rollins college annual financial report · for the year ended may 31, 2013 annual financial report...

FOR THE YEAR ENDED MAY 31, 2013ANNUAL FINANCIAL REPORTROLLINS COLLEGE

ROLLINS

ANNUAL FINANCIAL REPORT TABLE OF CONTENTS

For the Year Ended May 31, 2012

Part I Audited Financial Statements

Report of Independent Auditor

1

Statements of Financial Position

3 Statement of Activity

4

Statements of Cash Flows

6 Notes to Consolidated Financial Statements

7

Part II Report of Financial Operations – Current Funds Overview

1

Statement of Expenditures, Transfers & Revenues Available By Object Classification

2

By Functional Classification

3 Revenues Available

4

Financial Aid

6 Expenditures and Transfers – Object Class Analysis 8 Expenditures and Transfers – Functional Class Analysis 11

Part III Report of Investment Performance

Portfolio Management

1

Endowment Pool

1 Separately Invested Funds

3

Perpetual Trusts

3 Split-Interest Funds

4

Investment Results

4 Consolidated Investment Portfolio – Schedule of Changes in Valuation Appendix A Consolidated Investment Portfolio – Investment Values and Performance Appendix B Endowment Pool – Performance to Benchmark Appendix C Endowment Pool – Asset Allocation Appendix D Asset Holdings/Liquidity Analysis Appendix E Part IV Debt Requirements

FOR THE YEAR ENDED MAY 31, 2013

AUDITED FINANCIAL STATEMENTSPART I

ROLLINS COLLEGE CONSOLIDATED FINANCIAL STATEMENTS Years Ended May 31, 2013 and 2012 And Report of Independent Auditor

ROLLINS COLLEGE TABLE OF CONTENTS

REPORT OF INDEPENDENT AUDITOR ........................................................................................ 1-2 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Financial Position ......................................................................................... 3 Consolidated Statements of Activities ................................................................................................. 4 – 5 Consolidated Statements of Cash Flows ................................................................................................... 6 Notes to Consolidated Financial Statements ..................................................................................... 7 – 32

Report of Independent Auditor

To the Board of Trustees of Rollins College Winter Park, Florida

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Rollins College (the “College”) as of May 31, 2013 and 2012, and the related statements of activities 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 consolidated 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 consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to consolidated financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit 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 entity’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 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 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the College as of May 31, 2013 and 2012, 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.

2

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated September 26, 2013, on our consideration of the College’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over consolidated financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the College’s internal control over financial reporting and compliance.

Orlando, Florida September 26, 2013

CONSOLIDATED FINANCIAL STATEMENTS

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ROLLINS COLLEGE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

MAY 31, 2013 AND 2012

2013 2012

ASSETS

Cash and cash equivalents 19,429$ 47,776$ Cash restricted to payment of bond interest - 587 Student receivables, less allowance for losses of

$671 and $553, respectively 1,236 1,441 Contributions receivable 20,316 20,960 Remainder interest in charitable trusts 2,450 2,327 Loans to students, less allowance for losses of

$176 and $149, respectively 1,678 1,713 Long-term investments 332,869 317,668 Investment in commercial properties, net 18,048 15,691 Land, buildings, equipment, and books, less

accumulated depreciation 183,695 140,445 Unamortized bond issue costs 1,434 1,547 Non-student receivables and other assets 3,325 3,501 Investments held in trust by others 17,012 15,030

Total assets 601,492$ 568,686$

LIABILITIES AND NET ASSETS

Accounts payable 3,413$ 3,620$ Accrued and other expenses 8,358 6,002 Deferred revenues 1,883 2,177 Advances from federal government for student loans 1,399 1,399 Annuity and life income payable 2,198 2,174 Interest rate swap liability 4,295 5,413 Long-term debt 133,198 135,006

Total liabilities 154,744 155,791 Net assets

Unrestricted 100,480 119,149 Temporarily restricted 143,375 100,858 Permanently restricted 202,893 192,888

Total net assets 446,748 412,895

Total liabilities and net assets 601,492$ 568,686$

(In Thousands)

See accompanying notes. 3

ROLLINS COLLEGE

CONSOLIDATED STATEMENT OF ACTIVITY

MAY 31, 2013

Temporarily Permanently

Unrestricted Restricted Restricted Total

Operating revenues:Tuition and fees 96,112$ -$ -$ 96,112$ Less scholarships allowances (36,439) - - (36,439) Net tuition and fees 59,673 - - 59,673 Gifts and private grants 3,836 4,284 - 8,120 Federal and state grants - 1,242 - 1,242 Appropriation of endowment assets for expenditure 7,982 8,372 - 16,354 Investment income 2,733 512 - 3,245 Auxilliary enterprise revenues 16,853 - - 16,853 Other sources 2,962 - - 2,962 Net assets released from restrictions:

Scholarships 5,184 (5,184) - - Educational and general 7,353 (7,353) - -

Total operating revenues 106,576 1,873 - 108,449

Operating expenses:Instruction 37,980 - - 37,980 Academic support 12,791 - - 12,791 Student services 18,866 - - 18,866 Institutional support 21,744 - - 21,744 Public service 2,069 - - 2,069 Auxilliary enterprises 21,242 - - 21,242 Total operating expenses 114,692 - - 114,692 Decrease in net assets from operating activities (8,116) 1,873 - (6,243)

Non-operating activities:Gifts and private grants 298 2,609 5,533 8,440 Endowment income and other investment income 12,963 29,243 4,317 46,523 Appropriation of endowment assets for expenditure (7,982) (8,372) - (16,354) Other gains & losses (146) 219 1 74 Change in fair value of swap agreement 1,118 - - 1,118 Change in present value of split interest agreements - 141 154 295 Net assets released from restrictions for property, plant and equipment 50 (50) - Increase in net assets from nonoperating activities 6,301 23,790 10,005 40,096

Change in net assets (1,815) 25,663 10,005 33,853 Net assets at beginning of year 119,149 100,858 192,888 412,895 Florida UPMIFA Adoption Adjustment (16,854) 16,854 - - Net assets at end of year 100,480$ 143,375$ 202,893$ 446,748$

(In Thousands)


ROLLINS COLLEGE

CONSOLIDATED STATEMENT OF ACTIVITY

MAY 31, 2012

Temporarily Permanently Unrestricted Restricted Restricted Total

Operating revenues:Tuition and fees 93,880$ -$ -$ 93,880$ Less scholarships allowances (32,772) - - (32,772) Net tuition and fees 61,108 - - 61,108 Gifts and private grants 2,852 2,896 - 5,748 Federal and state grants - 1,171 - 1,171 Appropriation of endowment assets for expenditure 7,747 7,847 - 15,594 Investment income 2,350 674 - 3,024 Auxilliary enterprise revenues 15,953 - - 15,953 Other sources 2,459 40 - 2,499 Net assets released from restrictions:

Scholarships 4,332 (4,332) - - Educational and general 7,177 (7,177) - -

Total operating revenues 103,978 1,119 - 105,097

Operating expenses:Instruction 37,315 - - 37,315 Academic support 12,344 - - 12,344 Student services 17,788 - - 17,788 Institutional support 20,500 - - 20,500 Public service 1,697 - - 1,697 Auxilliary enterprises 22,153 - - 22,153 Total operating expenses 111,797 - - 111,797 Decrease (increase) in net assets from operating activities (7,819) 1,119 - (6,700)

Non-operating activities:Gifts and private grants - 7,781 2,006 9,787 Endowment income and other investment income (11,549) (12,943) (4,051) (28,543) Loss on early extinguishment of debt (539) - - (539) Other gains & losses 244 (218) (83) (57) Change in fair value of swap agreement (1,677) - - (1,677) Change in present value of split interest agreements - 567 (103) 464 Decrease in net assets from nonoperating activities (13,521) (4,813) (2,231) (20,565)

Change in net assets (21,340) (3,694) (2,231) (27,265) Net assets at beginning of year 140,489 104,552 195,119 440,160 Net assets at end of year 119,149$ 100,858$ 192,888$ 412,895$

(In Thousands)


ROLLINS COLLEGE

CONSOLIDATED STATEMENTS OF CASH FLOWS

MAY 31, 2013 AND 2012

2013 2012

Operating activities:Change in net assets 33,853$ (27,265)$ Adjustments to reconcile change in net assets to net cash

provided by operating activities:Realized and unrealized losses (gains) on investments (31,055) 27,585 Depreciation 10,575 11,141 Loss on disposal of fixed assets 67 - Loss on early extinguishment of debt - 539 Amortization 202 281 Contributions restricted for long-term investment

and plant acquisition (2,582) (7,179) (Increase) decrease in receivables and other assets:

Student receivables 205 (536) Contributions receivable 644 (3,468) Remainder interest in charitable trusts (123) (203) Non-student receivables and other assets 110 2,907

Increase (decrease) in liabilities:Accounts payable and accrued expenses 2,431 1,785 Deferred revenues and advances (288) (312) Annuity and life income payable 24 (1,142) Interest rate swap liability (1,118) 1,677

Net cash flows provided by operating activities 12,945 5,810

Investing activities:Proceeds from sales and maturities of investments (77,326) 268,439 Purchases of investments 91,198 (270,526) Purchases of land, buildings, equipment, and books (56,503) (17,896) Net cash flows used in investing activities (42,631) (19,983)

Financing activities:Payments on bonds (1,830) (18,301) Proceeds from issuance of bonds - 47,796 Contributions restricted for long-term investment

and facility acquisition 2,582 7,179 Net cash flows provided by financing activities 752 36,674

Net change in cash and cash equivalents (28,934) 22,501 Cash and cash equivalents – beginning of year 48,363 25,862 Cash and cash equivalents – end of year 19,429$ 48,363$

Supplemental information:Interest paid 6,970$ 7,288$

(In Thousands)


ROLLINS COLLEGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAY 31, 2013 AND 2012

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1. Summary of Organization, Basis of Accounting, Basis of Presentation, and Significant Accounting Policies Summary of Organization

Rollins College (the College) is an independent, nonsectarian college established in 1885. It is fully accredited by the Southern Association of Colleges and Schools. The College is a not-for-profit corporation under both federal and state rules. The College fulfills its educational mission through three major programs: the Arts and Science division offers a full-time program leading to a liberal arts degree; the Crummer Graduate School of Business offers full and part-time programs leading to graduate degrees; the Hamilton Holt School offers evening and weekend programs leading to undergraduate and graduate degrees in liberal arts and several specialized areas.

The accompanying financial statements include the consolidated statements of the College, Holt Properties, L.L.C., 140 Fairbanks, L.L.C., 200 Fairbanks, L.L.C., 220 Fairbanks, L.L.C., 400 Park South, L.L.C., Lawrence Center, L.L.C., and WPP Holt Properties, L.L.C., for which the College is the sole member. All material intercompany balances and transactions have been eliminated.

Basis of Accounting

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting.

Basis of Presentation

The accompanying consolidated statements of activities report the change in unrestricted, temporarily restricted and permanently restricted net assets, distinguishing between operating and non-operating activities. Operating revenues consist of all the activity of the College except for certain items specifically considered to be of a non-operating nature. Non-operating activities include contributions for endowment, contributions and other activity related to annuity and unitrust agreements, endowment income, gains and losses—net of amounts appropriated to support operations in accordance with the College’s spending policy, changes in the fair value of the interest rate swap agreements, and certain other unusual or non-recurring items.

Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the College are classified according to the following categories:

Permanently restricted net assets—Net assets subject to donor-imposed stipulations to be maintained permanently by the College. Generally, the donors of these assets permit the College to use all or part of the earnings on related investments for general or specific purposes.

Temporarily restricted net assets—Net assets subject to donor-imposed stipulations that may or will be met either by actions of the College and/or the passage of time.

Unrestricted net assets—Net assets that are not subject to donor-imposed stipulations.


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1. Summary of Organization, Basis of Accounting, Basis of Presentation, and Significant Accounting Policies (continued) Revenues from sources other than restricted contributions and investment earnings are generally reported as increases in unrestricted net assets. Expenses are reported as decreases in unrestricted net assets. Expenses are reported by program classifications. Certain expenses are allocated among programs by management based on estimates of square footage utilized and estimates of percentage of assets utilized.

Revenue Recognition and Release of Restrictions

Tuition and Fees

Tuition and fees are recorded net of scholarship allowances. Scholarship allowances are provided from earnings on restricted funds, certain board-designated endowments, and through unfunded discounts. Tuition payments made prior to the consolidated statement of financial position date for terms that will be in the future are recorded as deferred revenues.

Contributions

Contributions, which include unconditional promises to give, are reported as increases in unrestricted net assets unless use of the related assets is limited by explicit donor stipulation or by the passage of time. Contributions are recognized as revenues in the period an unconditional promise is made or a gift is received, net of a reserve for uncollectible amounts. Contributions to be received after one year are discounted using the appropriate risk-free rate and amortization of the discount is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any, on the contribution.

The College is the irrevocable remainder beneficiary of several forms of split-interest agreements, including charitable remainder trusts, charitable gift annuities, and pooled income agreements. Unless the donor has stipulated a permanent restriction on the use by the remainder man, contributions to these trusts are reported as increases in temporarily restricted net assets. The amount of contribution revenue recognized is reduced by an actuarial estimate of the trust’s liability for payments to an intermediate income beneficiary (or beneficiaries) over the term of the trust.

Investment Income or Loss

Investment income or loss includes (a) interest, dividends, and realized and unrealized gains and losses on investments controlled by the College, (b) net income derived from commercial property investments, (c) income received from, and changes in the fair value of, investments held in trusts by others, and (d) changes in valuation of alternative investments based on net asset value. In the absence of explicit donor stipulations for its use, investment income is reported as an increase in unrestricted net assets. Change in the fair value of investments held in trust by others is reported as permanently restricted investment income or loss, consistent with the classification of underlying assets.


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1. Summary of Organization, Basis of Accounting, Basis of Presentation, and Significant Accounting Policies (continued)

Auxiliary Enterprises

Auxiliary enterprises exist to furnish goods or services to students, faculty, staff, other institutional departments, or incidentally to the general public. A fee is charged for the goods or services, which may or may not equal the costs of the goods or services. Residence halls and food services make up the majority of auxiliary revenues. These revenues are recorded as earned.

Release from Restrictions

Temporary restrictions on net assets expire when the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed. Donor-restricted contributions in which the restrictions are satisfied in the same reporting period in which the contribution is received are classified as temporarily restricted. Typically, temporary restrictions expire when assets are expended in accordance with donor instructions. Temporary restrictions on contributions made for the acquisition of long-lived assets are released when the stipulated assets are placed in service. Temporary restrictions also expire upon termination of a split-interest gift agreement, which does not contain restrictions on the use of the remainder assets. These events are reported as net assets released from restrictions on the consolidated statements of activities.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments that are not designated as long-term investments and with an original maturity of less than three months. A portion of cash and cash equivalents, amounting to $3,223,367 and $28,305,090 at May 31, 2013 and 2012, respectively, was restricted by debt covenants for purchases and construction of buildings and infrastructure, as more fully described in Note 10.

Contributions Receivable

Contributions receivable includes unconditional promises to give and bequests that have cleared probate, when information regarding the College’s interest in a devise is deemed reasonably sufficient to form the basis for an accrual. Conditional promises to give are not recognized until the stipulated conditions are substantially met.

From time to time, the College is informed of intentions to give by prospective donors. Such expressions of intent are revocable and unenforceable. The ultimate values of these intentions have not been established nor have they been recognized in the accompanying consolidated financial statements.


10


Land, Building, Equipment, and Books, Less Accumulated Depreciation

Long-lived assets are stated at cost if purchased or at fair value on the date of gift if acquired by contribution. The College’s policy is to capitalize assets acquired for greater than $5,000. Depreciation is recognized on a straight-line basis over the estimated useful life of each major category of assets. These estimated useful lives are summarized in the following table:

Buildings 30-50 yearsImprovements to land and buildings 5-10 yearsComputers and software 3-10 yearsFurniture, fixtures, equipment, and library books 7-20 years

Tenant improvements made to commercial properties are amortized over the term of the respective underlying lease. Interest costs are capitalized on funds borrowed to finance building construction.

Unamortized Bond Issue Costs

The costs relating to issuance of bonds are capitalized at the time of issue and are amortized using the straight-line method over the term of the related bonds.

Investments Held in Trust by Others

Investments held in trust by others represent resources neither in the possession nor under the control of the College, but held and administered by an outside party, with the College deriving income from such funds. The fair value of the College’s share of investments held in trust by others is reflected in the consolidated statement of financial position, and the income, including fair value adjustments, is recorded in the consolidated statement of activities.

Annuity and Life Income Payable

The College is the irrevocable remainder beneficiary for several forms of split-interest agreements, including charitable remainder trusts, charitable gift annuities, and pooled income agreements. In agreements where the College is trustee of the assets, the actuarial present value of the trust’s liability for payments to an intermediate income beneficiary (or beneficiaries) over the term of the trust is recorded as annuity and life income payable. The College was trustee in 98 agreements at May 31, 2013, and 94 agreements at May 31, 2012. The ranges of discount and payout rates are detailed below:

Split‐Interest Type Number Payout Rates Discount Rates

Charitable Gift Annuities 83 6.0% - 18.2% 1.2% - 10.0% Annuity Trusts 1 7.2% 7.6% Unitrusts 5 6.0% - 7.0% 4.4% - 10.0% Pooled Income Funds 9 N/A N/A


11


Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. The College estimates the fair value of financial instruments using the hierarchical framework described below, segregated by Level I, Level II, and Level III for financial assets and liabilities that are measured and reported on a fair value basis.

Level I - Securities traded in an active market with available quoted prices for identical assets as of the reporting date.

Level II - Securities not traded on an active market but for which observable market inputs are readily available or Level I securities where there is a contractual restriction as of the reporting date. Level II also includes alternative investments for which the College has the ability to redeem in the near term.

Level III - Securities not traded in an active market and for which no significant observable market inputs are available as of the reporting date.

The fair values of cash and cash equivalents, student receivables, and loans to students of College funds are believed to approximate the carrying value of these instruments because of their short maturities. The carrying value of student receivables and loans to students of College funds has been reduced by an allowance for losses, based on historical collections experience.

The fair value of contributions receivable is believed to approximate carrying value and is calculated at the net present value of anticipated future cash flows reduced by an allowance for uncollectible contributions. (See Note 2.)

The carrying amount of loans to students under government loan programs approximates fair value because they consist of variable-rate loans and therefore reflect current market rates for loans with similar maturities and credit quality.

Investments in commercial properties are valued at cost, less accumulated depreciation.

The fair value of remainder interest in charitable trusts is determined based on the fair value of underlying net assets, in accordance with the Level III classification described in Note 1, as adjusted using the net present value of the College’s remainder interest. The calculation incorporates the actuarial lifespan of the youngest intermediate income beneficiary, discounted by the beneficiary income rate provided by the trust agreement.


12


The fair value of bonds payable with fixed interest rates is calculated by comparing the stated yield to current market yield and imputing a value that approximates what a purchaser would reasonably pay for a similar bond given current interest rates. (See Note 10.)

The interest rate swap agreement is reflected at fair value and based on valuation models and assumptions and available market data, applied to estimate the amount the College would receive or pay to terminate the swap agreement. (See Note 11.)

Artwork and Collections

The College does not record or capitalize its collections of works of art, historical treasures, or similar assets. These collections are held for public exhibition, education, and research in furtherance of the College’s educational and public service mission. The collections are appropriately cared for and preserved and are subject to a College policy that requires the proceeds from sales, if any, of collection items to be used to acquire other items for the collection.

Income Taxes

The College has been recognized by the Internal Revenue Service as an organization exempt from federal income taxation under Section 501(a) as an organization described in Section 501(c)(3) of the Internal Revenue Code on related income and continues to meet the criteria to be recognized as such. Accordingly, no provision for income taxes is made in the consolidated financial statements.

The College’s policy is to record a liability for any tax position taken that is beneficial to the College, including any related interest and penalties, when it is more likely than not the position taken by management with respect to a transaction or class of transactions will be overturned by a taxing authority upon examination. Management believes there are no such positions as of May 31, 2013 or 2012 and, accordingly, no liability has been accrued.

The IRS generally subjects federal income tax returns to examinations for a period of three years after the returns were filed. For the College this would include returns for the 2012, 2011, and 2010 fiscal years.

Advertising Costs

The College expenses advertising costs as incurred. The College expended $788,000 and $892,000 for advertising for the years ended May 31, 2013 and 2012, respectively.


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Accrued Compensation

The College accrued for vacation pay and all other compensation earned but not paid. These items are included in accrued expenses and other liabilities in the consolidated statements of financial position.

Use of Estimates

The preparation of financial consolidated statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain 2012 balances have been reclassified to conform to the financial statement presentation used in 2013.

Previously

Reported

Reclassified

Balance

Reclassified

Amount

Cash and Cash Equivalents 47,786$ 47,776$ (10)$ Investment in commercial properties, net 14,333 15,691 1,358 Land, buildings, equipment, and books, less

accumulated depreciation 141,787 140,445 (1,342) Non-student receivables 3,554 3,501 (53) Total assets 568,733 568,686 (47)

Accrued and other expenses 5,790 6,002 212 Agency funds and deposits 259 - (259) Total liabilities 155,838 155,791 (47) Total liabilities and net assets 568,733$ 568,686$ (47)$

Subsequent Events

Subsequent events have been evaluated through September 26, 2013, which is the date of the independent auditors’ report.


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2. Contributions Receivable

Contributions receivable at May 31, 2013 and 2012 includes the following unconditional promises (in thousands):

2013 2012 Contributions receivable, gross $ 22,493 $ 22,948 Allowance for uncollectibles (1,431) (1,269) 21,062 21,679 Discount (746) (719) Contributions receivable, net $ 20,316 $ 20,960

The allowance for uncollectible contributions is based upon management’s judgment and analysis of contributions receivable, past collection experience, and other relevant factors that bear on the ultimate collectability of outstanding amounts. Changes to the allowance relating to pledges that are restricted are reported as other losses. Unrestricted changes are reported as institutional support expense.

The discount is calculated using a risk-free rate as determined by the rate on U.S. Treasury Bills, applied to the following schedule of payments due during each fiscal year ending May 31 (in thousands):

2014 2015 2016 2017 2018

$ 10,3414,4183,5533,423

758Contributions receivable $ 22,493


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3. Remainder Interest in Charitable Trusts

Remainder interest in charitable trusts represents assets held in trust by others for which the College is irrevocably designated as remainder. The value of these assets is determined based on Level III criteria defined in Note 1 and is discounted based on the actuarial life expectancy of the intermediate beneficiary, according to the rate established in the trust agreement. The College recognizes changes for these trusts in actuarial estimates in the consolidated statement of activities.

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level III, in thousands):

Level III Investments Year Ended May 31 2013 2012 Opening Balance $ 2,327 $ 2,124

Change in present value of split interest agreements

142

(115)

Additions

-

339

Maturities/Distributions

(19)

(21)

Transfers in and/or out of Level III

-

-

Ending Balance

$ 2,450

$ 2,327

The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating

to assets still held at the reporting date $ 142 $ (115)


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4. Loans to Students

The College makes uncollateralized loans to students based on financial need. Student loans are funded through federal government loan programs or institutional resources. At May 31, 2013 and 2012, student loans represented .28% and .30% of total assets, respectively.

in thousands

2013 2012

Federal Government Programs $ 1,643 $ 1,609 Institutional Programs 211 253 1,854 1,862 Less Allowance for Doubtful Accounts: Beginning of Year (149) (149) Increases (27) (0) End of Year (176) (149) Student Loans Receivable, net $ 1,678 $ 1,713

Allowances for doubtful accounts were established based on prior collection experience and current economic factors which, in management’s judgment could influence the ability of loan recipients to repay the amounts per the loan terms. Institutional loan balances were written off only when they are deemed to be permanently uncollectible. Amounts due under the Perkins loan program are guaranteed by the government and, therefore, no reserves are placed on any past due balances under the program. At May 31, 2013 and 2012, the following amounts were past due under the student loan programs:

in thousands

May 31,

1‐60 days

past due

60‐90 days

past due

90+days

past due

Total past

due

2013 $ 1 $ 1 $ 174 $ 176 2012 $ 2 $ 1 $ 146 $ 149

Loans to students include participation in the Perkins federal revolving loan program. The availability of funds for loans under the program is dependent on reimbursements to the pool from repayments on outstanding loans. Funds advanced by the Federal government of $1,399,000 at May 31, 2013 and 2012, are ultimately refundable to the government and are classified as liabilities in the consolidated statements of financial position. Outstanding loans cancelled under the program result in a reduction of the funds available for loan and a receivable due from the government.


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5. Cash and Cash Equivalents, and Investments

The College invests cash in excess of daily requirements in money market and other short-term funds with maturities of three months or less.

Cash and cash equivalents consisted of the following at May 31 (in thousands):

2013 2012

Cash in banks and money market funds 19,348$ 47,693$ Petty cash 24 23Life insurance cash value 57 60Total cash and cash equivalents 19,429 47,776 Cash restricted to payment of bond interest - 587

19,429$ 48,363$

Deposit Insurance

The College places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts and temporarily provides unlimited coverage through December 31, 2012 for certain qualifying and participating non-interest-bearing transaction accounts. Effective January 1, 2013, funds in non-interest bearing transaction accounts no longer receive unlimited coverage, but are FDIC insured to the legal maximum of $250,000 for each bank. During the year, the College had amounts on deposit in excess of the insured limits. As of May 31, 2013 and 2012, the College had on deposit $18 million and $44 million, respectively, which exceeded these insured amounts.


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5. Cash and Cash Equivalents, and Investments (continued)

Investments

Investments consist of long-term assets controlled by the College. These assets are managed in the College endowment pool, are separately invested, or represent the investment of assets held in trust under split-interest gift agreements. Investments also include a reserve established for future debt service payments.

The investments of the College are reflected in the accompanying consolidated financial statements at fair value, as determined based on the fair value hierarchy discussed in Note 1. Fair value for alternative investments is calculated based on the net asset value of underlying assets as determined by the market approach for respective investment funds, consisting of hedge funds, open-ended private real estate investment trusts, closed-end private real estate investment funds and private equity funds.

Flexible Capital (Hedge Funds) As of May 31, 2013, the College was invested in 14 hedge fund managers, collectively pursuing a widely diversified group of investment strategies. The broad investment strategies include long/short equity positions, long/short credit positions, investments in distressed equity and debt, and short credit. No hedge fund manager represented more than 3% of the value of the total Endowment investment portfolio. The College is not obligated to make additional investments with any of its hedge fund managers. The College has the ability to redeem its investment with each manager at varying intervals ranging from full redemptions every two years on 90 days notice to full redemption every three years with 60 days notice.

Non-Marketable Securities

Real Assets and Real Estate As of May 31, 2013, the College was invested in four open-ended private real estate investment trusts and closed-end private real estate investment funds and two real asset private equity funds, with no investment representing more than 1% of the total Endowment investment portfolio. The College has committed to an additional $11,658,000 of investment in its private real asset and real estate investment funds. As of May 31, 2013, redemptions from the open-ended private real estate investment trusts had been suspended due to market factors.

Other Private Equity

At May 31, 2013, the College was invested in 12 private equity funds, which include equity buyouts, venture capital, and special situations. As of May 31, 2013, remaining uncalled commitments approximated $14,806,000.


19


On May 31, the investment portfolio included the following assets (in thousands):

Endowment

Pool

Separately

Managed Other 2013 TotalLevel I:

Short-term investments in USmoney market funds 1,260$ 195$ -$ 1,455$

Domestic equities 44,063 1,148 - 45,211 Equity mutual funds: -

Domestic 82,670 1,337 - 84,007 International 37,662 1,084 - 38,746

Fixed income mutual funds 44,597 523 - 45,120 Total Level I 210,252 4,287 214,539

Level II:US treasuries and agencies 4,028 - - 4,028

Total Level II 4,028 - - 4,028 Level III:

Hedge Funds 68,964 - - 68,964 Private Equity 24,091 - - 24,091 Real Assets 17,600 - - 17,600 Real Estate and Other - 179 - 179 Split Interest Trusts - - 3,468 3,468

Total Level III 110,655 179 3,468 114,302 Total investments 324,935$ 4,466$ 3,468$ 332,869$

Endowment

Pool

Separately

Managed Other 2012 TotalLevel I:

Short-term investments in USmoney market funds 2,802$ 284$ -$ 3,086$

Domestic equities 31,251 1,738 - 32,989 Equity mutual funds: -

Domestic 59,377 1,263 - 60,640 International 61,915 - - 61,915

Fixed income mutual funds 51,331 704 - 52,035 Total Level I 206,676 3,989 - 210,665

Level II:US treasuries and agencies 4,038 - - 4,038

Total Level II 4,038 - - 4,038 Level III:

Hedge Funds 56,870 - - 56,870 Private Equity 24,099 - - 24,099 Real Assets 16,761 - - 16,761 Real Estate and Other - 465 - 465 Split Interest Trusts - - 4,770 4,770

Total Level III 97,730 465 4,770 102,965 Total investments 308,444$ 4,454$ 4,770$ 317,668$

2013

2012


20


Level I investments consist of short-term investments, domestic equities, and equity in mutual funds. Level III investments consist of private equity, hedge funds, real/tangible assets and real estate and other investments. The following tables present a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level III, in thousands):

Private

Equity

Hedge

Funds

Real

Assets

RE &

Other

Split

Interest

Trusts TotalOpening Balance 24,099$ 56,870$ 16,761$ 465$ 4,770$ 102,965$

Total gains or losses (realized and 2,040 7,683 1,178 - - 10,901

(unrealized) included in changes in net assets - Purchases 2,513 21,446 1,116 1 - 25,076 Sales (4,561) (17,035) (1,455) (287) - (23,338)

Change in present value of split interest trusts - - - - (1,302) (1,302) Transfers in or out of Level III - - - - - -

Ending Balance 24,091$ 68,964$ 17,600$ 179$ 3,468$ 114,302$The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date (326)$ 7,629$ (267)$ -$ -$ 7,036$

Private Equity

Hedge Funds

Real Assets

RE & Other

Split Interest Trusts Total

Opening Balance 21,908$ 60,302$ 14,136$ 485$ 5,259$ 102,090$

Total gains or losses (realized and unrealized) 1,226 307 2,290 - - 3,823 included in changes in net assets

Purchases 6,713 3,739 2,222 - - 12,674 Sales (5,748) (7,478) (1,887) (20) - (15,133)

Change in present value of split interest trusts - - - - (489) (489) Transfers in or out of Level III - - - - - -

Ending Balance 24,099$ 56,870$ 16,761$ 465$ 4,770$ 102,965$The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date 269$ 747$ 1,713$ -$ -$ 2,729$

Level III Investments

Year Ended May 31, 2013

Level III InvestmentsYear Ended May 31, 2012


21


Investment Income (in thousands)

Unrestricted

Temporarily

Restricted

Permanently

Restricted TotalInterest and dividends:Cash in bank 73$ 8$ -$ 81$ Net income from real property investments 1,814 - - 1,814 Endowment pool 1,676 3,717 292 5,685 Income from perpetual trusts 145 455 - 600

3,708 4,180 292 8,180 Realized gain on investments 3,773 8,150 643 12,566 Unrealized gain on investments 8,600 18,266 3,447 30,313 Investment management fees (385) (841) (65) (1,291) Net investment income 15,696$ 29,755$ 4,317$ 49,768$

UnrestrictedTemporarily Restricted

Permanently Restricted Total

Interest and dividends:Cash in bank 63$ 8$ -$ 71$ Net income from real property investments 1,295 - - 1,295 Endowment pool 1,603 2,697 1,147 5,447 Income from perpetual trusts 162 557 - 719

3,123 3,262 1,147 7,532 Realized gain on investments 3,430 5,593 2,454 11,477 Unrealized gain on investments (7,632) (12,662) (7,390) (27,684) Investment management fees (373) (615) (262) (1,250) Net investment income (1,452)$ (4,422)$ (4,051)$ (9,925)$

May 31, 2013

May 31, 2012

Net investment income is presented on the Consolidated Statement of Activities as appropriation of endowment assets for expenditure, investment income, and endowment income and other investment income.

Investments in the College’s endowment pool are managed utilizing the total return concept, which includes interest and dividends (yield) and appreciation. The College has adopted an endowment pool spending policy designed to stabilize annual endowment income available for operations, while preserving the real value of the underlying principal. In years when yield exceeds the amount appropriated under the spending policy, the excess is returned to principal as appreciation. When annual yield is insufficient to support spending appropriations, the balance is provided from accumulated appreciation.

A significant portion of the College’s investments consist of REITs, hedge funds, and private equity. Management relies on various factors to estimate the fair value of these investments. Management believes its processes and procedures for valuing investments are effective, and that its estimate of value is reasonable. However, the factors used by management are subject to change in the near term, and accordingly, investment values and performance can be affected. The effect of these changes could be material to the consolidated financial statements.


22

6. Investment in Commercial Properties

Investment in commercial properties includes the real property and operating assets used by the College for commercial rentals. Investment in these properties excludes a reduction for long-term debt issued to finance their acquisition. The payment of principal and interest on this obligation is secured by a pledge of the general resources of the College. Please refer to Note 10 for further comment. Investment in commercial properties, valued at historical cost, includes the following at May 31 (in thousands):

2013 2012 Property, plant, and equipment: Property, plant, and equipment in service Accumulated depreciation

$ 26,475

(8,196)

$ 23,261

(7,593)

Other Current Assets 628 527Unamortized prepaid expenses 208 275Accounts payable and accrued expenses (854) (572)Unearned income (213) (207)Investment in commercial properties, net $ 18,048 $ 15,691

Depreciation expense charged to commercial properties was $617,000 and $643,000 for the years ended May 31, 2013 and 2012, respectively.

7. Land, Buildings, Equipment, and Books

The following is a summary of land, buildings, equipment, and books supporting the educational activities of the College, as of May 31 (in thousands):

2013 2012 Land and land improvements $ 38,153 $ 35,101Buildings 146,981 143,825Equipment 42,648 40,702Library books 4,316 4,316

Construction in progress 56,004 10,950 288,102 234,894Less accumulated depreciation (104,407) (94,449) $ 183,695 $ 140,445

Depreciation expense charged was $9,958,000 and $10,498,000 for years ended May 31, 2013 and 2012, respectively. The college incurred interest costs of $7,106,000 and $7,498,000 for years ended May 31, 2013 and 2012, respectively. Of these amounts, $1,367,000 and $165,000 was capitalized on construction in progress for the years ended May 31, 2013 and 2012, respectively.


23

7. Land, Buildings, Equipment, and Books (continued)

The College writes off certain building improvements when the underlying facilities are subjected to significant renovations, the majority of which consists of renovation projects that are fully depreciated or almost fully depreciated. There were no such write offs for the year ended May 31, 2013.

8. Investments Held in Trust by Others

Investments held in trust by others represent assets held in trust by outside trustees for which the College is irrevocably designated as the remainder. The value of these assets is determined based on Level III criteria defined in Note 1. The College generally receives an annual spending amount from these trusts as determined by the trustees. Distributions are recorded as Income from perpetual trusts and are detailed in Note 5. Other changes in value are recorded as unrealized gain or loss on investments and are also shown in Note 5.

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level III, in thousands):

2013 2012

Opening Balance 15,030$ 16,958$ Unrealized Gains (Losses) 2,418 (1,421) Distributions (436) (507)

Ending Balance 17,012$ 15,030$

2,418$ (1,421)$

Level III Investments

Year Ended May 31

The amount of total gains and losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date


24

9. Employee Retirement

Retirement benefits are provided through a defined contribution plan with either Fidelity Tax Exempt Services or the Teachers Insurance and Annuity Association and the College Retirement Equities Fund (TIAA-CREF). Vesting provisions are full and immediate under this plan. Contribution amounts are determinable by the Board as it deems appropriate. For the years ended May 31, 2013 and 2012, the College contributed 7%, 8%, 9%, or 10% of compensation to the plan on behalf of employees who contributed, respectively, 0%, 1%, 2%, or 3% or more of their compensation voluntarily to the plan. Expenses related to the above plan amounted to $3,698,000 and $3,513,000 for the years ended May 31, 2013 and 2012, respectively.

10. Long‐Term Debt Bonds and notes payable include the following at May 31 (in thousands):

Interest Maturity

Rate Dates 2013 2012 2013 2012

Bonds PayableOrange County Educational Facilities Authority - 2007 Loan Fixed - (5.23%) 2014-2037 $ 23,220 $ 23,690 $ 24,644 $ 25,858

Taxable Revenue Bonds - Series 2010 Fized - (5.83%) 2014-2026 24,795 25,830 26,638 29,254

Non-Taxable HEFFA Bonds - 2010 Loan Fixed - (4.94%) 2014-2038 37,545 37,545 39,887 40,889

Non-Taxable HEFFA Bonds - 2012 Loan Fixed - (4.10%) 2014-2037 46,990 46,990 47,949 48,718

Capital Lease Payable Fixed - (2.91%) 2014 448 773 n/a n/a

Principal Due 132,998 134,828 139,118 144,719 365 390 - - (1,113) (1,238) - - (384) (401) - - 1,332 1,427 - -

TOTAL $ 133,198 $ 135,006 $ 139,118 $ 144,719

Fair Value at May 31Balance at May 31

Premium on 2007 LoanDiscount on 2010 Taxable Loan

Premium on 2012 Non-Taxable HEFFA LoanDiscount on 2010 Non-Taxable HEFFA Loan


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10. Long‐Term Debt (continued)

In March 2012, the College borrowed $29,505,000 funded by the issuance of Higher Educational Facilities Financing Authority Revenue Bonds (HEFFA), Series 2012A. The proceeds of this issuance are for the renovation, expansion and improvements of two College buildings, the construction of two new residential halls and various capital infrastructure improvements called for in the College’s master plan. The bonds mature between 2013 and 2037 and carry a weighted average fixed rate of interest of 4.1%. Under the terms of the loan agreement with HEFFA, the College is responsible for payment of principal and interest on the bonds. Payment of the principal and interest is secured by a pledge of College resources. These bonds are subordinate with regard to repayment to the College’s outstanding Orange County Educational Facilities Authority (OCEFA) Series 2007 Bonds. Concurrent with the HEFFA Series 2012A Bond financing, the College issued an additional $17,485,000 of HEFFA Series 2012B Bonds. The proceeds of this issuance were utilized for the refunding of the College’s OCEFA Series 2002 Bonds. The HEFFA Series 2012B Bonds carry a weighted average fixed rate of interest of 4.1% and mature between 2013 and 2032. Under the terms of the loan agreement with HEFFA, the College is responsible for payment of principal and interest on the bonds. Payment of the principal and interest is secured by a pledge of College resources. These bonds are subordinate with regard to repayment to the College’s outstanding OCEFA Series 2007 Bonds. In April 2010, the College borrowed $25,830,000 funded by the issuance of Taxable Capital Improvement Revenue Bonds (Taxable), Series 2010. Proceeds from this borrowing were utilized to refund the College’s taxable loan from City National Bank, issued in October 2008. The bonds mature between 2013 and 2026 and carry a weighted average fixed rate of interest of 5.83%. These bonds are subordinate with regard to repayment to the College’s outstanding OCEFA Series 2007 Bonds. Also in April 2010, the College borrowed $37,545,000 funded by the issuance of HEFFA Series 2010 Bonds. $8.2 million of the proceeds of this issuance were used for renovation of residential halls and other capital projects of the College; the remaining proceeds were used to refund the OCEFA Series 2008 Bonds and OCEFA Series 2001 Bonds, both variable rate issues. The HEFFA Series 2010 Bonds mature between 2016 and 2038 and carry a weighted average fixed rate of interest of 4.94%. Under the terms of the loan agreement with HEFFA, the College is responsible for payment of principal and interest on the bonds. Payment of the principal and interest is secured by a pledge of College resources. These bonds are subordinate with regard to repayment to the College’s outstanding OCEFA Series 2007 Bonds.


26

10. Long‐Term Debt (continued)

In September 2007, the College borrowed $25 million, funded by the issuance of OCEFA 2007 Bonds. This borrowing was for the purpose of capital projects, including building renovations, construction or acquisition of certain facilities, and real property. Under the terms of the loan agreement with OCEFA, the College is responsible for payment of principal and interest on the bonds. Payment of the principal and interest on the bonds is secured by a pledge of College resources. The OCEFA 2007 Bonds mature between 2013 and 2037, and carry a weighted average fixed interest rate of approximately 5.23%. There are debt covenant requirements associated with the OCEFA Series 2007 bonds, most notably a debt service coverage ratio. Management believes the College is in compliance with these covenants.

Principal payments on the outstanding obligations for each of the next five fiscal years and thereafter are as follows (in thousands):

Year

Principal

Payments

2014 $ 3,399 2015 3,319 2016 3,565 2017 2,330 2018 2,425 Thereafter 117,960 $ 132,998

11. Interest Rate Swap

On August 5, 1998, the College entered into a variable-to-fixed interest rate swap agreement in the initial notional amount of $19 million. The purpose of the agreement was initially to hedge the interest rate risk on the taxable, variable-rate demand bonds issued by the College to finance the construction of the commercial real estate project described in Note 6. Under the terms of the agreement, the College pays a fixed rate of 6.11% to a counterparty and receives an amount based upon the London Interbank Offered Rate (LIBOR). The term of the agreement extends over the maturity period of the Taxable Revenue Bonds—Series 1998, with the notional amount being reduced in accordance with the original maturity of the Series 1998 Bonds through fiscal year 2027.

During 2008 the College refunded the 1998 Bonds, for which the swap agreement was originally intended as a hedge. However, the College has elected to retain the swap agreement. A termination may result in the College making or receiving a termination payment generally equal to the fair value of the swap agreement at the time of termination. Gains (losses) on the interest rate swap for the fiscal years ended May 31, 2013 and 2012, amounted to $1,118,000 and ($1,677,000), respectively, and are included with nonoperating activities in the accompanying consolidated statement of activities. The interest rate swap is presented at fair value, based on Level II criteria defined in Note 1, which was ($4,295,000) and ($5,413,000) as of May 31, 2013 and 2012, respectively.


27

11. Interest Rate Swap (continued)

Using an interest rate swap may increase the College’s exposure to credit risk and market risk. The College minimizes the credit (or repayment) risk in derivative instruments by (1) entering into transactions with high-quality counterparties, (2) limiting the amount of exposure to each counterparty, and (3) monitoring the financial condition of its counterparties. Market risk is the adverse effect on the value of a derivative financial instrument that results from a change in interest rates. The College manages the market risk associated with derivative financial instruments by monitoring and oversight activities applied by the College’s investment advisor and Board of Trustees.

12. Endowment

The College’s endowment consists of approximately 500 individual funds established for a variety of purposes, including both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. During fiscal 2012 the College’s endowment was administered under the Florida Uniform Prudent Management Funds Act of 2012. Effective July 1, 2012, the State of Florida adopted legislation that incorporates the provisions outlined in the Uniform Prudent Management Institutional Funds Act (Florida UPMIFA). The effect of applying Florida UPMIFA in fiscal year 2013 is a reclassification of donor-restricted endowment net assets from unrestricted to temporarily restricted to the extent amounts are not appropriated for expenditure. During the year ended May 31, 2013 the College reclassified $16,854,000 of donor-restricted net assets from unrestricted to temporarily restricted as a result of the Florida UPMIFA adoption; this reclassification is reflected in the Consolidated Statement of Activities as Florida UPMIFA adoption adjustment. The Colleges’ interpretation of its fiduciary responsibilities for donor-restricted endowments under Florida UPMIFA, barring the existence of any donor-specific provisions, is to preserve intergenerational equity. Under this broad guideline, future endowment beneficiaries should receive at least the same level of economic support that the current generation enjoys. The overarching objective is to preserve and enhance the real (inflation-adjusted) purchasing power of the fund in perpetuity. Florida UPMIFA specifies that unless stated otherwise in a gift instrument, donor-restricted assets in an endowment fund are restricted assets until appropriated for expenditure. Barring the existence of specific instructions in gift agreements for donor-restricted endowments, the College reports the historical value for such endowments as permanently restricted net assets and the net accumulated appreciation as temporarily restricted net assets. In this context, historical value represents the original value of initial gifts restricted as permanent endowment plus the original value of subsequent gifts, and if applicable, the value of accumulations made in accordance with the direction of specific donor gift agreements.


28

12. Endowment (continued)

Further, the College interprets that it may spend a prudent portion of its endowment regardless of underwater conditions so long as it does so in accordance with a predetermined, Board-approved spending policy that takes into consideration the following factors:

1. The purposes of the institution;

2. The intent of the donors of the endowment fund;

3. The terms of the applicable instrument;

4. The long-term and short-term needs of the institution in carrying out its purposes;

5. The general economic conditions;

6. The possible effect of inflation or deflation;

7. The other resources of the institution; and

8. Perpetuation of the endowment. The College’s objective for the endowment pool is to provide a sustainable and increasing level of distribution to support the College's annual operating budget while preserving the real (inflation adjusted) purchasing power of the endowment pool exclusive of gift additions. The level of distribution is expected to grow over time, at least at the same rate as the annual average increase in the College's operating budget. The investment objective for the endowment pool is to attain a compound return (net of fees) of at least 9.0% over the long term, as measured over rolling five-year time periods. The table below summarizes the calculation of the compound return need:

Spending Rate 4.5% Inflation 2.5% Real Growth 2.0% Compound Return Need, net of expenses 9.0% The College’s investment policies assume that annual appropriation of endowment assets for spending over the long term will represent 4.5% of the market value of the endowment pool. The “corridor method” is used to calculate the appropriation amount -- gift and other endowment additions earn appropriation amounts equivalent to an annual rate of 4.5% of the principal addition in the first fiscal year of investment. Each fiscal year thereafter, the appropriation amount, in dollars, is increased by 3%. The annual appropriation amount will not be less than 3.5% nor will it exceed 5.5% of the endowment’s fair market value measured by a four-quarter rolling average, lagged by one quarter, at the beginning of any fiscal year.


29


The annual appropriation distribution will primarily come from current income (dividends and interest); however, a prudent portion of realized and unrealized capital gains will be used. The College periodically reviews the spending policy and issues statements of change as appropriate. To attain the investment objective, the endowment pool assets are divided into three groups: fixed income, equities, and alternative investments. The purpose of using the asset allocation model is to ensure that the overall asset allocation among the major asset classes remains under the scrutiny of the Trustees and is not permitted to become the residual of separate manager decisions. The College’s asset allocation targets were as follows as of May 31, 2013:

Investment in alternative asset categories is an incremental process that normally requires several years to be fully implemented. Assets awaiting deployment to alternative investments may be invested in other authorized asset classes, resulting in a transitional allocation that is not compliant with the model.

Asset Class Allocation Policy Equities: Domestic Equity 16.5% Non-U.S. Developed Equity 13.5% Emerging Markets Equity 9.0% Total Equities 39.0% Fixed Income: Multi-Strategy Fixed Income 12.0% Total Fixed Income 12.0% Alternative Investments: Global Private Equity 10.0% Flexible Capital (Hedge Funds) 22.0% Inflation Hedging (Real Assets) 17.0% 49.0% Cash 0.0% 100.0%


30


Changes in endowment net assets for the years ended May 31, 2013 and 2012 are as follows:

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total

Donor-restricted endowment funds $ - $ 96,444 $ 201,004 $ 297,448 Board-designated endowment funds 40,847 11,809 - 52,656

Endowment net assets, May 31, 2013 40,847$ 108,253$ 201,004$ 350,104$

Investment return:Investment income 1,327 2,794 227 4,348 Net appreciation 12,374 26,392 4,090 42,856

Total investment return 13,701 29,186 4,317 47,204 Contributions 457 1,579 5,512 7,548 Divestitures (20,557) - - (20,557) Appropriation of endowment

assets for expenditure (7,982) (8,372) - (16,354) Reclassification due to UPMIFA Adoption (16,854) 16,854 - -

Change in net assets (31,235) 39,247 9,829 17,841

Donor-restricted endowment funds 16,854 57,584 191,175 265,613 Board-designated endowment funds 55,228 11,422 - 66,650

Endowment net assets, May 31, 2012 72,082$ 69,006$ 191,175$ 332,263$ Investment return:

Investment income 1,239$ 2,030$ 885$ 4,154$ Net appreciation (4,202) (7,125) (4,936) (16,263)

Total investment return (2,963) (5,095) (4,051) (12,109) Contributions 135 641 1,585 2,361 Appropriation of endowment

assets for expenditure (7,747) (7,847) - (15,594) Change in net assets (10,575) (12,301) (2,466) (25,342) Donor-restricted endowment funds 22,356 69,725 193,641 285,722 Board-designated endowment funds 60,301 11,582 - 71,883

Endowment net assets, May 31, 2011 82,657$ 81,307$ 193,641$ 357,605$


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13. Net Assets

Net assets consist of the following as of May 31, 2013 and 2012 (in thousands):

2013 2012 Unrestricted net assets: Available for current operations $ 17,889 $ 6,892Funds functioning as endowment 40,847 55,228Accumulated appreciation on unrestricted endowments - 16,854Plant and commercial property assets, net of outstanding

debt and accumulated depreciation 41,744 40,175Unrestricted net assets $ 100,480 $ 119,149 Temporarily restricted net assets: Restricted for specified programs (education and general

programs and scholarships) $ 9,799

$ 9,282Restricted for student loans 808 775Restricted for plant acquisition 22,602 18,491Restricted gifts functioning as endowments 11,809 11,422Split-interest trusts 1,913 3,304Accumulated appreciation on restricted endowments

(educational and general programs and scholarships) 96,444 57,584Temporarily restricted net assets $ 143,375 $ 100,858 Permanently restricted net assets: Split-interest trusts $ 1,889 $ 1,713Endowments restricted for education and general programs

and scholarships 201,004 191,175Permanently restricted net assets $ 202,893 $ 192,888

14. Related‐Party Transactions

The College maintains business relationships with companies owned or operated by trustee members. These relationships are disclosed to the organization and other trustee members. The College maintains a policy requiring trustees to abstain from voting on matters regarding business operations where potential conflicts of interest exist.

During the years ended May 31, 2013 and 2012, the College paid approximately $1,236,000 and $1,171,000 respectively, to firms related to board members for legal and other services.

During the years ended May 31, 2013 and 2012, the College received approximately $4,295,000 and $3,427,000, respectively, in contributions from members of its Board of Trustees which are included in contributions and private grants revenue in the accompanying consolidated financial statements.


32

14. Related‐Party Transactions (continued)

At May 31, 2013 and 2012, total contributions receivable included approximately $17,755,000 and $20,442,000, respectively, in pledged contributions from current members of the Board of Trustees.

15. Commitments

The College had committed to campus construction projects that, at May 31, 2013, were at various stages of completion. The estimated costs of these projects are $49,134,000, of which $38,201,000 had been accrued or paid as of May 31, 2013.

16. Contingencies

Amounts received by the College under federal and state financial assistance programs are subject to audit and adjustment by those agencies. If expenses under those programs were to be disallowed as a result of such audits, the reimbursement to the federal or state government would be recorded as a liability of the College. In the opinion of management, any such adjustment would not be material to the College’s consolidated financial statements or its financial assistance programs.

In the conduct of its operations, claims are occasionally made against the College. Some of the claims result in filing of lawsuits. In most cases, the College is insured by its commercial insurance carrier. Management is of the opinion that no significant financial losses to the College will result from the resolution of such matters currently pending.


FINANCIAL OPERATIONSPART II

REPORT OF FINANCIAL OPERATIONS ROLLINS COLLEGE ROLLINS COLLEGE

1

ROLLINS COLLEGE

REPORT OF FINANCIAL OPERATIONS


OVERVIEW The pages that follow present and discuss the revenues and expenditures of the current funds for the fiscal year ended May 31, 2013. Current funds provide resources for the day-to-day operations of the College. This report does not include results from the College’s Endowment performance (except to reflect the portion available for expenditure via the College’s Endowment Spending Rate – represented as Endowment Spending Distribution). The report also excludes results from changes in Split-Interest Arrangements, and expenditures for Construction or Acquisition of Plant Assets (unless funded by current operations). Expenditures for fixed assets are represented as current expenditures and depreciation on plant assets is excluded. Budgeted principal and interest payments on long-term debt are accounted for as expenditures. All of these aforementioned excluded items are included in the Audited Financial Statements under Part I. This section, Report of Financial Operations – Current Funds, attempts to “carve-out” of the audited financial statements the results of current operations and current designated and restricted activities. The current expenditures of the College are presented in two ways: by object class, such as salaries, benefits, supplies, etc.; and by function, such as instruction, academic support, and institutional support. The statements also detail sources of funding available to meet expenditures. The information is presented in comparative form for the current and prior fiscal year. Certain prior year amounts may have been reclassified to conform to the current year presentation. Net student income (tuition and fees, room and board) provided 64.0% of current fund revenues in 2013, compared to 67% in the prior year. Gift and grant revenue increased $2.4 million, a 35.3% increase from last year, due to increase in Rollins Fund giving and restricted gifts due to increased development efforts surrounding the capital campaign. At $19.6 million, Investment Income available for operations increased 5.3% or $981 thousand over last year. Commercial Property Investments contributed over $2.5 million to current operations. More specific comments on revenues begin on page 4. Total expenditures and transfers from the College’s unrestricted and restricted current funds increased from $105 million in 2012 to $110 million in 2013, representing a 4.8% increase. Further explanations and analysis of expenditures and transfers begin on page 8.


2

For the Year

Ended May 31,

2012

Unrestricted

Current

Designated

& Restricted

Total Total 2013 2012

REVENUES

Student Income

Tuition & Fees 95,867$ 244$ 96,111$ 93,880$

Scholarship Allowances (28,986) (7,453) (36,439) (32,772)

Net Tuition & Fees 66,881 (7,209) 59,672 61,108

Residence Halls 9,689 - 9,689 9,209

Student Income, net of Scholarships 76,570 (7,209) 69,361 70,317 64.0% 67.0%

Gifts & Grants

Private Gifts & Grants 2,226 5,894 8,120 5,748 7.5% 5.5%

Federal & State Grants - 1,242 1,242 1,171 1.1% 1.1%

Total Gifts & Grants 2,226 7,136 9,362 6,919 8.6% 6.6%

Investment Income

Investment Income 183 646 829 885 0.8% 0.8%

Endowment Spending Distribution 3,597 12,757 16,354 15,594 15.1% 14.8%

College Directed Reinvestment - (170) (170) - -0.2% 0.0%

Commercial Property Investments 2,586 - 2,586 2,139 2.4% 2.0%

Total Investment Income 6,366 13,233 19,599 18,618 18.1% 17.6%

Auxiliary & Other Revenues 8,748 1,378 10,126 9,243 9.3% 8.8%

Total Revenues 93,910 14,538 108,448 105,097 100.0% 100.0%

EXPENDITURES & TRANSFERS

Payroll & Related Expense

Permanent Faculty Positions 16,453 123 16,576 15,804 15.7% 15.7%

Permanent Administrative Positions 22,543 2,174 24,717 23,359 23.5% 23.3%

Adjuncts, Overloads, Temp, & Overtime 5,598 1,099 6,697 6,874 6.4% 6.9%

Fringe Benefits 15,264 946 16,210 15,619 15.4% 15.6%

Total Payroll Expense 59,858 4,342 64,200 61,656 61.0% 61.5%

General & Administrative Expense

General & Administrative Expense 24,437 3,511 27,948 26,951 26.5% 26.9%

Utilities 2,548 34 2,582 2,638 2.5% 2.6%

Debt Service 6,450 - 6,450 5,950 6.1% 5.9%

Equipment & Capital Purchases 2,621 1,528 4,149 3,097 3.9% 3.1%

Total General & Administrative Expense 36,056 5,073 41,129 38,636 39.0% 38.5%

Total Expenditures 95,914 9,415 105,329 100,292 100.0% 100.0%

Interfund Transfers

Capital Projects 3,502 - 3,502 4,000

Other Transfers (4,347) 5,621 1,274 741

Department Carry Forwards (1,197) 1,197 - -

Total Interfund Transfers (2,042) 6,818 4,776 4,741

Total Expenditures & Transfers 93,872 16,233 110,105 105,033

Change in Net Assets 38$ (1,695)$ (1,657)$ 64$

ROLLINS COLLEGE

REPORT of FINANCIAL OPERATIONS

CURRENT FUNDS


Statement of Expenditures, Transfers and Resources Available

By Object Classification

in thousands

For the Year Ended May 31, 2013 % of Total


3

For the Year

Ended May 31,

2012

Unrestricted

Current

Designated

& Restricted

Total Total 2013 2012

REVENUES

Student Income

Tuition & Fees 95,867$ 244$ 96,111$ 93,880$

Scholarship Allowances (28,986) (7,453) (36,439) (32,772)

Net Tuition & Fees 66,881 (7,209) 59,672 61,108

Residence Halls 9,689 - 9,689 9,209

Student Income, net of Scholarships 76,570 (7,209) 69,361 70,317 64.0% 67.0%

Gifts & Grants

Private Gifts & Grants 2,226 5,894 8,120 5,748 7.5% 5.5%

Federal & State Grants - 1,242 1,242 1,171 1.1% 1.1%

Total Gifts & Grants 2,226 7,136 9,362 6,919 8.6% 6.6%

Investment Income

Investment Income 183 646 829 885 0.8% 0.8%

Endowment Spending Distribution 3,597 12,757 16,354 15,594 15.1% 14.8%

College Directed Reinvestment - (170) (170) - -0.2% 0.0%

Commercial Property Investments 2,586 - 2,586 2,139 2.4% 2.0%

Total Investment Income 6,366 13,233 19,599 18,618 18.1% 17.6%

Auxiliary & Other Revenues 8,748 1,378 10,126 9,243 9.3% 8.8%

Total Revenues 93,910 14,538 108,448 105,097 100% 100%

EXPENDITURES

Instruction 32,263 1,317 33,580 32,678 31.9% 32.6%

Academic Support 10,314 1,775 12,089 11,299 11.5% 11.3%

Advancement Related 5,091 468 5,559 5,113 5.3% 5.1%

Student Services 14,681 2,508 17,189 15,568 16.3% 15.5%

Institutional Support 13,280 1,881 15,161 14,425 14.4% 14.4%

Operation & Maintenance of Plant 9,999 3 10,002 9,882 9.5% 9.9%

Public Service 658 1,253 1,911 1,536 1.8% 1.5%

Auxiliary Enterprises 9,628 210 9,838 9,791 9.3% 9.8%

Total Expenditures 95,914 9,415 105,329 100,292 100% 100%

Interfund Transfers

Capital Projects 3,502 - 3,502 4,000

Other Transfers (4,347) 5,621 1,274 741

Department Carry Forwards (1,197) 1,197 - -

Total Interfund Transfers (2,042) 6,818 4,776 4,741

Total Expenditures & Transfers 93,872 16,233 110,105 105,033

Change in Net Assets 38$ (1,695)$ (1,657)$ 64$

For the Year Ended May 31, 2013 % of Total

ROLLINS COLLEGE

REPORT of FINANCIAL OPERATIONS

CURRENT FUNDS


Statement of Expenditures, Transfers and Resources Available

By Functional Classification

in thousands


4

REVENUES AVAILABLE

TOTAL REVENUES AVAILABLE in fiscal year 2013 was $108 million compared to $105 million in 2012. Rollins is financed by four principal revenue sources: student income, gifts and grants, investment income, and auxiliary enterprises. Rollins tuition comes primarily from three major sources: the full-time day school (referred to as the Undergraduate Day Program), the Crummer Graduate School of Business, and the Hamilton Holt School (evening and part-time programs). The following graphs show the proportions of revenue and tuition by source:

Student Income

64.0%

Investment

Income

18.1%

Gifts & Grants

8.6%

Auxiliary & Other

Revenues

9.3%

Revenue By Source

Undergraduate

Day Program

67.9%

Crummer

13.1%

Holt

15.7%

Non-Credit Pgms

& Other

3.3%

Tuition By Source

(Net of Financial Aid)


5

Net Student Income of $69.3 million accounted for 64% of total revenues in the current funds. The components of net student income are tuition and fees (reduced by scholarship allowances) and housing revenue. Gross tuition and fees increased by $2.2 million or 2.4%. The Undergraduate Day Program tuition and fee rates increased by 3.8%, while room rates and board rates each increased by 3.8% as well. Other tuition increases for Crummer and Holt, and enrollment changes in certain programs, accounted for the remaining difference. Scholarship allowances (or financial aid awards) were $36.4 million in 2013, which represents a $3.6 million increase over 2012, or 11.2%. On a College-wide basis such allowances were 38.6% of applicable gross tuition and fees for 2013 and 35.3% for 2012. More information on financial aid is presented on page 6. Housing revenues were $9.6 million with occupancy rates 98%. This is $480 thousand over the prior year, an increase of 5.2%, including a room rate increase of 3.8%. The College has a policy requiring incoming freshmen as well as sophomores to live on-campus. Gifts and Grants for fiscal 2013 were $9.3 million, up $2.4 million or 35.3% from 2012. This category provided 8.6% of the College’s current operating funds, compared and 6.6% in the previous year. The increase is attributable to the capital campaign. Investment Income was $19.6 million for 2013 compared to $18.6 million for 2012, an increase of just over 5.3%. This increase is attributable to the purchase of additional commercial properties and the rent revenues derived from these properties. The College’s commercial properties generated net income before depreciation of over $2.5 million. Current income from endowments and trusts increased $760 thousand, or 4.9%. Auxiliary Enterprises and Other Revenues provided $10.1 million or 9.3% of total resources available, up from 8.8% of total resources in 2012. This category consists primarily of food service revenues but also includes rents, publishing services, bookstore commissions, admission and ticket sales, fines and penalties, vending sales, and other miscellaneous revenues not otherwise classified.


6

FINANCIAL AID

Scholarship Allowances Scholarship awards funded by institutional resources are reflected as discounts of tuition and fee income. The following chart illustrates the sources of institutional funds expended to provide scholarships to students enrolled in Rollins’ various academic programs:

2012

Undergradate

Day Crummer Holt

Non Credit

Programs Total Total

Tuition & Fee Revenues 74,615$ 9,255$ 10,015$ 2,226$ 96,111$ 93,880$

Scholarship Allowances, by Funding Source

Unrestricted Revenues 25,576$ 1,044$ 143$ -$ 26,763$ 24,262$

Rollins Fund 2,223 - - - 2,223 1,998

Cornell Scholarships 1,800 - - - 1,800 1,800

Restricted Gifts & Grants* 82 85 248 - 415 591

Endowments 4,428 312 277 - 5,017 4,121

Scholarship Allowances 34,109$ 1,441$ 668$ -$ 36,218$ 32,772$

% of Tuition and Fees 45.7% 15.6% 6.7% 0.0% 38.6% 35.3%

* Scholarship allowances excludes $221 thousand of the federally funded portion of the Supplemental Educational Opportunity Grant

in thousands

2013

2011 2012 2013

Tuition & Revenue* $65,535 $70,091 $74,615

Scholarship Allowances** $27,796 $30,375 $34,109

Net Tuition & Fees $37,739 $39,716 $40,506

$65,535 $70,091

$74,615

$27,796 $30,375 $34,109

$37,739 $39,716 $40,506

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Undergraduate Day Scholarship Allowances(in thousands)

Tuition & Revenue* Scholarship Allowances** Net Tuition & Fees

* Tuition & Revenue excludes non-creditted tuition and non-mandatory fees** Scholarship allowances excludes the federally funded portion of the Supplemental Educational Opportunity Grant


7

Other Financial Aid In addition to scholarship allowances, financial aid to students includes Federal and College sponsored work-study. This is a need-based student employment program, for which a College match is required to receive Federal funds. The college-matched portion is classified as temporary labor. Graduate assistantships are also available to students enrolled in post-baccalaureate studies. Additionally, loans are available via the Federal Government and college-sponsored Federal Perkins Loan Program, as well as privately endowed loan funds. The College serves as a conduit for the distribution of financial aid that is not incorporated into the financial operations. Sources of this aid include Federal and State loans and grants, and scholarships awarded by external organizations. Graduate students and non-residential undergraduates often use these resources for living expenses, books, transportation, and other expenses not paid to the College. The State of Florida continually decreases per student funding for the Florida Resident Access Grant (FRAG) Program. This totaled $2,837 for 2008-2009, $2,511 for 2009-2010, $2,425 for 2010-2011, $2,149 for 2011-2012, and $2,150 for 2012-2013. Students received the benefit of these resources as noted in the table below.

2011-12 Arts &

Sciences Crummer Holt

Non Credit

Programs Total Total

Tuition & Fee Revenues 74,615$ 9,255$ 10,015$ 2,226$ 96,111$ 93,880$

Agency Financial Aid (excluded from Financial Statements)

Federal Funding

PELL and Similar Grants 1,978 - 1,714 - 3,692 3,457

Direct Loans 9,801 4,308 8,233 - 22,342 21,535

Total Federal Funding 11,779 4,308 9,947 - 26,034 24,992

State Funding

Resident Access Grants 1,896 - 854 - 2,750 3,391

Florida Student Assistance 504 - 201 - 705 1,162

Bright Futures 2,034 3 162 - 2,199 1,065

Other 10 - - 10 8

Total State Funding 4,444 3 1,217 - 5,664 5,626

Other Sources - - - - - -

Total Agency 16,223$ 4,311$ 11,164$ -$ 31,698$ 30,618$

College Financial Aid (included in Financial Statements)

Scholarship Allowances*, from prior page 34,109$ 1,441$ 668$ -$ 36,218$ 32,772$

Total College 34,109 1,441 668 - 36,218 32,772

Grand Total 50,332$ 5,752$ 11,832$ -$ 67,916$ 63,390$

% of Tuition & Fees 67.5% 62.2% 118.1% 0.0% 70.7% 67.5%

* Scholarship allowances excludes $221 thousand of the federally funded portion of the Supplemental Educational Opportunity Grant

2012-13


8

EXPENDITURES AND TRANSFERS – OBJECT CLASS ANALYSIS

TOTAL EXPENDITURES AND TRANSFERS in fiscal year 2013 were $110 million, compared to $105 million in the prior year. This represents an increase of $5. million, or 4.8%. The following charts show the proportions of expenditures by object.


61.0%

General & Administrative

Expense

26.5%Debt Service

6.1%

Equipment & Capital

Purchases

3.9%

Utilities

2.5%

Expenditures by Object

2013


61.5%

General & Administrative

Expense

26.9%Debt Service

5.9%

Equipment & Capital

Purchases

3.1%

Utilities

2.6%

Expenditures by Object

2012


9

Payroll and Benefits totaled $64.2 million in fiscal 2013 compared $61.7 million in fiscal 2012, an increase of $2.5 million or 4.1%. In fiscal 2013, a 2% merit pool was approved college wide. In addition, changes in staffing levels or head counts, as well as selected market adjustments to salaries, also affected the year-over-year increase. 61.0% of the College’s expenditures are related to compensation and benefits. Employee benefit costs rose 3.8% in 2013, compared to an increase of 6.2% in 2012. The increases are spread over several areas—including health insurance, pension costs, and Social Security/Medicare. Health insurance costs increased from $5.0 million last year to over $5.3 million, a 6.0% increase. The major components of employee benefit costs are detailed in the chart that follows:

General and Administrative increased over the prior year to $27.9 million, and represents 26.5% of total expenditures in 2013, compared to $26.9 million in 2012. This category includes all items not reported elsewhere such as contract and professional services, travel and entertainment, telephone service, postage, insurance, and repairs and maintenance. Utilities decreased by 2.1% in 2013. At $2.5 million for 2013, utilities represented about 2.5% of expenditures. Utility costs continue to rise, however decreased consumption is attributable to the decrease in utility expenses.

% of % of

Amount Total Amount Total Amount % Change

Health & Dental Insurance 5,272$ 32.6% 4,972$ 31.9% 300$ 6.0%

Pension Plans 3,699 22.8% 3,513 22.5% 186 5.3%

Social Security/Medicare 3,312 20.4% 3,110 19.9% 202 6.5%

Tuition Programs 3,292 20.3% 3,169 20.3% 123 3.9%

Workers' Comp Insurance 231 1.4% 209 1.3% 22 10.5%

Life, ADD & LTD Insurance 208 1.3% 203 1.3% 5 2.5%

Accruals & Other 196 1.2% 444 2.8% (248) -55.9%

16,210$ 100.0% 15,620$ 100.0% 590$ 3.8%

Change

Employee Benefit Costs Components

in thousands

20122013


10

Debt Service, from the operating fund, increased by $500 thousand in 2013 to $6.4 million. The College is increasing its annual debt service outlay each year in a multi-year plan to bring the annual outlay up to the amounts required by the College’s fixed rate bond structure. Debt Service currently represents 6.1% of total expenses, up from 5.9% in 2012. The College’s Master Trust Indenture, which currently governs the College’s outstanding 2007 Orange County Educational Facilities bonds, defines a debt service coverage ratio for the College to maintain. The ratio of the sum of net income available for debt service to current annual debt service shall not exceed 1.10. For fiscal 2012-13 the ratio for senior debt was 4.68 compared to 4.55 for the 2011-12 fiscal period. The ratio for all debt in 2012-13 was 1.33, compared to 1.64 for the 2011-12 fiscal period. The drop in total debt service coverage ratio is due to the addition of $30 million in new bonds in April 2012 and the associated interest service costs. See also the tab “Debt Service Coverage Ratio” in this binding.

Equipment and Capital Purchases and Capital Projects funded by current operations decreased by a combined $1.1 million from prior year, from $5.9 million to $6.4 million. Expenditures for equipment and capital purchases funded from current operations include computers, software and related equipment, major building renovations, and significant, long-term capital improvements. Transfers to or from particular College funds are made to comply with donor or grantor stipulations or to provide for claims, contingencies, and other College needs arising during the year. Transfers, by definition, have offsetting amounts on other expense lines.


11

EXPENDITURES AND TRANSFERS – FUNCTIONAL CLASS ANALYSIS

The functional class presentation segregates expenses by the business function that incurred the expense. The following chart shows the proportions of expenditures by function:

Instruction

31.9%

Student Services

16.3%

Institutional Support

14.4%

Academic Support

11.5%

Operation & Maintenance

of Plant

9.5%


9.3%

Advancement Related

5.3%

Public Service

1.8%

Other

16.4%

Expenditures by Function

2013

Instruction

32.6%

Student Services

15.5%

Institutional Support

14.3%

Academic Support

11.3% Operation & Maintenance

of Plant

9.9%


9.8%

Advancement Related

5.1%

Public Service

1.5%

Other

16.4%

Expenditures by Function

2012


12

Instruction increased in 2013 to $33.6 million, up from $32.7 million in 2012, a 2.8% increase. This category represents the direct expense, including salaries, of academic departments and activities. Instructional compensation accounts for most of this category. Expenditures for 2013 and 2012 were as follows:

Academic Support includes expenditures incurred to provide support services for the College’s primary mission of instruction such as: deans’ office expenses, academic administration, library, visiting professorships and Bush Executive Center’s program costs and administration. Expenditures for 2013 and 2012 were as follows:

Advancement Related expenses increased in 2013 to $5.5 million from $5.1 million in 2012, or an increase of 8.7%. Advancement-related expenses include the direct cost of fundraising, plus alumni activities and public relations.

Program/ Activity Total % of Total Total % of Total

Arts & Sciences 24,752$ 73.7% 22,664$ 69.4%

Crummer Graduate School of Business 5,596 16.6% 6,485 19.8%

Hamilton Holt School 3,218 9.6% 3,507 10.7%

Other 14 0.1% 22 0.1%

Total 33,580$ 100.0% 32,678$ 100.0%

in thousands

2013 2012


Arts & Sciences 3,016$ 24.9% 3,085$ 27.3%


Hamilton Holt School 809 6.7% 665 5.9%

Olin Library 1,986 16.4% 1,943 17.2%

Other 4,735 39.2% 4,055 35.9%

Total 12,089$ 100.0% 11,299$ 100.0%

in thousands

2013 2012


13

Student Services include student affairs and activities, admissions, registration, records, health services, financial aid services, career services, advising and counseling, and athletics. In the Undergraduate Day Program, increased student participation on athletic teams is attributable to increased activities within Student Services. In other College programs, employees and departments having other primary functions and duties, provide student services which are recorded as either instructional, academic support, or student service. Time studies have not been conducted to accurately identify and allocate costs attributable to such dual efforts. Therefore, comparisons of the levels of student services between the College’s programs may not be meaningful. Expenditures for 2013 and 2012 were as follows:

Institutional Support consists of the cost of administrative and service functions of the College, including the Board of Trustees, President, Vice President for Academic Affairs & Provost, Vice President for Business & Finance and Treasurer, Human Resources, Post Office, Information Technology (allocated to academic support as well), Business Services, and Campus Safety. This category also includes the general expenses of the College such as dues, memberships, legal fees, audit fees, insurance, and employment searches. Expenditures in this category increased slightly from $14.4 million to $15.1 million, representing 14.4% of operating expenses. Operation and Maintenance of Plant increased by $120 thousand, from $9.9 million to $10.0 million, a 1.2% increase. Operation and Maintenance accounted for 9.5% of total operating expenses in 2013 and 9.9% in 2012. Public Service increased from $1.5 million in 2012 to $1.9 million in 2013, a 24.4% increase. Public service represents 1.5% of total operating expenses. These expenditures include support for activities such as the Cornell Fine Arts Museum, radio station WPRK, and the Philanthropy & Nonprofit Leadership Center. Auxiliary Enterprises remained at $9.8 million in 2012 and 2013, a $47 thousand or .5% increase. Auxiliary enterprise expenditures relate to activities of the College for which charges separate from tuition and fees are made, including food service, residence hall operations, rental properties, and copying/printing services. Food service expenses increase in tandem with food service revenues. Additionally, debt-financed capital projects (such as renovations on dormitories) increase auxiliary operations expenses.


Arts & Sciences 15,585$ 90.6% 14,266$ 91.7%


Hamilton Holt School 14 0.1% 53 0.3%

Total 17,189$ 100.0% 15,568$ 100.0%

in thousands

2013 2012


INVESTMENT PERFORMANCEPART III

ROLLINS COLLEGE REPORT of INVESTMENT PERFORMANCE


1

PORTFOLIO MANAGEMENT The Consolidated Investment Portfolio is comprised of endowment, split-interest funds and other assets that are invested with a long-term objective. The endowment portfolio is further subdivided into three major groups: the endowment pool, separately invested funds (non-pooled), and perpetual trusts (held by others). Investment of assets in the endowment pool are directly overseen and directed by the Investment Committee of the Rollins College Board of Trustees.

Appendix A provides an analysis of changes in the valuation of the Consolidated Investment Portfolio during the fiscal year ended May 31, 2013. Appendix B lists each investment contained in the Consolidated Investment Portfolio, noting the investment return for each account, and a comparison to the account’s benchmark return. Appendix C presents the total return of the endowment pool managers. Appendix D compares the actual asset allocation on May 31, 2013 to the policy asset allocation. Appendix E provides liquidity information by asset.

ENDOWMENT POOL

Investment Objective The investment objective for the endowment pool is to attain a compound return (net of fees) of at least 9.0% over the long term, as measured over rolling five-year time periods. The table below summarizes the calculation of the compound return need:

Spending Rate 4.5% Inflation 2.5% Real Growth 2.0% Compound Return Need, net of expenses 9.0% Asset Allocation The chart below presents a high-end allocation view as of May 31, 2013:

The allocation is presented in more detail on the following page:

Domestic Equity18.3%

Non-US Developed

Equity15.2%

Emerging Markets Equity

8.4%

Global Private Equity7.4%

Multi-Strategy Fixed Income

13.0%

Flexible Capital21.2%

Inflartion Hedging Assets

16.5%

Relative Allocation of Endowment Assets

REPORT OF INVESTMENT PERFORMANCE ROLLINS COLLEGE

`

2

Asset Allocation (continued)

Endowment Spending Policy For 2012-13, the College utilized a corridor approach in determining the amount of assets to be appropriated for spending, i.e., “the endowment-spending rate.” The Corridor calls for spending 4.5% of the original investment, increased annually by 3.0%, and subject to a floor and a ceiling of 3.5% and 5.5% of the endowment’s fair market value measured by a four-quarter rolling average, lagged by one quarter, at the beginning of any fiscal year. Over the past five fiscal years the spending rate policy has generated effective spending distributions in the range of 3.5% to 5.2% of the pool’s quarterly average market value in any one year, resulting in an average distribution of 5.0% for the five years ended May 31, 2013.

Endowment Pool Spending Distributions in thousands

Asset Class Allocation Asset Class AllocationDomestic Equity 18.3% Global Private Equity 7.4%Non U.S. Developed Equity 15.2% Flexible Capital 21.2%Emerging Markets Equity 8.4% Inflation Hedging Assets 16.5%Multi-Strategy Fixed Income 13.0% Cash 0.0%

Total 100.0%

Fiscal Year Spending Distribution

Spending % Increase

Quarterly Average

Market Value

Distribution %

2012-13 16,354$ 4.9% 330,156$ 5.0%2011-12 15,595 8.3% 313,865 5.0%2010-11 14,399 4.4% 298,965 4.8%2009-10 13,790 2.4% 263,004 5.2%2008-09 13,463 5.4% 262,490 5.1%

5 Year Average 14,720$ 5.1% 293,696$ 5.0%


`

3

Long-Term Results Information on portfolio appreciation and yield over the last ten fiscal years is presented below. Included is a simple computation of real results. Endowment income is net of investment management and administrative expenses Given their perpetual nature, one of the critical objectives in the management of endowed funds is to maintain the purchasing power of the assets, achieved when appreciation plus yield exceeds the combination of inflation and spending.

Fiscal Year Ended May 31

Total Results

2013 14.9% 2012 -3.1% 2011 2010 2009

21.4% 12.1% -25.6%

2008 2.9% 2007 21.0% 2006 14.9% 2005 16.6% 2004 23.6%

Ten Years, Annualized 8.8%

SEPARATELY INVESTED FUNDS Separately Invested Funds are individual funds whose assets are separately held and are not part of the pooled endowment. Some of the funds have investment objectives that differ from those found in the Endowment Pool. The assets are managed by external organizations in conjunction with the Treasurer of the College. The external investment managers have discretion, within the guidelines set forth in the policy statement and any additional guidelines provided to them, to manage the assets in each portfolio to achieve the investment objectives.

PERPETUAL TRUSTS

Perpetual Trusts consist of assets held by outside managers with only the income available to benefit Rollins College. One of the trusts (Warren Trust managed by BNY Mellon) is an irrevocable trust that contains specific requirements that must be met annually by the College. Distributions received from Perpetual Trusts are expended.

SPLIT-INTEREST FUNDS Split-Interest Funds consist of assets received to fund various charitable gift agreements, such as charitable remainder trusts, charitable gift annuities, and the Pooled Income Fund. Rollins serves as trustee and is the irrevocable remainder beneficiary of the trusts’ assets at maturity.


`

4

Long-Term Results (continued)

INVESTMENT RESULTS The following chart shows the valuation of the Endowment Pool and the Consolidated Investment Portfolio for the last ten fiscal years:

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Rollins CollegeInvestment Portfolio Growth

Ten Fiscal Years2004 through 2013

Endowment Consolidated Investment Portfolio


Appendix A

Separately Other ConsolidatedEndowment Invested Perpetual Split Interest Invested Investment

Pool Funds Trusts Total Funds Assets Portfolio

Beginning Valuation - June 1, 2012 308,857$ 5,227$ 15,030$ 329,114$ 4,739$ -$ 333,853$

Additions, Transfers, and EarningsGifts and Other Additions 6,809 (772) - 6,037 105 - 6,142 Transfers 1,520 - - 1,520 (1,520) - - Investment Earnings 45,916 541 2,706 49,163 446 - 49,609

Additions, Transfers, and Earnings 54,245 (231) 2,706 56,720 (969) - 55,751

WithdrawalsSpending and Beneficiary Payments (16,354) (494) (585) (17,433) (265) - (17,698) Investment Expenses (1,256) (36) (139) (1,431) (37) - (1,468) Other Withdrawals (20,557) - - (20,557) - - (20,557)

Withdrawals (38,167) (530) (724) (39,421) (302) - (39,723)

Investment Value - May 31, 2013 324,935$ 4,466$ 17,012$ 346,413$ 3,468$ -$ 349,881$

Reported in Cash & Cash Equivalents (145) 125 (20) (43) - (63)

Investments at FMV - May 31, 2013 324,790$ 4,591$ 17,012$ 346,393$ 3,425$ -$ 349,818$

Rollins CollegeConsolidated Investment PortfolioSchedule of Changes in Valuation

Fiscal Year Ended May 31, 2013

Endowment

This page intentionally left blank.


Appendix B

Account and Manager

May 31, 2013 Investment Value

(000's) 2009 2010 2011 2012 2013

5 Yrs, Annualized

Endowment Pool (b) 324,935$ -25.6% 12.1% 21.4% -3.1% 14.9% 2.4%Policy Allocation Index -25.1% 12.8% 20.5% -4.0% 14.5% 2.3%

Separately Invested Endowments and Long-Term FundsBush Chairs - Bank of America 3,563 -17.2% 14.7% 25.6% -7.7% 12.0% 4.3%Student Investment Fund - Crummer Students 724 3.3% 16.5% 19.3% -4.9% 16.0% 9.6%

Blended 70/30 Index -22.2% 17.4% 19.9% 1.9% 19.4% 5.9%

Real Estate, Insurance, and Other Misc Assets 179

Perpetual Trusts Held by OthersWarren - Mellon 12,423 -23.3% 16.6% 20.6% -7.9% 16.5% 3.0%

Blended 70/30 Index -22.2% 17.4% 19.9% 1.9% 19.4% 5.9%

AW Rollins - JP Morgan 2,370 -17.2% 12.7% 16.1% 0.1% 13.5% 4.2%Kinsman Crumb - Wachovia 6 -25.5% 18.1% 21.6% -8.7% 13.8% 2.1%

Blended 50/50 Index -14.2% 14.7% 15.9% 3.4% 14.1% 6.1%

Gundelach - US Bank 2,213 -29.8% 18.4% 27.4% -1.7% 23.6% 5.2%S&P 500 -32.6% 21.0% 25.9% -0.4% 27.3% 5.4%

Split Interest Trusts (all SSgA)Charitable Gift Annuity 1,961 0.2% 9.0% 7.4% 0.7% 12.6% 5.9%

Blended 10/90 Index 0.6% 9.7% 7.8% 6.4% 3.5% 5.5%Pooled Income Fund 532 -8.2% 10.9% 11.7% 1.3% 7.9% 4.4%

Blended 30/70 Index -6.8% 12.2% 11.8% 4.9% 8.8% 5.9%Charitable Remainder Trusts 975 -20.0% 16.9% 21.0% -4.3% 16.1% 4.7%

Blended 60/10/30 Index -18.2% 15.1% 17.3% 1.9% 16.7% 5.6%

Consolidated Investment Portfolio 349,881$ -24.5% 12.2% 12.2% -3.3% 14.9% 1.1%Blended 60/10/30 Index -18.2% 15.1% 17.3% 1.9% 16.7% 5.6%

Cash Pending Investment/(Uninvestment) (145) Cash Due to Endowment Pool 125 Cash Due from Trusts (43)

Consolidate Investment Pool Assets 349,818$

(a) Performance in excess of benchmark is noted in bold(b) Individual Manager Values and Returns are listed on a separate schedule

Rollins CollegeConsolidated Investment PortfolioInvestment Values and Performance

Total Return (Fiscal Periods) (a)


Group and Strategy Manager / BenchmarkInvestment

Value (000's)

Total Return Fiscal Year

2012 (a)


2013 (a)

Marketable SecuritiesStocks

US Large Cap Stralem 9,442 0.7% 20.6%S&P 500 -0.4% 27.3%

US Large Cap Growth Northern Trust Russell 1000 Fund 31,481 n/a 27.7%Russell 1000 Index 27.6%

US Small Cap Jensen Investment Management 9,113 -4.8% 26.1%Russell 1000 Growth 1.5% 22.6%

US Small Value Vaughan Nelson 9,291 -8.2% 29.6%Russell 2000 Value Index -8.3% 31.3%

Int'l Large Cap Vanguard Total Int'l Stock Index Fund 10,446 n/a 25.1%MSCI AC World ex US IMI (Net) 25.8%

Int'l Large Cap Sanderson Int'l Value 26,245 -14.5% 31.3%MSCI EAFE -20.5% 31.6%

Int'l Small Cap Mondrian 12,810 -11.7% 23.2%S&P EPAC SmallCap -20.1% 31.1%

Int'l Emerging Market Aberdeen Emerging Markets 20,752 -9.6% 19.1%Eaton Vance Parametric Emerging Markets (c) 6,463 n/a n/a

MSCI EM (net) -20.3% 14.1%

Fixed IncomeFixed Income PIMCO Total Return 7,309 6.3% 4.4%

Barclays U.S. Aggregate 7.1% 0.9%

Fixed Income Vanguard Total Bond Index Fund 12,274 n/a 0.9%Barclays U.S. Aggregate Float Adjusted 1.0%

Fixed Income Vanguard Inter-term Treasury Fund 4,028 n/a -0.2%Barclays U.S. Treasury: 5-10 Yr. -0.8%

Global Fixed Income Brandywine Global Fixed Income (c) 5,735 3.9% n/a

Global Fixed Income Colchester 12,924 -1.2% 3.3%Citigroup Wld Gov't Bond Index 2.8% -3.9%

Marketable Alternatives Real Assets Van Eck Hard Assets 15,387 -27.9% 14.0%

S&P North American Natural Resources Sector -22.6% 19.6%

AEW Global Property Securities (c) 7,141 n/a n/aUBS Real Estate Investors

Vanguard Inflation-Protected Sec I Fund (c) 6,356 n/a n/aBarclay's US Treasury: US TIPS

Wellington US Commodities (c) 6,739 n/a n/aWellington Commodities Custom Index

RREEF American REIT III (b) 3,900 48.7% 22.1%Park Street Natural Resources (b) 5,260 9.5% 7.7%Metropolitan Real Estate (b) 933 23.8% 6.0%Colony Realty (b) 1,257 8.0% -22.6%Newlin Energy (b) 5,201 13.6% 8.9%BlackRock Diamond Property Fund (b) 1,049 6.6% 11.5%

Rollins CollegeEndowment Pool

Performance to BenchmarkMay 31, 2013


Appendix C

Group and Strategy Manager / BenchmarkInvestment

Value (000's)


2012 (a)


2013 (a)

Marketable Alternatives (cont) Hedge Funds - Multi Strategy King Street Capital 6,888 -0.2% 16.2%

Silver Point Capital Offshore Fund 3,585 3.8% 20.2%Anchorage Capital 4,501 -3.6% 20.8%

HFRI ED: Distressed/Restructuring Index -3.6% 15.5%

Anchorage Short Credit Offshore II 993 8.9% -36.5%T-Bill 3 Month Index Plus 4% 4.0% -13.1%

Viking Global Equities 5,421 7.1% 14.3%Lakewood Capital Offshore Fund (c) 5,474 n/a n/aSeminole Offshore A Fund (c) 3,914 n/a n/aCrestwood Capital Intl (c) 3,567 n/a n/a

HFRI Equity Hedge (Total) Index -8.8% 14.1%

Canyon Value Realization Fund 6,769 -0.5% 20.2%Elliott Int'l 8,718 3.1% 14.3%Shepherd Investments 919 -0.9% -5.7%Davidson Kempner 6,394 0.0% 11.4%Och-Ziff Overseas Fund II 6,321 0.2% 12.7%Fir Tree Int'l Value Fund 5,500 1.7% 22.1%

HFRI Event-Driven (Total) Index -4.3% 13.8%

CashCash Pending Investment Northern Trust 344 0.0% 0.0%Cash Pending Investment/(Uninvestment) (145) 0.0% 0.0%

Citigroup 3 Month T-Bill 0.0% 0.1%

Composite Marketable Securities 300,844 -4.7% 15.8%Policy Allocation Index -7.2% 15.4%

Private EquityPrivate Equity Lindsay Goldberg & Bessemer, LP (b) 347 n/a n/a

Auda Secondary Fund (b) 521 n/a n/aPark Street Private Equity Fund VII (b) 2,280 n/a n/aPortfolio Advisors Private Equity Fund IV (b) 2,309 n/a n/aGoldman Sachs Vintage Fund IV (b) 2,207 n/a n/aNewbury (b) 4,867 n/a n/aHammond PIP 2008 Private Equity Fund (b) 4,887 n/a n/aNorthgate IV (b) 4,476 n/a n/aFLAG Global Partners (b) (c) 816 n/a n/aRCP Fund VIII (b) (c) 300 n/a n/aSiguler Guff COREplus, LP (b) 617 n/a n/aSiguler Guff Distressed Opportunities (b) 464 n/a n/a

Endowment Pool Investment Value 324,935$

Cash Pending Investment/(Uninvestment) (145)

Endowment Pool Assets 324,790$

(a) Performance in excess of benchmark is noted in bold(b) May 31 performance not available(c) Held less than one year


Performance to BenchmarkMay 31, 2013


Major Asset Class Methodology Manager FMV (000's) Target Actual Variance

US Large Cap Active Stralem 9,442 US Large Cap Growth Passive Northern Trust Russell 1000 Fund 31,481 US Large Quality Active Jensen Investment Management 9,113 US Small Value Active Vaughan Nelson 9,291

Domestic Equity 59,327 16.5% 18.3% 1.8%

International Large Cap Active Vanguard Total Int'l Stock Index Fund 10,446 International Large Cap Active Sanderson Int'l Value Fund 26,245 International Small Cap Active Mondrian Int'l Small Cap 12,810

Non-US Developed Equity 49,501 13.5% 15.2% 1.7%

Emerging Market Active Aberdeen Emerging Markets 20,752 Emerging Market Active Eaton Vance Parametric Emerging Markets 6,463

Emerging Markets Equity 27,215 9.0% 8.4% -0.6%

US Fixed Income Active PIMCO Total Return 7,309 US Fixed Income Active Vanguard Total Bond Index Fund 12,274 US Fixed Income Active Vanguard Inter-term Treasury Fund 4,028 Global Fixed Income Active Brandywine Global Fixed Income 5,735 Global Fixed Income Active Colchester 12,924

Multi-Strategy Fixed Income 42,270 12.0% 13.0% 1.0%

Private Equity* Private Equity Lindsay, Goldberg & Bessemer, LP 347 Private Equity* Private Equity Auda Secondary Fund 521 Private Equity* Private Equity Park Street Private Equity VII 2,280 Private Equity* Private Equity Portfolio Advisors Private Equity IV 2,309 Private Equity* Private Equity Goldman Sachs Vintage IV 2,207 Private Equity* Private Equity Newbury 4,867 Private Equity* Private Equity Hammond PIP 2008 Private Equity Fund 4,887 Private Equity* Private Equity Northgate IV 4,476 Private Equity* Private Equity FLAG Global Partners 816 Private Equity* Private Equity RCP Fund VIII 300 Private Equity* Multiple Strategy Siguler Guff COREPlus, LP 617 Private Equity* Distressed Securities Siguler Guff Distressed Opportunities 464

Global Private Equity 24,091 10.0% 7.4% -2.6%

Asset AllocationMay 31, 2013

Asset Allocation



Appendix D

Major Asset Class Methodology Manager FMV (000's) Target Actual Variance

Hedge Funds Distressed Securities Anchorage Capital 4,501 Hedge Funds Distressed Securities King Street Capital 6,888 Hedge Funds Distressed Securities Silver Point Capital Offshore 3,585 Hedge Funds 91 Day Treasury Bill + 4% Anchorage Short Credit Offshore Fund 993 Hedge Funds Long/Short Equity Viking Global Equities III 5,421 Hedge Funds Long/Short Equity Lakewood Capital Offshore Fund 5,474 Hedge Funds Long/Short Equity Seminole Offshore Fund A 3,914 Hedge Funds Long/Short Equity Crestwood Capital Intl 3,567 Hedge Funds Multi Strategy Davidson Kempner 6,394 Hedge Funds Multi Strategy Och-Ziff Overseas Fund II 6,321 Hedge Funds Multi Strategy Shepherd Investments Intl 919 Hedge Funds Multi Strategy Canyon Value Realization Fund 6,769 Hedge Funds Multi Strategy Elliott Int'l 8,718 Hedge Funds Multi Strategy Fir Tree Int'l Value Fund 5,500

Flexible Capital 68,964 22.0% 21.2% -0.8%

Real Assets Passive Van Eck Global Hard Assets 15,387 Real Assets AEW Global Property Securities 7,141 Real Assets Vanguard Inflation-Protected Sec I Fund 6,356 Real Assets Wellington US Commodities 6,739 Real Assets Active RREEF American REIT III 3,900 Real Assets Active Park Street Natural Resources 5,260 Real Assets Active Metropolitan Real Estate 933 Real Assets Active Colony Realty 1,257 Real Assets Active Newlin Energy Fund 5,201 Real Assets Active BlackRock Diamond Property Fund 1,049

Inflation Hedging (Real Assets) 53,223 17.0% 16.5% -0.5%

Cash Pending Investment Northern Trust 344

324,935$ Cash Pending Investment/(Uninvestment) (145)

Endowment Pool Assets 324,790$ 100.0% 100% 0.0%

* Valuations reflect base capital contributed on amounts called thru 5/31/13

Asset Allocation


Appendix E

Assets OperatingInvestment

Portfolio Total OperatingInvestment

Portfolio Total

Monthly Liquidity

Cash & Cash Equivalents 19,085$ 344$ 19,429$ 48,040$ 333$ 48,373$

Fixed Income (with liquidity of 30 days or less)Publicly Traded Fixed Inc Sec (Mutual Funds) 42,270 42,270 55,369 55,369

Equities (with liquidity of 30 days or less)Publicly Traded Equities (Mutual Funds)

Domestic 59,328 59,328 79,601 79,601 International 76,717 76,717 61,915 61,915

Publicly Traded Commodities/Mutual Funds 35,622 35,622 13,496 13,496

Hedge Funds 993 993

Subtotal: Monthly Liquidity 19,085 215,274 234,359 48,040 210,714 258,754

Annual Liquidity

Hedge Funds 57,051 57,051 47,528 47,528 Real Estate 4,948 4,948 4,310 4,310

Subtotal: Annual Liquidity 61,999 61,999 51,838 51,838

Liquidity with Lockup > 1 Year

Hedge Funds 10,920 10,920 9,342 9,342 Private Equity / Venture Capital 24,091 24,091 24,099 24,099 Real Estate 12,651 12,651 12,451 33,441 Separately Managed and Outside Trusts 21,478 21,478 19,484 19,484

Subtotal: Liquidity with Lockup > 1 Year 69,140 69,140 65,376 65,376

Split Interest Trusts not Included in Endowment 3,468 3,468 4,770 4,770

Total Investment Liquidity 349,881 349,881 332,698 332,698

Total Cash and Investment Liquidity 19,085$ 349,881$ 368,966$ 48,040$ 332,698$ 380,738$

Rollins CollegeAsset Holdings / Liquidity Analysis

May 31, 2013 May 31, 2012


COVERAGE RATIOPART IV

REPORT OF DEBT SERVICE COVERAGE RATIO ROLLINS COLLEGE

Rollins CollegeDebt Service Coverage Ratio

2009 2010 2011 2012 2013

Net Income Available for Debt Service 3,692$ 5,260$ 19,455$ 8,785$ 7,999$

Principal due in next fiscal year 1,185 880 930 470 510 Actual interest paid 4,388 2,181 2,145 1,460 1,201

Current Annual Debt Service Divided by 5,573$ 3,061$ 3,075$ 1,930$ 1,711$

Current Debt Service Coverage Ratio 0.66 1.72 6.33 4.55 4.68

Net Income Available for Debt Service 7,432$ 23,940$ 14,072$ 13,768$

Principal due in next fiscal year 1,187 1,231 1,830 3,399 Actual interest paid 4,353 6,630 6,747 6,970

Current Annual Debt Service Divided by 5,540$ 7,861$ 8,577$ 10,369$

Current Debt Service Coverage Ratio 1.34 3.05 1.64 1.33

Unrestricted Revenue 55,846$ 107,416$ 118,799$ 90,457$ 112,877$ Temporarily Restricted Revenue (62,478) 10,568 32,129 (3,694) 25,663 Unrealized (gain)/loss Unrestricted- from note 5 Add back 93,064 (13,460) (16,826) 7,632 (8,600) Unrealized (gain)/loss Temporarily Restricted- from note 5 Add back * (12,994) (20,841) 12,662 (18,266) Total Expenses Reduce By (97,082) (99,941) (108,089) (112,136) (116,694) Depreciation & Amortization Add Back 9,954 11,490 12,138 12,404 11,818 Interest Add Back 4,388 2,181 2,145 1,460 1,201

Net Income Available for Debt Service 3,692$ 5,260$ 19,455$ 8,785$ 7,999$

* FASB did not require identification of unrestricted and temporarily restricted unrealized (gains)/losses and therefore these amounts were not allocated in 2009

As of May 31

Net Income Available for Debt Service - Senior Bonds - All Revenues (UR & TR) excluding unrealized g/l, less total expenses other than depreciation, amortization and interest

Current Debt Service Coverage Ratio - Subordinate Bonds: The ratio of the sum of net income available for debt service to current annual debt service. No Requirement

Current Debt Service Coverage Ratio - Senior Bonds: The ratio of the sum of net income available for debt service to current annual debt service shall not exceed 1.10

N/A

REPORT OF DEBT SERVICE COVERAGE RATIO ROLLINS COLLEGE

1

2009 2010 2011 2012 2013

Unrestricted Revenue 107,416$ 118,799$ 90,457$ 112,877$ Temporarily Restricted Revenue 10,568 32,129 (3,694) 25,663 Unrealized (gain)/loss Unrestricted- from note 5 Add back (13,460) (16,826) 7,632 (8,600) Unrealized (gain)/loss Temporarily Restricted- from note 5 Add back (12,994) (20,841) 12,662 (18,266) Total Expenses Reduce By (99,941) (108,089) (112,136) (116,694) Depreciation & Amortization Add Back 11,490 12,138 12,404 11,818 Interest Add Back 4,353 6,630 6,747 6,970

Net Income Available for Debt Service 7,432$ 23,940$ 14,072$ 13,768$

* FASB did not require idetntificatuion of unrestricted and temporarily restricted unrealized (gains)/losses and therefore these amounts were not allocated in 2009

Unrestricted RevenueTotal Operating Revenues 98,543 98,805 100,080 103,978 106,576 Increase in net assets from non-operating activities (42,697) 8,611 18,719 (13,521) 6,301

Total Unrestricted Revenue 55,846$ 107,416$ 118,799$ 90,457$ 112,877$

Temporarily Restricted RevenueTotal Operating Revenues (116) 1,452 (624) 1,119 1,873 Increase in net assets from non-operating activities (63,405) 9,116 32,753 (4,813) 23,790

Total Temporarily Restricted Revenue (63,521)$ 10,568$ 32,129$ (3,694)$ 25,663$

Depreciation & AmortizationDepreciation from statement of cash flows 8,825 10,614 11,104 11,141 10,575 Amortization of bond issue costs from statement of cash flows 350 78 291 620 202

779 799 743 643 1,041 Total Depreciation & Amortization 9,954$ 11,490$ 12,138$ 12,404$ 11,818$

As of May 31

Net Income Available for Debt Service - Subordinate Bonds - All Revenues (UR & TR) excluding unrealized g/l, less total expenses other than depreciation, amortization and interest

N/A

Depreciation Charged to commercial properties from note 6 - "investment in commercial properties"

rollins college annual financial report · for the year ended may 31, 2013 annual financial report...

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