2004

2011

ANNUAL REPORT

LOYOLA UNIVERSITY OF CHICAGO

Prepared in compliance with

the Continuing Disclosure Agreement

dated as of July 9, 1997,

in connection with the Revenue Bonds Series 1997A-C

(Loyola University of Chicago) of the Authority

and

the Continuing Disclosure Agreement

dated as of July 16, 2003,

in connection with the Revenue Bonds Series 2003A&B

(Loyola University of Chicago) of the Authority

and

the Continuing Disclosure Agreement

dated as of December 2, 2004,

in connection with the Revenue Bonds Series 2004A

(Loyola University of Chicago) of the Authority

and

the Continuing Disclosure Agreement

dated as of April 12, 2007,

in connection with the Revenue Bonds Series 2007

(Loyola University of Chicago) of the Authority

and

the Voluntary Continuing Disclosure Undertaking Agreement

dated as of August 15, 2011,

in connection with the Commercial Paper Revenue Notes

(Loyola University of Chicago Financing Program) of the Authority

This Annual Report is prepared by Loyola University of Chicago, an Illinois not for profit corporation (the

“University”), in compliance with (a) the Voluntary Continuing Disclosure Undertaking Agreement (the “2011

Voluntary Continuing Disclosure Agreement”) dated as of August 15, 2011, in connection with the Commercial

Paper Revenue Notes (Loyola University of Chicago Financing Program) (the “2008 Commercial Paper Revenue

Notes”) of the Illinois Finance Authority (as successor to the Illinois Educational Facilities Authority, the

“Authority”); (b) the Continuing Disclosure Agreement (the “2007 Continuing Disclosure Agreement”) dated as of

April 12, 2007, entered into in connection with the Revenue Bonds Series 2007 (Loyola University of Chicago) (the

“Series 2007 Bonds”) of the Authority; (c) the Continuing Disclosure Agreement (the “2004A Continuing

Disclosure Agreement”) dated as of December 2, 2004, entered into in connection with the Revenue Bonds Series

2004A (Loyola University of Chicago) (the “Series 2004A Bonds”) of the Authority; (d) the Continuing Disclosure

Agreement (the “2003 Continuing Disclosure Agreement”) dated as of July 16, 2003, entered into in connection

with the Revenue Bonds Series 2003A and Series 2003B (Loyola University of Chicago) (the “Series 2003A&B

Bonds”) of the Authority; and (e) the Continuing Disclosure Agreement (the “1997 Continuing Disclosure

Agreement”, and together with the 2011 Voluntary Continuing Disclosure Agreement, the 2007 Continuing

Disclosure Agreement, the 2004A Continuing Disclosure Agreement, and the 2003 Continuing Disclosure

Agreement, the “Continuing Disclosure Agreements”) dated as of July 9, 1997, entered into in connection with the

Revenue Bonds Series 1997A, Series 1997B and Series 1997C (Loyola University of Chicago) (the “Series 1997A,

B & C Bonds” and, together with the 2008 Commercial Paper Revenue Notes, the Series 2007 Revenue Bonds, the

Series 2004A Bonds, and Series 2003A&B Bonds, the “Bonds”) of the Authority. Capitalized terms used herein but

not defined herein will have the meanings ascribed to them in Appendix A (“Appendix A”) of the Authority’s

Amended and Restated Offering Memorandum dated August 8, 2011 relating to the 2008 Commercial Paper

Revenue Notes (the “2011 Offering Memorandum”).

This document contains updated financial and operating data in those areas required to be updated by the

Continuing Disclosure Agreements. It is not intended to, and does not, represent a complete discussion of all

the affairs of the University for the past fiscal year, or periods subsequent thereto, include further

information that may be relevant, or attempt to update any information other than as required under the

Continuing Disclosure Agreements. In addition to this Annual Report, under the Continuing Disclosure

Agreements the University is obligated to disclose separately the occurrence of certain “Material Events” or “Listed

Events” as defined therein.

The University was founded in 1870 as St. Ignatius College. The founders were members of the Society of

Jesus, an order of Roman Catholic priests devoted to education. The University is the third-largest independent not-

for-profit institution of higher education in the State of Illinois on the basis of enrollment, with a total enrollment in

excess of 16,000 full-time and part-time students on four campuses as of Fall of 2011. The University is a

coeducational institution offering undergraduate, graduate and professional degree-granting programs. Unless

otherwise indicated, financial and statistical information provided herein comprises information of the University

and the LU Affiliates, as shown in the most recent audited financial statements of the University, and excludes

information relating to Loyola University Health System (the “Health System”).

Enrollment; Tuition and Fees; Student Housing; Financial Aid

The following table, based on Fall term registration, sets forth enrollments for the past four and current

academic years, representing full-time and part-time students in degree-granting programs. A majority of these

students are full-time students registered for the normal course load for the chosen field of study.

Enrollment

Academic

Year

Graduate

and

Professional

Undergraduate

Total

2007-08

5,595

9,950

15,545

2008-09

5,546

10,124

15,670

2009-10

5,802

10,077

15,879

2010-11

6,204

9,747

15,951

2011-12

6,184

9,856

16,040

Enrollment of freshmen at the University and the number of undergraduate student transfers for the

academic years 2007-08 through 2011-12 are as follows:

Freshman and Transfer Enrollment

Academic

Year

Freshman

Enrollment

Undergraduate

Transfers

(1)

Total

New Enrollment

2007-08

2,035

613

2,775

2008-09

2,176

538

2,791

2009-10

2,076

590

2,666

2010-11

2,063

512

2,575

2011-12

1,930

585

2,515

_______________

(1) Prior to the 2009-10 academic year, Undergraduate Transfers included students enrolled in the Accelerated

Bachelor of Science in Nursing (“ABSN”) program. Subsequent years’ reporting will no longer include that group

of students. For academic years 2007-08 and 2008-09, the ABSN students included in Undergraduate Transfers

numbered 127 and 77, respectively.

The University expects enrollment to remain stable. Various factors will affect future enrollment,

including: shifts in demographics, the number of students starting their degree at a community college, the number

of applications, the number of accepted students who enroll, the academic qualifications of admitted students,

admissions counseling, and the financial need of students. Although the University believes that such factors, in

addition to its urban location and diversity of programs, indicate that a generally stable demand for its educational

programs will continue, no assurance can be given regarding future enrollment levels.

The following table gives enrollment and other information regarding the student body for the five

academic years ending 2011-12.

Student Body Information

2007-08

2008-09

2009-10

2010-11

2011-12

Full-time Total Enrollment ..............................................................................................................................................

13,364

13,561

13,626

13,490

13,494

Part-time Total Enrollment ..............................................................................................................................................

2,181

2,109

2,253

2,461

2,546

Endowment per Full-time Student ..................................................................................................................................

$26,805

$26,430

$19,451

$21,986

$25,868

Freshman (Completed) Applications ...............................................................................................................................

17,357

17,287

17,383

17,671

17,828

Freshman Acceptances ....................................................................................................................................................

12,723

12,755

13,583

10,529

9,793

Freshman Enrollment

2,035

2,176

2,076

2,063

1,930

Acceptance Rate (Completed

Applications)

73.3%

73.8%

78.1%

59.6%

54.9%

Matriculation Rate ...........................................................................................................................................................

16.0%

17.1%

15.3%

19.6%

19.7%

Average ACT Score .........................................................................................................................................................

25.8

26.4

26.5

26.9

Average SAT Score .........................................................................................................................................................

1,168

1,178

1,186

1,191

1,187

Geographic Distribution (New Freshmen)

-Chicago Metropolitan ..................................................................................................................................................

52.9%

49.3%

53.0%

54.0%

56.1%

-State of Illinois ............................................................................................................................................................

5.8%

4.9%

5.0%

4.3%

3.6%

-Out-of-State .................................................................................................................................................................

41.3%

45.8%

42.0%

41.7%

40.3%

Tuition and Fees. The University meets the costs of its educational programs primarily through tuition, fees, gifts

and grants. Tuition is charged at different rates depending on the college or school in which the student is enrolled.

The following table sets forth the publicly announced base tuition to be charged by the principal colleges and

schools of the University in the 2011-12 academic year and the tuition charged in the preceding four academic years.

Tuition

2007-08

2008-09

2009-10

2010-11

2011-12

Undergraduate Schools ....................................................................................................................................................

$27,200

$28,700

$29,850

$31,040

$32,200

Graduate School ..............................................................................................................................................................

$710/ sem.hr.

$750/ sem.hr.

$790/ sem.hr.

$830/ sem.hr.

$870/ sem.hr.

Graduate School of Business ...........................................................................................................................................

$3,141/course

$3,315/course

$3,498/course

$3,672/course

$3,858/course

Graduate School of Social

Work ................................................................................................................................................................................

$710/sem.hr

$750/ sem.hr.

$790/ sem.hr.

$830/ sem.hr.

$870/ sem.hr.

School of Law (Day Program).........................................................................................................................................

$33,070

$34,890

$36,290

$37,380

$38,780

School of Medicine (MD

Program) ..........................................................................................................................................................................

$36,600

$37,700

$39,200

$41,200

$43,700

The University reserves the right to revise its charges from time to time, as determined by the Board of

Trustees. Future economic and other conditions may affect the University’s ability to increase its tuition and fees.

Although the University has increased tuition in recent years and believes that it would be able to increase its tuition

and fees without adversely affecting its future enrollment, there can be no assurance that it will be able to do so.

Student Housing. In Fall 2011, approximately 3,900 students occupied on-campus residences. There are currently

18 residential facilities at the Lake Shore Campus, and in 2006 the University opened its first student residence

facility at its Water Tower Campus. For the current academic year, the standard double room and board fees, which

include 19 meals per week, total $11,570. Pursuant to the University’s strategic housing plan, the University

expects to continue to improve its residential facilities to accommodate demand and enhance the student experience.

Financial Aid. During the 2010-11 academic year, approximately 13,900 students of the University received

approximately $367 million in financial aid. The sources of these funds were: the State of Illinois (3%), federal

programs (57%), University Funds which include scholarships and grants (33%) and direct awards to students from

various sources (7%). Approximately 88% of the University’s full-time students received some form of financial

aid. Financial aid information for the 2011-12 academic year is not yet available. The following table presents total

student financial aid by source.

Total Student Financial Aid

($000’s)

Academic Year

Federal

Illinois

University

Other

Total

2006-07 ............................................................................................................................................................................

121,889

13,059

90,582

43,403

268,933

2007-08 ............................................................................................................................................................................

138,544

12,631

98,154

40,848

290,177

2008-09 ............................................................................................................................................................................

158,461

12,776

105,746

41,647

318,630

2009-10 ............................................................................................................................................................................

187,760

12,582

110,564

31,152

342,058

2010-11 ............................................................................................................................................................................

210,784

11,560

119,299

25,390

367,033

All financial aid programs furnished by the federal and state governments are subject to appropriation and

funding by the U.S. Congress and the Illinois General Assembly. Federal appropriations to financial aid programs

nationally have been stable in recent years; however, cuts in federal aid are expected to occur in the future as the

federal budget and debt ceiling continue to come under increasing pressure. The effect of any such changes on the

University may be adverse and there is no assurance that the current levels of state, federal or University financial

aid will be maintained in future years. Changes in the availability of financial aid may adversely affect enrollment.

Gifts and Bequests

The following table sets forth the amount of gifts and private bequests received by the University for the

five fiscal years ended June 30, 2011. Amounts shown below are calculated based on generally accepted accounting

principles as set forth in the University’s audited financial statements and therefore reflect the amount accrued at the

time a pledge is made. Actual cash payments may occur over several-year periods. A bequest is recognized when

the cash is received.

Gifts and Bequests

($000’s)

Fiscal Year

Ended June 30

Unrestricted

Temporarily

Restricted

Permanently

Restricted

Total

2007 .................................................................................................................................................................................

1,634

9,927

9,231

20,792

2008 .................................................................................................................................................................................

3,054

13,816

9,572

26,442

2009 .................................................................................................................................................................................

8,532

10,926

6,105

25,563

2010

(1)

.............................................................................................................................................................................

35,851

39,985

5,779

81,615

2011 .................................................................................................................................................................................

2,027

11,934

4,785

18,746

______________________

(1)

2010 includes a one-time $50.1 million gift of property, artwork, cash and securities from the Cuneo

Foundation, the largest gift in the University’s history. $29.8 million was recorded in unrestricted gifts while the

remaining $20.3 million was recorded in temporarily restricted gifts.

Cash and Investments

The market value of the University’s cash and investments (collectively, “Total Investments”) at June 30,

2007 through 2011 and the total return on Total Investments for the fiscal years then ended are set forth in the table

below. The University records investment results net of management fees.

Market Value of Total Investments and Total Return

($000’s)

Fiscal Year

Ended June 30

Real Assets

(1)

Cash and

Cash

Equivalents

(2)

Fixed

Income

Equity

(3)

Total

Investments

Total

Return

(4)

2007 ·······································

14,906

153,619

81,375

276,529

526,429

69,626

2008 ·······································

16,986

119,917

85,151

279,131

501,185

(16,121)

2009 ·······································

13,717

104,891

67,584

185,344

371,536

(101,341)

2010 ·······································

23,865

104,145

107,779

197,589

433,378

36,132

2011 ·······································

45,615

86,560

107,105

241,378

480,658

71,229

(1)

Real Assets investments include private real estate funds and other investments expected to function as hedges

against inflation.

(2)

Includes amounts not included in Cash and Cash Equivalents on the balance sheet at fiscal year-end.

(3)

Equity investments include marketable equities, private capital and marketable alternative investments.

(4)

Total return on investments includes interest, dividends and realized and unrealized gains and losses on long-term

investments and interest earned on cash and cash equivalents.

Land, Buildings and Equipment

The following table sets forth the book value of the land, buildings and equipment of the University (net of

depreciation) as of June 30 in the years 2007 through 2011. The actual replacement value of the University’s

physical plant, as determined for insurance purposes as of May 1, 2011, was approximately $1.3 billion.

Fiscal Year Ended

June 30

Land, Buildings and

Equipment - Net

($000’s)

2007 .................................................................................................................................................................................

479,154

2008 .................................................................................................................................................................................

572,776

2009 .................................................................................................................................................................................

596,269

2010 .................................................................................................................................................................................

705,707

2011 .................................................................................................................................................................................

788,048

Outstanding Long-Term Indebtedness

The following table sets forth the total outstanding long-term indebtedness of the University as of June 30,

2011. No indebtedness of any University affiliate is included, and short-term indebtedness, including a 364-day

Credit Agreement with PNC Bank, National Association, under which the University may borrow up to $20 million

on a revolving loan basis, is excluded. The University routinely assesses its capital needs and borrowing plans on a

regular basis and expects to incur additional Long-Term Indebtedness as and when such financing is deemed

prudent and useful to the University in satisfying these capital needs. The University is currently assessing the

possibility of borrowing additional funds later in FY 2012, possibly up to $200 million, to fund additional capital

projects including the construction of two dormitories at the Lake Shore Campus. The structure and terms of that

borrowing have not yet been determined.

Year of

Final

Maturity

(1)

Interest

Rates

Amount

Outstanding

(June 30, 2011)

($000’s)

Installment Note, 6542-48 N. Sheridan ...........................................................................................................................

2015

9.50%

377

City of Chicago Loan ......................................................................................................................................................

2012

0.00%

188

Series 1997C Taxable Bonds ...........................................................................................................................................

2012

7.10%-7.12%

12,210

Medium-Term Notes .......................................................................................................................................................

2017

7.52%

21,100

Series 2003A Bonds ........................................................................................................................................................

2026

5.00%

28,155

Series 2003B Bonds.........................................................................................................................................................

2021

5.60%

37,520

Series 2003C Bonds.........................................................................................................................................................

2018

4.80%-5.30%

40,805

Series 2004A Bonds ........................................................................................................................................................

2025

5.00%-5.25%

23,330

Series 2007 Bonds ...........................................................................................................................................................

2024

4.00%-5.00%

26,925

2008 Commercial Paper Revenue Notes

(2)

......................................................................................................................

2038

Variable

80,000

Installment Note, Rome Center

(3)

....................................................................................................................................

2029

1.51%

13,868

Total

(4)(5)

.........................................................................................................................................................................

284,478

Adjustment for unamortized bond

premium/(discount) .........................................................................................................................................................

1,427

Total indebtedness net of unamortized

premium/(discount) .........................................................................................................................................................

285,905

______________________________

(1)

Final maturities reflect calendar year information whereas the University’s audited financial statements show

fiscal year data.

(2)

The University’s 2008 Commercial Paper Revenue Notes program has a final mandatory prepayment date of

June 1, 2038 and is treated by the University as long-term indebtedness. The 2008 Commercial Paper Revenue

Notes program is supported by a direct pay letter of credit from PNC Bank, National Association (the “PNC

Commercial Paper Facility”).

(3)

Principal amount outstanding is subject to currency (Euro) fluctuations.

(4)

The University maintained a $50 million unsecured bank line of credit with JPMorgan Chase Bank, N.A., until

it expired on November 30, 2010. On February 28, 2011, the University entered into a 364‐day credit agreement

with PNC Bank, National Association (the “PNC Revolving Credit Facility”), under which the University may

now borrow up to $20 million (previously $50 million as described in footnote 5 below) on a revolving loan

basis. Borrowings under the line of credit may bear interest at rates based on LIBOR, the Prime Rate, or other

negotiated rates. During the fiscal year ended June 30, 2011, there was no balance outstanding nor any interest

paid on any line of credit.

(5)

SUBSEQUENT EVENT: On November 17, 2011, the University entered into a Term Loan Agreement

(the “Term Loan Agreement”) under which $113.5 million was loaned to the University by PNC Bank,

National Association, at a fixed rate of 2.36% and with semi-annual principal amortization beginning in

2013 and a final maturity in June of 2018. In connection with the execution of the Term Loan Agreement,

the PNC Revolving Credit Facility was reduced from $50 million to $20 million, although the University

may request increases in such amount, subject to PNC Bank’s right to refuse the same, periodically in

connection with the expected annual renewal of such PNC Revolving Credit Facility.

Tests for the Incurrence of Additional Indebtedness

The Master Indenture requires that the University comply with one of two alternative tests as a condition

precedent to the incurrence of Additional Indebtedness under the Master Indenture. Capitalized terms used but not

otherwise defined under this caption shall have the meanings assigned thereto in APPENDIX H to the 2011 Offering

Memorandum.

Under the first alternative, a capitalization test, the University must demonstrate that Funded Indebtedness,

including any contemplated new debt, does not exceed 50% of total University capitalization (defined as the sum of

indebtedness plus net assets). Under the second alternative, a debt service coverage test, the Maximum Annual

Long-Term Debt Service on all Funded Indebtedness of the University, including the debt to be issued, may not

exceed 10% of (a) the average of University operating Revenues (as defined under the Master Indenture) for the two

most recent Fiscal Years or (b), if the University elects, and the new debt is to finance capital improvements, the

average of “Adjusted Revenues” (as defined under the Master Indenture) calculated by a consultant to include

projected revenues from such capital improvements.

The following tables provide the actual capitalization and maximum annual debt service coverage of the

University (excluding any affiliate) as of June 30, 2011.

All calculations in the two tables below are made as required or allowed under the Master Indenture.

Capitalization

($000’s)

June 30, 2011

Unrestricted Net Assets

822,888

Temporarily Restricted Net Assets

139,290

Permanently Restricted Net Assets

131,627

Total Net Assets

1,093,805

Indebtedness

285,905

Indebtedness plus Net Assets

1,379,710

Ratio (Not to exceed 50%)

20.7%*

*Taking into account the incurrence of the $113.5 million debt under the Term Loan Agreement, this ratio would be

26.7%.

Maximum Annual Debt Service Coverage

($000’s)

June 30, 2011

Average University Revenues (fiscal year

2010 and 2011)

469,885

Maximum Annual Long-Term Debt Service

Requirements

(1)

23,981

Ratio (Not to exceed 10%)

5.1%

(2)

___________________

(1) The Master Indenture permits the computation of long-term debt service requirements of Balloon Indebtedness, such as that

represented by the 2008 Commercial Paper Revenue Notes program, assuming that such debt is amortized on level debt service basis

over 30 years at an assumed interest rate required by the Master Indenture, which has been done for purposes of the computations of

maximum annual debt service included above, while the data in the table below entitled “Debt Service Schedule” is based on actual

debt service and an assumed annual interest rate on the outstanding 2008 Commercial Paper Revenue Notes going forward of 3.5%.

(2) Taking into account the incurrence of the $113.5 million debt under the Term Loan Agreement, this ratio would be 6.37%.

In addition, under the Master Indenture, the University is authorized to establish long-term revolving lines

of credit with one or more banks in amounts not to exceed $20 million outstanding at any time, without the need to

satisfy any incurrence test, which authority was unused at June 30, 2011. So long as any of the Series 1997C

Taxable Bonds or the Series 2004A Bonds are outstanding, the Master Indenture also provides that the University

may not, without the consent of the respective bond insurer for those issues (Ambac and XL Capital Assurance (now

Syncora Guarantee, Inc.), respectively), issue Additional Indebtedness unless the University satisfies either of the

following:

if the University elects to satisfy the capitalization test described above, then it must also comply

with either the maximum annual long-term debt service coverage test described above, or one of

the following two tests:

the Maximum Annual Debt Service Coverage Ratio of the University for the most recent

Fiscal Year on all Funded Indebtedness, including the debt to be issued, must be not less

than 1.20 to 1, or

the Debt Service Coverage Ratio of the University for the most recent Fiscal Year on all

Funded Indebtedness, but not the debt to be incurred, is not less than 1.20 to 1 and a

consultant’s report shows that taking the proposed debt into account, the Projected Debt

Service Coverage Ratio for the two full Fiscal Years following the issuance (or, for a

capital project, the two full Fiscal Years following completion) is not less than 1.20 to 1.

If the Projected Debt Service Coverage Ratio is at least 1.30 to 1, the University may

deliver an officer’s certificate in lieu of such consultant’s report;

if the University elects to satisfy the Maximum Annual Long-Term Debt Service Coverage test

first described above, then it must also comply with either the capitalization test or the

University’s unrestricted net assets plus temporarily restricted net assets minus net investment in

plant must be at least 65% of all long-term debt, including the debt to be issued.

The requirements described immediately above may be waived or modified by each respective bond insurer

at any time and are not for the benefit of the Authority or the holders of any bonds.

The maximum annual debt service coverage of the University at June 30, 2011 is 4.24 to 1.00 and the

unrestricted plus temporarily restricted net assets minus investment in plant at that date is 161% of long-term debt,

each calculated as required by the Master Indenture. Taking into account the incurrence of the $113.5 million debt

under the Term Loan Agreement, these ratios would be 3.40 to 1.00 and 144%, respectively.

So long as (a) the PNC Revolving Credit Facility remains in effect; or (b) the Term Loan Agreement

remains in effect; or (c) any Commercial Paper Revenue Notes remain outstanding that are secured by the PNC

Commercial Paper Facility, the University is required to meet the same tests for the incurrence of Additional

Indebtedness as those required under the Master Indenture, including those summarized in the third preceding

paragraph. In addition, effective November 17, 2011, as long as the 2011 Term Loan Agreement remains in effect,

the University must maintain a Debt Service Coverage Ratio at the end of each fiscal year, for the fiscal year then

ended, of at least 1.20 to 1.0.

Annual Debt Service Requirements

The following table sets forth the actual (subject to assumptions described below) annual amounts required

for the payment of principal at maturity or by mandatory sinking fund redemption and for the payment of interest on

the outstanding indebtedness of the University for each year ending June 30.

Debt Service Schedule

(1)

Fiscal

Year

2008

Commercial

Paper

(2)

Series

2007 Bonds

Series

2004A Bonds

Series

2003A, B &

C Bonds

Series

1997C

Bonds

All

Other

(3)

Total

2012

$2,800,000

$1,565,806

$ 1,176,925

$5,593,770

$7,211,980

$2,204,576

$20,553,057

2013

2,800,000

1,565,206

1,176,925

5,593,770

5,380,000

2,142,076

18,657,977

2014

2,800,000

1,569,006

1,176,925

12,053,090

2,064,816

19,663,837

2015

2,800,000

1,567,406

1,176,925

12,039,210

2,064,816

19,648,357

2016

2,800,000

1,563,906

3,100,350

12,014,990

1,962,283

21,441,529

2017

2,800,000

1,564,731

3,098,000

11,995,490

1,952,960

21,411,181

2018

2,800,000

1,564,881

958,000

4,120,490

21,505,908

30,949,279

2019

2,800,000

1,564,356

3,095,500

15,048,870

366,240

22,874,966

2020

2,800,000

1,563,156

2,455,750

14,657,510

1,098,720

22,575,136

2021

2,800,000

1,566,056

3,116,750

14,642,790

1,098,720

23,224,316

2022

2,800,000

1,563,281

3,111,500

14,622,750

1,098,720

23,196,251

2023

2,800,000

9,186,281

3,104,750

1,407,750

1,098,720

17,597,501

2024

2,800,000

14,630,531

3,101,000

1,407,750

1,098,720

23,038,001

2025

2,800,000

355,000

3,090,250

1,407,750

1,098,720

8,751,720

2026

2,800,000

1,505,000

14,446,500

1,098,720

19,850,220

2027

2,800,000

14,430,000

1,098,720

18,328,720

2028

2,800,000

1,098,720

3,898,720

2029

2,800,000

1,098,720

3,898,720

2030

2,800,000

2031

2,800,000

2032

2,800,000

2033

2,800,000

2034

2,800,000

2035

2,800,000

2036

2,800,000

2037

2,800,000

2038

82,566,667

(1)

Interest payments due on July 1 each year are included in the prior fiscal year's debt service requirements.

(2)

Assumes an average variable rate of 3.50% for outstanding 2008 Commercial Paper Revenue Notes. Although

the 2008 Commercial Paper Revenue Notes program has a final mandatory prepayment date of June 1, 2038,

which is reflected as a bullet maturity in this chart, management expects that the principal will be retired or

refunded from time to time in earlier years.

(3)

Includes $21.1 million of 7.52% Fixed-Rate Medium-Term Notes with a final maturity in 2017; approximately

$377,000 of 9.50% installment notes with a final maturity in 2015; $188,000 outstanding on an interest-free

loan from the City of Chicago with a final installment payment in 2012; and a mortgage due in 2029 on the

Rome Center property with an effective rate of 1.51% and approximately $13,868,000 outstanding (subject to

fluctuations in the Euro). Excludes $113.5 million of debt incurred on November 17, 2011 pursuant to the

Term Loan Agreement for which debt service is as follows: $1,681,566 in FY 2012; $2,715,803 in FY

2013; $21,453,401 in FY 2014; $27,365,859 in FY 2015; $26,765,407 in FY 2016; $26,156,678 in FY 2017;

and $19,238,761 in FY 2018.

Management’s Discussion of Financial Results

General. The University’s financial statements are prepared in conformity with accounting principles generally

accepted in the United States of America. See Note 3 of Notes to Consolidated Financial Statements for a summary

of significant accounting policies.

Healthcare Affiliates - Trinity Transaction. Effective July 1, 2011, the University completed a transaction

with Trinity Health Corporation (“Trinity”), an Indiana nonprofit corporation located in Novi, Michigan, pursuant to

a Definitive Agreement dated March 31, 2011 (the “Definitive Agreement”). As part of the transaction, Trinity

replaced the University as the sole member of the Health System, and all of its affiliates including Loyola

University Medical Center (“LUMC”), Gottlieb Health Resources, Inc. (“GHR”), Gottlieb Memorial Hospital

(“GMH”), and Loyola University of Chicago Insurance Company, Ltd. (“LUCIC”) (the “Trinity Transaction”).

Trinity assumed control of all the assets of the Health System and retained all of the liabilities of the Health System.

As a result of the Trinity Transaction, the University is no longer the parent or an affiliate of the Health System,

LUMC, GMH, LUCIC, or the other healthcare affiliates, and these entities no longer will be included in the

consolidated audited financial statements of the University. The consolidated audited financial statements of the

University for the year ended June 30, 2010 have been restated to reflect the impact of the Trinity Transaction.

Effective July 1, 2011, Trinity controlled all of the assets of the Health System and its affiliates, and all of the

liabilities remain with the Health System and its affiliates, except for any assets or liabilities excluded from the

Trinity Transaction by the parties. One financial effect of the Trinity Transaction on the Fiscal Year 2011 financial

statements was to increase the University’s net assets by $42.3 million, and the operations of the Healthcare

Affiliates are now reported as discontinued operations.

As part of the consideration under the Definitive Agreement, Trinity provided a payment to the University

of $100 million, $80 million of which was paid on July 1, 2011, and the remaining $20 million of which was used to

establish an escrow in order to secure the University’s obligations under the Definitive Agreement, including,

without limitation, the payment of any unrecorded, misstated or under-reserved pre-closing liabilities or the breach

of any representations, warranties or covenants made by the University in the Definitive Agreement. The escrow

will be released to the University over a period of four years if not required to cover these potential liabilities and/or

the indemnification owed to Trinity. There was also a post-closing reconciliation based on a comparison of the

Health System’s net assets at June 30, 2011 and its net assets on December 31, 2010 and the reconciliation resulted

in a payment from Trinity to the University in the amount of $49,553,000 on October 21, 2011.

For more information regarding the Trinity Transaction, see “Healthcare Affiliates - Trinity Transaction”

below.

Fiscal Year 2011 Compared to Fiscal Year 2010. During Fiscal Year 2011, net assets for the University

increased overall by $175.5 million, which included an increase of $133.3 million from continuing operations as

well as an increase of $42.3 million from discontinued operations. This is compared to an overall increase in net

assets of $148.8 million in 2010. An operating surplus of $54.3 million was recorded compared to the previous

fiscal year’s operating surplus of $63.8 million. For fiscal year 2011, investment return on the endowment portfolio

was a positive 21.7%, compared to the fiscal year 2010 return of positive 12.4%.

The fiscal year 2011 operating surplus is attributable primarily to a 4.8% or $14.5 million increase in net

tuition and fees revenue. This resulted from a combination of record enrollments and a tuition increase of

approximately 4.0% for undergraduate schools and a range of 3.0%-5.1% for graduate and professional school

tuition. In fiscal year 2011, total enrollment reached 15,951, representing both full- and part-time students. The

number of undergraduate students decreased 3.3% to 9,747 students compared to 10,077 in the prior year. Graduate

and professional enrollments increased 6.9% over the prior year to 6,204 students.

Total operating revenues increased 1.5% or $6.8 million from $466.5 million in fiscal year 2010 to $473.3

million in fiscal year 2011, and operating expenses increased 4.0% or $16.3 million from $402.7 million in fiscal

year 2010 to $419.0 million in fiscal year 2011. The increase in operating revenues was primarily the result of an

increase in net tuition and fees of $14.5 million, offset by a decrease in academic support of $5.8 million and a

decrease in unrestricted gift revenue of $4.0 million. The increase in operating expenses was the primarily the result

of an increase in salaries and wages of $8.0 million and an increase in fringe benefits of $5.4 million.

With a positive 21.7% investment return in fiscal year 2011, the market value of the University's

endowment fund assets increased to $388.7 million at June 30, 2011 from $315.3 million at June 30, 2010. Under

the Board of Trustees’ current policy, the University limits its spending of endowment funds to 5.0% annually. For

the last several years, actual spending has been less than 5.0% in an effort to grow the endowment. The effective

spending rate was 3.1% for 2011 and 3.4% for 2010.

Unrestricted net assets from continuing operations increased $102.9 million in fiscal year 2011 primarily

due to strong results of operations and investment performance. This is compared to an increase of unrestricted net

assets of $132.8 in fiscal year 2010, which included a $29.8 million unrestricted contribution. Temporarily

restricted net assets from continuing operations increased $23.8 million in fiscal year 2011 compared to an increase

of $6.4 million in fiscal year 2010 primarily due to investment performance. Permanently restricted net assets from

continuing operations increased $6.6 million in fiscal year 2011 compared to an increase of $9.5 million in fiscal

year 2010. Gifts totaled $18.7 million in fiscal year 2011 compared to $81.6 million in fiscal year 2010.

The University had $285.9 million in outstanding debt as of June 30, 2011 compared to $291.6 million as

of June 30, 2010. Debt service of $17.8 million in fiscal 2011 was 4.3% of operating expenses. The University

maintained a $50 million unsecured bank line of credit with JPMorgan Chase Bank, N.A., until it expired on

November 30, 2010. On February 28, 2011, the University entered into a 364-day credit agreement with PNC Bank,

National Association, under which the University may borrow up to $20 million (effective November 17, 2011) on a

revolving loan basis. Borrowings under the line of credit may bear interest at rates based on LIBOR, the Prime Rate,

or other negotiated rates. During the fiscal year ended June 30, 2011, there was no balance outstanding nor any

interest paid on any line of credit.

Fiscal year 2011 capital expenditures totaled $113.4 million. Significant improvements were made to the

University’s athletic facilities including the construction of the Norville Center for Intercollegiate Athletics, the

renovation of the Gentile Center into an NCAA-class arena, and renovations to the Halas Sports Center. Another

significant capital expenditure was related to the demolition of Damen Hall and the beginning of construction on

Cuneo Hall in its place. The new four-story academic center will use vanguard technology to reduce its carbon

footprint and increase energy efficiency. Lastly, the University invested in several strategic property acquisitions at

the Lake Shore Campus, and other various building renovations and plant upgrades. These expenditures were

financed primarily from operations, gifts, and grants.

Capital expenditures do not include, in accordance with University management policy, equipment

purchases with a value of $5,000 or less, which are expensed.

Revenues and Expenses: Certain Financial Information

Enclosed with this Annual Report are: Consolidated Statements of Financial Position as of June 30, 2011

and 2010; Consolidated Statements of Activities and Changes in Net Assets for the two years ended June 30, 2011

and 2010; Consolidated Statements of Cash Flows for the two years ended June 30, 2011 and 2010; Notes to

Consolidated Financial Statements; and the independent auditors’ report thereon. The audited financial

statements of the University for the year ended June 30, 2010 have been restated to reflect the impact of the

Trinity Transaction (in the manner described above under the caption “Management’s Discussion of

Financial Results --Healthcare Affiliates - Trinity Transaction”, including the related increase in net assets

from discontinued operations described therein).

The audited consolidated financial statements of the University referenced in the preceding paragraph

include the results of the University, Loyola Management Company (“LMC”), and Mundelein College

(“Mundelein” and together with LMC, the “LU Affiliates”). Only the University, however, is liable for

Obligations incurred under the Master Indenture and other University indebtedness described herein. No

affiliate of the University is liable for any indebtedness of the University including any Obligation incurred by

the University under the Master Indenture or is subject to any of its covenants. Consequently, no affiliate of

the University should be viewed as an available source of funds for the University, and, as described above

under “Management’s Discussion of Financial Results -- Healthcare Affiliates - Trinity Transaction”, the

Health System and LUMC are no longer affiliates of the University or an available source of funds except for

the limited purposes described below under the caption “Healthcare Affiliates – Trinity Transaction”

pursuant to the Academic Affiliation Agreement. The University has no legal obligation to make payments of

debt service on any indebtedness of the Health System, LUMC or any affiliate.

Under the Master Indenture, except as otherwise expressly set forth, all financial tests or reports

shall be based, at the University's option, but applied on a consistent basis with respect to a calculation made

in a particular instance, on either (A) the unconsolidated financial statements of the University without

regard to any Affiliate, as set forth in the unaudited consolidating schedules to the audited consolidated

financial statements of the University, or (B) the audited financial statements of the University including the

consolidated results of the University and any Affiliates; provided, however, that the University shall not use

statements under this clause (B) if any amount used in the calculation differs by more than 5% (higher or

lower) from the amount that would be used if the University had elected to perform the calculation as set out

in clause (A) of this sentence.

Except where otherwise indicated, the information in this Annual Report is presented including the

results of the University and the LU Affiliates.

Summary Unconsolidated University Financial Information: 2011 and 2010. The following tables present summary

financial information of the University for the 2011 and 2010 fiscal years. The following financial information for

fiscal years 2011 and 2010 is qualified in its entirety by reference to the audited financial statements of the

University. See “Management’s Discussion of Financial Results” above.

Selected Financial Information

($000’s)

Fiscal Year Ended June 30

2011

2010

Operating Revenues .........................................................................................................................................................

473,276

466,494

Operating Expenses .........................................................................................................................................................

418,996

402,689

Results of Operations .......................................................................................................................................................

54,280

63,805

Non-Operating Activities.................................................................................................................................................

48,624

69,024

Increase in Unrestricted Net Assets ................................................................................................................................

102,904

132,829

Increase in Temporarily Restricted Net Assets ...............................................................................................................

23,779

6,406

Increase in Permanently Restricted Net Assets ..............................................................................................................

6,591

9,518

Increase in Net Assets from Continuing Operations .......................................................................................................

133,274

148,753

Increase in Net Assets from Discontinued Operations ...................................................................................................

42,269

Increase in Net Assets .....................................................................................................................................................

175,543

152,076

Debt Service Requirements .............................................................................................................................................

17,823

17,486

Capital Outlays ................................................................................................................................................................

113,396

108,070

Selected Financial Information

($000’s)

June 30, 2011

June 30, 2010

Cash Equivalents and Short Term Investments ...............................................................................................................

80,354

101,849

Endowment and Other Long-Term Investments ..............................................................................................................

400,304

331,529

Land, Building and Equipment (net of depreciation) .......................................................................................................

788,048

705,707

Other Assets .....................................................................................................................................................................

289,535

71,896

Total Assets .....................................................................................................................................................................

1,558,241

1,210,981

Indebtedness ....................................................................................................................................................................

285,905

291,596

Other Liabilities ...............................................................................................................................................................

178,531

167,961

Net Assets ........................................................................................................................................................................

1,093,805

751,424

Total Liabilities and Net Assets .......................................................................................................................................

1,558,241

1,210,981

Healthcare Affiliates – Trinity Transaction

On March 4, 2011, the University entered into the Letter of Intent with Trinity and on March 31, 2011, the

University entered into the Definitive Agreement with Trinity. As described above, pursuant to the Definitive

Agreement, effective on July 1, 2011, Trinity replaced the University as the sole member of the Health System, and

otherwise directly or indirectly assumed control of LUMC, GMH, LUCIC, an offshore captive insurance company

that the University transferred to the Health System in 1997, and the other healthcare affiliates (other than Loyola

University Physician Foundation) of the Health System.

As a result of the Trinity Transaction, the University is no longer the parent or an affiliate of the Health

System, LUMC, GMH, LUCIC, or the other healthcare affiliates, and these entities no longer will be included in the

consolidated audited financial statements of the University effective for the fiscal year beginning July 1, 2011.

Effective July 1, 2011, Trinity controlled all of the assets of the Health System and its affiliates, and all of the

liabilities remain with the Health System and its affiliates, except for any assets or liabilities excluded from the

Trinity Transaction by the parties. Effective as of July 1, 2011, all assets and liabilities of the Health System and its

affiliates were removed from the statement of net assets of the University. The financial effect of the Trinity

Transaction on the University’s Fiscal Year 2011 Financial Statements was to increase the University’s net assets by

$42.3 million, and the operations of the Healthcare Affiliates are now reported as discontinued operations.

As described above under the caption “Management’s Discussion of Financial Results – Healthcare

Affiliates – Trinity Transaction”, as part of the consideration under the Definitive Agreement, Trinity provided a

payment to the University of $100 million, $80 million of which was paid on July 1, 2011, and the remaining $20

million of which was used to establish an escrow. Trinity also made a payment to the University in the amount of

$49,553,000 on October 21, 2011 as a result of the post-closing reconciliation required by the Definitive Agreement.

In addition to the consideration under the Definitive Agreement, Trinity has committed, under the

Definitive Agreement and a Research Facility Funding Agreement, a matching sum equal to $75 million towards a

new research facility to be owned by the University. The construction and related start-up operating costs of the

facility are estimated to be $150 million. The University will be responsible for the balance of the costs of the

facility as provided by the Research Facility Funding Agreement which was executed by the University and Trinity

effective July 1, 2011 and which contains the specific terms regarding the funding of the new research facility.

The education and research components of the University’s health sciences, including the Medical School

and the Nursing School, remain with the University following the Trinity Transaction. The University, the Health

System and LUMC have entered into an Academic Affiliation Agreement which includes negotiated terms and

conditions and which provides for an annual academic support payment to the University from the Health System

and LUMC (which payment is guaranteed by Trinity). The annual academic support payment amount is set at $22.5

million (subject to an inflation adjustment) for an initial term of 10 years. The specific terms and conditions of the

continuing extensions and the ability to renegotiate, modify, or renew certain terms of the Academic Affiliation

Agreement are set forth in the Academic Affiliation Agreement. Among these provisions is one which provides that

following the fifth anniversary of the Academic Affiliation Agreement, either party may give notice to the other

party to that agreement that the support payment be modified. If so modified, the modified agreement would

become effective as of the 6th year following the next anniversary of the Academic Affiliation Agreement following

the completion of successful negotiations. Otherwise, the Academic Affiliation Agreement would automatically

renew for an additional year unless the support payment is modified as described above, or unless the Academic

Affiliation Agreement is terminated (triggering a right in the University described below to repurchase the Health

System and its affiliates (as they are constituted at the time) at fair market value, during the next succeeding five

years of the remaining term of the Academic Affiliation Agreement). The Academic Affiliation Agreement

superseded and replaced the LUMC Affiliation Agreement (except as otherwise provided in the Academic

Affiliation Agreement) effective July 1, 2011.

The Definitive Agreement also provides the University with certain repurchase rights. If any of the

following events occurs, the University has the right to repurchase the Health System and its affiliates (as they are

constituted at the time), at fair market value: (i) a change of control of Trinity, the Health System or LUMC as a

result of which Trinity, the Health System or LUMC would no longer be bound by the Ethical and Religious

Directives for Catholic Health Services as promulgated by the United States Conference of Catholic Bishops, (ii)

any event that causes the failure of LUMC to maintain its status as an academic medical center as defined by and in

accordance with the Academic Affiliation Agreement, or (iii) upon the expiration of the Academic Affiliation

Agreement after failure of the parties to resolve a dispute related to the academic support payment amount or

academic support payment calculation methodology for any period after the initial 10 year term of the Academic

Affiliation Agreement. The specific terms and conditions of the University’s right to repurchase the Health System

and its affiliates are set forth in the Definitive Agreement and the Academic Affiliation Agreement.

In addition to the Research Facility Funding Agreement and the Academic Affiliation Agreement referred

to above, other agreements delivered in connection with the Trinity Transaction included a Branding and Trademark

License Agreement among the University, Trinity, the Health System, LUMC and certain of the other healthcare

affiliates regarding the use of the Loyola name, logo, trademarks, service marks, and all related goodwill in

connection with their healthcare operations; an Indemnification Escrow Agreement among Trinity, the University

and an escrow agent; a Shared Services Agreement among the University, the Health System and/or LUMC

regarding sharing certain services; a Real Estate Swap Agreement which resulted in transfers of real estate between

the University and LUMC as described below; various leases and other real estate agreements among the University,

the Health System and/or LUMC providing for the sharing or transfer of certain real estate on the Medical Center

Campus; and other instruments and documents.

As a result of the Real Estate Swap Agreement, the University now owns the central part of the Medical

Center Campus. This central part is the “Academic/Health Sciences Zone” and includes, among other facilities, the

Cuneo Center for the Stritch School of Medicine, the Center for Collaborative Studies/School of Nursing, the Center

for Health and Fitness, the Cardinal Bernardin Cancer Center (subject to a 99-year leasehold interest for the portion

of the Bernardin Center currently used by LUMC) and the space for the new research facility. The north end of the

campus is owned by LUMC, and includes the primary hospital building and other inpatient facilities and related

infrastructure. The south end of the campus is also owned by LUMC and includes outpatient/ambulatory facilities.

The Health System. The healthcare operations of the University’s affiliates prior to July 1, 2011 were

conducted through the Health System. Thereafter, these operations became the operations of Trinity. Prior to the

completion of the Trinity Transaction, the Health System controlled LUMC, GMH, LUCIC and various other

healthcare related entities. The Health System’s total assets were approximately $995.0 million as of June 30, 2010.

Operating revenues were $1,065.3 million and results of operations were $0.4 million for the fiscal year ended June

30, 2010. Outstanding indebtedness was $350.1 million at that date.

LUMC operates the Hospital, a tertiary-care teaching hospital operated in conjunction with the academic

programs of the University’s Medical School. The Hospital is, and under the Definitive Agreement, will continue to

be, staffed by the full-time medical faculty of the Medical School, which is augmented by a sizable part-time faculty

with staffing privileges. LUMC also operates outpatient care centers and certain other primary care sites.

Gottlieb Affiliates. On January 25, 2008, Gottlieb Health Resources, Inc. (“GHR”), an Illinois not-for-

profit corporation, and the Health System entered into a Membership Substitution Agreement. Under the terms of

the Membership Substitution Agreement, on July 1, 2008, the Health System became the sole member of GHR, and

the Health System was substituted for GHR as the sole member of GMH, an Illinois not-for-profit corporation.

Additionally, GMH was substituted for GHR as the sole member of two other Gottlieb related entities. Neither

GHR, GMH nor any of its subsidiaries was prior to June 30, 2011, nor will any of such entities be liable thereafter,

for any indebtedness of the University including any Obligation incurred by the University under the Master

Indenture or is subject to any of its covenants. GHR was dissolved in 2010 but the Health System continued to be

the sole member of GMH and the other Gottlieb related entities until June 30, 2011 and the completion of the

Trinity Transaction.

LUPF. Loyola University Physician Foundation, an Illinois not for profit corporation (“LUPF”), was a

medical faculty practice plan established in 1995 which predominantly consisted of the faculty of the Medical

School. LUPF represented the incorporation of the physician services provider function of the Medical School and

was responsible for the billing, collection and distribution of the professional fees generated by the Medical School

faculty. The physician/employees of LUPF performed their clinical services by contractual arrangement with the

University and LUMC. LUPF made certain payments to the University for research and education purposes.

Financial results of LUPF are not currently, and have previously never been, included in the University’s

consolidated financial statements.

On January 1, 2009, pursuant to a Closing Agreement among the Health System, LUMC and LUPF, the

LUPF portion of the employment of the clinical faculty transferred from LUPF to LUMC, and LUMC currently

employs the clinical faculty for the portion of their employment related to their clinical duties and responsibilities;

however, the University continues to employ the clinical faculty for the portion of their employment related to

education and research. Additionally, on January 1, 2009, pursuant to an Amended and Restated Loyola Medical

Practice Plan Agreement, LUMC became responsible for providing certain payments to the University in order to

support the research and education purposes of the Medical School in the same manner that LUPF had been

responsible for the support of the Medical School prior to that time. The Amended and Restated Loyola Medical

Practice Plan Agreement was superseded and replaced by the Academic Affiliation Agreement described above.

LUMC Affiliation Agreement. The University and LUMC entered into an Affiliation and Operating

Agreement dated October 1, 1995 (the “LUMC Affiliation Agreement”) to provide for the financial relationship

between the entities and to provide for various shared services and operating relationships. The LUMC Affiliation

Agreement provided for the transfer by the University of certain real estate and other assets which were used solely

by, or devoted exclusively to, healthcare operations to LUMC in connection with the transfer of healthcare

operations to LUMC. The healthcare assets and operations were transferred to LUMC subject to the liabilities

associated with those assets and operations. In addition to the transfer of real estate and other assets, under the

LUMC Affiliation Agreement, the University also transferred $50 million in cash to LUMC, as well as other funds,

including gifts, which were restricted for healthcare operations.

Under the LUMC Affiliation Agreement, LUMC was obligated to provide annual payments to the

University for the Medical School prior to June 30, 2011. The annual payments to the University for the Medical

School included (1) payments received by LUMC from third parties for direct graduate medical education

reimbursement, (2) a portion of the salaries and benefits of certain Medical School faculty who also provide

administrative or clinical services to LUMC, (3) support to the Medical School comprised of 2% of net patient

revenues of the Hospital, (4) up to $2,000,000 for capital support of the Medical School, and (5) such other support

equal to the operating deficit (as defined in the LUMC Affiliation Agreement) of the Medical School; provided that

the total amount of such annual payments could not exceed LUMC’s operating surplus (as defined in the LUMC

Affiliation Agreement). LUMC was also obligated to transfer to the University 20% of such operating surplus after

giving effect to the support for the Medical School. In any year in which the operating margin (as defined in the

LUMC Affiliation Agreement) of LUMC exceeded 10%, LUMC was obligated to transfer to the University 30% of

the amount of its operating surplus that exceeded the 10% operating margin. Prior to the transfer to LUMC,

healthcare operations represented a significant portion of overall University excess of revenue over expenses and, as

part of University consolidated results and through the operation of the LUMC Affiliation Agreement, were

expected to continue to have a significant impact on University operating results. Total payments paid to the

University by LUMC under the LUMC Affiliation Agreement during the five fiscal years ended June 30, 2010 are

shown in the following table. Of such total payments, the amounts shown below under “Salary Expense” reflect

amounts paid by LUMC to the University to compensate the University for salary and benefit expense attributable to

work performed for LUMC related activities (which expenses the University would not incur absent the LUMC

Affiliation Agreement).

Pursuant to an amendment to the LUMC Affiliation Agreement, beginning on January 1, 2009, LUMC no

longer provided payments to the Medical School for the portion of the salaries and benefits of certain Medical

School faculty who also provided administrative or clinical services to LUMC. From January 1, 2009 (but ending

with the Trinity Transaction on June 30, 2011, as described above), LUMC directly paid the salaries and benefits of

any Medical School faculty who also provided administrative or clinical services to LUMC.

Fiscal Year

Total LUMC Payments

Salary Expense

($000’s)

2006

32,838

10,153

2007

31,879

10,302

2008

37,174

11,868

2009

30,529

6,167

2010

20,485

In addition to the above payments, pursuant to the Amended and Restated Loyola Medical Practice Plan

Agreement mentioned above, LUMC also made payments to the University during fiscal year 2010 totaling $4.2

million to support the research and education purposes of the Medical School. Upon the closing of the Trinity

Transaction, the LUMC Affiliation Agreement and the Amended and Restated Loyola Medical Practice Plan

Agreement were superseded and replaced by the Academic Affiliation Agreement described above.

Other than as set forth in the preceding paragraph, LUMC had no obligation to make any payments to the

University, including under the Master Indenture. Neither Trinity, the Health System nor any other affiliate of the

Health System other than LUMC has any obligation, pursuant to any affiliation agreement or otherwise, to make any

payment to the University, except as described above with respect to the Trinity Transaction.

The University’s audited consolidated financial statements provided in previous years’ annual reports

submitted for purposes of continuing disclosure have reflected the financial position and results of operations of the

Health System and LUMC, as well as the other affiliates of the University referred to therein. Following the closing

of the Trinity Transaction on June 30, 2011, the University’s audited consolidated financial statements will no

longer include the financial position and results of operations of the Health System, LUMC, GMH, LUCIC or the

other healthcare affiliates. The audited financial statements of the University for the year ended June 30, 2010

have been restated to reflect the impact of the Trinity Transaction (in the manner described above under the

caption “Management’s Discussion of Financial Results -- Healthcare Affiliates - Trinity Transaction”,

including the related non-operating loss described therein) as shown therein.

Trinity, including the Health System and LUMC, derives a significant portion of its revenues from

Medicare, Medicaid and other third-party payor programs. The receipt of future revenues by Trinity and the Health

System, including LUMC, is subject to, among other factors, federal and state policies and procedures affecting the

healthcare industry, increased competition and other conditions that are not possible to predict. Developments in the

healthcare industry, including increases in managed care arrangements, have significantly increased competitive

pressures and seek to restrain the growth in healthcare spending by employers, insurers, health maintenance

organizations and other payors. No assurance can be given that Trinity, including the Health System and LUMC,

will have sufficient revenues or operating income necessary to meet their respective obligations to the University

under the new Academic Affiliation Agreement now in effect.