Midwestern University Foundation Years Ended June 30, 2016 and 2015 With Reports of Independent Auditors

Transcription

1 F INANCIAL S TATEMENTS AND S UPPLEMENTARY INFORMATION Midwestern University Foundation Years Ended June 30, 2016 and 2015 With Reports of Independent Auditors Ernst & Young LLP

2 Financial Statements and Supplementary Information Years Ended June 30, 2016 and 2015 Contents Report of Independent Auditors...1 Financial Statements Statements of Financial Position...3 Statements of Activities...4 Statements of Cash Flows...5 Notes to Financial Statements...6 Supplementary Information Report of Independent Auditors on Supplementary Information...15 Details of Statements of Financial Position, June 30, 2016 and Details of Statements of Activities, Years Ended June 30, 2016 and

3 Ernst & Young LLP 155 North Wacker Drive Chicago, IL Tel: Fax: ey.com The Board of Directors Midwestern University Foundation Report of Independent Auditors We have audited the accompanying financial statements of Midwestern University Foundation, which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities and cash flows for the years 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 conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion A member firm of Ernst & Young Global Limited

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Midwestern University Foundation at June 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. October 11, 2016 ey A member firm of Ernst & Young Global Limited

5 Statements of Financial Position Assets Current assets: Cash 378,257 June $ $ 407,231 Student loans receivable current portion 465,120 88,877 Other current assets 36,667 Total current assets 880, ,108 Other assets: Assets limited as to use investments restricted under debt agreements 9,905,300 32,244,824 Student loans receivable, less current portion, less allowances for uncollectible accounts of $136,000 and $35,000 as of June 30, 2016 and 2015, respectively 22,930,226 5,828,499 Other long-term assets 21,263 Total other assets 32,856,789 38,073,323 Total assets $ 33,736,833 $ 38,569,431 Liabilities and net assets Current liabilities: Accrued expenses $ 572,393 $ 437,136 Due to affiliate 777,619 5,341,726 Total current liabilities 1,350,012 5,778,862 Long-term debt, less current portion and less deferred bond issuance cost 27,847,325 27,765,216 Other long-term liabilities 19,670 21,855 Total liabilities 29,217,007 33,565,933 Unrestricted net assets 4,519,826 5,003,498 Total liabilities and net assets $ 33,736,833 $ 38,569,431 See accompanying notes

6 Statements of Activities Year Ended June Revenue Interest income on student loans $ 904,580 $ 85,129 Total revenue 904,580 85,129 Expenses Salaries 21,480 Administrative services 200, ,752 Total expenses 221, ,752 Operating income (loss) 682,976 (24,623) Nonoperating income (loss) Investment return 22,634 7,662 Interest expense (1,258,641) (22,023) Realized loss on termination of interest rate protection agreement (1,335,000) Total nonoperating loss (1,236,007) (1,349,361) Net asset transfer from affiliates 69,359 Decrease in net assets (483,672) (1,373,984) Unrestricted net assets at beginning of year 5,003,498 6,377,482 Unrestricted net assets at end of year $ 4,519,826 $ 5,003,498 See accompanying notes

7 Year Ended June Operating activities Decrease in net assets $ (483,672) $ (1,373,984) Adjustments to reconcile decrease in net assets to net cash used in operating activities: Amortization of bond issuance costs 69,159 Amortization of bond discounts 12,950 Unrealized gain on investments (22,634) Changes in operating assets and liabilities: Increase in other current assets (36,667) Increase in accrued interest on student loans (710,499) (57,277) Increase in allowance for student loans 100,766 35,227 (Increase) decrease in other long-term assets (21,263) 4,981 Increase in due to affiliate 5, ,474 Increase in accrued expenses 135, ,136 (Decrease) increase in other long-term liabilities (2,185) 21,855 Net cash used in operating activities (953,362) (289,588) Investing activities Purchases of investments (32,244,824) Proceeds from sales of investments 22,362,158 Origination of student loans (21,909,452) (1,227,445) Repayment of student loans 471,682 Proceeds from sale of student loans 115,821 Net cash provided by (used in) investing activities 924,388 (33,356,448) Financing activities Proceeds from issuance of long-term debt 30,000,000 Bond issuance discount (234,095) Bond issuance costs (2,000,689) Net cash provided by financing activities 27,765,216 Decrease in cash (28,974) (5,880,820) Cash at beginning of year 407,231 6,288,051 Cash at end of year $ 378,257 $ 407,231 Supplemental information Reclassification of cash flows between investing activities and operating activities for change in due to affiliates resulting from Foundation loans issued $ (4,569,533) $ 4,569,533 See accompanying notes. Midwestern University Foundation Statements of Cash Flows

8 Notes to Financial Statements June 30, Organization Midwestern University Foundation (the Foundation), an Illinois nonprofit corporation originally established in 1994, was organized exclusively for the benefit of Midwestern University (the University), which is the sole member of the Foundation. The Foundation has provided funding for federally guaranteed loans made by the University to its students. In March 2010, federal legislation was enacted that prohibits private sector companies from making new federal student loans after June 30, 2010, effectively eliminating the Federal Family Education Loan (FFEL) Program (and the Purchase and Participation Programs) and redirecting all loans to the Federal Direct Student Loan Program, under which the federal government funds loans directly to eligible students through eligible participating postsecondary education institutions. The University ceased making loans to students under the School as Lender Model in June Thereafter, University students are eligible for federal student loans made directly by the federal government through the Federal Direct Student Loan Program. Historically, at various times throughout the year, the Foundation would sell the loans to a loan purchaser at a premium. The proceeds from these sales were deposited with the trustee for the Foundation Bonds and made available for further loans to the University s students. In exiting the FFEL Program, the 2009A Foundation Bonds were effectively redeemed in June 2010 using the proceeds of the sale of $56,523,000 in student loans to the U.S. Department of Education (DOE) on June 24, 2010, and other funds held in reserve by the bond trustee at that date. In addition, the amount owed to the DOE under the Participation Program was fully paid back using the funds from the sale of $56,472,000 in student loans to the DOE on June 24, In September 2010, the Foundation sold most of the remaining FFEL Program loans to the DOE. On September 3, 2014, the Foundation sold the remaining FFEL student loans at par value for $116,

9 Notes to Financial Statements (continued) 1. Organization (continued) In fiscal year 2014, the Foundation created a new private loan program called the Midwestern University Private Loan Program (MPL Program) that has been and will continue to be funded through the combination of internal equity and the issuance of tax-exempt debt. The MPL Program functions like the FFEL Program loans in some respects (e.g., grace periods, deferment options, and interest capitalization at repayment) and like other private loan programs in other respects (e.g., credit underwriting, cosigners, and fixed interest rates). Unlike loans made under the FFEL Program, loans made under the MPL Program are made by the Foundation directly to students and are not guaranteed by the federal government. Since the inception of the MPL Program, there have been loans awarded in the amount of $23,173,000 and $5,894,000 as of June 30, 2016 and 2015, respectively, which are recorded as loans receivable on the accompanying statements of financial position. The MPL Program student loans are serviced by ECSI, a third-party loan servicer. Foundation Bonds issued to fund the MPL Program are not obligations of the University and are limited obligations of the Foundation, secured by and payable solely and exclusively from the student loans and related revenues and other assets comprising the trust estates created by the Trust Indentures pursuant to which those Bonds have been issued. Assets of the University are not available to creditors of the Foundation, and assets of the Foundation are not available to creditors of the University. The trust indentures for the Foundation Bonds contain numerous restrictions and requirements applicable to the MPL Program and the assets comprising the trust estates. 2. Accounting Policies and Basis of Presentation Basis of Presentation The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Although estimates are considered to be fairly stated at the time the estimates are made, actual results could differ from those estimates

10 Notes to Financial Statements (continued) 2. Accounting Policies and Basis of Presentation (continued) Cash Cash includes money on deposit with a financial institution. Assets Limited as to Use Assets limited as to use include investments held by bond trustees under debt agreements. Investments are measured at fair value in the financial statements. The entire investment portfolio has been designated as trading securities. Accordingly, realized and unrealized gains and losses on investments are included as investment return in nonoperating income on the accompanying statements of activities. The Foundation held assets limited as to use in the amount of $9,905,000 and $32,245,000 at June 30, 2016 and 2015, respectively. The Foundation s assets limited to use are recorded at fair value and are considered Level 1 fair value assets in accordance with the three-level valuation hierarchy established by Accounting Standards Codification Topic (ASC) 820, Fair Value Measurement. All of the Foundation s assets limited as to use are in cash and cash equivalents accounts held for the bond trustee at June 30, Student Loans Student loans are reported at the principal amount outstanding, net of unearned income. Interest income is recognized when earned. Loan origination fees and certain direct origination costs are deferred and amortized over the expected life of the loan and included in other revenue. As of June 30, 2016 and 2015, the outstanding loan balance was $23,395,000 and $5,917,000, respectively, and is included on the accompanying statements of financial position. For the years ended June 30, 2016 and 2015, interest income was $905,000 and $85,000, respectively, and is included on the accompanying statements of activities. In estimating expected losses, the Foundation evaluates loans for impairment in accordance with ASC 310, Receivables. A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due pursuant to the contractual terms of the loan. Impaired loans include loans with principal and/or interest at risk, even if the loan is current with all payments of principal and interest. Impairment is measured by

11 Notes to Financial Statements (continued) 2. Accounting Policies and Basis of Presentation (continued) estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the fair value of the underlying collateral less costs to sell. If the estimated fair value of the loan is less than the recorded book value, a valuation allowance is established as a component of the allowance for loan losses. For restructured loans in which impairment is calculated by the present value of future cash flows, the Foundation records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. Management reviews for potential credit quality deterioration and evidence for loan impairment on an annual basis for student loans. Allowances for doubtful accounts are established based on prior collection experience of University institutional loans and current economic factors that, in management s judgment, could influence the ability of loan recipients to repay the amounts per the loan terms. Loan balances are written off only when they are deemed to be permanently uncollectible. An allowance for impaired loans was recorded in the amount of $136,000 and $35,000 as of June 30, 2016 and 2015, respectively. There are no Foundation loans specifically identified as impaired as the balance of past-due loans was $0 at June 30, 2016 and 2015; rather, the loan allowance is an estimate based on historical default rates of other University loan programs. University students are eligible to apply for a Foundation loan only if they meet certain financial criteria, including, but not limited to, having a Fair Isaac Corporation score of at least 700, unless an eligible cosigner meets the financial criteria. Interest Rate Protection Agreements The Foundation uses derivative instruments to enhance interest rate sensitive asset-liability management and not for speculative or any purposes other than risk management. ASC 815, Derivatives and Hedging, requires that all derivatives be recorded at their current fair value on the statements of financial position. Certain derivative transactions that meet specified criteria qualify for hedge accounting under ASC 815 if designated as such. The Foundation has not designated (and is not required to designate) the use of hedge accounting for any of its derivative transactions; therefore, gains and losses resulting from changes in market interest rates are reported as nonoperating income (loss) on the statements of activities. Reported net assets may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but there will be no direct effect on

12 Notes to Financial Statements (continued) 2. Accounting Policies and Basis of Presentation (continued) cash flows resulting from changes in the fair value of derivative instruments. The fair value of interest rate protection agreements was estimated by the counterparty in the transaction and verified by an independent third party. The Foundation also uses, at times, derivative instruments to hedge the interest payable on bonds that might be issued at a future date in order to reflect thencurrent market conditions. These are discussed further in Note 5. Net Assets All of the Foundation s net assets are unrestricted. There are no net assets that are either temporarily or permanently restricted by donors. All operating expenses relate to operating the student loan program. Revenue Revenue represents interest income on student loans, which is recorded in operating income on the accompanying statements of activities. Revenue also represents interest earned on cash and assets limited as to use, which is recorded in nonoperating income on the accompanying statements of activities. Revenue is recognized when earned. Net Asset Transfer From Obligated Group The University has agreed to assume certain expenses incurred by the Foundation as it relates to administering the MPL Program, such as loan origination fees, loan servicing fees, and trustee fees. These expenses are incurred by the Foundation and shown as operating expenses on the accompanying statements of activities; however, the Foundation will not be required to reimburse the University for the expenses. Therefore, the Foundation s due to affiliates is reduced by these expenses, with an offsetting increase in net asset transfer from the University on the statements of activities. The net asset transfer from the Obligated Group to the Foundation was $69,000 and $0 for the fiscal years ended 2016 and 2015, respectively. Income Tax Status The Foundation is a not-for-profit corporation and is exempt from federal income taxes on related income under Section 501(c)(3) of the Internal Revenue Code

13 Notes to Financial Statements (continued) 2. Accounting Policies and Basis of Presentation (continued) Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued guidance related to recognizing revenue from contracts with customers. This new guidance dictates that the standard be applied either retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the revenue recognition standard recognized as of the date of initial application. In August 2015, the FASB agreed to extend the effective date whereby the new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, The Foundation is evaluating the effect this guidance will have on its financial statements. In April 2015, the FASB issued Accounting Standards Update No. (ASU) , Interest Imputation of Interest (Subtopic ): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs. This ASU requires that debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The guidance is effective for fiscal years beginning after December 15, Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. The Foundation early adopted this new standard in fiscal year In August 2016, the FASB issued guidance that changes certain financial statement requirements for not-for-profit (NFP) entities. NFPs will no longer be required to distinguish between resources with temporary and permanent restrictions on the face of their financial statements, meaning they will present two classes of net assets (with donor restrictions and without donor restrictions) instead of three classes. The guidance also will change how NFPs report certain expenses and provide information about their available resources and liquidity. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. The Foundation is evaluating the effect this guidance will have on its financial statements. Reclassifications Certain reclassifications were made to the 2015 financial statements to conform to the classifications used in The reclassifications had no effect on increase in net assets or net assets as previously reported. The debt issuance costs in 2015 of $2,001,000 were reclassified from deferred bond issuance costs, less amortization to long-term debt, less current portion on the statements of financial position

14 Notes to Financial Statements (continued) 3. Related-Party Transactions The Foundation has intercompany transfers between itself and the University. The University makes certain expenditures on behalf of the Foundation. These transactions include, but are not limited to, loans issued to students; payments made to loan servicers; and audit, legal, and consulting services. During the years ended June 30, 2016 and 2015, the University paid net $0 and $4,446,000, respectively, in loans issued to students on behalf of the Foundation. Also, during the years ended June 30, 2016 and 2015, the University paid $109,000 and $110,000, respectively, in expenses on behalf of the Foundation. The amounts designated as due from and due to affiliates on the statements of financial position at June 30, 2016 and 2015, represent the remaining balance owed from and owed to the University for payment of these expenditures. 4. Long-Term Debt In June 2015, the Foundation issued $15,000,000 in The Industrial Development Authority of the City of Glendale, Arizona, Graduate and Professional Student Loan Program Revenue Bonds, Senior Series 2015A ($13,000,000), interest at 2.20% to 4.25%, due in annual installments in amounts ranging from $700,000 in 2019 to $800,000 in 2031, and Subordinate Series 2015 B ($2,000,000), interest at 5.00%, due in Also in June 2015, the Foundation issued $15,000,000 in Illinois Finance Authority Graduate and Professional Student Loan Program Revenue Bonds, Senior Series 2015A ($13,000,000), interest at 2.350% to 4.375%, due in annual installments in amounts ranging from $700,000 in 2019 to $800,000 in 2031, and Subordinate Series 2015 B ($2,000,000), interest at 4.750%, due in The proceeds from the sale of these bonds (collectively, the Series 2015 Bonds), together with other available funds, were or will be used to (i) finance student loans to be made, or made, by the Foundation to certain qualified graduate and professional students attending the University; (ii) fund a capitalized interest fund; (iii) fund a debt service reserve fund; (iv) fund a trustee contingency fund; and (v) pay the costs of issuing the bonds

15 Notes to Financial Statements (continued) 4. Long-Term Debt (continued) The total carrying value of long-term debt is $27,847,000 at June 30, 2016, which consists of $30,000,000 of gross outstanding principal from the Series 2015 Bonds, less $2,153,000 of unamortized deferred bond issue costs and bond discounts/premiums. The total carrying value of long-term debt was $27,765,000 at June 30, 2015, which consisted of $30,000,000 of gross outstanding principal from the Series 2015 Bonds, less $2,235,000 of unamortized deferred bond issue costs and bond discounts/premiums. Interest expense incurred during fiscal years 2016 and 2015 was $1,259,000 and $22,000, respectively. Interest paid in fiscal years 2016 and 2015 was $588,000 and $0, respectively. Maturities of long-term debt for the next five fiscal years are as follows: 2017 $0, 2018 $0, 2019 $0, 2020 $1,400,000, and 2021 $1,800,000. The valuation for the estimated fair value of the Foundation s long-term debt is completed by a third-party service and is primarily driven by the Municipal Market Data (MMD) index and current market credit spreads against the MMD index. MMD is an index that is updated daily and reflects current borrowing rates in the tax-exempt bond market. A number of factors including, but not limited to, any one or more of the following variables affect MMD and credit spreads against MMD: (i) general interest rate and market conditions; (ii) macroeconomic environment; (iii) underlying credit ratings on the Foundation s outstanding debt; (iv) investor opinions about the Foundation and its outstanding debt; (v) if applicable, third-party credit enhancement provided on the Foundation s debt; and (vi) trades for comparable or similarly rated securities in the secondary market. Based on the inputs in determining the estimated fair value of the debt of the Foundation, this liability would be considered Level 2. The estimated fair value of long-term debt based on current market conditions was $33,091,000 and $29,988,000 at June 30, 2016 and 2015, respectively

16 Notes to Financial Statements (continued) 5. Derivatives Interest Rate Protection Agreements In November 2014, the Foundation entered into an interest rate swap transaction (the Swap) whereby it paid a fixed rate of 2.424% and received from a counterparty a floating rate based on the USD-SIFMA Municipal Swap Index on a notional amount of $30,000,000 over a 20-year term. The effective date for this transaction was June 1, 2015, and the termination date was July 1, 2035, with a possible early termination date of June 1, The purpose of the Swap was to act as a rate lock or interest rate hedge in anticipation of the Foundation issuing the Series 2015 Bonds on or before June 1, The Swap was structured to match the anticipated structure of the Series 2015 Bonds. The Swap was integrated with the Series 2015 Bonds so that any termination payment under the Swap would be included in determining the Series 2015 Bonds yield for federal income tax purposes, thereby enabling the Foundation to maintain an economic spread of 2% between the estimated yield on the bonds (4%) and the goal of originating student loans with bond proceeds at 6%. The contract was voluntarily terminated, prior to its stated termination date (July 1, 2035) by agreement of the parties, on June 18, As a result of the termination of the Swap, the Foundation recognized a realized loss on termination of interest rate protection agreement of $1,335,000 on the accompanying statement of activities. 6. Functional Expenses Expenses totaling $1,480,000 and $132,000 for the Foundation for the years ended June 30, 2016 and 2015, respectively, relate entirely to the student loan program. 7. Subsequent Events The Foundation evaluated events and transactions occurring subsequent to June 30, 2016 through October 11, 2016, the date of issuance of the accompanying financial statements. During this period, there were no subsequent events requiring recognition or disclosure in the accompanying financial statements

17 Supplementary Information

18 Ernst & Young LLP 155 North Wacker Drive Chicago, IL Tel: Fax: ey.com Report of Independent Auditors on Supplementary Information The Board of Directors Midwestern University Foundation Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The details of the statements of financial position and the statements of activities are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. October 11, 2016 ey A member firm of Ernst & Young Global Limited

19 Details of Statement of Financial Position June 30, 2016 Trust Non-Trust Consolidated Assets Current assets: Cash and cash equivalents $ $ 378,257 $ 378,257 Student loans receivable current portion 465, ,120 Other current assets 36,667 36,667 Total current assets 465, , ,044 Other assets: Assets limited as to use investments restricted under debt agreements 9,655, ,000 9,905,300 Student loans receivable, less current portion, less allowances for uncollectible accounts of $136,000 as of June 30, ,066,219 (135,993) 22,930,226 Other long-term assets 21,263 21,263 Total other assets 32,721, ,270 32,856,789 Total assets $ 33,186,639 $ 550,194 $ 33,736,833 Liabilities and net assets Current liabilities: Accrued expenses $ 566,313 $ 6,080 $ 572,393 Due to affiliate 777, ,619 Total current liabilities 566, ,699 1,350,012 Long-term debt, less current portion and less deferred bond issuance cost 30,000,000 (2,152,675) 27,847,325 Other long-term liabilities 19,670 19,670 Total liabilities 30,566,313 (1,349,306) 29,217,007 Unrestricted net assets 2,620,326 1,899,500 4,519,826 Total liabilities and net assets $ 33,186,639 $ 550,194 $ 33,736,

20 Details of Statement of Financial Position June 30, 2015 Trust Non-Trust Consolidated Assets Current assets: Cash and cash equivalents $ $ 407,231 $ 407,231 Student loans receivable current portion 88,877 88,877 Total current assets 88, , ,108 Other assets: Assets limited as to use investments restricted under debt agreements 31,994, ,000 32,244,824 Student loans receivable, less current portion, less allowances for uncollectible accounts of $35,000 as of June 30, ,863,726 (35,227) 5,828,499 Total other assets 37,858, ,773 38,073,323 Total assets $ 37,947,427 $ 622,004 $ 38,569,431 Liabilities and net assets Current liabilities: Accrued expenses $ 22,023 $ 415,113 $ 437,136 Due to affiliate 5,099, ,059 5,341,726 Total current liabilities 5,121, ,172 5,778,862 Long-term debt, less current portion and less deferred bond issuance cost 30,000,000 (2,234,784) 27,765,216 Other long-term liabilities 21,855 21,855 Total liabilities 35,121,690 (1,555,757) 33,565,933 Unrestricted net assets 2,825,737 2,177,761 5,003,498 Total liabilities and net assets $ 37,947,427 $ 622,004 $ 38,569,

21 Details of Statement of Activities Year Ended June 30, 2016 Trust Non-Trust Consolidated Revenue Interest income on student loans $ 904,580 $ $ 904,580 Total revenue 904, ,580 Expenses Salaries 21,480 21,480 Administrative services 200, ,124 Total expenses 221, ,604 Operating income (loss) 904,580 (221,604) 682,976 Nonoperating income (loss) Investment return 22,634 22,634 Interest expense (1,132,625) (126,016) (1,258,641) Total nonoperating loss (1,109,991) (126,016) (1,236,007) Net asset transfer from affiliates 69,359 69,359 Decrease in net assets (205,411) (278,261) (483,672) Unrestricted net assets at beginning of year 2,825,737 2,177,761 5,003,498 Unrestricted net assets at end of year $ 2,620,326 $ 1,899,500 $ 4,519,

22 Details of Statement of Activities Year Ended June 30, 2015 Trust Non-Trust Consolidated Revenue Interest income on student loans $ 85,129 $ $ 85,129 Total revenue 85,129 85,129 Expenses Administrative services 1, , ,752 Total expenses 1, , ,752 Operating income (loss) 83,741 (108,364) (24,623) Nonoperating income (loss) Investment return 7,662 7,662 Interest expense (22,023) (22,023) Realized loss on termination of interest rate protection agreement (1,335,000) (1,335,000) Total nonoperating loss (1,349,361) (1,349,361) Decrease in net assets (1,265,620) (108,364) (1,373,984) Unrestricted net assets at beginning of year 4,091,357 2,286,125 6,377,482 Unrestricted net assets at end of year $ 2,825,737 $ 2,177,761 $ 5,003,

23 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young LLP. All Rights Reserved. ey.com

24 Loan Program 2015 Arizona Bond Indenture Loan Portfolio & Trust Monitoring Report Issuer: Deal Name: Bond As Of Date: Portfolio As Of Date: Beginning Date: Contact Name: Contact Number: Contact Website: The Industrial Development Authority of the City of Glendale, Arizona (Issuer) $15,000,000 Midwestern University Foundation (Borrower), Graduate & Professional Student Loan Revenue Bonds, Senior Series 2015A and Subordinate Series 2015B 7/31/2016 7/31/2016 5/1/2016 Greg O'Coyne (623) / (630) gocoyn@midwestern.edu Bonds Bonds and Investment Accounts Series CUSIP Rate Original Bal. Beg Balance Interest Accrual Principal Paid End Princ Bal ª % of Securities Maturity Senior Series 2015 A HH % 700, ,000 3, , % 7/1/2019 Senior Series 2015 A HJ % 900, ,000 5, , % 7/1/2020 Senior Series 2015 A HK % 900, ,000 6, , % 7/1/2021 Senior Series 2015 A HL % 900, ,000 6, , % 7/1/2022 Senior Series 2015 A HM % 1,000,000 1,000,000 8,125-1,000, % 7/1/2023 Senior Series 2015 A HN % 1,000,000 1,000,000 8,750-1,000, % 7/1/2024 Senior Series 2015 A HP % 1,200,000 1,200,000 10,875-1,200, % 7/1/2025 Senior Series 2015 A HQ % 1,200,000 1,200,000 11,250-1,200, % 7/1/2026 Senior Series 2015 A HR % 1,200,000 1,200,000 12,000-1,200, % 7/1/2027 Senior Series 2015 A HS % 1,200,000 1,200,000 12,000-1,200, % 7/1/2028 Senior Series 2015 A HT % 1,100,000 1,100,000 11,344-1,100, % 7/1/2029 Senior Series 2015 A HU % 900, ,000 9, , % 7/1/2030 Senior Series 2015 A HV % 800, ,000 8, , % 7/1/2031 Subordinate Series 2015 B HW % 2,000,000 2,000,000 25,000-2,000, % 7/1/2033 Total 15,000,000 15,000, ,988-15,000, % (a) Should include Principal Pmts in the current distribution month Funds and Accounts Acquisition Fund ($) Capitalized Interest Account ($) Reserve Account ($) Pledged Revenue Account ($) Interest Fund Account ($) Beginning Balance 3,610,802 Capitalized Interest Account (beginning) 1,096,278 Reserve Account (beginning) 300,170 Pledged Revenue Account (beginning) 35,526 Interest Fund Account (beginning) 186,050 Less loans originated (821,821) Less releases - Less releases - Plus principal and interest payments 81,126 Plus amounts transferred from other accounts 126,777 Less amounts transferred to other accounts (2,440) Less draws (7,557) Less draws - Less draws (116,701) Less interest payments (279,975) Plus investment earnings 2,440 Plus investment earnings 695 Plus investment earnings 191 Plus investment earnings 48 Plus investment earnings 109 Ending Balance 2,788,981 Capitalized Interest Account (ending) 1,089,417 Reserve Account (ending) 300,361 Pledged Revenue Account (ending) (0) Interest Fund Account (ending) 32,961 Capitalized Interest Account Requirement - Reserve Account Requirement 300,000 Pledged Revenue Account Requirement - Interest Fund Account Requirement - Total Accounts Balances (includes above accounts) 4,211,720 Bond Indenture Parity Calculation Beg Balance Activity End Balance Assets Loans Receivable (including accrued interest) 11,219, ,711 12,186,239 Student Loan Fund 3,610,802 (821,821) 2,788,981 Capitalized Interest Account 1,096,278 (6,861) 1,089,417 Reserve Account 300, ,361 Pledged Revenue Fund 35,526 (35,526) - Interest Fund 186,050 (153,089) 32,961 Other Assets 29,902 (1,603) 28,300 Total Assets 16,478,257 (51,999) 16,426,258 Liabilities Payable to MWU for loans issued Senior Bonds Payable 13,000,000-13,000,000 Accrued Interest on Senior Bonds 153,317 (114,989) 38,329 Subordinate Bonds Payable 2,000,000-2,000,000 Accrued Interest on Subordinate Bonds 33,334 (25,000) 8,334 Accrued fees and expenses Other indenture liabilities Total Liabilities 15,186,651 (139,989) 15,046,663 Equity 1,291,606 87,990 1,379,595 Senior Parity % % % Total Parity % % %

25 Loan Program 2015 Arizona Bond Indenture Loan Portfolio & Trust Monitoring Report Issuer: Portfolio Statistics Portfolio Summary Beg Balance Activity End Balance Principal Balance $ 10,910,422 $ 822,927 $ 11,733,349 Principal Balance (cosigned borrowers) 2,117, ,298 2,241,624 Principal Balance (non-cosigned borrowers) 8,793, ,629 9,491,724 Accrued Interest to be Capitalized $ 309,107 $ 143,783 $ 452,890 Weighted Average Coupon (WAC) 5.98% 0.00% 5.98% Weghted Average Maturity (WAM) (0.13) Number of Loans Number of Borrowers Average Borrower Indebtedness $ 36,490 $ (1,360) $ 35,130 Weighted Average FICO Score Weighted Average FICO Score (cosigned borrowers) Weighted Average FICO Score (non-cosigned borrowers) Weighted Average Months in Status Voluntary Student Loan Prepayments Principal W.A. Mos W.A. Mos $ Amount % of Total Amount 1 % of Total until Rep'mt Rem Repay Original Principal Balance 1 $ 12,546,261 N/A In School $ 9,692, % Current Period Prepayments 33, % Grace 1,661, % Prior Prepayments 320, % Residency Deferment Cumulative Prepayments $ 354, % Other Deferment 121, % (1) Includes interest to be capitalized Forbearance 26, % Subtotal Non-Repay $ 11,502, % W.A. W.A. Mos Pmts Made Rem Repay Repayment 683, % Total Loans $ 12,186, % Weighted Average (1) Includes interest to be capitalized Portfolio by Loan Status # of Loans Balance (inc Accrued Interest) % of Balance WAC (%) 1 WARM (Mos.) 2 Beginning Ending Beginning Ending Beginning Ending Beginning Ending Beginning Ending In School: Deferred interest $ 8,272,909 $ 7,627, % 62.59% 6.00% 6.00% Interest only , , % 5.19% 5.98% 6.00% Principal + interest ,562,649 1,432, % 11.76% 5.99% 5.97% Subtotal In School $ 10,368,409 $ 9,692, % 79.54% 6.00% 5.99% Transition: Deferred interest 3 43 $ 63,450 $ 1,437, % 11.80% 6.00% 5.96% Interest only , % % Principal + interest , % % Subtotal Transition 3 51 $ 63,450 $ 1,661, % 13.63% 6.00% 5.97% Repayment: Current $ 706,257 $ 683, % 5.61% 5.80% 5.81% Days Delinquent % % Days Delinquent Days Delinqent Days Delinquent Subtotal Repayment $ 706,257 $ 683, % 5.61% 5.80% 5.81% Deferment: Residency / post-graduate enrollment - - $ - $ Unemployment / economic hardship , , % 1.00% 6.00% 6.00% Military Subtotal Deferment 2 5 $ 54,933 $ 121, % 1.00% 6.00% 6.00% Forbearance: Internship / residency - - $ - $ Economic hardship ,479 26, % 5.80% 5.75% Military Subtotal Forbearance 1 1 $ 26,479 $ 26, % % Default: Referred to Collections In Rehabiliation Written Off Subtotal Default - - $ - $ Total Portfolio $ 11,219,528 $ 12,186, % % 5.98% 5.98% (1) Weighted Average Coupon (i.e., stated borrower interest rate) on student loans. (2) Weighted average remaining maturity of student loans, stated in months.

26 Loan Program 2015 Arizona Bond Indenture Loan Portfolio & Trust Monitoring Report Issuer: Repayment Plan Type (Repayment Loans Only) # of Loans Balance (inc Accrued Interest) % of Balance WAC (%) 1 WARM (Mos.) 2 Beginning Ending Beginning Ending Beginning Ending Beginning Ending Beginning Ending Standard Repayment Plan (10 yrs.) $ 706,257 $ 683, % 5.61% 5.80% 5.81% Graduated Repayment Plan (10 Yrs.) Extended Repayment Plan (15 yrs.) Total Repayment Portoflio $ 706,257 $ 683, % 5.61% 5.80% 5.81% (1) Weighted Average Coupon (i.e., stated borrower interest rate) on student loans. (2) Weighted average remaining maturity of student loans, stated in months. Portfolio by Program Type # of Loans Balance (inc Accrued Interest) % of Balance WAC (%) 1 WARM (Mos.) 2 Beginning Ending Beginning Ending Beginning Ending Beginning Ending Beginning Ending Pharmacy $ 1,295,370 $ 1,348, % 11.07% 6.00% 5.98% Dental Medicine ,764,307 1,962, % 16.10% 6.00% 5.99% Physician Assistant Studies ,436,222 3,761, % 30.87% 5.95% 5.97% Physical Therapy ,655,563 1,709, % 14.03% 6.00% 5.99% Occupational Therapy , , % 6.32% 6.00% 6.00% Clinical Psychology ,105 28, % 0.24% 6.00% 6.00% Optometry , , % 1.86% 5.90% 5.93% Cardiovascular Science/Perfusion , , % 6.58% 6.00% 6.00% Nurse Anesthesia ,120,804 1,360, % 11.17% 6.00% 6.00% Podiatric Medicine , , % 1.77% 6.00% 5.97% Speech-Language Pathology Total Balance $ 11,219,528 $ 12,186, % % 5.98% 5.98% (1) Weighted Average Coupon (i.e., stated borrower interest rate) on student loans after taking into account ACH rate reduction (2) Weighted average remaining maturity of student loans, stated in months. Portfolio Indices Channel $ % Balance % of Total School $ 11,733, % Beginning Ending Beginning Ending DTC Fixed Rate Loans $ 10,910,422 $ 11,733, % % Total $ 11,733, % Variable Rate Loans (1) Direct-to-Consumer Total Pool Balance $ 10,910,422 $ 11,733, % % Distribution by FICO Credit Scores 1 # of Loans Balance % of Balance Beginning Ending Beginning Ending Beginning Ending Non-Cosigned 700 to $ 750,124 $ 875, % 7.19% ,120,511 1,148, % 9.42% ,041,304 2,150, % 17.65% ,936,908 2,104, % 17.27% ,313,083 2,561, % 21.02% , , % 7.03% 820 and above , , % 1.36% Non-Cosigned Subtotal $ 9,047,076 $ 9,865, % 80.95% Cosigned 700 to $ 145,427 $ 156, % 1.28% ,120 66, % 0.55% , , % 0.96% , , % 2.36% , , % 2.59% , , % 4.71% 820 and above , , % 6.59% Cosigned Subtotal $ 2,172,452 $ 2,321, % 19.05% Total Balance $ 11,219,528 $ 12,186, % % (1) FICO score is at the point of loan origination, provided by CampusDoor Inc. Collateral Pool Characteristics Amount ($) Cumulative Default Rate 7/31/2016 Original portfolio balance at inception $ 3,324,966 Cumulative original portfolio balance acquired through new originations 8,724,942 Current Period's Defaults ($) - Cumulative original portfolio balance acquired through additional bond issuance - Cumulative Defaults ($) - Cumulative accrued interest to be capitalized 452,890 Cumulative Default (% of original pool balance) ª 0.00% Cumulative Interest Capitalized on above loans 43,462 Cumulative Default (% of cumulative Entered Repayment balance) ª 0.00% Ending Original Pool Balance $ 12,546,261 Current period payments (recoveries) ($) - Current period borrower recoveries ($) - Cumulative Entered Repayment Balance Amount ($) Cumulative Recoveries ($) - Current amount in repayment ($) $ 683,535 Cumulative Recovery Rate (%) 0.00% Cumulative Principal Collections (Scheduled and Voluntary) ($) 120,291 Cumulative Net Loss Rate (%) 0.00% Cumulative Defaults ($) - Total $ 803,826 (a) Including loans originated through prefunding and recycling (b) Footnotes

27 Loan Program 2015 Illinois Bond Indenture Loan Portfolio & Trust Monitoring Report Issuer: Deal Name: Bond As Of Date: Portfolio As Of Date: Beginning Date: Contact Name: Contact Number: Contact Website: Illinois Finance Authority (Issuer) $15,000,000 Midwestern University Foundation (Borrower), Graduate & Professional Student Loan Revenue Bonds, Senior Series 2015A and Subordinate Series 2015B 7/31/2016 7/31/2016 5/1/2016 Greg O'Coyne (623) / (630) gocoyn@midwestern.edu Bonds Bonds and Investment Accounts Series CUSIP Rate Original Bal. Beg Balance Interest Accrual Principal Paid End Princ Bal ª % of Securities Maturity Senior Series 2015 A 45203H 2C % 700, ,000 4, , % 7/1/2019 Senior Series 2015 A 45203H 2D % 900, ,000 5, , % 7/1/2020 Senior Series 2015 A 45203H 2E % 900, ,000 6, , % 7/1/2021 Senior Series 2015 A 45203H 2F % 900, ,000 7, , % 7/1/2022 Senior Series 2015 A 45203H 2G % 1,000,000 1,000,000 8,500-1,000, % 7/1/2023 Senior Series 2015 A 45203H 2H % 1,000,000 1,000,000 9,125-1,000, % 7/1/2024 Senior Series 2015 A 45203H 2J % 1,200,000 1,200,000 11,250-1,200, % 7/1/2025 Senior Series 2015 A 45203H 2K % 1,200,000 1,200,000 12,000-1,200, % 7/1/2026 Senior Series 2015 A 45203H 2L % 1,200,000 1,200,000 12,375-1,200, % 7/1/2027 Senior Series 2015 A 45203H 2M % 1,200,000 1,200,000 12,375-1,200, % 7/1/2028 Senior Series 2015 A 45203H 2N % 1,100,000 1,100,000 11,344-1,100, % 7/1/2029 Senior Series 2015 A 45203H 2P % 900, ,000 9, , % 7/1/2030 Senior Series 2015 A 45203H 2Q % 800, ,000 8, , % 7/1/2031 Subordinate Series 2015 B 45203H 2R % 2,000,000 2,000,000 23,750-2,000, % 7/1/2033 Total 15,000,000 15,000, ,169-15,000, % (a) Should include Principal Pmts in the current distribution month (b) Footnotes Funds and Accounts Acquisition Fund ($) Capitalized Interest Account ($) Reserve Account ($) Pledged Revenue Account ($) Interest Fund Account ($) Beginning Balance 4,806,790 Capitalized Interest Account (beginning) 1,017,771 Reserve Account (beginning) 300,170 Pledged Revenue Account (beginning) 1,533 Interest Fund Account (beginning) 144,619 Less loans originated (1,121,771) Less releases - Less releases - Plus principal and interest payments 91,681 Plus amounts transferred from other accounts 189,355 Less amounts transferred to other accounts (3,011) Less draws (106,257) Less draws - Less draws (79,999) Less interest payments (286,338) Plus investment earnings 3,011 Plus investment earnings 646 Plus investment earnings 191 Plus investment earnings 17 Plus investment earnings 86 Ending Balance 3,685,019 Capitalized Interest Account (ending) 912,160 Reserve Account (ending) 300,361 Pledged Revenue Account (ending) 13,232 Interest Fund Account (ending) 47,723 Capitalized Interest Account Requirement - Reserve Account Requirement 300,000 Pledged Revenue Account Requirement - Interest Fund Account Requirement - ($) Total Accounts Balances (includes above accounts) 4,958,495 (a) footnotes Bond Indenture Parity Calculation Beg Balance Activity End Balance Assets Loans Receivable (including accrued interest) 10,144,804 1,221,799 11,366,603 Student Loan Fund 4,806,790 (1,121,771) 3,685,019 Capitalized Interest Account 1,017,771 (105,612) 912,160 Reserve Account 300, ,361 Pledged Revenue Fund 1,533 11,699 13,232 Interest Fund 144,619 (96,896) 47,723 Other Assets 15,532 (1,101) 14,431 Total Assets 16,431,220 (91,692) 16,339,529 Liabilities Payable to MWU for loans issued - 26,591 26,591 Senior Bonds Payable 13,000,000-13,000,000 Accrued Interest on Senior Bonds 159,225 (119,419) 39,806 Subordinate Bonds Payable 2,000,000-2,000,000 Accrued Interest on Subordinate Bonds 31,667 (23,750) 7,917 Accrued fees and expenses Other indenture liabilities Total Liabilities 15,190,892 (116,578) 15,074,314 Equity 1,240,329 24,886 1,265,215 (a) Footnotes Senior Parity % % % Total Parity % % %