FINANCIAL STATEMENTS - tcf-nd.s3.amazonaws.com€¦ · ST. CHRISTOPHER’S SCHOOL FOUNDATION...

ST. CHRISTOPHER’S SCHOOL FOUNDATION FINANCIAL STATEMENTS As of and for the Year Ended June 30, 2016 (With Comparative Totals for 2015)

And Report of Independent Auditor

ST. CHRISTOPHER'S SCHOOL FOUNDATION TABLE OF CONTENTS

REPORT OF INDEPENDENT AUDITOR .................................................................................................... 1

FINANCIAL STATEMENTS Statement of Financial Position ........................................................................................................................ 2-3 Statement of Activities ......................................................................................................................................... 4 Statement of Cash Flows ..................................................................................................................................... 5 Notes to the Financial Statements .................................................................................................................. 6-19

ST. CHRISTOPHER'S SCHOOL FOUNDATION BOARD OF DIRECTORS

Mr. Thurston Moore, Chairman Mr. Brett P. Hawkins

Mr. Matthew T. Akin Mr. Mason Lecky, 2016-2017 Headmaster

Mr. Samuel M. Bemiss Mr. R. Wheatly McDowell, President

Mr. Dennis I. Belcher Mr. Charles M. Stillwell, 2015-2016 Headmaster

Mr. Turner A.M. Bredrup Mr. Matthew G. Thompson

Mr. Matthew B. Engel Mr. E Carlton Wilton, Jr.

Mr. Jack E. Fockler, Jr. Mr. David S. Reynolds, Treasurer

Report of Independent Auditor To the Board of Directors of St. Christopher’s School Foundation Richmond, Virginia We have audited the accompanying financial statements of St. Christopher’s School Foundation (the “Foundation”), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Christopher’s School Foundation as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the Foundation’s financial statements as of and for the year ended June 30, 2015, and we expressed an unmodified audit opinion on those audited financial statements in our report dated September 21, 2015. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Richmond, Virginia September 20, 2016

ST. CHRISTOPHER’S SCHOOL FOUNDATION STATEMENT OF FINANCIAL POSITION JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015)

The accompanying notes to the financial statements are an integral part of this statement. 2

General Annual Capital

Endowment Giving Fund 2016 2015

ASSETS

Current Assets: Cash and cash equivalents 1,282,465$ 228,029$ 96,711$ 1,607,205$ 1,318,343$ Receivables:

Pledges, net, current portion 1,681,145 248,920 1,421 1,931,486 2,459,894 Split-interest agreements 735,039 - 66,491 801,530 828,926

Prepaid expenses 20,346 - - 20,346 17,421

Total Current Assets 3,718,995 476,949 164,623 4,360,567 4,624,584

Investments: Marketable securities 44,971,398 1,494,218 1,450,608 47,916,224 50,836,514 Corporate office 107,766 - - 107,766 107,073 Closely held stocks 6,250 - - 6,250 6,250 Real estate - residential property 2,434,731 - - 2,434,731 2,906,169 Notes receivable 2,290,936 - - 2,290,936 2,856,615

Total Investments 49,811,081 1,494,218 1,450,608 52,755,907 56,712,621

Property and Equipment, net 5,719,020 - - 5,719,020 4,278,032

Other Assets: Pledges, net, long-term portion 2,451,743 4,544 23,319 2,479,606 3,200,117 Corporate office endowment receivable 42,268 - - 42,268 42,268 Accrued interest receivable 182,504 - - 182,504 164,435 Notes receivable, long-term portion 250,000 - - 250,000 250,000 Assets held in trusts 260,704 - - 260,704 289,242 Cash value of life insurance 24,588 7,276 - 31,864 30,288 Due (to) from other funds (85,977) - 85,977 - -

Total Other Assets 3,125,830 11,820 109,296 3,246,946 3,976,350

Total Assets 62,374,926$ 1,982,987$ 1,724,527$ 66,082,440$ 69,591,587$

Total

ST. CHRISTOPHER’S SCHOOL FOUNDATION STATEMENT OF FINANCIAL POSITION (CONTINUED) JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015)



Endowment Giving Fund 2016 2015

LIABILITIES AND NET ASSETS

Current Liabilities:Accounts payable 4,028$ -$ -$ 4,028$ -$ Accounts payable - St. Christopher's School 586,241 - - 586,241 644,177

Total Current Liabilities 590,269 - - 590,269 644,177

Long-Term Liabilities:St. Christopher's School 3,189,251 - - 3,189,251 3,315,879 Amounts held for others 480,726 - - 480,726 665,528

Total Long-Term Liabilities 3,669,977 - - 3,669,977 3,981,407

Total Liabilities 4,260,246 - - 4,260,246 4,625,584

Net Assets:Unrestricted (deficit) (6,465,006) 1,982,987 - (4,482,019) (2,374,788) Unrestricted - Board designated 23,830,503 - 1,245,735 25,076,238 26,025,958

Total Unrestricted Net Assets 17,365,497 1,982,987 1,245,735 20,594,219 23,651,170 Temporarily restricted 9,896,410 - 478,792 10,375,202 12,828,569 Permanently restricted 30,852,773 - - 30,852,773 28,486,264

Total Net Assets 58,114,680 1,982,987 1,724,527 61,822,194 64,966,003

Total Liabilities and Net Assets 62,374,926$ 1,982,987$ 1,724,527$ 66,082,440$ 69,591,587$

Total

ST. CHRISTOPHER’S SCHOOL FOUNDATION STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015)


Permanently

RestrictedGeneral Annual Capital General Capital General

Endowment Giving Fund Endowment Fund Endowment 2016 2015Support and Revenue:

Gifts 206,360$ 1,586,621$ -$ 118,475$ 23,290$ 2,407,368$ 4,342,114$ 4,087,368$ Contributed services 455,754 140,868 - - - - 596,622 589,470 Investment income 426,324 37,713 - 715,596 30,516 - 1,210,149 1,845,636 Change in cash value of life insurance 1,308 268 - - - - 1,576 1,526 Gain on sale of investments 517,106 61,127 - 1,058,968 48,070 - 1,685,271 3,567,177 Realized gain (loss) on sale of real estate 123,620 - - - - - 123,620 (2,352) Unrealized depreciation of investments (1,282,624) (146,549) - (2,885,216) (126,387) - (4,440,776) (3,094,020) Change in split-interest agreements 96,131 - - - 727 (31,852) 65,006 (181,975) Bad debt losses (307,932) (33,686) - - (1,300) - (342,918) (42,354)

236,047 1,646,362 - (992,177) (25,084) 2,375,516 3,240,664 6,770,476 Net assets released from restrictions 1,434,165 - 10,948 (1,425,158) (10,948) (9,007) - -

Total Support and Revenue 1,670,212 1,646,362 10,948 (2,417,335) (36,032) 2,366,509 3,240,664 6,770,476

Program Expenses:Transfers to St. Christopher's School:

School operations 1,194,676 1,576,580 - - - - 2,771,256 2,977,177 Scholarships 646,045 - - - - - 646,045 566,687 Library 269,807 - - - - - 269,807 206,382 Awards 22,213 - - - - - 22,213 21,773 Faculty support 399,609 - - - - - 399,609 376,502 Construction and equipment 1,125,000 - - - - - 1,125,000 1,053,000

Maintenance, real estate 105,613 - - - - - 105,613 59,642 Investment and other fees 193,853 27,256 9,648 - - - 230,757 250,409

Administrative and General Expenses:Depreciation 83,078 - - - - - 83,078 75,776 Administrative fees 134,473 - - - - - 134,473 126,939

Fundraising:Contributed services 455,754 140,868 - - - - 596,622 589,470

Total Expenses 4,630,121 1,744,704 9,648 - - - 6,384,473 6,303,757

Change in net assets (2,959,909) (98,342) 1,300 (2,417,335) (36,032) 2,366,509 (3,143,809) 466,719 Net assets, beginning of year 20,325,406 2,081,329 1,244,435 12,313,745 514,824 28,486,264 64,966,003 64,499,284

Net assets, end of year 17,365,497$ 1,982,987$ 1,245,735$ 9,896,410$ 478,792$ 30,852,773$ 61,822,194$ 64,966,003$

Unrestricted Temporarily RestrictedTotal

ST. CHRISTOPHER’S SCHOOL FOUNDATION STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015)

The accompanying notes to financial statements are an integral part of this statement. 5

2016 2015Cash flows from operating activities:

Change in net assets (3,143,809)$ 466,719$ Adjustments to reconcile change in net assets to cash used in

operating activities:Gain on sale of investments (1,685,271) (3,567,177) (Gain) loss on sale of real estate (123,620) 2,352 Unrealized depreciation on investments 4,440,776 3,094,020 Depreciation 83,078 75,776 Bad debt losses 342,918 42,354 Contributions restricted for endowment (2,407,368) (1,570,073) Change in cash value of life insurance (1,576) (1,526) Change in:

Pledges receivable 906,001 467,694 Other receivable - 181,471 Split-interest agreements 27,396 12,216 Accrued interest receivable (18,069) (17,315) Prepaid expenses (2,925) (1,713) Accounts payable (53,908) (13,973) St. Christopher's School (126,628) 118,212 Amounts held for others (184,802) 51,154

Net cash used in operating activities (1,947,807) (659,809)

Cash flows from investing activities: Proceeds from sale of investments 5,889,019 16,766,582 Purchase of investments (5,724,927) (17,780,890) Purchase of residential property and improvements (363,329) (1,026,740) Change in assets held in trusts 28,538 47,899

Net cash used in investing activities (170,699) (1,993,149)

Cash flows from financing activities:

Contributions restricted for Endowment 2,407,368 1,570,073

Net change in cash and cash equivalents 288,862 (1,082,885) Cash and cash equivalents, beginning of year 1,318,343 2,401,228

Cash and cash equivalents, end of year 1,607,205$ 1,318,343$

Supplemental disclosure of noncash investing andfinancing activities:

Sale of an equity interest in multiple residential propertiesfor consideration of notes receivable 565,679$ 157,186$

Repurchases of an equity interest in residential properties: Fair value of original notes receivable used for consideration 1,037,117$ 413,026$

ST. CHRISTOPHER’S SCHOOL FOUNDATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016

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Note 1—Organization and nature of activities St. Christopher’s School Foundation (the “Foundation”) is a nonprofit organization created for the purpose of fostering and promoting the welfare and development of St. Christopher’s School (the “School”) located in Richmond, Virginia. Note 2—Summary of significant accounting policies Basis of Presentation – The Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The financial statements report amounts separately by class of net assets as follows:

Unrestricted – Net assets that are currently available at the discretion of the Foundation’s Board of Directors (the “Board”) for use in the Foundation’s operations and those resources invested in property or equipment.

Temporarily Restricted – Net assets that are stipulated by donors for specific purposes. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Restricted revenue whose restrictions are met in the same year is reflected as unrestricted revenue.

Permanently Restricted – Restricted amounts are restricted to investments in perpetuity, the income from which is expendable in accordance with the conditions of each specific donation.

Fund Accounting – In order to ensure observance of limitations and restrictions placed on the use of resources available to the Foundation, its accounts are maintained in accordance with the principles of fund accounting. Resources for various purposes are classified for accounting and reporting purposes into funds established according to their nature and purposes. Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been reported by fund group.

General Endowment Fund – The General Endowment Fund includes gifts whose principal amount is permanently restricted by the donor to be invested in perpetuity. The General Endowment Fund consists of unrestricted - board designated gifts to be used at the discretion of the Board, gifts with unrestricted purpose for School operations, donor temporarily restricted, and donor restricted permanent gifts where only the income and appreciation are expendable. The unrestricted General Endowment is to be used by the Foundation to help promote the general welfare and development of the School.

Annual Giving Fund – Records unrestricted gifts received from donors to be used at the discretion of the School for operating expenses.

Capital Fund – Records restricted campaign funds received to provide necessary additions to the School’s property, plant, or equipment. Distributions are made at the request of the Board of Governors.

Cash and Cash Equivalents – For purposes of reporting cash flows, the Foundation includes all highly liquid investments with a maturity of three months or less as cash equivalents. Investments – Investments in securities are carried at fair value or Net Asset Value (“NAV”) per share, or its equivalent. The fair value or NAV of hedge funds and private equity interests are determined in good faith by external investment managers or other independent sources and reviewed by management. Because alternative investments are not readily marketable, their estimated value is subject to additional uncertainty and therefore, value realized upon disposition may vary significantly from currently reported values.


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Note 2—Summary of significant accounting policies (continued)

Investment securities are exposed to several risks, such as interest rate, currency, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the Foundation’s financial statements. The residential real estate properties described in Note 10 are considered investments by the Foundation. The properties are not depreciated and are stated at cost. Property and Equipment – Property and equipment, consisting of buildings and leasehold improvements, are stated at cost and depreciated by the straight-line method over their estimated useful lives of 50 years. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in current year operations. Concentration of Credit Risk – The Foundation places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (FDIC) provides insurance coverage up to $250,000 for substantially all depository accounts. The Foundation from time to time may have had amounts on deposit in excess of the insured limits. As of year-end, the Foundation had $360,472 which exceeded these insured amounts. Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Income Taxes – The Foundation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Management has evaluated the effect of the guidance provided by U.S. generally accepted accounting principles on Accounting for Uncertainty in Income Taxes. Management believes that the Foundation continues to satisfy the requirements of a tax-exempt organization at June 30, 2016. Management has evaluated all other tax positions that could have a significant effect on the financial statements and determined the Foundation had no uncertain income tax positions at June 30, 2016. Donated Assets and Services – The Foundation receives free use of certain facilities which are provided by the School. The School received free use of certain real estate owned by the Foundation. The value of these donated services and facilities are not reflected in the financial statements since no objective basis is available to measure their value. Split-Interest Gifts – The Foundation has beneficial interests in various split-interest agreements. The contribution portion of an agreement is recognized as revenue when the Foundation has the unconditional right to receive benefits under the agreement and is measured at the expected future payments to be received. Any assets received under a trustee agreement are recorded at fair value. Any liabilities to third-party beneficiaries are recorded at the present value of the expected payments. All present value calculations are made using federal discount rates and life expectancy tables. During the term of an agreement, any changes in actuarial assumptions are recognized as “change in split-interest agreements” in the statement of activities.


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Note 2—Summary of significant accounting policies (continued) The Foundation has beneficial interests in various split interest agreements as follows:

The Foundation is a remainder beneficiary and trustee of two charitable remainder trusts, dated between 1997 and 1992. The average discount rate for these trusts is 4.2%, which is discounted over the longer life expectancy of each spousal donor. The payout rates range from 5.0% to 7.0%, paid quarterly, semi-annually, or annually.

The Foundation is a remainder beneficiary, but not the trustee, of six charitable remainder trusts, dated between 1984 and 2000. The average discount rate for these trusts is 1.8%, which is discounted over the longer life expectancy of each spousal donor. The payout rates range from 5.0% to 8.0%, paid monthly, quarterly, or annually.

The Foundation is the remainder beneficiary and trustee of 21 charitable gift annuities, dated between 1989 and 2015. The average discount rate for these annuities varies from 2.2% to 11.0%, which is discounted over the longer life expectancy of each spousal donor. The payout rates range from 4.9% to 12.5%, paid mostly quarterly. The total payout of all annuities for 2016 was $63,862.

The Foundation has also been named as a remainder beneficiary or contingent beneficiary in various wills and split-interest agreements. No financial information is currently available for these interests.

Bad Debt Losses – The Foundation records an allowance for uncollectible pledges as a reduction in support and revenue, gifts. Charge offs of specific pledges are recorded as bad debt losses. Note 3—Pledges receivable The Foundation has elected to record all pledges receivable at fair value. The process utilizes the income approach with discounted cash flows, providing a single discounted value for all pledges. The fair value adjustment for 2016 was $271,989 and is included in gifts in the statement of activities. No changes in the fair value measurement were attributable to instrument specific credit risk.


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Note 3—Pledges receivable (continued) The Foundation has pledges receivable at June 30, 2016, as follows:


Endowment Giving Fund Total

Pledges receivable 4,132,888$ 253,464$ 24,740$ 4,411,092$

Less current portion (1,681,145) (248,920) (1,421) (1,931,486)

Pledges receivable, long-term portion 2,451,743$ 4,544$ 23,319$ 2,479,606$


Endowment Giving Fund Total

Gross amounts to be collected in:

Less than one year 1,495,440$ 254,482$ 1,450$ 1,751,372$

One to five years 2,453,349 4,933 25,000 2,483,282

More than five years 328,957 - - 328,957

4,277,746 259,415 26,450 4,563,611

Less:

2.5% - 2.8% discount (50,518) (290) (1,181) (51,989)

Allowance for uncollectible (94,340) (5,661) (529) (100,530)

Fair Value 4,132,888$ 253,464$ 24,740$ 4,411,092$

Note 4—Investments – marketable securities

The carrying value of marketable securities held by various funds at June 30, 2016, is summarized below:

Fair Value Cost

Common stocks 8,852,653$ 9,969,182$

Hedge funds 5,464,438 1,629,622

Partnerships 5,102,528 6,587,934

Mutual funds 28,496,605 26,946,732

47,916,224$ 45,133,470$


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Note 5—Fair value measurements Current accounting standards establish a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The levels of the hierarchy are defined as follows:

Level 1 – Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities traded in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active

markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability on market-corroborated inputs.

Level 3 – Inputs to the valuation methodology are unobservable for the asset or liability and are significant

to the fair value measurement. The Foundation determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Foundation uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Quantitative information for Level 2 and Level 3 valuation inputs and related sensitivities is maintained by third parties and is not reasonably available to the Foundation. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2016.

Pledges Receivable – Valued using the income approach based on cash flows discounted using a credit risk adjusted discount rate.

Split-interest Agreements Receivable – Valued by calculating the present value of the future distributions expected to be received, using published life expectancy tables and a credit risk adjusted discount rate.

Investments – Common Stocks and Mutual Funds – Valued at the closing price reported on the active market on which the individual securities are traded.

Amounts Held for Others – Valued by calculating the present value of the future distributions expected to be paid, using published life expectancy tables and a credit risk adjusted discount rate.

Required disclosures concerning the estimated fair value of financial instruments are presented below. The estimated fair value amounts have been determined based on the School's assessment of available market information and appropriate valuation methodologies.


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Note 5—Fair value measurements (continued)

The following table summarizes required fair value disclosures and measurements at June 30, 2016, for assets measured at fair value on a recurring basis under ASC 820, Fair Value Measurements and Disclosures:

Level 1 Level 2 Level 3 Total

ASSETS

Pledges receivable -$ -$ 4,411,092$ 4,411,092$ Split-interest agreements - - 801,530 801,530 Investments:

Marketable securities:Common stocks:

Energy 160,971 - - 160,971 Materials 225,340 - - 225,340 Industrials 436,998 - - 436,998 Consumer discretionary 2,898,792 - - 2,898,792 Consumer staples 556,137 - - 556,137 Healthcare 459,634 - - 459,634 Financials 2,901,457 - - 2,901,457 Partnerships and closely held 2,825 2,825 Information technology 1,210,499 - - 1,210,499

Mutual funds:Small cap 1,571,443 - - 1,571,443 Large cap 5,138,245 - - 5,138,245 International equity 11,664,482 - - 11,664,482 Fixed income 4,792,808 - - 4,792,808 Bonds 2,484,584 - - 2,484,584

Marketable securities, at fair value 34,504,215 - - 34,504,215 Marketable securities, at NAV - - - 13,412,009

Total marketable securities 34,504,215 - - 47,916,224

Corporate Office, at NAV - - - 107,766

Total Assets 34,504,215$ -$ 5,212,622$ 53,236,612$

LIABILITIES

Amounts held for others -$ -$ (480,726)$ (480,726)$

Total Liabilities -$ -$ (480,726)$ (480,726)$


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Note 5—Fair value measurements (continued) Level 3 Gains and Losses – The table below sets forth a summary of changes in the fair value of the Foundation’s Level 3 investment assets and liabilities for 2016:

Pledges Split‐Interest Amounts Held

Receivable Agreements for Others Total

Balance, beginning of year 5,660,011$ 828,926$ (665,528)$ 5,823,409$ New pledges received 2,040,350 - - 2,040,350 Collections (2,856,704) - - (2,856,704) Bad debt losses (342,918) - - (342,918) Change in fair value (89,647) - - (89,647) Change in split-interest agreements - (27,396) - (27,396) Change in amounts held for others - - 184,802 184,802

Balance, end of year 4,411,092$ 801,530$ (480,726)$ 4,731,896$

Note 6—Investments carried at net asset value (or its equivalent) For entities that calculate net asset value per share (or its equivalent), the following table provides information about the probability of investments being sold at amounts different from NAV per share (or its equivalent) for the year ended June 30, 2016.

Outstanding Redemption Notice or

Market Value Commitments Frequency Lock‐In Period

Hedge Fund a 3,539,897$ -$ Annual

Hedge Fund b 1,924,541 - Quarterly 60-day notice,

Hedge Fund c 2,845,043 - Daily

(exit fee only)

Hedge Fund d 1,878,882 - Monthly

Hedge Fund e 1,077,267 - MonthlyPrivate Equity f 145,883 - * 2018

Private Equity f 302,408 - * 2019

Private Equity, distressed assets g 881,984 75,000 * 2019

Private Equity, real assets h 816,104 399,713 * 2020

Total investments carried at NAV 13,412,009$

None

4% side pocket

90-day notice

staggered in 1/3

30-day notice

Rolling 3-year


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Note 6—Investments carried at net asset value (or its equivalent) (continued) a This category includes funds that invest substantially all of its assets through a Master Fund that invests in securities,

private equity investments and derivative contracts. b This category includes funds that invest substantially all of its investable assets in The Canyon Value Realization Master

Fund which seeks capital appreciation and current income by investing in financial instruments that are perceived to be inefficiently priced as a result of business, financial or legal uncertainties. The Master Fund invests in publicly traded equity or debt securities as well as derivatives thereof.

c This category includes diversified funds that invest substantially all of its investable assets in The TIFF Multi-Asset Fund,

which is comprised of global equity, high yield bonds, and other hedging strategies which seeks to achieve a total return that, over a majority of market cycles, exceeds inflation.

d This category includes funds that typically invest in investment partnerships, managed funds and other investment

vehicles, with a fundamental approach of investing in individual securities, reducing volatility by hedging and expecting positive returns in most market conditions.

e This category includes funds that invest substantially in long energy infrastructure master limited partnerships and U.S.

energy markets. f This category includes funds that invest substantially in U.S. and non-U.S. private equity and energy related investment

partnerships, all of which are illiquid. g This category includes funds that typically invest in direct or indirect securities of companies undergoing financial

distress, operating difficulties and significant restructuring. h This category includes funds of private equity funds that invest in a diversified portfolio of opportunities within the real

assets sector with a focus on energy, timber and mining and metal and other natural resources properties. * The managers of private equity positions will make distributions from the proceeds from the sale of underlying investments

over a period of approximately five to ten years. The expected year distributions will begin is noted under “Notice or Lock-In Period”.

Note 7—Endowment funds The Foundation's endowment consists of multiple individual funds categorized into scholarships, library, awards, faculty support, and school operations. The endowment includes unrestricted, donor-restricted and board designated endowment funds. These funds were established for a variety of purposes. As required by generally accepted accounting principles (“GAAP”), net assets associated with these endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. At June 30, 2016, the endowment net asset composition by type of fund was as follows:

Temporarily Permanently

Unrestricted Restricted Restricted

Unrestricted endowments (6,121,203)$ -$ -$ Donor-restricted endowments (343,803) 9,896,410 30,852,773 Board-designated endowments 23,830,503 - -

17,365,497$ 9,896,410$ $ 30,852,773


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Note 7—Endowment funds (continued) The management of donor-restricted endowment funds is governed by state law under the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) as adopted by the Virginia state legislature in 2008. The law gives guidance for investment and spending practices, giving consideration for donor-intent and the organization's overall resources and charitable purpose. Based on their interpretation of law and in compliance with donor intent, the Foundation classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment. The portion of the donor-restricted endowment that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure. Return Objectives – Because the Foundation is expected to endure into perpetuity, and because inflation is a key component in its performance objective, the long-term risk of not investing in securities offering real growth potential outweighs the short-term volatility risk. As a result, the majority of assets will be invested in equity or equity-like securities, including real assets (real estate and natural resources). Real assets provide the added benefit of inflation protection. Fixed income and absolute return strategies will be used to lower short-term volatility and provide stability, especially during periods of deflation and negative equity markets. Cash is not a strategic asset of the Foundation, but is a residual to the investment process and used to meet short-term liquidity needs. Other asset classes are included to provide diversification (e.g., international equities) and incremental return (e.g., small cap equities). Spending Policy – The Foundation seeks to provide a reliable source of income to be used in a manner consistent with the donor’s stated interests and the School’s desire to provide quality service. The Foundation is to be managed in a manner consistent with the Board of Director’s fiduciary responsibility, emphasizing real growth in excess of inflation, administrative, and investment expenses. The Board of Directors shall manage distributions from the Foundation in accordance with investment policy. To minimize spending fluctuations due to market valuation fluctuations, the Foundation distributes funds to the School using a formula, which includes a spending (target) rate of 4.0% of General Endowment assets. The amount of Board Designated Endowment funds to be distributed to the School will be determined by the Board of Directors at its sole discretion on an annual basis. Funds with Deficiencies – From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the organization to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature that are reported in unrestricted net assets were $343,803 as of June 30, 2016. These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that were deemed prudent by the Board of Directors.


15

Note 7—Endowment funds (continued) A summary of the activity in endowment funds for the year ended June 30, 2016, is as follows:

Temporarily Permanently

Unrestricted Restricted Restricted Total

Endowment net assets, beginning of year 20,325,406$ 12,313,745$ 28,486,264$ 61,125,415$ Investment return:

Investment income 426,324 715,596 - 1,141,920 Net realized and unrealized loss (641,898) (1,826,248) - (2,468,146)

New gifts 206,360 118,475 2,407,368 2,732,203 Amounts appropriated for expenditure (3,503,888) - (9,007) (3,512,895) Other 553,193 (1,425,158) (31,852) (903,817)

Endowment net assets, end of year 17,365,497$ 9,896,410$ 30,852,773$ 58,114,680$

Note 8—Temporarily restricted net assets At June 30, 2016, temporarily restricted net assets are restricted for the following programs: Restricted scholarships 2,393,468$ Faculty support 3,075,349 School operations 3,125,123 Capital fund investments 1,256,246 School programs 39,934 School support 6,290 Other 478,792

Total temporarily restricted net assets 10,375,202$

Note 9—Permanently restricted net assets At June 30, 2016, permanently restricted net assets are restricted for the following programs: Restricted scholarships 8,339,354$ Faculty support 10,617,713 School operations 8,923,057 School programs 384,304 School support 1,133,126 Real estate 1,455,219

Total permanently restricted net assets 30,852,773$


16

Note 10—Real estate General Endowment - Residential Property – Property and equipment includes residential properties acquired by the Foundation that are contiguous to the School campus and are now being used for faculty housing. Repairs and maintenance expenses of $105,613 were incurred during 2016. The Foundation has entered into option agreements upon the sale of a 50% interest in certain residential properties to faculty members. The Foundation can buy back the property for the greater of 50% of the fair market value of the property or original consideration paid to the Foundation, plus costs of improvements made to the property that were agreed upon by the Foundation. The Foundation recorded sales of these properties with a cost of 50%, reflecting 50% of original cost.

606 Maple Avenue 195,277$

614 Maple Avenue 158,630





611 Henri Road 116,427



718 St. Christopher's Road 182,449



717 Pepper Avenue 193,517


Real estate - residential property 2,434,731$


17

Note 10—Real estate (continued) The Foundation has purchased real estate to hold for investment and to be rented to faculty members or the School at the following locations:

Cost and

Improvements

Faculty housing:

600 Maple Avenue 381,738$









608 Somerset Avenue 320,209

805 Henri Road 310,000610 St. Christopher's Road 1,765,412


6,058,949

Less accumulated depreciation (339,929)

Property and equipment, net 5,719,020$

Location

Note 11—Investments – notes receivable Notes Receivable – One-half interest in residences included in the table below has been sold to employees of the School in exchange for notes requiring monthly payments that represent interest only. The Foundation is obligated to repurchase these residences subject to an option and put price of the greater of 50% of the market value or original consideration paid plus improvements as agreed to by the Foundation. All notes are collateralized by deeds of trust on the respective property. Unless otherwise stated, principal on the notes is due when the Foundation repurchases these residences.


18

Note 11—Investments – notes receivable (continued) Notes receivable at June 30, 2016, are as follows:

192,124$

61,500

157,186

154,069

183,658

134,154

251,768

207,213

281,803

159,531

155,643

155,217

197,070

2,290,936$

Mortgage note on 618 Maple Avenue, interest only, receivable monthly at 5.00%, principal due July I, 2041.

Mortgage note on 700 Maple Avenue, interest only, receivable monthly at 4.60%, principal due April 1, 2039.

Mortgage note on 611 Henri Road, interest only, receivable monthly at 5.00%, principal due September 1, 2035.

Mortgage note on 803 Henri Road, interest only, receivable monthly at 5.09%, principal due October I, 2037.

Mortgage note on 724 St. Christopher's Road, interest only, receivable monthly at 5.00%, principal due November 8, 2037.

Mortgage note on 717 Pepper Avenue, interest only, receivable monthly at 5.00%, principal due November 1, 2043.

Mortgage note on 807 Henri Road, interest only, receivable monthly at 5.00%, principal due November 1, 2043.

Mortgage note on 721 Pepper Avenue, interest only, receivable monthly at 5.00%, principal due February 1, 2044.

Mortgage note on 718 St. Christopher's Road, interest only, receivable monthly at 5.02%, principal due June 1, 2042.

Mortgage note on 616 Maple Avenue, interest only, receivable monthly at 5.00%, principal due April 2, 2034.

Mortgage note on 726 St. Christopher's Road, interest only, receivable monthly at 5.00%, principal due November 1, 2042.

Mortgage note on 702 Maple Avenue, interest only, receivable monthly at 5.00%, principal due March 1, 2038.

Mortgage note on 606 Maple Avenue, interest only, receivable monthly at 5.00%, principaldue December 1, 2040.

Note 12—Related‐party transactions The Foundation provides financial support to the School. The School is a separate entity and is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. The financial statements of the Foundation do not reflect any assets or liabilities of the School. The $3,189,251 long-term liability due to the School represents funds which the School invested with the Foundation and which are a part of the Foundation’s unitized investment pool. Earnings on these funds are allocated to the School based on the unitization policy of the Foundation. These funds are recorded at fair value as of June 30, 2016.


19

Note 12—Related‐party transactions (continued) The Foundation provides financial support to the School. At June 30, 2016, the Foundation owed $586,241 to the School. Effective July 1, 2007, the Foundation entered into an agreement with Church Schools in the Diocese of Virginia, Inc., on behalf of the School. The agreement is for support services provided by the School for the Foundation. These support services are comprised of both professional services and facility use. In 2016, the Foundation paid $131,900 for these support services. This agreement renews annually unless 5-day notice of termination is given by either party. Note 13—Contingencies The Foundation has unconditionally guaranteed to Church Schools in the Diocese of Virginia, Inc., the borrower, the payments of all amounts owed under the terms of Variable Rate Educational Facilities Revenue Bonds that were issued for the benefit of the School. The outstanding balance on these bonds is $13,520,790 at June 30, 2016. The Foundation has provided a negative pledge regarding liens on the Foundation’s real or personal property with exceptions of “permitted liens” as defined in the guaranty agreement. The Foundation has also committed to meeting required ratios of cash and unrestricted investments equal to a percentage of the outstanding principal of the debt at June 30 of each year. The Foundation has unconditionally guaranteed to Church Schools in the Diocese of Virginia, Inc. the School borrowings under a bank revolving term loan. There was $475,000 in borrowings outstanding on the loan at year end. Note 14—Subsequent events The Foundation has evaluated subsequent events through September 20, 2016, the date the financial statements were available to be issued.

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