fiscal year ended june 30, 201420annual%20report.pdf · amherst college annual financial report...

Amherst College Annual Financial Report

Fiscal Year ended June 30, 2014

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Table of Contents

The Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A Message from the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Report from the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Amherst College Statement of Operating Resources and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Report from the Chief Investment Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Report from the Folger Shakespeare Memorial Library . . . . . . . . . . . . . . . . . . . . . . 18

Folger Shakespeare Memorial Library Statement of Operating Resources and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Amherst College Twenty Years in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Amherst College Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Folger Shakespeare Memorial Library Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Amherst College Gifts, Bequests and Grants Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Folger Shakespeare Memorial Library Gifts, Bequests and Grants Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

The Trustees of Amherst College

administer Amherst College in Amherst, Massachusetts, and

the Folger Shakespeare Memorial Library in Washington, D .C .

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Chairman of the CorporationCullen Murphy ’74, A .B .Medfield, MA

President of the College

Carolyn “Biddy” Martin, Ph .D . Amherst, MA

Members of the CorporationDanielle S . Allen, Ph .D .Princeton, NJ

Theodore W . Beneski ’78, M .B .A .Colleyville, TX

Rafael Campo, ’87, M .D .Boston, MA

Wei Sun Christianson ’85, J .D .Beijing, China

Brian J . Conway ’80, M .B .A .Boston, MA

Walter C . Donovan ’85, A .B .Boston, MA

Patrick Fitzgerald ’82, J .D .Chicago, IL

Howard Gardner, Ph .D .Cambridge, MA

Arthur W . Koenig ’66, M .I .A .London, England

Christopher S . Lehane ’90, J .D .San Francisco, CA

John S . Middleton ’77, M .B .A .Bryn Mawr, PA

Andrew J . Nussbaum, ’85, J .D .New York, NY

Hope E . Pascucci ’90, A .B .Wellesley, MA

Paula K . Rauch ’77, M .D .Boston, MA

Julia A . Segre ’87, Ph .D .Bethesda, MD

Shirley M . Tilghman, Ph .D .Princeton, NJ

James C . Tsai ’85, M .D .New Haven, CT

Scott F . Turow ’70, J .D .Chicago, IL

Laura J . Yerkovich ’80, M .B .A .Riverside, CT

Secretary of the CorporationSusan Pikor, A .B .Hadley, MA

Life TrusteesK . Frank Austen ’50, M .D .Boston, MA

George B . Beitzel ’50, M .B .A .*Ridgefield, CT

Martha L . Byorum, M .B .A .New York, NY

Rosanne M . Haggerty ’82, A .B .New York, NY

Amos B . Hostetter, Jr . ’58, M .B .A .*Boston, MA

Charles A . Lewis ’64, M .B .A .Evanston, IL

Charles R . Longsworth ’51, M .B .A .*Royalston, MA

Robert J . McKean, Jr . ’50, LL .B .Lantana, FL

Mary Patterson McPherson, Ph .D .Rosemont, PA

Peter A . Nadosy, M .B .A .New York, NY

Edward E . Phillips ’52, LL .B .Weston, MA

H . Axel Schupf ’57, M .B .A .New York, NY

The Corporation | Fiscal Year 2013–14

John I . Williams, Jr . ’75, J .D .Jamaica Plain, MA

Philip S . Winterer ’53, LL .B .New York, NY

Trustees EmeritiJohn E . Abele ’59, A .B .Shelburne, VT

Margaret A . Bangser ’81, M .P .P .M .Dar es Salaam, Tanzania

Alan S . Bernstein ’63, M .B .A .Coral Gables, FL

Paul E . Bragdon ’50, LL .B .Portland, OR

Robert W . Carington ’53, M .Arch .Bloomfield Hills, MI

Katherine K . Chia ’88, M .Arch .New York, NY

William A . Davis, Jr . ’63, J .D .Washington, DC

Michele Y . Deitch ’82, J .D .Austin, TX

Colin S . Diver ’65, LL .B .Boston, MA

Anne Melissa Dowling ’80, M .B .A .West Hartford, CT

Charles C . Eldredge ’66, Ph .D .Lawrence, KS

Willie J . Epps, Jr . ’92, J .D .St . Louis, MO

John C . Esty, Jr . ’50, M .A .Concord, MA

Nicholas M . Evans ’52, M .B .A .Vero Beach, FL

William E . Ford ’83, M .B .A . New York, NY

Steven M . Gluckstern ’72, Ed .D .San Francisco, CA

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Frederick E . Hoxie ’69, Ph .D .Evanston, IL

Richard (Dick) F . Hubert ’60, A .B .Rye Brook, NY

George R . Johnson, Jr . ’73, J .D .Greensboro, NC

David A . Kessler ’73, M .D .San Francisco, CA

Woodward Kingman ’49, M .B .A .Belvedere, CA

David L . Kirp ’65, LL .B .San Francisco, CA

Jonathan I . Landman ’74, M .S .New York, NY

Thai-Hi T . Lee ’80, M .B .A . Lebanon, NJ

Richard S . LeFrak ’67, J .D .New York, NY

Van Doorn Ooms ’56, Ph .D .Bethesda, MD

Stephen B . Oresman ’54, M .B .A .Darien, CT

George E . Peterson ’63, Ph .D .Washington, DC

Mark J . Sandler ’64, LL .B .New York, NY

W . Lloyd Snyder III ’66, M .B .A .Haverford, PA

Joan E . Spero, Ph .D .New York, NY

Richard R . Spies ’67, Ph .D .Providence, RI

Joseph E . Stiglitz ’64, Ph .D .New York, NY

Bradley A . Stirn ’72, M .B .A .Woodside, CA

Blair H . Taylor ’85, M .B .A . Seattle, WA

Louis B . Thalheimer ’66, J .D .Towson, MD

Diana Chapman Walsh, Ph .D .Brookline, MA

Gail T . Wickes, Ph .D .Dallas, TX

Karen Hastie Williams, J .D . Washington, DC

David S . Wolff ’62, M .B .A .Houston, TX

Kimba M . Wood, J .D .New York, NY

Jide J . Zeitlin ’85, M .B .A .*New York, NY

Advancement CommitteeMs . Pascucci (Chair), Mr . Beneski, Ms . Christianson, Messrs . Conway, Donovan, Koenig, Lehane, Middle-ton, Ms . Tilghman, Mr . Tsai, Ms . Yerkovich

Audit CommitteeMs . Yerkovich (Chair), Ms . Allen, Messrs . Fitzgerald, Lehane, Nussbaum, Mss . Pascucci, Rauch, Mr . Tsai

Budget and Finance CommitteeMr . Conway (Chair), Ms . Allen, Mr . Beneski, Ms . Christianson, Messrs . Donovan, Koenig, Middle-ton, Mss . Pascucci, Tilghman, Mr . Tsai

Buildings and Grounds CommitteeMr . Middleton (Chair), Mr . Campo, Ms . Christianson, Messrs . Donovan, Gardner, Mss . Segre, Tilghman, Mr . Turow

Compensation CommitteeMr . Murphy (Chair), Ms . Allen, Mr . Conway, Ms . Rauch

Emily Dickinson Committee (Ad Hoc)Ms . Yerkovich (Chair), Mr . Arm-strong (Emily Dickinson Board),

Ms . Bradford (Folger/Emily Dickinson Board), Messrs . Campo,Donovan, Rosenthal (Emily Dickin-son Board), Turow, Winterer

Honorary Degrees CommitteeMr . Turow (Chair), Ms . Christianson, Messrs . Fitzgerald, Gardner, Koenig, Lehane, Nussbaum, Mss . Pascucci, Segre, Tilghman, Yerkovich

Human Resources CommitteeMr . Nussbaum (Chair), Ms . Allen, Messrs . Campo, Fitzgerald,Mss . Rauch, Segre, Mr . Turow

Instruction CommitteeMs . Allen (Chair), Messrs . Campo, Conway, Fitzgerald, Gardner, Koenig, Lehane, Nussbaum, Mss . Rauch, Segre, Tilghman, Messrs . Tsai, Turow

Investment CommitteeMr . Ford (Chair), Messrs . Beneski, Donovan, Middleton,ex officio: Messrs . Hostetter, Nadosy

Student Life CommitteeMessrs . Gardner (Chair), Campo, Fitzgerald, Lehane, Nussbaum, Mss . Rauch, Segre, Mr . Turow, Ms . Yerkovich

Trusteeship CommitteeMr . Murphy (Chair), Ms . Allen, Mr . Conway, Mss . Pascuccci, Rauch, Mr . Turow, Ms . Yerkovich

* Chair Emeritus

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A Message from the President

Amherst College is fortunate to have one of the strongest financial port-folios in American higher education . For the first time, our endowment has topped $2 billion . Our endowment funds now exceed $1 million per student, a per-capita corpus few other colleges and universities can match . Amherst has attained this position because of the generosity of our alumni, who have supported the College with annual funding, gifts and bequests throughout its history .

As this report shows, Amherst has stew-arded its financial resources carefully, focusing them on programs that make the College a standard-bearer for liberal arts education . Thanks to the extraordi-nary work of a dedicated trustee Invest-ment Committee and our superb internal investments team, our endowment returns have been among the highest in the country across almost any time frame during the last 20 years . Simultaneously, the College has protected the endowment corpus with conservative distribution rates—specifically, below 5% every year since the mid-1990s .

We are committed to the same discipline in our approach to budgeting and man-agement and are instituting more rigorous budget and capital processes that force us to make hard choices about where to in-vest what we know are limited resources . Hiring and retaining the best faculty is a high priority . The faculty is in the midst of a generational transition . Retirements may well mean that one-quarter of our faculty will change in the coming decade; over the last 10 years, nearly 15% of our faculty has changed . We are recruiting exceptional teachers, scholars and artists from across the country and around the world to advance the College’s mission: the preparation of exceptional undergrad-uates for principled lives of consequence . Academic rigor and teaching through

close colloquy continue to be Amherst’s signature strengths . The College has also set itself apart by applying extensive financial aid policies that allow us to tap the excellence that exists in every socio-economic group . We have placed a high priority on ensuring that all our students benefit academically and socially from the opportunity to study and interact with peers from a wide range of backgrounds . Amherst offers students the depth and

Biddy Martin President

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pus to become a popular destination for students, faculty, staff and visitors .

All of these changes are embedded in the new strategic plan, which is nearing completion . The draft plan has benefit-ted from the feedback we have received over the past year, including from many alumni . The plan will reaffirm our com-mitment to what is precious about liberal arts education at Amherst, while embrac-ing the challenges and opportunities of the 21st century . The excellence of an Amherst education is possible because of the generosity of our alumni, parents and supporters . With gratitude for your faith in Amherst, I am pleased to share this financial report with you .

Sincerely,

Biddy MartinPresident

breadth of intellectual and personal experiences that can prepare them for a rapidly changing and increasingly inter-dependent world .

We have set the enhancement of stu-dents’ residential experience as another high priority . We have appointed new leadership in the Student Affairs office; restructured and reorganized the staff; and established new systems and policies to support student safety, wellness and enjoyment . Of the four class deans in Student Affairs, three are tenured faculty members, who provide a vital connection between students’ residential and aca-demic lives . The staff members who are responsible for compliance with Title IX and sexual-respect education have estab-lished new policies and procedures, cre-ated innovative educational programs and drawn students into the work of setting standards for conduct and relationships .

Capital investments are essential to the excellence of our academic and residen-tial programs . A new Science Center, four new residence halls and a Greenway that connects them will transform the eastern portion of campus and make the landscape their organizing principle . In consultation with our trustees and faculty, we are planning a cutting-edge science facility that achieves the cost-re-duction targets that we set after deciding to change the original site and design . The Science Center will open in fall 2017 . Our students have been integrally involved in our plans for the residence halls, which will open in fall 2016 and feature common spaces that bring stu-dents together from across the campus . The Greenway will stretch from Fayer-weather to the dormitories on the site where the temporary housing known as “Waldorf” and “Plaza” were located . The walkways, informal gathering spaces and plantings on the Greenway will enhance our already beautiful campus . We expect this re-envisioned eastern portion of cam-

We are recruiting

exceptional teachers,

scholars and artists

from across the

country and around

the world to advance

the College’s mission:

the preparation

of exceptional

undergraduates for

principled lives of

consequence.

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Report from the Chief Financial Officer

Greetings from Amherst . It is a pleasure to share with you the College’s financial results for the fiscal year concluded June 30, 2014 (FY14) . After my first full fiscal year on the job, I am happy to report that my initial observations articulated in last year’s report have proven true, to say the least . Amherst College’s students and faculty are second to none; its alumni are passionate, engaged and incredibly generous; its staff is highly skilled and completely dedicated to its mission; and its financial resources are broad and deep . As I also noted last year, Amherst College’s lofty ambitions and the high expectations of everyone affili-ated with this amazing place constantly test the limits of the College’s seemingly ample financial resources . I see this as im-mensely positive . My goal, and the goal of the financial team as a whole and all of our dedicated staff, is to help ensure that all of us here at the College deploy its resources in an energetic yet responsible manner to ensure that Amherst achieves all aspects of its mission both today and far into the future .

This report includes the audited financial statements for the Trustees of Amherst College (Institution), prepared in accordance with accounting standards generally accepted in the United States of America . These statements show the individual as well as the consolidated operations of Amherst College (College) and the Folger Shakespeare Memorial Library (Library), as well as the assets of trusts in which the Institution is a beneficiary, in one full set of financial statements . For a more detailed descrip-tion of the financial presentation, please see Footnote #1 on page 28, Basis of Presentation .

While statements in this format give a

true financial picture of the Institution as a whole and provide consistency and comparability among nonprofit institu-tions, they do not reflect how the Insti-tution is internally managed . In fact, the College, the Library and the Emily Dick-inson Museum (Museum) are managed as independent operations, with separate operating budgets . These budgets are based on the principles of fund account-ing, basically dividing the operation into operating resources, which fund the day-to-day business of the Institution; endowment resources, which help to finance the Institution over the long term; and facilities, concerned with man-aging and investing in the Institution’s physical assets . The operating results for the College are on page 8; detailed information related to the Library follows this narrative on page 19 .

The historical and

ongoing generosity

of the College’s

alumni and friends

through gifts to

the endowment,

Annual Fund and

other current uses

make it possible

for the College to

provide its students

with high-quality

education while re-

maining committed to

financial accessibility.

Kevin C . WeinmanChief Financial Officer

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Statement of Operating Resources and Expensesfor the years ended June 30, 2014 and 2013 (unaudited)

2014 2013Resources AvailableStudent tuition and fees $ 103,529,000 $ 100,295,000Less: Amherst College scholarship ($ 45,946,000) ($ 43,898,000) Net tuition and fees collected $ 57,583,000 $ 56,397,000

Auxiliary and other revenues $ 7,552,000 $ 7,391,000 Net utilization of new and prior restricted fund receipts ($ 1,795,000) ($ 2,026,000)Total Resources Available (before support from Alumni and Friends) $ 63,340,000 $ 61,762,000

Current ExpensesEducational and General Instruction $ 37,571,000 $ 36,694,000 Academic support $ 12,440,000 $ 12,739,000 Research $ 3,522,000 $ 3,778,000 Library $ 6,321,000 $ 5,952,000 Student services $ 18,830,000 $ 16,608,000 Operation and maintenance of plant $ 20,136,000 $ 19,548,000 Administration and general $ 18,971,000 $ 16,523,000 Pensions and professional fees $ 4,572,000 $ 5,024,000Total Education and General $122,363,000 $116,866,000

Other Expenses Academic awards $ 1,227,000 $ 1,138,000 Auxiliary activities and other $ 15,415,000 $ 14,953,000 Debt service $ 19,927,000 $ 16,745,000

Total Current Expenses $158,932,000 $149,702,000

Deficit before support from Alumni and Friends ($ 95,592,000) ($ 87,940,000)Distribution from endowment $ 77,812,000 $ 69,527,000Annual Fund $ 10,381,000 $ 10,305,000 Gifts and grants for operating purposes $ 9,080,000 $ 8,188,000Total support from Alumni and Friends $ 97,273,000 $ 88,020,000

Surplus before designation to reserves $ 1,681,000 $ 80,000

Transfer of Surplus to Designated Reserves ($ 581,000) $ 0Surplus to General Operating Reserve $ 1,100,000 $ 80,000

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AMHERST COLLEGE OPERATING RESULTS

The FY14 College operating budget was established at $159 .4 million, with an expectation of balanced revenues and ex-penditures . This represented an increase of 6 .5% over FY13 actual expenditures of $149 .7 million, as the College undertook some actions to enhance student life and experienced the full, annualized effects of a debt issuance that raised proceeds for several major capital projects . As you can see from the presentation on page 8, overall FY14 expenditures were $158 .9 million, slightly below budget . After factoring in slightly favorable revenues and reserve activities, the year ended with an operating surplus of approximately $1 .1 million . Unbudgeted gift and trust receipts and lower-than-anticipated employee benefits expenditures offset slightly higher expenditures in academic support and student life .

Cost per student (excluding scholarships) rose to approximately $89,100 in FY14, an increase of 7 .3%, slightly higher than the rate of increase in expenditures due to a slight drop in the number of students after the graduation of the larger-than-usual class of 2013 . With a FY14 compre-hensive fee of $57,970, Amherst offered a substantial discount relative to its costs for each and every student . Thus, even students who did not receive financial aid benefitted from a billed rate that was 35% less than the College’s cost per student . On average, Amherst students paid $32,300 after financial aid provided by the College in the form of grants; this average rate was about 64% less than the College’s cost per student .

The historical and ongoing generosity of the College’s alumni and friends through gifts to the endowment, Annual Fund and other current uses make it possible for the College to provide its students with high-quality education while remain-

ing committed to financial accessibility . That said, we remain ever mindful of the need to constrain costs, and to ensure that precious resources are directed to those activities most closely aligned with Amherst’s mission .

Annual resources available for the oper-ating budget are unusually concentrated . Nearly 85% of the College’s revenues are derived from two key sources—student fees net of financial aid, and endowment distribution:

In FY14, net student fees (comprehensive fee, room, board and other charges)—after discounting for financial aid—pro-vided 36% of the College’s revenues . Despite an increase in its comprehensive fee to $57,970, 4 .4% from the prior year, net collections of comprehensive-fee revenue increased only 2 .2% year-over-year as College-provided financial aid continued to increase at a faster rate than the College’s full comprehensive fee . These scholarships are awarded based on the financial need of students and families and represent an important institutional priority .

Distribution from Amherst’s endowment continued to be a substantial and grow-ing portion of the College’s operating revenues, totaling nearly 48% in FY14, one of the highest “endowment reliance” factors in higher education . The on going support from the endowment to the Col-lege’s budget remains substantial . This is possible only because of the extraordinary generosity, past and present, of alumni, parents and friends of the College; the expertise and acumen of the Investment Committee of the Board of Trustees and professionals in our internal Investment Office; and a long and cautious tradition of prudent utilization of the endowment to fund current operations . Despite Amherst’s unusually high reliance upon its endowment to fund current opera-tions, its endowment “spending rate” is a

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Even students not receiving financial aid pay a billed rate 35% lower than the College’s cost per student.

Cost per Student Comprehensive Fee Net Comprehensive Fee per Student

$100,000

$80,000

$60,000

$40,000

$20,000

$0

$89,100

$57,970

$32,300

■ Student Fees net of Financial Aid

■ Endowment Distribution

■ Annual Fund

■ Other Gifts and Grants

■ Auxiliary and Other Income

4%

36%

48%

6%6%

FY14 REVENUES = $160.4 MILLION

Nearly 85% of the College’s revenues come from student fees net of financial aid and endowment distribution.

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modest, responsible and healthy 4 .6% of the three-year average endowment value . Amherst’s target is to keep this distri-bution rate between 4% and 5%; it has been below 5% every year since the late 1990s . Amherst continuously monitors this utilization rate closely, as the admin-istration, trustees and campus community work to balance the needs of the present with a thoughtful and affordable plan for the future .

The Annual Fund continues to be a very important source of ongoing revenue . It provides 6% of the total operating budget, which allows Amherst to fund its most important priorities, including financial aid and access, superb teach-ing and research, facilities upkeep and enhancements, and student activities and services . Revenues from other gifts and grants, including those for research, fund another 6% of the budget . Auxiliary activ-ities cover the remaining 4% .

Amherst’s expenditures have been pro-portionately consistent for several

decades . In FY14, nearly one-quarter (24%) of expenditures were incurred directly for instruction . Instruction and related activities—including academic support, research and library—totaled nearly 40% of the budget . Together, plant and debt service (which is generally incurred to fund facility construction and renovation) totaled just over one-quar-ter of Amherst’s budget . Debt service is the line item with the most substantial growth over time, as Amherst has moved from very little debt in the 1990s to $401 million as of FY14 year-end . This transition has allowed the College to preserve its endowment while embarking upon a host of much-needed facilities projects and benefitting from a very low overall cost of borrowing due to the Col-lege’s strong credit and favorable debt markets .

Amherst College continues to monitor its debt portfolio in order to achieve the lowest possible overall cost of debt . Our debt trades very actively and is in high demand in the market, resulting in a very

FY14 EXPENDITURES = $158.9 MILLION

Overall expenditures were slightly below budget, and the year ended with an operating surplus of approximately $1 million.

4%

24%

8%

2%4%

12%13%

13%

12%

10%

■ Instruction

■ Academic support

■ Research

■ Library

■ Student services

■ Plant

■ Debt service

■ Admin and general

■ Auxiliary activities

■ Other

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low overall cost of debt . Recently, as part of a routine refinancing of one of its term bonds, Amherst obtained an update of its credit rating from two rating agencies, Moody’s and Standard & Poor’s (S&P) . We were especially pleased that Moody’s maintained Amherst’s Aaa rating, the highest available, and upgraded its outlook from “Negative” to “Stable” in recognition of Amherst’s “extraordinarily high wealth relative to annual expenses and enrollment, reputation as a highly selective premier liberal arts college, superior fundraising on a per student basis, and history of robust operating performance,” as well as “dedicated focus on liquidity management, conservative budgeting, and capital project over-sight .”1 S&P affirmed its Aa1 rating of Amherst, in place since S&P downgraded Amherst from Aaa in September 2012 . Even with this “split rating,” the College has very robust financial and physical assets, its cost of borrowing and access to funds remain unparalleled, and the remarketing of its term-bonds continues to occur at a historically low interest rate . Amherst continually monitors its liquidity to ensure it has access to funds to meet operational obligations and to protect against any potential difficulties in the remarketing of its variable-rate bonds . The College has adequate cash balances on hand and access to a number of low-cost lines of credit with several financial institutions that provide further security . Amherst has no outstanding borrowings on any of these lines .

GIVING TO THE COLLEGE

Continuing an extraordinary record of generosity, Amherst’s alumni, parents and friends provided the College with cash gifts, bequests and grants in FY14 of

1 Moody’s Investor Services, “Rating Update: Moody’s Revises Amherst College (MA) Outlook to Stable; Aaa and Aaa/VMIG-1 Affirmed,” October 23, 2014 .

$62 .8 million . This is slightly lower than the record level of receipts over the last two years—which occurred during the final stages of the successful Lives of Con-sequence campaign—but is still a remark-able and impactful amount (to say the least) . The Annual Fund (AF), composed of the Alumni Fund and the Parents’ Fund, raised $10 .2 million this past year, consistent with recent years’ results . The College uses the AF in the operating bud-get of the following year, so that it can budget the contribution with certainty . The AF will provide over 6% of the Col-lege’s total operating budget in FY15, a critically important source of unrestricted operating revenue . It would take approxi-mately $225 million in additional endow-ment principal to generate the amount of income to the operating budget needed to replace that level of support . The AF is the most meaningful way for alumni, parents and friends at all economic levels to participate in the College’s fundraising efforts . Many of Amherst’s most generous alumni began their support of the College with participation in the AF . Although their giving now includes endowment, facilities and life-income gifts, these donors remain loyal supporters of the AF . Because of this loyalty, Amherst is a national leader in alumni participation .

In FY14, the College received $34 .2 million in new endowment gifts, nearly 2% of current endowment valuation . In addition to Annual Fund receipts, gifts totaling $10 .7 million were received, sup-porting current operations in such areas as instruction, research, library purchases, scholarships and fellowships . Gifts for fa-cilities totaled $5 .7 million this past year . Life-income gifts—charitable remainder unitrusts and annuity trusts, charitable gift annuities and pooled income funds—totaled $1 .7 million in FY14 . These gifts will provide beneficiaries with income during their lifetimes while supporting a wide variety of College programs in future years . Since FY07, an Internal

13

ticipate that construction and renovation activities on the rest of campus will slow .

It is a terrific privilege to serve you as Amherst’s chief financial officer . I have had the pleasure to meet and speak with many students, parents, alumni and friends over the last 12 months, and I look forward to meeting many more of you in the near future . I have learned much about this incredible institution, and I have been inspired by your love and commitment to the College . It is a great pleasure to be here .

Kevin C . WeinmanChief Financial Officer

Revenue Service ruling allows the Col-lege to invest its charitable remainder unitrusts in units of the endowment in-vestment pool (referred to as an “endow-ment trust” by the College) . As a result, these trusts receive the same market returns as the endowment . Donors and beneficiaries now benefit from access to the investment expertise of the College’s endowment managers, and beneficia-ries receive annual income based on the trust’s yearly market value . This ruling contributed greatly to the level of life- income gifts received and pledged .

FACILITIES AND OTHER CAPITAL PROJECTS

As alluded to in Biddy’s opening state-ment, planning and enabling work continue apace on two major projects, a new dormitory cluster and a new Science Center, with completion scheduled for summer 2016 and summer 2018, respec-tively . The new Greenway meanwhile promises to be a spectacular new outdoor setting to connect these spaces while integrating the eastern quadrant with the rest of campus as never before .

Other projects were completed over the past year, including much-needed renovations of College Hall and Con-verse Hall, notably improvements to their energy efficiency and accessibility . The College sets aside funds annually to address deferred maintenance needs such as these; such needs will always be acute on an older campus in a climate that is often harsh and unforgiving . As a result, Amherst is continuously evaluating the adequacy of its annual and accumulated funding for such projects, and considers a wide variety of potential funding sources for these needed expenditures, includ-ing debt proceeds and philanthropy . As the College turns its attention to the enormous task of constructing the new dormitories and Science Center, we an-

14

The Amherst College endowment en-joyed a strong return this past fiscal year . We share these results with humility and appreciation . We take most seriously our obligation to protect and build the gener-ous resources invested in the College and its future by the many devoted alumni and friends of Amherst . I am pleased to report on these results with our gratitude for your trust and your confidence in what Amherst is and can become .

For the year ended June 30, 2014, the return on the College’s investments was 19 .5%, net of all investment-management fees and related expenses . The investment gains in the portfolio significantly out-paced the draw on the endowment, with the overall value of the portfolio closing at $2 .149 billion, well above the previ-ous year’s value of $1 .824 billion . The Folger Shakespeare Memorial Library’s Endowment Fund increased from $281 .8 million to $323 .5 million during the

Report from the Chief Investment Officer

fiscal year . Funds managed by the trustees under life-income agreements totaled $89 .5 million at June 30, 2014, showing a net increase of $8 .1 million from the prior year . Gifts of $34 .2 million and $3 .6 million in transfers from terminated life-income funds also contributed to the College’s endowment for the year .

As President Martin mentions, FY14 also marked the first time that the College’s endowment surpassed the $2 billion threshold . A summary of market values over the past 10 years is shown at right .

AMHERST ENDOWMENT MARKET VALUE

As seen in the chart at bottom right, on an absolute basis, the College’s invest-ment return of 19 .5% for the fiscal year considerably surpassed the long-term expected annual return of 6 .0% . The College’s return also outperformed that of the strategic policy benchmark, which rose 14 .3% for the period . The College’s return significantly outperformed the 60%/40% S&P 500 Index and Barclays U .S . Aggregate Bond Index blended return of 16 .2% .

Overall, the College’s FY14 return was quite favorable compared to those of peer institutions . It significantly outpaced the Cambridge Associates mean and will likely be in the top decile for college and university endowments . Longer-term re-sults are quite strong, with the College’s 10-, 15- and 20-year annualized returns standing at 10 .4%, 10 .9% and 12 .3%, respectively . These returns also rank at or near the top decile of returns for college and university endowments, and outpace both the strategic policy benchmark and the 60%/40% S&P 500 Index and Bar-

Mauricia Geissler Chief Investment Officer

15

$1,386

2,500

2,000

1,500

1,000

500

0

$993

$1,155

$1,337

$1,662 $1,706

$1,306

$1,642 $1,641

$1,824

$2,149

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fiscal Year

The endowment’s market value has increased 116% since 2004, surpassing the $2 billion threshold for the first time.

■ Amherst College ■ Simple Benchmark* ■ Strategic Benchmark** ■ Cambridge Associates Mean***

* Simple Benchmark represents a blended benchmark of 60% S&P 500 and 40% Barclays Aggregate Bond Index.

** Beginning January 1, 2005, Amherst has adopted a strategic policy benchmark which is weighted average return derived by applying the target strategic policy portfolio weights of each asset class to the performance of the respective asset class benchmarks. Effective July 1, 2011, the strategic policy benchmark weights and indices were changed to reflect the new policy portfolio and benchmarks approved by the Investment committee.

*** Consists of 147 institutions reporting to Cambridge Associates for one year, 146 institutions reporting for three years, 145 institutions reporting for five years, 137 institutions reporting for ten years and 90 institutions reporting for twenty years.

The College’s short- and long-term returns rate at or near the top decile among college/university endowments.

16.2%

14.3%

16.2%

20%

1 5 %

1 0 %

5%

0%

FY 2014 Three YearsEnded 6/30/14

Five YearsEnded 6/30/14

Twenty YearsEnded 6/30/14

Ten YearsEnded 6/30/14

19.5%

11.0%11.5%

8.2%8.8%

12.0%

13.3%

10.8%11.7%

10.4%

6.9%7.3% 7.6%

12.3%

8.6%

7.5%

9.2%

Endo

wm

ent

Val

ue in

Mill

ions

Inve

stm

ent

Ret

urn

16

clays U .S . Aggregate Bond Index blended portfolio .

In review, developed markets continued their strong run in FY14, with all devel-oped markets posting positive returns . While the U .S . equity market eclipsed its 2007 peak in FY13, the broader developed markets were able to fully recover their pre-crisis levels during FY14 . Emerging Markets again trailed Developed Markets during the fiscal year, although Frontier Markets posted their strongest fiscal-year return since 2007 . Bond markets were positive during the fiscal year, as the Bar-clays U .S . Aggregate Bond Index gained 4 .4% . Commodity markets were also positive, led by natural resources equities, which returned over 20% .

The contributors to the College’s excess returns over various portfolio benchmarks and peers included the outperformance of U .S . Equity managers, as a group, versus the S&P 500 Index; the College’s Asian Equity managers significantly outper-forming the MSCI Asia ex Japan Index; and Emerging Markets Equity managers

outpacing the MSCI Emerging Markets Index . In addition, the College’s Abso-lute Return managers produced low-teens returns, outperforming the HFRI Fund-of-Funds Composite Index . Finally, the College’s Private Capital strategies contributed significantly to performance during the year, led by particularly strong returns from Venture Capital, which re-turned over 46% for the fiscal year .

Over the past three years, the College has significantly lowered its allocation to Fixed Income strategies, given the market’s historically low yields . The College has shifted a significant portion of this exposure into Absolute Return strategies, comprising managers that have the ability to invest across asset classes (e .g ., Equities, Credit, Derivatives) . The charts below illustrate the change in asset allocation that has occurred over the past three years .

Over the past year, the College funded new managers within U .S . Equities, Global Equities and Asian Equities . In aggregate, the College increased expo-

Over the last three years, the College has increased its exposure to Absolute Return strategies and decreased its allocation to Fixed Income strategies.

➞■ Global Equities ■ Absolute Return ■ Real Assets ■ Fixed Income/Cash

57.9%

3.9%

14.9%

23.3%

12.1%

16.6%

13.9%

57.4%

June 2011 June 2014

17

tailwinds for performance, the Board of Trustees’ Investment Committee and the internal Investment staff recognize the importance of a sustained focus on capital preservation . We are encouraged by recent investment performance but realize that volatility and other challenges will eventually return to global markets . Our focus remains on positioning the endowment to take advantage of market opportunities, without taking excess risk . It is a focus we look forward to maintain-ing as we strive to protect and strengthen the resources provided by all the gener-ous donors to the College endowment .

Sincerely,

Mauricia Geissler Chief Investment Officer

sure to liquid equity strategies by over 7% during the fiscal year . Within the Hedged Equity portfolio, the College terminated one relationship and funded one new manager . Overall exposure to Hedged Equity dropped roughly 2% over the past year . As mentioned above, the College continues to increase exposure to Absolute Return strategies, funding two new managers during FY14 . At the same time, the College has been decreasing its allocation to Fixed Income and continues to maintain a short-duration portfolio . Over the past year, the College selectively made new commitments to private strat-egies, the majority being recommitments to existing relationships within Venture Capital .

The Investment Committee continues to categorize the endowment across four broad asset class types: Global Equities, Absolute Return, Fixed Income/Cash and Real Assets . The College’s strategic policy portfolio targets, along with actual asset allocation levels as of June 30, 2014, are shown in the table below:

We continue to marvel at the resiliency of equity markets, given the challenging investment environment . Geopolitical unease in the Middle East and Eastern Europe, globally diverging monetary policies, the end of quantitative easing in the U .S ., and economic malaise in the Eurozone and Japan all combine to create a landscape that is full of potential pitfalls . While equity markets continue to provide

Strategic Actual Asset Policy Target Allocation

Global Equities (public and private) 55% 58%

Absolute Return 20% 23%

Fixed Income (includes cash) 10% 4%

Real Assets (natural resources and real estate) 15% 15%

Total Pool 100% 100%

18

Report from the Folger Shakespeare Memorial Library

FY14 was a success as the Folger began to carry out many of the initiatives outlined in its 2013 Strategic Plan . The Great Hall of the magnificent 1932 Paul Cret building reopened on October 1 after un-dergoing climate-control and lighting im-provements, including the replacement of the striking front windows, over the sum-mer . Exhibitions in this space included Here is a Play Fitted, which explored four centuries of theatrical production of Shakespeare plays . In Shakespeare’s the Thing, marking the Bard’s 450th birth-day, the Folger staff highlighted some of their favorite items from the Folger collection, including Russian and Czech translations, a manuscript score by Felix Mendelssohn and set designs by Salvador Dalí, among other treasures .

Changes in the Folger Board of Gov-ernors membership included the res-ignations of Heather Cass, Paul Ruxin and Morrison Webb at the ends of their terms . Sadly, Folger Board member David Parsons passed away May 13, 2014 . Mr . Parsons had a passion for antiquarian books and became a collector and inter-nationally respected expert in the field . He is survived by his wife, current Folger Board member Mary Parsons, and their children and grandchildren .

Folger Theatre had a wonderful season, with Romeo and Juliet, nominated for five Helen Hayes Awards; the Folger’s first production “in the round,” Richard III; and presentations of the New York-based Fiasco Theater’s The Two Gentlemen of Verona and Cymbeline . Folger Consort celebrated the adventurous spirit of the Age of Discovery, and Folger Poetry’s O .B . Hardison Poetry Series featured eminent artists such as former U .S . Poet Laureate Charles Simic and current U .K . Poet Laureate Carol Ann Duffy . The Fol-ger also hosted the PEN/Faulkner Foun-dation’s literary awards and American reading series, which included readings by Tom Perrotta and Amy Tan, among others . Folger programming inspired a number of lectures, including the sold-out “Finding Richard,” featuring Turi King and Mathew Morris, both of whom were part of the Greyfriars Project that discov-ered King Richard III’s remains in 2012 .

Over the last year, Folger Education reached thousands of teachers and stu-dents with performance-based learning of Shakespeare . Looking forward, the divi-sion commissioned a study that demon-strates its alignment with Common Core State Standards; developed plans for a

Michael WitmoreDirector, Folger Shakespeare Library

19

suite of venture projects and services—updated curriculum tools and materials—that will serve middle and high school teachers in D .C . and around the country; and contracted an evaluation specialist to devise a divisionwide outcomes and assessment system for its programs . The Folger also became the professional-de-velopment provider of Shakespeare for D .C . Public Schools, preparing local educators to teach the plays across 7th, 10th and 12th grades .

The Folger Institute’s conferences and seminars continue to draw large groups of scholars . Most notably, the institute held the conference “Shakespeare and the Problem of Biography,” which included some of the world’s most renowned Shakespeare scholars . The fellowship program hosted five long- term and 49 short-term fellows . Our new Digital Media and Publications division propelled key digital projects forward, including digital versions of all 38 Folger Editions, which are now available free online at www .folgerdigitaltexts .org .

The library acquired a number of signifi-cant items during the year . Among these are approximately 15,000 photographs of Royal Shakespeare Co . actors in rehearsal and production, along with photographer Gordon Goode’s notebooks from the shoots; a gift of over 100 early Neo-Latin, Latin and English-language texts from Professor Lee Piepho; and a col-lection of more than 900 items, bound in 145 volumes, from the banking firm of Clayton & Morris, including some of the earliest examples of checks, banker’s notes and statements, bills, bonds, deeds, legal agreements and other documents crucial for the creation of mortgage contracts .

It is a pleasure to share with special friends of Amherst College this summary of the many exciting recent developments at the Folger .

With warmest regards,

Michael WitmoreDirector, Folger Shakespeare Library

Statement of Operating Resources and Expensesfor the years ended June 30, 2014 and 2013 (unaudited)

2014 2013Resources available Distribution from endowment $11,361,356 $11,250,633 Income from current fund investments 844 388 U .S . Government grants 773,452 1,155,740 Gifts and other grants 2,103,418 1,962,052 Other 3,400,334 3,621,130 17,639,404 17,989,943

Restricted expendable funds availed of—net 645,153 379,903

Appropriation for collection acquisitions (300,000) (300,000)

17,984,557 18,069,846

Current expenses Administration and general 6,247,600 6,102,954 Development office 863,618 724,342 Central Library 3,350,808 3,611,374 Museum Shop and Rental Properties 292,362 433,177 Folger Institute 1,101,895 1,374,668 Digital Media/Publications 670,400 247,204 Education programs 556,228 576,970 Public programs 3,118,466 2,945,646 Grant activities 672,006 969,013 16,873,383 16,985,348

Capital Campaign expenses Reserve transfer (706,000) (680,000) Plant transfer for building projects (400,000) (400,000)

Surplus $ 5,174 $ 4,498

20

Twenty Years in Review 2014 2013 2009 2004 1999 1994Assets (000’s omitted)Total Assets $3,058,913 $2,728,400 $2,013,088 $1,381,466 $911,077 $451,799Endowment Funds at Market 2,149,203 1,823,748 1,305,944 993,418 634,517 331,637Life Funds at Market 89,503 81,371 68,660 65,668 68,644 29,630Student Loans Outstanding 2,525 2,863 4,014 3,853 4,617 3,484

Income (000’s omitted)Net Student Income 57,583 56,397 48,041 40,439 36,256 28,672Student Income—% of Operating Expenditures 36.2% 37.7% 37.9% 44.9% 47.3% 50.5%Gifts, Bequests, and Grants Received 62,539 69,487 38,646 36,705 44,890 19,754Annual Fund, utilized 10,381 10,305 10,709 7,372 6,042 3,633Endowment Income Distributed 78,236 69,527 58,098 33,696 21,028 16,787

Expenditures (000’s omitted)Net Operating Expenditures 158,931 149,702 126,773 89,978 76,694 56,803Educational and General 122,363 116,865 103,860 74,805 57,654 45,151

Scholarships Awarded (000’s omitted) 45,946 43,898 30,318 18,173 12,059 8,999

MiscellaneousNumber of Students, average for year 1,785 1,805 1,676 1,594 1,620 1,574Comprehensive Fee $ 57,970 $ 55,510 $ 46,760 $ 36,910 $ 30,010 $ 23,880Net Cost per Student (net of scholarships) 89,037 82,937 75,640 56,462 47,357 36,088Endowment per student, based on fall enrollment 1,204,035 1,003,714 769,560 612,087 383,858 207,923

Comparative Investment Performances(Total Return Indexed)Amherst College Consolidated Fund 1,015 849 575 378 215 100.0Standard and Poor’s 500 646 519 273 306 342 100.0Barclays Aggregate 330 316 260 204 146 100.0MSCI EAFE Net 291 235 167 149 148 100.0

Investments (000’s omitted)Funds (at market) Consolidated Fund $2,148,174 $1,822,693 $1,303,925 $ 991,449 $631,976 $325,387 Folger Shakespeare Memorial Library 323,504 281,771 222,828 176,889 122,201 67,550 Separately Invested Endowment Funds 1,028 1,056 2,019 1,969 2,541 6,250 Immediate Life Income Funds 6,127 6,143 7,963 11,021 11,931 6,968 Balanced Life Income Funds 6,088 6,666 6,828 6,708 6,859 3,070 Life Growth Fund 21 Gift Annuities 8,358 7,795 4,632 5,124 1,643 Separately Invested Life Funds 68,930 60,767 49,237 42,815 48,211 19,571 Folger Life Income Funds 987 899 660 1,214 1,539 Other Investments 302,153 279,748 145,734 35,864 33,424Total Funds 2,865,349 2,467,538 1,743,826 1,273,053 860,325 428,817

Investments by asset allocation Cash and cash equivalents 76,467 121,360 184,344 124,730 21,940 16,495 Domestic equities 268,518 195,931 77,580 206,753 309,557 200,080 Foreign equities 394,670 305,909 154,399 119,532 62,541 49,978 Global equities 213,202 79,609 42,424 Private equities 542,160 428,179 368,131 173,326 137,745 6,872 Fixed income 64,443 184,096 139,566 150,517 129,904 118,096 Absolute return 868,013 719,869 470,243 376,937 139,653 24,037 Natural resources 433,411 421,762 296,474 113,805 57,495 6,230 Other investments 4,465 10,823 10,665 7,453 1,490 7,029Total Investments $2,865,349 $2,467,538 $1,743,826 $1,273,053 $860,325 $428,817

22

Balance SheetJune 30, 2014 Folger Shakespeare Amherst Memorial College Library Total

AssetsCash and cash equivalents $ 42,309,373 $ 2,691,884 $ 45,001,257Short term investments 40,640,043 40,640,043Accounts receivable, net 5,128,939 206,267 5,335,206Accrued interest receivable 171,633 76,579 248,212Contributions receivable, net 29,527,465 129,879 29,657,344Beneficial interest in perpetual trusts 17,397,393 17,397,393Other assets 5,428,062 482,262 5,910,324Investments 2,538,612,236 326,736,912 2,865,349,148Student loans receivable, net 2,524,535 2,524,535Mortgages and notes receivable 620,718 1,120,000 1,740,718Property, plant and equipment, net 376,552,899 42,398,336 418,951,235

Total assets $3,058,913,296 $373,842,119 $3,432,755,415

Liabilities and Net AssetsAccounts payable $ 9,654,579 $ 1,070,146 $ 10,724,725Accrued liabilities 4,084,725 12,582 4,097,307Deferred income and deposits 2,974,304 772,874 3,747,178Liability for life income obligations 44,932,595 519,428 45,452,023Pension and postretirement benefit obligations 53,311,638 7,268,801 60,580,439Bonds payable 398,504,333 398,504,333Government grants refundable 1,960,473 1,960,473Interest rate swap agreement 12,038,336 12,038,336Asset retirement obligations 8,851,283 158,034 9,009,317Other liabilities 4,408,334 526,275 4,934,609

Total liabilities 540,720,600 10,328,140 551,048,740

Net AssetsUnrestricted 898,722,143 64,430,028 963,152,171Temporarily restricted 1,155,091,380 274,185,069 1,429,276,449Permanently restricted 464,379,173 24,898,882 489,278,055

Total net assets 2,518,192,696 363,513,979 2,881,706,675

Total liabilities and net assets $3,058,913,296 $373,842,119 $3,432,755,415

The accompanying notes are an integral part of these financial statements.

23

Temporarily Permanently Unrestricted Restricted Restricted Total

Revenues, gains and other additions Student fee revenue $ 82,305,289 $ 82,305,289 Residence and dining hall revenue 21,223,686 21,223,686 Less Amherst College scholarships awarded (45,945,501) (45,945,501)Net student fee revenue 57,583,474 57,583,474Other revenue, gains and other additions Investment income 16,782,784 $ 30,063,368 $ 959,544 47,805,696 Realized gain on investments, net of fees 3,264,998 100,090,642 2,864,378 106,220,018 Unrealized gain on investments 86,785,670 156,865,638 1,801,517 245,452,825 Change in net value of life income funds 2,107,970 560,733 2,668,703 U.S. Government grants 347,877 1,552,064 1,899,941 Gifts and other grants 23,314,645 5,588,684 11,518,525 40,421,854 Other 9,704,601 194,435 9,899,036 Net assets released from restrictions 98,131,644) (98,131,644)

Total revenue, gains and other additions 295,915,693 198,331,157 17,704,697 511,951,547

Expenditures and other deductionsInstruction and academic programs 48,042,757 48,042,757Academic support 18,427,251 18,427,251Student services 26,063,661 26,063,661Library 9,813,310 9,813,310Research and public programs 4,157,991 4,157,991Administrative and general 24,082,013 24,082,013Academic prizes, fellowships and awards 1,226,960 1,226,960Unrealized loss and net settlement on interest rate swap 2,917,717 2,917,717Auxiliary activities 29,160,407 29,160,407Other 14,386,374 14,386,374

Total expenditures and other deductions 178,278,441 178,278,441

Increase in net assets 117,637,252 198,331,157 17,704,697 333,673,106

Net assets, beginning of year 781,084,891 956,760,223 446,674,476 2,184,519,590

Net assets, end of year $898,722,143 $1,155,091,380 $464,379,173 $2,518,192,696


Statement of Activities | Amherst Collegefor the year ended June 30, 2014

24


Other revenue, gains and other additions Investment income $ 6,501,895 $ 10,122 $ 6,512,017 Realized (loss) gain on investments, net of fees (3,254,553) 17,353,414 14,098,861 Unrealized gain on investments 3,172,672 30,579,009 33,751,681 Change in net value of life income funds 63,834 $ 17,842 81,676 U.S. Government grants 101,446 672,006 773,452 Gifts and other grants 1,544,042 564,148 91,904 2,200,094 Other 3,923,483 211,747 4,135,230 Net assets released from restrictions 11,723,354 (11,723,354)

Total revenue, gains and other additions 23,712,339 37,730,926 109,746 61,553,011

Expenditures and other deductionsInstruction and academic programs 1,848,467 1,848,467Library 7,923,695 7,923,695Research and public programs 4,467,136 4,467,136Administrative and general 6,505,756 6,505,756


Increase in net assets 2,967,285 37,730,926 109,746 40,807,957

Net assets, beginning of year 61,462,743 236,454,143 24,789,136 322,706,022

Net assets, end of year $64,430,028 $274,185,069 $24,898,882 $363,513,979


Statement of Activities | Folger Shakespeare Memorial Libraryfor the year ended June 30, 2014

25


Revenues, gains and other additions Student fee revenue $ 82,305,289 $ 82,305,289 Residence and dining hall revenue 21,223,686 21,223,686 Less Amherst College scholarships awarded (45,945,501) (45,945,501)Net student fee revenue 57,583,474 57,583,474Other revenue, gains and other additions Investment income 23,284,679 $ 30,073,490 $ 959,544 54,317,713 Realized gain on investments, net of fees 10,445 117,444,056 2,864,378 120,318,879 Unrealized gain on investments 89,958,342 187,444,647 1,801,517 279,204,506 Change in net value of life income funds 2,171,804 578,575 2,750,379 U.S. Government grants 449,323 2,224,070 2,673,393 Gifts and other grants 24,858,687 6,152,832 11,610,429 42,621,948 Other 13,628,084 406,182 14,034,266 Net assets released from restrictions 109,854,998 (109,854,998)

Total revenue, gains and other additions 319,628,032 236,062,083 17,814,443 573,504,558

Expenditures and other deductionsInstruction and academic programs 49,891,224 49,891,224Academic support 18,427,251 18,427,251Student services 26,063,661 26,063,661Library 17,737,005 17,737,005Research and public programs 8,625,127 8,625,127Administrative and general 30,587,769 30,587,769Academic prizes, fellowships and awards 1,226,960 1,226,960Unrealized loss and net settlement on interest rate swap 2,917,717 2,917,717Auxiliary activities 29,160,407 29,160,407Other 14,386,374 14,386,374


Increase in net assets 120,604,537 236,062,083 17,814,443 374,481,063

Net assets, beginning of year 842,547,634 1,193,214,366 471,463,612 2,507,225,612

Net assets, end of year $963,152,171 $1,429,276,449 $489,278,055 $2,881,706,675


Statement of Activities | Consolidatedfor the year ended June 30, 2014

26

Folger Shakespeare Amherst Memorial College Library Total

Cash flows from operating activities Increase in net assets $333,673,106 $40,807,957 $374,481,063 Adjustments to reconcile increase in net assets to net cash used in operating activities: Depreciation 14,876,216 682,489 15,558,705 Unrealized gain on investments (245,452,825) (33,751,681) (279,204,506) Change in net value of life income obligations 2,668,703 81,676 2,750,379 Unrealized loss on interest rate swap agreement 688,530 688,530 Change in beneficial interest in perpetual trusts (1,801,517) (1,801,517) Realized gain on investments, net (106,220,018) (14,098,861) (120,318,879) Contributions to permanent restricted endowment (34,232,611) (5,778) (34,238,389) Contributions to life income agreements (1,793,700) (1,793,700) Contributions to plant (5,674,584) (5,674,584) Receipt of contributed securities (29,136,853) (166,783) (29,303,636) Sale of contributed securities 27,144,610 166,783 27,311,393 Change in bond discount 105,268 105,268(Increase) decrease in assets: Accounts receivable, net (1,704,174) 304,458 (1,399,716) Accrued interest receivable 732,981 1,373 734,354 Contributions receivable 28,790,963 (40,631) 28,750,332 Other assets 48,410 (139,663) (91,253)Increase (decrease) in liabilities: Accounts payable 980,469 407,502 1,387,971 Accrued liabilities (2,528,909) (363,370) (2,892,279) Deferred income and deposits (137,638) 259,896 122,258 Liability for life income obligations 1,032,908 (23,782) 1,009,126 Pension and postretirement benefit obligations 4,453,358 1,713,751 6,167,109 Asset retirement obligations 47,905 5,368 53,273 Other liabilities 114,181 96,935 211,116

Net cash used in operating activities (13,325,221) (4,062,361) (17,387,582)

Cash flows from investing activitiesPurchases of plant and equipment, net (31,934,846) (2,198,481) (34,133,327)Net change in mortgages and student loans receivable 149,322 60,000 209,322Purchases of short term investments 649,074 649,074Purchases of investments (465,184,669) (59,746,916) (524,931,585)Proceeds from sales and maturities of investments 465,805,664 65,450,908 531,256,572

Net cash (used in) provided by investing activities (30,515,455) 3,565,511 (26,949,944)

Statement of Cash Flowsfor the year ended June 30, 2014

27

Folger Shakespeare Amherst Memorial College Library Total

Cash flows from financing activitiesContributions to plant 5,674,584 5,674,584Contributions to life income agreements 1,793,700 1,793,700Contributions to permanent restricted endowment 34,232,611 5,778 34,238,389Payments to beneficiaries under split interest agreements (4,572,280) (40,455) (4,612,735)Decrease in government grants refundable (28,996) (28,996)Proceeds from sale of contributed securities for long-term investment 2,349,003 2,349,003Payments on long-term debt/line of credit (6,875,000) (6,875,000)

Net cash provided by (used in) financing activities 32,573,622 (34,677) 32,538,945Net change in cash and cash equivalents (11,267,054) (531,527) (11,798,581)

Cash and cash equivalents, beginning of year 53,576,427 3,223,411 56,799,838Cash and cash equivalents, end of year $42,309,373 $ 2,691,884 $45,001,257Supplemental dataInterest and net swap settlements paid $ 10,898,742 $10,898,742Gifts in kind 106,968 106,968Purchases of plant and equipment included in accounts payable 2,772,269 2,772,269Contributed securities $ 31,223,614 $ 166,783 $ 31,390,397


Statement of Cash Flows(continued)

28

Notes to Financial Statements1. Accounting PrinciplesORGANIZATION

The Trustees of Amherst College (the “Institution”) include the activities of Amherst College (the “College”) and Folger Shakespeare Memorial Library (the “Library”). The College is an academically rigorous, residential, full-time, private, nonsectarian institution of higher educa-tion committed to the liberal education of young men and women. The Library is a center for advanced research in Shakespeare and the early modern period. It also sponsors a rich and var-ied season of cultural, educational and academic programs and is the home of The Shakespeare Quarterly.

In accordance with the terms of the wills of Henry Clay Folger, Class of 1879, and his wife, Emily Jordan Folger, the Institution established the Folger Shakespeare Memorial Library. The original gift to establish the Library provides that 25% of the Folger Fund annual investment income up to a maximum of $226,000 is to be distributed for the general operations of the College. The maximum was distributed in fiscal year 2014.

The Institution qualifies as a tax-exempt, not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for income taxes has been made.

The Institution owns 100% of the common stock of Amherst Inn Company (the “Company”). The Company has been consolidated in the Institution’s financial statements.

In November 2011, the Company closed a transaction with two financial institutions (the “HTC Investors”) related to the historic rehabilitation of the Lord Jeffery Inn (the “Project”). The Project, completed in 2011, helps to ensure the preservation and protection of a historic structure through the restoration of the historic interior and exterior of the Lord Jeffery Inn. Because the Company may not have been able to take full advantage of available historic tax credits, the Company entered into a venture with the HTC Investors for this Project. The HTC Investors agreed to contribute an aggregate of approximately $2.8 million to the proj-ect in four installments from the closing date in 2011 through expiration of the historical tax credit recapture period in 2016, subject to the Company’s achievement of certain conditions that include its compliance with applicable federal regulations. As of June 30, 2014, the HTC Investors have paid $2.5 million for these credits; however, since the payment is subject to recapture if certain conditions are not met, 60%, or approximately $1.5 million, of this contri-bution has been included in Other Liabilities in the consolidated balance sheet. In exchange for their contributions, the HTC Investors will receive substantially all of the benefits derived from the tax credits.

BASIS OF PRESENTATIONThe financial statements have been prepared on the accrual basis of accounting. The prepara-tion of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and revenues, gains and expenses recognized during the reporting period. Actual results could differ from those estimates. The Institution’s significant estimates include the fair value of its alternative investments, reserves for contributions, student loans and accounts receivable, retirement and postretirement benefit obligations, asset retirement obliga-tions, and its liability for life income obligations.

The classifications of net assets and revenues, expenses, gains, and losses are determined by the existence or absence of donor-imposed restrictions. In the accompanying financial statements, net assets that have similar characteristics have been combined as follows:

Permanently Restricted—Net assets subject to donor-imposed stipulations that they be main-tained permanently by the Institution. Generally, the donors of these assets permit the Insti-

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tution to use all or part of the income earned on these assets. Such assets primarily include the Institution’s permanent endowment funds.

Temporarily Restricted—Net assets whose use by the Institution is subject to donor-imposed stipulations that can be fulfilled by actions of the Institution or that expire by the passage of time. Realized and unrealized gains and losses on permanently and temporarily restricted donor funds are recorded as temporarily restricted net assets in accordance with Massachu-setts law.

Unrestricted—Net assets that are not subject to donor-imposed stipulations. Net assets may be designated for specific purposes by action of the Board of Trustees or may otherwise be limited by contractual agreements with outside parties.

Contributions are reported as increases in the applicable category of net assets. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments are reported as increases or decreases in the applicable category of unrestricted net assets unless their use is restricted by explicit donor stipulations or by law. Revenues from other sources are generally reported as increases in unrestricted net assets. Expirations of temporary restrictions recognized on net assets (i.e., the donor stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications from temporarily restricted net assets to un-restricted net assets. Temporary restrictions on gifts to acquire long-lived assets are considered met in the period in which the assets are acquired or placed in service.

Contributions, including unconditional promises to give, are recognized as revenues in the period the commitment is received. Contributions received with donor imposed restrictions are reported as permanently or temporarily restricted revenues depending upon the specific restriction. Conditional promises to give are not recognized until the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their esti-mated fair value at the date of gift. Contributions to be received after one year are discounted at a rate commensurate with the risk involved. Amortization of the discount is recorded as contribution revenue. Allowance is made for uncollectible contributions based upon manage-ment’s judgment and analysis of the creditworthiness of the donors, past collection experience and other relevant factors. Grant revenue from exchange contracts is recognized in the period in which the grant expenditures are incurred.

INTERPRETATION OF RELEVANT LAWAbsent explicit donor stipulations to the contrary, The Board of Trustees of the Institution has interpreted Massachusetts’ Uniform Prudent Management of Institutional Funds Act (“ UPMIFA”) statute, which was enacted in July 2009, and related Commonwealth of Massa-chusetts Attorney General guidance to require the preservation of donor-restricted endowment funds at their fair value measured on the date of the gift. As a result of this interpretation, the Institution classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment and (b) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumu-lation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Institution in a manner consistent with the standard of prudence prescribed by UPMIFA.

INVESTMENTSThe Institution has established a diversified investment portfolio in accordance with the invest-ment strategy determined by the Investment Committee of the Board of Trustees.

Investments are recorded at fair value. The values 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. Investments in units of non-publicly traded pooled funds are valued at the unit value determined by the fund’s administrator based on quoted market values of the underlying

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securities. Private equities and certain other nonmarketable securities, including alternative investments, are valued using current estimates of fair value based upon the net asset value of the funds determined by the general partner or investment manager for the respective funds. Because alternative investments are not readily marketable, the estimated fair value is subject to uncertainty and may differ from the value that would have been used had a ready market for the investments existed. Such differences could be material. The Institution’s alternative in-vestments include venture capital funds, private equity funds and investments in real estate and natural resources. These alternative investments represented approximately 34% of the Institu-tion’s investments at June 30, 2014.

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is possible that changes in the values of investment securities could occur in the near term and that such changes could materially affect investment balances and results included in the financial statements.

Under the terms of certain limited partnership agreements that represent venture capital, private equity, real estate and oil and gas investments, the Institution is obligated to remit addi-tional funding periodically as capital calls are exercised.

Purchases and sales of investments are recorded on the trade date of the transaction. Realized investment gains and losses are recorded based on the average cost method for all investments except where specific identification is required by tax law.

DERIVATIVE FINANCIAL INSTRUMENTSThe Institution’s investment policies allow for the use of derivative financial instruments to manage currency exchange and interest rate risks arising from investments in nonderivative assets in proportion to the assets at risk. Such instruments consist of forward foreign exchange and interest rate futures contracts entered into as part of the investments of the Institution.

The College utilizes swap agreements to moderate its exposure to interest rate risk on certain bond issuances. (See note 6)

The Institution also has investments which participate directly, or have the option to participate in, derivative financial instruments. These investments represent 30% of the Institution’s total consolidated endowment funds. Derivatives held by investments in which the Institution invests pose no off balance sheet risk to the Institution due to the limited liability structure of the investment.

BENEFICIAL INTEREST IN PERPETUAL TRUSTSBeneficial interest in perpetual trusts represent resources neither in the possession of nor under the control of the Institution, but held and administered by outside fiscal agents, with the College deriving income from such funds. The trusts are recorded at their respective fair values, which are reported periodically to us by the outside fiscal agent.

PROPERT Y, PLANT AND EQUIPMENTProperty, plant and equipment are recorded at cost. The cost of collections at the College are expensed as incurred.

The Institution capitalizes the cost of construction and major improvements to buildings, and purchases of equipment, and library books. Depreciation is calculated on a straight line basis over the estimated useful life of the asset. Purchases for the Library’s collections are recorded at cost. The collections are reduced by the proceeds from a sale, resulting in the recognition of no gain or loss. Sales are not significant. (See note 11)

CASH EQUIVALENTSCash equivalents include short-term, highly liquid investments with a maturity of three months or less at the time of purchase. Cash and cash equivalents representing assets of endowment and

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similar funds and life income funds are included in long-term investments. Cash equivalents are recorded at cost which approximates fair value.

SHORT TERM INVESTMENTSShort term investments are comprised of equity securities received as gifts and identified for liquidation by the Institution, as well as funds identified for specific capital projects expected to be liquidated in the short term.

LIFE INCOME OBLIGATIONSLife income obligations result from annuity and life income agreements which are irrevocable charitable remainder agreements. The assets held for these agreements are reported as part of the Institution’s investments at their fair value. The College records contribution revenue for the gift net of the liability calculated as the present value of the estimated future payments to be made to the beneficiaries. The liability has been determined using discount rates ranging from 2.0% to 6.9% dependent upon the year in which the agreement was entered. The obligation is adjusted during the term of the agreement for changes in the value of the assets, amortization of the discount and other changes in the estimates of future benefits.

ASSET RETIREMENT OBLIGATIONSAn asset retirement obligation (“ARO”) is a legal obligation associated with the retirement of long-lived assets. These liabilities are initially recorded at fair value and the related asset retire-ment costs are capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the College records period-to-period changes in the ARO liability resulting from the passage of time or revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The College reduces ARO liabilities when the related obligations are settled.

UNCERTAIN TA X POSITIONSThe Institution is generally exempt from federal and state income taxes. Management performs an annual review for uncertain tax positions along with any related interest and penalties and believes that the Institution has no uncertain tax positions that would have a material adverse effect, individually or in the aggregate, upon the Institution’s balance sheet, or the related statements of activities, or cash flows.

2. InvestmentsThe Institution records its investments at fair value. Fair value is the amount that would be received when selling an asset or paying to transfer a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in developing those assumptions generally correlates to the level of pricing observability. The availability of observable inputs can vary among financial assets and liabilities.

For investments, fair value is affected by a wide variety of factors including, the type of invest-ment, whether the investment is new and not yet established in the market place and other characteristics particular to the investment. The inputs used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

The Institution’s investments have been categorized based upon a fair value hierarchy com-prised of the following three broad levels:

Level 1: Valuations based on observable inputs that reflect quoted prices in active markets for identical assets and liabilities. Assets and liabilities utilizing Level 1 inputs include exchange traded securities, short term money market funds and actively-traded obligations issued by the U.S. Treasury.

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Level 2: Valuations based upon quoted prices for identical or similar assets or liabilities in markets that are less active or other significant market-based inputs which are observable, either directly or indirectly.

Level 3: Valuations based on unobservable inputs that are significant to determining an overall fair value measurement. Assets and liabilities utilizing Level 3 inputs include real estate partner-ships, private equity investments, and other illiquid securities with little, if any, market activity. Valuation of these instruments entails a significant degree of estimation and judgment.

The comparison of fair value and cost for investments in accordance with the fair value hierar-chy was as follows as of June 30, 2014:

CollegeFair Value Measurements as of June 30, 2014

Description Level 1 Level 2 Level 3 Total Cost

Financial AssetsCash and equivalents $ 68,368,560 $ 68,368,560 $ 68,368,560Domestic equities 167,311,942 $ 70,727,568 238,039,510 144,190,806Global equities $86,852,410 101,981,005 188,833,415 155,118,171Foreign equities 24,018,991 186,306,535 139,240,856 349,566,382 252,728,102Private equities 480,190,637 480,190,637 331,674,537Fixed income 51,074,407 6,896,632 57,971,039 62,554,029Absolute return 115,420,716 653,378,372 768,799,088 528,766,919Real estate and natural resources 20,080,254 363,791,319 383,871,573 336,698,657Other investments 92,282 2,879,750 2,972,032 5,306,525

Total Investments 446,367,152 273,158,945 1,819,086,139 2,538,612,236 1,885,406,306

Beneficial interest in perpetual trusts 17,397,393 17,397,393 16,782,366Total Financial Assets $446,367,152 $273,158,945 $1,836,483,532 $2,556,009,629 $1,902,188,672

As of June 30, 2014, the College had interest rate swaps with a fair value liability of $12,038,336, which were valued using significant other observable inputs (Level 2).

LibraryFair Value Measurements as of June 30, 2014

Description Level 1 Level 2 Level 3 Total Cost

Financial AssetsCash and equivalents $ 8,098,123 $ 8,098,123 $ 8,098,123Domestic equities 21,350,156 $ 9,127,426 30,477,582 16,906,117Global equities $ 11,208,344 13,160,696 24,369,040 18,705,021Foreign equities 3,099,662 24,042,946 17,961,606 45,104,214 30,475,375Private equities 61,968,825 61,968,825 39,995,182Fixed income 5,581,932 890,014 6,471,946 6,612,037Absolute return 14,895,098 84,318,784 99,213,882 63,761,686Real estate and natural resources 2,591,366 46,947,441 49,538,807 40,601,019Other investments 168,881 106,770 1,218,842 1,494,493 1,679,523Total Investments $55,785,218 $35,358,060 $235,593,634 $326,736,912 $226,834,083

There were no transfers between levels during fiscal year 2014.

The College’s Investments as of June 30, 2014 are comprised of Endowment and Similar Funds of $2,149,202,662, Life Income Funds of $89,502,862 and Other Funds of $299,906,712.

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The Library’s Investments as of June 30, 2014 are comprised of Endowment and Similar Funds of $323,503,515, Life Income Funds of $986,679 and Other Funds of $2,246,718.

The Institution’s major investment categories are comprised of the following:

DOMESTIC EQUITIESThe Domestic Equities category includes investments in separate accounts and institutional commingled funds that invest primarily in the equity securities of U.S. domiciled corporations. Fund managers generally hold long portfolio capital assets. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valuation, free cash flow, profitability, strategic advantage, and corporate manage-ment quality. The fair values of the investments in this category are estimated using the net asset value (NAV) per share of the fund, or in the case of the majority of these assets where the securities are directly owned in a separate account, they are recorded at the market value of the underlying securities at the close of business.

GLOBAL EQUITIESThe Global Equities category includes investments in institutional commingled funds that invest primarily in the equity securities of both U.S. domiciled and foreign corporations. Fund managers generally hold long portfolio capital assets. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valuation, free cash flow, profitability, strategic advantage, and corporate management quality. The fair values of the investments in this category are estimated using the net asset value (NAV) per share of the funds.

FOREIGN EQUITIESThe Foreign Equities category includes investments in institutional commingled funds that invest primarily in the equity securities of non-U.S. domiciled corporations. Fund managers generally hold long portfolio capital assets. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valua-tion, free cash flow, profitability, strategic advantage, and corporate management quality. The fair values of the investments in this category are estimated using the net asset value (NAV) per share of the funds.

PRIVATE EQUITIESThe Private Equities category includes investments in limited partnerships that invest primarily in unlisted, non-public U.S. and non-U.S. domiciled companies. Private Equity includes ven-ture capital (early-stage) and buyout (later-stage) investments. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valuation, uniqueness of market and product, strategic advantage, corporate manage-ment quality, financial conditions and financing requirements, and anticipated exit strategies. Liquidity for these funds is based on the term of each partnership, but is mostly greater than five years. The fair values of the investments in this category are estimated using the General Partner’s valuation of investments, generally equal to or based upon the reported capital ac-count or net asset value (NAV) of the underlying investee funds.

FIXED INCOMEThe Fixed Income category includes investments in separate accounts and commingled funds that invest primarily in the debt securities of U.S. domiciled corporations. Fund managers hold long and short portfolio capital assets. Underlying investment securities in the funds are se-lected based upon several criteria, including, but not limited to: absolute and relative valuation, duration, convexity, liquidity, credit risk, term structures, and strategic advantage. Liquidity for these funds is provided daily. The fair values of the investments in this category are estimated using the net asset value (NAV) per share of the funds or in the case of the separate accounts

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where the securities are directly owned, they are recorded at the market value of the underlying securities at the close of business.

ABSOLUTE RETURNThe Absolute Return category includes investments in commingled funds that invest primar-ily in the equity, debt, and derivative securities of U.S. and non-U.S. domiciled corporations. Fund managers hold long and short portfolio capital assets. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valuation, free cash flow, profitability, strategic advantage, and corporate management quality. The fund managers may also invest in securities related to interest rates, exchange rates, and privately held assets. The fair values of the investments in this category are estimated using the net asset value (NAV) per share of the funds.

REAL ESTATE AND NATUR AL RESOURCESThe Real Estate and Natural Resources category includes investments in limited partnerships that invest primarily in unlisted, non-public U.S. and non-U.S. real estate, timber, and oil and gas assets. Underlying investment securities in the funds are selected based upon several criteria, including, but not limited to: absolute and relative valuation, uniqueness of market and product, strategic advantage, corporate management quality, financial conditions and financing requirements, and anticipated exit strategies. Liquidity for these funds is based on the term of each partnership, but is generally greater than seven years. The fair values of the investments in this category are estimated using the General Partner’s valuation of investments, generally equal to or based upon the reported capital account or net asset value (NAV) of the underlying investee funds.

OTHERThe Other category includes investments in separate account and general partnership funds that have been or are currently being liquidated.

The unfunded commitment and redemption frequencies of the Institution’s investment catego-ries as of June 30, 2014 were as follows:

Institution

Investment Unfunded Strategy Commitments Notice Period and Redemption Frequency

Domestic equities No notice period to 60 days; immediate to annual redemptionGlobal equities 30 day notice; between quarterly and five year redemptionForeign equities 6–90 day notice; between monthly and five year redemptionPrivate equities $207,948,000 Not redeemableFixed income 7,112,000 No notice period; between immediate and not redeemableAbsolute return Daily–180 day notice; between daily and five year redemptionReal estate and natural resources 78,992,000 Not redeemable $294,052,000

The investments in domestic equities do not possess a defined liquidation period. These invest-ments can be liquidated as deemed appropriate by the Institution. The Institution is unable to redeem its investments in private equities, real estate and natural resources until the underlying partnerships are dissolved and the funds closed, although the Institution would have the ability to liquidate these partnerships through a negotiated transaction in the secondary market. Investments in private equities, real estate and natural resources have remaining durations from one to thirteen years as of June 30, 2014. Lockup periods on the investment strategies above range from thirty days through five years.

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The reconciliation of the Level 3 total financial assets for the College and Library as of June 30, 2014 are as follows:

CollegeFair Value Measurements Using Significant Unobservable Inputs (Level 3)

Net Net Realized and Purchases Transfers In Investment Beginning Unrealized and Sales and (Out) of Ending Category Balance Gains Issuances Settlements Level 3 Balance

Domestic equities $ 59,636,297 $ 11,091,271 $ 70,727,568Global equities 70,398,028 253,414 $ 15,712,206 $ (2,522,608) $18,139,965 101,981,005Foreign equities 116,949,950 38,979,353 22,528,600 (21,077,082) (18,139,965) 139,240,856Private equities 378,638,969 112,718,252 62,872,520 (74,039,104) 480,190,637Fixed income 6,527,367 695,898 22,919,423 (23,246,056) 6,896,632Absolute return 577,154,456 77,175,652 88,406,971 (89,358,707) 653,378,372Real estate and natural resources 340,982,456 39,762,171 48,468,552 (65,421,860) 363,791,319Other investments 8,704,197 237,583 (6,062,030) 2,879,750Perpetual trusts 15,595,876 1,801,517 17,397,393Total Level 3Financial Assets $1,574,587,596 $282,715,111 $260,908,272 $(281,727,447) $ 0 $1,836,483,532

LibraryFair Value Measurements Using Significant Unobservable Inputs (Level 3)

Net Net Realized and Purchases Transfers In Investment Beginning Unrealized and Sales and (Out) of Ending Category Balance Gains Issuances Settlements Level 3 Balance

Domestic equities $ 7,802,691 $ 1,324,735 $ 9,127,426Global equities 9,210,734 343,954 $ 2,055,753 $ (823,141) $2,373,396 13,160,696Foreign equities 15,301,492 4,841,983 2,947,596 (2,756,069) (2,373,396) 17,961,606Private equities 49,540,345 14,665,215 8,226,112 (10,462,847) 61,968,825Fixed income 854,028 88,240 2,998,731 (3,050,985) 890,014Absolute return 82,563,685 2,986,828 11,566,985 (12,798,714) 84,318,784Real estate and natural resources 44,613,441 4,991,590 6,341,527 (8,999,117) 46,947,441Other investments 1,773,185 72,808 694 (627,845) 1,218,842Total Level 3Financial Assets $211,659,601 $29,315,353 $34,137,398 $(39,518,718) $ 0 $235,593,634

The amount of total unrealized net gains on Level 3 assets for the year ended June 30, 2014 is $167,593,000 for the College and $16,717,000 for the Library.

SPENDING POLICY AND HOW THE INVESTMENT OBJECTIVES RELATE TO SPENDING POLICY

The Institution has adopted a spending policy that is calculated as a percentage of the average market value of the endowment for the three previous years. This allows for the smoothing of growth and decline in endowment fair values. Specifically, the formula used to set the amount of annual spending increases the prior year’s distribution by a factor equal to inflation plus the percentage growth in the endowment from prior year capital gifts. This amount is compared to the budgetary needs of the Institution and is increased, if possible, to reflect the use of market growth over time. The calculated amount is also evaluated as a percentage of the endowment’s market value and the growth portion of the formula would be held to a rate at or below in-flation if the spending rate were to continue to exceed 5.0% over time. It is expected that over time the rate will range between 3.5% and 5.0% of the average market value of the endowment

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for the three previous years—higher in years of market decline and lower in years of market growth.

The Institution has adopted investment policies for its endowment assets that seek to ensure that current and future spending requirements are supported, while also preserving the endow-ment fund in perpetuity. Endowment assets include those assets that have been restricted by the donor or designated by the Trustees and are invested to provide future revenue to support the Institution’s activities. Under the Institution’s investment policy, as approved by the Commit-tee on Investment of the Board of Trustees, an asset allocation or strategic policy portfolio is developed based on long-term return, risk and correlation assumptions that seek to balance the need for liquidity, preservation of purchasing power, and risk tolerance. The Institution uses two benchmarks to assess aggregate performance:

• Simple Market Benchmark—serves to help evaluate the value added from asset allocation in creating a well-diversified investment program versus a non-diversified market index. This benchmark consists of: 60% S&P 500 Index and 40% Barclays Aggregate Bond Index.

• Strategic Policy Portfolio Benchmark—serves to evaluate the impact of manager selection and active management versus passive management. This benchmark is a weighted average return derived by applying the target policy weights of each asset class to the performance of the respective asset class benchmarks.

The Institution expects its endowment funds, over time, to provide an average real rate of return of approximately 3.5% percent annually (or a nominal annual rate of return of approxi-mately 6.0%). The investments in the Institution’s endowment portfolio involve various risks, and actual returns in any given year may vary from this anticipated long-term average annual rate of return.

To satisfy its long-term return objectives, the Institution relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and un-realized) and current yield (interest and dividends). The Institution has established a strategic policy portfolio that is diversified across asset classes.

3. Endowment and Similar FundsIncluded in unrestricted, temporarily restricted, and permanently restricted net assets are the College’s and Library’s endowment and similar funds and life income funds.

Endowment and similar funds is a commonly used term to refer to the resources that have been restricted by the donor or designated by the Trustees that will be invested to provide future revenue to support the Institution’s activities. Included in endowment are funds which were not restricted by the donor and, accordingly, are unrestricted net assets of the Institution.

Included in Endowment are the Consolidated Endowment Funds for both the College and the Library and separately invested endowment funds. The fair value of the Amherst College Consolidated Endowment Fund as of June 30, 2014 was $2,148,174,408 with a per share fair value of $24.82 ($21.48 at June 30, 2013). The fair value of the separately invested endowment funds as of June 30, 2014 was $1,028,252. The fair value of the Folger Fund as of June 30, 2014 was $323,503,515 with a per share fair value of $37.45 ($32.58 at June 30, 2013). The total endowment shares in the Amherst College Consolidated Endowment Fund as of June 30, 2014 were 86,538,565. The total endowment shares in the Folger Fund as of June 30, 2014 were 8,638,020.

Net assets of life income funds represent the difference between the investment assets of the funds and the estimated liability for the obligation to beneficiaries.

Net assets included the following endowment and similar funds at June 30, 2014:

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College


Endowment funds Endowment Income unrestricted $ 8,261,412 $ 165,460,359 $ 167,559,049 $ 341,280,820 Income restricted 12,626,830 912,730,548 255,863,137 1,181,220,515 Quasi-endowment Income unrestricted 450,916,806 450,916,806 Income designated 103,582,323 103,582,323 Appropriated for spending 72,202,198 72,202,198 $647,589,569 $1,078,190,907 $423,422,186 $2,149,202,662Life income funds Income $3,134,620 $1,652,684 $4,787,304 Balanced 4,154,236 829,196 4,983,432 Annuity 2,371,720 2,216,449 4,588,169 Unitrusts 16,830,815 13,531,622 30,362,437 $ 26,491,391 $ 18,229,951 $ 44,721,342

Library


Endowment funds Endowment Income unrestricted $ 216,194,875 $ 5,944,903 $ 222,139,778 Income restricted $ 2,867,710 54,332,153 18,798,653 75,998,516 Quasi-endowment Income unrestricted 12,651,887 12,651,887 Income designated 10,907,575 10,907,575 Appropriated for spending 1,805,759 1,805,759 $28,232,931 $270,527,028 $24,743,556 $323,503,515Life Income Funds $ 372,325 $ 161,897 $ 534,222

The activity of the endowment and similar funds net assets for the College and Library for the year ended June 30, 2014 is as follows:

College


Endowment net assets, beginning of year $ 555,524,011 $ 880,464,897 $ 387,759,295 $ 1,823,748,203Investment return: Investment income 397,323 959,544 1,356,867 Net realized and unrealized appreciation 111,850,875 258,371,543 3,238 370,225,656Total investment return 112,248,198 258,371,543 962,782 371,582,523

Contributions 1,741,761 651,885 31,838,965 34,232,611Appropriation of endowment return for expenditure (24,356,299) (59,130,964) (83,487,263)Other changes 2,431,898 (2,166,454) 2,861,144 3,126,588Endowment net assets, end of year $647,589,569 $1,078,190,907 $423,422,186 $2,149,202,662

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Library


Endowment net assets, beginning of year $ 24,481,397 $ 232,638,188 $ 24,651,653 $ 281,771,238Investment return: Investment income 114,444 10,124 124,568Net realized and unrealized appreciation 4,420,641 47,983,520 52,404,161Total investment return 4,535,085 47,993,644 52,528,729Contributions 1,132 14,557 5,778 21,467Appropriation of endowment return for expenditure (899,570) (9,535,679) (10,435,249)Other changes 114,887 (583,682) 86,125 (382,670)Endowment net assets, end of year $28,232,931 $270,527,028 $24,743,556 $323,503,515

TOTAL RETURN DISTRIBUTION ON INVESTMENTSThe Institution adds interest and dividends earned on the College’s investments and the Folger Fund, which represent approximately 99% of the investments of its endowments and similar funds, to the income allocation pools from which returns are distributed to the respective funds at a predetermined, per share rate set annually by the Board of Trustees. The Institution’s spending is determined on a total return basis. The total amount distributed for spending in 2013-2014 was $91,904,433 for the College and $11,791,246 for the Library. In addition, investment manager fees and expenses, which include the general partners’ share of gains in limited partnerships, were distributed from this pool and were $39,388,527 for the College and $4,815,271 for the Library. Interest and dividend income earned in 2013-2014 by the Funds was $47,805,696 and $6,171,268 for the College and Library, respectively. The amount dis-tributed in excess of interest and dividend income earned was provided by transferring realized gains from the Institution’s investment pools of $83,487,264 for the College and $10,435,249 for the Library.

4. ContributionsContributions receivable, net, are summarized as follows at June 30, 2014:

College Library

Unconditional promises expected to be collected within: One year $ 12,334,322 $ 129,879 Two to five years 8,985,936 Over five years 13,214,027 34,534,285 129,879Less: Unamortized discount and allowance for uncollectible accounts (5,006,820) $29,527,465 $129,879

At June 30, 2014 the College had also received conditional promises to give of $5,650,000. These conditional promises will not be recognized as assets until the conditions are substan-tially met. They are generally restricted for specific purposes stipulated by donors, primarily endowments for faculty support, scholarships, buildings and improvements or general operating support.

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5. Property, Plant and EquipmentProperty, plant and equipment as of June 30, 2014 consisted of the following:

Useful Life College Library

Land $ 8,552,404 $ 908,397Land improvements 10 17,638,102Buildings and improvements 50 450,665,678 31,120,798Faculty residences 30 12,197,021Equipment 5–10 71,232,872 4,105,875Library books 10 33,004,399Folger collection 22,181,471 593,290,476 58,316,541Less: Accumulated depreciation (227,162,702) (15,918,205) 366,127,774 42,398,336Construction in progress 10,425,125 $376,552,899 $42,398,336

In fiscal year 2013–2014, depreciation of these assets amounted to $14,876,216 for the College and $682,489 for the Library.

Included in other expenses on the Statement of Activities is approximately $3.6 million in-curred from the reclass of expenditures categorized as construction in progress. Management of the College has examined these underlying transactions and determined that they are not eligible for future capitalization.

6. Bonds PayableThe Institution has financed the cost of constructing and renovating various College facili-ties through the issuance of Massachusetts Development Finance Agency (the “Agency” or “MDFA”) bonds. The Institution issued taxable bonds in fiscal year 2009 for working capital and other eligible purposes and in fiscal year 2013 issued taxable bonds to finance certain capi-tal projects and other eligible purposes.

The College’s fiscal year 2014 debt service and bonds payable as of June 30, 2014 were as follows:

MDFA Series/ Final Year Interest 2014 Debt Bonds Taxable Bonds of Maturity Rates Service Payable

F 2026 Variable, (0.03%–0.11% in 2013–2014) $ 2,016,754 $ 31,500,000H 2033 Variable, (1.00% in 2013–2014) 850,250 39,875,000I 2028 Variable, (0.03%–0.11% in 2013–2014) 15,468 29,700,000J-1 2035 Variable, (0.03%–0.11% in 2013–2014) 15,625 30,000,000J-2 2035 Variable, (0.01%–0.11% in 2013–2014) 8,504 20,000,000K-1 2021 Fixed, (4.00%–5.00%) 720,717 4,925,000K-2 2038 Variable, (1.70% in 2013–2014) 2,380,433 47,445,000Taxable Bonds, Series 2009A 2039 Fixed, 5.875% 5,875,000 100,000,000Taxable Bonds, Series 2012A 2042 Fixed, (0.438%–3.794%) 5,419,441 97,655,000Less discount (2,595,667) $17,302,192 $398,504,333

The issuance costs incurred in connection with the bonds are amortized on a straight line basis over the remaining period the bonds are outstanding.

The Series F bonds are a variable rate issue and a general obligation of the College. The average interest rate for fiscal year 2013-2014 was 0.05% and the interest rate at June 30, 2014 was 0.07%. The bonds are redeemable at par prior to maturity at the option of the Agency with the consent of the College.

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The Series H bonds are a variable rate issue and a general obligation of the College. The average in-terest rate for fiscal year 2013–2014 was 1.00% and the interest rate at June 30, 2014 was 1.00%. The bonds are subject to optional redemption at par plus accrued interest at the option of the College.

The Series I bonds are a variable rate issue and a general obligation of the College. The average in-terest rate for fiscal year 2013–2014 was 0.05% and the interest rate at June 30, 2014 was 0.07%. The bonds are subject to optional redemption at par plus accrued interest at the option of the College.

The Series J bonds are a variable rate issue and a general obligation of the College. The interest rate on the issue averaged 0.05% for the Series J-1 bonds and 0.04% for the Series J-2 bonds for the fiscal year 2013–2014. The interest rate was 0.07% for the Series J-1 bonds and 0.02% for the Series J-2 bonds at June 30, 2014. The bonds are subject to optional redemption at par plus accrued interest at the option of the College.

The Series K-1 bonds were issued at a fixed rate and are a general obligation of the College. The average interest rate on the issue was 4.04% for the year ended June 30, 2014. The Series K-2 bonds are a variable rate issue and a general obligation of the College. The average interest rate for fiscal year 2013–2014 was 1.70% and the interest rate at June 30, 2014 was 1.70%. The proceeds were used for capital projects. The Series K-1 bonds maturing on or after November 1, 2018 are subject to optional redemption after that date, at the option of the Agency with the written consent of the College or at the written direction of the College. The Series K-2 bonds are not subject to optional redemption.

The Series 2009A taxable bonds were issued at a fixed rate and are a general obligation of the College. The proceeds of the bonds were used by the College for the payment of the issuance costs, working capital, and other eligible expenses. The bonds are subject to optional redemp-tion at the consent of the College with a make-whole provision.

The Series 2012A taxable bonds were issued at a fixed rate and are a general obligation of the College. The proceeds of the bonds were used by the College for the payment of the issuance costs, certain capital projects, and other eligible expenses. The bonds are subject to optional redemption at the consent of the College with a make-whole provision.

In connection with the issuance of the Series I and Series J bonds, the College entered into interest rate swap agreements to moderate its exposure to interest rate changes and to lower the overall cost of borrowing. The swaps were not designated as cash flow hedges for the bonds. The interest rate swap agreements effectively change the interest rate exposure on the issues from a variable rate to a fixed rate of 3.07% for Series I and 3.13% for Series J. The interest rate swap agreements have a notional amount of $79,700,000 as of June 30, 2014 and termination date equal to the maturity date of the respective bonds. On June 30, 2014, the fair value of the interest rate swap agreements was a liability of $12,038,336 and was recorded on the balance sheet. The total change in the fair value of the liability from the prior year balance and the net settlements was $2,917,717, which is a Level 2 fair value measurement, and is recorded in the College’s statement of activities for the year ended June 30, 2014.

The principal payments on such bonds for the fiscal years 2014–15 through 2018–19 is $7,035,000; $7,210,000; $7,390,000; $7,580,000; and $7,775,000, respectively. The com-bined principal payments thereafter approximates $364,110,000.

The Series F, H, I, J and K-2 bonds are subject to tender by bondholders. As of June 30, 2014, the Series J-2 bonds are set to remarket in a daily mode, the Series F, I and J-1 bonds set in a weekly mode and Series H and K-2 in a term mode until November 2014 and November 2016, respectively.

If these bonds had been fully tendered as of June 30, 2014, or on their next remarketing date, the principal payments for fiscal years 2015 through 2019 would have been approximately, $154,000,000; $2,900,000; $50,400,000; $3,000,000 and $3,100,000, respectively. The principal payments thereafter would have approximated $187,700,000. The College has not experienced a failed remarketing of its bonds.

The fair value of the bonds payable at June 30, 2014 approximates $425,000,000 and is a Level 2 fair value measurement.

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7. Lines of CreditThe College has uncollateralized bank lines of credit for purposes of repurchasing its outstand-ing bonds if they are unable to be remarketed as of June 30, 2014 as follows:

Available Borrowing Balance Termination Capacity Outstanding Interest Rate Date

$75,000,000 $0 LIBOR plus 1.00% June 27, 2016

The College has uncollateralized bank lines of credit for operational purposes as of June 30, 2014 as follows:

Available Borrowing Balance Termination Capacity Outstanding Interest Rate Date

$37,500,000 $0 LIBOR plus 0.30% September 1, 2016$37,500,000 0 LIBOR plus 0.25% October 31, 2014$25,000,000 $0 LIBOR plus 0.25% February 25, 2015

8. Pension BenefitsThe Institution has TIAA-CREF defined contribution pension plans for faculty, administrative and staff employees of the College, and for Library administrative employees. Eligibility for the plans begins following two years of employment for individuals, unless they were previously enrolled in a comparable plan and therefore are immediately eligible. Contributions to the plans, based on a percentage of salaries, were $5,833,931 for the College and $456,333 for the Library for the year ended June 30, 2014.

The Institution has maintained a TIAA-CREF noncontributory, defined benefit pension plan for College staff employees who, prior to July 1, 1994, were not covered by the defined contri-bution plan, were at least twenty-one years of age, and had completed one year of service. All participants in this plan are fully vested as of June 30, 2013. Retirement benefits are calculated based on a percentage of final three-year average salary times the participant’s years of service with a minimum benefit payable equal to $50 per year times the number of years of credited service. Years of service for purposes of calculating the benefit accrual were frozen on June 30, 1994, when all active College employees began participating in the defined contribution plan. The defined benefit plan continues to provide prior service benefits for participants active at July 1, 1994, and supplemental benefits to certain long-term employees whose retirement bene-fit would have been negatively affected by the change.

The Institution has a TIAA-CREF noncontributory, defined benefit pension plan for Library employees who are not covered by the defined contribution plan, who are at least twenty-one years of age, and who have completed one year of service. An employee is fully vested after five years of participation in the plan. Retirement benefits are calculated based on a percentage of final three-year average salary times the participant’s years of service with a minimum benefit payable equal to $50 per year times the number of years of credited service.

For those who have participated in the defined contribution plans, benefits purchased by employer contributions will reduce the benefits from these defined benefit plans. This defined contribution offset benefit is the annual single life annuity retirement benefit commencing at the normal retirement date which is the actuarial equivalent of the defined contribution account balance using the applicable mortality and interest rates under the Internal Revenue Code.

The Institution contributes to each defined benefit pension plan an amount equal to the required minimum plan contribution as of the beginning of the plan year with interest to the

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date of payment. The Institution contributed $631,230 to the College’s Plan and $108,315 to the Library’s Plan in 2013–2014.

The plan’s accumulated benefit obligation at June 30, 2014 was approximately $25,400,000 and $3,000,000 for the College Plan and Library Plan, respectively. Net actuarial loss amor-tization of $640,352 and $51,937 is expected to be recognized in fiscal year 2015 for the College Plan and Library Plan, respectively. Amortization of prior service cost of $5,391 is expected to be recognized in fiscal year 2015 for the Library Plan.

Effective July 1, 2013, the Library Plan was amended to close the Plan to new participants, discontinue service accruals for participants less than the age of forty, and to determine the amount of offset attributable to participation in the defined contribution plan as the earlier of the employee’s termination or retirement date.

The following were the components of net periodic pension cost for the defined benefit pension plans for the fiscal year ended June 30, 2014:

College Library Employee Plan Employee Plan

Service cost $ 3,780 $ 98,388Interest cost 1,108,943 166,869Expected return on plan assets (1,216,124) (144,763)Amortization of unrecognized prior service cost (5,391)Amortization of net actuarial loss 756,868 105,284Net periodic pension cost $ 653,467 $220,387

The following is a summary of the projected benefit obligation, plan assets, and funded status of the defined pension plans as of June 30, 2014.


Change in projected benefit obligation: Projected benefit obligation, June 30, 2013 $25,677,502 $4,112,862 Decrease due to benefits paid (1,150,003) (118,907) Increase due to employee service 3,780 98,388 Increase due to accrual of interest 1,108,943 166,869 Increase (Decrease) due to changes in actuarial assumptions and other sources 1,533,939 (516,048) Projected benefit obligation, June 30, 2014 $27,174,161 $3,743,164

Change in plan assets: Fair value of plan assets, June 30, 2013 $16,540,442 $1,936,928 Actual return 2,685,531 281,314 Employer contributions 631,230 108,315 Change in surrender charge 10,126 (886) Benefits paid (1,150,003) (118,907) Fair value of plan assets, June 30, 2014 $18,717,326 $2,206,764

Funded status: Projected benefit obligation $(27,174,161) $(3,743,164) Fair value of plan assets 18,717,326 2,206,764 Funded status $(8,456,835) $(1,536,400)

Cumulative Net Actuarial Loss: Cumulative net actuarial loss, June 30, 2013 $7,966,378 $1,459,707 Amortization (756,868) (105,284) Net loss (gain) 54,406 (590,583) Cumulative net actuarial loss, June 30, 2014 $7,263,916 $763,840

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Defined benefit plan assets consist of Deposit Administration Group Annuity Contracts with Teachers Insurance and Annuity Association and College Retirement Equities Fund.

The discount rates used in determining benefit obligations as of June 30, 2014 were 3.97% for the College Employee Plan and 4.26% for the Library Employee Plan. The rate of compensation increase used in determining benefit obligations and the net periodic pension cost was 3.50% for both plans. The discount rates used in determining the net periodic pension cost were 4.43% for the College Employee Plan and 4.52% for the Library Employee Plan. The long-term rate of return was 7.50% for both plans.

The expected long-term rate of return on plan assets is determined by reviewing historical returns, taking into account current asset diversification between equity and fixed income in-vestments. Current market factors such as inflation and interest rates are evaluated.

The asset allocations at June 30, 2014 of the defined benefit plans were as follows:


Equity securities $ 12,685,271 68% $ 1,251,309 57%Fixed income 6,032,055 32% 955,455 43%

Total $18,717,326 100% $2,206,764 100%

The defined benefit plans’ assets are valued using the same fair value hierarchy as the Institu-tion’s investments as described in note 2, Investments.

The following table summarizes the Institution’s fair values of investments by major type held by the defined benefit plans at June 30, 2014:

College Employee Plan

Level 1 Level 2 Level 3 Total

Equity securities $ 12,685,271 $ 12,685,271Fixed income $ 6,032,055 6,032,055

Total $12,685,271 $6,032,055 $18,717,326

Library Employee Plan

Level 1 Level 2 Level 3 Total

Equity securities $ 1,251,309 $ 1,251,309Fixed income $ 955,455 955,455

Total $1,251,309 $955,455 $2,206,764

The reconciliation of Level 3 total investments for the defined benefit plans as of June 30, 2014 is as follows:

Level 3 Fair Value Measurements

College Library Employee Employee Plan Plan Total

Beginning balance $ 6,303,996 $ 927,177 $ 7,231,173Contributions 631,230 108,315 739,545Interest income 236,706 39,756 276,462Sales, net (1,150,003) (118,907) (1,268,910)Change in surrender charge 10,126 (886) 9,240

Total $6,032,055 $955,455 $6,987,510

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The equity securities account seeks a favorable long-term return through both appreciation of capital and investment income by investing primarily in a broadly diversified portfolio of common stocks. The account is divided into three segments. One segment is designed to track U.S. equity markets and invests in the Russell 3000 Index. Another segment contains stocks that are selected for their investment potential and the third segment invests in foreign stocks and other equity securities.

The fixed income account guarantees both principal and a specified interest rate. The account seeks to achieve the highest rate of return over long periods of time, within reasonable risk mea-sures. Investments are held in funds which invest in publicly traded bonds, loans to business and industry, commercial mortgages and income producing real estate.

The Institution expects the 2014–2015 contribution to be reasonably consistent with the current year. The following benefit payments, which reflect expected future service, are expected to be paid:


2015 $1,339,000 $121,0002016 1,322,000 128,0002017 1,370,000 130,0002018 1,425,000 133,0002019 1,488,000 142,0002020–2024 8,093,000 924,000

Total $15,037,000 $1,578,000

The Institution offers a Phased Retirement Program to faculty of the College. Faculty members may enter the program at any time between age 60 and 65. Upon entering the program, faculty mem-bers receive a reduced salary. Participants also receive stipends for part-time work which they can continue until age 70 when they fully retire. The Institution has recorded a liability for this program of $6,162,077 as of June 30, 2014. This program is funded on a cash basis as benefits are paid.

9. Other Postretirement BenefitsThe Institution provides a defined benefit health insurance plan to eligible College employees employed before July 1, 2003 who have met certain age and service criteria. The Institution also provides a defined benefit health insurance plan to eligible Library employees and their de-pendents who have met certain age and service criteria. The Institution funds these plans on a cash basis as benefits are paid.

The Institution provides a defined contribution health program for the College employees that do not qualify for the defined benefit plan described above. Under this plan, each year eligible participants (regular, benefited employees) are entitled to a contribution based on 66.7% of the College’s Medicare supplemental insurance cost and interest that is credited to a notional account. Eligibility for contributions begins at age 40 for a maximum of 25 years and vesting requires 10 years of service after the age of 40 and attainment of age 62 when retiring from the College.

As of June 30, 2014 a $38,692,726 and $5,732,401 postretirement benefit obligation liability is recorded for the College and Library, respectively.

The components of net periodic postretirement benefit cost for the Institution’s plans as of June 30, 2014 were as follows:


Service cost $ 922,067 $ 207,656Interest cost 1,575,363 233,328Actuarial loss 64,608 147,843Amortization of prior service credit (12,873)

Net periodic postretirement benefit cost $2,549,165 $588,827

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The following provides a reconciliation of the accumulated benefit obligation, plan assets and funded status of the plans:


Change in accumulated postretirement benefit obligation Benefit obligation, June 30, 2013 $ 35,135,207 $ 3,379,116 Service cost 922,067 207,656 Interest cost 1,575,363 233,328 Medicare Part D subsidy 95,193 Plan participants’ contributions 246,923 15,830 Change in actuarial assumptions 2,405,903 2,026,562 Benefits paid (1,687,930) (130,091)

Benefit obligation, June 30, 2014 $ 38,692,726 $ 5,732,401

Change in plan assets Fair value of plan assets, June 30, 2013 $0 $0 Employer contribution 1,345,814 114,261 Plan participants’ contributions 246,923 15,830 Medicare Part D subsidy 95,193 Benefits paid (1,687,930) (130,091)

Fair value of plan assets, June 30, 2014 $ 0 $ 0

Funded status Retirees and dependents $ (19,016,678) $ (2,312,754) Actives fully eligible (1,294,511) (532,362) Actives not fully eligible (18,381,537) (2,887,285) Accumulated postretirement benefit obligation (38,692,726) (5,732,401) Fair value of plan assets 0 0

Accrued postretirement benefit cost $(38,692,726) $(5,732,401)

As of June 30, 2014 the College Plan had a cumulative net actuarial loss of $6,501,115. The Library Plan had a cumulative net actuarial loss of $2,599,774. In fiscal year 2015 the College and Library have an expected amortization from unrestricted net assets into net periodic benefit of $285,449 and $169,584, respectively.

Included in change in actuarial assumptions for the College Plan and Library Plan are losses from assumption changes in the discount rate amounting to $2,517,010 and $418,446, respec-tively.

The discount rate used in determining the accumulated postretirement benefit obligation as of June 30, 2014 for the College Plan was 4.14% compared to 4.58% at June 30, 2013. The dis-count rate for the Library Plan was 4.30% as of June 30, 2014 compared to 4.73% as of June 30, 2013.

The assumed health care cost trend rate used in measuring the College Plan’s accumulated postretirement benefit obligation was 7.00%. The assumed health care cost trend rate used in measuring the Library Plan’s accumulated postretirement benefit obligation was 9.00% in 2014 for participants not yet Medicare eligible and 5.00% for participants who are Medicare eligi-ble. The ultimate trend rate for the College plan declines gradually to 5.00% in 2016 and the Library’s ultimate trend rate declines gradually to 5.00% in 2018. The discount rate used in determining the net periodic postretirement benefit cost at June 30, 2014, which is determined as of July 1, 2013, was 4.58% for the College Plan and 4.73% for the Library Plan.

Following is the effect of a change in the trend rates at June 30, 2014:

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Impact of 1% increase in health care cost trend Interest cost plus service cost $ 359,100 $ 103,900 Accumulated postretirement benefit obligation 5,670,400 1,129,000

Impact of 1% decrease in health care cost trend Interest cost plus service cost (286,900) (78,000) Accumulated postretirement benefit obligation $(4,598,800) $(885,000)

The Institution expects its 2014-2015 contribution to be reasonably consistent with the current year. The following benefit payments, which reflect expected future service, are expected to be paid by the Institution:


2015 $ 1,552,000 $ 142,0002016 1,687,000 152,0002017 1,787,000 164,0002018 1,846,000 179,0002019 1,940,000 198,0002020–2024 10,900,000 1,276,000

Total $19,712,000 $2,111,000

10. Temporarily and Permanently Restricted Net AssetsTemporarily restricted net assets were available for the following purposes at June 30, 2014

College Library

Program services $37,086,951 $3,293,884Student loans 4,480,921Life income funds 26,410,266 364,103Buildings and improvements 8,636,657Realized and unrealized gains available for distribution under the limits of total return policy 1,077,956,485 270,426,189Other 520,100 100,893

$1,155,091,380 $274,185,069

Temporarily restricted net assets released from restrictions during the year for the Institution’s activities were used for the following purposes:

College Library

Program services $33,038,590 $2,187,675Buildings and improvements 5,962,090Total return distribution 59,130,964 9,535,679

$98,131,644 $11,723,354

Permanently restricted net assets are summarized as follows at June 30, 2014:

College Library

Permanent endowment $423,422,182 $24,743,557Contributions receivable 5,399,598Life income funds 18,160,000 155,325Beneficial interest in perpetual trusts 17,397,393

$464,379,173 $24,898,882

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11. CollectionsThe Folger Shakespeare Memorial Library holds the largest and most complete collection of Shakespeareana in the world and the largest collection of English printed books from 1475 to 1640 outside of England, as well as extensive Continental Renaissance holdings. The collection spans a broad range of subjects and includes books, manuscripts, documents, paintings, illustra-tions, tapestries, furnishings, musical instruments, scores, and curios from the Renaissance and theater history. The collection is a source of research for scholars from all over the world and is shared with the public through extensive exhibitions.

The collection is exhibited within the Folger Shakespeare Memorial Library in Washington, D.C.

The Emily Dickinson Museum consists of two historic houses, and their contents, in the center of Amherst, Massachusetts, closely associated with the poet Emily Dickinson and members of her family during the nineteenth and early twentieth centuries. The Museum is dedicated to educating diverse audiences about Emily Dickinson’s life, family, creative work, times, and enduring relevance, and to preserving and interpreting the Homestead and The Evergreens as historical resources for the benefit of scholars and the general public.

The College has collections housed in the Mead Art Museum and the Beneski Museum of Nat-ural History. The Mead Art Museum exhibits selections from its diverse collection of 18,500 works including American art, Russian modernist art, French art, British portraiture, African art, Japanese art, 19th and 20th century photography, and master and modern prints and draw-ings. The Beneski Museum of Natural History houses research collections of vertebrate and invertebrate paleontology, minerals, anthropology and modern vertebrates, as well as numerous exhibits which illustrate the evolution and ecology of major groups of animals.

The College’s collections are exhibited on campus where they are maintained.

The College and the Library maintain policies and procedures addressing the collections’ up-keep as well as other aspects of their management, including accession and deaccession policies.

12. Subsequent EventsManagement has evaluated subsequent events for the period after June 30, 2014, through Oc-tober 15, 2014 the date the financial statements were available to be issued. Management is not aware of any other subsequent events that would have a material impact on the June 30, 2014 financial statements.

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Gifts, Bequests and Grants ReceivedAmherst College | for the year ended June 30, 2014 (unaudited)

Gifts, Bequests and Grants ReceivedFolger Shakespeare Memorial Library | for the year ended June 30, 2014 (unaudited)

Fund

Endowment

Life 2014 2013 Purpose Permanent Term Quasi Income Plant Current Total Total

Unrestricted 26,219,782 649,361 1,036,791 956,886 28,862,820 28,460,692Administration 5,474 1,294,561 1,300,035 1,316,666Instruction 65,524 300 218,459 284,283 3,153,512Library 930 320 167,960 169,210 41,405Physical Plant 5,540,852 625 5,541,477 6,526,465Scholarships and Student Aid 4,084,011 702,563 2,776,897 7,563,471 10,499,262Prizes 1,888 800 400 3,088 3,154Fellowships 1,500 56,000 57,500 57,500Research 2,388,286 2,388,286 2,369,782Annual Fund 2,316 9,955,930* 9,958,246 10,129,296Academic Services 921,918 1,261 443,635 1,366,814 1,174,913Student Services 535,622 2,250 2,288,402 2,826,274 2,042,253Remainder Interest 1,744,952 1,744,952 3,261,587Dickinson Museum 133,832 338,818 472,650 420,768

Total—2014 31,838,965 649,361 1,744,285 1,744,952 5,674,684 20,886,859 62,539,106Total—2013 36,027,862 1,468,679 1,426,733 3,291,587 6,669,002 20,603,392 69,457,255

*This amount does not include endowment income transferred to the 2014 Annual Fund. When that amount is included, the total of the 2014 Annual Fund is $10,277,328.

Fund

Endowment

Life 2014 2013 Purpose Permanent Term Quasi Income Plant Current Total Total

Unrestricted 1,134,147 1,134,147 1,097,579Administration 225 1,000 1,225 40,025Director 0 103,165Research Division 1,132 350 1,482 25,894Public Programs 14,557 412,987 427,544 421,691Education 500 89,060 89,560 118,614Grant Support 92,255 92,255 92,394Technology 50,000 50,000 0Central Library 46,129 46,129 29,920Acquisitions 5,250 65,488 70,738 172,650Folger Unitrust 1,000 1,000 1,000Total—2014 5,750 225 15,689 1,000 0 1,891,416 1,914,080 Total—2013 5,750 10,000 152,759 1,000 25 1,933,398 2,102,932

Amherst College does not discriminate in its admission or employment policies and practices on the basis of such factors as race, sex, sexual orientation, gender identity, gender expression, age, color, religion, national origin, disability, or status as a veteran of the Vietnam War or as a disabled veteran. The College complies with federal and state legislation and regulations regarding nondiscrimination. Inquiries should be directed to the Director of Human Resources, Amherst College, PO Box 5000, Amherst, MA 01002-5000.

Photography by Ryan Donnell, Adam Grim, Joel Haskell and Rob Mattson

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