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“As a child of Egyptian immigrants, growing up was a very difficult thing. I always felt like I didn’t quite fit in. Sesame Street was my place of refuge. It was a happy place. I remember feeling that it was okay to be different; that on Sesame Street it didn’t matter if you were blue or if you were green or if you were yellow.”

– teacher and lifelong Sesame Street fan

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Respect and Understanding

“Today we plant the seed; tomorrow is in our hands. We know a better world is up to us.”

These words, sung by children in Hebrew and Arabic, are part of the theme song that opens and closes every episode of Sesame Stories, the groundbreaking media initiative helping Jordanian, Palestinian, and Israeli children learn about themselves and one another as a bridge to a better tomorrow.

We know, of course, that it’s never that simple. But we also know that media can be used effectively to foster respect and understanding among children across and within cultures and countries. For the last three decades, Sesame Workshop has been at the forefront of this effort: using Sesame Street in the United States and in coproductions around the world to help children develop the skills to challenge ignorance, dispel stereotypes and champion diversity – skills that contribute, in no small way, to sustaining peace in an increasingly complex and interconnected world.

In addition to Sesame Stories, targeted efforts to promote respect and under- standing include Rruga Sesam and Ulica Sezam, a Sesame Street adaptation in Albanian and Serbian respectively, that helps children from different backgrounds in Kosovo learn about one another. And here in the United States “Global Grover,” a daily segment of Sesame Street, introduces children to the ways in which their counterparts live around the world.

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“Sesame Street has meant the world to me! As a child it was my first teacher, my first English tutor…. As an only child in a new country it was also my best friend; it gave me a sense of belonging…. As a parent, I see the enthusiasm on my son and daughter’s [faces] as they watch Elmo and crew…. They have learned so much – colors, alphabet, numbers, sharing, life… [The show is] [rein]forcing their desire to learn….”

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School Readiness

Entering school “ready to learn” requires more than recognizing letters and numbers. It requires physical skills and the abilities to listen, get along with others, and develop friendships. It requires a sense of mastery over behavior and emotions and the abilities to predict and recognize the consequences of actions. It requires enthusiasm for learning.

Sesame Workshop is unique in its focus on the full range of child development. We embrace the “whole child,” helping develop the cognitive, social, emotional, and physical skills necessary for children not only to be ready for school but to reach for a bigger, better world.

This approach is as central to Sesame Street abroad as it is domestically, particularly in places where access to educational opportunity is limited. Our coproductions in Egypt and Mexico promote school readiness for all children and soon in Bangladesh and India, our work will support a new focus on the importance of early childhood education.

Here at home, we’re in the early stages of a new educational outreach project for children in rural America. Created in collaboration with the Early Childhood Institute at Mississippi State University and “Between the Lions” producers WGBH and Sirius Thinking, Ltd., the Rural Literacy Project will consist of video, audio, DVD, and print materials for children, caregivers, and teachers to help redress gaps in school readiness among children in rural regions.

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“My friend…is Nomfundo.... Her mom died a few weeks ago…. I feel sad because my friend is HIV positive. Other children they don’t play with her and they don’t love her. My friend is still my friend and I love her. Everyday I’m watching Takalani Sesame with my friend. Moshe and Kami on Takalani Sesame they care about people who are HIV positive…”

– young Takalani Sesame fan from Eshowe Township, South Africa

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HIV/AIDS Education

Kami, the vibrant Muppet on Takalani Sesame, the South African adaptation of Sesame Street, is sad and doesn’t want to play. “Why not?” asks her Muppet friend, Zuzu, curious and concerned. “The other children at school don’t want to play with me because I’ve got HIV,” Kami explains. “They don’t want to touch me because they think I will make them sick.” Throwing her arms around Kami, Zuzu exclaims, “…but you can’t get HIV just by touching someone. We’re not scared to play with you, because we know that we can’t get HIV just by being your friend!”

Clear, simple statements spoken by characters children love and trust, state- ments that empower children with age-appropriate information to cope with the consequences of HIV/AIDS – these are the hallmarks of Takalani Sesame and its pioneering HIV/AIDS curriculum, launched in 2002 to address the devastating impact of the disease on South Africa’s children.

Developed in collaboration with coproducing partners, the curriculum centers on the adventures of Kami and provides children and their caregivers with basic knowledge about the disease, skills for coping with profound loss, and a basis for altering behaviors that perpetuate HIV- and AIDS-related stigmas. Since her debut, Kami has been warmly received and widely recognized, helping to increase public discourse on issues typically constrained by prejudice and silence.

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“I learn everyday something new from my friends Khokha, Filfil, and Nimnim, which helps me to become a better person.”

“I like Khokha because she encourages us to go to school…”

– young viewers of Alam Simsim

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Girls’ Education

“My name is Khokha. I am a young girl. When I grow up, I’ll be a doctor. I’ll be a pilot or a ship captain or I could also be a lawyer….” So sings Khokha, the bubbly female Muppet in Alam Simsim, the Egyptian adaptation of Sesame Street, as she imagines what she’ll be when she grows up. Central to the scene is something subtle but equally powerful: As Khokha happily sings, the male cast around her – two men, a boy, and two Muppets – affirm each choice, lending support and encouragement to a young girl’s sense of possibility.

On Sesame Street, as in all Workshop productions, we strive to help all children reach their highest potential by modeling a sense of what’s possible and making sure girls, Muppets, and everyone else, no matter their color, gender, size – or stripe – are not defined by stereotypes.

This is particularly potent in those parts of the world newly committed to lifting the status of women. In Egypt, for example, where illiteracy among girls is disproportionately higher than among boys, one of the central themes of Alam Simsim is to promote girls’ education. The same is true in Afghanistan where Koche Sesame, the Afghani adaptation of Sesame Street, endorses equal access to educational opportunity.

By modeling girls engaged in academic pursuits such as reading, studying, and going to the library, the program helps girls – and just as important, boys – broaden their sense of what constitutes a woman’s role in society. After all, for many children, media is the lens through which they view the world; it is both the reflector and the definer of cultural norms.

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300,000 “Sesame Workshop’s...’Healthy children under the age of 18 are directly involvedHabits’ in armed campaign conflicts worldwide offers a new 6,000,000and welcome opportunity to... childrenhelp inaddress the United States one are ofobese our nation’s 800,000greatest public health threats.... SouthBy helpingAfrican children preschool-aged became HIV-positive in 2002 children 1,000,000learn lessons about healthy eating womenand inexercise...we Egypt cannot read or write can...improve 2,000,000the health of our next generation.” million Mexican children do not attend school

– Senate Majority Leader 500,000Bill Frist, R-Tenn. AfghanMay 2004 girls launch attended of Sesame school Workshop’s under the Taliban “Healthy Habits for Life” initiative 1,000,000 women in Egypt cannot read or write 2,000,000 million Mexican children do not attend school SW_AR04_01.13_1222 1/20/05 6:30 PM Page 18

15,000,000 Healthy Habits for Life children have been orphaned by HIV/AIDS, as of 2003. Nowhere is this epidemic more devastating to children than in sub-Saharan Africa, home to 80% of those orphaned by the disease. Sesame Workshop has long modeled strategies to promote good health on UNICEF Report: "Childhood Under Threat: The State of the World’s Children 2005" Sesame Street and in other Workshop endeavors. But in response to alarming trends in childhood obesity and its attendant illnesses, the Workshop has turned up the volume, launching a comprehensive, multiyear initiative to help 17,600,000 preschoolers and their families develop “Healthy Habits for Life.” children under age 5 worldwide are estimated to be overweight.

Recognizing that maintaining good health is as central to a child’s success as In the United States, the prevalence of obese children aged 6 to 11 years has doubled since the 1960s. learning ABCs and 123s, the Workshop – in partnership with the US Department World Health Organization: Global Strategy on Diet, Physical Activity and Health, 2003. of Health and Human Services, PBS Kids, The Parenting Group, the National Association for the Education of Young Children, The Ad Council, and the YMCA of America – is creating content in various media to help children learn how to 20,000,000 take care of their bodies, and help parents help their children do so. children have been forced by conflict or human rights violations to leave their homes in the last decade. Informed by an advisory board of top health, nutrition, fitness, and education UNICEF Report: "Childhood Under Threat: The State of the World’s Children 2005" experts, the “Healthy Habits for Life” curriculum will span the 36th season of Sesame Street. It will also include public service announcements; new book titles and Sesame Street Magazine content; a bilingual, educational outreach 65,000,000 kit; an interactive museum exhibit in fifteen cities; a new online area on of the world’s primary-school-age girls do not attend school. SesameStreet.com; theme-based entertainment; and new home video, DVD, Implementation of the United Nations Millennium Declaration, Report of the Secretary-General, 2004. and audio releases – all providing extended opportunities for children to establish healthy habits now, to last a lifetime.

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President’s Letter

progress is possible… a message from the President one millions child at a time of children each and everyday

Making a difference – one child at a time, millions of children the world over. That’s what it’s about for us: effecting change on a scale unique to mass media, yes, but change that moreover takes hold and grows, one child at a time.

Nothing expresses this more clearly than the letters, e-mails, drawings, and other direct contact we have with our audiences, young and old, here and around the world.

This year’s annual report features quotes from several such exchanges. Each is a reflection of the impact of our work on one individual, which also calls attention to children’s greater needs – needs that go beyond learning ABCs and 123s.

After all, children live in no less “real” a world than adults do. From its inception, the Workshop has recognized and honored the way children experience their environments. We do this not by holding fast to an unchanging view of children or the challenges they face but by embracing and incorporating new issues into our programming as new needs arise.

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President’s Letter President’s Letter

“…a dynamic collaboration among educators, researchers, and producers to set goals, establish curricula, monitor impact, and continually raise the bar.”

This is why, in addition to promoting school readiness in more than 120 countries, groups, corporations, philanthropists, educators, broadcasters, and many others our work includes initiatives to reduce the stigma associated with HIV/AIDS in South coalesce around our projects, united in the shared purpose of using media to make Africa; encourage gender equality in Egypt and Afghanistan; prevent childhood a difference in children’s lives. obesity and promote healthy lifestyles in the United States; and foster cross-cultural If there is one factor responsible for our success, besides a strict adherence to mis- respect and understanding among children in Israel, Jordan, and Palestine, as well sion, it is research – research that helps us understand children’s changing needs as among Albanian- and Serbian-speaking children in Kosovo. and how media can best address them. The same spirit of innovation and experi- Our ability to address children’s needs derives from a process first pioneered with mentation that suffused this organization 36 years ago continues today, perhaps Sesame Street in 1969, a dynamic collaboration among educators, researchers, and even more so, with research called on to maximize the educational potential of mul- producers to set goals, establish curricula, monitor impact, and continually raise the tiple media across multiple continents and multiple cultures. bar. The Sesame Workshop Model has proven effective around the world as a flexible Of course, the truest measure of our success will always be the meaningful differ- framework for the expression of local norms and indigenous social practices, producing ences we make in children’s lives. More than 1,000 studies on record speak to this a range of educational outcomes in different countries to meet different needs. efficacy, but none more powerfully than the letters and comments we cite here. And it’s more than television. We apply the model across multiple media – radio, They give us great hope that progress is possible. And there are so many more books, magazines, computers, film, video, and educational outreach – to reach encouraging signs: The schoolgirl in Paghman, Afghanistan who learns not only children wherever they are and with whatever resources are available to them. about letters and numbers from Koche Sesame, the Afghani adaptation of Sesame Street, but is also encouraged to believe in herself and all she can achieve; the We serve as a catalyst for change that brings together local stakeholders in the public daughter of Egyptian immigrants to this country, who credits watching Sesame Street and private sectors. Government ministries, development agencies, foundations, civic as a child with her sense of belonging as well as her career choice as a teacher;

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President’s Letter

“…through education we can make measurable differences here and around the world, now and for generations to come.”

the 6-year-old Iraqi girl who, in the midst of war, writes to tell us that she and her For more than 35 years, Sesame Workshop younger brother love and want to be friends with the characters on Alam Simsim, our Egyptian production broadcast via satellite to Iraq and 21 other Arab nations. has been helping children learn, grow and Each is an example of progress – one child at a time. reach their highest potential. From Brooklyn I think we can all agree that education changes the course of history, that through to Kabul, we connect with millions of children education we can make measurable differences here and around the world, now and for generations to come. This was the conviction and idealism that sparked the and effect change where it matters most. creation of Sesame Street and the Workshop in the late 1960s, and even now with the world a different place, continues to sustain us. Despite all the changes of the last four decades, our vision, our values, our focus on helping children learn have remained constant. One child at a time, millions of children the world over.

Gary E. Knell President and Chief Executive Officer

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Brooklyn, New York Sesame Street

Now celebrating its 35th consecutive season, Sesame Street continues to set the gold standard for excellence in educational media, helping children in the United States develop the cognitive, emotional, physical, and social skills essential for today’s world.

Partners

Broadcast: PBS Noggin

Funding: Corporation for Public Broadcasting McDonald’s Corporation The Quaker Oats Company Unique Vacations, Inc., worldwide representatives for Beaches Resorts US Department of Education (Ready-to-Learn)

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Plaza Sésamo San Salvador, El Salvador

Premiering in Mexico in 1972, this Spanish-language adaptation of Sesame Street now broadcast throughout Latin America, the Caribbean, and the United States, promotes school readiness while showcasing cultural diversity.

Partners

Broadcast / Project: Discovery Kids Latin America Telefutura Televisa

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Paghman, Afghanistan Koche Sesame

Launched in 2004, Koche Sesame, the Afghani adaptation of Sesame Street, is an educational outreach initiative that brings to life basic lessons on literacy, numeracy, gender equity, and global cultural awareness for Afghani children. The Egyptian adaptation of Sesame Street, based on the television series Alam Simsim and translated and dubbed into Dari, includes print and video materials supported by classroom supplies that together advance educa- tional reconstruction in Afghanistan.

Partners

Project / Funding: The Government of Qatar RAND

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Sesamstrasse Berlin, Germany

Premiering in 1973, the German adaptation of Sesame Street is among our earliest international coproductions. Airing seven days a week, the program remains popular among Germany’s youngest citizens. Throughout the years, Sesamstrasse has helped children learn through discovery. More recently the program has included a special focus on helping children develop awareness of and respect for Germany's increasingly diverse population.

Partners

Broadcast: Norddeutscher Rundfunk (NDR) KiKa (Der Kinderkanal) ARD

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Rotterdam, The Netherlands Sesamstraat

Looking forward to celebrating its 30th anniversary in 2006, the Dutch coproduction of Sesame Street focuses on children’s socio- emotional development with an emphasis on music and the arts, closing every evening broadcast with a signature bedtime story.

Partners

Broadcast: Nederlandse Programma Stichting (NPS) Nederlandse Omroep Stichting (NOS)

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Sesame Stories Amman, Jordan

This groundbreaking media initiative helps Jordanian, Israeli, and Palestinian children learn about themselves and one another as a bridge to a better tomorrow in the region.

Partners

Broadcast: Funding: HOP! Channel European Union Jordan Radio and Television The Kahanoff Foundation Ma’an Network The Ford Foundation The Atlantic Philanthropies Project: Charles H. Revson Foundation Al-Quds Educational Television The Netherlands Ministry HOP! Channel of Foreign Affairs Jordan Pioneers (JP) for Joseph and Harvey Meyerhoff TV Production Family Charitable Funds Middle East Nonviolence Foreign Affairs Canada and Democracy (MEND) The Double H Foundation, Inc. Alan B. Slifka Foundation The Zanvyl and Isabelle Krieger Fund The Wolfensohn Family Foundation

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New London, South Africa Takalani Sesame

Through television, radio, and community outreach programs, the South African adaptation of Sesame Street helps preschoolers develop basic literacy and numeracy skills. And, in a country where the devastation of HIV/AIDS impacts so many children’s lives, Kami, a Muppet who is HIV-positive, conveys age-appropriate messages designed to reduce the fear and stigma associated with the disease and help children cope.

Partners

Broadcast: South African Broadcasting Corporation (SABC)

Project: South African National Department of Education

Funding: SANLAM Life Insurance Limited United States Agency for International Development (USAID)

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Ulitsa Sezam Moscow, Russia

First broadcast in 1996, this Russian coproduction focuses on helping that nation’s youngest citizens develop the skills to thrive in an open society, maintain a healthy lifestyle, and gain an awareness of and appreciation for diversity.

Partners

Broadcast: CTC NTV

Project: Ministry of Education and Science of the Russian Federation Ritm TV, a subsidiary of DIXI-TV Productions

Funding: Nestlé Food LLC

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Shkabaj, Kosovo Rruga Sesam and Ulica Sezam

Debuting in November 2004, this Sesame Street coproduction – Rruga Sesam in Albanian and Ulica Sezam in Serbian – provides children in Kosovo with critical early education skills. At the same time they promote awareness and understanding of their own culture and the multiethnic society in which they live.

Partners

Broadcast: Funding: Radio Television of Kosovo (RTK) Canadian International Children’s Television Station (DTV) Development Agency (CIDA) TV Herpce The German Institute for Foreign TV Most Cultural Relations (ifa) The Netherlands Ministry of Project: Foreign Affairs CMB Productions Organization for Security and UNICEF Cooperation in Europe (OSCE) UNICEF

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Alam Simsim Sinai, Egypt

Airing daily on Egyptian television since 2000 and throughout North Africa and the Middle East via satellite since 2003, this Egyptian adaptation of Sesame Street mobilizes media in the service of children with a particular emphasis on educating girls. An extensive outreach program deepens and extends the on-air messages, with recent research documenting gains in the areas of health, hygiene, and nutrition among children, parents, care- givers, and families.

Partners

Broadcast: Egyptian Television Middle East Broadcasting Corporation (MBC)

Project: AlKarma Edutainment Egyptian Ministry of Education

Funding: United States Agency for International Development (USAID)

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Location to come Sesame Street Japan

In September 2004, Japanese children and families, who had long benefited from the United States version of Sesame Street, celebrated the launch of their own entirely original coproduction. Using nature as a thematic springboard for showcasing Japan's unique cultural heritage, the series helps Japanese children use their imagination, think independently, appreciate diversity, and learn simple English phrases.

Partners

Broadcast: TV TOKYO Corporation

Project: ASATSU-DK Inc. Kyodo Television, Ltd. Nikkeisha, Inc. Odyssey Communications, Inc Sesame Street Partners Japan Television Tokyo Broadband Entertainment Inc. We’ve, Inc.

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Sisimpur Jossure, Bangladesh

Set to launch in April 2005, this widely anticipated adaptation of Sesame Street will provide access to educational opportunity for all Bangladeshi children. And to help build the capacity to develop and sustain such programming for generations to come, the Workshop will forge partnerships with local stakeholders, including government ministries, development agencies, foundations, civil society groups, corporations, educators, and broadcasters.

Partners

Broadcast: Bangladesh Television

Project: Nayantara Communications

Funding: United States Agency for International Development (USAID)

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Houston, Texas Dragon Tales

The number-one rated television show for preschoolers in the United States for two years running,* Dragon Tales helps children here and around the world with the “three Rs” of early childhood education: resilience, relationships, and readiness. New this year are 13 original episodes using folk stories, music and street games to highlight the Hispanic American experience.

Partners

Broadcast: PBS

Project: Sony Pictures Television

Funding: Corporation for Public Broadcasting Kellogg USA Inc. US Department of Education (Ready-to-Learn)

* Source: Nielsen, PBS PP, AA% K2-5, average of September 2002-August 2003 and September 2003- August 2004, ratings may include viewing to more than one telecast per program per day; Galaxy Explorer/PNF, AA% K2-5, total U.S. coverage, 08/26/02-08/31/03 and 09/01/03-08/29/04, 6A-6P; Dragon Tales versus all regularly scheduled children's programs 6AM-6PM, 120+ episodes M-F. SW_AR04_01.13_1222 1/20/05 6:30 PM Page 52

Happy, Healthy, Ready for School Phildelphia, Pennsylvania

Part of the “PNC Grow Up Great” program funded by The PNC Financial Services Group, Inc., this educational outreach initiative is a collection of print materials and a DVD designed to improve school readiness for children up to age 5 in Pennsylvania, Delaware, Kentucky, New Jersey, and Ohio.

Partners

Funding: The PNC Financial Services Group, Inc. SW_AR04_01.13_1222 1/20/05 6:30 PM Page 54

Major Supporters Major Supporters

Sesame Workshop gratefully acknowledges the generous support of Friedman Kaplan Seiler & Edith Cooper and Robert Taylor Daniel Burstein and Neal Shapiro and Juju Chang Adelman LLP Julie O’Connor Irwin and Concepción Federman Mr. and Mrs. Peter Solomon partners around the world who share our vision. Their commitment Hallmark Cards, Inc. Christopher B. Cerf Theodore J. Forstmann Melissa and Robert Soros The Jim Henson Company Connie Chung and Maury Povich makes our endeavors on behalf of children possible and enables us Robert Goldberg and George Stephanopoulos and The Jim Henson Legacy Betsy MacIsaac Kevin Clash Alexandra Wentworth to bring our mission to life. Leventhal, Senter & Lerman PLLC Martín Gómez Patricia Cook, Ph.D. Ben Stiller Magno Sound & Video Mr. and Mrs. Henry Grunwald Peggy Dulany Rose Styron Mele Companies, Inc. Mr. and Mrs. Murray Halpern Mr. and Mrs. Lewis Eisenberg Paul A. Volcker Corporations, Joseph and Harvey Meyerhoff $15,000 - $24,999 $2,500 - $7,499 Morgan, Lewis & Bockius LLP Cheryl and Fred Halpern Barbara D. Finberg Ellen Wartella Foundations, Government, Family Charitable Funds The Cole Family Foundation The Bloomingdale’s Fund of the Proskauer Rose LLP Kati Marton and Mark Gallogly Alan and Barbara Washkowitz and Donor Agencies NAMM (International Music Federated Department Stores The Zanvyl and Richard Holbrooke Products Association) Foundation Robinson Lerer & Sarah and Seth Glickenhaus Mr. and Mrs. Lester Isabelle Krieger Fund $1,000,000 + Montgomery, LLC Ann and Vernon Jordan Wunderman Stavros S. Niarchos Foundation The Mark & Anla Cheng Agnes Gund and Daniel Shapiro Macy’s Parade Campbell Soup Company Kingdon Foundation Rosie’s For All Kids Foundation Gary E. Knell and Kim Larson Phyllis Harrison-Ross, M.D. $500 - $999 The Parenting Group Corporation for $100,000 - $249,999 The Children’s Health Fund WNYC Radio Deborah Slaner Larkin Cheryl Henson and Ed Finn Susan Akbarpour and Public Broadcasting Simpson Thacher & Bartlett LLP Anonymous Evelyn G. Lipper Foreign Affairs Canada Credit Suisse First Boston Anne and John Herrmann Faraj Aalaei European Union Thirteen/WNET Sanford M. Litvack, Esq. Organization for Security & Hasbro, Inc. Peter Jennings and Kayce Freed Ralph Bartel Federal Emergency Cooperation in Europe (OSCE) VEE Corporation Individuals HBO Jamie and Michael Lynton David Brown and Management Agency Carol Kane W.L.S. Spencer Foundation Wolfensohn Family Foundation Helen Gurley Brown Investcorp International Inc. $50,000 - $99,999 Catie and Donald B. Marron The Kahanoff Foundation Mr. and Mrs. Hans W. Kertess United Nations Children’s Fund Amanda Burden Kauff McClain & McGuire LLP Joan Ganz Cooney and Maurice and Elizabeth Myers Kellogg USA, Inc. (UNICEF) $7,500 - $14,999 Mr. and Mrs. Brad Klatt Peter G. Peterson Amy Entelis The Leonard and Evelyn Lauder Lionel I. Pincus and McDonald’s Corporation AEA Investors Mr. and Mrs. Murray Kushner Foundation Vincent and Anne Mai HRH Princess Firyal Dr. and Mrs. Yale Fisher $50,000 - $99,999 Karyn and Kevin T. Lamb National Science Foundation American Greetings Corporation David Rockefeller Canadian International and the Employees of American MetLife Foundation Clarence Fogelstrom Nestlé Food LLC $25,000 - $49,999 Joan Lombardi Development Agency (CIDA) Greetings Corporation National Geographic Society Jeanne and Nicolas Rohatyn Mr. and Mrs. Steven Goldby The PNC Financial Jane Hartley and Dr. Loretta Long Fisher-Price Amtrak The Pierre and Wendy and Eric Schmidt Gould Shenfeld Family Services Group, Inc. Ralph Schlosstein Lili Lynton and Michael Ryan Pamela Omidyar Fund Merrill Lynch & Co., Inc. Lisbeth R. Barron on behalf of Kenneth and Marisa Starr Linda and Morton Janklow Prudential Foundation Mona Mangan Bear, Stearns & Co. Inc. Peninsula Community Fund National Conference for $15,000 - $24,999 Preston Robert Tisch Sheryl Leach The Quaker Oats Company Cynthia McFadden Community and Justice Busch Entertainment Piper Rudnick LLP Richard Beattie Anastasia Vournas and Gina Maya and Charles H. Revson Foundation Corporation/ Sesame Place Mr. and Mrs. Lloyd Morrisett Nexsam Technologies Steven Rattner and P. Maureen Toni and Dwight Bush J. William Uhrig Richard Capelouto SANLAM Life Insurance Limited The Gina and David Chu White Foundation George B. and Sony Music Entertainment Judy and Steven Gluckstern Joanne and Cyrus Walker Mr. and Mrs. Chris Ream Foundation Elinor Bunin Munroe South African Broadcasting Ross Stores, Inc. Anonymous Jessica and Jerry Seinfeld Jeffrey and Lynn Watanabe Marcia Robbins-Wilf Corporation Davis Wright Tremaine LLP George and Joan Newcombe Scholastic Scott and Lisa Stuart The Honorable Kimba M. Wood John G. Roche Unique Vacations, Inc., $25,000 - $49,999 Deloitte Hannah Pakula Sony Corporation of America and Frank E. Richardson worldwide representatives Rodney and Sukey Wagner Robert C. Sheehan Bank of America The Walt Disney Company Kimberly and Jean Putzer for Beaches Resorts Warner Brothers Consumer Ann and Bill Ziff Mr. and Mrs. Kevin Steinberg The German Institute for Foreign Foote Cone & Belding Products Deborah Roberts and Al Roker U.S. Agency for International $7,500 - $14,999 Anonymous Cultural Relations (ifa) HIT Entertainment plc Annalee Van Kleeck Development (USAID) Waste Management Charitable Afsaneh Beschloss Senator and The Double H Foundation J.P. Morgan Chase & Co. Foundation $1,000 - $2,499 Mrs. John D. Rockefeller IV U.S. Department of Education Rachel Hines and For more information Maya Ajmera The Helen Hotze Haas Kaufman Astoria Studios We Are Family Foundation Michael Cembalest Mr. and Mrs. Felix Rohatyn about how you can support $500,000 - $999,999 Foundation Mr. and Mrs. Luis Alvarez Sesame Workshop please MGM Home Entertainment Margaret Loesch and Dr. and Mrs. Mitchell Rosenthal $1,000 - $2,499 contact: The Atlantic Philanthropies ICTV The Hatchery, LLC New School University Gigi Arledge Glenn Ross The Archstone Partnerships Jaime Greenberg The Ford Foundation Markle Foundation David Westin Joanna Barsh and Lizzie and Jeffrey Rudnick Novell, Inc. Vice President, Bloomingdale’s David Garbasz The Netherlands McKinsey & Company, Inc. Anonymous Prudential Financial Richard E. Salomon Philanthropic Development Ministry of Foreign Affairs Nickelodeon Networks Broadway Video Candice Bergen and (212) 875-6451 Public Broadcasting Service Julienne Scanlon Bernard van Leer Foundation James E. and Diane W. Burke $2,500 - $7,499 Marshall Rose RAND Phil Schlein Anita Stewart Random House Children’s Books Foundation, Inc. Mr. and Mrs. John Bolger Vice President, Alan B. Slifka Foundation David and Mary Boies $250,000 - $499,999 Frances Schultz Corporate Sponsorship Sidley Austin Brown & Wood KL Felicitas Foundation Marcia M. Carlucci Marie Brenner and Starbucks Coffee Company (212) 875-6889 American Institutes for Research Ernest Pomerantz Kenneth W. Schwab Transworld Television Corporation Fox Family Foundation Jessica Reif Cohen and StorageTek Or visit: Merrill Lynch & Co., UBS Bob Cohen Steve and Gretchen Burke Steven Shamah sesameworkshop.org/edonations Foundation, Inc. Toys "R" Us Children’s Fund, Inc.

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Liscensees Management Discussion and Analysis

Sesame Workshop’s Financial Strategies

To sustain long-term viability and support its educational initiatives here at home and around the world, Sesame Licensing to Support Educational Programs Workshop employs three financial strategies. The first is to assemble public and private funding partnerships. As a nonprofit organization, Sesame Workshop relies not only on This strategy was applied from the start with Sesame Street, the Workshop’s flagship preschool series, whose philanthropic support but also on the income from the sales of initial funding partners included the US Department of Education, the Corporation for Public Broadcasting, the Carnegie Corporation of New York, and the Ford Foundation. Over the years, funding alliances have been formed Sesame Street and other Workshop products to fund educational with a variety of government, corporate, and philanthropic partners to support other mission-related endeavors. programs that help children everywhere learn and grow. Sesame Workshop’s second financial strategy depends on self-generated revenue. In this arena, the organization We partner with best-in-class licensees that believe in our brands has successfully undertaken a range of activities that enable it to generate revenue while remaining true to its educational mission. These activities include domestic and foreign distribution of local-language television programs, and share our vision. Long-term and committed partners like Sony international coproductions, global product licensing, book and magazine publishing, and overseas syndication Wonder, Fisher-Price, Random House, The Parenting Group (Sesame of our television series Sesame Street; Dragon Tales; Sagwa, The Chinese Siamese Cat; Out There; and Play With Street Magazine), Busch Entertainment Corporation (Sesame Place), Me Sesame. and VEE Corporation (Sesame Street Live), are essential to advancing The Workshop’s third financial strategy, similar to other nonprofit educational institutions, is to maintain an invest- our educational initiatives around the world. ment portfolio to ensure the organization’s long-term financial viability and to provide financing for educational activities that are otherwise difficult to fund.

Sesame Workshop’s future financial vitality depends on its abilities to develop new sources of revenue for current and future educational projects. Therefore, the Workshop has stepped up its efforts to secure funding from government agencies and institutional and individual donors. In a competitive marketplace dominated by large, for-profit media companies, this shift in funding strategy is the most effective way to support the Workshop’s programs and initiatives for years to come.

public support and revenue

17% institutional & individual giving 9% government & other agencies 6% program reimbursements 68% net from licensing

34 2004 Annual Report Sesame Workshop Photograph by Ross Whitaker Sesame Workshop 2004 Annual Report 35 SW_AR04_01.13_1222 1/20/05 6:30 PM Page 58

Management Discussion and Analysis Management Discussion and Analysis

Fiscal Year 2004 Financial Conditions and Liquidity The second significant transaction in fiscal year 2003 was the prepayment of the $56.0 million outstanding loan due

The financial condition of Sesame Workshop continued to be strong in fiscal year 2004. The Consolidated to EM.TV/Henson at a discount rate of 11.2%, resulting in a nonoperating gain of $5.2 million. This loan was part Statement of Activities reflects an operating loss of $1.8 million, which is $0.7 million higher than fiscal year 2003. of the Workshop’s acquisition of the Muppet characters of Sesame Street from EM.TV/Henson in fiscal year 2001.

Revenues increased by $3.8 million, or 4%, due to stronger global product licensing, primarily from higher sales In fiscal year 2004, Total Assets increased by $2.2 million. Cash and Marketable Securities rose by $15.7 million, in Japan. There also was a onetime improvement in fiscal year 2004 from the impact of a change in the compa- or 10%, primarily due to investment income of $9.1 million. This increase was partially offset by lower programs in ny’s method of accounting for guaranteed licensing revenue. These increases were partially offset by reduced process of $4.0 million due to prepaid program costs recorded as expenses in 2004, and lower intangible assets grant revenues, a decline in cable retransmission royalties received from PBS, and international program sales, due to the annual amortization of $6.9 million. which were higher in fiscal year 2003 due to the launch of Out There. In fiscal year 2004, Total Liabilities were reduced by $3.8 million based on lower accrued expenses and accounts

Expenses increased by $4.5 million, or 5%, in fiscal year 2004 compared to fiscal 2003. Program production payable as compared to fiscal year 2003. costs were up $2.4 million, or 7%, primarily due to increased production activity such as Sesame Stories, the For the year ending June 30, 2004, Total Net Assets on our Consolidated Statement of Activities were $217.6 mil- Israel-Palestine-Jordan coproduction. International marketing and development expenses were higher based lion, $6.0 million higher than the $211.6 million for the year ending June 30, 2003. The fiscal year net operating on expanded licensing initiatives and the establishment of an International Business Development group respon- loss was $1.8 million, and interest expense was $1.2 million. This net loss of $3.1 million was more than offset by sible for coordinating all projects in foreign countries. Marketing and promotion costs were up due to enhanced investment income of $9.1 million. Sesame Street promotion and the cost of promotional materials related to sponsored outreach projects. In addition, Corporate Affairs, Education, and Development costs increased due to the launch of a direct-mail fund-raising Significant Strategic Transactions campaign. In December 2000, the Workshop acquired the Muppet characters of Sesame Street from the Jim Henson Two significant transactions affected the financial position of the company in fiscal year 2003. The first was the Company, a subsidiary of EM.TV & Merchandising AG. Full ownership of the Muppet characters of Sesame Street sale of the Workshop’s 50% interest in Noggin to MTV Networks in September 2002. The transaction resulted in allows for greater creative freedom, control of content, and enhanced revenue opportunities. In September 2002, 1) a $61.2 million nonoperating gain and 2) an imputed deferred royalty value of $5.4 million attributed to the the Workshop sold its 50% ownership interest in the Noggin joint venture to its partner, MTV Networks/Viacom, continued use of Sesame Workshop’s program library by Noggin for a three-year term commencing with the providing capital to expand its mission internationally, remain strong in a highly competitive domestic market- sale. Of this, $1.8 million was reflected in Program Sales and Royalties revenue in each of the fiscal years 2003 place, and retire a portion of existing debt. and 2004, while the remaining amount is included in Deferred Program and Product License Revenues on the Consolidated Statement of Financial Position and will be recognized over the remaining term. The following statements are an extract of Sesame Workshop’s audited financial statements for the fiscal years 2004 and 2003.

expenses program expenses

73% 6% programs interactive media 13% administrative 48% 5% domestic outreach 9% production amortization 2% 28% creative 5% international development fund-raising production 1% 10% publishing research

36 2004 Annual Report Sesame Workshop Sesame Workshop 2004 Annual Report 37 SW_AR04_01.13_1222 1/20/05 6:30 PM Page 60

Consolidated Statement of Activities Consolidated Statement of Financial Position For the years ended June 30 (000s omitted) For the years ended June 30 (000s omitted)

‘04 ‘03 ‘04 ‘03

Revenues Assets

Program Support $ 23,960 $ 24,962 Cash and Short-Term Investments $ 16,824 $ 3,147 Program Sales and Royalties 6,809 10,900 Receivables Publishing and Licensing 66,043 57,185 Programs and Product Licenses and Contracts in Support of Programs,

Total Operating Revenues 96,812 93,047 Net of Allowance for Doubtful Accounts 21,269 20,328 Grants 2,975 5,522

Expenses 24,244 25,850 Programs in Process 6,693 10,718 Program Production 34,939 32,490 Marketable Securities 152,325 150,312 Publishing, Product Licensing, Development, and Distribution 19,327 17,365 Intangible Assets 113,585 120,530 Interactive Media 2,616 4,047 Fixed Assets 9,298 8,619 Corporate Affairs, Education, and Development 15,652 13,145 Other Assets 2,320 3,878 General and Administrative 19,169 19,798 Amortization 6,945 7,361 Total Assets $ 325,289 $ 323,054

Total Operating Expenses 98,648 94,206 Liabilities and Net Assets

Operating Loss (1,836) (1,159) Accounts Payable and Accrued Expenses $ 24,134 $ 27,550

Net Investment Income 9,124 4,123 Deferred Program and Product License Revenues 18,434 18,465 Equity Earnings – 967 Deferred Rent Payable 5,080 5,466 Interest Expense (1,217) (3,023) Debt Payable 60,000 60,000 Other Nonoperating (Losses) Income (3) 67,235 Total Liabilities 107,648 111,481

Increase (Decrease) in Net Assets $ 6,068 $ 68,143 Net Assets

Unrestricted 217,143 207,412 Temporarily Restricted 498 4,161

Total Net Assets 217,641 211,573

Total Liabilities and Net Assets $ 325,289 $ 323,054

38 2004 Annual Report Sesame Workshop Sesame Workshop 2004 Annual Report 39 SW_AR04_01.13_1222 1/20/05 6:30 PM Page 62

Consolidated Statement of Cash Flow Board of Trustees For the years ended June 30 (000s omitted)

‘04 ‘03 Mr. Vincent A. Mai Mr. Martín Gómez Dr. Kyle Pruett Chairman of the Board President and Chief Executive Officer Clinical Professor, Sesame Workshop Urban Libraries Council Child Psychiatry and Nursing Cash Flows from Operating Activities: Chairman Yale University School of Medicine AEA Investors, Inc. Ms. Jane Hartley Increase (Decrease) in Net Assets $ 6,068 $ 68,143 Chief Executive Officer Dr. Linda G. Roberts Adjustments to Reconcile (Decrease) Increase in Net Assets Mrs. Joan Ganz Cooney G7 Group, Inc. National Consultant to Net Cash (Used in) Provided by Operating Activities Co-Founder and Former Director, Chairman of the Executive Committee Ms. Rachel Hines Office of Educational Technology Depreciation and Amortization 9,245 9,960 Sesame Workshop Former Managing Director, U.S. Department of Education Amortization of Programs in Process 20,548 12,622 J.P. Morgan Chase & Co. Inc. Member, Council on Foreign Relations Mr. Richard Steadman (Increase) in Net Unrealized Appreciation on Marketable Securities (8,288) (1,478) Ms. Joanna Barsh Mr. Rodney B. Wagner Loss (gain) on Sale of Marketable Securities 243 (178) Mr. Gary E. Knell Director Former Vice Chairman of the Board President and Chief Executive Officer (Gain) on Disposal of Joint Venture — (61,234) McKinsey & Company, Inc. J.P. Morgan Chase & Co. Inc. Sesame Workshop (Gain) on Early Extinguishment of Debt — (5,152) Richard I. Beattie, Esq. Dr. Ellen Wartella Sanford M. Litvack, Esq. (Gain) on Disposal of Magazine Subscriber Lists — (852) Chairman Executive Vice President and Provost Partner Simpson Thacher & Bartlett LLP University of California - Riverside (Gain) on Investment in Joint Venture — (967) Hogan & Hartson L.L.P. Decrease (Increase) in Receivables 1,606 (8,954) Mrs. Afsaneh M. Beschloss Jeffrey N. Watanabe, Esq. Ms. Margaret Loesch (Increase) in Programs in Process (16,523) (11,195) President and Chief Executive Officer Partner Managing Partner Rock Creek Group Watanabe, Ing, Kawashima & Komeiji (Increase) in Other Assets 1,387 (1,971) The Hatchery (Decrease) Increase in Accounts Payable and Accrued Expenses (3,416) 5,245 Mr. David C. Cole Mr. Lloyd N. Morrisett Chairman, President and (Decrease) Increase in Program and Product License Revenues (31) 1,597 Co-Founder and Chief Executive Officer (Decrease) in Deferred Rent Payable (386) (385) Chairman Emeritus of the Board Maui Land and Pineapple Co., Inc. Sesame Workshop Net Cash Provided by Operating Activities 10,453 5,201

Cash Flows from Investing Activities

Additions to Property and Equipment (2,808) (1,728) Purchases of Marketable Securities (43,138) (113,598) Proceeds from the Sale of Marketable Securities 49,170 54,297 Proceeds from the Sale of Joint Venture Interest — 93,788

Net Cash Provided by Investing Activities 3,224 32,759

Cash Flows From Financing Activities

(Payments) on Note Payable — (39,191)

Net Cash (Used in) Financing Activities — (39,191)

Cash (Used in) Discontinued Operations — (72)

Net Increase (Decrease) in Cash and Short-Term Investments 13,667 (1,303) Cash and Short-Term Investments, Beginning of Period 3,147 4,450

Cash and Short-Term Investments, End of Period $ 16,824 $ 3,147 Mr. Vincent A. Mai

Mrs. Joan Ganz Cooney

40 2004 Annual Report Sesame Workshop Sesame Workshop 2004 Annual Report 41 SW_AR04_01.13_1222 1/20/05 6:30 PM Page 64

Executive Management

Gary E. Knell Karen Gruenberg Janet Robertson President and Chief Executive Officer Executive Vice President, Content Executive Vice President, International Business Development H. Melvin Ming Liz Kalodner Chief Operating Officer Executive Vice President and General Daniel Victor Manager, Global Consumer Products Executive Vice President, Legal and Business Affairs, General Counsel and Michael Lombardi Secretary Executive Vice President, Chief Financial Officer Sherrie Rollins Westin Executive Vice President, Corporate Affairs, Education and Development

Many thanks to staff and partners who contributed these great candid shots of children in our coproducing countries around the world: Ginger Brown; Nada Elattar; Joe Fisher, RAND Initiative for Middle Eastern Youth; Robert Knezevic; Linda Goldstein Knowlton; Nicole Toutounji, UNICEF.

Karen Gruenberg

Gary E. Knell

Liz Kalodner

H. Melvin Ming

©2005 Sesame Workshop.

Sesame Workshop® Sesame Street® and international Sesame Street coproductions, and all of their associated characters, trademarks, and design elements are owned and licensed by Sesame Workshop. ©2005 Sesame Workshop. All rights reserved.

©2005 Sesame Workshop/Columbia Tristar Television Distribution. “Dragon Tales” and its logo are trademarks of Sesame Workshop and Columbia Tristar Television Distribution. All rights reserved. Funded in part by a grant from the Corporation for Public Broadcasting through funds from the U.S. Department of Education.

©2005 CinéGroupe Sagwa Inc. Characters and Original Story ©2005 Amy Tan. Illustrations ©2005 Gretchen Schields. “Sagwa” and its logo are trademarks of CinéGroupe Sagwa Inc. All rights reserved. Sagwa, The Chinese Siamese Cat is produced by CinéGroupe Sagwa Inc. in association with Sesame Workshop, based on the book written by Amy Tan and illustrated by Gretchen Schields.

Daniel Victor Out There™ and associated characters, trademarks, and design elements are owned and licensed by Sesame Workshop. ©2005 Sesame Workshop. Michael Lombardi All rights reserved Sherrie Rollins Westin Janet Robertson Muppets™ is a trademark of Muppets Holding Company, LLC.

42 2004 Annual Report Sesame Workshop SW_AR04_01.13_1222 1/20/05 6:30 PM Page 66

“…in our country which has been torn by violence, your program [Sippuray Sumsum] could possibly be the last one of its kind to por- tray people as human beings….”

– Israeli father

Sippuray Sumsum is the Israeli adaptation of Sesame Street 0

One Lincoln Plaza New York, New York 10023 212.595.3456 www.sesameworkshop.org SW_AR04_01.13_1222 1/20/05 6:30 PM Page 67

Sesame Street works.

Among the more than 1,000 studies on record are those telling us that Sesame Street reaches children in every demographic group, that preschoolers who watch are more likely to show signs of emerging literacy and numeracy skills than nonviewers, and that the Sesame Street advantage lasts: Teens who watched as children had better grades in high school, read more books for pleasure, placed higher value on academic achievement, and expressed less aggressive attitudes than those who watched rarely or not at all.

0

< Brosh Israel