ANNUAL FINANCIAL REPORT · 2020. 6. 30. · ANNUAL FINANCIAL REPORT For the year ended May 31, 2012. TAB 1 Table of Contents . ROLLINS ... plant and equipment 1,516 (1,516) ... Proceeds

ANNUAL FINANCIAL REPORT

For the year ended May 31, 2012

TAB 1

Table of Contents

ROLLINS

ANNUAL FINANCIAL REPORT TABLE OF CONTENTS

For the Year Ended May 31, 2012

Part I Audited Financial Statements

Independent Auditors’ Report

1

Statements of Financial Position

2 Statements of Activities

3

Statements of Cash Flows

5 Notes to Consolidated Financial Statements

6

Part II Fund Based Financial Statements

Introduction

1 Fund Based Statement of Activities – All Funds 3 Current Operating Funds, Budget to Actual and Prior Year 5 Statements of Activities and Financial Position – Restricted Funds 7 Statements of Activities and Financial Position – Other Restricted Funds 9 Statements of Activities and Financial Position – Plant Funds 11

Part III 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 IV 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

TAB 2

Audited Financial

Statements

PART I

AUDITED FINANCIAL STATEMENTS


ROLLINS COLLEGE

Consolidated Financial Statements

Years Ended

May 31, 2012 and 2011

ROLLINS COLLEGE

Contents

Independent Auditors’ Report ....................................................................................................... 1 Consolidated Financial Statements Consolidated Statements of Financial Position ............................................................................ 2 Consolidated Statements of Activities .................................................................................... 3 – 4 Consolidated Statements of Cash Flows ...................................................................................... 5 Notes to Consolidated Financial Statements ........................................................................ 6 – 30

Independent Auditors' Report To the Board of Trustees of Rollins College Winter Park, Florida We have audited the accompanying consolidated statements of financial position of Rollins College (the “College”) as of May 31, 2012 and 2011 and the related consolidated statements of activities and cash flows for the years then ended. These consolidated financial statements are the responsibility of the College's management. 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 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the College as of May 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 13, 2012 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Orlando, Florida September 13, 2012

CONSOLIDATED FINANCIAL STATEMENTS

ROLLINS COLLEGEConsolidated Statements of Financial Position

May 31, 2012 and 2011

2012 2011

Assets:Cash and cash equivalents 47,786$ 25,862$ Cash restricted to payment of bond interest 587 - Student receivables, less allowance for losses of

$553 and $408, respectively 1,441 1,010 Contributions receivable 20,960 17,492 Remainder interest in charitable trusts 2,327 2,124 Loans to students, less allowance for losses of

$149 and $149, respectively 1,713 1,608 Long-term investments 317,668 341,238 Investment in commercial properties, net 14,333 15,072 Land, buildings, equipment, and books, less

accumulated depreciation 141,787 134,553 Unamortized bond issue costs 1,547 1,556 Non-student receivables and other assets 3,554 6,653 Investments held in trust by others 15,030 16,958

Total assets 568,733$ 564,126$

Liabilities and net assets:Accounts payable 3,620$ 2,611$ Accrued and other expenses 5,790 5,384 Agency funds and deposits 259 255 Deferred revenues 2,177 2,494 Advances from federal government for student loans 1,399 1,399 Annuity and life income payable 2,174 3,316 Interest rate swap liability 5,413 3,736 Long-term debt 135,006 104,771

Total liabilities 155,838 123,966 Net assets

Unrestricted 119,149 140,489 Temporarily restricted 100,858 104,552 Permanently restricted 192,888 195,119

Total net assets 412,895 440,160

Total liabilities and net assets 568,733$ 564,126$

May 31,

(In Thousands)

See accompanying notes. 2

ROLLINS COLLEGEConsolidated Statement of Activities

Year Ended 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 Increase (decrease) 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 COLLEGEConsolidated Statement of Activities

Year Ended May 31, 2011

Temporarily Permanently Unrestricted Restricted Restricted Total

Operating revenues:Tuition and fees 90,490$ -$ -$ 90,490$ Less scholarships allowances (30,617) - - (30,617) Net tuition and fees 59,873 - - 59,873 Gifts and private grants 2,423 1,203 - 3,626 Federal and state grants - 1,107 - 1,107 Appropriation of endowment assets for expenditure 6,839 7,560 - 14,399 Investment income 2,425 635 - 3,060 Auxilliary enterprise revenues 15,122 - - 15,122 Other sources 2,195 137 - 2,332 Net assets released from restrictions:

Scholarships 4,399 (4,399) - - Educational and general 6,834 (6,834) - -

Total operating revenues 100,110 (591) - 99,519

Operating expenses:Instruction 37,116 - - 37,116 Academic support 11,556 - - 11,556 Student services 17,052 - - 17,052 Institutional support 19,514 - - 19,514 Public service 1,890 - - 1,890 Auxilliary enterprises 20,961 - - 20,961 Total operating expenses 108,089 - - 108,089 Decrease in net assets from operating activities (7,979) (591) - (8,570)

Non-operating activities:Gifts and private grants 272 12,527 2,124 14,923 Endowment income and other investment income 16,751 22,323 4,763 43,837 Other gains & losses 128 (621) 56 (437) Change in fair value of swap agreement (56) - - (56) Change in present value of split interest agreements - 7 101 108 Net assets released from restrictions for property, plant and equipment 1,516 (1,516) - - Other 78 - - 78 Increase in net assets from nonoperating activities 18,689 32,720 7,044 58,453

Change in net assets 10,710 32,129 7,044 49,883 Net assets at beginning of year 129,779 72,423 188,075 390,277 Net assets at end of year 140,489$ 104,552$ 195,119$ 440,160$

(In Thousands)


ROLLINS COLLEGEConsolidated Statements of Cash Flows

May 31, 2012 and 2011

2012 2011

Operating activities:Change in net assets (27,265)$ 49,883$ Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activities:Realized and unrealized losses (gains) on investments 27,585 (55,713) Depreciation 11,141 11,104 Loss on disposal of fixed assets - 133 Loss on early extinguishment of debt 539 - Amortization 281 291 Contributions restricted for long-term investment

and plant acquisition (7,179) (11,970) (Increase) decrease in receivables and other assets:

Student receivables (536) 739 Contributions receivable (3,468) (9,361) Remainder interest in charitable trusts (203) (149) Non-student receivables and other assets 2,917 (2,361)

Increase (decrease) in liabilities:Accounts payable and accrued expenses 1,785 (651) Deferred revenues and advances (312) 282 Annuity and life income payable (1,142) (6) Interest rate swap liability 1,677 56

Net cash flows provided by (used in) operating activities 5,820 (17,723)

Investing activities:Proceeds from sales and maturities of investments 268,439 210,005 Purchases of investments (270,526) (200,486) Purchases of land, buildings, equipment, and books (17,896) (13,353) Net cash flows used in investing activities (19,983) (3,834)

Financing activities:Payments on bonds (18,301) (1,186) Proceeds from issuance of bonds 47,796 - Contributions restricted for long-term investment

and facility acquisition 7,179 11,970 Net cash flows provided by financing activities 36,674 10,784

Net change in cash and cash equivalents 22,511 (10,773) Cash and cash equivalents – beginning of year 25,862 36,635 Cash and cash equivalents – end of year 48,373$ 25,862$

Supplemental information:Interest expensed and paid 7,288$ 6,630$

(In Thousands)


ROLLINS COLLEGE Notes to Consolidated Financial Statements

Years Ended May 31, 2012 and 2011

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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 and 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.

ROLLINS COLLEGE Notes to Consolidated Financial Statements (continued)


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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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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.

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.



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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.

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 94 agreements at May 31, 2012, and 91 agreements at May 31, 2011. The ranges of discount and payout rates are detailed below:

Split-Interest Type Number Payout Rates Discount Rates

Charitable Gift Annuities 77 6.0% - 18.2% 1.4% - 10.0% Annuity Trusts 2 7.2% - 8.0% 6.2% - 7.6% Unitrusts 5 6.0% - 7.0% 4.4% - 10.0% Pooled Income Funds 10 N/A N/A



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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.



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The carrying amount of bonds payable with variable interest rates approximates fair value, because the variable rates reflect current market rates for bonds with similar maturities and credit quality. (See Note 10.)

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 is based on the estimated 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, 2012 or 2011 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 2011, 2010 and 2009 fiscal years.

Advertising Costs

The College expenses advertising costs as incurred. The College expended $892,000 and $995,000 for advertising for the years ended May 31, 2012 and 2011, 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 2011 balances have been reclassified to conform to the financial statement presentation used in 2012.

Subsequent Events

Subsequent events have been evaluated through September 13, 2012, which is the date of the independent auditors’ report. 2. Contributions Receivable

Contributions receivable at May 31, 2012 and 2011 includes the following unconditional promises (in thousands):

2012 2011 Contributions receivable, gross $ 22,948 $ 19,534 Allowance for uncollectibles (1,269) (1,006) 21,679 18,528 Discount (719) (1,036) Contributions receivable, net $ 20,960 $ 17,492

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.



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2. Contributions Receivable (continued)

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):

2013 2014 2015 2016 2017

$ 7,7303,0753,8282,8155,500

Contributions receivable $ 22,948

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

2012 2011

Opening Balance $ 2,124 $ 1,975

Change in present value of split interest agreements

(115)

172

Additions

339

-

Maturities/Distributions

(21)

(23)

Transfers in and/or out of Level III

-

-

Ending Balance

$ 2,327

$ 2,124

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 $ (115) $ 172



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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, 2012 and 2011, student loans represented .30% and .28% of total assets, respectively.

in thousands

2012 2011

Federal Government Programs $ 1,609 $ 1,460 Institutional Programs 253 297

1,862 1,757 Less Allowance for Doubtful Accounts:

Beginning of Year (149) (139) Increases - (10) End of Year (149) (149) Student Loans Receivable, net $ 1,713 $ 1,608

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, 2012 and 2011, the following amounts were past due under the student loan programs (in thousands):

in thousands

May 31, 1-60 days past due

60-90 days past due

90+days past due

Total past due

2012 $2 1 146 $149 2011 $1 2 146 $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, 2012 and 2011 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 decrease in the liability to 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. Due to long-term investment managers represents cash that, by donor designation, must be invested in the College’s endowment.

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

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. During the year, the College had amounts on deposit in excess of the insured limits. As of May 31, 2012 and 2011, the College had on deposit $44 million and $20 million, respectively, which exceeded these insured amounts.

2012 2011

Cash in banks and money market funds 46,406$ 25,766$ Due to long-term investment managers 1,300 96Total cash and cash equivalents 47,706$ 25,862$



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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.

Private Equity

At May 31, 2012, the College was invested in 12 private equity funds, which include equity buyouts, venture capital, natural resources investment funds, and special situations. As of May 31, 2012, remaining uncalled commitments approximated $9,459,000.

Hedge Funds

As of May 31, 2012, the College was invested in 13 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.

Real Assets and Real Estate and Other

As of May 31, 2012, the College was invested in four open-ended private real estate investment trusts and closed-end private real estate investment funds, with no investment representing more than 1% of the total Endowment investment portfolio. The College is obligated to make additional investments to its real estate trusts and funds at an amount substantially less than 1% of the total value of the Endowment investment portfolio. As of May 31, 2012, redemptions from the open-ended private real estate investment trusts had been suspended due to market factors. For the private real estate investments, the remaining dollar amount of commitments was, as of May 31, 2012, $76,000.



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5. Cash and Cash Equivalents, and Investments (continued) On May 31, the investment portfolio included the following assets (in thousands):

Endowment Pool

Separately Managed Other 2012 Total

Level I:Short-term investments in US

money 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:Private Equity 24,099 - - 24,099 Hedge Funds 56,870 - - 56,870 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$

Endowment Pool

Separately Managed Other 2011 Total

Level I:Short-term investments in US

money market funds 2,057$ 140$ -$ 2,197$ Domestic equities 21,719 1,521 - 23,240 Equity mutual funds: -

Domestic 70,060 1,126 - 71,186 International 80,749 820 - 81,569

Fixed income mutual funds 60,032 924 - 60,956 Total Level I 234,617 4,531 - 239,148

Level III:Private Equity 21,908 - - 21,908 Hedge Funds 60,302 - - 60,302 Real Assets 14,136 - - 14,136 Real Estate and Other - 485 - 485

Split Interest Trusts - - 5,259 5,259

Total Level III 96,346 485 5,259 102,090 Total investments 330,963$ 5,016$ 5,259$ 341,238$

2012

2011



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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 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 assetsPurchases 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 and / 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$

Private Equity

Hedge Funds

Real Assets

RE & Other

Split Interest Trusts Total

Opening Balance 19,770$ 64,254$ 11,073$ 400$ 5,354$ 100,851$ Total gains or losses (realized and unrealized) 1,576 5,821 2,339 - - 9,736

included in changes in net assetsPurchases 7,407 9,773 2,960 100 - 20,240 Sales (6,845) (19,546) (2,236) (15) - (28,642) Change in present value of split interest trusts - - - - (95) (95) Transfers in and / or out of Level III - - - - - -

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

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 86$ 5,708$ 2,110$ -$ -$ 7,904$

Level III InvestmentsYear Ended May 31, 2012

Level III InvestmentsYear Ended May 31, 2011



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Investment Income (in thousands)

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.

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)$

UnrestrictedTemporarily Restricted


Interest and dividends:Cash in bank 228$ -$ -$ 228$ Net income from real property investments 1,303 - - 1,303 Endowment pool 2,012 2,382 196 4,590 Income from perpetual trusts 77 559 - 636

3,620 2,941 196 6,757 Realized gain on investments 6,073 7,361 635 14,069 Unrealized gain on investments 16,826 20,841 3,984 41,651 Investment management fees (504) (625) (52) (1,181)

Net investment income 26,015$ 30,518$ 4,763$ 61,296$

May 31, 2012

May 31, 2011



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6. Investment in Commercial Properties

Investment in commercial properties includes the real property and operating assets associated with SunTrust Plaza and the Lawrence Center, retail/office developments located in downtown Winter Park. Investment in these properties excludes a reduction for long-term debt issued to finance the acquisition of these assets; 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):

2012 2011 Property, plant, and equipment: Property, plant, and equipment in service Accumulated depreciation

$ 22,946

(8,620)

$ 22,782

(7,977)Cash and cash equivalents 503 328Unamortized prepaid expenses 235 299Accounts payable and accrued expenses (524) (158)Unearned income (207) (202)Investment in commercial properties, net $ 14,333 $ 15,072

Depreciation expense charged to commercial properties was $643,000 and $743,000 for the years ended May 31, 2012 and 2011, 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):

2012 2011

Land and land improvements $ 38,353 $ 35,777Buildings 140,850 136,498Equipment 40,702 38,199Library books 4,316 4,316

Construction in progress 10,988 2,763

235,209 217,533Less accumulated depreciation (93,422) (83,000)

$ 141,787 $ 134,553

Depreciation expense charged was $10,498,000 and $10,361,000 for years ended May 31, 2012 and 2011, respectively.



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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, 2012. For the year ended May 31, 2011, these write offs had an aggregate cost of $868,000 with associated accumulated depreciation of $763,000.

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):

2012 2011

Opening Balance 16,958$ 14,727$ Unrealized Gains (Losses) (1,421) 2,649 Distributions (507) (418)

Ending Balance 15,030$ 16,958$

(1,421)$ 2,649$

Level III InvestmentsYear 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



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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, 2012 and 2011, 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 $3,461,000 and $3,390,000 for the years ended May 31, 2012 and 2011, respectively.

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

Interest MaturityRate Dates 2012 2011 2012 2011

Bonds Payable

Orange County Educational Facilities Authority - 2002 Bonds Fixed - (5.25%) n/a $ - $ - $ - $ 17,994

Orange County Educational Facilities Authority - 2007 Bonds Fixed - (5.20%)

2013-2037 23,690 24,145 25,858 25,012

Taxable Revenue Bonds Series 2010 Fixed - (5.95%)

2013-2026 25,830 25,830 29,254 26,917

Non-Taxable HEFFA Bonds 2010 Loan Fixed - (4.93%)

2016-2038 37,545 37,545 40,889 37,550

Non-Taxable HEFFA Bonds 2012 Loan (A&B) Fixed - (4.40%)

2013-2037 46,990 - 48,718 -

Capital Lease Payable Fixed - (2.91%) 2013-2014 773 1,089 - -

Principal Due 134,828 106,139 144,719 107,473 390 416 - - (1,238) (1,364) - - (401) (420) - - 1,427 - - -

TOTAL $ 135,006 $ 104,771 $ 144,719 $ 107,473

Fair Value at May 31Balance at May 31

Premium on 2007 Non-Taxable OCEFA BondsDiscount on 2010 Taxable Bonds

Premium on 2012 Non-Taxable HEFFA BondsDiscount on 2010 Non-Taxable HEFFA Bonds



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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 4.40%. 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 will be utilized for the refunding of the College’s OCEFA Series 2002 Bonds, fixed rate bonds carrying a weighted average rate of interest of 5.25%. The OCEFA Series 2002 Bonds are not callable until December 2012. The proceeds from this issuance were placed in escrow with the College’s Bond Trustee, US Bank (Trustee). As of May 31, 2012, the Trustee held assets of $18,086,000 which will be used to redeem the OCEFA Series 2002. The assets held by the Trustee are invested in Short Term US Treasury Time Deposits. Management believes these resources are sufficient to redeem the OCEFA Series 2002 Bonds principal and accrued interest; therefore, neither the assets held by the Trustee or the liability related to the OCEFA Series 2002 Bonds are shown as assets or liabilities of the College in the accompanying Statement of Financial Position as of May 31, 2012. The HEFFA Series 2012B Bonds carry a weighted average fixed rate of interest of 3.25% 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 5.951%. 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 4.93%. 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.



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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 5.20%. 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

2013 $ 1,8302014 3,3992015 3,3192016 3,5652017 2,330 Thereafter 120,385 $ 134,828

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 above. 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. Losses on the interest rate swap for the fiscal years ended May 31, 2012 and 2011, amounted to $1,677,000 and $56,000, 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 ($5,413,000) and ($3,736,000) as of May 31, 2012 and 2011, respectively.



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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 requiring approval of the Board of Trustees for all such activities.

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. The College has interpreted the Florida Uniform Management of Institutional Funds Act of 2003 (the Act) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulation to the contrary. As a result of this interpretation, the College classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund.

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 remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as unrestricted or temporarily restricted net assets until those amounts are appropriated for expenditure by the College in accordance with the College’s endowment spending policy.



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12. Endowment (continued)

The State of Florida adopted legislation during June 2011 that incorporates the provisions outlined in the Uniform Prudent Management Institutional Funds Act (UPMIFA), to be effective for fiscal years ending after July 1, 2012. The effect of applying UPMIFA in fiscal year 2013 is anticipated to result in a reclassification of endowment net assets from unrestricted to temporarily restricted to the extent amounts are not appropriated for expenditure. The management 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. 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.



27


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, 2012:

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 13.5% Non-U.S. Developed Equity 13.5% Emerging Markets Equity 9.0% Total Equities 36.0% Fixed Income: Multi-Strategy Fixed Income 17.0%

Total Fixed Income 17.0% Alternative Investments: Global Private Equity 10.0% Flexible Capital (Hedge Funds) 20.0% Inflation Hedging (Real Assets) 17.0% 47.0% Cash 0.0% 100.0%



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Changes in endowment net assets for the years ended May 31, 2012 and 2011 are as follows:

Unrestricted Temporarily Restricted


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


Investment return:Investment income 1,382$ 1,579$ 144$ 3,105$ Net appreciation 22,768 28,206 4,612 55,586

Total investment return 24,150 29,785 4,756 58,691

Contributions 20,222 116 2,114 22,452

Appropriation of endowment assets for expenditure (6,839) (7,560) - (14,399)

Change in net assets 37,533 22,341 6,870 66,744

Donor-restricted endowment funds 12,848 48,274 186,771 247,893 Board-designated endowment funds 32,276 10,692 - 42,968




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13. Net Assets

Net assets consist of the following as of May 31, 2012 and 2011 (in thousands):

2012 2011Unrestricted net assets: Available for current operations $ 6,892 $ 10,827Funds functioning as endowment 55,228 60,301Accumulated appreciation on unrestricted endowments 16,854 22,356Plant and commercial property assets, net of

outstanding debt and accumulated depreciation 40,175 47,005Unrestricted net assets $ 119,149 $ 140,489

Temporarily restricted net assets: Restricted for specified programs (education and

general programs and scholarships) $ 9,282

$ 8,310Restricted for student loans 775 744Restricted for plant acquisition 18,491 11,487Restricted gifts functioning as endowments 11,422 11,582Split-interest trusts 3,304 2,704Accumulated appreciation on restricted endowments

(educational and general programs and scholarships) 57,584 69,725Temporarily restricted net assets $ 100,858 $ 104,552

Permanently restricted net assets: Split-interest trusts $ 1,713 $ 1,478Endowments restricted for education and general

programs and scholarships 191,175 193,641Permanently restricted net assets $ 192,888 $ 195,119

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, 2012 and 2011, the College paid approximately $1,171,000 and $1,142,000 respectively, for various services to eight and nine firms, respectively, related to board members.

During the years ended May 31, 2012 and 2011, the College received approximately $3,427,000 and $763,000, 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.



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14. Related-Party Transactions (continued)

At May 31, 2012 and 2011, total contributions receivable included approximately $10,442,000 and $5,815,000, 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, 2012, were at various stages of completion. The estimated costs of these projects are $25,453,000, of which $2,409,000 had been accrued or paid for as of May 31, 2012.

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.

TAB 3

Fund Based Financial

Statements

PART II

FUND BASED FINANCIAL STATEMENTS


This Page Intentionally Left Blank

1

Rollins College

Fund Based Financial Statement Reports


INTRODUCTION

For purposes of its fiduciary stewardship of donated funds, Rollins College employs a fund accounting system that is designed to track revenue sources and match that revenue to related allowable expenditures. This fund accounting system has been in place for as long as the College has received gifts. According to the June 1934 Report of Audit, Rollins’ endowment was just over $1 million and divided between just nine designations. Today, the College’s endowment is nearly $350 million divided between more than 500 designations. In addition, the College tracks over 100 expendable gift funds, created when a donor wishes their gift spent as opposed to endowed.

The system permeates decision making and the financial function of the College and extends to Board or managerial designations. For instance, through Board designation the Cornell gift was not absorbed into the College’s operating budget as a huge influx of new revenues. Rather, revenues from the gift are parceled to a separate fund where expenditures can be closely tracked and are otherwise not accounted for as part of the College’s “operating budget.”

With the advent of Financial Accounting Standards 116 and 117 in 1996 the College’s financial statements began to be prepared utilizing only three classifications of activity all based solely on donor intention. These three classifications: unrestricted, temporarily restricted and permanently restricted do not take into account the Board and managerial decisions. For instance, the College’s endowment spending policy is designed to spend a steadily increasing amount of endowment each year. The amount of return in excess of the appropriated spending is represented as either unrestricted or temporarily restricted based upon donors intentions. However, due to Board oversight the College has been instructed to leave this amount in the endowment and is therefore unable to spend this portion. In the Audited Financial Statements contained in Part I, endowment assets and returns are represented under all three designations. The Fund Based Financial Statements separate the funds into meaningful classes that will allow users to better understand the College’s activities and assist users in assessing accountability and making economic and programmatic decisions. The totals of these reports agree to the Audited Financial Statements of the College.

2

Rollins College’s fund based financial statements are divided into four broad categories; the following pages explore each class in more detail but a synopsis is included below:

Current Operating Funds – Represent the bulk of Rollins’ operating activities, on a modified cash basis. These funds are used to record revenues from operations (tuition, housing, operating gifts, non-endowment investment income and auxiliary operations) and the expenditure of those funds. They also include as revenues annual endowment spending from unrestricted endowments and from certain restricted endowments considered as underwriting. Capital Items purchased with Operating Funds are recorded as expense to the Operating Funds and income to Plant and Debt Funds. Principal payments on debt and future debt service set-asides are also accounted for as expense to Operating Funds and, in so much as they exceed actual disbursements, income to Plant and Debt Funds. The objective of the Operating Funds is to ensure that the college is “paying as it goes,” and that current (quasi-cash based) income is able to pay for current obligations. Current Operating and Current Designated and Restricted Funds are discussed in greater detail in Part III – Report of Financial Operations. Current Designated & Restricted Funds – For the most part represent gifts (or endowment spending from restricted endowed gifts) in which the donor had directed the present or future use of the funds. In addition, this category includes funds that have been internally designated, either by Board action or by College management. Like the Operating Funds, capital items are accounted for as expense as incurred. Restricted Funds will often have negative net income due to timing, as gifts and their related expenditures are sometimes not recorded in the same fiscal period. Plant & Debt Funds – Track capital projects, physical assets and long-term debts of the College. Depreciation and amortization is recorded and the internal debt service fund is maintained within these funds. Endowment & Split Interest Funds – These funds hold the assets and record the activity of the College’s endowment and split interest (donor annuity) agreements. Generally, three items affect the endowment: returns on endowment investments, new gifts designated to be invested in perpetuity and annual endowment spending. The latter is determined by Board policy and is accounted for as an expense to the endowment funds and as income to the Current Operating and Restricted Funds. Total - The Fund Based Statement of Activities shows Rollins had a $27.3 million decline in net assets for the year ended May 31, 2012 and an increase in net assets of $49.9 million for the fiscal year ended May 31, 2011. For fiscal 2012, $24.5 million of the change was centered on the endowment, $15.6 million representing the annual distribution and $12.1 million in total investment loss. Absent the Endowment activity, Rollins had a negative change in net assets of $2.8 million after $12.7 million in non-cash charges; depreciation ($10.5 million), change in interest rate swap value ($1.7 million) and loss on early extinguishment of debt ($0.5 million).

3

ROLLINS COLLEGEFund Based Statement of Activities

Year Ended May 31, 2012in thousands

Current Operating

Current Designated &

Restricted Plant & Debt

Endowments & Split Interest

TrustsTotal all Funds

2012

Revenues, Gains and Other Support:

Tuition and Fees 93,648$ 232$ -$ -$ 93,880$

Financial Aid and Scholarships (26,260) (6,512) - - (32,772)

Residence Hall Fees 9,209 - - - 9,209

Gifts and Private Grants 1,998 3,750 7,040 2,747 15,535

Federal and State Grants - 1,171 - - 1,171

Investment Income 2,353 671 (839) (12,109) (9,924)

Endowment Spending Distribution 6,062 9,532 - (15,594) -

College Directed Reinvestment - - - - -

Auxiliary Enterprises 6,448 296 - - 6,744

Adjustment of Actuarial Liabilities - - - 464 464

Other Sources 1,752 747 (2,145) (129) 225

Total Revenues, Gains and Other Support 95,210 9,887 4,056 (24,621) 84,532

Salaries, Wages and Fringe Benefits:

Faculty Permanent Positions (15,708) (96) - - (15,804)

Administrative Permanent Positions (21,086) (2,273) - - (23,359)

Adjuncts, Overloads, Temp and Overtime (5,671) (1,203) - - (6,874)

Fringe Benefits (14,688) (931) - - (15,619)

Total Salaries, Wages and Fringe Benefits (57,153) (4,503) - - (61,656)

General and Administrative Expenses & Transfers:

General & Administrative (25,250) (4,798) 376 - (29,672)

Utilities (2,581) (57) - - (2,638)

Debt Service (5,950) - (1,383) - (7,333)

Depreciation - - (10,498) - (10,498)

Capital Projects (4,000) - 4,000 - -

Department Carry Forwards (52) 52 - - -

Other Transfers (177) (564) 625 116 -

Total General and Administrative Expenses & Transfers: (38,010) (5,367) (6,880) 116 (50,141)

Change in Net Assets 47$ 17$ (2,824)$ (24,505)$ (27,265)$

4

ROLLINS COLLEGEFund Based Statement of Activities


Current Operating

Current Designated &

Restricted Plant & Debt

Endowments, Split Interest

Trusts & LoansTotal all Funds

2011


Tuition and Fees 90,267$ 223$ -$ -$ 90,490$

Financial Aid and Scholarships (24,035) (6,582) - - (30,617)

Residence Hall Fees 8,569 - - - 8,569

Gifts and Private Grants 1,848 1,778 12,273 2,650 18,549

Federal and State Grants - 1,107 - - 1,107

Investment Income 2,407 757 (560) 58,692 61,296

Endowment Spending Distribution 5,662 8,711 - (14,373) -

College Directed Reinvestment - (105) - 105 -

Auxiliary Enterprises 6,260 293 - - 6,553

Adjustment of Actuarial Liabilities - - - 108 108

Other Sources 1,330 964 (475) 98 1,917

Total Revenues, Gains and Other Support 92,308 7,146 11,238 47,280 157,972


Faculty Permanent Positions (15,977) (54) - - (16,031)

Administrative Permanent Positions (20,331) (1,829) - - (22,160)

Adjuncts, Overloads, Temp and Overtime (5,393) (1,031) - - (6,424)

Fringe Benefits (14,004) (707) - - (14,711)

Total Salaries, Wages and Fringe Benefits (55,705) (3,621) - - (59,326)


General & Administrative (25,040) (4,132) 667 (356) (28,861)

Utilities (2,935) (48) - - (2,983)

Debt Service (5,900) (139) (519) - (6,558)

Depreciation - - (10,361) - (10,361)

Capital Projects (3,075) - 3,075 - -

Department Carry Forwards (436) 436 - - -

Other Transfers 820 879 (21,701) 20,002 -

Total General and Administrative Expenses & Transfers: (36,566) (3,004) (28,839) 19,646 (48,763)

Change in Net Assets 37$ 521$ (17,601)$ 66,926$ 49,883$

5

The budget the College prepares and presents to the Board annually is that of the Current Operating Funds. Current Operating Funds revenues are sourced primarily through tuition and student fees, but also include Rollins Annual Fund revenues, investment income on working capital and annual unrestricted endowment spending draw. With these revenues it is expected that the College balance operations while accounting for capital expenditures, debt service principal and sinking reserve expenditures as expense. Depreciation and amortization expenses are not charged to this fund as any purchases were treated as expended when purchased.

For the years ended May 31, 2012 and 2011 the College showed a change in Current Operating net assets of $47 and $38 thousand, respectively. The College is allowing administrative departments to keep their unspent portions of discretionary operating budgets. Total savings were $52 and $436 thousand for the years ended May 31, 2012 and 2011, respectively. Aggregate departmental carryover balances are shown in the table to the right.

Current Operating FundsBalance Sheet Summaryas of May 31,

2012 2011Cash and Short-Term Investments 6,876$ 6,725$ Accounts Receivable 3,111 2,942 Prepaid Expense 672 550 Other Assets 152 572 Accounts Payable (1,706) (1,436) Accrued Expenses (5,748) (5,381) Deferred Revenue (2,177) (2,839)

Net Assets at End of Period 1,180$ 1,133$

in thousands

Aggregate Budget Carry Over Savings by Department 2011-2012 2010-2011

PresidentPresident 34$ 20$ Admission & Enrollment Management 23 17 Physical Education and Athletics - 242

57 279

ProvostHamilton Holt School 200 200 Olin Library 2 183 Provost Administration 335 196 Undergraduate Day Progams 589 307

1,126 886 TreasurerTreasurer's Office 127 97 Business Services 217 129 Campus Security 79 83 Facilities Management - 149 Food Services 1,233 897 Information Technology 663 167

2,319 1,522

V.P. for Student AffairsV.P. for Planning Office 375 1,204 Student Affairs 161 59 International Programs 85 38 Student Success 196 61

817 1,362

V.P. for Institutional Advancement 28 246

Total Carry Forward 4,347$ 4,295$

6

ROLLINS COLLEGECurrent Operating Funds, Budget to Actual and Comparison to Prior Year


2012 Actual 2012 Budget Variance 2011 Actual


Tuition and Fees 93,648$ 93,039$ 609$ 90,267$

Financial Aid and Scholarships (26,260) (24,708) (1,552) (24,035)

Residence Hall Fees 9,209 8,758 451 8,569

Gifts and Private Grants 1,998 2,150 (152) 1,848

Investment Income 2,353 2,453 (100) 2,407

Endowment Spending Distribution 6,062 6,461 (399) 5,662

Auxiliary Enterprises 6,448 6,623 (175) 6,260

Other 1,752 1,534 218 1,330

Total Revenues, Gains and Other Support 95,210 96,310 (1,100) 92,308


Faculty Permanent Positions (15,708) (15,984) 276 (15,977)

Administrative Permanent Positions (21,086) (21,296) 210 (20,331)

Adjuncts, Overloads, Temp and Overtime (5,671) (4,868) (803) (5,393)

Fringe Benefits (14,688) (13,687) (1,001) (14,004)

Total Salaries, Wages and Fringe Benefits (57,153) (55,835) (1,318) (55,705)


General & Administrative (25,250) (27,710) 2,460 (25,040)

Utilities (2,581) (3,020) 439 (2,935)

Debt Service Expense (5,950) (5,950) - (5,900)

Capital Projects (4,000) (4,000) - (3,075)

Department Carry Forwards (52) - (52) (436)

General Reserve - 600 (600) -

Transfers (177) (395) 218 820

Total General and Administrative Expenses & Transfers: (38,010) (40,475) 2,465 (36,566)

Change in Net Assets 47$ -$ 47$ 37$

7

ROLLINS COLLEGEStatements of Activities and Financial Position - Restricted Funds


Scholarships & Awards

Professorships & Faculty

DevelopmentCornell

Initiative Funds PNLC ContingencyDepartment

Carry Forwards Other Total Restricted

Funds


Tuition and Fees -$ -$ -$ 232$ -$ -$ -$ 232$

Financial Aid and Scholarships (4,080) - (1,885) - - - (547) (6,512)

Gifts and Private Grants (91) - - 371 - - 3,470 3,750

Federal and State Grants 514 - - - - - 657 1,171

Investment Income 67 65 - - - - 539 671

Endowment Spending Distribution 3,882 1,905 2,725 7 - - 1,013 9,532

Auxiliary Enterprises - - 111 - - - 185 296

Other 32 - 1 185 - - 529 747

Total Revenues, Gains and Other Support 324 1,970 952 795 - - 5,846 9,887


Faculty Permanent Positions - (51) - - - - (45) (96)

Administrative Permanent Positions - - (1,114) (392) - - (767) (2,273)

Adjuncts, Overloads, Temp and Overtime (312) (230) (80) (13) - - (568) (1,203)

Fringe Benefits - (48) (405) (148) - - (330) (931)

Total Salaries, Wages and Fringe Benefits (312) (329) (1,599) (553) - - (1,710) (4,503)


General & Administrative (57) (332) (1,288) (256) - - (2,865) (4,798)

Utilities - - (20) - - - (37) (57)

Department Carry Forwards - - - - - 52 - 52

Transfers (75) (1,060) 674 - - - (103) (564)

Total G and A Expenses & Transfers: (132) (1,392) (634) (256) - 52 (3,005) (5,367)

Change in Net Assets (120) 249 (1,281) (14) - 52 1,131 17

Net Assets at Beginning of Year: 1,047 1,705 2,750 633 6,637 4,295 7,011 24,078

Net Assets at End of Year: 927 1,954 1,469 619 6,637 4,347 8,142 24,095

Composition of Net Assets at End of Year:

Cash & Short-Term Investments 934 1,962 1,538 620 6,637 4,347 5,286 21,324

Other Assets - - 14 - - - (2,200) (2,186)

Contributions Receivable - - - - - - 2,310 2,310

Investments - - - - - - 19 19

Accounts Payable (7) (8) (83) (1) - - (102) (201)

Net Assets at End of Year: 927$ 1,954$ 1,469$ 619$ 6,637$ 4,347$ 5,313$ 21,266$

8

Scholarships & Awards -- This category tracks restricted scholarships income and endowment draw and the related expenditures. The balance at the end of year represents scholarships that we had funded to give but could not find a student who met the restriction.

Professorships & Faculty Development Funds -- Professorships, or endowed chairs, and allotments to faculty for professional development or achievement awards are tracked in this category.

Cornell Initiative Funds -- Created in 2004 from the residuary of the Cornell Estate, the fund provides resources for short-term projects and new initiatives that the College wishes to undertake. The largest funded items from the initiatives are Cornell and Deans Scholars, the Winter Park Institute, and the Strategic Marketing Initiative.

Philanthropy & Non Profit Leadership Center (PNLC) -- The College took over the PNLC in 2000 at the behest of the Edyth Bush Foundation. The PNLC offers certificate programs for nonprofit managers, staff and volunteers, and offers courses in board development and nonprofit governance. The PNLC is funded by grants from the Edyth Bush and the Jessie Ball DuPont Foundations and also receives tuition income.

Contingency -- The College Contingency fund provides the College with a buffer for unforeseen expenditures. The College began funding for contingency in 2004 and between 2004 and 2008 set aside $6.6 million. The College neither funded nor drew upon the Contingency in 2012 nor 2011.

The following pages provide greater detail on Other Restricted Funds.

9

ROLLINS COLLEGEStatements of Activities and Financial Position - Other Restricted Funds


Arts & Sciences Academic

Departments Athletics Olin Library

Crummer Graduate

SchoolHamilton Holt

School OtherTotal Other Restricted


Financial Aid and Scholarships (228)$ -$ -$ (58)$ (230)$ (31)$ (547)$

Gifts and Private Grants 465 407 8 740 870 980 3,470

Federal and State Grants - - - - - 657 657

Investment Income 3 - - - - 536 539

Endowment Spending Distribution 487 1 251 7 22 245 1,013

Auxiliary Enterprises - - - 180 - 5 185

Other Sources (2) 150 2 8 109 262 529

Total Revenues, Gains and Other Support 725 558 261 877 771 2,654 5,846


Faculty Permanent Positions - - - - - (45) (45)

Administrative Permanent Positions (149) (64) - (218) - (336) (767)

Adjuncts, Overloads, Temp and Overtime (72) (138) - (10) - (348) (568)

Fringe Benefits (57) (31) - (79) - (163) (330)

Total Salaries, Wages and Fringe Benefits (278) (233) - (307) - (892) (1,710)


General & Administrative (465) (446) (215) (205) (138) (1,396) (2,865)

Utilities - - - (21) - (16) (37)

Transfers 180 109 (566) 113 (6) 67 (103)

Total General and Administrative Expenses & T (285) (337) (781) (113) (144) (1,345) (3,005)

Change in Net Assets 162 (12) (520) 457 627 417 1,131

Net Assets at Beginning of Year: 1,779 899 628 (1,869) 2,497 3,078 7,011

Net Assets at End of Year: 1,941 887 108 (1,412) 3,124 3,495 8,142


Cash & Short-Term Investments 1,848 152 541 539 356 1,256 4,692

Other Assets 2 1 - 1 107 1,751 1,862

Contributions Receivable 9 105 - 2 1,758 736 2,610

Investments - - - - - 19 19

Accounts Payable (7) (17) - (11) (22) (4) (61)

Other Liabilities (2) - - (2,748) - (1,399) (4,149)

Net Assets at End of Year: 1,850$ 241$ 541$ (2,217)$ 2,199$ 2,359$ 4,973$

10


11

ROLLINS COLLEGEStatements of Activities and Financial Position - Plant Funds


Project Funds Fixed AssetsDebt & Related

Reserves

SunTrust & Lawrence Centers

Total Plant Funds


Gifts and Private Grants 7,040$ -$ -$ -$ 7,040$

Investment Income (100) - - (739) (839)

Other Gains & Losses 72 (1) (2,216) - (2,145)

Total Revenues, Gains and Other Support 7,012 (1) (2,216) (739) 4,056


General & Administrative - 376 - - 376

Debt Service Expense - - (1,383) - (1,383)

Depreciation Expense - (10,498) - - (10,498)

Capital Projects 4,000 - - - 4,000

Transfers 21,119 9,506 (30,000) - 625

Total General and Administrative Expenses & Transfers: 25,119 (616) (31,383) - (6,880)

Change in Net Assets 32,131 (617) (33,599) (739) (2,824)

Net Assets at Beginning of Year: 15,781 134,539 (111,985) 15,072 53,407

Net Assets at End of Year: 47,912 133,922 (145,584) 14,333 50,583


Cash & Short-Term Investments 1,617 - (7,408) 5 (5,786)

Other Assets - 2,747 3,874 - 6,621

Contributions Receivable 12,416 - - - 12,416

Investments - - - 15,072 15,072

Land, Buildings, Equipment and Books, Less Accumulated Depreciation 2,763 131,790 - - 134,553

Accounts Payable (1,015) - - (5) (1,020)

Interest Rate Swap Valuation - - (3,680) - (3,680)

Bonds Outstanding - - (106,139) - (106,139)

Unamortized Bond Issuance Expenses, Premiums & Discounts - - 1,368 - 1,368

Net Assets at End of Year: 15,781$ 134,537$ (111,985)$ 15,072$ 53,405$

12

Project Funds – Are used for job costing capital projects; they are a subset of the Fixed Asset Funds. The funds are used to account for project costs during the construction period. At year end construction in progress and/or completed projects are transferred to the Fixed Asset Funds so assets held in project funds represent remaining amounts available for projects. Projects are funded through gifts, capital budget and debt issuances. For the year ended May 31, 2012 the College received $7.0 million (net of allowances and pledge discounts) in new gifts for construction and funded an additional $4.0 million in capital from the Current Operating Fund; The College received $30 million for projects from new debt issuances and $9.5 million in project expenditures were transferred to the Fixed Asset Funds.

Fixed Asset Funds -- These funds are used to track the physical assets of the College and account for their depreciation per GAAP. Fixed Assets are funded in one of four ways: gifts, debt issuance, capital budget and departmental purchases. When a department expends its budget to purchase an item in excess of the College’s capitalization policy (greater than $5,000), the Current Operating (or Restricted) Funds are charged and the capitalized asset is transferred to the Fixed Asset Fund as a credit to general and administrative expense, $625 thousand of equipment was purchased by the Operating Fund and subsequently capitalized and transferred to the Fixed Asset Fund.

Debt and Related Reserves – During the year the College issued $30 million in new non-taxable debt to be used for the Bush Science Center Renovation ($20 million), construction of the new Strong Residence Halls ($5 million), major campus infrastructure improvements ($5 million) and renovation of the Cornell Campus Center ($2 million). Also, during the year, the College drew $1.4 million from its debt service reserve for payment of debt service. Other Gains and Losses (in this case non-cash charges) represent the continued decline in value of the College’s outstanding interest rate swap agreement (a $1.7 million charge) and loss from the early extinguishment of debt ($0.5 million).

SunTrust & Lawrence Centers – These funds track the book value of the College’s commercial properties. Since inception of the SunTrust project, the College has accounted for the Centers on a “net-investment” basis. Rather than integrating the assets of the College and the Centers, the College reports the net assets as “Investments” as opposed to the components of the Centers (which are largely composed of land and buildings). During the year, net cash generated from the Centers is transferred to the Current Operating Fund as “Investment Income” while the non-cash component of the Centers (depreciation) is recorded here as ”Investment Income” to conform to financial statement presentation. This confusing accounting is a holdover from concerns of Board members that the SunTrust project should be measured on a stand-alone basis to ensure it would not become a burden to the College.

TAB 4

Financial Operations

PART III

REPORT OF FINANCIAL OPERATIONSCURRENT FUNDS


REPORT OF FINANCIAL OPERATIONS ROLLINS COLLEGE

1

ROLLINS COLLEGE

REPORT OF FINANCIAL OPERATIONS For the Year Ended May 31, 2012

OVERVIEW The pages that follow present and discuss the revenues and expenditures of the current funds for the fiscal year ended May 31, 2012. 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 and in the Fund Based Financial Statements under Part II. 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 67.0% of current fund revenues in 2012, compared to 68.8% in the prior year. Gift and grant revenue increased $2.1 million, a 46.2% increase from last year, due to large gifts for capital projects. At $18.6 million, Investment Income available for operations increased 6.8% or $1.2 million over last year. Commercial Property Investments contributed over $2.1 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 $98.9 million in 2011 to $105 million in 2012, representing a 6.2% increase. Further explanations and analysis of expenditures and transfers begin on page 8.


3

For the Year

Ended May 31, 2011

UnrestrictedCurrent

Designated& Restricted

Total Total 2012 2011

REVENUESStudent Income

Tuition & Fees 93,648$ 232$ 93,880$ 90,490$ Scholarship Allowances (26,260) (6,512) (32,772) (30,617)

Net Tuition & Fees 67,388 (6,280) 61,108 59,873 Residence Halls 9,209 - 9,209 8,569

Student Income, net of Scholarships 76,597 (6,280) 70,317 68,442 67.0% 68.8%Gifts & Grants

Private Gifts & Grants 1,998 3,750 5,748 3,626 5.5% 3.6%Federal & State Grants - 1,171 1,171 1,107 1.1% 1.1%Total Gifts & Grants 1,998 4,921 6,919 4,733 6.6% 4.7%

Investment IncomeInvestment Income 214 671 885 932 0.8% 1.0%Endowment Spending Distribution 6,062 9,532 15,594 14,373 14.8% 14.5%College Directed Reinvestment - - - - 0.0% 0.0%Commercial Property Investments 2,139 - 2,139 2,127 2.0% 2.1%Total Investment Income 8,415 10,203 18,618 17,432 17.6% 17.6%

Auxiliary & Other Revenues 8,200 1,043 9,243 8,847 8.8% 8.9%

Total Revenues 95,210 9,887 105,097 99,454 100% 100%

EXPENDITURESInstruction 31,232 1,446 32,678 32,476 32.5% 33.3%Academic Support 9,129 2,170 11,299 10,882 11.3% 11.2%Advancement Related 4,663 450 5,113 4,319 5.1% 4.4%Student Services 13,437 2,131 15,568 15,062 15.5% 15.4%Instituitional Support 12,573 1,852 14,425 14,481 14.4% 14.8%Operation & Maintenance of Plant 9,881 1 9,882 9,344 9.9% 9.6%Public Service 478 1,058 1,536 1,721 1.5% 1.8%Auxiliary Enterprises 9,541 250 9,791 9,235 9.8% 9.5%

Total Expenditures 90,934 9,358 100,292 97,520 100% 100%

Interfund TransfersCapital Projects 4,000 - 4,000 3,075 Other Transfers 177 564 741 (1,699) Department Carry Forwards 52 (52) - -

Total Interfund Transfers 4,229 512 4,741 1,376

Total Expenditures & Transfers 95,163 9,870 105,033 98,896

Change in Net Assets 47$ 17$ 64$ 558$

For the Year Ended May 31, 2012 % of Total

ROLLINS COLLEGEREPORT of FINANCIAL OPERATIONS

CURRENT FUNDSFor the Year Ended May 31, 2012

Statement of Expenditures, Transfers and Resources AvailableBy Functional Classification

in thousands


4

REVENUES AVAILABLE TOTAL REVENUES AVAILABLE in fiscal year 2012 was $105 million compared to $99.5 million in 2011. 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 67.0%

Investment Income 17.6%

Gifts & Grants 6.6%

Auxiliary & Other Revenues

8.8%

Revenue By Source

Undergraduate Day Program

65.8%

Crummer 16.5%

Holt 16.3%

Non-Credit Pgms & Other

1.4%

Tuition By Source (Net of Financial Aid)


5

Net Student Income of $70.3 million accounted for 66.9% 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 $1.8 million or 2.7%. The Undergraduate Day Program tuition and fee rates increased by 2.0%, while room rates and board rates each increased by 2.0% 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 $32.8 million in 2012, which represents a $2.1 million increase over 2011, or 7%. On a College-wide basis such allowances were 34.9% of gross tuition and fees for 2012 and 33.8% for 2011. More information on financial aid is presented on page 6. Housing revenues were $9.2 million with occupancy rates at 100%. This is $640 thousand over the prior year, an increase of 7.5%, including a room rate increase of 1.9%. The College has a policy requiring incoming freshmen as well as sophomores to live on-campus. Gifts and Grants for fiscal 2012 were $6.9 million, up $2.1 million or 46.2% from 2011. This category provided 6.6% of the College’s current operating funds, compared and 4.7% in the previous year. The increase is attributable to the onset of the capital campaign. Investment Income was $18.6 million for 2012 compared to $17.4 million for 2011, an increase of just over 6.8%. This increase is attributable to the college investing $20 million of its core cash in the endowment. The cash was previously held in low-interest bearing accounts (.25%). Current income from endowments and trusts increased $1.2 million, or 8.5%. SunTrust Plaza & Lawrence Center, the College’s commercial properties, generated net income before depreciation of $2.1 million. Auxiliary Enterprises and Other Revenues provided $9.2 million or 8.8% of total resources available, down slightly from 8.9% of total resources in 2011. 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:

2011

Undergradate Day Crummer Holt

Non Credit

Programs Total Total

Tuition & Fee Revenues 70,729$ 11,791$ 10,487$ 873$ 93,880$ 90,490$

Scholarship Allowances, by Funding Source

Unrestricted Revenues 22,719$ 1,438$ 105$ -$ 24,262$ 22,178$ Rollins Fund 1,998 - - - 1,998 1,838

Cornell Scholarships 1,800 - - - 1,800 1,800 Restricted Gifts & Grants 302 54 235 - 591 605Endowments 3,750 202 169 - 4,121 4,197

Scholarship Allowances 30,569$ 1,694$ 509$ -$ 32,772$ 30,618$

% of Tuition and Fees 43.2% 14.4% 4.9% 0.0% 34.9% 33.8%

2012

in thousands

2008 2009 2010 2011 2012Tuition & Revenue* $80,403 $84,190 $88,713 $90,269 $93,649Scholarship Allowances $23,058 $25,163 $28,054 $30,618 $32,772Net Tuition & Fees $57,345 $59,027 $60,659 $59,651 $60,877

$80,403 $84,190 $88,713 $90,269 $93,649

$23,058 $25,163 $28,054 $30,618 $32,772

$57,345 $59,027 $60,659 $59,651 $60,877

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000

$100,000

College - Wide Scholarship Allowances (in thousands)

Tuition & Revenue* Scholarship Allowances Net Tuition & Fees

*Excludes revenues from the Philanthropy & Non-profit Leadership Center


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, and then reduced again to $2,149 for 2011-2012. Students received the benefit of these resources as noted in the table below.

2011 Undergradate

Day Crummer Holt

Credit

Programs Total Total

Tuition & Fee Revenues 70,729$ 11,791$ 10,487$ 873$ 93,880$ 90,490$

Agency Financial Aid (excluded from Financial Statements)

Federal FundingPELL and Similar Grants 1,904 - 1,553 - 3,457 3,511

Direct Loans 9,275 4,570 7,690 - 21,535 22,740

Total Federal Funding 11,179 4,570 9,243 - 24,992 26,251

State FundingResident Access Grants 2,298 - 1,093 - 3,391 3,048

Florida Student Assistance 1,129 2 31 - 1,162 775

Bright Futures 927 1 137 - 1,065 2,683

Other 8 - - - 8 24

Total State Funding 4,362 3 1,261 - 5,626 6,530

Other Sources - - - - - -

Total Agency 15,541$ 4,573$ 10,504$ -$ 30,618$ 32,781$

College Financial Aid (included in Financial Statements)

Scholarship Allowances, from prior page 30,569$ 1,694$ 509$ -$ 32,772$ 30,618$

Total College 30,569 1,694 509 - 32,772 30,618

Grand Total 46,110$ 6,267$ 11,013$ -$ 63,390$ 63,399$

% of Tuition & Fees 65.2% 53.2% 105.0% 0.0% 67.5% 70.1%

in thousands2012


8

EXPENDITURES AND TRANSFERS – OBJECT CLASS ANALYSIS

TOTAL EXPENDITURES AND TRANSFERS in fiscal year 2012 were $105 million, compared to $98.9 million in the prior year. This represents an increase of $6.1 million, or 6.2%. The following charts show the proportions of expenditures by object.

Payroll & Related Expense 61.5%

General & Administrative

Expense 26.9%

Debt Service 5.9% Equipment &

Capital Purchases 3.1%

Utilities 2.6%

Expenditures by Object 2012

Payroll & Related Expense 60.8%

General & Administrative

Expense 28.0%

Debt Service 6.2% Equipment &

Capital Purchases 1.9%

Utilities 3.1%

Expenditures by Object 2011


9

Payroll and Benefits totaled $61.7 million in fiscal 2012 compared to 59.3 million in fiscal 2011, an increase of $2.4 million or 4.0%. In fiscal 2012, a 2% merit pool was approved college wide; final determination of distribution was not made until September 2011. In addition, changes in staffing levels or head counts, as well as selected market adjustments to salaries, also affected the year-over-year increase. 61.5% of the College’s expenditures are related to compensation and benefits. Employee benefit costs rose 6.2% in 2012, compared to an increase of 5.9% in 2011. The increases are spread over several areas—including health insurance, pension costs, and Social Security/Medicare. Health insurance costs increased from $4.6 million last year to $5.0 million, an 8.3% increase. The major components of employee benefit costs are detailed in the chart that follows:

General and Administrative decreased over the prior year to $26.9 million, and represents 26.9% of total expenditures in 2012, compared to $27.2 million in 2011. 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 11.6% in 2012. At $2.6 million for 2012, utilities represented about 2.6% of expenditures. Utility costs continue to rise, however decreased consumption is attributable to the decrease in utility expenses.

% of % of % ofAmount Total Amount Total Amount Total

Health & Dental Insurance 4,972$ 31.8% 4,592$ 31.2% 380$ 8.3%Pension Plans 3,513 22.5% 3,392 23.1% 121 3.6%Social Security/Medicare 3,110 19.9% 3,038 20.6% 72 2.4%Tuition Programs 3,169 20.3% 3,044 20.7% 125 4.1%Workers' Comp Insurance 209 1.3% 193 1.3% 16 8.3%Life, ADD & LTD Insurance 203 1.3% 214 1.5% (11) -5.1%Accruals & Other 444 2.8% 239 1.6% 205 85.8%

15,620$ 100.0% 14,712$ 100.0% 908$ 6.2%

Change

Employee Benefit Costs Componentsin thousands

20112012


10

Debt Service, in terms of current outlay, decreased by $89 thousand in 2012 to $5.9 million. Debt Service currently represents 5.9% of total expenses, down from 6.2% in 2011. The debt leverage ratios exhibited below measure the extent to which the institution has leveraged its capital. The leverage ratio is calculated by dividing available net assets by long-term debt (amounts taken from Part I - Audited Financial Statements). This ratio was below the 2.0 KPMG-defined higher education benchmark, as shown in the chart below. The decrease in the 2009 and 2010 ratio is associated with new debt acquired during fiscal 2009 as well as net asset decreases stemming from endowment losses. In fiscal 2009, the College added $10 million in debt to acquire the (Langford) Inn as Rollins property. In fiscal 2010 the College added $8.2 million debt used for renovation of Rollins and Rex Beach residence halls and certain other capital projects. In 2011, endowment revenues bolstered the ratio.

Equipment and Capital Purchases and Capital Projects funded by current operations decreased by a combined $1.1 million from prior year, from $6.1 million to $5 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.

3.32

1.91 1.91 2.34

1.63

0

0.5

1

1.5

2

2.5

3

3.5

2008 2009 2010 2011 2012

Leverage Ratios

2008 2009 2010 2011 2012Current Net Assets 288,916$ 184,159$ 202,202$ 245,041$ 220,007$ Long-Term Debt 87,035$ 96,256$ 105,840$ 104,771$ 135,006$

Ratio 3.32 1.91 1.91 2.34 1.63

in thousands


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 32.5%

Student Services 15.5%

Institutional Support 14.4%

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

Instruction 33.3%

Student Services 15.4%

Institutional Support 14.8%

Academic Support 11.2%

Operation & Maintenance of

Plant 9.6%


9.5%

Advancement Related 4.4%

Public Service 1.8%

Other 15.7%

Expenditures by Function 2011


12

Instruction increased slightly in 2012 to $32.7 million, up from $32.5 million in 2011, a less than 1% increase. This category represents the direct expense, including salaries, of academic departments and activities. Instructional compensation accounts for most of this category. Expenditures for 2012 and 2011 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 2012 and 2011 were as follows:

Advancement Related expenses increased in 2012 to $5.1 million from $4.3 million in 2011, or an increase of 18.4%. Advancement-related expenses include the direct cost of fundraising, plus alumni activities and public relations.

Program/Activity Total % of Total Total % of TotalUndergraduate Day Program 22,664$ 69.4% 22,055$ 67.9%Crummer Graduate School of Business 6,485 19.8% 6,811 21.0%Hamilton Holt School 3,507 10.7% 3,610 11.1%Other 22 0.1% - -

Total 32,678$ 100.0% 32,476$ 100.0%

in thousands2012 2011

Program/Activity Total % of Total Total % of TotalUndergraduate Day Program 3,085$ 27.4% 3,085$ 28.5%Crummer Graduate School of Business 1,551 13.7% 2,270 20.9%Hamilton Holt School 665 5.9% 699 6.4%Olin Library 1,943 17.1% 2,396 21.9%Other 4,055 35.9% 2,432 22.3%

Total 11,299$ 100.0% 10,882$ 100.0%



13

Student Services include student affairs and activities, admissions, registration, records, health services, financial aid services, career services, advising and counseling, and athletics. In certain College programs (other than Undergraduate Day Program), 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 2012 and 2011 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 decreased slightly from $14.5 million to $14.4 million, representing 14.4% of operating expenses. Operation and Maintenance of Plant increased by $538 thousand, from $9.3 million to $9.9 million, a 5.8% increase. Operation and Maintenance accounted for 9.9% of total operating expenses in 2012 and 9.6% in 2011. Public Service decreased from $1.7 million in 2011 to $1.5 million in 2012, a 10.7% decrease. 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 increased from $9.3 million in 2011 to $9.8 million in 2012, a $556 thousand or 6% 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.

Program/Activity Total % of Total Total % of TotalUndergraduate Day Program 14,266$ 91.6% 13,581$ 90.2%Crummer Graduate School of Business 1,249 8.1% 1,469 9.7%Hamilton Holt School 53 0.3% 13 0.1%

Total 15,568$ 100.0% 15,063$ 100.0%


TAB 5

Report of Investment

Performance

PART IV

REPORT OF INVESTMENT PERFORMANCE


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, 2012. 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, 2012 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, 2012. The allocation is presented in more detail on the following page:

Domestic Equity25.3%

Flexible Capital18.1% Multi-Strategy Fixed

Income17.6%

Non US Developed Equity14.1%

Inflation Hedging Assets9.7%

Global Private Equity7.7%

Emerging Markets Equity5.5%

Cash2.0%

Relative Allocation of Endowment Assets

REPORT OF INVESTMENT PERFORMANCE ROLLINS COLLEGE

`

2

Asset Allocation (continued)

Endowment Spending Policy For 2011-12, 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 4.6% for the five years ended May 31, 2012.

Endowment Pool Spending Distributions in thousands

Asset Class Allocation Asset Class Allocation

Domestic Equity 25.8% Global Private Equity 7.8%Non U.S. Developed Equity 14.4% Flexible Capital 18.4%Emerging Markets Equity 5.6% Inflation Hedging Assets 9.9%Multi-Strategy Fixed Income 17.9% Cash 0.2%

Total 100.0%

Fiscal YearSpending

DistributionSpending %

Increase

Quarterly Average

Market Value

Distribution %

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%2007-08 12,768 13.6% 370,006 3.5%

5 Year Average 14,003$ 6.8% 301,666$ 4.6%


`

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

2012 -3.1% 2011 21.4% 2010 2009 2008

12.1% -25.6% 2.9%

2007 21.0% 2006 14.9% 2005 16.6% 2004 23.6% 2003 0.5%

Ten Years, Annualized 7.4%

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

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rollins CollegeInvestment Portfolio Growth

Ten Fiscal Years2003 through 2012

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, 2011 332,943$ 5,091$ 16,974$ 355,008$ 5,247$ -$ 360,255$

Additions, Transfers, and EarningsGifts and Other Additions 1,500 687 - 2,187 103 - 2,290 Transfers - - - - - - - Investment Earnings (8,591) (313) (1,137) (10,041) 1 - (10,040)

Additions, Transfers, and Earnings (7,091) 374 (1,137) (7,854) 104 - (7,750)

WithdrawalsSpending and Beneficiary Payments (15,595) (202) (696) (16,493) (576) - (17,069) Investment Expenses (1,211) (33) (97) (1,341) (36) - (1,377) Other Withdrawals - - - - - - -

Withdrawals (16,806) (235) (793) (17,834) (612) - (18,446)

Ending Valuation - May 31, 2012 309,046$ 5,230$ 15,044$ 329,320$ 4,739$ -$ 334,059$

Less: Accrued Interest and Dividends 189 3 14 206 - - 206

Investments at FMV - May 31, 2012 308,857$ 5,227$ 15,030$ 329,114$ 4,739$ -$ 333,853$

Rollins CollegeConsolidated Investment PortfolioSchedule of Changes in Valuation

Fiscal Year Ended May 31, 2012

Endowment



Appendix B

Account and Manager

May 31, 2012 Investment Value

(000's) 2008 2009 2010 2011 2012

5 Yrs, Annualized

Endowment Pool (b) 308,857$ 2.9% -25.6% 12.1% 21.4% -3.1% 0.2%Policy Allocation Index 2.2% -25.1% 12.8% 20.5% -4.0% 0.0%

Separately Invested Endowments and Long-Term FundsBush Chairs - Bank of America 3,344 -0.3% -17.2% 14.7% 25.6% -7.7% 1.9%Student Investment Fund - Crummer Students 645 -3.0% 3.3% 16.5% 19.3% -4.9% 5.8%

Blended 70/30 Index -2.6% -22.2% 17.4% 19.9% 1.9% 1.7%

Cash Due to Endowment Pool 773 Real Estate, Insurance, and Other Misc Assets 465

Perpetual Trusts Held by OthersWarren - Mellon 11,097 -0.9% -23.3% 16.6% 20.6% -7.9% -0.3%

Blended 70/30 Index -2.6% -22.2% 17.4% 19.9% 1.9% 1.7%

AW Rollins - JP Morgan 2,124 -0.9% -17.2% 12.7% 16.1% 0.1% 1.5%Kinsman Crumb - Wachovia 5 1.4% -25.5% 18.1% 21.6% -8.7% -0.2%

Blended 50/50 Index 0.1% -14.2% 14.7% 15.9% 3.4% 3.4%

Gundelach - US Bank 1,804 -4.5% -29.8% 18.4% 27.4% -1.7% -0.1%S&P 500 -6.7% -32.6% 21.0% 25.9% -0.4% -0.9%

Split Interest Trusts (all SSgA)Charitable Gift Annuity 3,337 4.8% 0.2% 9.0% 7.4% 0.7% 4.4%

Blended 10/90 Index 5.5% 0.6% 9.7% 7.8% 6.4% 5.9%Pooled Income Fund 516 2.3% -8.2% 10.9% 11.7% 1.3% 3.3%

Blended 30/70 Index 2.8% -6.8% 12.2% 11.8% 4.9% 4.7%Charitable Remainder Trusts 917 -0.3% -20.0% 16.9% 21.0% -4.3% 1.5%

Blended 60/10/30 Index -1.6% -18.2% 15.1% 17.3% 1.9% 2.1%Cash Due from Trusts (31)

Consolidated Investment Portfolio 333,853 2.6% -24.5% 12.2% 12.2% -3.3% -1.2%Blended 60/10/30 Index -1.6% -18.2% 15.1% 17.3% 1.9% 2.1%

(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

2011 (a)


2012 (a)

Marketable SecuritiesStocks

US Large Cap Stralem 26,552 23.4% 0.7%S&P 500 25.9% -0.4%

US Large Cap Growth Northern Trust Russell 1000 Fund (c) 32,862 n/a n/aRussell 1000 Index

US Small Cap Jensen Investment Management 13,019 n/a -4.8%Russell 1000 Growth 1.5%

US Small Value Vaughan Nelson 7,169 29.5% -8.2%Russell 2000 Value Index 22.9% -8.3%

Int'l Large Cap Vanguard Total Int'l Stock Index Fund (c) 8,352 n/a n/aMSCI AC World ex US IMI (Net)

Int'l Large Cap Sanderson Int'l Value 19,983 31.8% -14.5%MSCI EAFE 30.7% -20.5%

Int'l Small Cap Mondrian 11,987 42.2% -11.7%S&P EPAC SmallCap 39.0% -20.1%

Int'l Large Cap EuroPacific Growth Fund 4,171 n/a -18.2%MSCI AC World ex US (Net) -20.5%

Int'l Emerging Market Aberdeen Emerging Markets 17,421 31.2% -9.6%MSCI EM (net) 28.8% -20.3%

Fixed IncomeFixed Income PIMCO Total Return 15,519 8.1% 6.3%

Barclays U.S. Aggregate 5.8% 7.1%

Fixed Income Vanguard Total Bond Index Fund (c) 12,168 n/a n/aBarclays U.S. Aggregate Float Adjusted

Fixed Income Vanguard Inter-term Treasury Fund 4,038 n/a n/aBarclays U.S. Treasury: 5-10 Yr. (c)

Global Fixed Income Brandywine Global Fixed Income 5,168 17.1% 3.9%Global Fixed Income Colchester 18,476 11.5% -1.2%

Citigroup Wld Gov't Bond Index 12.2% 2.8%

Marketable Alternatives Real Assets Van Eck Hard Assets 13,496 43.3% -27.9%

S&P North American Natural Resources Sector 40.9% -22.6%RREEF American REIT III (b) 3,368 24.2% 48.7%Park Street Natural Resources (b) 4,931 13.8% 9.5%Metropolitan Real Estate (b) 1,089 6.4% 23.8%Colony Realty (b) 1,517 30.5% 8.0%Newlin Energy (b) 4,915 20.1% 13.6%BlackRock Diamond Property Fund (b) 942 30.9% 6.6%

Rollins CollegeEndowment Pool

Performance to BenchmarkMay 31, 2012


Appendix C

Group and Strategy Manager / BenchmarkInvestment

Value (000's)


2011 (a)


2012 (a)

Marketable Alternatives (cont) Hedge Funds - Multi Strategy King Street Capital 5,926 7.0% -0.2%

Silver Point Capital Offshore Fund 5,383 18.2% 3.8%Anchorage Capital 3,725 7.8% -3.6%

HFRI ED: Distressed/Restructuring Index 10.0% -3.6%

Anchorage Short Credit Offshore II 1,564 -21.9% 8.9%T-Bill 3 Month Index Plus 4% 4.1% 4.0%

Viking Global Equities 4,742 13.1% 7.1%HFRI Equity Hedge (Total) Index 13.1% -8.8%

Canyon Value Realization Fund 5,671 13.1% -0.5%Elliott Int'l 8,096 7.1% 3.1%Shepherd Investments 1,113 15.2% -0.9%Davidson Kempner 5,740 9.2% 0.0%Och-Ziff Overseas Fund II 5,607 11.7% 0.2%Fir Tree Int'l Value Fund 4,503 15.8% 1.7%

HFRI Event-Driven (Total) Index 13.3% -4.3%

Wexford Offshore 4,798 9.5% -5.0%HFRI Macro (Total) Index 12.2% -1.8%

CashCash Pending Investment Northern Trust 333 0.0% 0.0%Cash Pending Investment/(Uninvestment) 413 0.0% 0.0%

Citigroup 3 Month T-Bill 0.1% 0.0%

Composite Marketable Securities 284,757 22.6% -4.7%Policy Allocation Index 20.7% -7.2%

Private EquityPrivate Equity Lindsay Goldberg & Bessemer, LP (b) 730 n/a n/a

WestAM COREplus, LP (b) 759 n/a n/aAuda Secondary Fund (b) 651 n/a n/aPark Street Private Equity Fund VII (b) 2,361 n/a n/aPortfolio Advisors Private Equity Fund IV (b) 2,324 n/a n/aGoldman Sachs Vintage Fund IV (b) 2,155 n/a n/aNewbury (b) 5,319 n/a n/aHammond PIP 2008 Private Equity Fund (b) 4,330 n/a n/aNorthgate IV (b) 4,223 n/a n/aSiguler Guff Distressed Opportunities (b) 1,248 n/a n/a

Endowment Pool Assets 308,857$

(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, 2012


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

US Large Cap Active Stralem 26,552 US Large Cap Growth Passive Northern Trust Russell 1000 Fund 32,862 US Large Quality Active Jensen Investment Management 13,019 US Small Value Active Vaughan Nelson 7,169

Domestic Equity 79,602 13.5% 25.8% 12.3%

International Large Cap Active Vanguard Total Int'l Stock Index Fund 8,352 International Large Cap Active Euro-Pacific Growth Fund 4,171 International Large Cap Active Sanderson Int'l Value Fund 19,983 International Small Cap Active Mondrian Int'l Small Cap 11,987

Non-US Developed Equity 44,493 13.5% 14.4% 0.9%

Emerging Market Active Aberdeen Emerging Markets 17,421

Emerging Markets Equity 17,421 9.0% 5.6% -3.4%

US Fixed Income Active PIMCO Total Return 15,519 US Fixed Income Active Vanguard Total Bond Index Fund 12,168 US Fixed Income Active Vanguard Inter-term Treasury Fund 4,038 Global Fixed Income Active Brandywine Global Fixed Income 5,168 Global Fixed Income Active Colchester 18,476

Multi-Strategy Fixed Income 55,369 17.0% 17.9% 0.9%

Private Equity* Private Equity Lindsay, Goldberg & Bessemer, LP 730 Private Equity* Private Equity Auda Secondary Fund 651 Private Equity* Private Equity Park Street Private Equity VII 2,361 Private Equity* Private Equity Portfolio Advisors Private Equity IV 2,324 Private Equity* Private Equity Goldman Sachs Vintage IV 2,155 Private Equity* Private Equity Newbury 5,319 Private Equity* Private Equity Hammond PIP 2008 Private Equity Fund 4,330 Private Equity* Private Equity Northgate IV 4,223 Private Equity* Multiple Strategy WestAM COREPlus, LP 759 Private Equity* Distressed Securities Siguler Guff Distressed Opportunities 1,248

Global Private Equity 24,100 10.0% 7.8% -2.2%

Asset AllocationMay 31, 2012

Asset Allocation



Appendix D

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

US Large Cap Active Stralem 26,552 US Large Cap Growth Passive Northern Trust Russell 1000 Fund 32,862 US Large Quality Active Jensen Investment Management 13,019 US Small Value Active Vaughan Nelson 7,169

Domestic Equity 79,602 13.5% 25.8% 12.3%

International Large Cap Active Vanguard Total Int'l Stock Index Fund 8,352 International Large Cap Active Euro-Pacific Growth Fund 4,171 International Large Cap Active Sanderson Int'l Value Fund 19,983 International Small Cap Active Mondrian Int'l Small Cap 11,987

Non-US Developed Equity 44,493 13.5% 14.4% 0.9%

Hedge Funds Distressed Securities Anchorage Capital 3,725 Hedge Funds Distressed Securities King Street Capital 5,926 Hedge Funds Distressed Securities Silver Point Capital Offshore 5,383 Hedge Funds 91 Day Treasury Bill + 4% Anchorage Short Credit Offshore Fund 1,564 Hedge Funds Long/Short Equity Viking Global Equities III 4,742 Hedge Funds Multi Strategy Davidson Kempner 5,740 Hedge Funds Multi Strategy Och-Ziff Overseas Fund II 5,607 Hedge Funds Multi Strategy Shepherd Investments Intl 1,113 Hedge Funds Multi Strategy Canyon Value Realization Fund 5,671 Hedge Funds Multi Strategy Elliott Int'l 8,096 Hedge Funds Multi Strategy Fir Tree Int'l Value Fund 4,503 Hedge Funds Global Macro Wexford Offshore Spectrum Fund 4,798

Flexible Capital 56,868 20.0% 18.4% -1.6%

Real Assets Passive Van Eck Global Hard Assets 13,496 Real Assets Active RREEF American REIT III 3,368 Real Assets Active Park Street Natural Resources 4,931 Real Assets Active Metropolitan Real Estate 1,089 Real Assets Active Colony Realty 1,517 Real Assets Active Newlin Energy Fund 4,915 Real Assets Active BlackRock Diamond Property Fund 942

Inflation Hedging (Real Assets) 30,258 10.0% 9.9% -0.1%

Cash Cash 746 0.0% 0.2% 0.2%

Total Endowment Pool 308,857$ 93.0% 100% 7.0%

* Valuations reflect base capital contributed on amounts called thru 5/31/12

Asset Allocation


Appendix E

Assets Operating Endowment Total Operating Endowment Total

Monthly Liquidity

Cash & Cash Equivalents 27,051$ 3,032 30,083 51,413 3,297.68 54,711

Fixed Income (with liquidity of 30 days or less)Publicly Traded Fixed Inc Sec (Mutual Funds) 60,032 60,032 7,211 35,225 42,436

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

Domestic 73,824 73,824 53,392 53,392 International 80,749 80,749 66,624 66,624

Publicly Traded Commodities/Mutual Funds 18,715 18,715 14,432 14,432

Subtotal: Monthly Liquidity 27,051 236,352 263,403 58,624 172,971 231,595

Annual Liquidity

Hedge Funds 48,960 48,960 51,557 51,557 Real Estate 3,150 3,150 2,499 2,499

Subtotal: Annual Liquidity 52,110 52,110 54,056 54,056

Liquidity with Lockup > 1 Year

Hedge Funds 11,342 11,342 12,698 12,698 Private Equity / Venture Capital 21,908 21,908 19,770 19,770 Real Estate 10,987 10,987 8,503 8,503 Separately Managed and Outside Trusts 22,046 22,046 19,593 19,593

Subtotal: Liquidity with Lockup > 1 Year 66,283 66,283 60,564 60,564

Total Operating and Endowment 27,051$ 354,745 381,796 58,624 287,591 346,215

Split Interest Trusts not Included in Endowment 5,238 5,344

Total Cash and Investment Liquidity 27,051$ 354,745 387,034 58,624 287,591 351,559

Rollins CollegeAset Holdings / Liquidity Analysis

May 31, 2011 May 31, 2010

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ANNUAL FINANCIAL REPORT · 2020. 6. 30. · ANNUAL FINANCIAL REPORT For the year ended May 31, 2012. TAB 1 Table of Contents . ROLLINS ... plant and equipment 1,516 (1,516) ... Proceeds