Swarthmore College Revenue Bonds, Series of 2015

OFFICIAL STATEMENT DATED JULY 14, 2015 NEW ISSUE — BOOK-ENTRY ONLY Ratings: Moody’s: “Aaa” S&P: “AAA” (See “RATINGS” herein) In the opinion of Bond Counsel, interest on the 2015 Bonds is not includable in gross income for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions, subject to the condition described in “TAX MATTERS” herein, and interest on the 2015 Bonds is not treated as an item of tax preference under Section 57 of the Internal Revenue Code of 1986, as amended (the “Code”) for purposes of the individual and corporate alternative minimum taxes. However, under the Code, such interest may be subject to certain other taxes affecting corporate holders of the 2015 Bonds. Under the laws of the Commonwealth of Pennsylvania, the 2015 Bonds are exempt from personal property taxes in Pennsylvania, and interest on the 2015 Bonds is exempt from Pennsylvania personal income tax and the Pennsylvania corporate net income tax. For a more complete discussion, see “TAX MATTERS” herein.

$54,940,000 SWARTHMORE BOROUGH AUTHORITY Swarthmore College Revenue Bonds, Series of 2015

Dated: Date of Delivery Due: September 15, as shown on inside front cover The $54,940,000 Swarthmore College Revenue Bonds, Series of 2015 (the “2015 Bonds”) of the Swarthmore Borough Authority (the “Authority”) are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York. Purchases of the 2015 Bonds will be made in book-entry form only and purchasers will not receive certificates representing their beneficial ownership interests in the 2015 Bonds. Registered owners means Cede & Co., and not the beneficial owners of the 2015 Bonds. The payment of the principal of and premium, if any, and interest on the 2015 Bonds will be made by The Bank of New York Mellon Trust Company, N.A., Philadelphia, Pennsylvania, as trustee (the “Trustee”), directly to Cede & Co. (as nominee for DTC) as registered owner of the 2015 Bonds, to be subsequently disbursed to DTC Participants and thereafter to beneficial owners of the 2015 Bonds, all as described herein. See “THE 2015 BONDS – Book-Entry Only System.”

Interest on the 2015 Bonds is payable on each March 15 and September 15, commencing March 15, 2016.

The 2015 Bonds are subject to redemption prior to maturity as set forth herein. See “THE 2015 BONDS – Redemption.”

The 2015 Bonds are being issued pursuant to the Pennsylvania Municipality Authorities Act and a Trust Indenture dated as of July 1, 2015 (the “Indenture”), between the Authority and the Trustee. The 2015 Bonds are limited obligations of the Authority payable solely from payments to be made by

Swarthmore College

under a Loan and Security Agreement dated as of July 1, 2015 (the “Loan Agreement”), between the Authority and Swarthmore College (the “College”) and certain moneys held by the Trustee under the Indenture. See “SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS.”

The proceeds from the sale of the 2015 Bonds will be used to provide funds to finance certain costs of a project (the “2015 Project”) consisting generally of: the payment of, or reimbursement to the College for (1) the design, purchase, construction, renovation and equipping of new facilities, including, a new science center, dining facilities, a dormitory, the renovation of Clothier Memorial Hall, a parking lot and pedestrian crossing on Chester Road, various office migrations and swing space needs, utility upgrades, sustainability improvements and the regular ongoing renovation, refurbishment and renewal of existing College facilities, together with all planning, consulting, architectural, engineering and site work related thereto; and (2) payment of costs of issuance of the 2015 Bonds.

The 2015 Bonds are limited obligations of the Authority, payable solely from Revenues pledged to the Authority by the College and other amounts maintained under the Indenture that comprise the Trust Estate. Neither the general credit of the Authority, nor the credit of any member, officer or employee, past, present or future, of the Authority or of any successor body, either directly or through the Authority or any such successor body, nor the credit nor the taxing power of the Borough of Swarthmore (the “Borough”) or of the Commonwealth of Pennsylvania (the “Commonwealth”) or of any other political subdivision, agency or instrumentality thereof is pledged for the payment of the principal of, redemption premium, if any, or interest on the 2015 Bonds, nor shall the 2015 Bonds be or be deemed to be obligations of the Borough or of the Commonwealth or any other political subdivision, agency or instrumentality thereof, nor shall the Borough, the Commonwealth or any political subdivision, agency or instrumentality thereof be liable for the payment of the principal of, redemption premium, if any, or interest on the 2015 Bonds, nor shall any member of the Authority or any member of a successor body be personally responsible for payment of the principal of, redemption premium, if any, or interest on the 2015 Bonds. The Authority has no taxing power.

MATURITY DATES, AMOUNTS, INTEREST RATES, YIELDS, PRICES AND CUSIPS (See Inside Front Cover)

This cover page contains limited information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.

The 2015 Bonds are offered when, as and if issued by the Authority and received by the Underwriter subject to the approving legal opinion of Saul Ewing LLP, Bond Counsel, Philadelphia, Pennsylvania. Certain legal matters will be passed upon for the College by its Counsel, Dilworth Paxson LLP, Philadelphia, Pennsylvania. Certain legal matters will be passed upon for the Authority by its Counsel, Law Office of Steven A. Goldfield, Esquire, Media, Pennsylvania. It is expected that the 2015 Bonds will be available through the facilities of The Depository Trust Company for delivery in New York, New York, on or about July 30, 2015.

MATURITY DATES, AMOUNTS, INTEREST RATES, YIELD, PRICES AND CUSIPS

$54,940,000 Swarthmore Borough Authority Swarthmore College Revenue Bonds, Series of 2015

Serial Bonds

Maturity Date Principal CUSIP* (September 15) Amount Interest Rate Yield Price (870000)

09/15/2016 870,000 4.000% 0.400% 104.036 JH0 09/15/2017 905,000 4.000% 0.690% 106.969 JJ6 09/15/2018 940,000 4.000% 0.980% 109.271 JK3 09/15/2019 980,000 4.000% 1.180% 111.320 JL1 09/15/2020 1,020,000 4.000% 1.440% 112.602 JM9 09/15/2021 1,065,000 5.000% 1.720% 118.988 JN7 09/15/2022 1,120,000 5.000% 2.040% 119.534 JP2 09/15/2023 1,175,000 5.000% 2.200% 120.726 JQ0 09/15/2024 1,235,000 5.000% 2.360% 121.556 JR8 09/15/2025 1,300,000 5.000% 2.500% 122.238 JS6 09/15/2026** 1,365,000 5.000% 2.650% 120.746 JT4 09/15/2027** 1,435,000 5.000% 2.750% 119.763 JU1 09/15/2028** 1,510,000 5.000% 2.830% 118.984 JV9 09/15/2029** 1,590,000 5.000% 2.900% 118.307 JW7 09/15/2030** 1,670,000 5.000% 2.970% 117.635 JX5 09/15/2031** 1,755,000 5.000% 3.030% 117.063 JY3 09/15/2032** 1,845,000 5.000% 3.080% 116.588 JZ0 09/15/2033** 1,940,000 5.000% 3.120% 116.210 KA3 09/15/2034** 2,040,000 5.000% 3.160% 115.834 KB1 09/15/2035** 2,145,000 5.000% 3.200% 115.458 KC9 09/15/2036** 2,245,000 4.000% 3.640% 103.022 KD7 09/15/2037** 2,335,000 4.000% 3.680% 102.681 KE5 09/15/2038** 2,430,000 4.000% 3.720% 102.340 KF2 09/15/2039** 2,530,000 4.000% 3.750% 102.086 KG0 09/15/2040** 2,630,000 4.000% 3.780% 101.833 KH8

Term Bonds

$14,865,000, 4.000% Term Bond due September 15, 2045;** Yield 3.910% Price 100.742; CUSIP* 870000KJ4

* Copyright 2013, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the 2015 Bonds and none of the Authority, the College or the Underwriters makes any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2015 Bonds as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2015 Bonds.

** Priced to September 15, 2025 optional redemption date.

The information set forth in this Official Statement has been obtained from the Swarthmore Borough Authority (the "Authority"), Swarthmore College (the "College") and other sources which are believed to be reliable. The information provided by sources other than the Authority is not guaranteed as to accuracy or completeness by the Authority. The information and expressions of opinions herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2015 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, WITHOUT PRIOR NOTICE.

THE ORDER AND PLACEMENT OF MATERIALS IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, IS NOT TO BE DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE 2015 BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE OFFICIAL STATEMENT.

If and when included in this Official Statement, the words "expects," "forecasts," "projects," "intends," "anticipates," "estimates," "assumes" and analogous expressions are intended to identify forward-looking statements and any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties which could affect the revenues and obligations of the College include, among others, changes in economic conditions, mandates from other governments and various other events, conditions and circumstances, many of which are beyond the control of the College. Such forward-looking statements speak only as of the date of this Official Statement. The College disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in the College’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

The 2015 Bonds are not and will not be registered under the Securities Act of 1933, as amended, and the Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, or under any state securities laws, in reliance upon exemptions contained in such Acts. Neither the Securities and Exchange Commission nor any federal, state, municipal or other governmental agency will pass upon the accuracy, completeness or adequacy of this Official Statement.

No dealer, broker, salesperson or other person has been authorized by the Authority or the College to give any information or to make any representations with respect to the 2015 Bonds, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy any of the 2015 Bonds in any jurisdiction in which it is unlawful to make such an offer, solicitation or sale.

The Preliminary Official Statement is the only version of the Preliminary Official Statement that has been authorized by the Authority to be distributed in connection with the offer and sale of the 2015 Bonds. Any other documents purporting to be drafts or copies of the Preliminary Official Statement that are not identical to this Preliminary Official Statement have not been deemed final and were not authorized to be distributed on behalf of the Authority.

TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 THE AUTHORITY ...... 3 THE 2015 BONDS ...... 3 Description of the 2015 Bonds ...... 3 Book-Entry Only System ...... 4 Transfers and Exchanges ...... 6 Redemption ...... 6 PLAN OF FINANCE ...... 7 SOURCES AND USES OF FUNDS ...... 7 SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS ...... 8 Limited Obligations of Authority ...... 8 Authority Pledge of Revenues ...... 8 The Loan Agreement; Unrestricted College Revenues ...... 8 Limitations on Pledge of Unrestricted College Revenues ...... 9 Existing Long Term Indebtedness of the College ...... 10 Additional Bonds and Other Permitted Indebtedness ...... 10 Intercreditor Agreement ...... 10 TAX MATTERS...... 11 General ...... 11 Alternative Minimum Tax ...... 11 Branch Profits Tax ...... 12 S Corporations with Passive Investment Income ...... 12 Social Security and Railroad Retirement Benefits ...... 12 Deduction for Interest Paid by Financial Institutions to Purchase or Carry Tax-Exempt Obligations ..... 12 Property or Casualty Insurance Company ...... 12 Accounting Treatment of Amortizable Bond Premium ...... 12 Reportable Payments and Backup Withholding ...... 13 OTHER MATTERS ...... 13 Changes in Federal Law ...... 13 FINANCIAL ADVISOR ...... 13 LEGAL MATTERS ...... 13 LITIGATION ...... 14 CONSOLIDATED FINANCIAL STATEMENTS ...... 14 UNDERWRITING ...... 14 RATINGS ...... 14 SECONDARY MARKET DISCLOSURE ...... 15 MISCELLANEOUS ...... 16 Appendix A – Information Concerning Swarthmore College Appendix B – Audited Consolidated Financial Statements of Swarthmore College as of and for the Years Ended June 30, 2014 and 2013 Appendix C – Definitions of Certain Terms and Summaries of Certain Provisions of the Indenture and Loan Agreement Appendix D – Form of Proposed Bond Counsel Opinion

OFFICIAL STATEMENT

$54,940,000 Swarthmore Borough Authority Swarthmore College Revenue Bonds, Series of 2015

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and the appendices attached hereto, is to furnish certain information concerning the Swarthmore Borough Authority (the "Authority"), Swarthmore College (the "College"), $54,940,000 principal amount of the Authority’s Swarthmore College Revenue Bonds, Series of 2015 (the "2015 Bonds"). The 2015 Bonds are being issued pursuant to the Pennsylvania Municipality Authorities Act, as amended and supplemented (the "Act"), a resolution of the Authority adopted on June 9, 2015 (the "Resolution") and a Trust Indenture dated as of July 1, 2015 (the "Indenture"), between the Authority and The Bank of New York Mellon Trust Company, N.A., Philadelphia, Pennsylvania, as trustee (the "Trustee"). Certain capitalized terms are used in this Official Statement with the meanings given to them in Appendix C – "DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT."

The Authority is a body corporate and politic organized and existing under the Act with power and authority to undertake projects consisting of the financing of buildings and facilities for private, non-profit, nonsectarian colleges which it determines to be eligible.

The College is a private nonprofit nonsectarian, coeducational institution offering undergraduate instruction, located in the Borough of Swarthmore, Delaware County, Pennsylvania. For a further description of the College, see Appendix A – "INFORMATION CONCERNING SWARTHMORE COLLEGE."

The Authority is issuing the 2015 Bonds to provide funds to finance certain costs of a project (the "2015 Project") consisting generally of the payment of, or reimbursement to the College for (1) the design, purchase, construction, renovation and equipping of new facilities, including, a new science center, dining facilities, a dormitory, the renovation of Clothier Memorial Hall, a parking lot and pedestrian crossing on Chester Road, various office migrations and swing space needs, utility upgrades, sustainability improvements and the regular ongoing renovation, refurbishment and renewal of existing College facilities, together with all planning, consulting, architectural, engineering and site work related thereto; and (2) payment of costs of issuance of the 2015 Bonds. See "PLAN OF FINANCE." In connection with the issuance of the 2015 Bonds, the College and the Authority are entering into a Loan and Security Agreement dated as of July 1, 2015 (the "Loan Agreement"), pursuant to which the Authority will loan the proceeds of the 2015 Bonds to the College, and the College will agree to repay directly to the Trustee (as assignee of the Authority’s interest in the Loan Agreement) the amounts required, together with certain other funds available to the Trustee for such purpose, to pay the principal of and interest on the 2015 Bonds as the same becomes due and to pay certain administrative costs of the Authority.

The 2015 Bonds are limited obligations of the Authority, secured under the Indenture equally and ratably with any Additional Bonds issued pursuant to the Indenture by the pledge and assignment to the Trustee of all of the Authority’s right, title and interest in the Loan Agreement (subject to certain reserved rights), and all payments, revenues and receipts derived by the Authority under and pursuant to and subject to the provisions of the Loan Agreement, and all moneys and securities from time to time held in the funds and accounts established under the Indenture.

security interest). However, the lien on and security interest in Unrestricted College Revenues pledged to secure the College’s obligations under the Loan Agreement will automatically terminate once all of the Legacy Parity Bonds (as defined and described below) have been paid in full or provision has been made for the payment of the same (as further defined herein, the "Revenue Pledge Termination Date"). Purchasers of the 2015 Bonds should assume that the pledge of Unrestricted College Revenues will not be in place. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS."

Upon the issuance of the 2015 Bonds and the application of the proceeds thereof, a total of $255,090,000 principal amount of Parity Bonds will be outstanding. In addition to the 2015 Bonds, the Parity Bonds consist of:

 $75,210,000 principal amount of the Authority’s Swarthmore College Revenue Bonds, Series A of 2006 (the "2006A Bonds") (the "Legacy Parity Bonds");

 $26,665,000 principal amount of the Authority’s Swarthmore College Revenue Bonds, Series of 2011 (the "2011 (June Issue) Bonds");

 $13,545,000 principal amount of Swarthmore College Revenue Bonds, Series B of 2011 (the "2011B Bonds");

 $39,215,000 principal amount of Swarthmore College Taxable Revenue Bonds, Series C of 2011 (the "2011C Bonds");

 $45,515,000 principal amount of Swarthmore College Revenue Bonds, Series of 2013 (the "2013 Bonds" and, together with the 2015 Bonds, the Legacy Parity Bonds, the 2011 (June Issue) Bonds, the 2011B Bonds and the 2011C Bonds, the "Parity Bonds").

All Parity Bonds are secured on a parity basis by the Unrestricted College Revenues (subject to automatic termination on the Revenue Pledge Termination Date with respect to the 2015 Bonds, the 2013 Bonds the 2011 (June Issue) Bonds, the 2011B Bonds and the 2011C Bonds), all as described herein.

In connection with the issuance of the 2015 Bonds, the Authority, the College, the Trustee and the trustees for the outstanding Parity Bonds will enter into the Ninth Amended and Restated Intercreditor Agreement, dated as of July 1, 2015 (the "Intercreditor Agreement"), to confirm the parity lien on the Unrestricted College Revenues for the 2015 Bonds and the outstanding Parity Bonds. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS – Existing Long Term Indebtedness of the College" and Appendix A – "INFORMATION CONCERNING SWARTHMORE COLLEGE - College Indebtedness," which sets forth a table of Debt Service Requirements for the Long Term Indebtedness of the College for each Fiscal Year beginning with the Fiscal Year ending June 30, 2014.

The Indenture permits Additional Bonds to be issued thereunder from time to time, and further permits such Additional Bonds to be secured equally and ratably with the 2015 Bonds. In addition, the College may incur indebtedness (including indebtedness in respect of bonds issued under other trust indentures) and such indebtedness may be secured (to the extent described below) equally and ratably with the security interest granted in the Unrestricted College Revenues to secure the College’s obligations under the Loan Agreement, but only if such grant is subject to automatic termination on the Revenue Pledge Termination Date (defined below). See "SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS."

Brief descriptions of the 2015 Bonds, the Loan Agreement, the Indenture and the Intercreditor Agreement are included in this Official Statement. The summaries of the documents contained herein do not purport to be complete, comprehensive or definitive and are qualified in their entirety by reference to the entire text of such documents, and the description herein of the 2015 Bonds is qualified in its entirety by reference to the form thereof and the information with respect thereto included in the aforesaid documents. Copies of the

Loan Agreement, the Indenture and the Intercreditor Agreement will be available for inspection during the initial offering period and, after initial delivery of the 2015 Bonds, at the corporate trust office of the Trustee in Philadelphia, Pennsylvania.

THE AUTHORITY

The Authority is a body politic and corporate created pursuant to an ordinance of the Borough of Swarthmore (the "Borough") under the Act. The Secretary of the Commonwealth of Pennsylvania issued to the Authority a Certificate of Incorporation dated April 13, 1982, as amended by the filing of Articles of Amendment on November 27, 2006.

The Authority may, among other things, acquire, hold, construct, improve, maintain, own, operate and lease, as lessor or lessee, college facilities, real estate and other projects acquired, constructed or improved for various purposes and sell, lease as lessor, transfer and dispose of any property or interest therein at any time acquired by it, subject to the prior approval of each project by the Council of the Borough and may finance such projects by making loans evidenced by loan agreements. On June 1, 2015, the Council of the Borough approved the undertaking of the Authority to issue the 2015 Bonds, the proceeds of which will provide funds for certain costs of the 2015 Project. The Authority is authorized by the Act and Resolution adopted on June 9, 2015 to issue the 2015 Bonds.

The governing body of the Authority is a board consisting of five members appointed or reappointed for five-year terms by the Council of the Borough. The present members of the Board of the Authority are:

Member Office Term Expires Maria M. Zissimos Chair December 31, 2015 David Wolfsohn Vice Chair December 31, 2017 Stephen Carp Secretary December 31, 2018 Elric C. Gerner Treasurer December 31, 2019 Peter Stroup Assistant December 31, 2016 Treasurer/Secretary

THE 2015 BONDS

Description of the 2015 Bonds

The 2015 Bonds will be dated and will bear interest from the date of their initial delivery, with interest payable on March 15, 2016 and semiannually thereafter on September 15 and March 15 (each, an "Interest Payment Date") of each year. The 2015 Bonds will bear interest at the rates (computed on the basis of a 360- day year of twelve 30 day months) and will mature on the dates and in the amounts set forth on the inside cover page of this Official Statement.

The 2015 Bonds are being issued as fully registered book-entry bonds, and registered in the name of Cede & Co. ("Cede"), as nominee for The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2015 Bonds under its book-entry only system (the "DTC Book-Entry Only System"). An individual purchaser may purchase a 2015 Bond in book-entry form, without certificates, in denominations of $5,000 or any integral multiple thereof. So long as DTC (or its nominee Cede) is the registered owner of the 2015 Bonds, the principal or redemption price of, and interest on, the 2015 Bonds will be paid to DTC or Cede, as its nominee. See "THE 2015 BONDS – Book-Entry Only System" below. In the event the 2015 Bonds are no longer subject to the DTC Book-Entry Only System the principal or redemption price of the 2015 Bonds will be payable upon surrender of the respective 2015 Bonds at a designated payment office of the Trustee. Interest on the 2015 Bonds will then be paid by check of the Trustee mailed to the registered owner thereof as of the last day of the calendar month preceding any Interest Payment Date at its address on file on the bond registry maintained by the Trustee.

Book-Entry Only System

General. The information in this section has been provided by DTC and is not to be deemed to be a representation of the Authority, the College or the Underwriters.

DTC, New York, New York, will act as securities depository for the 2015 Bonds. The 2015 Bonds will be issued as fully registered 2015 Bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of the 2015 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.7 million issues of U.S. and non U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the 2015 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2015 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2015 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2015 Bonds, except in the event that use of the book entry system for the 2015 Bonds is discontinued.

To facilitate subsequent transfers, all 2015 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2015 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2015 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2015 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2015 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of the 2015 Bonds may wish to ascertain that the nominee holding the 2015 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices will be sent to DTC. If less than all of the 2015 Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2015 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to an issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the 2015 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal, premium, if any, and interest on the 2015 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with 2015 Bonds held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Authority or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium, if any, and interest on the 2015 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the 2015 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, 2015 Bond certificates are required to be printed and delivered.

Discontinuation of Book-Entry Only System. As described above, DTC may determine to discontinue providing its service with respect to the 2015 Bonds at any time by giving notice to the Authority and the Trustee and discharging its responsibilities with respect thereto under applicable law. In addition, the Authority may decide at any time to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In either event, certificates for the 2015 Bonds would be printed and delivered, and the following provisions would apply, subject to the further conditions set forth in the Indenture.

Delivery of Certificates; Registered Owners. 2015 Bond certificates in fully registered form will be delivered to, and registered in the names of, the DTC Participants or such other persons as such DTC Participants may specify (which may be the Indirect Participants or beneficial owners), in authorized denominations of $5,000 or integral multiples thereof. The ownership of the 2015 Bonds so delivered (and any 2015 Bonds thereafter delivered upon a transfer or exchange described below) shall be registered on the bond register (the "Bond Register") of the Authority to be maintained by the Trustee at its payment office, and the Authority and the Trustee will be entitled to treat the Registered Owners of such 2015 Bonds, as their names appear on the Bond Register as of the appropriate dates, as the owners thereof for all purposes described herein and in the Indenture.

Transfers and Exchanges

The 2015 Bonds may be transferred or exchanged only on presentation and surrender thereof to the Trustee, accompanied by an assignment duly executed by the registered owner thereof or his authorized representative, and subject to such additional requirements as may be established by the Trustee. The Trustee is not required to issue, exchange or transfer any 2015 Bonds during the period from the date of selection of 2015 Bonds to be redeemed to the date of the mailing of the related notice of redemption, or to transfer or exchange any 2015 Bonds or portions thereof which have been selected or called for redemption in whole or in part.

Redemption

Extraordinary Optional Redemption. The 2015 Bonds of any maturity or maturities are subject to redemption prior to maturity, at the election of the College, in whole or in part at any time out of insurance proceeds, condemnation awards and the proceeds of conveyances in lieu of condemnation deposited with the Trustee for such purpose; provided that such deposited amounts must relate solely to College Facilities financed or refinanced with proceeds of the 2015 Bonds and must not exceed the aggregate principal amount of the 2015 Bonds originally allocated to such facilities as shown on the records of the College. In the case of any extraordinary optional redemption of 2015 Bonds in part, the 2015 Bonds shall be selected in such order of maturity, and in such principal amount within a maturity, as the Authority, at the written request of the College, directs in writing, and within each maturity by lot. Extraordinary optional redemptions will be made upon payment of a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption.

Optional Redemption. The 2015 Bonds maturing on and after September 15, 2026 are subject to redemption prior to maturity at the option of the Authority, at the direction of the College, on or after September 15, 2025, in whole or in part at any time, and from time to time, in such principal amount as may be designated in writing by the College. Any such optional redemption of the 2015 Bonds shall be at a redemption price of 100% of the principal amount of the 2015 Bonds to be redeemed, without premium, plus interest accrued to the redemption date.

Mandatory Sinking Fund Redemption. The 2015 Bonds maturing on September 15, 2045 are subject to mandatory sinking fund redemption, in part, as drawn by lot by the Trustee, on September 15 of each of the years set forth below, in the respective principal amounts listed opposite each year, upon payment of a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption.

Year Principal (September 15) Amount 2041 2,740,000 2042 2,850,000 2043 2,970,000 2044 3,090,000 2045* 3,215,000

*Final Maturity

Partial Redemption. In the event a 2015 Bond is of a denomination larger than $5,000, a portion of such 2015 Bond may be redeemed, but the portion to be redeemed shall be in the principal amount of $5,000 or any multiple thereof. In such case, the registered owner is required to surrender such 2015 Bond in exchange for one or more 2015 Bonds in an aggregate principal amount equal to the unredeemed principal amount thereof.

Notice of Redemption. Any extraordinary optional or optional redemption will be made on notice of redemption which will be conclusively presumed to have been given when mailed not less than 20 nor more than 60 days prior to the date fixed for redemption by first class mail, postage prepaid, to all registered owners of the 2015 Bonds to be redeemed at their addresses as they appear in the bond registry of the Authority maintained by the Trustee; provided, however, that failure to mail such notice to any registered owner or any defect in the notice so mailed or in the mailing thereof, as it affects any particular 2015 Bond, will not affect the validity of the proceedings for such redemption of any other 2015 Bond.

If at the time of mailing of notice of optional redemption or extraordinary optional redemption the Authority or the College has not deposited with the Trustee moneys sufficient to redeem all the 2015 Bonds called for redemption, such notice may state that it is conditional, that is, the redemption itself is subject to the deposit of the redemption moneys with the Trustee not later than the opening of business on the redemption date, and such notice will be of no effect unless such moneys are so deposited. If such moneys are not deposited by such date and time, the Trustee must promptly notify the holders of all 2015 Bonds called for redemption of such fact.

PLAN OF FINANCE

2015 Project. A portion of the proceeds of the 2015 Bonds will be deposited in the 2015 Project Fund held by the Trustee and will be applied to pay, or reimburse the College, for the costs of the design, purchase, construction, renovation and equipping of new facilities, including, a new science center, dining facilities, a dormitory, the renovation of Clothier Memorial Hall, a parking lot and pedestrian crossing on Chester Road, various office migrations and swing space needs, utility upgrades, sustainability improvements and the regular ongoing renovation, refurbishment and renewal of existing College facilities, together with all planning, consulting, architectural, engineering and site work related thereto.

Costs of Issuance. A portion of the proceeds of the 2015 Bonds also will be used to pay the costs of issuing the 2015 Bonds.

SOURCES AND USES OF FUNDS

The following table sets forth the estimated sources and uses of funds in connection with the 2015 Bonds.

Sources of Funds Par Amount of 2015 Bonds ...... $54,940,000 Original Issue Premium ...... 5,056,832 TOTAL SOURCES OF FUNDS ...... $59,996,832

Uses of Funds Deposit into 2015 Project Fund ...... $59,647,895 Costs of Issuance (1) ...... 348,937 TOTAL USES OF FUNDS ...... $59,996,832

(1) Includes underwriter's discount, legal costs, ratings fees, printing costs, trustee fees and other miscellaneous fees and expenses.

SOURCES OF PAYMENT AND SECURITY FOR THE 2015 BONDS

Limited Obligations of Authority

THE 2015 BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED AS PROVIDED IN THE INDENTURE EQUALLY AND RATABLY WITH ANY ADDITIONAL BONDS ISSUED UNDER THE INDENTURE BY AN ASSIGNMENT TO THE TRUSTEE OF ALL THE RIGHT, TITLE AND INTEREST OF THE AUTHORITY IN AND TO THE LOAN AGREEMENT (SUBJECT TO CERTAIN RESERVED RIGHTS) AND ALL FUNDS AND ACCOUNTS ESTABLISHED UNDER THE INDENTURE.

NEITHER THE GENERAL CREDIT OF THE AUTHORITY, NOR THE CREDIT OF ANY MEMBER, OFFICER OR EMPLOYEE, PAST, PRESENT OR FUTURE, OF THE AUTHORITY OR OF ANY SUCCESSOR BODY, EITHER DIRECTLY OR THROUGH THE AUTHORITY OR ANY SUCH SUCCESSOR BODY, NOR THE CREDIT NOR THE TAXING POWER OF THE BOROUGH OR OF THE COMMONWEALTH OF PENNSYLVANIA OR OF ANY OTHER POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF IS PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE 2015 BONDS, NOR SHALL THE 2015 BONDS BE OR BE DEEMED TO BE OBLIGATIONS OF THE BOROUGH OR OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF, NOR SHALL THE BOROUGH, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE 2015 BONDS, NOR SHALL ANY MEMBER OF THE AUTHORITY OR ANY MEMBER OF A SUCCESSOR BODY BE PERSONALLY RESPONSIBLE FOR PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE 2015 BONDS. THE AUTHORITY HAS NO TAXING POWER.

Authority Pledge of Revenues

The Authority has pledged to the Trustee and granted a security interest in the Revenues of the Authority from the College and the other components of the Trust Estate (which currently consist principally of moneys and investments held by the Trustee in the funds and accounts established under the Indenture), as security for the payment of the 2015 Bonds and the performance of all obligations of the Authority under the Indenture. This pledge and the covenants and agreements to be performed by or on behalf of the Authority is for the equal and ratable benefit, protection and security of the holders of the 2015 Bonds and any Additional Bonds, all of which, regardless of their times of issue and maturity, will be of equal rank without preference, priority or distinction. The Revenues of the Authority from the College and the other components of the Trust Estate shall, to the extent permitted by law, immediately be subject to the lien of the pledge without any physical delivery thereof or further act. The amounts payable under the Loan Agreement are required to be paid directly to the Trustee by the College whereupon the Trustee will deposit the same in the Revenue Fund, pursuant to the assignment to the Trustee of the Authority’s rights under the Loan Agreement. There is no debt service reserve fund or similar reserve fund being established as security for the 2015 Bonds.

The Loan Agreement; Unrestricted College Revenues

The timely payment of all amounts due under the Loan Agreement is a general obligation of the College. The College’s obligations under the Loan Agreement are also secured by the College’s grant to the Authority of a lien on and a security interest in Unrestricted College Revenues (subject to a prior lien and security interest as described below). However, the lien on and security interest in Unrestricted College Revenues pledged to secure the College’s obligations under the Loan Agreement will automatically terminate once all of the Legacy Parity Bonds have been paid in full or provision has been made for the payment of the same (the "Revenue Pledge Termination Date"). The outstanding Legacy Parity Bonds have a final maturity

date of September 15, 2030; however such Legacy Parity Bonds maturing on and after September 15, 2017 are subject to redemption prior to maturity at the option of the Authority, at the direction of the College, on or after September 15, 2016 in whole at any time, or in part from time to time, in such principal amount as may be designated in writing by the College. Purchasers of the 2015 Bonds should assume that the pledge of Unrestricted College Revenues will not be in place. The Authority is assigning such security interest to the Trustee for the benefit of the Bondholders.

The "Unrestricted College Revenues" being pledged by the College as security for its obligations under the Loan Agreement include such revenues, income and other moneys (both operating and nonoperating) received by the College that would properly be recorded as additions to Unrestricted Net Assets during the period being measured. However, for purposes of the definition of "Unrestricted College Revenues", in each context involving measuring coverage for purposes of a financial covenant, an amount equal to the budgeted unrestricted investment earnings (realized and unrealized gains and income) of the College pursuant to the College’s endowment spending formula, as determined by the College Board for such Fiscal Year, will be included in Unrestricted College Revenues and the balance of realized and unrealized gains or losses and any income earned on such investments will be excluded from Unrestricted College Revenues (or the equivalent as estimated by the College if the College’s accounting presentation format changes materially in the future).

The pledge of the Unrestricted College Revenues is of equal rank and priority with the lien on and security interest in the Unrestricted College Revenues granted by the College to secure the Parity Bonds, and to be pledged to secure other permitted indebtedness (including indebtedness in respect of bonds issued under other trust indentures); provided, however, that any such pledge granted after the issuance of the 2015 Bonds must be subject to automatic termination on the Revenue Pledge Termination Date.

The existence of the pledge and security interest does not prevent the College from spending, depositing or commingling the Unrestricted College Revenues so long as all required payments under the Loan Agreement are made when due. Prior to the Revenue Pledge Termination Date, in the event of a failure to make payments when due or if an Event of Default has occurred and is continuing, the Trustee shall have and may exercise all of its statutory rights as a secured party, and the College has covenanted to thereafter pay directly to the Trustee, or permit the Trustee to collect for the equal and ratable benefit of the owners of the Parity Bonds and any Additional Bonds that may be issued pursuant to the Indenture and subject to any applicable provisions of any Intercreditor Agreement then in effect, all Unrestricted College Revenues to the extent necessary to cure the payment default. See Appendix C – "DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT."

Limitations on Pledge of Unrestricted College Revenues

The effectiveness of the pledge of Unrestricted College Revenues of the College is limited because a security interest in money generally cannot be perfected by the filing of financing statements under the Pennsylvania Uniform Commercial Code (the "UCC"). Instead, such a security interest is perfected by taking possession of the subject funds. So long as the College has made all required payments under the Loan Agreement and an Event of Default has not occurred or is continuing under such Loan Agreement, the moneys constituting Unrestricted College Revenues received by the College from time to time are not required to be transferred to or held by the Trustee, and may be spent by the College, deposited in other accounts or commingled with its other funds. Under such circumstances, the pledge of Unrestricted College Revenues may not be considered perfected under the UCC.

To the extent that a security interest can be perfected in the Unrestricted College Revenues by the filing of financing statements, such filings will be made. The security interest in the Unrestricted College Revenues may not be enforceable against third parties unless such Unrestricted College Revenues are actually transferred to the Trustee or are subject to exceptions under the UCC as enacted in the Commonwealth of Pennsylvania. Under the current law, the security interest may be further limited by the following:

(1) statutory liens; (2) rights arising in favor of the United States of America or any agency thereof; (3) present or future prohibitions against assignment contained in any Pennsylvania or federal statutes or regulations; (4) constructive trusts, equitable liens or other rights impressed or conferred by any Pennsylvania or federal court in the exercise of its equitable jurisdiction; (5) federal bankruptcy laws or state laws dealing with fraudulent conveyances affecting assignments of revenues and assets; and (6) any defect in the filing of, or any failure to file, appropriate continuation statements pursuant to the UCC.

Existing Long Term Indebtedness of the College

Upon the issuance of the 2015 Bonds, a total of $255,090,000 principal amount of Parity Bonds will be outstanding. In addition to the 2015 Bonds, the Parity Bonds consist of: $75,210,000 principal amount of the 2006A Bonds, $26,665,000 principal amount of the 2011 (June Issue) Bonds, $13,545,000 principal amount of the 2011B Bonds, $39,215,000 principal amount of the 2011C Bonds and $45,515,000 principal amount of the 2013 Bonds. The Parity Bonds are secured on a parity basis by the Unrestricted College Revenues (subject to automatic termination on the Revenue Pledge Termination Date with respect to the 2015 Bonds, the 2011 (June Issue) Bonds, the 2011B Bonds, the 2011C Bonds and the 2013 Bonds). In Appendix A of this Official Statement, under the caption "College Indebtedness," there is a table showing the Debt Service Requirements for the Long Term Indebtedness of the College for each Fiscal Year beginning with the Fiscal Year ending June 30, 2010 and ending with the Fiscal Year ending June 30, 2014.

Additional Bonds and Other Permitted Indebtedness

The Authority may issue Additional Bonds under the Indenture on a parity with the Parity Bonds to provide funds for any purpose permitted under the Act. The College may incur additional Long Term Indebtedness which may be unsecured, secured by a lien on the Unrestricted College Revenues on a parity with or subordinate to the lien created by the Loan Agreement as long as any such parity pledge is subject to automatic termination on the Revenue Pledge Termination Date, or secured by any other College properties or College Facilities. For a description of the conditions under which Additional Bonds may be issued, see Appendix C – "DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT" under the heading "THE INDENTURE." The College is not required to satisfy any financial tests in connection with the incurrence of additional Long Term Indebtedness.

Intercreditor Agreement

To confirm that the 2015 Bonds are secured by the Unrestricted College Revenues on a parity with the outstanding Parity Bonds, concurrently with the issuance of the 2015 Bonds, the Authority, the College, the Trustee and the trustees for each issue of Parity Bonds are entering into a Ninth Amended and Restated Intercreditor Agreement, dated as of July 1, 2015 (the "Intercreditor Agreement").

The Indenture provides that any event of default by the College under a debt instrument secured by the Unrestricted College Revenues on a parity with the pledge of Unrestricted College Revenues securing the 2015 Bonds (e.g., the College’s loan agreements relating to each issue of Parity Bonds) will automatically cause an event of default to occur under the Indenture. The trust indentures for the Parity Bonds contain similar cross default provisions, with the goal of assuring that an event of default under any debt instrument in which the College’s obligations are secured on a parity by the Unrestricted College Revenues will cause an event of default to occur under all other such debt instruments. The Intercreditor Agreement provides generally that any Unrestricted College Revenues received by a bond trustee upon a payment default under its trust indenture be distributed to the other trustees on an essentially pro rata basis.

The Intercreditor Agreement also provides that no additional debt incurred by the College (whether directly or through an Authority bond issue for its benefit) may be secured by a lien on the Unrestricted

College Revenues unless the holder of the new debt (or its trustee) agrees to be bound by the provisions of the Intercreditor Agreement.

TAX MATTERS

General

The Internal Revenue Code of 1986, as amended (the "Code") contains provisions relating to the tax- exempt status of interest on obligations issued by governmental entities which apply to the 2015 Bonds. These provisions include, but are not limited to, requirements relating to the use and investment of the proceeds of the 2015 Bonds and the rebate of certain investment earnings derived from such proceeds to the United States Treasury Department on a periodic basis. These and other requirements of the Code must be met by the Authority and the College subsequent to the issuance and delivery of the 2015 Bonds in order for interest thereon to be and remain excludable from gross income for purposes of federal income taxation. The Authority and the College have made covenants to comply with such requirements.

In the opinion of Bond Counsel, interest on the 2015 Bonds [(including accrued original issue discount)] is not includable in gross income for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions. The opinion of Bond Counsel is subject to the condition that the Authority and the College comply with all applicable federal income tax law requirements that must be satisfied subsequent to the issuance of the 2015 Bonds in order that interest thereon continues to be excluded from gross income. Failure to comply with certain of such requirements could cause the interest on the 2015 Bonds to be so includable in gross income retroactive to the date of issuance of the 2015 Bonds. The Authority and the College have covenanted to comply with all such requirements.

Interest on the 2015 Bonds is not treated as an item of tax preference under Section 57 of the Code for purposes of the individual and corporate alternative minimum taxes; however, under the Code, to the extent that interest on the 2015 Bonds is a component of a corporate holder’s "adjusted current earnings," a portion of that interest may be subject to the corporate alternative minimum tax. Bond Counsel expresses no opinion regarding other federal tax consequences relating to the 2015 Bonds or the receipt of interest thereon. See discussion of "Alternative Minimum Tax", "Branch Profits Tax", "S Corporations with Passive Investment Income", "Social Security and Railroad Retirement Benefits", "Deduction for Interest Paid by Financial Institutions to Purchase or Carry Tax-Exempt Obligations", "Property or Casualty Insurance Company," "Accounting Treatment of Amortizable Bond Premium," "Recent State Tax Developments," and "Reportable Payments and Backup Withholding" below.

In the opinion of Bond Counsel, under the laws of the Commonwealth of Pennsylvania as enacted and construed on the date hereof, the 2015 Bonds, and the interest thereon are free from taxation for state and local purposes within the Commonwealth of Pennsylvania, but such exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the 2015 Bonds or the interest thereon. Profits, gains or income derived from the sale, exchange, or other disposition of the 2015 Bonds are subject to state and local taxation within the Commonwealth of Pennsylvania. Specifically, the 2015 Bonds are exempt from personal property taxes in Pennsylvania and interest on the 2015 Bonds is exempt from the Pennsylvania personal income tax and the Pennsylvania corporate net income tax.

Alternative Minimum Tax

The Code includes, for purposes of the corporate alternative minimum tax, a preference item consisting of, generally, seventy-five percent of the excess of a corporation’s "adjusted current earnings" over its "alternative minimum taxable income" (computed without regard to this particular preference item and the alternative tax net operating loss deduction). Thus, to the extent that tax-exempt interest (including interest on the 2015 Bonds) is a component of a corporate holder’s "adjusted current earnings," a portion of that interest may be subject to the alternative minimum tax.

Branch Profits Tax

Under the Code, foreign corporations engaged in a trade or business in the United States will be subject to a "branch profits tax" equal to thirty percent (30%) of the corporation’s "dividend equivalent amount" for the taxable year. The term "dividend equivalent amount" includes interest on tax-exempt obligations.

S Corporations with Passive Investment Income

Section 1375 of the Code imposes a tax on the income of certain small business corporations for which an S Corporation election is in effect, and that have "passive investment income." For purposes of Section 1375 of the Code, the term "passive investment income" includes interest on the 2015 Bonds. This tax applies to an S Corporation for a taxable year if the S Corporation has Subchapter C earnings and profits at the close of the taxable year and has gross receipts, more than twenty-five percent (25%) of which are "passive investment income." Thus, interest on the 2015 Bonds may be subject to federal income taxation under Section 1375 of the Code if the requirements of that provision are met.

Social Security and Railroad Retirement Benefits

Under Section 86 of the Code, certain Social Security and Railroad Retirement benefits (the "benefits") may be includable in gross income. The Code provides that interest on tax-exempt obligations (including interest on the 2015 Bonds) is included in the calculation of "modified adjusted gross income" in determining whether a portion of the benefits received are to be includable in gross income of individuals.

Deduction for Interest Paid by Financial Institutions to Purchase or Carry Tax-Exempt Obligations

The Code, subject to limited exceptions not applicable to the 2015 Bonds, denies the interest deduction for indebtedness incurred or continued to purchase or carry tax-exempt obligations, such as the 2015 Bonds. With respect to banks, thrift institutions and other financial institutions, the denial to such institutions is one hundred percent (100%) for interest paid on funds allocable to the 2015 Bonds and any other tax-exempt obligations acquired after August 7, 1986.

Property or Casualty Insurance Company

The Code also provides that a property or casualty insurance company may also incur a reduction, by a specified portion of its tax-exempt interest income, of its deduction for losses incurred.

Accounting Treatment of Amortizable Bond Premium

The 2015 Bonds are hereinafter referred to as the "Premium Bonds." An amount equal to the excess of the initial public offering price of a Premium Bond set forth on the inside cover page over its suited redemption price at maturity constitutes premium on such Premium Bond. A purchaser of a Premium Bond must amortize any premium over such Premium Bond’s term using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the purchaser’s basis in such Premium Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed.

Purchasers of any Premium Bonds, whether at the time of initial issuance or subsequent thereto, should consult their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning Premium Bonds.

Reportable Payments and Backup Withholding

Under 2006 amendments to the Internal Revenue Code, payments of interest on the 2015 Bonds will be reported to the Internal Revenue Service by the payor on Form 1099 unless the 2015 Bond is an "exempt person" under Section 6049 of the Code. A Bondholder who is not an exempt person may be subject to "backup withholding" at a specified rate prescribed in the Code if the 2015 Bond does not file Form W-9 with the payor advising the payor of the Bond’s taxpayer identification number. Bondholders should consult with their brokers regarding this matter.

The Trustee will report to the Bondholders and to the Internal Revenue Service for each calendar year the amount of any "reportable payments" during such year and the amount of tax withheld, if any, with respect to payments made on the 2015 Bonds.

OTHER MATTERS

Changes in Federal Law

From time to time, there are presidential proposals, proposals by various federal committees and legislative proposals in Congress that, if enacted, could alter or amend the tax matters referred to herein or adversely affect the marketability or market value of the 2015 Bonds or otherwise prevent holders of the 2015 Bonds from realizing the full benefit of the tax exemption of interest on the 2015 Bonds. Further, such proposals may impact the marketability or market value of the 2015 Bonds simply by being proposed. It cannot be predicted whether or in what form any such proposals may be enacted or whether if enacted such proposals would apply to bonds issued prior to enactment. In addition, regulatory or other actions are from time to time announced or proposed which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the 2015 Bonds. It cannot be predicted whether any such regulatory or other actions will be implemented or whether the 2015 Bonds would be impacted thereby.

Purchasers of the 2015 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulations or other potential changes in law. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the 2015 Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation, regulations or other potential changes in law.

FINANCIAL ADVISOR

The Yuba Group LLC, also known as Yuba Group Advisors, is serving as financial advisor to the College (the "Financial Advisor") in connection with the issuance of the 2015 Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of, or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in the Official Statement and the Appendices hereto. The Financial Advisor is a financial advisory and consulting organization, and is not engaged in the business of underwriting, marketing or trading municipal securities or any other negotiable instruments. A portion of the Financial Advisor's fees for services rendered with respect to the sale of the 2015 Bonds is contingent upon issuance and delivery of the 2015 Bonds.

LEGAL MATTERS

Certain legal matters incident to the authorization, issuance and sale of the 2015 Bonds will be passed upon by Saul Ewing LLP, Philadelphia, Pennsylvania, Bond Counsel. The issuance of the 2015 Bonds is subject to the receipt of the approving opinion of Bond Counsel, which approving opinion will be delivered

with the 2015 Bonds. Certain legal matters will be passed upon for the College by its counsel, Dilworth Paxson LLP, Philadelphia, Pennsylvania; and for the Authority by its counsel, Steven A. Goldfield, Esq., Media, Pennsylvania.

LITIGATION

There is no litigation of any nature pending or, to the best knowledge of the Authority, threatened seeking to restrain or enjoin the issuance, sale, execution or delivery of the 2015 Bonds, or in any way contesting or affecting the validity of the 2015 Bonds or any proceedings of the Authority taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or the security provided for the payment of the 2015 Bonds or the existence or powers of the Authority, or any of the transactions contemplated by the 2015 Bonds, the Indenture or the Loan Agreement. For litigation disclosure concerning the College, see Appendix A – "INFORMATION CONCERNING SWARTHMORE COLLEGE - Litigation."

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of the College at June 30, 2014 and 2013 and for the fiscal years then ended included in Appendix B to this Official Statement have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report appearing in Appendix B herein.

UNDERWRITING

After competitive bidding on July 14, 2015, the 2015 Bonds were awarded to Bank of America Merrill Lynch (the "Underwriter"). The Underwriter has agreed to purchase said 2015 Bonds at a purchase price of $59,933,326.75 (which is equal to the aggregate principal amount of $54,940,000 plus original issue premium of $5,056,831.90 less underwriter’s discount of $63,505.15). The Underwriter’s obligation to make such purchase is subject to the approval of certain legal matters by Bond Counsel and certain other conditions.

The Underwriter reserves the right to change the initial prices of the 2015 Bonds in connection with the marketing of the 2015 Bonds and may offer and sell the 2015 Bonds to certain dealers (including dealers depositing the 2015 Bonds into investment trusts) and others at prices lower than the initial public offering price or prices set forth in the Official Statement.

The Underwriter, and respective affiliates, are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter, and respective affiliates, may have, from time to time, performed and may in the future perform, various investment banking services for the College, for which they may have received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriter, and respective affiliates, may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the College. The Underwriter, and respective affiliates, may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

RATINGS

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), and Moody’s Investors Service, Inc. ("Moody’s") have assigned the 2015 Bonds the ratings of "AAA" and "Aaa", respectively, based upon the creditworthiness of the College. Any explanation of these ratings may only be

obtained from S&P and Moody’s, respectively. Generally, rating agencies base their ratings on information and materials supplied to them and on their own investigations, studies and assumptions. There is no assurance that such ratings, once assigned, will remain for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agencies concerned if in their judgment circumstances so warrant. Any such downward change or withdrawal of the ratings assigned to the 2015 Bonds by S&P and Moody’s, respectively, may have an adverse effect on the market price of the 2015 Bonds.

None of the College, the Underwriters, the Authority or any member of the Authority has assumed any responsibility to maintain any rating on the 2015 Bonds.

SECONDARY MARKET DISCLOSURE

In the Loan Agreement, the College agrees to provide certain financial information and operating data (the "Annual Financial Information") relating to the College by not later than 180 days after the end of each Fiscal Year, commencing with the fiscal year ended June 30, 2015.

The Annual Financial Information shall include: (i) a copy of the annual consolidated financial statements of the College prepared in accordance with generally accepted accounting principles in the United States of America and audited by a certified public accountant; and (ii) certain annual financial information and operating data generally consistent with certain information contained in Appendix A hereto.

The College also has covenanted in the Loan Agreement to deliver to the Municipal Securities Rulemaking Board (the "MSRB") via the Electronic Municipal Market Access System ("EMMA"), notice to the MSRB in a timely manner not in excess of ten Business Days of the occurrence of any of the following enumerated events, all as required by Securities and Exchange Commission Rule 15c2-12 (the "Rule"):

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) unscheduled draws on credit enhancements reflecting financial difficulties;

(v) substitution of credit or liquidity providers, or their failure to perform;

(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2015 Bonds, or other material events affecting the tax status of the 2015 Bonds;

(vii) modifications to rights of the security holders, if material;

(viii) bond calls, if material, and tender offers;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the 2015 Bonds, if material;

(xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of the College;

(xiii) the consummation of a merger, consolidation, or acquisition involving the College or the sale of all or substantially all of the assets of the College, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material.

The Annual Financial Information, together with audited financial statements of the College for such Fiscal Year if then available (if audited consolidated financial statements are not then available, unaudited financial statements are required to be delivered as part of the Annual Financial Information and the audited consolidated financial statements will be delivered when they become available), will be filed with the MSRB through EMMA. The notices of material events will be filed by the College with the MSRB through EMMA and with a copy to the Authority for informational purposes only. These covenants have been made in order to assist the Underwriters in complying with the Rule.

A failure by the College to perform its covenants relating to continuing disclosure set forth in the Loan Agreement will not constitute an Event of Default under the Loan Agreement, and the sole remedy available to the Authority (or the Trustee as its assignee) for the College’s non-compliance is an action for specific performance.

The College has made similar undertakings in the past in connection with the Parity Bonds. During the past five years, the College has complied with such existing continuing disclosure undertakings in accordance with the Rule.

MISCELLANEOUS

All of the summaries of the provisions of the Act, the 2015 Bonds, the Indenture, the Loan Agreement and the Intercreditor Agreement set forth herein and in the Appendices and all other summaries and references to such other materials not purporting to be quoted in full, are only brief outlines of certain provisions thereof and are made subject to all the detailed provisions thereof, to which reference is hereby made for further information, and do not purport to be complete statements of any or all such provisions of such documents.

All estimates and assumptions in this Official Statement have been made on the best information available and are believed to be reliable, but no representations whatsoever are made that such estimates or assumptions are correct or will be realized. So far as any statements herein involve matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact.

This Official Statement is issued by the Authority and approved by the College.

SWARTHMORE BOROUGH AUTHORITY

By: /s/ Maria Zissimos Chair

Approved:

SWARTHMORE COLLEGE

By: /s/ Gregory Brown Vice President for Finance and Administration

By: /s/ Eileen Petula Associate Vice President for Finance and Treasurer

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Appendix A

Information Concerning Swarthmore College

SWARTHMORE COLLEGE

Table of Contents

Page

Introduction ...... 2 Board of Managers ...... 3 Administration ...... 6 Academic Program ...... 8 Faculty ...... 10 Admissions ...... 10 Costs of Attendance ...... 11 Student Financial Aid ...... 13 Student Enrollment ...... 14 Financial Operations ...... 14 Investments and Net Assets ...... 15 Employees ...... 17 College Indebtedness ...... 17 Gifts, Grants and Bequests ...... 19 Physical Plant ...... 19 Litigation and Other Proceedings ...... 20

SWARTHMORE COLLEGE

Introduction

Swarthmore College (“Swarthmore” or the “College”) is a private college of liberal arts and engineering located 11 miles southwest of Philadelphia in the Borough of Swarthmore, Pennsylvania. Coeducational since its founding in 1864 by the Religious Society of Friends (Quakers), the College is nonsectarian today, but still reflects many Quaker traditions and values.

Renowned for its rigorous academics, Swarthmore is consistently ranked among the top liberal arts colleges in the country. The College offers two degrees: the Bachelor of Arts in the arts and sciences and the Bachelor of Science in engineering. With a current student/faculty ratio of approximately 8 to 1, Swarthmore ensures that its approximately 1,540 students (including students studying abroad) have close and regular contact with their professors. In fact, the College has no teaching assistants.

Swarthmore’s residential campus includes the beautiful Crum Woods and features 425 acres that are maintained by staff horticulturists from the nationally registered Scott Arboretum. Adorned by more than 4,000 different plants and trees, the grounds are open to the public daily from dawn to dusk at no charge.

There are currently nearly 20,000 living Swarthmore alumni. Five Swarthmore graduates have won the Nobel Prize, 36 have earned membership in the National Academy of Sciences and nine are in the National Academy of Engineering. Prominent Swarthmore alumni include: Feng He `03, co-founder of DemoHour, the first and largest crowd-funding website in China; Michael Dukakis `55, former governor of Massachusetts and 1988 presidential candidate; Jonathan Franzen `81, National Book Award recipient and Pulitzer Prize for Fiction finalist; Antoinette Sayeh `79, director of the African Department at the International Monetary Fund; Cynthia Leive, `88, editor-in-chief of Glamour magazine; the late James Michener `29, the Pulitzer Prize-winning author; and John Mather `68, Nobel Prize winner and senior astrophysicist at NASA.

Swarthmore ranks high in the number of students awarded National Science Foundation fellowships and in the percentage of students who go on to earn doctorates. Swarthmore graduates are also regularly awarded such coveted fellowships as the Fulbright, Mellon Mays, Watson, Mitchell, and Luce. Thirty-one former Swarthmore students have been Rhodes scholars, including seven since 2000, and 20 have been MacArthur (genius award) fellows, an award established in 1981 by the MacArthur Foundation.

Swarthmore has long been distinguished by its Honors program, which, from its inception, has provided an experience unparalleled in American undergraduate education: an intense intellectual exercise in which students study in small groups, without grades, for two years and are then evaluated by outside scholars.

The College’s library holds approximately 850,000 print volumes and a rapidly growing collection of digital resources (more than 470,000 books, journals, and databases), which, in absolute numbers, exceed the holdings of many larger liberal arts institutions. The College is also noted for the Peace Collection, the nation’s most comprehensive collection on the peace movement, and for the Friends Historical Library, the country’s premier collection of materials relating to the history of the Quakers. In addition to Quaker studies, scholars use the Friends Historical Library to delve into Native-American history, women’s history, and African-American history. The College holds one of the country’s most important collections of drawings by artist Benjamin West. West’s childhood home, a national landmark, is on the College grounds and serves as the visitors’ center.

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The College’s endowment was $1.877 billion as of June 30, 2014. Swarthmore’s financial strength enables it to admit academically qualified students without regard to their ability to pay and to meet in full the financial need of each admitted United States citizen or permanent resident. Financial aid is also available for qualifying international students. Offering one of the most generous grant programs in the country, Swarthmore awards loan-free financial aid awards to the more than half its students qualifying for aid.

Swarthmore College has a long-standing commitment to social responsibility and community engagement. Students find support for service, internships, and social action projects under the auspices of the Eugene M. Lang Center for Civic and Social Responsibility, through the Swarthmore Foundation, Lang Opportunity Scholarships, and the Project Pericles Fund, along with other funds and programs maintained by the College. Swarthmore students have collaborated with local and global communities to help improve education in urban areas, democratic participation, housing provision and rehabilitation, environmental sustainability, and public health, among other initiatives.

Board of Managers

Swarthmore is a nonprofit corporation organized in the Commonwealth of Pennsylvania. The College is managed by a Board of Managers, which has overall responsibility for management and governance. The bylaws of the College provide for an Executive Committee of the Board and 11 other standing committees: Finance, Investment, Student Affairs, Admissions and Financial Aid, Property, Audit and Risk Management, Academic Affairs, Development and Communications, Nominating and Governance, Compensation, and Social Responsibility.

The College charter provides that voting membership on the Board of Managers is limited to 39 members. There are two categories of voting Managers. Term Managers, nominated by the Nominating and Governance Committee, may serve three successive four-year terms and then they are not eligible for re-election for at least one year. The Nominating and Governance Committee and the Alumni Council jointly nominate Alumni Managers, who serve a single four-year term. Alumni Managers may not be re- elected for at least one year after their respective terms expire. There are currently 37 voting Managers and nine nonvoting Managers. The Board meets in February, May, September, and December, while some committees meet between Board meetings.

The officers of the College are listed below. The Chair and Vice Chair are required to be members of the Board of Managers.

Officers

Chair of the Board of Managers Thomas E. Spock

Vice Chair of the Board of Managers Rhonda Resnick Cohen

Secretary Nancy N. Nicely

Assistant Secretary Sharmaine B. Lamar

Treasurer Eileen E. Petula

Assistant Treasurer Lori Ann Johnson

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The members of the College’s 2015-2016 Board of Managers along with their principal professional/business affiliations and, in the case of College alumni, their respective years of graduation, are as follows:

Board of Managers

Karim Abdel-Motaal '90 Founder, APQ Partners Richard A. Barasch '76 Chairman/CEO, Universal American Corporation William F. Boulding ‘77 Dean of the Fuqua School of Business, Duke University *Rhonda Resnick Cohen '76 Attorney, Philadelphia and Pennsylvania Civic Leader *Janet Smith Dickerson H‘92 Retired Vice President, Campus Life, Princeton University Delvin Dinkins '93 Director of Assessment and Accountability, Tredyffrin- Easttown School District Elizabeth Charissa Economy ‘84 C.V. Starr Senior Fellow and director Asia Studies, Council on Foreign Relations *David Gelber '63 Managing Director, Roaring Fork Films James E. Gregory ‘85 Partner, Lowenstein Sandler LLP ‡Julie Lange Hall '55 Retired, Head of School, North Shore Country Day School Thomas W.T. Hartnett '94 Managing Director, Deutsche Bank AG ‡Samuel L. Hayes III '57 Professor Emeritus, Investment Banking, Harvard Business School Marilyn Holifield '69 Partner, Holland & Knight LLP James C. Hormel '55 Chairman, Equidex, Inc. S. Leslie Jewett '77 President, California First National Bank Jaky Joseph ‘06 Vice President, Merrill Lynch & Company, Inc. *Harold Kalkstein '78 Retired, Managing Director, Boston Consulting Group *Giles K. Kemp '72 Founder/President, Home Decorators Collection ‡Jerome Kohlberg '46 Special Limited Principal, Kohlberg & Co. *‡Eugene M. Lang '38 Chairman, Eugene M. Lang Foundation Jane Lang '67 Producer, Tribute Productions

Danielle Moss Lee '90 Chief Executive Officer, YWCA of the City of New York Susan B. Levine '78 Managing Director, Ramius LLC, Cowen Group *Bennett Lorber '64 Professor of Medicine, Temple University School of Medicine and Hospital

______* Member of the Executive Committee ‡ Non-voting member

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James Lovelace '79 Senior Vice President, Capital Research Global *Barbara W. Mather '65 Partner, Pepper Hamilton LLP ‡Elizabeth J. McCormack Advisor, Rockefeller Family & Associates *Christopher M. Niemczewski '74 Founder and President, Marshfield Associates Nicole O’Dell Odim ‘84 Self-employed journalist Sibella Clark Pedder '64 Deputy Chairperson, C&J Clark Shareholder Council Cathryn J. Polinsky ‘99 Director of Software Development, Salesforce.com Ann Reichelderfer '72 Shareholder, Stevens & Lee, PC Elizabeth H. Scheuer '75 Attorney ‡Marge Pearlman Scheuer '48 New York City Civic Leader Gustavo Schwed '84 Managing Director, Wil Capital June Rothman Scott '61 Retired, Professor of Microbiology and Immunology, Emory University Medical School ‡J. Lawrence Shane '56 Retired Vice Chair and Chief Administrative Officer, Scott Paper Company *Robin M. Shapiro '78 CEO, Encore Financial Services Group, Inc. Salem Shuchman '84 Managing Partner, Entrepreneur Partners, LLC *David W. Singleton '68 Retired Business Executive and Public Official Sujatha A. Srinivasan '01 Risk Management, Goldman Sachs Rob Steelman '92 Senior Investment Analyst, CIFC Davia Temin '74 President and CEO, Temin and Company Joseph L. Turner '73 Strategic Consultant, Bio-Tech industry Ruth Shoemaker Wood '01 Adjunct Faculty, NYU, Penn, CUNY, Rider

Audit and Risk Management Committee

Sujatha Srinivasan ‘01, Chair Risk Management Goldman Sachs Ann Reichelderfer ‘72 Vice Chair Shareholder, Stevens & Lee, PC James Gregory '85 Partner, Proskauer Rose, LLP Leslie Jewett '77 President, California First National Bank Harold Kalkstein '78, ex officio Retired, Managing Director, Boston Consulting Group ______* Member of the Executive Committee

‡ Non-voting member

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Finance Committee

Harold Kalkstein '78, Chair Retired, Managing Director, Boston Consulting Group Gustavo Schwed '84, Vice Chair Managing Director, Wil Capital ‡Sohail Bengali '79 (non voting member) Managing Director, Stone & Youngberg, LLC William F. Boulding ‘77 Dean of the Fuqua School of Business, Duke University Rhonda Resnick Cohen '76 Attorney, Philadelphia and Pennsylvania Civic Leader Thomas W.T. Hartnett '94 Managing Director, Deutsche Bank AG Leslie Jewett ‘77 President, California First National Bank Gil Kemp ‘78 Founder, Home Decorators Collection Barbara W. Mather ‘65 Partner, Pepper Hamilton, LLP Salem D. Shuchman '84 Managing Partner, Entrepreneur Partners, LP David W. Singleton '68 Retired Business Executive and Public Official

Investment Committee

Christopher Niemczewski '74, Chair Founder and President, Marshfield Associates Salem Shuchman '85, Vice Chair Managing Partner, Entrepreneur Partners LP *Ephraim Greenwall '80 Founder and President, Talcott Holdings, Inc. Thomas W.T. Hartnett '94 Managing Director, Deutsche Bank AG

Harold Kalkstein '78, ex officio Retired, Managing Director, Boston Consulting Group

Gil Kemp ‘78 Founder, Home Decorators Collection

*Corey Mulloy '94 General Partner and Managing Director, Highland Capital Partners, LLC Gustavo Schwed '84 Managing Director, Wil Capital ______* Not a member of the Board of Managers

Administration

The President of the College has the chief responsibility for the operation of the College in all of its aspects. The Provost, Vice Presidents, Deans and all other administrative officers are responsible to the President and through the President to the Board of Managers. The current senior administrators of the College in alphabetical order are as follows:

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James L. Bock, Vice President and Dean of Admissions, B.A., M.Ed.

Bock served as Assistant Dean, Associate Dean, and Senior Associate Dean and Director of Admissions of the College from 1995 to 2000. In 2001, he was appointed Dean of Admissions and Financial Aid. Prior to joining Swarthmore, he spent two years as an admissions counselor for the Darden Graduate School of Business at the University of Virginia and three years as Assistant Director of Admissions for Connecticut College. He holds a B.A. from Swarthmore and a M.Ed. from the Curry School of Education at the University of Virginia.

H. Elizabeth Braun, Dean of Students, B.A., M.A., Ph.D.

Braun became Swarthmore’s Dean of Students in 2010. Braun earned her B.A. in English from Mary Washington College and an M.A. in English Literature from Boston University. She served as director of residential life at Mount Holyoke College from 1999 to 2003. In 2003 she was appointed Mount Holyoke’s dean of students, a role in which she supervised the offices of Residential Life, Student Programs, and Disability Services. Her experience in higher education also includes serving as assistant director of residential life at Bowdoin College. She received her Ph.D. in anthropology at the University of Massachusetts-Amherst.

Gregory N. Brown, Vice President for Finance and Administration, B.A., M.P.A.

Brown joined the College in June, 2014. Prior to joining Swarthmore, he served as Chief Operating Officer (2008-2014) and the Vice President for Finance and Planning (2006-2008) at Barnard College; as Chief Administrative Officer at Hebrew Union College (2004-2006); as Assistant Vice Chancellor and Controller for the university of California at Berkeley (1999- 2004); as controller for the City of New Haven, Connecticut (1994-1999); and as Finance Director for the Town of North Branford, Connecticut (1992-1994). In addition, he worked at Yale University from 1981-1992 in a variety of capacities in the Controller’s Office, the Office of Budget and Planning, Internal Audit, and the School Drama. He holds a B.A. from Wesleyan University and a M.P.A. from the University of New Haven.

Karl Clauss, Vice President for Development and Alumni Relations, B.A.

Clauss joined Swarthmore in March 2012 as Vice-President for Development and Alumni Relations. Before joining the College, he was Associate Vice-President for Institutional Advancement and Director of Capital and Annual Support at Colgate University (2010-2012), Director of Institutional Advancement (2005-2010), Director of Major Gifts (2002-2005) and Regional Development Director (2000-2002). Prior to his work at Colgate, he served as Development Associate at Rocky Mountain Institute (1999), Executive Search Consultant at Lynch Miller Moore (1998), and several positions at Colgate University (1993-1998). He holds a B.A. from Colgate University.

C. Stuart Hain, Vice President for Facilities and Capital Projects, B.A.

Hain joined the College in 1991 as Director of Facilities Management and became Associate Vice President for Facilities and Services in 2005 and Vice President in 2008. Before joining the College, he spent 22 years in the construction industry. He received his B.A. from Roanoke College.

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Nancy Nicely, Secretary of the College and Vice President for Communications, B.A., M.S.

Nicely joined the College in 2007 as Director of Communications. Named the Vice President for Communications in 2010, she oversees the College's media relations, social media, website, publications, alumni and development communications, crisis communications, and supports the communications needs of the President and other members of President's staff. Named Secretary of the College in 2011, she also provides administrative support for the College's Board of Managers. Prior to working at Swarthmore, she was the Executive Director of External Affairs in the Provost's Office at the University of Pennsylvania for 10 years and also served as the Director of Communications for then-Pennsylvania House Speaker Robert W. O'Donnell for eight years. She holds a B.A. in English and Psychology from the College of William and Mary and an M.S. in Organizational Dynamics from the University of Pennsylvania.

Pamela Prescod-Caesar, Vice President for Human Resources, B.S., M.B.A.

Pamela Prescod-Caesar was appointed as vice president for human resources at Swarthmore in February 2012. Prior to her appointment she held the position of associate vice president for human resources at Colgate University. Prescod-Caesar also served as associate director for human resources at Harvard University and vice president of human resources at Morgan Memorial Goodwill Industries in Boston. She holds an M.B.A. from Curry College and a B.S. degree in business management from Lesley College.

Valerie Smith, President, B.A., M.A., Ph.D.

Smith, a distinguished scholar of African American literature and culture and current Dean of the College at Princeton University, took office as the 15th president on July 1, 2015. Prior to her deanship, she served as the founding director of the Center for African American Studies at Princeton, as well as being the Woodrow Wilson Professor of Literature and Professor of English and African American Studies. Before Princeton, Dr. Smith spent 12 years at University of California Los Angeles as Professor of English and ultimately as chair of the International Program in African-American Studies. She received a B.A. from Bates College, and a M.A. and Ph.D. from the University of Virginia.

Thomas A. Stephenson, Provost, B.S., Ph.D.

Stephenson has been a member of the Swarthmore faculty since 1985 and is now the James H. Hammons Professor of Chemistry and Biochemistry. He was appointed to the position of Provost in 2011. Stephenson received his B.S. from Furman University and his Ph.D. from the University of Chicago.

Academic Program

A visiting team representing the Middle States Commission on Higher Education conducted a site visit at Swarthmore College in spring, 2009. In its report, the team wrote:

“From our brief but intense encounter with a sizeable cross-section of the Swarthmore community and from a careful assessment of the self-study and ancillary documents, we emerged with a strong impression that the college is, as it represents itself, “exceptional,” “distinctive,” even “extraordinary” in many respects. We found nothing to gainsay the college’s self-portrait as an ambitious and engaged community of learners dedicated to

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“independent, rigorous and creative thought,” and to the production and application of knowledge to advance the cause of justice, from the classroom, to the campus, to the community, to the world.”

“We found a college that is excellent in every respect; in quality of its faculty and its students, in the dedication of its staff, the sophistication of its administration, the leadership of its president, the successes of its alumni/ae, and the wisdom of its Board. Evidence of these strengths was everywhere manifest. Less concrete, but equally practical as a resource that characterizes Swarthmore, helps explain the College’s success, and bodes well for its future were the unusually deep reservoirs of mutual trust we found at every turn.”

The Commission reaffirmed the College’s accreditation in June 2009.

The curriculum that makes up the academic program is structured to offer both depth and diversity. Between 675 and 775 undergraduate courses and seminars are taught in any given year by over 40 different departments and programs. More than a third of the courses and seminars taught have an enrollment of fewer than ten students. This scale is possible because the College maintains a student- faculty ratio of 8 to 1 (academic year 2014-2015).

The Swarthmore curriculum requires of its students a diversity of intellectual experiences sufficient to test and develop different capacities and perspectives. It also requires concentration on some field sufficiently intensive to develop a serious understanding of problems and methods, and a sense of the conditions of mastery. These ends of a liberal arts education are reflected in requirements for course distribution in the Humanities, the Social Sciences and Natural Sciences and Engineering, and for the major.

The College’s Honors Program is characterized by flexibility in format of instruction, including seminars, course combinations, theses and research projects, study abroad, work in the creative and performing arts, and community-based learning. A major curricular innovation in the 1920s, the Honors Program, most recently revised in 1995, remains one of Swarthmore’s distinctive contributions to American higher education. The academic program also allows study in interdisciplinary programs in such fields as Asian studies, Black studies, Islamic studies, cognitive science, environmental studies, interpretation theory, Latin American studies, peace and conflict studies, and gender and sexuality studies. The College’s writing requirement designates certain courses in most disciplines as writing courses, designed to help students improve their skills in writing; students must take three. Distribution requirements in each of three divisions include three courses in the Natural Sciences and Engineering, one of which must have a lab component.

The College is currently expanding the faculty as part of a strategic initiative to recalibrate the formal teaching load to better match that of peer institutions and to assure that faculty can commit the time to the robust high impact learning experiences – supervising student theses, directed readings, community based learning projects and other one-on-one and small group setting engagements – that are the hallmarks of a residential liberal arts college. This expansion is occurring over a period of seven years, and to date has resulted in the allocation of new faculty positions in Anthropology, Arabic, Biology, Chemistry, Computer Science, Economics, Environmental Studies, History, Mathematics, Political Science, Statistics and Studio Art.

Swarthmore students may take courses offered by Bryn Mawr College, Haverford College and the University of Pennsylvania without payment of extra tuition. Swarthmore has collaborative agreements with institutions in Ghana, India, Poland, South Africa and Costa Rica. In addition,

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Swarthmore students may attend programs in many other countries abroad with the guidance of the College’s Director of Off-Campus Study.

Faculty

The College has 176 tenured and tenure-track positions. Essentially all (99%) of Swarthmore faculty members hold doctoral degrees or comparable terminal degrees in their respective fields. More than half of the faculty earned their highest degrees from Harvard University, Yale University, Columbia University, Princeton University, Stanford University, the University of Pennsylvania, Massachusetts Institute of Technology, the University of Chicago, the University of California, Berkeley, or Johns Hopkins University.

The faculty is primarily committed to teaching, but maintains scholarly output more typical of a large university. As noted above, the faculty teaching load is currently transitioning from five courses per year to four courses. This transition is expected to be complete in 2020-2021. The College maintains a liberal leave policy that allows a semester of fully paid leave as often as every fourth year. Approximately 20% of the faculty is on leave at any time in pursuit of their scholarly interests.

The College believes that it has been successful in recruiting and retaining a highly qualified faculty because of its instructional environment and leave policy. Policies regarding tenure and compensation are also important factors. All new tenure-track members of the faculty are evaluated for continuous tenure by the seventh year of service. This system is designed to encourage strong teaching, to protect academic freedom and integrity and to foster personal scholarship and professional development. In 2014-2015, 79% of the College’s faculty is tenured.

A key priority for the College has been to target faculty compensation (salaries plus benefits) to be competitive with the average compensation offered at a group of peer institutions.

The College is committed to attracting and retaining a diverse faculty. In 2014-15, 45% of the tenured and tenure-track faculty are women, and 21% are faculty of color.

In 1984, to assist in the steady regeneration of the faculty, the College began to offer an early retirement program to those members of the faculty who have reached the age of 60. Faculty who elect to retire and assume emeritus status retain certain privileges and are encouraged to remain involved in the College. Thus far, 62 tenured faculty members have elected early retirement.

Admissions

The College’s admissions policy emphasizes an active approach for attracting students. Representatives of the College visit more than 400 secondary schools each year and use computer-based systems and direct mail techniques to support recruiting efforts. Over 900 alumni are actively involved in the recruiting program both domestically and abroad. The College has also broadened the geographic area from the Middle Atlantic states. The student body comes from 48 states and 60 nations.

One of the primary admissions objectives of the College is to seek a student body that is broadly representative of the nation’s population and reflective of the global world. In order to achieve this, the College has increased the resources devoted to its admissions operation.

Over the past few years, interest in Swarthmore has been strong. In the last five years of completed admissions activity, first year student applications have ranged between 5,540 and 7,817. For the entering class in the fall of 2015, the College received 7,817 applications, about 19 applications for each available spot in the Class of 2019. The College has offered admission to 12% of the pool, and it is

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working to enroll a first-year class of 418. The greatest competition for students accepted by Swarthmore has been from Yale, Harvard, Princeton, Stanford, Brown, Columbia, Pennsylvania, and Chicago Universities, and Williams and Amherst Colleges.

Student Applications, Acceptances and Enrollments (entering fall class)

2010 2011 2012 2013 2014

Completed Applications 6,041 6,547 6,589 6,615 5,540 Number of Students Accepted 974 987 935 947 943 (% of Applications) 16% 15% 14% 14% 17% Number of Students Enrolled 388 386 378 388 407 (% of Accepted) 40% 39% 40% 41% 43% (% of Applications) 6% 6% 6% 6% 7% Percentage of Enrolled Students in Top 10% of High School Class (of schools that provide rank) 87% 84% 91% 89% 88% Median SAT Scores of Enrolled Class 1,440 1,440 1,460 1,450 1,460

Student Geographical Distribution1 (entering fall class)

2010 2011 2012 2013 2014 Middle Atlantic 39 41 35 37 34 New England 13 11 10 11 16 Midwest 8 10 11 8 6 Southeast 8 8 10 10 8 Southwest 6 2 3 5 6 Mountain States 2 2 2 2 1 Far West 14 16 16 18 13 Other 11 10 13 10 14

1 Percentage of the first year class entering in the Fall of the year indicated; percentages may not add to 100% due to rounding. 2 Geography is based on students’ high schools.

Costs of Attendance

The annual charges for full-time students for the past five academic years, as well as for 2015- 2016 appear below:

Tuition & Fees Room & Board Total

2010-11 $39,600 $11,900 $51,500 2011-12 $41,150 $12,100 $53,250 2012-13 $43,080 $12,670 $55,750 2013-14 $44,718 $13,152 $57,870 2014-15 $46,060 $13,550 $59,610 2015-16 $47,442 $13,958 $61,400

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The following table shows Swarthmore’s student charges (tuition, mandatory fees, room and board) in 20142015 in relation to the student charges for other educational institutions that are members of COFHE (Consortium on Financing Higher Education). The institutions listed (in order of highest to lowest student charges) include those most frequently attended by accepted applicants who elect not to attend Swarthmore.

Student Institution Charges Columbia $63,400 U Chicago $62,457 Dartmouth $61,947 Oberlin $61,788 Trinity $61,756 Northwestern $61,640 Johns Hopkins $61,306 Amherst $61,206 Wesleyan $61,198 U Penn $61,132 Georgetown $61,092 Williams $61,070 Cornell $60,964 Duke $60,936 U Rochester $60,668 Pomona $60,532 Washington $60,355 Carleton $60,102 Bryn Mawr $59,890 Yale $59,800 Smith $59,674 Swarthmore $59,610 Brown $59,428 Wellesley $59,038 Barnard $58,880 Harvard $58,607 Stanford $58,388 MIT $58,240 Princeton $55,440 Mt. Holyoke $55,146 Rice $53,966

Source: Consortium on Financing Higher Education, June 2014

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Student Financial Aid

Swarthmore offered institutional financial aid as early as 1893, and upholds firm commitments to admitting students without regard to their financial circumstances and meeting all demonstrated financial need. This “need-blind” admission policy, combined with a “need-based” financial aid policy, ensures that for each student admitted to the College, the difference between the College’s cost of attendance and the family’s ability to pay will be bridged by a financial aid award of scholarship and campus job.

In the 2013-14 academic year, 52% of Swarthmore students received institutional need-based financial aid. The average need was $39,449, and the average Swarthmore Scholarship component of its aid awards to meet that need was $34,940. For the past five fiscal years, the components of the College’s need-based financial aid were as shown in the following table (in thousands).

Components of Need-Based Financial Aid ($ in thousands) (fiscal year ended June 30)

2010 2011 2012 2013 2014

Funds Provided by the College scholarships/grants $23,519 $25,029 $27,171 $27,408 $27,218 loan 9 7 8 7 1 work 421 430 475 428 424 Subtotal $23,949 $25,466 $27,654 $27,843 $27,643

Outside Sources of Aid federal student aid programs 1 1,855 1,973 1,900 1,970 2,011 state student aid programs 2 160 143 171 200 167 other sources 3 597 566 645 709 789 Total $26,561 $28,148 $30,370 $30,722 $30,610

1 Includes federal SEOG, College work study, Perkins Loan, Pell Grants, Stafford Loans, ACG and SMART Grants. 2 Includes state scholarships. 3 Includes community/church/foundation/corporation/employer scholarships.

Beginning with the 2008-09 academic year, the College’s financial aid awards no longer included a loan component. Instead, additional scholarship was granted in loan-free aid awards.

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Student Enrollment

Over the years, Swarthmore has, by deliberate policy, attempted to retain its small size. Over 90% of the student body (excluding students studying abroad) resides on campus.

Full-Time Fall Student Enrollment

Class 2010 2011 2012 2013 2014 Senior 371 375 391 390 379 Junior 274 282 295 282 291 Sophomore 381 387 385 372 380 First Year 388 386 378 388 407 Other Students 5 10 6 4 12 Total On-Campus 1,419 1,440 1,455 1,436 1,469 Students Abroad 90 96 77 88 61 Total 1,509 1,536 1,532 1,524 1,530

Most students who enroll continue through graduation. Swarthmore’s six-year graduation rate based on the 2014 new first-year student cohort is 94.1%.

Financial Operations

Sources of Revenue. About 41% of the operating revenues of Swarthmore in the fiscal year ended June 30, 2014 came from tuition, student fees, and room and board charges (net of financial aid). Endowment income generated about 40% of operating revenue, and the remainder was provided by other income, such as gifts, grants and (non-endowment) investment income.

Budgeting. The College uses a five-year financial model as the basis for the development of annual operating and capital budgets. The model enables the College to view the financial impact of changes in key variables such as enrollment, tuition rate increases, endowment spending rates, salaries and benefits, size of faculty and staff, level of student financial aid, and various expense components. As a matter of practice, the College constructs an annual operating budget in which projected expenditures, plus provisions for (i) debt service on long-term debt, (ii) physical plant renewals and replacements, and (iii) planned contingencies, are balanced by an equivalent or greater amount of projected revenues.

Accounting and Financial Reporting. The College operates on a fiscal year ending June 30. The financial statements of the College are prepared in accordance with accounting principles generally accepted in the United States of America. The principles require that net assets, revenues, gains, expenses and losses be classified as unrestricted, temporarily restricted or permanently restricted based on the existence or absence of donor-imposed restrictions as follows:

Permanently Restricted - Net assets subject to donor-imposed stipulations that they be maintained permanently by the College. Generally, the donors of these assets permit the College to use all or part of the income earned. Contributions of permanently restricted net assets are primarily invested in the College’s permanent endowment funds.

Temporarily Restricted - Net assets whose use by the College is subject to donor-imposed or legal stipulations that can be fulfilled by actions of the College pursuant to those stipulations or that expire by the passage of time.

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Unrestricted – Net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Board of Managers, as quasi endowment, or may otherwise be considered limited by contractual agreements with outside parties.

The report of PricewaterhouseCoopers LLP, the College’s independent accountants, together with the College’s financial statements as of and for the years ended June 30, 2014 and 2013, are included in Appendix B.

Investments and Net Assets

The market value (in thousands) of the College’s investment assets as of the past five fiscal year- ends is summarized in the table below. Unrestricted endowment assets can be utilized by the College, if necessary, for operating expenditures at the discretion of the Board of Managers, and temporarily restricted endowment assets can be so utilized in accordance with the donor’s restrictions and Commonwealth of Pennsylvania law. However, assets contributed to the College as permanently restricted endowment cannot be utilized for operating expenditures.

($ in thousands, for the fiscal year ended June 30) 2010 2011 2012 2013 2014 Permanently Restricted Endowment $156,620 $161,104 $169,214 $173,453 $180,819 Unrestricted Endowment 464,944 544,505 553,547 604,730 681,913 Temporarily Restricted Endowment 627,690 802,874 776,014 856,502 1,013,937 Total Endowment $1,249,254 $1,508,483 $1,498,775 $1,634,685 $1,876,669

Life Income and Annuity 42,873 43,271 40,713 41,445 45,760 Other 10,491 12,037 39,267 76,650 64,409 Total $1,302,618 $1,563,791 $1,578,755 $1,752,780 $1,986,838

The Board of Managers has fiduciary responsibility for all endowment assets. This responsibility is exercised through supervision by the Investment Committee of the Board of Managers, which oversees all investments and investment transactions. The chair of the Investment Committee is Christopher Niemczewski, who is a College alumnus and the president and founder of Marshfield Associates, an investment management firm.

The endowment assets are managed with the objective of generating a total return sufficient to preserve the purchasing power of the endowment principal and to provide a material portion of the current financial needs of the College according to the College's Investment Policy Statement for Board of Managers. To achieve such growth, the endowment has been heavily invested in common stocks for many decades. Fixed income investments are made in order to provide a predictable source of current income and to protect the income stream during periods of extreme inflation or deflation. The allocation to certain alternative assets (private equity, real assets, and marketable alternative strategies such as hedge funds) has increased in recent years. These have been added to increase return, decrease volatility, and provide diversification. If called upon at June 30, 2014, management estimated that it could have liquidated within 30 days approximately $965 million to meet short-term needs and provide investment flexibility.

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Support to the budget from the endowment over the long-term is designed to be between 3.5% and 5.0% of the fair market value of the primary pool of the endowment. The total endowment distribution in the fiscal year ended June 30, 2014 was $56,096,000 representing 3.52% of the market value of the endowment at the beginning of that fiscal year.

The amount of endowment investment return that is used to support current operations is set by the Board of Managers annually, and is guided by a policy of the Investment Committee that seeks to balance spending for current purposes with protection of the real dollar value of the endowment.

The endowment is invested with more than 100 investment advisors. The following table shows the asset allocation at the most recent fiscal year-end.

Endowment Investment Allocation

2014 Common Stocks Domestic (%) 23 International (%) 23 Private Equity (%) 17 Marketable Alternatives (%) 12 Real Assets (%) 9 Fixed Income/Cash (%) 16 100

The chart below shows the performance of the College’s endowment over longer periods of time. Return figures are net of fees except for years before 1994 when fees were estimated to range between 0.4% and 0.6% annually. The value of the endowment at June 30, 2014 was $1.877 billion.

Average Annual Endowment Returns

For the Period Ended June 30, 2014 Total Return 1 Year 17.8% 3 Years 10.4% 5 Years 14.0% 10 Years 8.8%

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The College’s endowment assets and other investments are included as part of the College’s net assets in its financial statements. By the nature of restrictions placed on some funds by donors, only certain net assets are currently expendable at the discretion of the Board of Managers. The following table reflects the College’s total net assets, expendable net assets and unrestricted net assets as of June 30 for the past five fiscal years (dollars in thousands):

2010 2011 2012 2013 2014

Total net assets $1,381,277 $1,642,252 $1,627,255 $1,790,693 $2,044,159 less permanently restricted net assets (176,947) (179,431) (186,680) (197,948) (207,500) less net investment in plant (58,242) (59,014) (62,369) (63,732) (70,917) Expendable net assets $1,146,088 $1,403,807 $1,378,206 $1,529,013 $1,765,742 less temporarily restricted net assets1 (657,744) (834,746) (802,184) (899,189) (1,060,356) Expendable Unrestricted Net Assets $488,344 $569,061 $576,022 $629,824 $705,386

1 As of June 30, 2014, temporarily restricted net assets were $1,060,356, of which $1,013,937 constituted cumulative net gains on permanently restricted endowment. Commonwealth of Pennsylvania law permits the College to allocate a portion of these net gains to unrestricted net assets each year.

Employees

About 60% of the College’s operating expenses are devoted to faculty and staff salaries and fringe benefits. There are approximately 747 full-time and part-time faculty and staff employees. There are no unions representing any employees on campus.

The College offers a defined contribution retirement plan to faculty and staff through the Teachers Insurance Annuity Association-College Retirement Equities Fund (TIAA-CREF) or through a selection of the Vanguard mutual funds, at the employee’s option. The plan requires mandatory participation by eligible employees, and both the College and the plan participants make contributions. Because the plan is funded by contributions on a current basis, no unfunded liability exists for employee past service under the plan.

Upon retirement, the College provides some retiree health benefits to eligible employees. The total obligation of the College for health benefits and other contractual agreements with former employees were $18,062,000 at June 30, 2014.

College Indebtedness

As of June 30, 2014 the College had five outstanding bond issues through the Swarthmore Borough Authority, as follows: $76,085,000 Swarthmore College Revenue Bonds, Series A of 2006 (the “2006A Bonds”); $26,665,000 Swarthmore College Revenue Bonds, Series 2011 (the “2011 (June Issue) Bonds”); $13,830,000 Swarthmore College Revenue Bonds, Series 2011B (the “2011B (December Issue) Bonds”); $42,335,000 Swarthmore College Revenue Bonds, Series 2011C (the “2011C (December issue) Bonds”); and $47,340,000 Swarthmore College Revenue Bonds, Series 2013 (the “2013 Bonds”). The College has two letters of credit taken out on August 21, 2014 and September 11, 2014 as requested by the Pennsylvania Department of Public Transportation and the Borough of Swarthmore for $2.4 million and $3.1 million, respectively, serving as security for performance of road construction and construction projects.

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The table below illustrates the College’s fiscal year debt service requirements after issuance of the 2015 bonds.

Fundraising and Comprehensive Campaign

The College concluded its last comprehensive campaign on December 31, 2006 with a total of $245.5 million in gifts and pledges raised. After concluding the campaign the College embarked on its next comprehensive planning effort, which identified priorities for the coming years and was a major component of the institutional self-study for the Middle States accreditation review in 2009. The completion of this effort was interrupted by the economic downturn and the College’s recent presidential transition.

Under Rebecca S. Chopp’s presidency in fiscal years 2011-14 the College secured $196.8 million in commitments in support of Strategic Directions for Swarthmore College, a plan begun in 2012 outlining a vision for the College for the next decade along with the quiet phase of a comprehensive campaign to raise an anticipated $400 million in support of strategic initiatives outlined in the report. New initiatives in the sciences and financial aid for students, comprising nearly half the total, received the largest commitments to date. During the five years of Rebecca Chopp’s tenure the College received on average $23.6 million in gifts and pledge payments from private sources annually. When Constance Cain Hungerford became interim president on July 1, 2014, the quiet phase of the campaign was extended until a new president would be in place. Valerie Smith, distinguished scholar of African American literature and current Dean of the College at Princeton University, became Swarthmore’s 15th president on July 1, 2015, and the College anticipates the public phase of the comprehensive campaign will be launched in fall 2016.

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Gifts, Grants and Bequests

The proceeds of gifts and bequests received by the College for the fiscal years ended June 30, 2010 through June 30, 2014 are presented in the following table (dollars in thousands).

2010 2011 2012 2013 2014 Total Annual Giving $ 4,704 $ 4,913 $ 4,594 $ 5,000 $ 5,426 Other Gifts and Bequests 10,076 11,377 17,449 46,479 16,398 Total Voluntary Support 14,780 16,290 22,043 51,479 21,824 Government Grants 1,471 1,938 1,991 1,993 2,050 Total Gifts, Grants and Bequests1 $16,251 $18,228 $24,034 $53,472 $23,874 Alumni Participation Rate (of alumni solicited) 55.0% 56.0% 53.1% 53.0% 54.5% ______1 Gift totals may differ from those reported in the audited financial statements, primarily due to pledges received and treatment of irrevocable trusts with Swarthmore College as remainder for which the College is not trustee.

Physical Plant

The College campus occupies about 425 acres, most of which has been developed as a horticultural and botanical collection of trees, shrubs, and herbaceous plants through the provisions of the Scott Arboretum, established in 1929. When the College opened in the fall of 1864, it consisted of one building, Parrish Hall. This building still serves as the main administration building and a residence hall. The campus buildings now number 60 (not including faculty housing), with approximately 1,553,000 total gross square feet.

In 2013, Swarthmore College completed a Campus Master Plan informed by its Strategic Framework Plan. The College is now designing and constructing projects that upgrade and expand facilities in support of its mission, as determined within the Master Plan, including a new 21,000 square foot multipurpose facility that supports individual strength and conditioning programs as well as group fitness and wellness programs, and also provides teaching space for the theater program. On schedule to be completed this summer is a new infill addition which will connect two residence halls, add 68 beds, and make the entire complex ADA accessible. The construction of Town Center West, a 40-room inn with restaurant and campus community and book store, that will welcome guests and strengthen downtown Swarthmore, has also commenced.

Several upcoming projects identified in the Campus Master Plan are in the design stage. A new student gathering space is being designed to provide additional accessible support for residence life while meeting the standards of the Living Building Challenge. Construction will begin this summer. A new Engineering and interdisciplinary science building of approximately 170,000 is currently in the schematic design phase, with construction slated to begin in 2017. Construction will begin within a year on a new 16,000 square foot academic support building that will first serve as swing space during the construction of the new science building, and then will be used for other academic departments. Also in progress is work on a departmental migration plan that will inform the renovations of the building currently occupied by Biology and the space currently occupied by the Art Department. The construction of a 166-space parking lot to move student parking to the campus periphery will be completed within the upcoming year. Also currently in design is a new suite-style residence hall for at least 120 students, scheduled to open for fall 2017. Sharples dining hall, as well as Clothier Hall, which contains a snack bar and student life spaces, will be re-envisioned during project formation work later this year. Finally, this summer, the

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College will begin a visioning exercise for the future of its libraries, with the goal of starting library design work in 2016.

All of the work mentioned above will be designed and constructed to the standards of our Sustainability Framework Plan, which targets net zero carbon emissions. In addition to the above, planned facilities renovation and renewal projects will continue our planned 5-year cycle of preventative and restorative maintenance on existing buildings. The College annually funds a reserve and replacement (the "R&R" Fund) through the approved operating budget. The approved budget allocation to the R&R Fund is $9.2 million and $10.2 million for the 2015 and 2016 fiscal years, respectively. The R&R Fund is anticipated to be used to fund multiple projects that are approved but not debt financed. It is not anticipated that there will be significant overlap between projects funded by the R&R Fund and those funded through a bond financing. The College anticipates funding additional debt-financed, new money capital projects during fiscal years 2016 and 2017 for approximately $175 million and further anticipates refinancing the 2006 bond issue during fiscal year 2017 for approximately $76 million, as authorized by the debt resolution approved by the Board of Managers on May 2, 2015.

The College’s buildings and its contents and equipment have an estimated replacement value of $504 million. Swarthmore carries customary commercial insurance policies, including coverage for real and personal property, comprehensive general and excess liability, educators’ legal liability, and automobile liability.

Litigation and Other Proceedings

The College, like other similar institutions, is subject to a variety of lawsuits and proceedings arising in the routine course of business. In the opinion of the College, no litigation or other proceedings, individually or in the aggregate, currently pending, or to the knowledge of the College threatened against it, will result in a material adverse effect on its financial condition.

As is the case with several colleges and universities today, the College is currently participating with the U.S. Department of Education in their investigations of student complaints alleging that the College failed to adequately report and/or respond to sexual misconduct on its campus, as required by the Clery Act and Title IX of the Education Amendments of 1972. While the outcome of these investigations has not yet been determined, in recent years, the College has conducted both an internal and external review of its policies and procedures related to sexual misconduct. In order to ensure that the College continuously adheres to best practices in this area, the College commissioned a nationally-recognized consulting firm to conduct an independent evaluation of the College's sexual misconduct policies and procedures. The College has implemented each of the recommendations of that independent evaluation, and is confident that its protocols are among the leading best practices within higher education.

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Appendix B

Audited Consolidated Financial Statements of Swarthmore College as of and for the Years Ended June 30, 2014 and 2013

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Swarthmore College Consolidated Financial Statements June 30, 2014 and 2013

SWARTHMORE COLLEGE TABLE of CONTENTS June 30, 2014 and 2013 ______

Page(s)

Report of Financial Statements ...... 1

Consolidated Financial Statements

Statement of Financial Position ...... 2

Statements of Activities...... 3–4

Statement of Cash Flows ...... 5

Notes to Consolidated Financial Statements ...... 6–22

Independent Auditor’s Report

To the Board of Managers

We have audited the accompanying consolidated financial statements of Swarthmore College, which comprise the consolidated statement of financial position as of June 30, 2014 and June 30, 2013 and the related consolidated statements of activities and changes in net assets, cash flows for the year then ended.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Swarthmore College’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Swarthmore College's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Swarthmore College at June 30, 2014, 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.

PricewaterhouseCoopers LLP Philadelphia, PA September 19, 2014

PricewaterhouseCoopers LLP,Two Commerce Square, 2001 Market Street, Philadelphia, PA 19103-7042 T: (267) 330-3000, F: (267) 330-3300, www.pwc.com/us

SWARTHMORE COLLEGE

STATEMENTS OF FINANCIAL POSITION

as of June 30, 2014 and 2013 (in thousands)

ASSETS 2014 2013

Cash and cash equivalents $ 28,130 $ 23,343 Accounts receivable, net $ 2,908 1,236 Prepaid expenses and inventories $ 3,819 3,239 Contributions receivable $ 31,909 27,816 Student loans receivable, net $ 1,113 1,394 Employee mortgages receivable $ 13,228 12,848 Assets restricted to investment in property and equipment $ 19,211 6,416 Property and equipment, net $ 253,629 246,933 Investments, at market Endowment $ 1,876,669 1,634,685 Life income and annuity $ 45,760 41,445 Other $ 64,409 76,650

Total assets $ 2,340,785 $ 2,076,005

LIABILITIES

Accrued compensation $ 7,632 $ 7,447 Payables and other accruals 8,743 7,492 Student deposits 2,148 2,170 Deferred payments and other liabilities 58,599 60,829 Refundable government loan funds 1,742 1,742 Bonds and notes payable 217,762 205,632

Total liabilities 296,626 285,312

NET ASSETS

Unrestricted $ 776,303 $ 693,556 Temporarily restricted 1,060,356 899,189 Permanently restricted 207,500 197,948

Total net assets 2,044,159 1,790,693

Total liabilities and net assets $ 2,340,785 $ 2,076,005

See accompanying notes to consolidated financial statements.

2 SWARTHMORE COLLEGE

CONSOLIDATED STATEMENT OF ACTIVITIES

for the year ended June 30, 2014

(in thousands)

Restricted Total Unrestricted Temporarily Permanently 2014 Operating revenues: Student tuition and fees $ 68,121 $ $ $ 68,121 Room and board 17,500 17,500 Less student aid (28,062) (28,062) Net student tuition and fees 57,559 0 0 57,559 Revenues from investments Endowment spending distribution 54,114 1,982 56,096 Other 685 685 Private gifts and grants 10,949 3,337 14,286 Government grants 462 1,606 2,068 Other additions 7,465 994 8,459 Transfers among net asset classes 12 (12) 0 Net assets released from restrictions 6,999 (6,999) 0 Total operating revenue 138,245 908 0 139,153 Operating expenses: Instruction 49,920 49,920 Academic support 20,357 20,357 Student services 12,401 12,401 Institutional support 26,066 26,066 Auxiliary activities 22,535 22,535 Research and public service 4,676 4,676 Total operating expenses 135,955 0 0 135,955 Increase in net assets from operating activities 2,290 908 0 3,198 Nonoperating activities: Net realized and unrealized gain on investments, net of endowment spending 76,653 161,304 237,957 Private gifts and grants 892 1,484 8,991 11,367 Change in present value of life income funds (728) (728) Maturities of annuity and life income funds 1,150 (1,578) 428 0 Change in other post retirement benefits (1,399) (1,399) Other 921 2,117 33 3,071 Transfers among net asset classes (1,407) 1,307 100 0 Net assets released from restrictions 3,647 (3,647) 0 0 Increase in net assets from nonoperating activities 80,457 160,259 9,552 250,268 Net increase in net assets for the year 82,747 161,167 9,552 253,466 Net Assets, June 30, 2013 693,556 899,189 197,948 1,790,693 Net Assets, June 30, 2014 $ 776,303 1,060,356$ $ 207,500 $ 2,044,159

See accompanying notes to consolidated financial statements.

3 SWARTHMORE COLLEGE

CONSOLIDATED STATEMENT OF ACTIVITIES

for the year ended June 30, 2013

(in thousands)

Restricted Total Unrestricted Temporarily Permanently 2013 Operating revenues: Student tuition and fees $ 66,421 $ $ $ 66,421 Room and board 17,204 17,204 Less student aid (28,395) (28,395) Net student tuition and fees 55,230 0 0 55,230 Revenues from investments Endowment spending distribution 54,533 1,325 55,858 Other 830 830 Private gifts and grants 8,203 8,538 16,741 Government grants 494 1,495 1,989 Other additions 7,008 1,002 8,010 Transfers among net asset classes 25 (25) 0 Net assets released from restrictions 6,199 (6,199) 0 Total operating revenue 132,522 6,136 0 138,658 Operating expenses: Instruction 47,280 47,280 Academic support 17,688 17,688 Student services 11,749 11,749 Institutional support 24,479 24,479 Auxiliary activities 21,787 21,787 Research and public service 5,164 5,164 Total operating expenses 128,147 0 0 128,147 Increase in net assets from operating activities 4,375 6,136 0 10,511 Nonoperating activities: Net realized and unrealized gain on investments, net of endowment spending 43,704 78,670 122,374 Private gifts and grants 1,038 5,596 20,901 27,535 Change in present value of life income funds 207 207 Maturities of annuity and life income funds 1,332 (1,727) 395 0 Change in other post retirement benefits 423 423 Other 1,011 1,354 23 2,388 Transfers among net asset classes 155 9,896 (10,051) 0 Net assets released from restrictions 3,127 (3,127) 0 0

Increase in net assets from nonoperating activities 50,790 90,869 11,268 152,927 Net increase in net assets for the year 55,165 97,005 11,268 163,438 Net Assets, June 30, 2012 638,391 802,184 186,680 1,627,255 Net Assets, June 30, 2013 $ 693,556 $ 899,189 $ 197,948 $ 1,790,693

See accompanying notes to consolidated financial statements.

4 SWARTHMORE COLLEGE

STATEMENTS OF CASH FLOWS

for the years ended June 30, 2014 and 2013 (in thousands)

2014 2013 Cash flows from operating activities

Change in net assets $ 253,466 $ 163,438 Adjustments to reconcile change in net assets to net cash used by operating activities Depreciation 7,455 7,293 Amortization of bond premium (1,725) (1,674) Donor restricted gifts (6,759) (14,400) Receipt of contributed securities (3,954) (25,855) Proceeds of contributed securities 1,368 25,156 Net unrealized and realized gains on investments (284,071) (165,533) Change in student loan reserve 10 (55) Changes in operating assets and liabilities Change in accounts receivable, contributions receivable, prepaid expenses and inventories (6,345) (9,388) Change in deferred payments and other liabilities (2,230) 14,278 Change in student deposits, payables and accruals (972) (3,065) Net cash used by operating activities (43,757) (9,805)

Cash flows from investing activities Purchase of property and equipment (11,765) (12,207) Proceeds from sale of investments 926,420 1,105,721 Purchase of investments (876,757) (1,113,795) Student loans and employee mortgages advanced (1,566) (1,340) Payments on students loans and employee mortgages 1,457 1,633 Net cash provided/used by investing activities 37,789 (19,988)

Cash flows from financing activities Donor restricted gifts 6,759 14,400 Proceeds from contributed securities designated for purchase of property and equipment and long-term investment 2,936 294 Change in assets restricted to investment in property and equipment (12,795) 10,903 Proceeds from bonds and notes payable 52,616 0 Payments on bonds and notes payable (38,761) (4,726) Net cash provided by financing activities 10,755 20,871

Change in cash and cash equivalents 4,787 (8,922)

Cash and cash equivalents, beginning of year 23,343 32,265

Cash and cash equivalents, end of year $ 28,130 $ 23,343

Interest paid $ 8,765 $ 8,370 Non-cash capital expenditures in accounts payable $ 2,386 $ 2,053

See accompanying notes to consolidated financial statements.

SWARTHMORE COLLEGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 and 2013 (dollars in thousands)

Swarthmore College (the College) is a private coeducational college of liberal arts and engineering located in Swarthmore, Pennsylvania.

1. Summary of Significant Accounting and Reporting Policies

Reporting Entity The consolidated financial statements of Swarthmore College include a wholly-owned, for-profit company, Marjay Productions, Inc., which was received as a bequest by a donor. The purposes of Marjay Productions, Inc. are to hold copyrights of the donor’s works and to receive royalties. Its financial operations are immaterial to Swarthmore College as a whole.

The consolidated financial statements of Swarthmore College include a wholly-owned, for-profit, sole member Pennsylvania Limited Liability Corporation named Parrish LLC that was created on July 11, 2012. The purpose of Parrish LLC is to acquire and operate a hotel/inn and restaurant facility in the Borough of Swarthmore, PA. Its financial operations are immaterial to Swarthmore College as a whole.

Basis of Presentation The College's consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The principles require that net assets, revenues, gains, expenses and losses be classified as unrestricted, temporarily restricted or permanently restricted based on the existence or absence of donor-imposed restrictions as follows:

Permanently Restricted - Net assets subject to donor-imposed stipulations that they be maintained permanently by the College. Generally, the donors of these net assets permit the College to use all or part of the income earned. Contributions of permanently restricted net assets are primarily invested in the College's permanent endowment funds.

Unrestricted - Net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Board of Managers, as quasi endowment, or may otherwise be considered limited by contractual agreements with outside parties.

Expenses are reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations that simultaneously increase one class of net assets and decrease another are reported as reclassifications between the applicable classes of net assets.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the valuation of alternative investments, allowance for doubtful accounts and accrued employee benefits. Actual results could differ from those estimates.

6 Notes to the consolidated financial statements (continued) (dollars in thousands)

Cash Equivalents Cash equivalents are readily convertible to cash and have an original maturity date of three months or less from the date purchased. Pooled endowment fund cash equivalents invested with managers are classified as investments.

New Accounting Pronouncements In October 2012, the FASB issued a standard on Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows. This standard defines the appropriate financial reporting for the receipt of donated securities in the Statement of Cash Flows. Donated securities with no donor-imposed restrictions are to be included in the operating section of the statement, while donated securities with donor-imposed long-term restrictions should be included in the financing section. The College has adopted this standard in Fiscal Year 2014 and disclosures for the years ended June 30, 2014 and 2013 pertaining to this topic have been included in the consolidated financial statements.

In April 2013, the FASB issued a standard on Not-for-Profit Entities: Services Received from Personnel of an Affiliate. This standard defines the revenue recognition for services received from personnel that directly benefit the recipient not-for-profit entity. The amendment is effective prospectively for fiscal years beginning after June 15, 2014. The College does not anticipate any impact to the consolidated financial statements and disclosures resulting from this standard.

Reclassification Certain 2013 amounts have been reclassified in the College’s consolidated financial statements to conform to the 2014 presentation.

Investments Refer to the Investments footnote 3 for the investments reporting policy.

Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Expenditures for new construction, major renovations and equipment are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of buildings (60 years), improvements (15 years) and equipment (5 years). Depreciation is funded annually by internally designating funds for plant renewal and replacement. Amounts totaling $9,365 and $9,927 were so designated for the years ended June 30, 2014 and 2013, respectively.

Works of art, historical treasures and similar assets have been recognized at their estimated fair value at the time of gift based upon appraisals or similar valuations. All material items, whether contributed or purchased, have been capitalized. Works of art, historical treasures and similar assets are not subject to depreciation.

Contributions Contributions and investment income with donor-imposed restrictions that are met in the same year as received or earned are reported as unrestricted revenues. Contributions and investment income with donor-imposed restrictions that are not met in the same year as received or earned are reported as temporarily restricted revenues and are reclassified to unrestricted net assets when the donor-imposed restrictions are satisfied. Temporarily restricted revenues or net assets are used prior to utilizing unrestricted revenues or net assets. Contributions restricted for the acquisition of property and equipment are reported as an increase to temporarily restricted net assets within the nonoperating section of the consolidated statement of activities. These contributions are recorded in assets in the accompanying statement of financial position under the caption, “Assets restricted to investment in property and equipment” until utilized for their intended purpose.

7 Notes to the consolidated financial statements (continued) (dollars in thousands)

Contributions receivable are stated at their present values and are net of any allowance for uncollectible contributions. Present values are determined using the applicable market rate in the period contributions are recognized, which ranges from 0.95% to 5.06%.

Compensated Absences Accrued compensation includes vacation time earned by hourly and staff employees, but not yet taken as of fiscal year-end. A staff employee is entitled to receive pay in lieu of vacation upon termination. Employees may accrue a maximum of 240 hours of vacation. Accrued vacation payable amounted to $2,423 and $2,393 as of June 30, 2014 and 2013, respectively.

College Housing Programs For employees who meet certain eligibility requirements, the College has a rental and mortgage assistance program. The goal of the programs is to encourage eligible faculty and staff to live close to campus for the enhancement of the community and greater access for students. The College Mortgage Loan program permits 20, 25, 30 or 40 year monthly amortizing first mortgage loans of up to 100% of the College appraised value (subject to a cap) for homes which are within a specified distance to faculty, instructional staff and other staff members who meet certain eligibility requirements. All mortgages must be paid off in full within 360 days of the termination of employment for any reason (death, retirement or severance). The interest rate on such mortgage loans is reviewed and updated on a quarterly basis. Management evaluates current economic conditions and collection history to determine if an allowance is necessary. Currently, there is no associated allowance for the receivables held under this program. The College owns a number of houses and apartments which are rented to faculty, instructional staff and other staff members who meet certain eligibility requirements.

Subsequent Events The College evaluated the period from June 30, 2014, the date of the financial statements, through September 19, 2014, the date of the issuance of the financial statements for subsequent events. On August 21, 2014, the College took out a letter of credit in the amount of $2.4 million as required by the Pennsylvania Department of Public Transportation related to a road construction project. On September 11, 2014, the College took out a letter of credit in the amount of $3.1 million as required by the Borough of Swarthmore related to the College’s new development and construction project. The College had no other reportable subsequent events between June 30, 2014 and September 19, 2014.

2. Contributions Receivable

Contributions receivable at June 30, 2014 and 2013 were as follows:

Due in: 2014 2013 Less than one year $20,049 $14,500 One to five years 9,569 11,013 More than five years 3,788 3,464 33,406 28,997 Unamortized discount (753) (487) Allowance for doubtful contributions (744) (674) $31,909 $27,816

8 Notes to the consolidated financial statements (continued) (dollars in thousands)

3. Investments

The College records its investments at fair value in accordance with the Fair Value Measurement accounting standard. The value of publicly-traded fixed income and equity securities are based upon quoted market prices at the close of business on the last day of the fiscal year. As a practical expedient, the College is permitted to record the fair value of an investment at the measurement date using the reported NAV or capital account balance without further adjustment in most cases. When the reported NAV or capital account balance is not at the measurement date, the most current NAV or capital account balance adjusted for subsequent cash flows is used. The College has determined that this fairly represents fair value as of June 30, 2014 and 2013.

The College’s interests in private equity and real asset limited partnerships and other nonmarketable investments managed by investment companies are carried at the capital account balance or NAV as determined by the investment managers as of June 30, 2014 and 2013. The College performs additional due diligence and reviews these for reasonableness. The College has assessed factors including, but not limited to, managers’ compliance with the Fair Value Measurement standard in their audited financial statements, price transparency, valuation policies, redemption conditions and restrictions.

Endowment investments include the College’s permanent funds and quasi-endowment funds. Although quasi-endowment funds have been established by the Board of Managers for the same purposes as endowment funds, any portion of quasi-endowment funds may be expended.

Annuity, unitrust and life income funds periodically pay either the income earned or a fixed percentage of the assets to designated beneficiaries and terminate at a designated time, usually upon the death of the last designated income beneficiary. The College’s remainder interest is then available for use by the College as designated by either the donor or the Board of Managers. The actuarial liability for the charitable gift annuities as of June 30, 2014 and 2013 is based on the present value of future payments discounted at rates that vary by participant from 2.0% to 11.6% and the 2000CM Mortality Table. The actuarial liability for the unitrusts as of June 30, 2014 and 2013 is based on the present value of future payments discounted at rates that vary by trust from 5% to 9% and the Annuity 2000 Mortality Table.

The Board of Managers sets the level of distribution of endowment return annually. In fiscal years 2014 and 2013, the distribution of the endowment income exceeded the net yield (interest and dividends less fees) generated by endowment fund investments: therefore, $46,114 and $43,159, respectively, of net realized gains were allocated to the endowment spending distribution.

Net realized and unrealized gains on permanently restricted investments are included as either unrestricted or temporarily restricted revenues unless stipulated by the donor for perpetuity. The Commonwealth of Pennsylvania has not adopted the Uniform Management of Institutional Funds Act (UMIFA) or the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Rather, the Pennsylvania Uniform Principal and Income Act (Pennsylvania Act) governs the investment, use and management of the College’s endowment funds. Commonwealth of Pennsylvania law permits the College to define as income each year a portion of these net realized gains. The amount so designated when added to net yield (interest and dividends less fees) cannot exceed 7% of the average of the past three fiscal years’ fair values of the permanently restricted assets. The difference between the endowment distribution and the total income is included in unrestricted net assets. Pursuant to this Commonwealth of Pennsylvania law and at the direction of the Board of Managers, $14,010 and $11,606 of net realized gains on endowments which have their earnings distributed for general purposes were included in unrestricted revenues in fiscal years 2014 and 2013, respectively.

The College has various sources of internal liquidity at its disposal, including cash, cash equivalents, marketable debt and equity securities. If called upon at June 30, 2014, management estimates that it

9 Notes to the consolidated financial statements (continued) (dollars in thousands)

could have liquidated within 30 days approximately $965 million (unaudited) to meet short-term needs and provide investment flexibility.

Investment activity for fiscal years 2014 and 2013 was:

Endowment Annuity and and similar Life Income 2014 2013 funds funds Other Total Total Investments, beginning of year $ 1,634,685 $ 41,445 $ 76,650 $ 1,752,780 $ 1,578,755 Contributions 10,121 1,496 11,617 11,519 Maturities of annuity and life income funds (2,260) (2,260) (2,913) Other (1,245) (415) (1,660) (575) Transfers in 6,834 6,834 46,858 Transfers out (5,956) (15,560) (21,516) (5,682) 10,999 (2,009) (15,975) (6,985) 49,207 Interest and dividends 18,535 1,181 19,716 21,610 Unrealized and realized gains and (losses) 274,520 5,817 3,734 284,071 165,533 Investment management fees (5,974) (5,974) (5,678) 287,081 6,998 3,734 297,813 181,465 Payments to annuity and life income beneficiaries (674) (674) (789) Endowment spending distribution Unrestricted (54,114) (54,114) (54,533) Temporarily Restricted (1,982) (1,982) (1,325) (56,096) (674) 0 (56,770) (56,647) Investments, end of year $ 1,876,669 $ 45,760 $ 64,409 $ 1,986,838 $ 1,752,780

The Fair Value Measurement accounting standard established a three-level hierarchy for fair value measurements based on the transparency of information used in the valuation of an asset or liability as of the measurement date. Categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value. Observable inputs reflect market data obtained from sources independent of the reporting entity, and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

- Level I-Quoted prices are available in active markets for identical investments as of the reporting date.

- Level II- Pricing inputs, including broker quotes, are generally those other than exchange-quoted prices in active markets, which are either directly or indirectly observable as of the reporting date.

10 Notes to the consolidated financial statements (continued) (dollars in thousands)

- Level III- Pricing inputs are unobservable for the investment and include situations where a/ there is minimal, if any, market activity for the investment and b/ the inputs used in determination of fair value require significant management judgment or estimation.

The endowment objective established by the Board of Managers is to provide a sustainable level of distribution in support of the College’s annual operating budget while preserving the real purchasing power of the endowment before gifts. The endowment provides significant support of the College’s operations; therefore, endowment policies seek to achieve stability of and sustained growth in this support. The College aims for the distribution from the endowment for operations to grow over time at least as quickly as the average annual increase in College costs. In furtherance of these objectives, the endowment is invested in a diversified investment portfolio of equity and fixed income securities in order to reduce volatility and achieve targeted risk-adjusted returns over complete market cycles.

The College’s investment objectives guide its asset allocation policy and are achieved by investing with external investment management firms who utilize different investment strategies and who operate through a variety of investment vehicles, including separate accounts, commingled funds managed by investment companies and limited partnerships. The College has investments in six asset categories:

- Cash and Cash Equivalents are investments in short-term cash and money market instruments. These are able to be liquidated immediately or within 30 days.

- Fixed Income includes investments in fixed income securities, including U.S. Treasury bonds and Treasury Inflation-Protected securities. Level I assets have immediate liquidity while Level III assets have liquidity provisions similar to those for marketable alternatives, as described below.

- Public Equity includes investment in publicly-traded stocks of domestic and international companies. Level I and Level II assets are able to be liquidated immediately or within 30 days. Level III assets have liquidity provisions similar to those for marketable alternatives, as described below.

- Real Assets include investments in real estate and natural resources such as oil and gas and commodities. Level II assets are able to be liquidated within 30 days. Level III assets are invested through limited partnerships which have stated terms of typically 10 to 12 years. The remaining terms of the College’s private real estate and natural resource investments range from 1 to 10 years and 3 to 25 years respectively.

- Private Equity includes investments in buyouts, venture capital and distressed companies. These assets are considered to be Level III and are invested through limited partnerships which have stated terms of typically 10 to 12 years. The remaining terms of the College’s private equity investments range from 1 to 20 years.

- Marketable Alternatives include investments in equity hedge funds, risk arbitrage and distressed securities. These are typically investments managed by investment companies which are subject to restrictions that limit 1/ the College’s ability to redeem/withdraw capital from such investment during a specified period of time subsequent to the initial investments and/or 2/the amount of capital that investors may redeem/withdraw as of a given redemption/withdrawal date. Capital available for redemption/withdrawal may also be subject to redemption/withdrawal charges. Certain investments in illiquid securities may have additional liquidation restrictions. Investments in Marketable Alternatives generally limit redemptions to monthly, quarterly, semi-annually, annually or longer, at fair value and require between 45 and 180 days notice.

11 Notes to the consolidated financial statements (continued) (dollars in thousands)

A summary of investments, measured in accordance with the Fair Value Measurement standard, as of June 30, 2014 is as follows:

Significant Quoted Prices In Significant Other Unobservable Active Markets Observable Inputs Inputs Level I Level II Level III Total Endowment Cash and Cash Equivalents $ 167,980 $ - $ - $ 167,980 Fixed Income 73,666 37,475 111,141 Public Equity 268,382 $ 362,404 241,960 872,746 Real Assets 11,616 160,358 171,974 Private Equity 323,167 323,167 Marketable Alternatives 229,661 229,661 Total Endowment $ 510,028 $ 374,020 $ 992,621 $ 1,876,669

Life income 45,760 45,760 Other 62,599 1,810 64,409 Total Investments $ 618,387 $ 374,020 $ 994,431 $ 1,986,838

Changes to the reported amounts of investments measured at fair value on a recurring basis using significant unobservable (Level III) inputs as of June 30, 2014 are as follows:

Fixed Public Private Marketable Income Equity Real Assets Equity Alternatives Other Total Fair Value, June 30, 2013 $38,250 $164,346 $146,135 $316,383 $243,098 $1,777 $909,989 Realized gains/(losses) 3,952 5,945 44,220 11,803 7 65,927 Unrealized gains/(losses) (775) 51,500 8,634 17,241 11,116 87,716 Purchases 38,769 29,865 34,457 18,250 199 121,540 Sales (16,607) (30,221) (89,134) (54,606) (173) (190,741) Fair Value, June 30, 2014 $37,475 $241,960 $160,358 $323,167 $229,661 $1,810 $994,431

12 Notes to the consolidated financial statements (continued) (dollars in thousands)

A summary of investments, measured in accordance with the Fair Value Measurement standard, as of June 30, 2013 is as follows:

Significant Quoted Prices In Significant Other Unobservable Active Markets Observable Inputs Inputs Level I Level II Level III Total Endowment Cash and Cash Equivalents $ 110,590 $ - $ - $ 110,590 Fixed Income 62,569 38,250 100,819 Public Equity 242,955 $ 301,319 164,346 708,620 Real Assets 9,040 146,135 155,175 Private Equity 316,384 316,384 Marketable Alternatives 243,097 243,097 Total Endowment $ 416,114 $ 310,359 $ 908,212 $ 1,634,685

Life income 41,445 41,445 Other 74,873 1,777 76,650 Total Investments $ 532,432 $ 310,359 $ 909,989 $ 1,752,780

Changes to the reported amounts of investments measured at fair value on a recurring basis using significant unobservable (Level III) inputs as of June 30, 2013 are as follows:

Fixed Private Marketable Income Equity Real Assets Equity Alternatives Other Total Fair Value, June 30, 2012 $42,234 $131,687 $127,597 $342,474 $215,308 $2,007 $861,307 Realized gains/(losses) 5,705 47,652 2,825 (23) 56,159 Unrealized gains/(losses) (3,984) 32,659 (573) (24,171) 32,247 36,178 Purchases 34,067 37,124 658 98 71,947 Sales 0 (20,661) (86,696) (7,940) (305) (115,602) Fair Value, June 30, 2013 $ 38,250 $ 164,346 $ 146,135 $ 316,383 $ 243,098 $ 1,777 $ 909,989

For the fiscal years ended June 30, 2014 and 2013 the College recorded no transfers between levels within the fair value hierarchy.

13 Notes to the consolidated financial statements (continued) (dollars in thousands)

The College has made commitments to various limited partnerships. The College expects the majority of these funds to be called over the next four years with liquidity to be received over the next fifteen years. The fair value of outstanding commitments at June 30, 2014 and 2013 were: 2014 2013 Private equity $166,392 $136,913 Real estate 62,546 46,159 Natural resources 44,758 46,669 Total unfunded commitments $273,696 $229,741

The College has a unitization system for the management of separate endowments. All endowments are invested similarly in one pool of investment assets. Each separate endowment owns units in that investment pool, and the College determines the fair value of a unit on a quarterly basis. Gifts to the endowment create new units at the unit value in effect at the time of the gift. Changes in the unit value reflect changes in the fair value of endowment assets. Such changes arise from investment income, gains and losses and from the annual withdrawal from the endowment to support the intended purposes of each endowment.

The following table shows the distribution and unit value for the investment pool at June 30, 2014 and 2013 respectively: Number Fair Income of Units Value Distribution

June 30, 2014 2,473,651 $772.65 $23.89

June 30, 2013 2,453,643 $678.10 $24.07

4. Property and Equipment

Property and equipment at June 30, 2014 and 2013 consisted of the following:

2014 2013

Land $5,757 $5,757 Buildings and improvements 341,196 333,110 Construction in progress 8,684 3,641 Equipment 19,184 18,934 Works of art, historical treasures and similar assets 4,666 4,591 379,487 366,033 Accumulated depreciation (125,858) (119,110) $253,629 $246,933

Interest payments totaling $235 and $300 were capitalized in 2014 and 2013, respectively.

14 Notes to the consolidated financial statements (continued) (dollars in thousands)

5. Deferred Payments and Other Liabilities

Deferred payments and other liabilities at June 30, 2014 and 2013 consisted of the present value of future payments due to or on behalf of employees and former employees under retirement and postretirement programs, donors under annuity and life income programs, a capital purchase agreement, the conditional asset retirement obligation and conditional gifts.

2014 2013 Donors $14,718 $13,994 Postretirement health benefit 12,893 11,494 Conditional gift liability 24,759 24,759 Employees and former employees 5,169 4,603 Capital acquisition 0 4,936 Conditional asset retirement obligation 1,060 1,043 $58,599 $60,829

The College currently provides a postretirement health benefit in the form of a monthly stipend for the purchase of medical premiums to all employees who meet certain eligibility requirements. The components of the benefit as of June 30, 2014 and 2013 are as follows:

2014 2013 Change in accumulated postretirement benefit obligation Postretirement benefit obligation at beginning of year Actives not fully eligible to retire $ 6,559 $ 7,422 Actives fully eligible to retire 3,414 2,877 Retirees 1,521 1,618 Total 11,494 11,917

Service cost 457 529 Interest cost 545 465 Actuarial (gain) / loss 603 (1,194) Benefits paid (206) (224)

Postretirement benefit obligation at end of year Actives not fully eligible to retire 7,892 6,559 Actives fully eligible to retire 3,615 3,414 Retirees 1,386 1,521 Total $ 12,893 $ 11,494

15 Notes to the consolidated financial statements (continued) (dollars in thousands)

2014 2013 Change in plan assets Employer contribution $ 206 $ 224 Benefits paid (206) (224) Fair value of plan assets at end of year $ - $ -

Funded status Postretirement benefit obligation at end of year $ 12,893 $ 11,494 Fair value of plan assets at end of year - - Funded status end of year 12,893 11,494

Current liability 366 313 Non-current liability 12,527 11,181 Total $ 12,893 $ 11,494

Components of the net periodic postretirement benefit cost Service cost $ 457 $ 529 Interest cost 545 465 Amortization of actuarial (gain) / loss 0 51 Total $ 1,002 $ 1,045

OPEB changes other than net periodic postretirement benefit cost New actuarial (gain) / loss $ 603 $ (1,194) Amortization of unrecognized amounts - (50) Total $ 603 $ (1,244)

Unrecognized amounts and amortization amounts in the following year: Net actuarial (gain) / loss 900 297 Total $ 900 $ 297

Amortization amounts in following year (estimate) Net actuarial (gain) / loss - - Total $ - $ -

16 Notes to the consolidated financial statements (continued) (dollars in thousands)

Assumptions and effects: 2014 2013 Medical trend rate next year 7.00% 8.00% Ultimate trend rate 5.00% 5.00% Year ultimate trend rate is achieved 2016 2013 Discount rate used to value end of year accumulated postretirement benefit obligation 4.15% 4.62% Discount rate used to value net periodic postretirement benefit cost 4.62% 3.90%

Effect of a 1% increase in health care cost trend rate on: Interest cost plus service cost $ 203 $ 210 Accumulated postretirement benefit obligation $ 2,346 $ 1,947

Effect of a 1% decrease in health care cost trend rate on: Interest cost plus service cost $ (161) $ (166) Accumulated postretirement benefit obligation $ (1,893) $ (1,582)

Measurement date 6/30/2014 6/30/2013

Year Beginning July 1st Estimated Future Benefit Payment 2014 366 2015 433 2016 497 2017 538 2018 580 2019 - 2023 3,632

6. Bonds and Notes Payable

Bonds and notes payable at June 30, 2014 and 2013 were:

2014 2013

Fair Value Cost Fair Value Cost Swarthmore Borough Authority 1998 Revenue Bonds $ - $ - $1,509 $1,495 2006A Revenue Bonds 81,638 78,333 80,188 78,497 2008 Revenue Bonds - - 25,594 25,716 2009 Revenue Bonds - - 8,593 8,583 2011 Revenue Bonds 30,266 28,923 30,157 29,454 2011B Revenue Bonds 16,472 15,902 16,477 16,451 2011C Revenue Bonds 43,473 42,335 46,397 45,425 2013 Revenue Bonds 54,510 52,269 - - Other notes payable - - 11 11

Total bonds and notes payable $226,359 $217,762 $208,926 $205,632

17 Notes to the consolidated financial statements (continued) (dollars in thousands)

The College bond ratings by Moody’s and Standard & Poor’s were Aaa/AAA for the years ended June 30, 2014 and 2013.

The fair value of the College’s long-term debt is based on quoted market prices, Level 1 input, for all outstanding issues as of June 30, 2014 and 2013.

On July 31, 2013, the College issued $47,340 aggregate principal amount of 2013 Revenue Bonds (2013 Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used to refund the 2008 Revenue Bonds, par value of $25,360, which were scheduled to mature on September 15, 2013, to refund the 2009 Revenue Bonds, par value of $8,525, which were scheduled to mature on September 15, 2013, to fund various tax-exempt capital projects and to fund the costs of issuing the 2013 Bonds. The 2013 Bonds have interest rates of 3.0% to 5.0% depending upon the maturity dates, which range from 2014 to 2043 in annual amounts ranging from $745 to $2,375. Interest is payable semi-annually.

On December 21, 2011, the College issued $14,380 aggregate principal amount of 2011B Revenue Bonds (2011B Revenue Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used for various tax-exempt capital projects and to fund the costs of issuing the 2011B Bonds. The 2011B Bonds have interest rates of 2.0% to 5.0% depending upon the maturity dates, which range from 2014 to 2021 in annual amounts ranging from $285 to $11,595. Interest is payable semi-annually.

On December 21, 2011, the College issued $46,280 aggregate principal amount of taxable 2011C Revenue Bonds (2011C Revenue Bonds) through the Swarthmore Borough Authority. The proceeds were used for general operations, to advance refund a portion of the 2002 Revenue Bonds, par value of $19,665 with maturity dates between 2013 and 2020 and to fund the costs of issuing the 2011C Bonds. The 2011C Bonds have interest rates of 1.146% to 3.10% depending upon the maturity dates, which range from 2014 to 2021 in annual amounts ranging from $3,120 to $21,420. Interest is payable semi- annually.

On June 29, 2011, the College issued $26,665 aggregate principal amount of 2011 Revenue Bonds (2011 Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used to refund the 2001 Revenue Bonds, par value of $29,320, which were scheduled to mature on September 15, 2031 and to fund the costs of issuing the 2011 Bonds. The 2011 Bonds have interest rates of 3.0%, 4.0% and 5.0% (priced to yield 2.18%) and mature on September 15, 2018. Interest is payable semi-annually.

On July 29, 2009, the College issued $8,525 aggregate principal amount of 2009 Revenue Bonds (2009 Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used to refund a portion of the 1998 Revenue Bonds which were scheduled to mature on September 15, 2018 and September 15, 2028, and to fund the costs of issuing the 2009 Bonds. The 2009 Bonds had interest rates of 2.0% and 5.0% (priced to yield 1.56%) and were scheduled to mature on September 15, 2013. On July 31, 2013, the 2009 Bonds were refunded in total using proceeds from the 2013 Bonds.

On April 30, 2008, the College issued $25,360 aggregate principal amount of 2008 Revenue Bonds (2008 Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used to refund the 2006B variable auction rates notes (2006B Bonds), par value of $27,600 and to fund the costs of issuing the 2008 Bonds. The 2008 Bonds had interest rate of 5.0% (priced to yield 2.95%) and were scheduled to mature on September 15, 2013. On July 31, 2013, the 2008 Bonds were refunded in total using proceeds from the 2013 Bonds.

On December 20, 2006, the College issued $76,085 aggregate principal amount of 2006A Revenue Bonds (2006A Bonds) through the Swarthmore Borough Authority at a premium. The proceeds were used to advance refund $10,375 of the 1998 Revenue Bonds, to advance refund $63,970 of the 2001 Revenue Bonds and to fund the costs of issuing the 2006A Bonds. The 2006A Revenue Bonds have

18 Notes to the consolidated financial statements (continued) (dollars in thousands)

interest rates from 4.0% to 5.0% depending upon the maturity dates, which range from 2014 to 2030 in annual amounts ranging from $450 to $22,915. Interest is payable semi-annually.

On July 1, 1998, the College issued $34,960 of 1998 Revenue Bonds through the Swarthmore Borough Authority. The proceeds were used for the refunding of the 1988 Revenue Bonds of $6,530, the advance refunding of $8,770 of 1992 Revenue Bonds, $18,088 to finance the costs of renovation and other capital improvements to various College facilities and the remainder to pay a portion of the costs of issuing the 1998 Revenue Bonds. On December 20, 2006, $10,375 of the 1998 Revenue Bonds with maturity dates between 2014 and 2028 and interest rates of 5.0% were advance refunded using proceeds from the 2006A Revenue Bonds. The final 1998 Revenue Bond of $1,495, with an interest 4.75%, matured on September 15, 2013.

Debt service payments for the next five fiscal years on all borrowings are as follows:

Principal Interest Total 2014-2015 6,105 8,680 14,785 2015-2016 6,260 8,530 14,790 2016-2017 6,450 8,344 14,794 2017-2018 6,660 8,133 14,793 2018-2019 33,565 7,323 40,888

Interest paid on bonds and notes payable was $8,765 and $8,370 for the years ended June 30, 2014 and 2013, respectively.

7. Retirement Benefits

Retirement benefits for all eligible employees of the College are individually funded and vested under a defined contribution Sec. 403(b) retirement plan with Teachers Insurance and Annuity Association of America (TIAA), or Vanguard Group of Investment Companies. Under this arrangement, the College makes monthly contributions as defined in the Plan to the accounts of all employees. The College's contributions under this Plan are included in operating expenses and were $5,160 in 2014 and $4,960 in 2013.

During fiscal year 2003 the College initiated a Sec. 457 non-qualified deferred compensation plan for senior management employees. Participants elect to defer compensation, which is invested with the Teachers Insurance and Annuity Association of America (TIAA) or the Vanguard Group of Investment Companies and is considered College property until the employee withdraws the funds due to emergency, termination or retirement. The participants’ contributions are subject to the general creditors of the College, so the invested asset is offset by a corresponding liability in the amounts of $800 and $739 at June 30, 2014 and 2013 respectively. The College does not record transaction activity as revenue or expense. The investments are reported at fair value.

19 Notes to the consolidated financial statements (continued) (dollars in thousands)

8. Net assets

Net assets at June 30, 2014 were designated or allocated to:

Temporarily Permanently Unrestricted Restricted Restricted Total Endowment True Endowment $913,626 $180,819 $1,094,445 Term Endowment 100,310 100,310 Quasi Endowment $681,915 681,915 Annuity and life income 10,824 19,894 2,392 33,105 Student loans 2,122 2,122 Property and equipment Unexpended 285 285 Net investment in property and equipment 70,917 70,917 Other purposes 10,525 26,241 24,289 61,055 $776,303 $1,060,356 $207,500 $2,044,159

Net assets at June 30, 2013 were designated or allocated to:

Temporarily Permanently Unrestricted Restricted Restricted Total Endowment True Endowment $770,739 $173,453 $944,192 Term Endowment 85,763 85,763 Quasi Endowment $604,730 604,730 Annuity and life income 8,427 19,117 2,475 30,019 Student loans 2,085 2,085 Property and equipment Unexpended 2,521 2,521 Net investment in property and Equipment 63,732 63,732 Other purposes 14,582 21,049 22,020 57,651 $693,556 $899,189 $197,948 $1,790,693

Certain amounts have been transferred out of unrestricted net assets and temporarily restricted net assets into permanently restricted net assets as a result of donor restrictions on matching gifts, unspent investment return added to principal, and clarifications of donors’ restrictions.

As of June 30, 2014 there were no donor-related endowment funds for which the fair value of assets is less than the level required by donor stipulations.

20 Notes to the consolidated financial statements (continued) (dollars in thousands)

Changes to the reported amount of the College's endowment as of June 30 are as follows:

Temporarily Permanently Unrestricted Restricted Restricted Total

Endowment total, June 30, 2012 $ 553,547 $ 776,014 $ 169,214 $ 1,498,775

Contributions 3,624 4,000 3,118 10,742 Transfers 2,466 1,375 1,111 4,952 Interest and dividends 20,305 10 20,315 Unrealized and realized gains (losses) 84,999 76,438 161,437 Investment management fees (5,678) (5,678) Endowment spending distribution (54,533) (1,325) (55,858) Endowment total, June 30, 2013 $ 604,730 $ 856,502 $ 173,453 $ 1,634,685

Contributions 3,350 160 6,611 10,121 Transfers (4,068) 4,197 749 878 Interest and dividends 18,529 6 18,535 Unrealized and realized gains (losses) 119,459 155,061 274,520 Investment management fees (5,974) (5,974) Endowment spending distribution (54,113) (1,983) (56,096) Endowment total, June 30, 2014 $ 681,913 $ 1,013,937 $ 180,819 $ 1,876,669

9. Expenses by Natural Classification

Expenses for the years ended June 30, 2014 and 2013 were incurred for the following:

2014 2013 Compensation $80,876 $76,802 Amortization 216 272 Life income payments and other adjustments 1,755 1,852 Bookstore merchandise for resale 485 579 Dining services food 2,158 2,028 Equipment 3,156 2,577 Foreign study program expenses 3,503 2,926 Insurance 853 794 Interest 7,115 6,448 Library materials 2,372 2,270 Services, supplies and other 19,174 17,876 Real estate taxes 1,177 1,036 Travel 3,450 3,333 Utilities 2,210 2,061 Depreciation 7,455 7,293

$135,955 $128,147

21 Notes to the consolidated financial statements (continued) (dollars in thousands)

10. Income Tax

The College has been granted tax-exempt status as a non-profit organization under Section 501(c) (3) of the Internal Revenue Code, and accordingly, files federal tax Form 990 (Return of Organization Exempt from Income Tax) annually. The College also files federal tax Form 990-T (Exempt Organizations Business Income Tax Return).

Marjay Productions, Inc. is a for-profit corporation subject to federal income taxes under the Internal Revenue Code.

Parrish LLC is a for-profit corporation subject to federal income taxes under the Internal Revenue Code. Through June 30, 2014, this wholly-owned, sole member Pennsylvania Limited Liability Corporation has not generated any taxable income.

Per the requirement to assess uncertain tax positions, no adjustments to the financial statements were required as a result of the standard. The College will continue to monitor and evaluate its unrelated business income activity.

11. Commitments and Contingencies

In the ordinary course of business the College occasionally becomes involved in legal proceedings relating to contracts or other matters. While any proceedings or litigation have an element of uncertainty, management believes that the outcome of any pending or threatened actions will not have a material adverse effect on the business or financial condition of the College.

As of June 30, 2014 and 2013, the College had outstanding commitments for construction contracts of $23,876 and $2,859, respectively.

Appendix C

Definitions of Certain Terms and Summaries of Certain Provisions of the Indenture and Loan Agreement

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DEFINITIONS OF CERTAIN TERMS

The following are definitions of certain terms used in the Indenture and the Loan Agreement.

"Act" shall mean the Pennsylvania Municipality Authorities Act, 53 Pa. Cons. Stat. §§5601-5622, together with all acts supplemental or amendatory thereof.

"Additional Bonds" shall mean any Bonds, other than the 2015 Bonds, duly executed, authenticated, issued and delivered pursuant to the provisions of the Indenture.

"Administrative Expenses" shall mean those expenses of the Authority which are properly chargeable as administrative expenses under Generally Accepted Accounting Principles and include, without limiting the generality ,of the foregoing, the following: (a) fees and expenses of the Trustee, including annual fees; (b) fees and expenses of the Authority's professional advisers required by the Indenture or reasonably necessary and fairly attributable to any Project, including, without limiting the generality of the foregoing, fees and expenses of the Authority's Consultants, Certified Public Accountants and Counsel (including those incurred in furnishing any Opinion of Counsel required or permitted to be delivered under the Indenture or under the Loan Agreement); and (c) the Authority's annual fee for the general administrative services of the Authority in an amount determined from time to time by the Authority.

"Annual Financial Information" shall mean annual financial and operating data of the College of the nature contained in (a) the following Sections of Appendix A of the Official Statement: (i) under the section captioned "Admissions" and the table thereunder captioned "Student Applications, Acceptances and Enrollments," information regarding applications, acceptances, enrollment and SAT Scores for the College’s first year class for the fall of each year, commencing with the fall of 2015; (ii) under the section captioned "Costs of Attendance," information regarding tuition and fees, room and board and total charges at the College for the fiscal year, commencing with the 2015-2016 fiscal year; (iii) under the section captioned "Student Financial Aid" and the table thereunder captioned "Components of Need-Based Financial Aid," information regarding the College’s components of need-based financial aid for the fiscal year, commencing with the fiscal year ending June 30, 2015; (iv) under the section captioned "Student Enrollment" and the table thereunder captioned "Full-Time Fall Student Enrollment," information regarding the College’s enrollment stated in the categories enumerated therein, commencing with the fall enrollment for the fiscal year 2015-2016; (v) under the section captioned "Investments and Net Assets," information regarding the market value of the College’s investment assets for the fiscal year, commencing with the fiscal year ending June 30, 2015, and information regarding the College’s total net assets and expendable unrestricted net assets for the fiscal year, commencing with the fiscal year ending June 30, 2015; (vi) under the section captioned "Employee Compensation," information regarding (A) the percentage of the College’s operating expenses devoted to salaries and fringe benefits, and (B) the total obligation of the College for health benefits and other contractual agreements with former employees at the end of each fiscal year, commencing with the fiscal year ending June 30, 2015; (vii) under the section captioned "College Indebtedness," information regarding information regarding the College’s fiscal year debt service requirements, commencing with the fiscal year ending June 30, 2015; and (viii) under the section captioned "Gifts, Grants and Bequests Received," the

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proceeds of gifts and bequests received by the College for the fiscal year, commencing with the fiscal year ending June 30, 2015; and (b) the College’s audited financial statements of the type shown in Appendix B of the Official Statement. The information described in clause (a) above, which constitute a part of the College’s Annual Financial Information, may be included as part of the College’s audited financial statements. The financial statements of the College, which comprise a part of the Annual Financial Information, are currently, and in the future shall be, prepared in accordance with Generally Accepted Accounting Principles.

"Authority" shall mean the Swarthmore Borough Authority, a body corporate and politic organized and existing under the laws of the Commonwealth of Pennsylvania, and any successor thereto.

"Authority Board" shall mean the then legally constituted governing body of the Authority.

"Authorized Officer of the College" or "Authorized Officer" shall mean the Chair, the Vice Chair, the President of Swarthmore College, the Vice President for Finance and Treasurer, the Managing Director of Investments, the Assistant Treasurer, or such other official of the College as may be authorized pursuant to a resolution of the College Board to perform any act or execute any document in connection with a Project, the Indenture or the Loan Agreement.

"Bond" or "Bonds" shall mean the 2015 Bonds and any Additional Bonds authenticated and delivered under the Indenture.

"Bondholder" or "Holder of Bonds" or any similar term shall mean (i) with respect to the 2015 Bonds, the Person in whose name any 2015 Bond is registered upon the registration books of the Authority maintained by the Trustee or its agent for that purpose pursuant to the terms of the Indenture, and (ii) with respect to any Additional Bonds, shall have the same meaning, unless a different meaning shall be set forth in the Supplemental Indenture executed with respect to such Additional Bonds.

"Borough" shall mean the Borough of Swarthmore, Delaware County, Pennsylvania.

"Business Day" shall mean (i) with respect to the 2015 Bonds, any day that is not a Saturday, Sunday, legal holiday or a day on which the Trustee or any duly appointed paying agent or bond registrar is authorized or required by law or executive order to close any office at which any actions are required to be taken under the Indenture, and (ii) with respect to any Additional Bonds, shall have the same meaning, unless a different meaning is assigned to such term in the Supplemental Indenture under which such Additional Bonds are issued.

"Capital Additions" shall mean real and personal property of any kind and any and all additions and improvements to the College Facilities acquired or constructed by the Authority at the request of the College, or by or for the College, after the date of issuance of the 2015 Bonds, which is used or useful in connection with the College Facilities, which have been approved, if required by law, by a resolution of the Council of the Borough, and the Cost of which is properly chargeable to plant or property accounts under Generally Accepted Accounting Principles, including, without limiting the generality of the foregoing, land, easements, rights of

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way, leaseholds, other interests in real property, replacements of property retired, and permanent additions and Extraordinary Repairs.

"Certified Public Accountant" shall mean a Person who shall be Independent, appointed by the College Board or the Authority, as the case may be, actively engaged in the business of public accounting and duly certified as a certified public accountant under the laws of the Commonwealth.

"Code" shall mean the Internal Revenue Code of 1986, as amended, and all applicable regulations promulgated thereunder.

"College" shall mean Swarthmore College, a nonprofit corporation organized and existing under the laws of the Commonwealth, and any successor thereto.

"College Board" shall mean the then legally constituted governing body vested with the power of management of the College, or a duly authorized committee thereof.

"College Facilities" shall mean the buildings, structures, real estate and any appurtenant facilities and fixtures acquired or to be acquired by the College and used or useful by the College in connection with or incidental to its functioning as an institution of higher learning.

"Commonwealth" shall mean the Commonwealth of Pennsylvania.

"Consultant" shall mean a Person, who shall be Independent, appointed by the College or the Authority, as the case may be, qualified to pass upon the matters under consideration and having a favorable reputation for skill and experience in such matters.

"Cost" or "Costs," in connection with any Project, shall mean all costs and expenses permitted under the Act which are properly chargeable thereto under Generally Accepted Accounting Principles or which are incidental to the financing, acquisition, construction and equipping of the Project and the placing in operation thereof, including, without limiting the generality of the foregoing:

A. Amounts payable to contractors and costs incident to the award of contracts;

B. Costs of labor, facilities and services furnished by the Authority, the College and their employees or others, materials and supplies purchased by the Authority, the College or others, and permits and licenses obtained by the Authority, the College or others;

C. Engineering, architectural, legal, underwriting, accounting and other professional and advisory fees, rating agency fees, and fees in respect of the issuance of any letter of credit, guaranty, surety bond, insurance policy or similar form of credit enhancement;

D. Premiums for contract bonds and insurance during construction and costs on account of personal injuries and property damage in the course of construction and insurance against the same;

E. Interest expenses during construction and for a reasonable period thereafter;

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F. Administrative Expenses during construction and for a reasonable period thereafter;

G. Printing, engraving, and all other expenses of issuing Bonds and obtaining other financing;

H. Costs, fees and expenses in connection with the acquisition of real and personal property or rights therein, including premiums for title insurance;

I. Costs of equipment purchased by the Authority or the College and necessary to the completion and proper operation of the Project or property in question;

J. Amounts required to repay temporary or bond anticipation loans, or advances from other funds of the College, made to finance the costs of any Project;

K. Money necessary to fund the Funds created under the Indenture, but only to the extent that such funding does not cause a breach of any provision of the Indenture; and

L. Working capital as permitted under the Act.

"Counsel" shall mean an attorney-at-law or law firm (who or which may be counsel for the College or for the Authority).

"Debt Service" shall mean, for any period or payable at any time the principal of, premium, if any, and interest on the Bonds for that period or payable at that time, whether due on an interest payment date, at maturity or upon acceleration or redemption.

"Debt Service Fund" shall mean the Fund so designated which is established pursuant to Section 6.05 of the Indenture.

"Debt Service Requirements" for any Bonds or other Long Term Indebtedness, with reference to a specified period, shall mean:

A. interest payable on such Long Term Indebtedness during the period, excluding (i) interest funded from the proceeds thereof, (ii) interest on Long Term Indebtedness to be redeemed during such period through any sinking fund account which would otherwise accrue after the redemption date, and (iii) any amount deposited in escrow which is available to pay interest on such Long Term Indebtedness (and the interest earned thereon to the extent required to be applied to pay interest on such Long Term Indebtedness);

B. amounts required to be paid into any mandatory sinking fund account during the period;

C. amounts needed to pay the principal of such Long Term Indebtedness maturing during the period; and

D. in the case of Long Term Indebtedness in the form of leases capitalized under Generally Accepted Accounting Principles, the lease rentals payable during the period;

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provided, however, that (i) "Debt Service Requirements" shall not include payments of the principal or redemption price of and interest on obligations to the extent that such obligations are paid or to be paid with moneys not constituting revenues of the College or moneys deposited in escrow and available for such purpose; (H) interest payable shall be reduced by the amount of any interest subsidy which a Federal, state or local government or agency is irrevocably committed to pay for the period in question, and (Hi) in determining the fixed amounts required for the payment of interest, the rate of interest used to compute interest requirements for any Long Term Indebtedness having a variable interest rate shall be the rate in effect at the beginning of the period or periods under consideration, or, if such rate has not been determined, the rate in effect at the time such determination of interest requirements is made.

"EMMA" shall mean the Electronic Municipal Market Access System maintained by the MSRB.

"Event of Default" shall mean, as the context requires, any of the events described as such in Section 10.01 of the Indenture or Section 10.01 of the Loan Agreement.

"Extraordinary Repairs" shall mean alterations, repairs, renewals, improvements and/or replacements, with respect to the College Facilities, which are necessary or desirable for proper operation and maintenance and which are of a type which ordinarily would not be made by the College out of current revenues as current operating expenses.

"Fiscal Year" shall mean, with respect to the College, the period of twelve months beginning July 1 of each year, or such other period of twelve months established by the College as its Fiscal Year, and, with respect to the Authority, the period of twelve months beginning January 1 of each year, or such other period of twelve months established by the Authority as its Fiscal Year.

"Future Parity Debt" shall mean Long Term Indebtedness which is secured by a lien on and security interest in Unrestricted College Revenues on a parity with the lien on and security interest in Unrestricted College Revenues in favor of the Bondholders and the holders of the Parity Bonds, and which expressly provides that such lien and security interest will automatically terminate on the Revenue Pledge Termination Date.

"Future Parity Debt Instrument" shall mean any indenture or other instrument or agreement under which any Future Parity Debt is issued and secured.

"Generally Accepted Accounting Principles" shall mean those accounting principles in effect on the date of the determination, certification, computation or other action in question which are applicable in the preparation of financial statements of institutions of higher education or municipal authorities, as appropriate, as promulgated by the Financial Accounting Standards Board in the case of the College, and the Governmental Accounting Standards Board in the case of the Authority, or such other bodies recognized as authoritative by the American Institute of Certified Public Accountants or any successor body.

"Government Obligations" shall mean (a) direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged, (b) obligations issued by a Person controlled or supervised by and acting as an

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instrumentality or agency of the United States of America, the payment of the principal of and interest on which is fully and unconditionally guaranteed as a full faith and credit obligation of the United States of America (including any securities described in (a) or (b) issued or held in book-entry form in the name of the Trustee only on the books of the Department of Treasury of the United States of America), which obligations, in either case, are not subject to redemption prior to maturity by anyone other than the holder, or (c) any, certificates or any other evidences of an ownership interest in obligations or specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in (a) or (b).

"Holder" shall have the same meaning assigned to the term "Bondholder" in these definitions.

"Independent" shall mean with respect to any Consultant or Certified Public Accountant, a Person who is not a member of the College Board or the Authority Board, an officer or employee of the Authority or an officer or employee of the College, or which is not a Person having a partner, director, officer, member or substantial stockholder who is a member of the College Board or the Authority Board, or who is an officer or employee of the Authority or an officer or employee of the College; provided, however, that the fact that such Person is retained regularly by or transacts business with the Authority or the College shall not make such Person an employee within the meaning of this definition.

"Intercreditor Agreement" shall mean any agreement between the Trustee and the Holders of any Parity Bonds and any Future Parity Debt or a trustee acting on their behalf ("Parity Debt Holders") entered into after the issuance of the 2015 Bonds (and in which the Authority and the College may join) which provides, inter alia, for the distribution of Unrestricted College Revenues received by the Trustee or Parity Debt Holders following an event of default under the Indenture, the Loan Agreement, any Parity Indenture or any Future Parity Debt Instrument proportionately, taking into account the outstanding principal amount of the 2015 Bonds and such Parity Bonds and Future Parity Debt and otherwise in such manner as shall be agreed to among the Trustee and such Parity Debt Holders.

"Investment Securities" shall mean and include any of the following securities which at the time are legal investments under the laws of the Commonwealth for moneys held under the Indenture:

A. Government Obligations;

B. Written repurchase agreements for securities described in paragraphs A. or C. hereof which are entered into with banks (which may include the Trustee and any of its affiliates) and other financial institutions rated by S&P or Moody’s at the time of such investment in one of the two highest rating categories assigned by each such rating service, which repurchase agreements are fully secured as to principal by investments described in paragraphs A. or C. hereof having a weekly market value at least equal to 102% of the amount so invested; provided however, that the Trustee shall have a perfected security interest in all collateral for such repurchase agreements, free and clear of the claims of third parties, and, to that end, such collateral must be transferred to the Trustee or a third party agent by physical delivery or by an entry made on the records of the issuer of such obligations. Any investment in

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a repurchase agreement shall be considered to mature on the date the bank or other financial institution providing the repurchase agreement is obligated to repurchase the securities which are the subject of the repurchase agreement;

C. Direct and general obligations of the Commonwealth or any political subdivision or agency or instrumentality of the Commonwealth, for the payment of the principal of and interest on which the full faith and credit of the Commonwealth or such political subdivision, agency or instrumentality is pledged;

D. Debt obligations of any state or political subdivision thereof or any agency or instrumentality of such a state or political subdivision, provided that such obligations are rated at the time of purchase "A" or better by S&P and by Moody’s;

E. U.S. dollar denominated time and demand deposit accounts, federal funds, trust funds, trust accounts, certificates of deposit and banker's acceptances with domestic commercial banks, including the Trustee and any of its affiliates which have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1+" by S&P or "P-1" by Moody's and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank);

F. Trust funds, trust accounts, certificates of deposit, time deposit agreements, demand deposits or other comparable banking arrangements, whether negotiable or nonnegotiable, issued by any bank, trust company or national banking association (including the Trustee and any of its affiliates), provided that such investments must be (i) fully insured by the Federal Deposit Insurance Corporation, or (ii) secured, to the extent not insured by the Federal Deposit Insurance Corporation, by Government Obligations held by the Trustee or an appropriate third party approved by the Trustee, having a market value determined weekly, at least equal to the principal amount thereof (or portion thereof not insured as aforesaid), or (iii) issued by an institution whose unsecured, long term senior debt obligations are, at the time of such issuance, rated by S&P and Moody's in either of their respective two highest rating categories (disregarding qualifications of such categories by symbols as "+" or "-");

G. Investment in money market mutual funds having a rating in the highest investment category granted thereby from S&P or Moody's, including, without limitation any mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from funds for services rendered, (ii) the Trustee collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to the Indenture may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee;

H. Commercial paper maturing not more than 270 days from the date of issuance thereof and which, at the time of purchase, is rated by S&P or Moody’s in its highest rating category;

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I. Debt obligations of any state or political subdivision thereof or any agency or instrumentality of such a state or political subdivision, provided that the principal or redemption price of and interest on such obligations are secured by and payable from amounts received (without reinvestment) in respect of the principal of and interest on non-callable Government Obligations, and provided further that, at the time of purchase, such obligations are rated by S&P and by Moody’s in the highest rating category assigned by each such rating service;

J. Rights to receive the principal of or the interest on obligations of states, political subdivisions, agencies or instrumentalities meeting the requirements set forth in paragraph D. above, whether through (i) direct ownership as evidenced by physical possession of such obligations or unmatured interest coupons or by registration as to ownership on the books of the issuer or its duly authorized paying agent or transfer agent, or (ii) purchase of certificates or other instruments evidencing an undivided ownership interest in payments of the principal or interest on such obligations;

K. Investment agreements with a bank, trust company, national banking association (including the Trustee and its bank affiliates), insurance company, financial services company or other similar organization whose unsecured long term debt obligations (in the case of a bank, trust company, national banking association or other financial services company) or whose claims paying abilities (in the case of an insurance company) are at all times rated in any of the three highest rating categories by S&P and by Moody’s; and

L. Any other securities approved by the College in writing which at the time are legal investments under the laws of the Commonwealth for moneys held under the Indenture.

"Legacy Parity Bonds" shall mean the 2006A Bonds.

"Long Term Indebtedness" shall mean any or all obligations for the payment of money, incurred, assumed or guaranteed by or on behalf of the College (including, without limitation, the 2015 Bonds, the Parity Bonds and any other indebtedness issued by the Authority or a comparable entity for the benefit of the College), whether due and payable in all events or upon the performance of work, possession of property or satisfaction of other specified conditions, except:

(a) Short Term Indebtedness and Non-Recourse Indebtedness;

(b) Current obligations payable out of current revenues, including current payments for the funding of pension plans;

(c) Obligations under contracts for supplies, services and pensions, allocable to the current operating expenses of future years in which the supplies are to be furnished, the services rendered or the pensions paid; and

(d) Rentals payable under leases which are not properly capitalized under Generally Accepted Accounting Principles.

"Moody's" shall mean Moody's Investors Service, Inc., and its successors and assigns, or if such firm shall be dissolved or liquidated or shall no longer perform the functions of a

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securities rating service, Moody's shall mean any other nationally recognized securities rating service designated by the College.

"MSRB" shall mean the Municipal Securities Rulemaking Board.

"Non-Recourse Indebtedness" shall mean any indebtedness of the College secured solely by liens on or security interests in particular properties of the College and the revenues derived from the ownership, leasing or operation of such properties, and the holder of which has no claim for any payments in respect thereof against the general credit of the College or against any other properties or revenues of the College.

"Opinion of Counsel" shall mean a written opinion signed by Counsel.

"Outstanding," in connection with Bonds, shall mean as of the time in question, all Bonds authenticated and delivered under the Indenture, except:

A. Bonds theretofore canceled or required to be canceled under Section 2.12 of the Indenture;

B. Bonds for the payment, redemption or purchase of which money or Defeasance Securities, the principal of, and interest on which, when due, will provide sufficient monies to fully pay the principal of, premium, if any, and interest on such Bonds, all in accordance with the provisions of the Indenture, shall have been or shall concurrently be deposited with the Trustee; provided that, if such Bonds are being redeemed, the required notice of redemption shall have been given or provision satisfactory to the Trustee shall have been made therefor, and that if such Bonds are being purchased, there shall be a firm commitment for the purchase and sale thereof; and

C. Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to Article II of the Indenture.

Anything to the contrary in this definition or elsewhere in the Indenture notwithstanding, Bonds held by or on behalf of the College shall not be deemed to be Outstanding for purposes of determining whether the requisite number or percentage of Bondholders have requested or consented to any action under the Indenture.

"Parity Bonds" shall mean, collectively, the 2006A Bonds, the 2011 (June Issue) Bonds, the 2011B Bonds, the 2011C Bonds, the 2013 Bonds and the 2015 Bonds.

"Parity Indenture" shall mean any indenture under which any Parity Bonds are issued and secured.

"Person" shall mean an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization, a governmental body, any other political subdivision, a municipality or municipal authority or any other group or entity.

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"Project" shall mean and include the 2015 Construction Project and any other acquiring, holding, constructing, improving, maintaining, operating, owning and leasing, directly or indirectly either in the capacity of lessor or lessee, or the financing or refinancing, of grounds, premises, buildings and other property used or useful to the College in providing instruction, housing, recreation or other services related to higher education and related activities, so long as it has been financed in whole or in part by the proceeds of Bonds or other amounts held in Funds established under the Indenture, including, without limitation, any Capital Additions and Extraordinary Repairs; provided that the College shall have obtained all requisite certificates and approvals related thereto from all appropriate Regulatory Bodies; provided, further, that the term "Project" as used from time to time may refer, collectively, to the 2015 Construction Project and any other Project "Project Facilities" shall mean all property, real, personal or mixed, that is financed or refinanced from proceeds of any Bonds.

"Project Fund" shall mean a Fund so designated which is established for a Project pursuant to the Indenture.

"Record Date" shall mean, in respect of a particular series of Bonds, the fifteenth (15th) day (whether or not a Business Day) of the calendar month next preceding the month in which the applicable interest payment date occurs, in the event that the interest payment date is the first day of a month, and the first day (whether or not a Business Day) of the calendar month in which the applicable interest payment date occurs, in the event that the interest payment date is the fifteenth (15th) day of a month.

"Redemption Price," where used with respect to a Bond, Parity Bond or other Long Term Indebtedness, shall mean the price to be paid for such Bond, Parity Bond or Long Term Indebtedness upon redemption thereof pursuant to the Indenture, a Parity Indenture or the instrument pursuant to which such other Long Term Indebtedness was issued.

"Regulatory Body" shall mean and include (i) the United States of America and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the United States of America, (ii) the Commonwealth, any political subdivision thereof and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the Commonwealth, (iii) the Borough and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the Borough, and (iv) any other public or private body, whether Federal, state, local or otherwise, and in any case, having or exercising regulatory or supervisory jurisdiction and authority over the College or the College Facilities or rates and charges of the College, but shall not include the Authority.

"Revenue Fund" shall mean the Fund so designated which is established pursuant to the Indenture.

"Revenue Pledge Termination Date" shall mean the first day on which all Legacy Parity Bonds shall have been paid in full or provision for such payment shall have been made in accordance with the terms of the Legacy Parity Indentures.

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"Revenues of the Authority from the College" shall mean all amounts payable by the College to the Authority under the Loan Agreement, except those representing reimbursement of the Administrative Expenses of the Authority and the Authority's right to indemnification by the College.

"S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, S&P shall mean any other nationally recognized securities rating service designated by the College.

"Securities Depository" shall mean The Depository Trust Company, New York, New York, or its nominee Cede & Co.

"Short Term Indebtedness" shall mean any obligation for the repayment of borrowed moneys which matures not later than 365 consecutive days after it is incurred and any obligation for the repayment of borrowed moneys which is payable upon demand within such period at the option of the Holder; provided that the term Short Term Indebtedness shall not be deemed to include any Non-Recourse Indebtedness or Demand Obligation.

"Supplemental Agreement" or "agreement supplemental thereto" shall mean any agreement amending or supplementing the Loan Agreement entered into by the Authority and the College in accordance with the provisions of the Indenture and the Loan Agreement.

"Supplemental Indenture" or "indenture supplemental thereto" shall mean any indenture amending or supplementing the Indenture which may be entered into in accordance with the provisions of the Indenture.

"Tax-Exempt Bonds" shall mean any Bonds the interest on which is intended to be excludable from the gross income of the holders thereof for federal income tax purposes.

"Trustee" shall mean The Bank of New York Mellon Trust Company, N.A., and its successor or successors as trustee under the Indenture.

"Trust Estate" shall mean at any particular time (i) all money and investments, including earnings thereon, which at such time are deposited, or required to be deposited, with the Trustee or to be held in trust under any of the provisions of the Indenture (except funds deposited in any fund or account described in clause (iii) hereof), (ii) the Loan Agreement and the Revenues of the Authority from the College, (iii) with respect to any Additional Bonds only, all moneys and investments deposited or required to be deposited in any reserve fund, redemption fund or similar fund, any sinking fund, or any similar account within an existing fund, established in respect of such Additional Bonds and (iv) all other property which at such time is covered or intended to be covered by the lien of the Indenture.

"Unrestricted College Revenues" shall mean such revenues, income and other moneys (both operating and non-operating) received by the College that would properly be recorded as additions to Unrestricted Net Assets during the period being measured; provided that, for purposes of this definition, in each context involving measuring coverage for purposes of a financial covenant, an amount equal to the budgeted unrestricted investment earnings (realized

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and unrealized gains and income) of the College pursuant to the College's endowment spending formula as determined by the College Board for such Fiscal Year shall be included and the balance of realized and unrealized gains or losses and any income earned on such investments shall be excluded; or the equivalent as estimated by the College if the College's accounting presentation format changes materially in the future.

"Unrestricted Net Assets" shall mean net assets that are not subject to donor-imposed stipulations, as recorded on the annual financial statements of the College, or the equivalent as estimated by the College if the College's accounting presentation format changes materially in the future.

SUMMARIES OF CERTAIN PROVISIONS OF THE INDENTURE AND THE LOAN AGREEMENT

The following are summaries of certain provisions of the Indenture and the Loan Agreement. These summaries should not be regarded as full statements of the documents themselves, or of the portions summarized. Reference is made to the documents in their entireties, copies of which are on file at the corporate trust office of the Trustee in Philadelphia, Pennsylvania, for the complete statements of the provisions thereof.

THE INDENTURE

Pledge and Assignment

Under the Indenture, all Revenues of the Authority from the College and other components of the Trust Estate have been pledged to the Trustee to secure the payment of the Bonds and the performance and observance of the covenants of the Authority under the Indenture.

Pursuant to the assignment to the Trustee of the Authority's rights under the Loan Agreement, the amounts payable under the Loan Agreement (except amounts required to pay Administrative Expenses and indemnification of the Authority by the College) shall be paid directly to the Trustee by the College.

Project Fund

The Indenture establishes a 2015 Project Fund for the 2015 Construction Project. The Trustee, in the future, shall establish separate Project Funds for the payment of Costs of any Project for which Additional Bonds are issued. Each Project Fund shall consist of the amounts deposited therein pursuant to the Indenture or the Loan Agreement, and any other amounts the Authority or the College may deposit therein. The amounts in each Project Fund, until applied as provided in the Indenture, shall be held for the security of all Bonds Outstanding under the Indenture.

Payments from any Project Fund will be made by the Trustee to pay Costs of the particular Project upon receipt by the Trustee of the requisitions or other written directions required by the Indenture. Upon receipt of a completion certificate for any Project, as provided in the Indenture, the balance in the Project Fund applicable to such Project (less any amounts

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reserved for the payment of unpaid Costs of the Project) shall be transferred by the Trustee to the Revenue Fund, unless otherwise specifically directed in a Supplemental Indenture.

Revenue Fund

The Trustee shall deposit in the Revenue Fund all loan payments made by the College under the Loan Agreement, and any other amounts received by the Trustee from the Authority, the College or any other Person, or in connection with the Project Facilities, for deposit therein.

The Trustee may, at the request of the Authority, reserve an amount on account of the Authority's Administrative Expenses from each payment made by the College under the Loan Agreement which is deposited in the Revenue Fund (except for any payments made to pay Debt Service on the 2015 Bonds or any Additional Bonds), and shall pay such money to the Authority within five days of receipt of a requisition by the Authority. The Trustee shall make transfers from the Revenue Fund to the Debt Service Fund (and any other Funds established under the Indenture) in accordance with the Schedule of Transfers set forth in Exhibit B of the Indenture.

Debt Service Fund

The Trustee shall pay from the money in the Debt Service Fund (other than any sinking fund established for any series of Additional Bonds) the interest on the Bonds as and when due, and the principal or Redemption Price of Bonds when the same shall become due and payable but only upon presentation and surrender of the appropriate Bonds.

Moneys to Be Held for All Bondholders

Money and investments in the various Funds created under the Indenture, until applied as provided with respect to the Fund in question, shall be held in trust by the Trustee for the benefit of the Holders of all Outstanding Bonds, subject to the provisions of any Intercreditor Agreement then in effect, except that: (a) on and after the date on which the interest on or principal or Redemption Price of any particular Bond or Bonds is due and payable from the Debt Service Fund, the unexpended balance of the amount deposited or reserved in such Fund for the making of such payments shall, to the extent necessary therefor, be held for the benefit of the Bondholder or Bondholders entitled thereto; (b) any special redemption fund established in connection with the issuance of any Additional Bonds for a refunding shall be held for the benefit of the holders of the Bonds or other Long Term Indebtedness being refunded; and (c) any reserve fund established in respect of Additional Bonds, to the extent provided in the Supplemental Indenture governing the issuance of such Bonds, shall be held for the benefit and security of the holders of such Additional Bonds.

Investments of Funds

All moneys received by the Trustee under the Indenture for deposit in any Fund established thereunder shall be considered trust funds and shall, except as therein provided, be deposited in the commercial department of an affiliate of the Trustee until or unless otherwise invested or deposited as provided in the Indenture. All such deposits, to the extent not insured by the Federal Deposit Insurance Corporation or other federal agency, shall be fully secured as

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to both principal and interest by Government Obligations or as otherwise provided by law in the manner and to the extent required or permitted by applicable statutes and regulations affecting the Trustee.

The Trustee shall, as directed in writing by the College, invest money held in the various Funds established under the Indenture only in Investment Securities. Absent specific instructions from the College, the Trustee shall invest amounts held by it under the Indenture only in shares of a mutual fund described in paragraph E of the definition of Investment Securities as directed in writing by the College at the time of issuance of the 2015 Bonds. All investments shall mature or be subject to redemption by the holder at not less than the principal amount thereof or the cost of acquisition, whichever is lower, and all deposits in time accounts shall be subject to withdrawal, without penalty, not later than the date when the amounts will foreseeably be needed for purposes of the Indenture, which dates may be determined based on estimates of cash needs approved by the College from time to time and filed with the Trustee.

Neither the Trustee nor the Authority shall be accountable for any sale of securities or for any depreciation in the value of any security or for any loss resulting from the sale thereof. The Trustee shall be entitled to rely upon instructions from the College regarding suitability and legality of investments and the Trustee shall have no liability to the College, the Authority or Bondholders if and to the extent it relies upon such instructions in making investments.

Valuation of Funds

The securities purchased and the deposits made with the money in each Fund or Account shall be deemed a part of such Fund. The Trustee shall value the assets in each of the Funds and Accounts established under the Indenture annually, after taking into account all transfers or payments then required to be made from each Fund and Account. In computing the assets of any Fund or Account, investments and accrued interest thereon shall be deemed a part thereof. Such investments shall be valued at the lower of the face value or the current market value thereof or at the redemption price, if then redeemable at the option of the holder. If the value of any Fund or Account on any valuation date falls below the amount required to be on deposit in such Fund or Account as of such valuation date in order to meet the Authority's obligations under the Indenture (taking into account any amount then available in the Revenue Fund as a credit against such obligation), the Authority shall cause the College, upon written notice to that effect from the Authority or the Trustee, to transfer into the appropriate Fund or Account amounts sufficient to remedy such deficiency, promptly following receipt of such request.

Additional Bonds

The Authority may issue Additional Bonds under the Indenture from time to time to provide funds for any purpose permitted under the Act, and to pay the expenses of issuance thereof.

The Trustee, at the request of the Authority, shall authenticate the Additional Bonds and deliver them as specified in the request, but only upon receipt of the following items, among others:

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A. A Supplemental Indenture (i) establishing the series to be issued and providing the terms of the Additional Bonds, (ii) authorizing the execution and delivery of the Additional Bonds to be issued, and (iii) setting forth any other matters relating to the issuance of the Additional Bonds or the purpose for which they are to be issued;

B. A Supplemental Agreement providing for additional loan payments sufficient to pay when due the debt service on the Additional Bonds and the Administrative Expenses of the Authority; and

C. The proceeds of the sale of the Additional Bonds.

The contents of other required items, including inter alia, certifications of the College and other parties, a certified resolution of the Authority and opinions of counsel, are described in the Indenture, to which reference is made for more complete details of these requirements.

Future Parity Debt

The Authority and the Trustee acknowledge in the Indenture that they are familiar with the provisions of the Loan Agreement respecting the incurrence of Future Parity Debt. Any remedies available under the Loan Agreement which are exercised pursuant to the terms of the Indenture shall be exercised for the equal and ratable benefit of all Holders of Bonds and all holders of such Future Parity Debt, and the holders of such Future Parity Debt (or a trustee acting on their behalf) shall be deemed to be Holders of Bonds for the purpose of determining whether any holders of Bonds are entitled to require or direct the exercise of such remedies by the Trustee or to exercise such remedies directly. The foregoing shall not be construed to permit or require the Funds established under the Indenture, or any payments due under the Loan Agreement, to be made available to the holders of such Future Parity Debt, or any trust fund established under any Future Parity Debt Instrument to be made available to the Holders of Bonds.

Any default under any Future Parity Debt Instrument which permits the acceleration of repayment of the Future Parity Debt or permits the holders thereof to realize upon their security interest in the Unrestricted College Revenues shall be a default under the Indenture and under the Loan Agreement and there shall be included in any Future Parity Debt Instrument a provision that any default under the Loan Agreement or the Indenture shall be a default under such Future Parity Debt Instrument.. In the event of any default, the College shall certify to the Trustee the amount of Future Parity Debt outstanding and the holders of such debt shall be entitled to the same remedies as the Bondholders under the Indenture and their rights shall be enforced by the Trustee in the same manner, and subject to the same limitations, as the rights of such Bondholders.

Covenants of the Authority

The Authority covenants, among other things, to promptly pay the interest on and the principal or Redemption Price of Bonds issued under the Indenture according to the terms thereof, but only out of the Revenues of the Authority from the College and the other components of the Trust Estate. The Authority shall maintain its corporate existence and its power to perform its obligations and to exercise its rights and remedies under the Loan Agreement. The Authority shall cause each Project to be constructed and installed in accordance

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with the terms of the Loan Agreement and the Indenture and shall enforce payment of all amounts payable under the Loan Agreement and any supplement or amendment thereto, and shall otherwise enforce all of its rights and privileges, and honor all of its obligations thereunder. The Authority will not create or suffer to be created or to exist any lien or charge upon the Trust Estate except the lien and charge of the Bonds and, to the extent provided in the Indenture, Parity Bonds and Future Parity Debt. The Authority covenants that it will make no investment or other use of the proceeds of the 2015 Bonds or any other series of Tax-Exempt Bonds that would cause such Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and that it will comply with the requirements of all applicable Code sections and regulations throughout the term of the 2015 Bonds and any other series of Tax-Exempt Bonds. The Authority will comply with the covenants in the Tax Certificate and Agreement.

Events of Default and Remedies

Each of the following events shall constitute an "Event of Default" under the Indenture:

(a) if payment of any installment of interest on any of the Bonds is not made when it becomes due; or

(b) if payment of the principal or Redemption Price of any Bond is not made when it becomes due and payable at maturity or upon call for redemption or otherwise; or

(c) if there is a default in payments under the Loan Agreement or any amendment or supplement thereto or any other default thereunder which would give the Authority the right to terminate the Loan Agreement; or

(d) if the Authority is rendered incapable of fulfilling its obligations under the Indenture or under the Act; or

(e) if the College is adjudicated bankrupt or declared insolvent by the decree of a court of competent jurisdiction, or makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally when or as they become due, or a trustee, custodian, receiver or liquidator is appointed for all or any part of the College Facilities or the College files or has filed against it a petition to be adjudicated a bankrupt or insolvent or seeking reorganization, arrangement, adjustment or composition of or in respect of the College under the United States Bankruptcy Code, or other similar laws, federal or state, and if such petition is filed by a person other than the College, such petition is not vacated, dismissed or stayed on appeal within sixty (60) days; or

(f) if the Authority defaults in the due and punctual performance of any other covenant in the Bonds or the Indenture, and such failure continues for sixty (60) days after written notice requiring the same to be remedied shall have been given by the Trustee, who may give the same in its discretion and shall be obliged to give the same at the written request of the Holders of not less than 25% in aggregate principal amount of the Bonds then Outstanding; provided, however, that if such performance requires work to be done, actions to be taken or conditions to be remedied which by their nature cannot reasonable be done, taken or remedied within such sixty (60) day period, no Event of Default shall be deemed to have occurred if the

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Authority shall commence such performance within such sixty (60) day period and shall diligently prosecute the same to completion; or

(g) if a default under any Parity Indenture or Future Parity Debt Instrument shall occur and be continuing, and the existence of such default entitles the holders of any Parity Bonds or Future Parity Debt issued thereunder (or a trustee acting on their behalf) to accelerate the repayment of such indebtedness, or otherwise permits such holders (or a trustee acting on their behalf) to realize upon a security interest in the Unrestricted College Revenues.

If any Event of Default has occurred and is continuing the Trustee may, and the Trustee shall upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, by written notice to the Authority, declare the Bonds to be immediately due and payable, and the Trustee shall give notice thereof to the Authority and the College, and shall give notice thereof by first class mail to all Holders of Outstanding Bonds.

If, after the principal of the Bonds is declared to be due and payable, and before any judgment or decree for the payment of the money due shall have been obtained or entered, the Authority shall cause to be deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all Bonds and the principal or Redemption Price of all Bonds which shall have become due otherwise than by reason of such declaration (with interest upon such principal and, to the extent permissible by law, on overdue installments of interest, at the highest rate specified in any of the Bonds then Outstanding) and an amount sufficient to cover reasonable compensation and reimbursement of expenses payable to the Trustee, and all Events of Default under the Indenture other than nonpayment of the principal of Bonds which shall have become due by said declaration shall have been remedied, then, such Event of Default shall be deemed waived and such declaration and its consequences rescinded and annulled, and the Trustee shall promptly give written notice of such waiver, rescission or annulment to the Authority and the College, and by first class mail, to all Holders of Outstanding Bonds; but no such waiver, rescission and annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereof.

If any Event of Default has occurred and is continuing, the Trustee may, and upon the written request of the holders of at least twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding and receipt of indemnity to its satisfaction shall: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Holders of the Bonds, including the right to require the Authority to charge and collect rates, rentals and other charges adequate to carry out the terms of the Indenture and to require the Authority or the College to carry out any other agreements with, or for the benefit of, such Bondholders and to perform its or their duties under the Act, the Loan Agreement or the Indenture; (b) bring suit upon such Bonds; (c) by action or suit in equity require the Authority to account as if it were the trustee of an express trust for the Bondholders; (d) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders; and (e) exercise any or all other rights and remedies provided for by the Act or by any other law.

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Application of Money Following an Event of Default

Following an Event of Default, money received by the Trustee (including available money on deposit in Indenture Funds and Accounts and money received through enforcement of the Trustee's rights under the Indenture and the Loan Agreement) shall be applied in the following order:

First: to the payment of the outstanding fees and the costs of the Trustee, including counsel fees and expenses, any disbursements of the Trustee with interest thereon, and its reasonable compensation;

Second: subject to the provisions of any Intercreditor Agreement then in effect and to certain provisions of the Indenture whereby money in certain Funds and Accounts may be reserved for payments to specified Bondholders, to the payment of the principal or Redemption Price (as the case may be) of and interest then owing on the Bonds and in case such moneys shall be insufficient to pay the same in full, then to the payment of the principal or Redemption Price of and interest on the Bonds ratably, without preference or priority of one Bond over another or of any installment of interest over any other installment of interest, except as otherwise provided in the Indenture; and

Third: to the payment of the surplus, if any, to the Authority or the College or the Person lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Such money shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such money available for application and the likelihood of additional money becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

Limitations On Actions by Bondholders

Bondholders shall have no right to pursue any remedy under the Indenture unless (i) the Trustee shall have been given written notice of an Event of Default, (ii) the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding shall have requested the Trustee in writing to exercise the powers granted in the Indenture to pursue such remedy, (iii) the Trustee shall have been offered indemnity satisfactory to it against costs, expenses and liabilities, and (iv) the Trustee shall have failed to comply with such request within a reasonable time. Whenever a specified percentage of Bondholders may consent to or direct action under the Indenture, such requirement shall be satisfied by the consent or direction of the specified percentage of Holders of a single series of the Bonds in any matter affecting only the Holders of the Bonds of such series. Reference is made to the Indenture for a more complete statement of the rights and remedies of Bondholders and of the limitations thereon.

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Amendments

The Indenture may be amended or supplemented at any time, without the consent of the Bondholders, by a Supplemental Indenture, for one or more of the following purposes:

(a) to set forth such matters in connection with the issuance of Additional Bonds as are required by the Indenture, or such other matters as will not adversely affect the Holders of any Bonds then Outstanding,

(b) to add additional covenants of the Authority or to surrender any right or power in the Indenture conferred upon the Authority,

(c) to cure any ambiguity or to cure, correct or supplement any defective provision of the Indenture in such manner as shall not be inconsistent with the Indenture and shall not impair the security thereof or adversely affect the Bondholders, or to reflect any change in applicable law,

(d) to make such additions, deletions or modifications as may be necessary in the case of Tax-Exempt Bonds issued under the Indenture to assure compliance with Section 145 of the Code relating to qualified 501(c)(3) obligations, Section 148()) of the Code relating to required rebate of excess investment earnings to the United States government or otherwise as may be necessary to assure exemption from federal income taxation of interest on Tax-Exempt Bonds, and

(e) to make such other additions, deletions, modifications or amendments (except those requiring Bondholder consent) which in the Trustee's judgment, in reliance upon an Opinion of Counsel, or an opinion of a Consultant experienced in the subject matter of the proposed amendment, do not adversely affect the rights of Bondholders.

The Indenture may be amended, except with respect to (1) interest payable on any Bonds, (2) the dates of maturity or redemption provisions of such Bonds, (3) the creation of any lien prior to or on a parity with the lien of the Indenture upon the Trust Estate thereunder, and (4) the amendment provisions of the Indenture, by a Supplemental Indenture approved by the Holders of at least a majority in aggregate principal amount of the Bonds then Outstanding; provided that (A) no amendment which adversely affects one or more but less than all series of Bonds shall be made without the consent of the Holders of at least a majority in aggregate principal amount of the Outstanding Bonds of each series so affected, (B) no amendment which affects the rights of some but less than all of the Outstanding Bonds of any one series shall be made without the consent of the Holders of a majority in aggregate principal amount of the Bonds of the series so affected, and (C) the Indenture may be amended with respect to items (1) through (4) above with the written consent of the Holders of all of the Outstanding Bonds.

Defeasance

When the interest on, and the principal or Redemption Price (as the case may be) of, all Bonds issued under the Indenture have been paid, or there shall have been irrevocably deposited with or held by the Trustee an amount, evidenced by cash or Defeasance Securities or any combination thereof, sufficient to pay the principal or Redemption Price of the Bonds and

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interest thereon due or to become due to the date or dates of maturity or fixed for redemption, as well as all other sums payable under the Indenture by the Authority with respect to the Bonds or to the Trustee, then the right, title and interest of the Trustee under the Indenture shall cease, and the Trustee on the written demand of the Authority shall release the Indenture and the lien thereof and shall execute such documents to evidence such release as may be reasonably required by the Authority and shall turn over to the College or to such Person, body or authority as may be entitled to receive the same all property pledged under the Indenture and any and all balances remaining in any Fund established therein (except amounts deposited or reserved in any Fund to pay the principal or Redemption Price of or interest on any of the Bonds).

THE LOAN AGREEMENT

Loan of 2015 Bond Proceeds

The Loan Agreement provides that the Authority shall loan the proceeds of the 2015 Bonds to the College for the purpose of paying the costs of the 2015 Project.

Obligation of the College

The Loan Agreement is a general obligation of the College, and the full faith and credit of the College is pledged to the payment of all sums due thereunder.

Pledge of Unrestricted College Revenues

The College, to the extent permitted by law, has assigned and pledged to the Authority and granted to the Authority a lien on and security interest in, the Unrestricted College Revenues and all rights to receive the same and the proceeds thereof. Such lien and security interest shall be of equal rank and priority with the lien on and security interest in the Unrestricted College Revenues granted by the College to secure the Parity Bonds and any lien on and security interest in the Unrestricted College Revenues hereafter granted pursuant to any Future Parity Debt Instrument.

Such lien and security interest will be, subject only to (a) the aforesaid lien of equal rank and priority granted to secure the Parity Bonds, (b) any lien of equal rank and priority hereafter granted to secure any Future Parity Debt, and (c) non-consensual liens arising by operation of law.

The existence of the foregoing pledge and security interest shall not prevent the expenditure, deposit or commingling of any of the Unrestricted College Revenues by the College so long as all required payments are made when due and an Event of Default has not occurred and is continuing hereunder. Prior to the Revenue Pledge Termination Date, if any required payment is not made when due, or an Event of Default occurs, and for so long as it continues to exist, any Unrestricted College Revenues then on hand and not yet commingled with other funds of the College or deposited in bank accounts of the College, and any Unrestricted College Revenues thereafter received, shall not be so commingled or deposited, but shall immediately or upon receipt be transferred to the Trustee, as assignee of the Authority, for

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deposit in the Revenue Fund to the extent necessary for the purpose of making any payments or deposits required hereunder or under the Indenture; provided, that if a payment default under any Parity Indenture or Future Parity Debt Instrument shall also have occurred and be continuing thereunder (or shall have been caused as a result of the payment of such Unrestricted College Revenues to the Trustee hereunder), then all such Unrestricted College Revenues shall be applied in accordance with the terms of any Intercreditor Agreement then in effect.

Assignment to Trustee

All right, title and interest of the Authority in the Loan Agreement, and all payments required to be made by the College thereunder, except for the Authority's right to be reimbursed for Administrative Expenses and its right to indemnification by the College, will be assigned to the Trustee for the benefit and security of the Holders of all Bonds.

No Abatement or Set-Off

The obligation of the College to pay amounts due under the Loan Agreement will be absolute and unconditional and will not be suspended, abated, reduced, abrogated, waived, diminished or otherwise modified in any manner or to any extent whatsoever, regardless of any rights of setoff, recoupment or counterclaim that the College might otherwise have against the Authority or the Trustee or any other party or parties and regardless of any contingency, act of God, event or cause whatsoever.

Insurance

The College covenants to provide and maintain continuously during the term of the Loan Agreement such insurance and fidelity coverage of its properties and operations as the College deems reasonable and as is customary for institutions similar to the College.

In the event of any damage to or destruction or condemnation (or conveyance in lieu of condemnation) of all or any portion of the Project Facilities, the net amount received by the College in respect of any such occurrence will be applied as follows:

(a) The College may elect to apply the net amount received to the repair, reconstruction or replacement of the affected Project Facilities or other College Facilities, in which case such amount shall be transferred to a Project Fund established for such purpose. Money in excess of the amount needed for costs of such repair, reconstruction or replacement may be applied as provided in (b) or (c) below, or returned to the College for use for any of its lawful corporate purposes, as the College shall elect; or

(b) Subject to compliance with the terms of any Intercreditor Agreement then in effect, the College may elect to have the Trustee apply such net amount to the extraordinary optional redemption of 2015 Bonds as provided in the Indenture; provided, however, that the amount of the 2015 Bonds which may be subject to such an extraordinary optional redemption shall not exceed the net amount received by the College in connection with any such damage to or destruction or condemnation (or conveyance in lieu of condemnation) of Project Facilities; or

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(c) Subject to compliance with the terms of any Intercreditor Agreement then in effect, the College may elect to apply such net amount in any other manner determined by the College, if the College shall have obtained an opinion of Bond Counsel, addressed to the College, the Authority and the Trustee, to the effect that the proposed use will not adversely affect the exclusion of interest on the 2015 Bonds from gross income for purposes of federal income taxation under Section 103 of the Code.

These provisions shall apply with equal effect to losses relating to Project Facilities financed with proceeds of Additional Bonds unless otherwise provided in the Supplemental Indenture under which such Additional Bonds are issued.

Additional Covenants of the College

In addition to the foregoing, the Loan Agreement contains various additional covenants of the College, including, among others:

(a) Except as provided in paragraph (b) below, the College covenants to preserve and maintain its existence as a not-for-profit corporation under the laws of the Commonwealth, and preserve and maintain its authority to operate its facilities as an institution of higher education in the Commonwealth. The College covenants to maintain the necessary accreditation to enable it to maintain its authority to operate the College as an institution of higher education in the Commonwealth and as an "eligible educational institution" within the meaning of the Act.

(b) The College covenants that it will not consolidate with, transfer all or substantially all of its assets, or merge into any other Person, unless the following conditions shall be met:

(i) the successor or transferee shall expressly assume in writing the full and faithful performance of the College's duties and obligations under the Loan Agreement to the same extent as if such successor or transferee had been the original party thereto;

(ii) immediately after such consolidation, merger or transfer, the Authority and the Trustee receive a Certificate of an Authorized Officer of the College to the effect that the College or such successor or transferee shall not be in default in the performance or observance of any duties, obligations or covenants of the College under the Loan Agreement; and

(iii) the Authority and the Trustee shall have received an opinion or opinions of Bond Counsel to the effect that the merger, transfer or consolidation will not adversely affect the validity of any Bonds or adversely affect the exclusion from gross income of interest on any Bonds for purposes of federal income taxation.

(c) The College covenants to use its best efforts to continuously operate the College as an institution of higher education, and to maintain such certifications for licensure and such accreditations as it deems reasonably necessary for the proper operation of the College.

(d) The College covenants to comply with all of the terms, provisions and conditions set forth in the Tax Certificate and Agreement, including, without limitation, the payment of any

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arbitrage amounts required to be rebated to the United States pursuant to Section 148(f) of the Code, and the making of any other payments and filings required thereunder.

(e) The College covenants that it will not take any action or permit any action to be taken on its behalf, or cause or permit any circumstances within its control to arise or continue, if such action or circumstances would cause the interest paid by the Authority on Tax-Exempt Bonds to be subject to federal income tax in the hands of the Holders thereof or would adversely affect the then applicable exemptions of the Bonds from Commonwealth taxes.

(f) Within 180 days of the close of each Fiscal Year of the College, commencing with the Fiscal Year ending June 30, 2015, the College covenants to file the Annual Financial Information for such Fiscal Year with the MSRB via EMMA and the Trustee, and to provide notices of the occurrence of certain enumerated events, all as required by Securities and Exchange Commission Rule 15c2-12.

The College also has covenanted to deliver to the MSRB via EMMA notice of the occurrence of any events enumerated by Securities and Exchange Commission Rule 15c2-12.

A failure by the College to perform its covenants relating to continuing disclosure set forth in the Loan Agreement will not constitute an Event of Default under the Loan Agreement, and the sole remedy available to the Authority (or the Trustee as it assignee) for the College's non-compliance is an action for specific performance.

Parity Debt

The College represents and warrants that (a) no bonds other than the Parity Bonds have been issued under any of the Parity Indentures, and (b) no bonds have been issued under any other indenture or other instrument, and no other indebtedness has been incurred by the College, which is secured by a lien upon the Unrestricted College Revenues on a parity with the lien on Unrestricted College Revenues granted in favor of the Bondholders and the holders of the Parity Bonds. The College covenants and agrees that (a) it will not request or cause the Authority to issue any additional bonds under any of the Parity Indentures, and (b) it will not issue or cause to be issued any Long Term Indebtedness which is secured by a lien on and security interest in Unrestricted College Revenues on a parity with the lien on and security interest in Unrestricted College Revenues in favor of the Bondholders and the holders of the Parity Bonds unless such Long Term Indebtedness constitutes Future Parity Debt.

Events of Default and Remedies

Each of the following events shall constitute "Events of Default" under the Loan Agreement:

(a) the College fails to make any loan payment required to pay the principal or Redemption Price of and interest on the 2015 Bonds or any Additional Bonds when the same shall become due and payable; or

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(b) the College fails to make any other payment required by the Loan Agreement when due and such failure continues for thirty (30) days after notice thereof from the Authority or the Trustee; or

(c) the College fails to perform any of its other covenants under the Loan Agreement (except for its obligations described in paragraph (0 under "Additional Covenants of the College") or under the Indenture and such failure continues for thirty (30) days after the Authority or the Trustee gives the College notice thereof; provided, however, that if such performance requires work to be done, actions to be taken, or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such thirty (30) day period, no Event of Default shall be deemed to have occurred or to exist if, and so long as, the College shall commence such performance within such thirty (30)-day period and shall diligently and continuously prosecute the same to completion; or

(d) any other obligation of the College for the payment of borrowed money in excess of $1,000,000 becomes or is declared to be due and payable prior to its stated maturity other than at the election of the College or there shall occur any event permitting the holder of any such obligation or a trustee therefor to make any such declaration and such event shall have continued past any grace period applicable thereto; provided, however, that no Event of Default shall be deemed to have occurred or to exist if and so long as the College shall in good faith contest such payment by appropriate legal proceedings or otherwise; or

(e) the College is adjudicated bankrupt or declared insolvent by a court of competent jurisdiction, or makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally when or as they become due, or a trustee, custodian, receiver or liquidator is appointed for all or any part of the College Facilities or the College files or has filed against it a petition to be adjudicated a bankrupt or insolvent or seeking reorganization, arrangement, adjustment or composition of or in respect of the College under the United States Bankruptcy Code, or other similar laws, federal or state and if such petition is filed by a Person other than the College, such petition is not vacated, dismissed or stayed on appeal within sixty (60) days; or

(f) if the College shall be in default in respect of any payment or other obligations relating to any Parity Bonds or Future Parity Debt, and if the existence of the default entitles the holders thereof or a trustee acting on their behalf to accelerate the repayment of such Parity Bonds or Future Parity Debt, or otherwise permits the holders thereof or a trustee acting on their behalf to realize upon its security interest in the Unrestricted College Revenues; or

(g) if for any reason the then Outstanding Bonds shall be declared due and payable by acceleration in accordance with the terms of the Indenture.

If acceleration of the principal amount of and accrued interest on the then Outstanding Bonds has been declared pursuant to the Indenture, the Trustee, as assignee of the Authority, shall declare all payments receivable by the Authority from the College under the Loan Agreement with respect to such Bonds to be immediately due and payable, whereupon the same shall become immediately due and payable. In addition, if an Event of Default shall occur and be continuing, the Authority (or the Trustee as its assignee) may at its option exercise any

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one or more of the following remedies: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Authority, and require the College to carry out any agreements with or for the benefit of the Bondholders and to perform its duties under the Act or the Loan Agreement; or (b) by action or suit in equity require the College to account as if it were the trustee of an express trust for the Authority; or (c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Authority; or (d) upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate, with such powers as the court making such appointment shall confer, provided, however, that the Authority consents in the Loan Agreement to the transfer to such receiver, to the extent permitted by law, of any net income after the payment of repairs (including replacements), maintenance and operation of the College Facilities, including Debt Service Requirements on the Bonds; or (e) upon notice of the College, accelerate the due dates of all sums due or to become due under the Loan Agreement.

For so long as any Bonds remain Outstanding under the Indenture, and except with respect to the College's obligations in respect of the Authority's right to notices, its right to be reimbursed for Administrative Expenses, and its right to indemnification by the College, and the College's obligations to comply with the Act, the Trustee, as the assignee of the Authority, shall have the sole right to exercise rights and remedies against the College upon the occurrence of any Event of Default under the Loan Agreement, and the exercise by the Trustee of such rights and remedies shall be subject to all applicable provisions of the Indenture, the Loan Agreement and the Act. To the extent necessary or appropriate and requested by the Trustee, the Authority shall cooperate with the Trustee in connection with the exercise by the Trustee of such rights and remedies against the College.

Amendments

The Loan Agreement may be amended or supplemented, without the consent of Bondholders, for the following purposes:

(a) to set forth any matters in connection with the issuance of Additional Bonds;

(b) to cure any ambiguity, defect or omission in the Loan Agreement or in any amendment thereto;

(d) to provide for the refunding of any Bonds;

(e) to modify, eliminate or add to the provisions of the Loan Agreement to such extent as shall be necessary to obtain, maintain or improve a rating of any Bonds by Moody's or S&P;

(f) to add covenants of the College or surrender rights or powers of the College;

(g) in connection with any other change in the Loan Agreement if in the judgment of the Trustee in reliance on an Opinion of Counsel (which may be Bond Counsel), or an opinion

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of a Consultant experienced in the subject matter of the proposed amendment, the proposed change does not adversely affect the rights of the Holders of any Bonds;

(h) to make such additions, deletions or modifications as may be necessary in the case of any Tax-Exempt Bonds to assure compliance with Section 145 of the Code relating to qualified 501(c)(3) obligations, Section 148(f) of the Code relating to required rebate of excess investment earnings to the United States government or otherwise as may be necessary to assure exemption from Federal income taxation of interest on such Tax-Exempt Bonds; or

(i) to effect any amendment to the secondary market disclosure obligations of the College, in accordance with the requirements of the Loan Agreement.

Except for amendments, changes or modifications as provided in clauses (a) through (i) above, neither the Authority nor the Trustee shall consent to any amendment, change or modification of the Loan Agreement or waive any obligation or duty of the College under the Loan Agreement without the written consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Bonds adversely affected thereby; provided, however, that no such waiver, amendment, change or modification shall permit termination or cancellation of the Loan Agreement or any reduction of the loan payments payable under the Loan Agreement or change the date when such payments are due without the consent of the Holders of all the Bonds then Outstanding who are adversely affected thereby.

Termination

When the interest on, and the principal or the Redemption Price (as the case may be) of, all Bonds Outstanding under the Indenture has been paid or duly provided for, and all other obligations to the Authority and the Trustee under the Indenture and the Loan Agreement have been paid or duly provided for, the Loan Agreement shall be terminated, and the Authority shall cause the Trustee to pay over to the College any money then remaining in any Funds created under the Indenture and not set aside for payment of the Bonds and Administrative Expenses, and shall pay over to the College any such money which shall have been paid to the Authority by the Trustee.

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Appendix D

Form of Proposed Bond Counsel Opinion

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[FORM OF OPINION OF BOND COUNSEL]

______, 2015

$54,940,000 SWARTHMORE BOROUGH AUTHORITY Swarthmore College Revenue Bonds, Series of 2015

TO THE PURCHASERS OF THE ABOVE-CAPTIONED BONDS:

We have acted as bond counsel to the Swarthmore Borough Authority (the "Authority") in connection with the issuance by the Authority of $54,940,000 aggregate principal amount of its Swarthmore College Revenue Bonds, Series of 2015 (the "2015 Bonds"). The 2015 Bonds are being issued under and pursuant to the Pennsylvania Municipality Authorities Act, 53 Pa. Cons. Stat. §§5601-5622, as amended and supplemented (the "Act"), and a Trust Indenture, dated as of July 1, 2015 (the "Indenture"), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). Capitalized terms not otherwise defined herein have the meanings assigned to such terms in the Indenture.

The Authority is issuing the 2015 Bonds at the request of Swarthmore College (the "College") to provide funds to finance the costs of a project (the "Project") consisting of the payment of, or reimbursement to the College for (1) the design, purchase, construction, renovation and equipping of new facilities, including, a new science center, dining facilities, a dormitory, the renovation of Clothier Memorial Hall, a parking lot and pedestrian crossing on Chester Road, various office migrations and swing space needs, utility upgrades, sustainability improvements and the regular ongoing renovation, refurbishment and renewal of existing College facilities, together with all planning, consulting, architectural, engineering and site work related thereto; and (2) payment of costs of issuance of the 2015 Bonds.

The Authority and the College have entered into a Loan Agreement dated as of July 1, 2015 (the "Loan Agreement"), which provides for the loan of the proceeds of the 2015 Bonds to the College to pay the costs of the Project. Under the Loan Agreement, the College is obligated to make loan payments in the amounts and at the times necessary to pay, when due, the principal or redemption price of and interest on the 2015 Bonds. Under the Indenture, the Authority has assigned certain of its interests under the Loan Agreement, including its right to receive the payments under the Loan Agreement in respect of the 2015 Bonds, to the Trustee for the benefit of the holders of the 2015 Bonds.

In our capacity as bond counsel, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Indenture, the Loan Agreement, the Tax Certificate, dated the date hereof, between the Authority and the College (the "Tax Certificate"), opinions of counsel to the Authority and the College, certificates of the Authority, the College and the Trustee, and such other documents, records and other instruments as we

D-1 have deemed appropriate for purposes of the opinions set forth herein. We also have examined an executed 2015 Bond, and assume that all other 2015 Bonds have been similarly executed and have been properly authenticated by the Trustee.

We have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of the documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, facsimile or photostatic copies, and the authenticity of all documents submitted to us as copies. We have assumed that the Indenture and the Loan Agreement constitute the valid and binding obligations of each party thereto other than the Authority. We have assumed, without undertaking to independently verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions referred to in the next paragraph hereof.

We have relied upon the opinion of counsel to the Authority with respect to the valid existence of the Authority and the authorization, execution and delivery of the documents to which the Authority is a party. We have relied on the opinion of counsel to the College regarding, among other matters, the current qualification of the College as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). We note that such opinion is subject to various qualifications and limitations.

Based upon and subject to the foregoing, and in reliance thereon, we are of the opinion that:

1. The Authority is a body corporate and politic validly existing under the laws of the Commonwealth, with full power and authority under the Act to undertake the financing of the Project, to execute, deliver and perform its obligations under the Indenture and the Loan Agreement, and to issue and sell the 2015 Bonds.

2. The Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Authority and constitute the valid and binding obligations of the Authority, enforceable against the Authority in accordance with their terms.

3. The issuance and sale of the 2015 Bonds have been duly authorized by the Authority and, on the assumption as to authentication stated above, the 2015 Bonds have been duly executed and delivered by the Authority and authenticated by the Trustee, are the valid and binding limited obligations of the Authority, and are entitled to the benefit and security of the Indenture.

4. Under existing laws of the Commonwealth of Pennsylvania, the interest on the 2015 Bonds is free from Pennsylvania personal income taxation and Pennsylvania corporate net income taxation, but such exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the 2015 Bonds or the interest thereon.

5. Interest on the 2015 Bonds is not includable in gross income for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions. The

D-2 opinion set forth in the preceding sentence is subject to the condition that the Authority and the College comply with all applicable federal income tax law requirements that must be satisfied subsequent to the issuance of the 2015 Bonds in order that interest thereon continues to be excluded from gross income for purposes of federal income taxation. The College and Authority have covenanted to comply with all such requirements. Failure to comply with all of such requirements could cause the interest on the 2015 Bonds to be includable in gross income retroactive to the date of issuance of the 2015 Bonds. Interest on the 2015 Bonds is not treated as an item of tax preference under Section 57 of the Code for purposes of the individual and corporate alternative minimum taxes; however, under the Code, to the extent that interest on the 2015 Bonds is a component of a corporate holder’s "adjusted current earnings," a portion of that interest may be subject to the corporate alternative minimum tax. We express no opinion regarding other federal tax consequences relating to the 2015 Bonds or the receipt of interest thereon.

We call your attention to the fact that the 2015 Bonds are limited obligations of the Authority, payable only out of certain revenues of the Authority and certain other monies available therefor as provided in the Indenture, and that the 2015 Bonds do not pledge the credit or the taxing power of the Borough of Swarthmore, Delaware County, Pennsylvania, or of the Commonwealth or any political subdivision, agency or instrumentality thereof. The Authority has no taxing power.

We express no opinion with respect to the accuracy or completeness of any offering document or other information pertaining to the offering for sale of the 2015 Bonds.

The opinions expressed herein are subject to bankruptcy, insolvency, fraudulent transfer and other similar laws affecting the rights and remedies of creditors generally and general principles of equity.

This opinion letter is effective only as of the date hereof. We do not assume responsibility for updating this opinion as of any date subsequent to its date, and we assume no responsibility for advising you of any changes with respect to any matters described in this opinion letter that may occur subsequent to the date of this opinion letter or from the discovery, subsequent to the date of this opinion letter, of information not previously known to us pertaining to the events occurring prior to such date.

Very truly yours,

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