THE LUTHERAN CHURCH—MISSOURI SYNOD AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR’S REPORT JUNE 30, 2020 TABLE OF CONTENTS Page Independent Auditor’s Report ....................................................................................... 1 Financial Statements Consolidated Statements of Financial Position ................................................................... 3 Consolidated Statements of Activities ................................................................................. 4 Consolidated Statements of Functional Expenses ............................................................... 8 Consolidated Statements of Cash Flows ............................................................................ 10 Notes to Consolidated Financial Statements ...................................................................... 11 Supplemental Information Independent Auditor’s Report on Supplemental Information ............................................ 38 Consolidating Schedule of Financial Position – 2020 ........................................................ 39 Consolidating Schedule of Activities – 2020 ..................................................................... 40 Consolidating Schedule of Cash Flows – 2020 .................................................................. 44 Consolidating Schedule of Financial Position – 2019 ........................................................ 45 Consolidating Schedule of Activities – 2019 ..................................................................... 46 Consolidating Schedule of Cash Flows – 2019 .................................................................. 50 Independent Auditor’s Report Board of Directors The Lutheran Church—Missouri Synod and Subsidiaries St. Louis, Missouri Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of the Lutheran Church—Missouri Synod and Subsidiaries (the “Organization”), which comprise the consolidated statements of financial position as of June 30, 2020 and 2019 and the related consolidated statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of LCMS Holdings, Ltd., a wholly owned subsidiary, which statements reflect total assets of $163,489,000 and $168,719,000 as of June 30, 2020 and 2019, and total revenues of $63,630,000 and $63,619,000 for the years then ended. Those statements, which were prepared in accordance with Hong Kong Financial Reporting Standards as issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, were audited by other auditors in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants, whose report has been furnished to us. We have applied audit procedures on the conversion adjustments to the financial statements of LCMS Holdings, Ltd., which conform those financial statements to accounting principles generally accepted in the United States of America. Our opinion, insofar as it relates to the amounts included for LCMS Holdings, Ltd., prior to these conversion adjustments, is based solely on the report of the other auditors. 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Lutheran Church—Missouri Synod and Subsidiaries as of June 30, 2020 and 2019, and the consolidated changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter In March 2020, the World Health Organization declared COVID-19 to constitute a “Public Health Emergency of International Concern.” As discussed in Note T to the consolidated financial statements, given the uncertainty of the situation, the duration of any business disruption and related financial impact cannot be reasonably estimated at this time. Our opinion is not modified with respect to this matter. St. Louis, Missouri November 19, 2020 THE LUTHERAN CHURCH—MISSOURI SYNOD AND SUBSIDIARIES Consolidated Statements of Financial Position June 30, 2020 and 2019 (See Independent Auditor's Report) In Thousands 2020 2019 ASSETS Cash and cash equivalents – domestic operations $ 28,947 $ 37,484 Cash and cash equivalents – foreign operations (Note B) 89,936 110,029 Accrued interest and dividends receivable 627 865 Contributions receivable – net (Note F) 14,872 15,490 Notes and accounts receivable: From Synod-related parties 2,135 2,851 From others 6,095 13,301 Total notes and accounts receivable 8,230 16,152 Land, buildings, and equipment – net of depreciation (Note G) 45,597 49,161 Investments (Note C) 84,309 42,030 Funds held in custody by others (Note H) 24,640 23,748 Prepaid expenses – Convention and Youth Gathering - 6,277 Other assets 2,161 1,542 TOTAL ASSETS $ 299,319 $ 302,778 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 13,403 $ 16,654 LCEF line of credit - 395 Support payable (Note I) 2,502 5,050 Funds on deposit by related entities 986 400 Notes payable (Note J) 27,130 17,651 Deferred revenue: Convention and Youth Gathering - 9,438 Tuition and fees 30,695 39,752 Other (Note V) - 4,739 Total deferred revenue 30,695 53,929 Advance payments on third-party billings 14,652 8,571 Capital lease obligations (Note W) 1,206 709 Other liabilities 2,373 1,717 Funds held in custody for others 685 714 Total liabilities 93,632 105,790 Net assets Without donor restrictions: Undesignated 46,773 38,365 Board designated (Note K) 20,989 19,737 Net investment in land, buildings and equipment 44,391 49,011 Total without donor restrictions 112,153 107,113 With donor restrictions: Temporary in nature (Note L) 54,662 51,818 Perpetual in nature (Note M) 38,872 38,057 Total with donor restrictions 93,534 89,875 Total net assets 205,687 196,988 TOTAL LIABILITIES AND NET ASSETS $ 299,319 $ 302,778 The accompanying notes are an integral part of these consolidated financial statements. -3- THE LUTHERAN CHURCH—MISSOURI SYNOD AND SUBSIDIARIES Consolidated Statement of Activities Year Ended June 30, 2020 (See Independent Auditor's Report) (In Thousands) Without With Donor Restrictions Donor Temporary Perpetual Restrictions in Nature in Nature Total Total Support, revenues, and gains Support: District pledge $ - $ 12,971 $ - $ 12,971 $ 12,971 Gifts and grants 2,875 29,609 1,427 31,036 33,911 Bequests 867 4,469 - 4,469 5,336 Contributed services (Note N) - 180 - 180 180 Total support 3,742 47,229 1,427 48,656 52,398 Revenues: Investment, trust and other income 1,043 1,697 - 1,697 2,740 Sales and services (Note O) 2,862 - - - 2,862 Convention and Youth Gathering 11,354 - - - 11,354 Concordia Plan Services 30,638 - - - 30,638 LCMS Holdings Limited – tuition and other 63,630 - - - 63,630 Total revenues 109,527 1,697 - 1,697 111,224 Net realized & unrealized gain/(loss) on investments (401) 8 - 8 (393) Change in value of split-interest agreements - (184) (612) (796) (796) Gain on sale of assets 4,874 - - - 4,874 Net assets released from restrictions (Note L) 45,906 (45,906) - (45,906) - Total support, revenues, and gains 163,648 2,844 815 3,659 167,307 The accompanying notes are an integral part of these consolidated financial statements.