Cornell University 2011-2012 Annual Report - DFA Home - Cornell ...

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands)There were no significant transfers between Level 1 and Level 2 during 2012. There were significant transfers into Level3 from Level 2 including $57,288 of marketable alternatives. Transfers into Level 3 were the result of redemption andtermination events that reduced the liquidity of the underlying assets. There were significant transfers out of Level 3 intoLevel 2 including $48,368 of hedged equities and $81,895 of marketable alternatives. The transfers are a result of increasedliquidity due to an expiration of lockups on the underlying assets.All net realized and unrealized gains/(losses) in the table above are reflected in the accompanying consolidated statementof activities. Net unrealized gains/(losses) relate to those financial instruments held by the University at June 30, 2012.Under the terms of certain limited partnership agreements, the University is obligated to make additional capital contributionsup to contractual levels. At June 30, 2012 and 2011, the University had commitments of $739,193 and $681,614,respectively, for which capital calls had not been exercised (Note 1-E). Such commitments generally have fixed expirationdates or other termination clauses.Under terms of certain options contracts on interest rate swaps, the University is obligated to make future premium payments.At June 30, 2012 and 2011, the University had premium payment commitments of $22,772 and $27,440 , respectively.The University’s premium payment schedule is as follows: $5,184 annually for the years ending June 30, 2013, and2014; $4,809 for the year ending June 30, 2015; $2,184 for the year ending June 30, 2016; $1,314 for the year ending June30, 2017 and $4,097 thereafter.Additional information about the University’s investment return for the fiscal years ending June 30 is presented in thefollowing table:SUMMARY OF INVESTMENT RETURN2012 2011Interest and dividends, net of investment fees $ 111,480 $ 112,010Net realized gain/(loss) 124,911 360,510Net unrealized gain/(loss) (193,429) 440,004Total investment return $ 42,962 $ 912,524B. Long-Term Investment PoolThe LTIP is a mutual-fund-like vehicle used for investing the University’s true endowment funds, funds functioning asendowment, and other funds that are not expected to be expended for at least three years. The University employs a unitmethod of accounting for the LTIP. Each participating fund enters into and withdraws from the pooled investment accountbased on monthly unit fair values. At June 30, 2012 and 2011, the fair values per unit were $50.67 and $53.58, respectively.The total return on the University’s long-term investments, of which the LTIP is the major component, was 0.1 percentfor the fiscal year ending June 30, 2012. The changes in the fair value and cost of the LTIP and information about itsparticipating units as of June 30, 2012 and 2011 are as follows:SUMMARY INFORMATION - LONG-TERM INVESTMENT POOLFair valueCostAppreciation/(depreciation)Fair valueper unitNumber of unitsEnd of year $ 4,786,915 $ 4,124,822 $ 662,093 $ 50.67 94,467,507Beginning of year $ 4,921,840 $ 4,103,292 $ 818,548 $ 53.58 91,861,708Unrealized net gain/(loss) for year $ (156,455)Realized net gain/(loss) for year $ 99,211Net gain/(loss) for year $ (57,244)For the fiscal year ending June 30, 2012, investment payout to participating funds totaled $203,643 ($2.20 per unit), ofwhich $177,435 was paid out for the University’s operations, with the balance in the amount of $26,208 either returnedto principal or distributed to funds held for others. The payout for the fiscal year ending June 30, 2012 was comprised of$39,410 in net investment income and $164,233 paid from accumulated gains. For the fiscal year ending June 30, 2011, theinvestment payout was $198,751 ($2.20 per unit), and was comprised of $30,977 in net investment income and $167,774paid from accumulated gains.21