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3 NPR FOUNDATION Statements of Financial Position As of September 30, 2004 (with comparative totals for 2003) TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL TOTAL ASSETS Cash and cash equivalents $ 2,988,827 $ - $ - $ 2,988,827 $ 592,101 Investments 30,319, ,306, ,626,337 27,090,939 Receivables 288,623 2,303,699 1,357 2,593,679 4,503,994 Due from National Public Radio 619, ,682 - Interfund (payable) receivable (52,509) 52, TOTAL ASSETS $ 34,164,355 $ 2,356,208 $ 195,307,962 $ 231,828,525 $ 32,187,034 ============== ============== ============== ============== ============== LIABILITIES AND NET ASSETS Due to National Public Radio $ - $ - $ - $ - $ 20,817 Accrued expenses 75, ,544 30, TOTAL LIABILITIES 75, ,544 51,466 NET ASSETS 34,088,811 2,356, ,307, ,752,981 32,135, TOTAL LIABILITIES AND NET ASSETS $ 34,164,355 $ 2,356,208 $ 195,307,962 $ 231,828,525 $ 32,187,034 ============== ============== ============== ============== ============== See notes to financial statements. -2-

4 NPR FOUNDATION Statements of Activities Year Ended September 30, 2004 (with comparative totals for 2003) TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL TOTAL REVENUES Contributions $ 2,044,061 $ - $ 194,259,782 $ 196,303,843 $ 6,337,181 Net assets released from restrictions 1,830,833 (1,830,833) Investment income 5,730,223-11,863 5,742,086 3,744,801 TOTAL REVENUES 9,605,117 (1,830,833) 194,271, ,045,929 10,081,982 EXPENSES Fundraising administration 421, , ,724 President's Council 189, , ,557 Other expenses 68, , ,245 TOTAL EXPENSES 678, , ,526 CHANGES IN NET ASSETS BEFORE CONTRIBUTIONS TO NATIONAL PUBLIC RADIO 8,926,601 (1,830,833) 194,271, ,367,413 9,311,456 Contributions to National Public Radio 1,750, ,750,000 1,500,000 CHANGE IN NET ASSETS 7,176,601 (1,830,833) 194,271, ,617,413 7,811,456 NET ASSETS, BEGINNING OF YEAR 26,912,210 4,187,041 1,036,317 32,135,568 24,324,112 NET ASSETS, END OF YEAR $ 34,088,811 $ 2,356,208 $ 195,307,962 $ 231,752,981 $ 32,135,568 ============== ============== =============== =============== ============== See notes to financial statements. -3-

5 NPR FOUNDATION Statements of Cash Flows Year Ended September 30, 2004 (with comparative totals for 2003) CASH FLOWS FROM OPERATING ACTIVITIES: CHANGE IN NET ASSETS $ 199,617,413 $ 7,811,456 ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Unrealized/realized gain on investments (120,879) (3,118,723) Decrease (increase) in receivables 1,910,315 (2,544,434) Increase in due from National Public Radio (619,682) - Decrease in due to National Public Radio (20,817) (410,930) Decrease in accrued expenses 44,895 13,772 Donated securities - (91,350) Contribution revenue restricted for endowment purposes (194,259,782) - Investment income restricted for endowment purposes (11,863) (36,317) Net cash flows provided by operating activities 6,539,600 1,623,474 CASH FLOWS FROM INVESTING ACTIVITIES: INVESTMENTS: Purchases (241,343,805) (9,440,203) Maturities 42,929,286 8,359,880 Net cash flows used in investing activities (198,414,519) (1,080,323) CASH FLOWS FROM FINANCING ACTIVITIES: Contribution revenue restricted for endowment purposes 194,259,782 - Investment income restricted for endowment purposes 11,863 36,317 Net cash flows provided by financing activities 194,271,645 36,317 NET INCREASE IN CASH AND CASH EQUIVALENTS 2,396, ,468 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 592,101 12,633 CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,988,827 $ 592,101 ================ ================ See notes to financial statements. -4-

6 NPR FOUNDATION NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION NPR Foundation (the Foundation), an affiliated organization of National Public Radio, Inc. (NPR), was founded in 1992 with the purpose of raising charitable contributions for the benefit of NPR, disbursing funds to NPR for the operation, promotion, development, capital expansion, and other valid purposes of NPR, and conducting fundraising efforts and engaging in related activities for the benefit of NPR. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying financial statements of the Foundation are presented on the accrual basis of accounting. The financial statements include certain prior-year summarized comparative information in total but not by asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the organization s audited financial statements for the year ended September 30, 2003, from which the summarized information was derived. Classification of Net Assets Net assets are reported separately by class as follows: a. Permanently restricted net assets Contributions and other inflows of assets whose use is limited by donor-imposed stipulations that the resources must be maintained permanently; however, as specified by the donor income may be used by the Foundation (Note 9). b. Temporarily restricted net assets Contributions and other inflows of assets whose use is limited by donor-imposed stipulations that will expire by donor payment of an Endowment for Excellence pledge, passage of time, or can be fulfilled and removed by actions of the entity, such as usage for specific programs. c. Unrestricted net assets Unrestricted net assets result from revenues derived from unrestricted contributions, investment income, and other inflow of assets whose use is not limited by donor-imposed restrictions less expenditures. Earnings from the Endowment for Excellence, as well as its principal, are available to support the unrestricted activities of the Foundation, including disbursing funds to NPR. Contributions - Contribution revenue is recognized when assets or commitments of unconditional promises to give are received. Contributions of investments are recorded at fair value at the date of donation. Contributions restricted in perpetuity are classified as permanently restricted. Contributions that are restricted by the donor for a specific time or purpose, or unpaid contributions not explicitly designated as available to support current operations, are reported as temporarily restricted contributions, except those contributions whose restrictions are met in the current fiscal year are recognized as unrestricted revenue. When a donor-stipulated time restriction ends or purpose restriction is accomplished, or when an endowment pledge not designated for current year use is paid, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. All unconditional promises to give, which are expected to be received beyond one year, are discounted to their net present value, as well as reduced for any estimated uncollectible amounts. Cash and Cash Equivalents Cash and cash equivalents reflect amounts that approximate fair value due to the short maturity of these instruments. Operating checking accounts, sweep accounts, interest bearing liquid investment accounts, and repurchase agreements are included in cash and cash equivalents. Interfund (payable) receivable - Certain restricted assets held in unrestricted accounts as of the fiscal year end are reflected as interfund payable/receivable on the statement of financial position

7 Investments - The Foundation carries its investments at fair value determined by current market prices with any related gain or loss reported in the statement of activities. Fair value for private equities and marketable alternatives (hedge funds) are determined using the best available information, including valuations by the respective external fund managers or the private company issuer, as appropriate. Concentration of Business Activity Financial instruments, which potentially subject the Foundation to concentrations of credit risk, consist primarily of cash, cash equivalents, receivables, and investments. The Foundation maintains cash and cash equivalents and investments with high quality institutions and has established guidelines relative to diversification and maturities that maintain safety and liquidity. As of September 30, 2004, substantially all of the balances were in excess of the Federal Deposit Insurance Corporation insurance limit. The Foundation has not incurred any losses due to the credit risk on these instruments or receivables. Income Taxes - The Foundation is exempt from Federal income tax under the provisions of Section 501(c)(3) of the Internal Revenue Code, except for unrelated business income. No provision for income tax is required for 2004 and Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. 3. RELATED PARTIES Most expenses are initially paid for by NPR and periodically throughout the year the Foundation will reimburse NPR for the expenses paid on its behalf. The amounts due to/from NPR, if any, are reflected in the accompanying financial statements. 4. COMMITMENTS In connection with its corporate purpose of disbursing funds to NPR as described in Note 1, the Foundation entered into a Support Agreement dated June 4, 2003 with NPR and NPR s lender. The terms of the Support Agreement defined, among other issues, when the Foundation was required to make support payments to NPR. No support payments were required to be made during 2004 or Subsequent to September 30, 2004, all parties terminated the Support Agreement mutually. 5. INVESTMENTS The Foundation s investments at September 30, 2004 and 2003, stated at fair value, are comprised of the following: Mutual funds $ - $ 2,014,804 Equities 29,444,318 13,725,983 Fixed income 154,784,357 6,641,310 Money market funds 20,339, Marketable alternative and private equities 21,058,572 4,708,335 Total $ 225,626,337 $ 27,090,939 The estimated net realizable value of stock in Overseas Partners Ltd. (OPL), a Bermuda-based reinsurance company, is $930,465 and $2,327,266 as of September 30, 2004 and 2003 respectively, and is included in private equities. OPL has announced its decision to cease writing new business and is in the process of liquidating operations and assets. OPL made payments of liquidating distributions of $1,418,873 and $630,610 in 2004 and 2003, respectively

8 As of September 30, 2004, the Foundation had an outstanding capital commitment to a private real estate investment partnership of $5,000, INVESTMENT INCOME (LOSS) For the years ended September 30, 2004 and 2003, investment income (loss) was comprised of the following: Dividends and interest $ 5,621,207 $ 626,078 Realized gain (loss) (1,659,466) (165,410) Unrealized gain 1,780,345 3,284,133 Total $ 5,742,086 $ 3,744, RECEIVABLES As of September 30, 2004 and 2003, contributors to the Foundation have pledged within five years as follows: Less than one year $ 1,516,865 $ 1,772,098 One to five years 1,260,566 2,975,650 Total 2,777,431 4,747,748 Allowance for doubtful accounts (131,510) (191,512) Discount to present value (52,242) (52,242) Total $ 2,593,679 $ 4,503, TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets, consisting primarily of future year Endowment for Excellence pledges, are all time restricted and total $2,356,208 and $4,187,041 as of September 30, 2004 and 2003, respectively

9 9. PERMANENTLY RESTRICTED NET ASSETS During the year ended September 30, 2000, the Foundation received contributions totaling $1,000,000, with donor stipulations that permanently limit the use of assets. Under the terms of the contributions, the amount of each contribution was to establish a permanently restricted fund. The investment income from the funds are to be used for the support of cultural programming. Further, one contribution required a portion of investment earnings to be added to the principal annually in order to preserve the purchasing power of the fund. In fiscal years 2004 and 2003, respectively, $11,863 and $36,317 were added for this purpose. The remaining investment income is permitted to be used to support current operations. During the year ended September 30, 2004, the Foundation received a contribution of cash and investments totaling $194,259,782 to establish a permanently restricted endowment for the support of NPR operations. Under the terms of the contribution, the income and net appreciation of the endowment are available to support the mission of NPR. Therefore, the income and net appreciation of the endowment are recorded as unrestricted revenue as earned