IHP's Combined Financial Statements, FY 2013 & 2012

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC.

COMBINED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 2013 AND 2012

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. TABLE OF CONTENTS YEARS ENDED JUNE 30, 2013 AND 2012

INDEPENDENT AUDITORS’ REPORT

1

COMBINED FINANCIAL STATEMENTS COMBINED STATEMENTS OF FINANCIAL POSITION

3

COMBINED STATEMENTS OF ACTIVITIES

4

COMBINED STATEMENTS OF CHANGES IN NET ASSETS

5

COMBINED STATEMENTS OF CASH FLOWS

6

NOTES TO COMBINED FINANCIAL STATEMENTS

7

INDEPENDENT AUDITORS’ REPORT

Board of Trustees International House of Philadelphia and International House Center, Inc. Philadelphia, Pennsylvania

We have audited the accompanying combined financial statements of International House of Philadelphia and International House Center, Inc. (a nonprofit organization) which comprise the combined statement of financial position as of June 30, 2013, and the related combined statements of activities, changes in net assets and cash flows for the years then ended, and the related notes to the combined financial statements.

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

Auditors’ Responsibility Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

An independent member of Nexia International

(1)

Board of Trustees International House of Philadelphia and International House Center, Inc.

Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of International House of Philadelphia and International House Center, Inc. as of June 30, 2013 and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matter The 2012 combined financial statements of International House of Philadelphia and International House Center, Inc. were audited by other auditors whose report dated September 6, 2012, expressed an unmodified opinion on those statements.

CliftonLarsonAllen LLP

Plymouth Meeting, Pennsylvania September 11, 2013

(2)

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. COMBINED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2013 AND 2012

2013

2012

$ 515,596 22,173 120,787 55,171 713,727

$ 219,578 17,080 157,739 47,903 442,300

PROPERTY AND EQUIPMENT, NET

5,472,613

5,891,417

OTHER ASSETS Investments Bond Issuance Costs, Net Pledges Receivable Total Other Assets

1,641,305 29,160 1,000,000 2,670,465

1,491,353 31,959 1,000,000 2,523,312

$ 8,856,805

$ 8,857,029

CURRENT LIABILITIES Current Portion of Long‐Term Debt Accounts Payable Accrued Expenses Unearned Income Total Current Liabilities

$ 239,104 299,960 147,143 137,899 824,106

$ 270,961 309,766 134,239 104,719 819,685

LONG‐TERM LIABILITIES Long ‐Term Debt, Less Current Portion Total Long‐Term Liabilities

1,739,511 1,739,511

1,977,673 1,977,673

2,563,617

2,797,358

1,616,987 1,641,305 3,258,292 3,034,896 6,293,188

1,428,297 1,491,353 2,919,650 3,140,021 6,059,671

$ 8,856,805

$ 8,857,029

ASSETS CURRENT ASSETS Cash and Cash Equivalents Accounts Receivable Pledges Receivable, Net of Allowance Prepaid Expenses Total Current Assets

Total Assets LIABILITIES AND NET ASSETS

Total Liabilities NET ASSETS Unrestricted Undesignated Board Designated Total Unrestricted Temporarily Restricted Total Net Assets Total Liabilities and Net Assets

See accompanying Notes to Combined Financial Statements.

(3)

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. COMBINED STATEMENTS OF ACTIVITIES YEARS ENDED JUNE 30, 2013 AND 2012

2013

2012

$ 4,462,795 116,783 374,028 32,556 160,159 265,250 5,411,571

$ 4,293,129 182,831 315,568 33,520 (9,333) 267,544 5,083,259

3,218,801 382,872 3,601,673

3,047,788 468,253 3,516,041

678,056 214,488 892,544

633,491 252,798 886,289

4,494,217

4,402,330

Changes in Unrestricted Net Assets Before Depreciation and Amortization

917,354

680,929

Depreciation and Amortization

578,712

601,086

Changes in Unrestricted Net Assets

338,642

79,843

160,125 (265,250)

50,000 (267,544)

Changes in Temporarily Restricted Net Assets

(105,125)

(217,544)

Total Changes In Net Assets

$ 233,517

$ (137,701)

UNRESTRICTED Support and Revenue Program Revenue Residential and Facility Arts, Cultural and Educational Programs Contributions Investment Income Unrealized Gain (Loss) on Investments Net Assets Released from Time and Purpose Restrictions Total Support and Revenue Expenses Program Services Residential and Facility Arts, Cultural and Educational Programs Total Program Services Supporting Services General and Administrative, Marketing and Public Relations Development Total Supporting Services Total Expenses

TEMPORARILY RESTRICTED Contributions Net Assets Released from Time and Purpose Restrictions

See accompanying Notes to Combined Financial Statements.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. COMBINED STATEMENTS OF CHANGES IN NET ASSETS YEARS ENDED JUNE 30, 2013 AND 2012

Net Assets, June 30, 2011

Unrestricted Net Assets $ 2,839,807

Temporarily Restricted Net Assets $ 3,357,565

Total Net Assets $ 6,197,372

Changes in Net Assets

79,843

(217,544)

(137,701)

Net Assets, June 30, 2012

2,919,650

3,140,021

6,059,671

Changes in Net Assets

338,642

(105,125)

233,517

Net Assets, June 30, 2013

$ 3,258,292

$ 3,034,896

$ 6,293,188

See accompanying Notes to Combined Financial Statements.

(5)

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2013 AND 2012

2013

2012

$ 233,517

$ (137,701)

(160,159) 578,712

9,333 601,086

(5,093) 36,952 (7,268)

50,853 217,233 (8,114)

(9,806) ‐ 12,904 33,180 712,939

(68,249) (11,209) 2,431 (5,548) 650,115

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Investments Sale of Investments Purchase of Property and Equipment Net Cash Used by Investing Activities

(32,345) 42,552 (157,109) (146,902)

(33,435) ‐ (189,218) (222,653)

CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Line of Credit Proceeds from Long‐Term Debt Repayment of Long‐Term Debt Net Cash Used by Financing Activities

‐ ‐ (270,019) (270,019)

(267,000) 65,000 (255,928) (457,928)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

296,018

(30,466)

Cash and Cash Equivalents ‐ Beginning of Year

219,578

250,044

CASH AND CASH EQUIVALENTS ‐ END OF YEAR

$ 515,596

$ 219,578

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid

$ 97,685

$ 124,352

CASH FLOWS FROM OPERATING ACTIVITIES Changes in Net Assets Adjustments to Reconcile Changes in Net Assets to Net Cash Provided

by Operating Activities: Unrealized (Gain) Loss on Investments Depreciation and Amortization (Increase) Decrease in: Accounts Receivable Pledges Receivable Prepaid Expenses Increase (Decrease) in: Accounts Payable Security Deposits Accrued Expenses Unearned Income Net Cash Provided by Operating Activities

See accompanying Notes to Combined Financial Statements (6)

INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations International House of Philadelphia (IHP) provides housing and educational programs for International and American students and arts and cultural programs for the people of the Delaware Valley. International House Center, Inc. (Center), a related corporation, constructed and owns the facilities which International House of Philadelphia occupies under a long‐term lease.

Principles of Combination The accounts of International House of Philadelphia and International House Center, Inc. (collectively, the “Company”) have been combined in the accompanying financial statements.

Intercompany transactions and accounts have been eliminated in combination.

Residential and Facility Revenue Revenue consists primarily of residential and commercial leases which are recognized on a month‐ to‐month basis over the lease term.

Net Asset Classification, Contributions The Company reports information regarding its financial position and activities according to three classes of net assets as follows:

 Unrestricted net assets are not subject to donor‐imposed restrictions.  Temporarily restricted net assets are subject to donor‐imposed restrictions that will be met either by actions of the Company or the passage of time.  Permanently restricted net assets are subject to donor‐imposed restrictions that neither expire by passage of time nor can be fulfilled or otherwise removed by the Company.

Contributions, including unconditional promises to give (pledges), are recognized as revenue in the period the promise is received. Collection of the contributions receivable is determined based on management’s evaluation of the collectability of individual promises. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met.

Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire within the fiscal year in which the contributions are received. All other donor‐restricted contributions are reported as increases in temporarily or permanently restricted net assets depending upon the nature of the restrictions. When a restriction expires (that is when a stipulated time restriction ends or the purpose of the restriction is accomplished), temporarily restricted net assets are transferred to unrestricted net assets.

Temporarily restricted net assets that were restricted by the donor for the construction or acquisition of long‐term assets are released to unrestricted net assets over the useful life of the related assets. The amount released each year equals the current year depreciation expense.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Asset Classification, Contributions (Continued) Contributions include gifts for specific programs and unrestricted gifts. Program revenue represents income earned by each program and excludes contributions.

Board Designated Net Assets The Board designated net assets have been designated by the Board of Trustees to be retained and function in a similar manner as an endowment, governed by policies established by the Board of Trustees. Each year, the Board authorizes an amount to be used for operations. In 2013 and 2012, the amount was equal to 5% of the average market value of the investments during the preceding three years (See Note 12).

Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents consist of checking and treasury securities. Income earned on cash and cash equivalents is reported as operating income.

Investments Investments are stated at fair value based upon quoted market prices in active markets for identical assets or liabilities. The Company has adopted an investment policy for all investments to produce a predictable stream of funding to programs/operations while seeking to maintain the purchasing power of the assets. Under this policy, as approved by the Board of Trustees, the assets are invested in a manner that is intended to produce returns that exceed the 5% spending policy, while assuming a moderate level of investment risk. Actual returns may vary from the intended results.

To satisfy its long‐term rate of return objectives, the Company relies on a total return strategy in which investment returns are achieved through both capital appreciation and yield. The Company targets a diversified asset allocation that places greater emphasis on equity‐based investments to achieve its long‐term objectives within prudent risk constraints.

Property and Equipment Property and equipment are stated at acquisition cost or fair value at the date of contribution.

Fixed assets with an acquisition cost greater than five hundred dollars and a useful life of greater than one year are capitalized. Depreciation and amortization are provided by the straight‐line method over the estimated useful lives of the assets as follows:

Years

Building and Improvements 7‐50

Machinery and Equipment 3‐10

Furniture and Fixtures 7

Works of fine art received are stated at appraised value at the date of donation and are not depreciated.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Bond Issuance Costs Bond issuance costs consist of costs incurred in securing the bond financing of the Company’s building capital improvements project. Deferred bond issuance costs are amortized over the terms of the bonds.

Unearned Income Unearned income represents receipts of rental payments for future periods. Such amounts are recognized as revenue upon provision of rental space in such periods.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Advertising Costs The Company expenses advertising costs as incurred. Advertising expense was $56 and $8,126 for the years ended June 30, 2013 and 2012, respectively.

Tax‐Exempt Status/Uncertain Income Tax Positions International House of Philadelphia and International House Center, Inc. have been granted tax‐ exempt status as nonprofit organizations under Section 501(c)(3) of the Internal Revenue Code and file Federal Forms 990 (Return of Organization Exempt from Income Tax) annually.

For the years ended June 30, 2013 and 2012, the Company did not identify any uncertain tax positions taken or expected to be taken in an information return which would require adjustment to or disclosure in its combined financial statements. International House of Philadelphia and International House Center, Inc. are potentially subject to federal tax examinations for years subsequent to June 30, 2009.

Impairment of Long‐Lived Assets Management assesses whether there are indicators that the value of the Company’s long‐lived assets may be impaired whenever events or changes in the circumstances indicate that the carrying amount of an asset may not be recoverable. The value of a long‐lived asset may be impaired if management’s estimate of the aggregate, undiscounted future cash flows to be generated from the use or disposition of a long‐lived asset are less than the carrying value of the asset. If impairment has occurred, the loss shall be measured as the excess of the carrying amount of the asset over its fair value. Based on management’s judgment, no such indicators of impairment have occurred.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NOTE 2

Reclassification Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Subsequent Events In preparing these combined financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through September 11, 2013, the date that the combined financial statements were issued.

CONCENTRATION OF CREDIT RISK

NOTE 3

The Company maintains its cash balances with financial institutions which, at times, may exceed federally insured limits. At June 30, 2013 and 2012, noninterest bearing accounts in the commercial banks were guaranteed by the Federal Deposit Insurance Corporation (FDIC). Interest bearing cash accounts in the commercial banks were guaranteed by the FDIC up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash and cash equivalents.

PLEDGES RECEIVABLE The Company recorded unconditional promises to give as pledges receivable, as follows at June 30: Receivable in: Less Than One Year More Than One Year

2013

2012

$ 120,787 1,000,000 $ 1,120,787

$ 157,739 1,000,000 $ 1,157,739

As stated in Note 7, a $1,000,000 pledge has been assigned as security related to certain bond financing, the proceeds of which were received in 2008.

During 2012, the Company received a restricted grant totaling $800,000 that contained grantor conditions (primarily matching funds requirements). Since this grant represents a conditional promise to give, it is not recorded as contribution revenue until donor conditions are met. Donor conditions were not met in 2013 and therefore no revenue related to this grant was recorded as of June 30, 2013.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 4

FAIR VALUE OF FINANCIAL INSTRUMENTS FASB Accounting Standards Codification (“ASC”) Topic 820‐10, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

This hierarchy consists of three broad levels:

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market‐corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The Company uses appropriate valuation techniques based on the available inputs to measure the fair value of its investment portfolio. At June 30, 2013 and 2012, the Company did not use any Level 3 inputs to measure the fair value of its investment portfolio.

Investments at fair value are as follows at June 30, 2013:

Mutual Funds Invested Primarily in: Equities (a) Fixed Income (b) U.S. Treasury Securities (c)

Level 1 Quoted Prices in Active Markets

Level 2 Significant Other Observable Inputs

$ 1,131,885 509,420

$ ‐ ‐

‐ $ 1,641,305

196,377 $ 196,377

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 4

FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Investments at fair value are as follows at June 30, 2012:

Mutual Funds Invested Primarily in: Equities (a) Fixed Income (b) U.S. Treasury Securities (c)

Level 1 Quoted Prices in Active Markets

Level 2 Significant Other Observable Inputs

$ 965,691 525,662

$ ‐ ‐

‐ $ 1,491,353

194,489 $ 194,489

(a) For 2013 and 2012, approximately 84% and 83% of the funds are invested in U.S. equities and 16% and 17% in international equities, respectively.

(b) For 2013 and 2012, approximately 86% and 83% of the funds are invested in short‐term bonds and 14% and 17% in intermediate‐term bonds, respectively.

(c) Short‐term treasury securities are included in cash and cash equivalents.

Investment income for the years ended as of June 30, 2013 and 2012 is as follows:

Interest and Dividends Less: Investment Fees Net Investment income Unrealized Gain (Loss) on Investments Total Investment Income

2013

2012

$ 37,697 5,141 32,556 160,159 $ 235,553

$ 38,342 4,822 33,520 (9,333) $ 67,351

The following is a description of the valuation methodologies used for investments measured at fair value as of June 30, 2013 and 2012.

Level 1 Fair Value Measurements Mutual funds are valued based on quoted net asset values of the shares held by the Company at year‐end.

Level 2 Fair Value Measurements U.S. Treasury securities are valued on the basis of market prices and information furnished by an independent pricing service of the investment advisor.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 5

PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30: Land Buildings and Improvements Machinery and Equipment Furniture and Fixtures Fine Art Less Accumulated Depreciation and Amortization Construction in Progress Property and Equipment, Net

2013 $ 276,273 17,593,105 2,968,107 2,667,341 90,041 23,594,867

2012 $ 276,273 17,467,913 2,916,764 2,643,814 90,041 23,394,805

18,122,254 5,472,613 ‐ $ 5,472,613

17,546,341 5,848,464 42,953 $ 5,891,417

NOTE 6

LINE OF CREDIT

NOTE 7

The Company has a $700,000 line of credit secured by certain investments, bearing interest at the prime rate (3.25% at June 30, 2013 and 2012), which expires in March, 2014. There was no amounts outstanding at June 30, 2013 and June 30, 2012.

LONG‐TERM DEBT Long‐term debt consists of the following at June 30: Bonds Payable to U.S. Department of Housing and Urban Development Bond Payable to Upper Darby Industrial Development Authority Loan Payable (A) Loan Payable (B) Loan Payable (C) Loan Payable (D) Less Current Portion

2013

2012

$ 540,000

$ 620,000

1,000,000 ‐ 46,939 358,859 32,817 1,978,615 239,104 $ 1,739,511

1,000,000 47,105 59,108 469,123 53,298 2,248,634 270,961 $ 1,977,673

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 7

LONG‐TERM DEBT (CONTINUED) Bonds Payable to U.S. Department of Housing and Urban Development The bonds payable to the United States Department of Housing and Urban Development bear interest at 3%. Interest on the bonds is payable semiannually. The bonds mature serially on May 1 of each year through 2019, and are secured by a first mortgage on the building, together with an assignment of the lease for the facilities between the Center and IHP. The bonds are cosigned by the University of Pennsylvania. The University of Pennsylvania maintains a second mortgage on the facilities. The bonds mature in increasing amounts through 2019. The maximum amount maturing in any given year is $95,000.

Bond Payable to Upper Darby Industrial Development Authority The bond payable to the Upper Darby Industrial Development Authority bears interest at 4.95% through December 24, 2012 payable quarterly and a floating interest rate equal to the greater of LIBOR or 4% thereafter. The bond matures on December 24, 2022, and is secured by a third mortgage on the building, an assignment of rights, a guaranty by the International House Center, Inc., and a pledge and assignment by IHP of the proceeds of a pledged gift, (See Note 3). Payments on the bond commence on March 24, 2018, in 20 equal quarterly installments of $50,000. The Company is subject to a number of financial and other covenants as defined in the agreement. At June 30, 2013, management is not aware of any violations of the covenants.

Loan Payable (A) The loan payable (A) to PNC Bank was unsecured, due in monthly installments of $4,391 which includes interest at 5.75% with the final payment paid on May 2, 2013.

Loan Payable (B) The loan payable (B) to PNC Equipment Finance secured by certain equipment is due in monthly installments of $1,206 which includes interest in 4.29% with the final payment due on December 12, 2016.

Loan Payable (C) The loan payable (C) to PNC Bank, secured by certain investments, is due in monthly installments of $11,821 which includes interest at 7.3% with the final payment due on March 9, 2016.

Loan Payable (D) The loan payable (D) to PNC Bank, secured by certain investments and a security interest in all of the Company’s assets, is due in monthly installments of $1,902 which includes interest at 5.25% with the final payment due on December 8, 2014.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 7

LONG‐TERM DEBT (CONTINUED) Principal maturities of long‐term debt for each of the five years subsequent to June 30, 2013 and the aggregate are as follows:

Years Ending June 30, 2014 2015 2016 2017 2018 Thereafter

NOTE 8

Amount $ 239,104 238,251 207,005 104,255 195,000 995,000 $ 1,978,615

Total interest expense for the years ended June 30, 2013 and 2012 was $97,685 and $124,352, respectively.

RENTAL INCOME UNDER OPERATING LEASES Rental agreements between International House of Philadelphia and its commercial tenants provide for base rental income. One lease also provides for contingent rental income based on a specified percentage of operating expenses. The base rental income for 2013 and 2012 was $350,890 and $439,497, respectively. Contingent rental income for 2013 and 2012 amounted to approximately $96,000 and $73,500, respectively. Base rental income and contingent rental income are recorded in residential and facility program revenue in the accompanying combined statements of activities.

The future minimum lease rental income for non‐cancelable leases, which expire through 2024 is as follows: Years Ending June 30, 2014 2015 2016 2017 2018 Thereafter

Amount $ 395,716 322,597 300,439 302,356 252,527 236,226 $ 1,809,861

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 9

BENEFIT PLAN The Company has a defined contribution retirement plan provided through the Teachers Insurance and Annuity Association. The Plan covers all eligible employees. The Company contributed $34,034 and $42,412 to this Plan during the years ended June 30, 2013 and 2012, respectively.

NOTE 10

CONTRIBUTED SERVICES

NOTE 11

A number of unpaid volunteers have made significant contributions of time to program and support services of the Company. No value has been assigned to these contributed services because they do not meet the criteria for recognition in the combined financial statements.

TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at June 30, 2013 and 2012 are as follows:

2013 $ 1,879,651 995,120 160,125 $ 3,034,896

Capital Campaign for Building Renovations Long‐Term Assets Operations, Program and Time Restricted

NOTE 12

2012 $ 2,020,455 1,069,566 50,000 $ 3,140,021

BOARD DESIGNATED NET ASSETS

The Company does not have any donor‐restricted endowment funds. As such, the following information relates only to Board designated net assets, which are classified as unrestricted in the accompanying combined financial statements:

Board Designated Net Assets, Beginning of Year Investment Return: Investment Income Net Appreciation (Depreciation) Total Investment Return Amounts Authorized for Operations Amounts Retained in Board Designated Net Assets Board Designated Net Assets, End of Year

2013 $ 1,491,353

2012 $ 1,467,252

32,346 160,159 192,505

33,434 (9,333) 24,101

(67,951) 25,398 $ 1,641,305

(61,145) 61,145 $ 1,491,353

In 2008, $300,000 was transferred from the Board designated net assets to reduce the outstanding line of credit balance. The amount transferred has been returned to the Board designated net assets in full through the use of the annual Board authorized 5% spending policy, which amounted to $25,398 and $61,145 in 2013 and 2012, respectively. During 2013, $42,553 was designated by the Board for operating needs.

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INTERNATIONAL HOUSE OF PHILADELPHIA AND INTERNATIONAL HOUSE CENTER, INC. NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012

NOTE 13

FUNCTIONAL EXPENSES Functional expenses, including depreciation and amortization, for the years ended June 30, 2013 and 2012 are as follows:

Program Services Residential and Facility Arts, Cultural and Educational Programs Supporting Services General and Administrative, Marketing and Public Relations Development Total

2013

2012

$ 3,633,280 432,174

$ 3,463,927 532,187

765,368 242,107 $ 5,072,929

719,987 287,315 $ 5,003,416

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