

$

6,966,792 8,581,284 428,422

Unfunded Commitments

$

40,063,306

-

1,805,557 $ 57,845,361

5,000

202,659 $

Redemption Frequency

Daily, Quarterly Daily, monthly Daily, Monthly, quarterly, annually, at maturity Monthly, quarterly, annually At maturity

Redemption Notice Periods

1-60 days 1-30 days 1-60 days, at maturity 30-180 days n/a

207,659

The Foundation had outstanding purchase commitments for investments in partnerships amounting to approximately $190,000 and $208,000, as of June 30, 2016 and 2015 respectively, and expects these funds to be called from July 2016 through December 2017.

24

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 7.

Property, Facilities and Equipment Property, facilities and equipment consist of the following at June 30, 2016 and 2015:

Useful Life Land and land improvements Buildings and improvements Broadcast, video and film equipment Office equipment, furniture and fixtures Computers and peripherals Capitalized interest Fixed assets not yet placed into service

2016

2015

3-40 years $ 6,716,080 3-20 years 173,952,617 3-25 years 21,393,741 3-10 years 5,404,518 25-39 years 12,777,480 19,714,140 3,642,861

Less: Accumulated depreciation Property, facilities and equipment, net

$

6,716,080 173,697,075 28,223,781 6,177,520 20,018,320 19,714,140 2,335,034

243,601,437

256,881,950

(77,012,081)

(87,305,594)

$ 166,589,356

$ 169,576,356

The Foundation disposed of $19,032,000 and $14,000 of fixed assets, respectively, during the years ended June 30, 2016 and 2015. The assets were fully depreciated and these disposals resulted in no gain or loss. Depreciation expense related to property, facilities and equipment was $8,726,000 and $8,353,000 for the years ended June 30, 2016 and 2015, respectively. 8.

Long-Term Debt Long-term debt consists of the following at June 30, 2016 and 2015:

MDFA Series 2002A revenue bonds, 4.0%-5.8%, due 2006-2042 MDFA Series 2008A revenue bonds, 3.0%-5.0%, due 2008-2042 MDFA Series 2008B revenue bonds, Zero Coupon, due 2024-2042 PRI Citizens Term Loan 3.75% due 2014-2016 PRI Citizens Line of Credit, due 2017 Discounts and premiums, net Less: Current maturities

Original Issuance

2016

2015

$ 111,890,000 107,495,000 22,566,620 2,163,404 2,000,000

$ 46,430,000 100,365,000 22,566,620 1,140,522

$ 46,430,000 101,450,000 22,566,620 716,404 445,661

170,502,142

171,608,685

2,062,693

2,143,045

172,564,835

173,751,730

(2,390,522)

Long-term debt, net

$ 170,174,313

(2,247,065) $ 171,504,665

Discounts and premiums include MDFA Series 2002A premium of $2,161,000 and $2,245,000 as of June 30, 2016 and 2015, respectively, and MDFA Series 2008A discount of $98,000 and $102,000 as of June 30, 2016 and 2015, respectively. The net amortization for the discounts and premiums was $80,000 for the each of the years ended June 30, 2016 and 2015.

25

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Debt Covenants The Foundation’s debt agreements contain limitations on additional indebtedness, mergers, and other covenants, including required debt service coverage and liquidity ratios. Debt service coverage ratio should be at least 1.20 times actual debt service for the period. Liquidity ratio should not be less than 90% of total unrestricted and temporarily restricted net assets. The scheduled principal payments are shown in the table below: Fiscal Year 2017 2018 2019 2020 2021 Thereafter

$

Total principal payments

2,390,522 1,400,000 1,650,000 1,910,000 2,000,000 161,151,620

$ 170,502,142

With the exception of the zero coupon bonds, bond interest is payable semiannually. Interest on term loans and lines of credit is payable monthly. Total interest expense was $9,568,000 and $9,601,000 for the years ended June 30, 2016 and 2015, respectively, and is included in general and administrative expenses on the statements of activities and changes in net assets. One insurance company insures the 2002 Bonds and a different insurance company insures the 2008 Bonds. The two insurers have recourse to the Foundation if the Foundation defaults and an insurer must pay. The Foundation’s obligations to the insurers in connection with the 2002 Bonds and the 2008 Bonds are collateralized by an assignment of the payment stream under the noninterest-bearing note receivable issued in connection with the sale of certain real estate, and a mortgage on the headquarters of the Foundation located in Brighton, MA. PRI established a term note payable to RBS Citizens Bank of $2,163,000 on November 8, 2012. The interest rate on the note was 3.75%. The note was collateralized by all business assets of PRI and is guaranteed in full by WGBH. PRI paid the note in full on October 30, 2015 when PRI amended their line of credit. Line of Credit The Foundation has access to a discretionary line of credit of $25,000,000. Borrowings under the agreement are made at the Foundation’s option, as either a LIBOR Rate Loan or as a Prime Rate Loan. If made as a LIBOR Rate Loan, interest on the outstanding principal will accrue at a rate equal to the sum of the LIBOR Advantage Rate plus 2.5%. If made as a Prime Rate Loan, the outstanding principal will accrue interest at a per annum rate equal to the prime rate minus 1.0%. There were no amounts outstanding on the line of credit at June 30, 2016 and 2015, respectively. In addition to the term note agreement entered into with RBS Citizens Bank, PRI also entered into a line of credit agreement with RBS Citizens Bank which is collateralized by all business assets of PRI and is guaranteed in full by WGBH. The line of credit was amended on October 30, 2015 and provides maximum availability through October 31, 2016 of $2,000,000. For the period of November 1, 2016 through October 31, 2017, PRI’s maximum availability on the loan will be $1,500,000 and will subsequently be reduced to $1,000,000 thereafter. The amended termination date of the line of credit agreement is October 31, 2018. PRI has debt covenants for minimum operating income. Line of credit payments and advances occur on a daily basis using a sweep.

26

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 The outstanding balance on the line of credit was $1,141,000 and $446,000 on June 30, 2016 and 2015, respectively. Interest is calculated at the LIBOR Advantage Rate (average 3.7%) and payments are required monthly beginning December 31, 2012, with the principal balance due upon maturity. 9.

Retirement Plan The Foundation has multiple defined contribution plans (the “Plans”) for eligible employees through the Teachers Insurance and Annuity Association (“TIAA”) and College Retirement Equity Fund accordance with the provisions of Section 403(b) of the Internal Revenue Code. Contributions are made by the provisions of Section 403(b) of the Internal Revenue Code. The Foundation’s expense under the Plans totaled $1,402,000 and $1,369,000 for the years ended June 30, 2016 and 2015, respectively. At June 30, 2016 and 2015, the Foundation had a liability of $62,000 and $0, respectively, for benefits paid under the Plans. The Foundation matched 80% of qualified employee salary deferrals for the largest plan for the years ended June 30, 2016 and 2015. These amounts are included within accrued expenses on the consolidated statement of financial position. PRI participates in a tax-deferred annuity plan (the “PRI Plan”) covering substantially all employees. Participation in the PRI Plan is mandatory upon six months of employment and requires a minimum employee contribution of 1% of annual compensation, with an accompanying contribution by PRI equal to 2% of annual compensation. PRI’s contributions to the PRI Plan were $140,000 and $97,000 for each of the years ended June 30, 2016 and 2015, respectively.

10.

Components of Net Assets Net assets of the Foundation consist of the following designations at June 30, 2016 and 2015:

Unrestricted

2016 Temporarily Permanently Restricted Restricted

Detail of net assets Undesignated $ 20,293,655 Board-designated debt service 84,376,104 Board-designated programming 35,675,513 Grants for future programming Capital campaign and other Endowment 32,631,544

$ 1,409,166 86,679,405 33,805,493 9,899,279

$ 172,976,816

$ 131,793,343

27

$

Total

42,822,987

$ 21,702,821 84,376,104 35,675,513 86,679,405 33,805,493 85,353,810

$ 42,822,987

$ 347,593,146

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015

Unrestricted Detail of net assets Undesignated $ 8,298,168 Board-designated debt service 87,714,257 Board-designated programming 38,806,251 Grants for future programming Capital campaign and other Endowment 36,221,253 $ 171,039,929

2015 Temporarily Permanently Restricted Restricted

$

1,800,372 111,875,593 28,956,747 12,731,736

$ 155,364,448

$

Total

41,082,300

$ 10,098,540 87,714,257 38,806,251 111,875,593 28,956,747 90,035,289

$ 41,082,300

$ 367,486,677

Permanently restricted net assets of $42,823,000 and $41,082,000 at June 30, 2016 and 2015, respectively, are composed of the investments of contributed principal that have been restricted by the donor in perpetuity and the beneficial interest that the Foundation has in certain third-party perpetual trusts. Unless there are specific donor stipulations or Board of Trustees designations, the related investment income is used to support programs and operating expenses. The Foundation’s endowment consists of individual funds established for a variety of purposes and includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Net assets associated with endowment funds designated by the Board of Trustees may be expended by a vote of the Board of Trustees and are recorded as unrestricted net assets. The Foundation’s endowment is subject to an enacted version of the UPMIFA, and as such, generally accepted accounting principles requires disclosures about the Foundation’s endowment funds including both donor-restricted and board-designated endowment funds. The policy governing the investment of the Foundation’s endowment is twofold: to provide a reasonable and prudent level of currently expendable income in accordance with the spending policy set by the Investment Committee from time to time (currently 4.5% of the endowment’s moving average fair value over the prior 36 months as of March 31 of the preceding fiscal year in which distribution is planned); and to support the Foundation and its mission over the long term by ensuring that the future growth of the endowment is sufficient to offset normal inflation plus reasonable spending, thereby preserving the constant dollar value and purchasing power of the endowment for the benefit of future programs and services. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce a real return, net of inflation and investment management costs, of at least 5% over the long term. Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based and alternative investments to achieve its longterm objective within prudent risk constraints.

28

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 At June 30, 2016, the endowment net asset composition by type of fund consisted of the following:

Temporarily Restricted

Unrestricted Donor-restricted funds Board-designated funds Total endowments

$

(84,873) $ 32,716,417

$ 32,631,544

$

Permanently Restricted

Total

9,899,279 -

$ 42,822,987 -

$ 52,637,393 32,716,417

9,899,279

$ 42,822,987

$ 85,353,810

Changes in endowment net assets for the years ended June 30, 2016, consisted of the following:

Endowment net assets at June 30, 2015

Unrestricted

Temporarily Restricted

Permanently Restricted

Total

$ 36,221,253

$ 12,731,736

$ 41,082,300

$ 90,035,289

Investment return Investment income Net depreciation (realized and unrealized) Total investment gains (losses) Contributions Appropriation of endowment assets for expenditures Other changes Endowment net assets at June 30, 2016

338,909 (2,039,197)

233,470 (1,594,818)

(693,828)

572,379 (4,327,843)

(1,700,288)

(1,361,348)

(693,828)

(3,755,464)

(1,804,778) (84,643)

(1,555,752) 84,643

2,819,514 (384,999)

2,819,514 (3,360,530) (384,999)

$ 32,631,544

29

$

9,899,279

$ 42,822,987

$ 85,353,810

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 At June 30, 2015, the endowment net asset composition by type of fund consisted of the following:

Temporarily Restricted

Permanently Restricted

Total

(230) $ 12,731,736 36,221,483 -

$ 41,082,300 -

$ 53,813,806 36,221,483

$ 41,082,300

$ 90,035,289

Unrestricted Donor-restricted funds Board-designated funds Total endowments

$

$ 36,221,253

$ 12,731,736

Changes in endowment net assets for the years ended June 30, 2015, consisted of the following:

Endowment net assets at June 30, 2014

Unrestricted

Temporarily Restricted

Permanently Restricted

Total

$ 37,136,687

$ 14,049,656

$ 40,178,077

$ 91,364,420

Investment return Investment income Net depreciation (realized and unrealized) Total investment gains (losses) Contributions Appropriation of endowment assets for expenditures Other changes Underwater endowment transfer Endowment net assets at June 30, 2015

11.

428,805 (193,003)

272,048 (150,277)

(344,533)

700,853 (687,813)

235,802

121,771

(344,533)

13,040

603,149 (1,754,155) (230) $ 36,221,253

(1,439,921)

1,248,756 -

1,851,905 (3,194,076)

230

-

-

$ 12,731,736

$ 41,082,300

$ 90,035,289

Commitments and Contingencies The Foundation is obligated to make rental payments for operating facilities and equipment under various noncancelable operating lease agreements expiring from 2017 to 2040, as follows: Fiscal Year 2017 2018 2019 2020 2021 Thereafter

$

1,605,216 1,390,386 1,271,429 948,047 695,702 14,693,172

$ 20,603,952

Rent expense on these noncancelable agreements amounted to $1,936,000 and $1,595,000 for the years ended June 30, 2016 and 2015, respectively.

30

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 Under operating lease agreements, the Foundation rents certain office space to third parties. The total of future minimum rentals to be received by the Foundation under the noncancelable leases are as follows: Fiscal Year 2017 2018 2019 2020 2021 Thereafter

$

2,870,076 2,875,513 2,885,176 2,830,606 2,305,183 16,864,106

$ 30,630,660

Rental income for building leases amounted to $2,525,000 and $1,451,000 for the years ended June 30, 2016 and 2015, respectively. Production and Acquisition Commitments PRI, in the ordinary course of business, has entered into firm commitments for the co-production and acquisition of programing for distribution to its affiliated stations. These commitments are funded by program fees and underwriting grants, as well as through grants and gifts. Future minimum commitments under terms of these agreements and potential termination options are as follows:

Year Ending June 30,

Amount

2017

$

7,876,728

$

7,876,728

The Foundation receives funding or reimbursement from government agencies for various business

activities, which are subject to audit. In addition, the Foundation is engaged in various legal cases, which have arisen in the normal course of its operations. The Foundation believes that the outcomes of these matters will not have a material adverse effect on the financial position of the Foundation.

31

WGBH Educational Foundation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2016 and 2015 12.

Subsequent Events The Foundation recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the consolidated statements of financial position. The Foundation does not recognize subsequent events that provide evidence about conditions that did not exist at the date of the consolidated statement of financial position but arose after the consolidated statement of financial position date but before the consolidated financial statements are issued. For these purposes, the Foundation has evaluated events occurring subsequent to the consolidated statement of financial position date through November 10, 2016, the date the consolidated financial statements were issued. There were no subsequent events that occurred after the balance sheet date that have a material impact on the Foundation’s consolidated financial statements, except for the following matter. On July 27, 2016, the Foundation issued $43,650,000 of revenue bonds at a net original issuance premium of $5,614,000. The proceeds were used to refund a portion of the outstanding Series 2008A bonds. Principal and interest is due semi-annually, with interest rates ranging from 3 to 5%. The bonds will mature on January 1, 2042.

32

Supplemental Consolidating Information

WGBH Educational Foundation and Subsidiaries Consolidating Statement of Financial Position June 30, 2016

WGBH Assets Cash Accounts receivable (less allowance for uncollectible accounts of $1,266,000 for 2016) Current portion of receivables for asset sales Grants receivable (less allowance for uncollectible grants of $90,000 for 2016) Pledges receivable, net Prepaid expenses and other assets

$ 17,940,214

Total current liabilities Long-term deferred revenue and other liabilities Long-term debt, net of unamortized discount and premium Accrued bond interest expense Total liabilities Net assets (deficit) Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets

102,257

$

WGBH– Consolidated

-

$ 18,042,471

330,931 -

(20,838) -

83,939,863 3,825,032 1,332,696

3,021,345 1,029,099 606,851

(1,057,601) (207,698)

11,849,136 5,472,765 85,903,607 4,854,131 1,731,849

124,049,613

5,090,483

(1,286,137)

127,853,959

4,985,069 22,458,858 135,663,446 16,868,713 10,256,074 15,746,148 87 73,121,957 165,603,571

995,520 1,190,068 6,681,725 985,785

$ 568,753,536

$ 14,943,581

$ (1,286,137) $ 582,410,980

$

$

$

Total current assets

Total assets

$

Elimination

11,539,043 5,472,765

Long-term pledges receivable, net Long-term grants receivable, net Long-term receivables for asset sales Radio licenses Other assets Equity investments Funds held under bond agreements - restricted Investments, at fair value Property, facilities and equipment, net

Liabilities Current maturities of debt Accounts payable Accrued expenses Royalties payable Accrued bond interest expense Deferred revenue and other liabilities

PRI

1,250,000 8,007,242 16,789,207 2,279,931 6,055,975 4,484,450

1,140,522 2,082,294 337,067 644,603

38,866,805

4,204,486

7,206,727 170,174,313 15,053,969

371,327 -

231,301,814

4,575,813

176,375,296 124,918,764 36,157,662

(3,146,002) 6,848,445 6,665,325

337,451,722

10,367,768

$ 568,753,536

$ 14,943,581

-

5,980,589 23,648,926 135,663,446 16,868,713 10,256,074 15,746,148 87 79,803,682 166,589,356

- $ 2,390,522 (831,257) 9,258,279 (228,536) 16,897,738 2,279,931 6,055,975 5,129,053 (1,059,793) -

42,011,498 7,578,054 170,174,313 15,053,969

(1,059,793)

234,817,834

(252,478) 26,134 -

172,976,816 131,793,343 42,822,987

(226,344)

347,593,146

$ (1,286,137) $ 582,410,980

The accompanying note is an integral part of these supplemental consolidating financial statements. 34

WGBH Educational Foundation and Subsidiaries Consolidating Statement of Activities Year Ended June 30, 2016

WGBH Operating revenue Contributions, principally viewer and listener support Community service grants from the Corporation for Public Broadcasting Royalty and licensing Captioning and ancillary services Planned giving Accretion of interest and other income on long-term receivables Investment earnings authorized for operations In-kind contributions and donated services Affiliation revenue Distribution fees Miscellaneous income

$ 26,377,594

Total operating revenue

PRI

$

1,093,460

9,002,161 3,579,357 7,565,041 906,253 8,363,374 1,555,752 737,070 12,347,040

4,796,924 6,448,956 1,130,263

$

Elimination

WGBH– Consolidated

-

$ 27,471,054

(22,726) (54,029) (66,081) (237,920)

9,002,161 3,579,357 7,542,315 906,253 8,363,374 1,555,752 737,070 4,742,895 6,382,875 13,239,383

70,433,642

13,469,603

(380,756)

83,522,489

114,122,779

4,760,040

(3,280,465)

115,602,354

184,556,421

18,229,643

(3,661,221)

199,124,843

132,879,499 15,062,416 7,026,907 154,968,822

12,113,448 4,187,286 16,300,734

(3,641,321) (3,641,321)

141,351,626 19,249,702 7,026,907 167,628,235

20,169,892 7,406,011 19,833,841 47,409,744

1,184,317 849,266 2,033,583

(19,900) (19,900)

21,354,209 7,386,111 20,683,107 49,423,427

Total operating expenses

202,378,566

18,334,317

(3,661,221)

217,051,662

(Deficit) of operating revenue over operating expenses

(17,822,145)

(104,674)

-

(17,926,819)

Nonoperating gains Underwater endowment transfer Realized gain on investments Change in net unrealized losses on investments Investment income Gain on equity investments Net asset transfer Other gains, net

(84,643) 71,822 (2,113,385) 457,078 15,113,161 (154,893) 6,076,049

296,261 47,363 154,893 -

-

(84,643) 368,083 (2,113,385) 504,441 15,113,161 6,076,049

Net assets released from restrictions Total operating revenue and other support Operating expenses Program services Programming and production Broadcasting Public information, guides and educational material Total program services Supporting services Fundraising and development Underwriting General and administrative Total supporting services

Nonoperating gains, net

19,365,189

Increase in unrestricted net assets

$

1,543,044

498,517 $

393,843

$

-

19,863,706 $

1,936,887

The accompanying note is an integral part of these supplemental consolidating financial statements. 35

WGBH Educational Foundation and Subsidiaries Consolidating Statement of Changes in Net Assets Year Ended June 30, 2016

WGBH Unrestricted Net Assets at June 30, 2015

$ 174,832,252

Deficit of operating revenue over operating expenses Underwater endowment transfer Realized gains on investments Change in net unrealized losses on investments Investment income Gain on equity investments Net asset transfer Other gain, net

PRI $ (3,539,845) $

(17,822,145) (84,643) 71,822 (2,113,385) 457,078 15,113,161 (154,893) 6,076,049

Total increase in unrestricted net assets

Elimination

(104,674) 296,261 47,363 154,893 -

1,543,044

393,843

Unrestricted Net Assets at June 30, 2016

$ 176,375,296

$ (3,146,002) $

Temporarily Restricted Net Assets at June 30, 2015

$ 152,581,718

$

Temporarily restricted contributions for national programming Temporarily restricted contributions - other Temporarily restricted contributions for local sponsorship Change in value of split interest agreements Investment earnings authorized for operations Net assets released from restrictions used for operations Underwater endowment transfer Realized gains on investments Change in net unrealized losses on investments Investment income

73,389,418 9,017,126 6,885,738 (190,038) (1,555,752) (114,122,779) 84,643 51,494 (1,456,274) 233,470

Total (decrease) increase in temporarily restricted net assets

2,750,188

$

7,608,032 1,250,265 (4,760,040) -

(27,662,954)

(252,478) $ 171,039,929 -

(17,926,819) (84,643) 368,083 (2,113,385) 504,441 15,113,161 6,076,049

-

1,936,887

(252,478) $ 172,976,816 32,542 (3,286,873) 3,280,465 -

4,098,257

WGBH– Consolidated

(6,408)

$ 155,364,448 77,710,577 9,017,126 8,136,003 (190,038) (1,555,752) (115,602,354) 84,643 51,494 (1,456,274) 233,470 (23,571,105)

Temporarily Restricted Net Assets at June 30, 2016

$ 124,918,764

$

6,848,445

$

26,134

$ 131,793,343

Permanently Restricted Net Assets at June 30, 2015

$ 33,723,147

$

7,359,153

$

-

$ 41,082,300

Restricted contributions for endowment Planned giving Change in value of split interest agreements Realized losses on investments Change in net unrealized losses on investments

43,907 2,775,607 (384,999) -

Total increase (decrease) in permanently restricted net assets Permanently Restricted Net Assets at June 30, 2016

(242,255) (451,573)

2,434,515 $ 36,157,662

-

(693,828) $

6,665,325

$

43,907 2,775,607 (384,999) (242,255) (451,573)

-

1,740,687

-

$ 42,822,987

The accompanying note is an integral part of these supplemental consolidating financial statements. 36

WGBH Educational Foundation and Subsidiaries Note to Supplemental Consolidating Information June 30, 2016

1.

Basis of Presentation The accompanying supplemental consolidating information includes the consolidating statements of financial position, activities and changes in net assets of the individual entities of WGBH Educational Foundation and Subsidiaries. All intercompany accounts and transactions between entities have been eliminated. The consolidating information presented is prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America consistent with the consolidated financial statements. The consolidating information is presented for purposes of additional analysis of the consolidated financial statements and is not required as part of the basic financial statements.

37