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Financial Statements (Together with Independent Auditorsâ€™ Report) For The Years Ended December 31, 2018 and 2017

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. FINANCIAL STATEMENTS (Together with Independent Auditorsâ€™ Report) YEARS ENDED DECEMBER 31, 2018 AND 2017

CONTENTS Page Independent Auditors' Report ................................................................................................................................ 1 Statements of Financial Position .......................................................................................................................... 2 Statements of Activities ......................................................................................................................................... 3 Statements of Functional Expenses...................................................................................................................4-5 Statements of Cash Flows .................................................................................................................................... 6 Notes to Financial Statements .........................................................................................................................7-13

Marks Paneth LLP 685 Third Avenue New York, NY 10017 P 212.503.8800 F 212.370.3759 markspaneth.com

INDEPENDENT AUDITORS’ REPORT The Board of Directors of the Vellore Christian Medical College Foundation, Inc. We have audited the accompanying financial statements of The Vellore Christian Medical College Foundation, Inc. (the “Foundation”), which comprise the statements of financial position as of December 31, 2018 and 2017, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Vellore Christian Medical College Foundation, Inc. as of December 31, 2018 and 2017, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2 to the financial statements, during the year ended December 31, 2018, the Foundation adopted Accounting Standards Update 2016-14, “Not-for-Profit Entities”. Our opinion is not modified with respect to this matter.

New York, NY May 20, 2019

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2018 AND 2017

2018

2017

ASSETS Cash and cash equivalents (Notes 2C, 8 and 9) Investments (Notes 2D, 2E, 4 and 5) Pledges receivable (Notes 2F and 6) Beneficial interest in trust (Note 2G) Prepaid expenses and other Property and equipment, net (Notes 2H and 7) TOTAL ASSETS

LIABILITIES Accounts payable and accrued expenses (Note 9)

348,204 6,498,819 119,985 6,715 8,628 4,500

226,747 6,816,141 112,254 7,721 9,234 14,300

6,986,851

7,186,397

174,384

193,005

TOTAL LIABILITIES

174,384

193,005

312,521 2,441,483 2,754,004

285,842 2,722,480 3,008,322

2,041,335 2,017,128 4,058,463

1,967,942 2,017,128 3,985,070

6,812,467

6,993,392

COMMITMENTS AND CONTINGENCIES (Note 9) NET ASSETS (Note 2B) Without Donor Restrictions: Operating Board designated (Note 10) Total without donor restrictions With donor restricitons (Note 10) Time and purpose restricted Endowment in perpetuity (Note 10) Total With donor restricitons (Note 10) TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS

6,986,851

7,186,397

The accompanying notes are an integral part of these financial statements. -2-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 For the Year Ended December 31, 2018 Without Donor With Donor Restrictions Restrictions Total

For the Year Ended December 31, 2017 Without Donor With Donor Restrictions Restrictions Total

OPERATING SUPPORT AND REVENUE: Contributions Individuals Groups Foundations, corporations and trusts Institutional members Special Events (net of direct expenses of $42,205 and $5,563) Donated goods and services (Note 2I)

Other revenue Investment earnings appropriated for operations (Note 10) Net assets released from restrictions (Notes 2I and 10) TOTAL OPERATING SUPPORT AND REVENUE

168,984 5,628 372 16,950 54,640 6,714 253,288 6,152 319,327 416,580

995,347

541,710 3,289 5,000 34,205 584,204 (416,580)

167,624

710,694 8,917 5,372 51,155 54,640 6,714 837,492 6,152 319,327 -

193,847 5,025 508 11,000 3,995 7,094 221,469 6,854 313,203 358,834

1,162,971

900,360

282,509 9,050 140,698 53,505 485,762 (358,834)

126,928

476,356 14,075 141,206 64,505 3,995 7,094 707,231 6,854 313,203 1,027,288

OPERATING EXPENSE (Note 2J): Program services: India USA Total program services

548,052 135,575 683,627

417,848 304,620 722,468

Supporting services: Management and general Fundraising Total supporting services

207,948 77,093 285,041

202,884 68,948 271,832

968,668

994,300

TOTAL OPERATING EXPENSES CHANGE IN NET ASSETS FROM OPERATIONS NON-OPERATING ACTIVITY: Investment activity (Notes 2D and 4) Appropriations for operations (Note 10) TOTAL NON-OPERATING ACTIVITY CHANGE IN NET ASSETS Net assets - beginning of year NET ASSETS - END OF YEAR

26,679

167,624

194,303

(93,940)

126,928

32,988

(39,358) (241,639)

(16,543) (77,688)

(55,901) (319,327)

548,138 (313,203)

260,930 -

809,068 (313,203)

(280,997)

(94,231)

(375,228)

234,935

260,930

495,865

(254,318)

73,393

(180,925)

140,995

387,858

528,853

2,867,327

3,597,212

6,464,539

3,008,322 $

2,754,004

3,985,070 $

4,058,463

6,993,392 $

6,812,467

3,008,322

3,985,070

6,993,392

The accompanying notes are an integral part of these financial statements. -3-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 (With Comparative Totals for 2017)

Program Services India Salaries Payroll taxes and employee benefits (Note 11)

Total Salaries and Related Costs

USA $

Grants (Note 2K) Travel, Meal and Accomodations Occupancy (Note 9) Telephone and Communications Payroll processing fees Transaction processing services Professional fees (Note 2I) Office Expenses Insurance Printing and fundraising fees Depreciation (Notes 2H and 7) Other TOTAL EXPENSES

544,268 3,784 $

548,052

Supporting Services Total Program Services

57,201 8,075

Management and General $

71,469 10,090

Total Supporting Services

Fundraising $

27,999 3,953

99,468 14,043

Total 2018 $

156,669 22,118

Total 2017 $

312,069 46,180

65,276

81,559

31,952

113,511

178,787

358,249

4,846 8,773 5,694 615 4,725 12,004 1,074 24,357 7,840 371

544,268 8,630 8,773 5,694 615 4,725 12,004 1,074 24,357 7,840 371

10,087 11,273 3,759 768 70,177 10,822 10,103 1,960 7,440

2,165 4,294 1,086 301 10,158 3,237 23,900 -

12,252 15,567 4,845 1,069 80,335 14,059 10,103 23,900 1,960 7,440

544,268 20,882 24,340 10,539 1,684 4,725 92,339 15,133 10,103 48,257 9,800 7,811

415,130 18,781 24,264 9,548 1,372 4,793 51,612 15,988 9,991 61,538 10,600 12,434

135,575

683,627

207,948

77,093

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

285,041

968,668

994,300

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THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2017

Program Services

India Salaries Payroll taxes and employee benefits (Note 11)

Total Salaries and Related Costs

USA $

415,130 2,718 $

417,848

Supporting Services Total Program Services

183,808 27,200

Management and General $

85,739 12,688

Total Supporting Services

Fundraising $

42,522 6,292

128,261 18,980

Total $

312,069 46,180

211,008

98,427

48,814

147,241

358,249

1,187 13,946 5,595 808 4,793 5,920 52,365 8,480 518

415,130 3,905 13,946 5,595 808 4,793 5,920 52,365 8,480 518

11,537 7,092 2,907 377 51,612 10,068 9,991 2,120 8,753

3,339 3,226 1,046 187 9,173 3,163

14,876 10,318 3,953 564 51,612 10,068 9,991 9,173 2,120 11,916

415,130 18,781 24,264 9,548 1,372 4,793 51,612 15,988 9,991 61,538 10,600 12,434

304,620

722,468

202,884

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

68,948

271,832

994,300

-5-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from contributors Investment return Grants paid to Vellore Cash received from other revenue Payments for other expenses

Net Cash Used in Operating Activities

865,252 91,611 (544,268) 6,152 (467,100)

636,386 89,983 (411,948) 6,854 (589,217)

(48,353)

(267,942)

261,303 (91,493)

215,265 (89,846)

169,810

125,419

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

121,457

(142,523)

Cash and cash equivalents - beginning of year

226,747

369,270

CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investments Purchases of investments Net Cash Provided by Investing Activities

CASH AND CASH EQUIVALENTS - END OF YEAR

348,204

226,747

(180,925)

528,853

RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH USED IN OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation expense Realized and unrealized loss (gain) on investments Subtotal Changes in assets and liabilities: Decrease (increase) in assets: Pledges receivable Beneficial interest in trust Prepaid expenses and other Increase (decrease) in liabilities: Accounts payable and accrued expenses Net Cash Used in Operating Activities

9,800 147,512

10,600 (719,085)

(23,613)

(179,632)

(7,731) 1,006 606

(63,751) (385) (724)

(18,621)

(23,450)

(48,353)

(267,942)

The accompanying notes are an integral part of these financial statements. -6-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 1—ORGANIZATION AND NATURE OF ACTIVITIES The Vellore Christian Medical College Foundation, Inc. (the “Foundation”) is a non-profit organization (formed in New York) exempt from federal taxes under section 501(c)(3) of the Internal Revenue Code. The Foundation’s mission is to provide a focus for excellence and integrity at Christian Medical College, Vellore (“CMC”) through participation in and continuing support of CMC’s drive to provide universal access to quality medicine and compassionate healthcare. NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting – The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). B. Net Assets – The Foundation maintains its net assets under the following two classes: Without Donor Restrictions – Net assets without donor restrictions represent the portion of net assets of the Foundation that is not restricted by donor-imposed stipulations. Contributions are considered available for unrestricted use unless specifically restricted by the donor. Net assets without donor restrictions include amounts designated for use by the Board as a quasi-endowment. With Donor Restrictions – Net assets resulting from contributions and other inflows of assets whose use by the Foundation is limited by donor-imposed stipulations that either expire by the passage of time or can be fulfilled and removed by actions of the Foundation pursuant to those stipulations. In addition, earnings on endowment assets are classified as net assets with donor restrictions until appropriated for operations by the Board. When such stipulations end or are fulfilled, net assets with restrictions are reported in the statement of activities as net assets released from restrictions. C. Cash and Cash Equivalents – Cash equivalents include all highly liquid instruments with maturities of three months or less when acquired. D. Investments – Investments are stated at their fair value. Realized and unrealized gains and losses are recognized as changes in net assets in the period in which they occur. Investment purchases and sales are recorded in a trade date basis. Dividend income is recognized on the date dividends are declared. Discounts/premiums received to par on fixed income securities are capitalized and accreted or amortized into income over the life of the securities. Any remaining discount/premium is accreted or amortized into income upon early maturity or sale of the instrument. E. Fair Value Measurements – Fair value measurements are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy prioritizes observable and unobservable inputs used to measure fair value into three levels, as described in Note 5. F. Pledges Receivable – Pledges are recorded as revenue when received as unconditionally promised. It is the Foundation’s practice to discount pledges receivable due in more than one year to present value unless the amount is immaterial. Historically, the Foundation has not experienced significant bad debt losses. The Foundation bases its allowance for doubtful accounts on its historical loss experience, the age of the receivables, and an evaluation of the creditworthiness of the donor. Pledges receivable are written off against the allowance for doubtful accounts when all reasonable collection efforts have been exhausted. The Foundation has determined that no allowance was necessary as of December 31, 2018 and 2017.

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THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Beneficial Interest in Trust – The Foundation has been named a beneficiary in a charitable remainder unitrust. The Foundation will receive 50% of the balance of the trust after the passing of a named beneficiary. As of December 31, 2018 and 2017, the Foundation’s interest in this trust amounted to $6,715 and $7,721, respectively. H. Property and Equipment – Property and equipment is stated at cost less accumulated depreciation. These amounts do not purport to represent replacement or realizable values. Property and equipment is depreciated on a straight-line basis over the estimated useful life of the asset. The Foundation capitalizes property and equipment having a cost of $1,000 or more and a useful life of at least one year. I.

Contributions – The Foundation report gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statement of activities as net assets released from restrictions. In-kind contributions are recorded at their fair value on the date received. Contributed services are recognized in the financial statements if the services enhance or create nonfinancial assets or require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. In-kind contributions received by the Foundation for the years ended December 31, 2018 and 2017, amounted to $6,714 and $7,094, respectively, and are included in contributions which are offset by like amounts included in the functional expenses.

Functional Allocation of Expenses – The Foundation allocates expenses on a functional basis among its various programs and supporting services. Expenses that can be identified as belonging to a specific program and/or supporting services are allocated directly according to their natural expenditure classification. Certain costs have been allocated among the program and supporting services benefited. The expenses that are allocated include salaries and payroll taxes and employee benefits, which are allocated on the basis of estimates of time and effort.

K. Grant Expense – Grants made, including unconditional promises to give, are recognized as an expense in the period made. L. Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. M. New Accounting Pronouncement – Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-14, “Not-for-Profit Entities” was adopted for the year ended December 31, 2018. ASU 2016-14 provides for a number of changes, including the presentation of two classes of net assets and enhanced disclosure on liquid resources and expense allocation. These changes had no impact on the change in net assets for the year ended December 31, 2018. Net assets as of December 31, 2017 were reclassified to conform to the new presentation. NOTE 3—LIQUDITY AND AVAILABILITY OF RESOURCES FOR OPERATING EXPENSES The Foundation receives significant contributions restricted by donors, and considers contributions restricted for programs which are ongoing, major, and central to its annual operations to be available to meet cash needs for general expenditures. For the purpose of analyzing resources available to meet general expenditures over a 12month period, the Foundation considers all expenditures related to its ongoing program activities as well as service undertaken to support those activities to be general expenditures. The organization manages its liquidity and reserves following three guiding principles: operate within a prudent range of financial soundness and stability, maintain adequate liquid assets to fund near-term operating needs, and maintain sufficient

-8-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 3—LIQUDITY AND AVAILABILITY OF RESOURCES FOR OPERATING EXPENSES (Continued) reserves to provide reasonable assurance that long-term obligations will be discharged. The organization’s liquidity policy requires it to maintain its working capital, or its current assets less its current liabilities, at a minimum of 90 days of operating expenses. The organization has a policy to target a year-end balance of reserves of unrestricted, undesignated net assets to meet 15 to 30 days of expected expenditures. To achieve these targets, it forecasts its future cash flows and monitors its liquidity quarterly and monitors its reserves annually. During the year ended December 31, 2018, the level of liquidity and reserves was managed in accordance with the policy requirements. As of December 31, 2018, financial assets were as follows: Cash and cash equivalents Investments Pledges receivable Total financial assets

Donor-imposed restrictions: Funds subject to time and purpose restrictions Cash held for disbursement to Bayer Endowments

348,204 6,498,819 119,985 6,967,008

(2,041,335) (130,255) (2,017,128)

Net financial assets after donor-imposed restrictions

2,778,290

Internal Designations: Board-designated funds

(2,441,483)

Financial assets available to meet cash needs for general expenditures within one year

336,807

NOTE 4—INVESTMENTS Investments consist of financial assets carried at fair value at the following as of December 31, 2018 and 2017: 2018 Equities Money Market Funds Fixed Income Mutual Funds

2017

4,011,025 419,913 2,037,509 30,372

4,214,956 112,382 2,189,105 299,698

6,498,819

6,816,141

Investments are subject to market volatility, which could substantially change the carrying value in the near-term. NOTE 5—FAIR VALUE MEASUREMENTS In determining fair value, the Foundation utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, in its assessment of fair value. The fair value hierarchy defines three levels as follows: Level 1: Valuations based on quoted prices (unadjusted) in an active market that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

-9-

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 5â€”FAIR VALUE MEASUREMENTS (Continued) Level 2: Valuations based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in inactive markets; or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. Level 3: Valuations based on unobservable inputs are used when little or no market data is available. The fair value hierarchy gives lowest priority to Level 3 inputs. Investments in equities, money market funds, and mutual funds are valued using market prices in active markets (Level 1). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Investments in fixed income are valued using quoted prices in inactive markets (Level 2). Level 2 instruments valuations are obtained from similar assets or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. Financial assets carried at fair value at December 31, 2018, are classified in the table below as follows: ASSETS CARRIED AT FAIR VALUE Level 1 Equities Money Market Funds Fixed Income Mutual Funds TOTAL ASSETS AT FAIR VALUE

Level 2

Total

4,011,025 419,913 943,782 30,372

1,093,727 -

4,011,025 419,913 2,037,509 30,372

5,405,092

1,093,727

6,498,819

Financial assets carried at fair value at December 31, 2017, are classified in the table below as follows: ASSETS CARRIED AT FAIR VALUE Level 1 Equities Money Market Funds Fixed Income Mutual Funds TOTAL ASSETS AT FAIR VALUE

Level 2

Total

4,214,956 112,382 841,160 299,698

1,347,945 -

4,214,956 112,382 2,189,105 299,698

5,468,196

1,347,945

6,816,141

The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value to another. In such instances, the transfer is reported at the end of the reporting period. For the years ended December 31, 2018 and 2017, there were no such transfers. NOTE 6â€”PLEDGES RECEIVABLE Pledges receivable are scheduled to be received as follows as of December 31: 2018 Amount due in less than one year

2017

119,985

112,254

119,985

112,254 - 10 -

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 7—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of December 31: 2018 Furniture, fixtures, and equipment, total cost Less: accumulated depreciation

$ $

54,955 (50,455) 4,500

2017 $ $

98,544 (84,244) 14,300

Estimated Useful Life 5 years

Depreciation expense amounted to $9,800 and $10,600 for the years ended December 31, 2018 and 2017, respectively. The Foundation wrote off fully depreciated assets no longer in use amounting to $43,589 during the year ended December 31, 2018. NOTE 8—CONCENTRATION Cash that potentially subjects the Foundation to a concentration of credit risk includes cash accounts with banks that at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limits. Accounts are insured up to $250,000 per depositor. As of December 31, 2018 and 2017, there was approximately $98,000 and $0, respectively, held by one bank that exceeded FDIC limits. Such excess includes outstanding checks. NOTE 9—COMMITMENTS AND CONTINGENCIES A. The Foundation has a lease agreement for the rental of its New York office space which expires in 2020. Approximate minimum annual rentals related to this lease are as follows for the years subsequent to December 31, 2018: 2019 2020

23,000 24,000

47,000

Rent expense amounted to $24,028 and $23,677 for the years ended December 31, 2018 and 2017, respectively, and is included in occupancy expenses in the accompanying statements of functional expenses. B. The Foundation believes it has no uncertain income tax positions as of December 31, 2018 and 2017, in accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” which provides standards for establishing and classifying any tax provisions for uncertain tax positions. C. The Foundation had approximately $130,000 and $170,000 held for CMC under an agency agreement as of December 31, 2018 and 2017, respectively. Such amounts are recorded as cash and cash equivalents and accounts payable and accrued expenses in the accompanying statements of financial position. NOTE 10—NET ASSETS WITH DONOR RESTRICTIONS Net assets with donor restrictions consist of the following as of December 31, 2018 and 2017:

Health programs Education programs Assisted living residence Capital/other programs Time restricted

2018

2017

230,533 116,595 361,014 75,174 6,715

197,264 35,637 361,014 20,772 7,721 - 11 -

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 10—NET ASSETS WITH DONOR RESTRICTIONS (Continued)

Unappropriated endowment earnings Endowment Net Assets

2018

2017

1,251,304 2,017,128

1,345,534 2,017,128

$ 4,058,463

$ 3,985,070

Net assets released from restrictions amounted to $416,580 and $358,834 during the years ended December 31, 2018 and 2017, respectively. In addition, $77,688 and $0 of accumulated endowment earnings were appropriated for operations during the years ended December 31, 2018 and 2017, respectively, and classified as net assets without donor restrictions. ENDOWMENT NET ASSETS The Foundation recognizes that New York State adopted as law the New York Prudent Management of Institutional Funds Act (“NYPMIFA”). In addition, the Foundation recognizes that NYPMIFA permits the Board of Directors to appropriate for expenditure all earnings of endowment funds (both realized and unrealized) with a presumption of prudence to a ceiling of 7% annually based on a quarterly rolling five-year average of the endowment’s market value. The investments of the Foundation include those assets of donor restricted funds that it must hold in perpetuity or for a donor specified period as well as board designated funds. In accordance with NYPMIFA, any unappropriated earnings on endowment funds that would otherwise be considered as net assets without donor restrictions by the donor should be reflected as net assets with donor restrictions until appropriated by the Board of Directors. The Foundation’s Board has interpreted NYPMIFA as allowing the Foundation to appropriate for expenditure or accumulate so much of an endowment fund as the Foundation determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established, subject to the intent of the donor as expressed in the gift instrument. The Foundation’s Board has approved a spending policy that appropriates for spending 5% of the average fair value of the prior five years. From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the Foundation to retain as a fund of perpetual duration. Deficiencies of this nature are reported in net assets with donor restrictions. The Foundation has not incurred such deficiencies in its endowment funds as of December 31, 2018 and 2017. The Foundation has adopted investment and spending policies that attempt to achieve total investment return, or aggregate return from appreciation or depreciation of capital, earnings form dividends, and interest income. The Foundation evaluates investment managers’ performance against weighted market indices and volatility metrics. Changes in endowment net assets for the year ended December 31, 2018, are as follows: Net Assets Without Donor Restrictions (Board Designated)

Net Assets With Donor Restrictions (UnAppropriated Earnings)

Net Assets With Donor Restrictions (Endowment Funds)

Total

Endowment assets, beginning of year Investment activity Appropriated for spending

2,722,480 (39,358) (241,639)

1,345,535 (16,543) (77,688)

2,017,128 -

6,085,143 (55,901) (319,327)

Endowment assets, end of year

2,441,483

1,251,304

2,017,128

5,709,915

- 12 -

THE VELLORE CHRISTIAN MEDICAL COLLEGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 NOTE 10—NET ASSETS WITH DONOR RESTRICTIONS (Continued) As of December 31, 2018, earnings on endowment funds are available as follows: Principal balance with income with donor restrictions as to use $ 1,819,449 Principal balance with income without donor restrictions as to use 197,679 $ 2,017,128 Changes in endowment net assets for the year ended December 31, 2017, are as follows: Net Assets Without Donor Restrictions (Board Designated)

Net Assets With Donor Restrictions (UnAppropriated Earnings)

Net Assets With Donor Restrictions (Endowment Funds)

Total

Endowment assets, beginning of year Investment activity Contributions Appropriated for spending

2,487,680 548,003 (313,203)

1,084,605 260,930 -

2,007,128 10,000 -

5,579,413 808,933 10,000 (313,203)

Endowment assets, end of year

2,722,480

1,345,535

2,017,128

6,085,143

As of December 31, 2017, earnings on endowment funds are available as follows: Principal balance with income restricted as to use Principal balance with income unrestricted as to use

$ 1,819,449 197,679 $ 2,017,128

NOTE 11—PENSION PLAN The Foundation participates in a defined contribution retirement plan with the United Church of Christ for all of its qualified employees. Contributions to the plan are based upon a percentage of earnings of all eligible employees. Pension expense for the years ended December 31, 2018 and 2017, amounted to $0 and $6,784, respectively. NOTE 12—SUBSEQUENT EVENTS The Foundation has evaluated, for potential recognition and disclosure, events subsequent to the date of the statements of financial position through May 20, 2019, the date the financial statements were available to be issued.

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