Channel 5 Public Broadcasting Inc.

“Channel 5's endowment (the endowment) consists of three endowment funds established by donors to provide annual funding for specific activities and general operations. The endowment also includes certain unrestricted net assets designated for endowment by the board of trustees. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The board of trustees has interpreted the nevada uniform prudent management of institutional funds act (upmifa) as requiring 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. At september 30, 2017 and 2016, there were no such donor stipulations. As a result of this interpretation, channel 5 classifies as permanently restricted net assets (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts donated to endowment, and (c) unrealized and realized gains (losses) to the endowment made in accordance with the direction of the applicable donor gift instrument at the time accumulation is added. The remaining portion of the donor-restricted endowment (interest and dividends) is classified as temporarily restricted net assets until those amounts are appropriated by the board of trustees in a manner consistent with the standard of prudence prescribed by upmifa. Channel 5 considers the following factors in making a determination to appropriate or accumulate endowment funds: - the duration and preservation of the fund - the purposes of channel 5 and the board-designated endowment fund - general economic conditions; - the possible effect of inflation and deflation - the expected total return from income and appreciation of investments - other resources of channel 5 - the investment policies of channel 5”

“Channel 5 is organized as a nevada nonprofit corporation and has been recognized by the internal revenue service (irs) as exempt from federal income taxes under section 501(a) of the internal revenue code as organization described in section 501(c)(3), qualifies for the charitable contribution deduction under section 170(b)(1)(a)(vi), and has been determined not to be a private foundation under section 509(a)(1). Channel 5 is annually required to file a return of organization exempt from income tax (form 990) with the irs. In addition, channel 5 is subject to income tax on net income that is derived from business activities that are unrelated to our exempt purpose. We have determined that we are not subject to unrelated business income tax and have not filed an exempt organization business income tax return (form 990-t) with the irs. We believe that channel 5 has appropriate support for any tax positions taken affecting its annual filing requirements, and as such, does not have any uncertain tax positions that are material to the financial statements. We would recognize future accrued interest and penalties related to unrecognized tax benefits and liabilities in income tax expense if such interest and penalties are incurred. Channel 5's form 990 and other income tax filings required by state, local, or non-u.s. Tax authorities are no longer subject to tax examination for years before 2012.”