HADLEY INSTITUTE FOR THE BLIND AND VISUALLY IMPAIRED. FINANCIAL STATEMENTS June 30, 2016 and 2015

HADLEY INSTITUTE FOR THE BLIND AND VISUALLY IMPAIRED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS CONTENTS INDEPENDENT AUDITOR S REPORT... 1 FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION... 3 STATEMENTS OF ACTIVITIES... 4 STATEMENTS OF CASH FLOWS... 6... 7

Crowe Horwath LLP Independent Member Crowe Horwath International INDEPENDENT AUDITOR S REPORT The Board of Trustees Hadley Institute for the Blind and Visually Impaired Winnetka, Illinois Report on the Financial Statements We have audited the accompanying financial statements of Hadley Institute for the Blind and Visually Impaired (the Institute), which comprise the statements of financial position as of, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the 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 entity 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hadley Institute for the Blind and Visually Impaired as of, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Chicago, Illinois September 28, 2016 Crowe Horwath LLP 2.

STATEMENTS OF FINANCIAL POSITION 2016 2015 Endowment Endowment and and Operating Investment Total Operating Investment Total Funds Funds All Funds Funds Funds All Funds ASSETS Cash and cash equivalents $ 110,374 $ 509,155 $ 619,529 $ 246,100 $ 50,677 $ 296,777 Investments - 81,119,649 81,119,649-84,549,842 84,549,842 Interfund accounts 4,579,464 (4,579,464) - 4,613,276 (4,613,276) - Bequest receivable - - - - 23,792 23,792 Inventory 8,652-8,652 14,441-14,441 Property and equipment, net 856,508-856,508 908,031-908,031 Total assets $ 5,554,998 $ 77,049,340 $ 82,604,338 $ 5,781,848 $ 80,011,035 $ 85,792,883 LIABILITIES AND NET ASSETS Accounts payable and accrued expenses $ 821,882 $ 26,117 $ 847,999 $ 877,460 $ 26,118 $ 903,578 Gift annuities payable - 20,968 20,968-48,740 48,740 Total liabilities 821,882 47,085 868,967 877,460 74,858 952,318 Net assets Unrestricted Undesignated 2,106,404-2,106,404 1,918,393-1,918,393 Invested in property and equipment 856,508-856,508 908,031-908,031 2,962,912-2,962,912 2,826,424-2,826,424 Board designated - 71,027,694 71,027,694-73,744,146 73,744,146 Total unrestricted 2,962,912 71,027,694 73,990,606 2,826,424 73,744,146 76,570,570 Temporarily restricted 1,770,204 671,815 2,442,019 2,077,964 899,285 2,977,249 Permanently restricted - 5,302,746 5,302,746-5,292,746 5,292,746 Total net assets 4,733,116 77,002,255 81,735,371 4,904,388 79,936,177 84,840,565 Total liabilities and net assets $ 5,554,998 $ 77,049,340 $ 82,604,338 $ 5,781,848 $ 80,011,035 $ 85,792,883 See accompanying notes to financial statements. 3.

STATEMENTS OF ACTIVITIES Year ended June 30, 2016 Revenue and public support Unrestricted Board Temporarily Permanently Total Operating Designated Total Restricted Restricted All Funds Contributions $ 955,547 $ 2,590,175 $ 3,545,722 $ 352,745 $ 10,000 $ 3,908,467 Investment income (net of management fees of $55,072) - 1,043,377 1,043,377 259,283-1,302,660 Net realized gains on sales of investments - 1,446,435 1,446,435 - - 1,446,435 Net change in unrealized gain/loss on investments - (2,422,397) (2,422,397) (294,717) - (2,717,114) Investment return on endowment and investment funds designated for operations 5,374,042 (5,374,042) - - - - Release of net assets from restriction arising from satisfaction of program restrictions 852,541-852,541 (852,541) - - Tuition 65,815-65,815 - - 65,815 Other 375,070-375,070 - - 375,070 7,623,015 (2,716,452) 4,906,563 (535,230) 10,000 4,381,333 Expenses Educational programs and public awareness 5,951,712-5,951,712 - - 5,951,712 Development (fundraising) 469,089-469,089 - - 469,089 General and administrative 1,065,726-1,065,726 - - 1,065,726 7,486,527-7,486,527 - - 7,486,527 Changes in net assets 136,488 (2,716,452) (2,579,964) (535,230) 10,000 (3,105,194) Net assets Beginning of year 2,826,424 73,744,146 76,570,570 2,977,249 5,292,746 84,840,565 End of year $ 2,962,912 $ 71,027,694 $ 73,990,606 $ 2,442,019 $ 5,302,746 $ 81,735,371 See accompanying notes to financial statements. 4.

STATEMENTS OF ACTIVITIES Year ended June 30, 2015 Unrestricted Board Temporarily Permanently Total Operating Designated Total Restricted Restricted All Funds Revenue and public support Contributions $ 710,284 $ 483,447 $ 1,193,731 $ 920,777 $ 111,500 $ 2,226,008 Investment income (net of management fees of $51,936) - 2,118,408 2,118,408 311,696-2,430,104 Net realized gains on sales of investments - 2,518,122 2,518,122 4,086-2,522,208 Net change in unrealized gain/loss on investments - (1,379,073) (1,379,073) (307,851) - (1,686,924) Investment return on endowment and investment funds designated for operations 4,907,506 (4,907,506) - - - - Release of net assets from restriction arising from satisfaction of program restrictions 1,429,293-1,429,293 (1,429,293) - - Tuition 29,343-29,343 - - 29,343 Other 346,098-346,098 - - 346,098 7,422,524 (1,166,602) 6,255,922 (500,585) 111,500 5,866,837 Expenses Educational programs and public awareness 5,593,324-5,593,324 - - 5,593,324 Development (fundraising) 455,545-455,545 - - 455,545 General and administrative 983,260-983,260 - - 983,260 7,032,129-7,032,129 - - 7,032,129 Changes in net assets 390,395 (1,166,602) (776,207) (500,585) 111,500 (1,165,292) Net assets Beginning of year 2,436,029 74,910,748 77,346,777 3,477,834 5,181,246 86,005,857 End of year $ 2,826,424 $ 73,744,146 $ 76,570,570 $ 2,977,249 $ 5,292,746 $ 84,840,565 See accompanying notes to financial statements. 5.

STATEMENTS OF CASH FLOWS Years ended 2016 2015 Cash flows from operating activities Change in net assets $ (3,105,194) $ (1,165,292) Adjustments to reconcile change in net assets to net cash used in operating activities Depreciation 122,026 106,761 Permanently restricted contributions (10,000) (111,500) Net realized gain on sales of investments (1,446,435) (2,522,208) Net change in unrealized gain/loss on investments 2,717,114 1,686,924 Loss on disposal of property - 20,832 Changes in operating assets and liabilities Bequest receivable 23,792 300,000 Inventory 5,789 41,893 Accounts payable and accrued expenses (55,579) (91,080) Gift annuities payable (27,772) 27,373 Net cash used in operating activities (1,776,259) (1,706,297) Cash flows from investing activities Additions to property and equipment (70,503) (185,510) Proceeds from sales of investments 18,394,660 19,732,586 Purchases of investments (16,235,146) (17,953,147) Net cash provided by investing activities 2,089,011 1,593,929 Cash flows from financing activities Contributions to endowments 10,000 111,500 Net cash provided by financing activities 10,000 111,500 Increase (decrease) in cash 322,752 (868) Cash and cash equivalents at beginning of year 296,777 297,645 Cash and cash equivalents at end of year $ 619,529 $ 296,777 Supplemental disclosures of cash flow information Interest paid on deferred compensation $ 39,418 $ 44,827 Contribution revenue from donated securities $ 1,892,724 $ 71,635 See accompanying notes to financial statements. 6.

NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES Hadley Institute for The Blind and Visually Impaired (the Institute) is a nonprofit educational institution located in Winnetka, Illinois whose mission is to promote independent living through lifelong, distance education programs for people who are blind or visually impaired, their families, and blindness service providers. Programs for non-professional students are offered free of charge; the Institute s activities are funded primarily by charitable contributions (principally from local donors) and investment return. As a result, fundraising is a critically important function and supporting service at the Institute. The Institute s significant accounting policies are described below: Basis of Presentation: In order to ensure the observance of limitations and restrictions placed on the use of available resources, the Institute maintains its financial accounts in accordance with the principles and practices of fund accounting. This is the procedure by which resources for various purposes are classified for accounting purposes into funds established in accordance with their nature and purpose. For financial reporting purposes, fund balances and related activities of the various funds are classified as either unrestricted, temporarily restricted, or permanently restricted based on the existence or absence of donor-imposed restrictions. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America on the accrual basis of accounting. The Institute s assets, liabilities and net assets are reported in the following categories: Operating funds, which include unrestricted and temporarily restricted resources, which represent the portion of expendable funds available for support of program activities. Endowment and investment funds, which represent (a) funds subject to permanent restrictions imposed by donors, which generally require the principal to be invested in perpetuity and the income be used for operating purposes, and (b) funds that have been designated by the Institute s Board of Trustees to be held for investment to be used for operating purposes and additions to property and equipment. Cash and Cash Equivalents: The Institute maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Institute has not experienced any losses in such accounts. Management believes that the Institute is not exposed to any significant credit risk on cash. Cash and cash equivalents with an original maturity of ninety days or less that are considered a portion of investments are classified and reported as investments. Investments: Investments are presented in the financial statements at fair value. Investment income, realized gains (losses), and change in unrealized gains (losses) are reflected in the statements of activities. Investments received as contributions are recorded at fair value at the date of receipt. The Institute recorded contribution revenue from donated securities of $1,892,724 and $71,635 for the years ended June 30, 2016 and 2015, respectively. The Institute s investment portfolio is subject to various risks, such as interest rate, credit and overall market volatility. Because of these risks, it is possible that changes in the fair value of investments may occur and that such changes could materially affect the Institute s financial statements. 7.

NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES Adoption of New Accounting Standard: In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-07 (ASU 2015-07), Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent). Under the amendments in this update, investments for which fair value is measured at net asset value per share (or its equivalent) using the practical expedient should not be categorized in the fair value hierarchy. ASU 2015-07 is effective for fiscal years beginning after December 15, 2016, for nonpublic business entities, and provides an option for early adoption. The Institute elected to adopt ASU 2015-07 as of and for the year ended June 30, 2016. Accordingly, investments for which fair value is measured using net asset value per share (or its equivalent) as a practical expedient have not been categorized within the fair value hierarchy. Property and Equipment: Property and equipment are stated at cost, except for donated assets, which are recorded at fair value at the time of receipt. Additions and improvements to existing property and equipment over $1,000 during the year are capitalized, while general maintenance and repairs are charged to expense. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. For building and improvements, lives range from 5 to 40 years and for equipment, lives range from 3 to 10 years. On an ongoing basis, the Institute reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amounts may be overstated. As of, management believes that no impairments exist. Gift Annuities Payable: Assets received as a result of charitable gift annuities are recorded at fair value and liabilities resulting from charitable gift annuities are recorded at the present value of estimated future payments. Revenue for charitable gift annuities is recognized at the date the agreement is established, net of the liability recorded for the present value of the estimated future payments to be made to the designated beneficiaries. Contributions: The Institute reports contributions, including unconditional promises to give, as revenue in the period the contribution or promise is received. Contributions of cash and other assets are reported as restricted support if received with donor stipulations that limit the use of the contribution. Depending on the nature of the restriction, such contributions are reported as an increase in temporarily or permanently restricted net assets. Conditional promises to give are not recognized until the conditions on which they depend are substantially met. When the donor restriction expires (when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Donated Services: Donated services and other noncash donations are recorded as contributions at their estimated fair value on the date received. Many individuals volunteer their time and perform a variety of tasks that assist the Institute with its programs and administration, but these donated services are not reflected in the financial statements because they do not meet the requirements for inclusion. Contributions of services are recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. For fiscal 2016 and 2015, the Institute recorded in-kind contribution revenue under other revenue in the statements of activities of approximately $300,000 and $345,000, respectively, for donated printing services. 8.

NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES Deferred Compensation: The Institute has a deferred compensation arrangement with a former employee. The employee has retired and the Institute is in the process of making distributions as required under the agreement. The agreement requires equal quarterly payments of $25,889 including interest at a rate of 9% through April of 2021. The liability related to this arrangement, which is included in the accounts payable and accrued expenses line on the statement of financial position, totaled approximately $397,000 and $461,000 as of, respectively. Functional Expenses: Operating expenses directly identified with a functional area are charged to that area and, where these expenses affect more than one area, they are allocated on the basis of employee hours. Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, the Institute s administration makes estimates and assumptions affecting the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Income Tax Status: The Institute, an Illinois nonprofit corporation, has received a letter from the Internal Revenue Service indicating that the Institute is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, except for taxes pertaining to unrelated business income, if any. The Institute has concluded there were no material uncertain tax positions at. The Institute does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. In the event the Institute incurred interest or penalties related to unrecognized tax positions, these amounts would be recognized in interest and income tax expense, respectively. However, the Institute has no amounts paid or accrued for interest or penalties as of. There are no ongoing federal, state or local tax audits. 9.

NOTE 2 - INVESTMENTS AND FAIR VALUE MEASUREMENTS Investments, at fair value, at consisted of the following: 2016 2015 Cash and equivalents $ 418,076 $ 328,288 Mutual funds: Government fixed income 4,564,307 3,511,914 Mortgage backed fixed income 3,188,389 5,347,053 Corporate fixed income 4,737,698 2,532,984 U.S. equities 29,166,124 31,169,989 International equities 14,962,540 16,086,508 Alternative investments: Real estate funds 9,794,518 9,279,176 Hedge funds 14,287,997 11,229,031 $ 81,119,649 $ 79,484,943 Investment redemption receivable - 5,064,899 $ 81,119,649 $ 84,549,842 Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Institute uses various methods including market, income, and cost approaches. Based on these approaches, the Institute often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Institute utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Institute is required to classify the instrument within the fair value hierarchy. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity s own assumptions about the assumptions that market participants would use in pricing an asset or liability. 10.

NOTE 2 - INVESTMENTS AND FAIR VALUE MEASUREMENTS In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Investments using Net Asset Value (NAV) per share (or its equivalent) as a fair value expedient have not been classified in the fair value hierarchy. These investments are presented as Other in the following tables to permit reconciliation of the fair value hierarchy table to the total investments at fair value presented in the Statement of Financial Position. The Institute s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The valuation methodologies used for instruments at fair value are described below: Cash and cash equivalents: Fair values of money market funds are estimated to approximate deposit account balances, payable on demand, as no discounts for credit quality or liquidity were determined to be applicable (Level 2 inputs market approach). Mutual Funds: These investments consist of mutual fund holdings primarily invested in equity securities, fixed income funds, and real estate funds. The fair value of these investments are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs market approach). Alternative investments: Investments in hedge funds and real estate funds are reported at fair value based on net asset values (NAV) provided by the external investment manager as of the date of their most recent audited financial statements, adjusted for cash receipts, cash disbursements and other anticipated income or loss. The NAVs of the investment funds are determined on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. The managers utilize standard valuation procedures and policies to assess the fair value of the underlying investment holdings to derive NAV. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. The fair value of the Institute s investments in investment limited partnerships generally represents the amount the Institute would expect to receive if it were to liquidate its investment in the investment limited partnerships excluding any redemption charges that may apply. The partnerships have annual, quarterly, or weekly redemption periods with notice periods ranging from 5-90 days. At, the Institute had unfunded commitments of approximately $790,000 and $1,500,000 related to hedge fund investments, respectively, and no unfunded commitments related to the real estate funds investment. Unfunded commitments represent capital calls which can be made at the discretion of the general partner within contractual limits. These commitments do not represent obligations required to be accrued on the Statements of Financial Position. The Institute s hedge fund holdings invest primarily in other hedge funds that invest primarily in exchange traded equity and debt securities and private equity investments. The Institute s real estate funds holding invests primarily in core stable institutional quality office, retail, industrial and multi-family residential properties that are substantially leased and have minimal deferred maintenance or functional obsolescence. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risks associated with investing in those instruments. 11.

NOTE 2 - INVESTMENTS AND FAIR VALUE MEASUREMENTS The following table summarizes investments according to the fair value hierarchy as of June 30, 2016: Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Other Total 2016 Cash and equivalents $ - $ 418,076 $ - $ - $ 418,076 Mutual funds: Government fixed income 4,564,307 - - - 4,564,307 Mortgage backed fixed income 3,188,389 - - - 3,188,389 Corporate fixed income 4,737,698 4,737,698 U.S. equities 29,166,124 - - - 29,166,124 International equities 14,962,540 - - - 14,962,540 Alternative investments: Real estate funds - - - 9,794,518 9,794,518 Hedge funds - - - 14,287,997 14,287,997 Total investments recorded at fair value $ 56,619,058 $ 418,076 $ - $ 24,082,515 $ 81,119,649 The following table summarizes investments according to the fair value hierarchy as of June 30, 2015: Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Other Total 2015 Cash and equivalents $ - $ 328,288 $ - $ - $ 328,288 Mutual funds: Government fixed income 3,511,914 - - - 3,511,914 Mortgage backed fixed income 5,347,053 - - - 5,347,053 Corporate fixed income 2,532,984-2,532,984 U.S. equities 31,169,989 - - - 31,169,989 International equities 16,086,508 - - - 16,086,508 Alternative investments: Real estate funds - - - 9,279,176 9,279,176 Hedge funds - - - 11,229,031 11,229,031 Total investments recorded at fair value $ 58,648,448 $ 328,288 $ - $ 20,508,207 $ 79,484,943 Investment redemption receivable 5,064,899 Total investments $ 84,549,842 12.

NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment at consisted of: 2016 2015 Land $ 39,908 $ 39,908 Buildings and improvements 2,848,070 2,844,470 Equipment 1,583,195 1,516,292 4,471,173 4,400,670 Accumulated depreciation (3,614,665) (3,492,639) $ 856,508 $ 908,031 NOTE 4 - EMPLOYEE BENEFIT PLANS The Institute maintains a defined contribution retirement plan. The plan is a target benefit plan, which specifies an annual benefit to be paid to employees at normal retirement age, but the amount is a goal, not a guarantee. The contribution rates are specific for each employee and are established to provide the stated benefit at normal retirement age. The contributions are allocated to each employee s individual account and each employee directs how his or her contributions are to be invested among the various investment options. The benefits received are based on the accumulated value of each employee s account at retirement. The Institute s contribution for eligible employees was approximately $435,000 and $418,000 for fiscal years 2016 and 2015, respectively. The Institute also provides a tax sheltered retirement program in accordance with the provisions of Section 403(b) of the Internal Revenue Code, whereby it makes contributions equal to 50 cents for each dollar of payroll reduction contribution up to $1,200 and 25 cents for each dollar of payroll reduction contribution above $1,200, subject to IRS limitations. The Institute s contribution was approximately $119,000 and $116,000 in 2016 and 2015, respectively. 13.

NOTE 5 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets were available for the following activities at : 2016 2015 Audio $ 2,659 $ 2,780 Awards ceremony 10,870 28,032 Entrepreneurship 481,040 523,069 Communications 482,218 533,113 Course development 417,810 606,627 Everitt room repairs 3,131 3,633 Videos - 22,397 Florida recruiting 43,201 43,201 Independent living and low vision 1,275 48,867 Reference materials 2,177 2,801 Low vision 176,979 311,468 Older blind 6,972 8,718 Leadership 137,865 149,980 Texas recruiting 71,432 71,432 Student scholarship 23,353 34,453 Veterans 572,911 577,625 Video equipment 8,126 9,053 $ 2,442,019 $ 2,977,249 14.

NOTE 5 - TEMPORARILY RESTRICTED NET ASSETS The following is a summary of amounts released from restriction: 2016 2015 Audio $ 121 $ 4,879 Awards ceremony 12,433 16,130 Baby braille - 15,000 Braille instruction - 4,642 Entrepreneurship 224,378 232,977 Communications 33,434 32,603 Course development 277,298 338,342 Deaf/blind activity - 231,138 e-hadley - 136,000 Enjoying Birdsong - 7,198 Everitt room repairs 501 1,080 General purpose - 100,000 Videos 22,397 - Independent living and low vision 43,059 88,103 Landscaping - 5,000 Reference materials 536 547 Low vision 217,658 197,877 Leadership 5,749 5,830 Student scholarship 7,391 6,135 Veterans 6,658 4,505 Video equipment 928 1,034 Youth education - 273 $ 852,541 $ 1,429,293 15.

NOTE 6 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are invested in perpetuity, the income from which is expendable to support the following activities at : 2016 2015 General Operations $ 2,468,451 $ 2,468,451 Communications 1,000,000 1,000,000 Course Development 506,464 506,464 Awards Ceremony 288,000 288,000 Independent living and low vision 279,631 269,631 Student Scholarship 245,500 185,000 Deaf/blind Activity 185,000 245,500 Braille instruction 169,700 169,700 Older blind 100,000 100,000 Blinded Veterans 25,000 25,000 Everitt room repairs 20,000 20,000 Youth Education 10,000 10,000 Reference materials 5,000 5,000 $ 5,302,746 $ 5,292,746 NOTE 7 - ENDOWMENT NET ASSETS The Institute s endowment consists of individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Institute has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA), to require the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Institute classified as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net asset is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Institute in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Institute considers the following factors in making a determination to appropriate or accumulate earnings on donor-restricted endowment funds: 16.

NOTE 7 - ENDOWMENT NET ASSETS 1. The duration and preservation of the fund; 2. The purpose of the Institute and the donor-restricted endowment fund; 3. General economic conditions; 4. The possible effect of inflation and deflation; 5. The expected total return from income and the appreciation of investments; 6. Other resources of the Institute; and 7. The investment policies of the Institute. Endowment Composition: The Institute s endowment net assets are as follows: 2016 2015 Board designated funds $ 71,027,694 $ 73,744,146 Donor-restricted funds - temporarily restricted 671,815 899,285 Donor-restricted funds - permanently restricted 5,302,746 5,292,746 $ 77,002,255 $ 79,936,177 Changes in Endowment Net Assets: Changes in endowment net assets for the years ended June 30, 2016 and 2015 are as follows: Board Designated Temporarily Restricted Permanently Restricted Total 2016 Balance, beginning of year $ 73,744,146 $ 899,285 $ 5,292,746 $ 79,936,177 Contributions 2,590,175-10,000 2,600,175 Net investment return 67,415 (35,434) - 31,981 Appropriation of endowment assets for expenditure (5,374,042) (192,036) - (5,566,078) Balance, end of year $ 71,027,694 $ 671,815 $ 5,302,746 $ 77,002,255 Board Designated Temporarily Restricted Permanently Restricted Total 2015 Balance, beginning of year $ 74,910,748 $ 1,409,758 $ 5,181,246 $ 81,501,752 Contributions 483,447 2,450 111,500 597,397 Net investment return 3,257,457 7,931-3,265,388 Appropriation of endowment assets for expenditure (4,907,506) (520,854) - (5,428,360) Balance, end of year $ 73,744,146 $ 899,285 $ 5,292,746 $ 79,936,177 Funds with Deficiencies: From time to time, the fair value of assets associated with individual donorrestricted endowment funds may fall below the level that the donor or Illinois UPMIFA requires the Institute to retain as a fund of perpetual duration. Deficiencies of this nature will be reported in unrestricted net assets. These deficiencies result from unfavorable market fluctuations that occur after the investment of new permanently restricted contributions and continued appropriation for certain programs that are deemed prudent by the Board. As of, there were no individual donor restricted endowment funds with deficiencies. 17.

NOTE 7 - ENDOWMENT NET ASSETS Return Objectives and Risk Parameters: The Institute has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Institute must hold in perpetuity or for a donorspecified period(s) as well as board-designated funds. Under this policy, as approved by the Board, the endowment assets are invested in a manner intended to achieve a rate of return consistently 3% to 5% over the rate of inflation (as measured by the National Consumer Price Index), on an after-fee-basis over a typical market cycle of no less than three years and no more than five years. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives: To satisfy its long-term rate-of-return objectives, the Institute relies on a total return strategy in which returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Institute targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy: The Institute has a policy of appropriating an estimate of expenditures each year as part of a formal, annual budget. Changes to appropriations are also approved during the year as unexpected needs arise. In establishing this policy, the Institute considered the long-term expected return on its endowment and historical levels of contributions. NOTE 8 - SUBSEQUENT EVENTS Management has performed an analysis of the activities and transactions subsequent to June 30, 2016 to determine the need for any adjustments to and/or disclosures within the audited financial statements for the year ended June 30, 2016. Management has performed their analysis through September 28, 2016, the date the financial statements were available to be issued. 18.