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MISSISSIPPI COLLEGE FINANCIAL STATEMENTS, SUPPLEMENTAL INFORMATION, AND SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND REPORTS UNDER THE UNIFORM GUIDANCE As of and for the Years Ended May 31, 2018 and 2017 And Report of Independent Auditor

TABLE OF CONTENTS Report of Independent Auditor ...................................................................................... 1-2 Financial Statements

Statements of Financial Position .......................................................................................... 3 Statements of Activities ..................................................................................................... 4-5 Statements of Functional Expenses ................................................................................ 6-7 Statements of Cash Flows ..................................................................................................... 8 Notes to the Financial Statements ................................................................................. 9-31 Supplemental Information Schedule of Expenditures of Federal Awards .................................................................. 32 Notes to Schedule of Expenditures of Federal Awards ................................................. 33 Report of Independent Auditor on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ..................................................... 34-35 Report of Independent Auditor on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance ............................................................................. 36-37 Schedule of Findings and Questioned Costs ............................................................. 38-39 Statements of Net Assets Without Donor Restrictions,

Exclusive of Plant and Plant Related Debt (Unaudited)............................................ 40

Report of Independent Auditor The Board of Trustees Mississippi College Clinton, Mississippi We have audited the accompanying financial statements of Mississippi College (the “University”), which comprise the statements of financial position as of May 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. Auditor’s 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 auditor’s 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 auditor considers internal control relevant to the University’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 University’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 University as of May 31, 2018 and 2017, and the changes in its net assets, functional expenses and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

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Effect of Adopting New Accounting Standards As discussed in Note 2, in 2018 the University adopted Accounting Standards Update (“ASU”) 2016-14, Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities, and ASU No. 2015-07, Fair Value Measurement (Topic 820) – Disclosures for Investments in Certain Entities That Calculate Net Assets Value per Share (or Its Equivalent). Our opinion is not modified with respect to this matter. Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively comprise the University’s basic financial statements. The supplemental information, including the statements of unrestricted net assets, which is the responsibility of management, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Supplemental information also includes the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting, and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated August 29, 2018 on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance.

Charlotte, North Carolina August 29, 2018

Mississippi College Statements of Financial Position As of May 31, 2018 and 2017

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

2018 2017 Assets Cash and cash equivalents $ 31,919,496 $ 27,139,118 Accounts receivable, net 1,085,178 966,651 Loans receivable 1,449,804 1,701,346 Investments 79,409,532 73,693,059 Contributions receivable, net 3,787,265 1,709,481 Beneficial interest in external trusts 7,953,560 7,730,489 Land, buildings, and equipment, net 110,966,064 115,044,419 Collections 1,475,441 1,475,441 Other assets 934,441 994,582 Total Assets $ 238,980,781 $ 230,454,586

Liabilities and Net Assets Liabilities

Accounts payable and accrued expenses $ 1,891,179 $ 1,411,531 Accrued salaries 3,674,352 3,686,003 Accrued pension obligation 20,251,345 21,018,505 Deposits held for others 226,566 205,322 Government advances for student loans 1,132,956 1,393,218 Bonds and notes payable 14,813,640 17,459,450 Other liabilities 4,006,828 4,132,111 Total Liabilities 45,996,866 49,306,140 Net Assets

Without donor restrictions 91,278,971 87,621,815 With donor restrictions 101,704,944 93,526,631 Total Net Assets 192,983,915 181,148,446

Total Liabilities and Net Assets $ 238,980,781 $ 230,454,586

Mississippi College Statement of Activities Year Ended May 31, 2018

The accompanying notes to the financial statements are an integral part of this statement. 4

Operating activities Revenues and other support:

Without Donor Restrictions

With Donor Restrictions Total

Student income, net $ 52,684,118 $ -- $ 52,684,118 Contributions and grants - operating 4,668,485 5,081,221 9,749,706 Auxiliary enterprises 17,068,599 -- 17,068,599 Sales and services 44,768 -- 44,768 Other income 2,823,687 631,476 3,455,163 Investment income designated for operations 450,722 -- 450,722 Net assets released from restrictions 5,283,997 (5,283,997) -- Total revenues and other support 83,024,376 428,700 83,453,076 Expenses: Instruction 38,415,499 -- 38,415,499 Academic support 4,388,545 -- 4,388,545 Student services 13,450,582 -- 13,450,582 Institutional support 14,023,433 -- 14,023,433 Student aid 2,845,994 -- 2,845,994 Auxiliary enterprises 8,439,168 -- 8,439,168 Total expenses 81,563,221 -- 81,563,221 Change in net assets from operations 1,461,155 428,700 1,889,855 Nonoperating activities

Contributions and grants, non-operating -- 3,743,297 3,743,297 Net assets released from restrictions for capital acquisitions 664,334 (664,334) -- Investment income, net (480,252) 4,670,650 4,190,398 Change in additional minimum pension liability 1,862,057 -- 1,862,057 Other non-operating changes 149,862 -- 149,862 Total nonoperating activities 2,196,001 7,749,613 9,945,614 Total change in net assets 3,657,156 8,178,313 11,835,469 Net assets, beginning of year 87,621,815 93,526,631 181,148,446 Net assets, end of the year $ 91,278,971 $ 101,704,944 $ 192,983,915

Mississippi College Statement of Activities Year Ended May 31, 2017

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

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Operating activities Revenues and other support:

Without Donor Restrictions

With Donor Restrictions Total

Student income, net $ 53,344,000 $ -- $ 53,344,000 Contributions and grants - operating 2,986,346 2,362,705 5,349,051 Auxiliary enterprises 16,140,958 -- 16,140,958 Sales and services 150,885 -- 150,885 Other income 2,002,328 729,690 2,732,018 Investment income designated for operations 127,171 -- 127,171 Net assets released from restrictions 3,992,984 (3,992,984) -- Total revenues and other support 78,744,672 (900,589) 77,844,083 Expenses: Instruction 38,010,851 -- 38,010,851 Academic support 4,393,605 -- 4,393,605 Student services 13,701,880 -- 13,701,880 Institutional support 13,973,235 -- 13,973,235 Student aid 1,723,577 -- 1,723,577 Auxiliary enterprises 8,229,258 -- 8,229,258 Total expenses 80,032,406 -- 80,032,406 Change in net assets from operations (1,287,734) (900,589) (2,188,323) Nonoperating activities

Contributions and grants, non-operating -- 3,334,757 3,334,757 Net assets released from restrictions for capital acquisitions 1,040,283 (1,040,283) -- Investment income, net 453,088 6,299,897 6,752,985 Change in additional minimum pension liability 839,957 -- 839,957 Other non-operating changes 49,241 166,744 215,985 Total nonoperating activities 2,382,569 8,761,115 11,143,684 Total change in net assets 1,094,835 7,860,526 8,955,361 Net assets, beginning of year 86,526,980 85,666,105 172,193,085 Net assets, end of the year $ 87,621,815 $ 93,526,631 $ 181,148,446

Mississippi College Statements of Functional Expenses Years Ended May 31, 2018 and 2017

The accompanying notes to the financial statements are an integral part of this statement.

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Instruction Academic Support

Student Services

Student Aid

Institutional Support

Auxiliary Enterprises Total

Salaries and Benefits 28,963,004$ 2,397,145$ 6,792,308$ $ -- 7,336,446$ 1,301,245$ 46,790,148$ Student Aid -- -- -- 2,845,994 -- -- 2,845,994 Occupancy 222,704 60,427 111,536 -- 427,298 2,089,513 2,911,478 Professional Services 594,937 207,792 1,413,346 -- 1,168,491 3,385,551 6,770,117 Office Expenses 148,762 7,779 184,090 -- 322,937 123,717 787,285 Supplies 837,470 82,067 412,564 -- 541,852 176,563 2,050,516 Advertising 46,142 693 345,782 -- 19,228 -- 411,845 Information Technology -- 834,559 99 -- 206,285 -- 1,040,943 Travel 645,113 54,567 1,172,543 -- 100,017 15,010 1,987,250

Plant Expenses Including Depreciation 5,965,837 681,531 2,088,844 -- 2,177,804 1,310,583 12,224,599 Other 991,530 61,985 929,470 -- 1,723,075 36,986 3,743,046

38,415,499$ 4,388,545$ 13,450,582$ 2,845,994$ 14,023,433$ 8,439,168$ 81,563,221$

Program Services Management and General Year Ended May 31, 2018

Academic Instruction

Academic Support

Student Services

Student Aid

Institutional Support

Auxiliary Enterprises Total

Salaries and Benefits 28,734,531$ 2,522,310$ 6,876,718$ $ -- 7,062,128$ 1,339,461$ 46,535,148$ Student Aid -- -- 151,126 1,723,577 -- -- 1,874,703 Occupancy 210,880 61,534 89,168 -- 386,081 1,935,097 2,682,760 Professional Services 374,510 197,619 1,363,480 -- 1,067,893 3,300,371 6,303,873 Office Expenses 149,753 5,729 291,767 -- 252,268 98,621 798,138 Supplies 673,421 86,337 425,831 -- 408,741 185,411 1,779,741 Advertising 102,839 2,181 372,697 -- 34,306 -- 512,023 Information Technology -- 725,071 -- -- 199,483 -- 924,554 Travel 562,592 48,727 1,185,157 -- 94,662 17,466 1,908,604

Plant Expenses Including Depreciation 6,077,461 702,483 2,190,760 -- 2,234,147 1,315,753 12,520,604 Other 1,124,864 41,614 755,176 -- 2,233,526 37,078 4,192,258

38,010,851$ 4,393,605$ 13,701,880$ 1,723,577$ 13,973,235$ 8,229,258$ 80,032,406$

Program Services Management and General Year Ended May 31, 2017

Mississippi College Statements of Cash Flows Years Ended May 31, 2018 and 2017

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

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Cash Flows from Operating Activities: 2018 2017 Change in net assets $ 11,835,469 $ 8,955,361 Adjustments to reconcile change in net assets to

net cash from operating activities: Depreciation and amortization 6,662,848 6,727,324 Gain on disposal of assets (1,085,634) -- Provision for losses on accounts receivable and loans to students 48,718 28,861 Realized and unrealized gains on investments (2,804,783) (5,279,178) Restricted non-operating contributions (3,743,297) (3,334,757) Changes in assets and liabilities that provide (use) cash:

Accounts receivable (118,527) 144,921 Loans receivable 202,824 304,935 Contributions receivable (2,077,784) 220,719 Beneficial interest in external trusts (223,071) (458,696) Other assets 60,141 (55,291) Accounts payable and accrued expenses 479,648 (482,779) Accrued salaries (11,651) 310,461 Accrued pension obligation (767,160) 214,178 Deposits held for others 21,244 (4,088) Other liabilities (125,283) 375,646

Net Cash From Operating Activities 8,353,702 7,667,617 Cash Flows from Investing Activities:

Purchase of fixed assets (2,532,422) (5,080,078) Purchase of investments (3,932,589) (2,176,538) Proceeds from sale and maturities of investments 1,020,899 1,583,866 Proceeds from sale of fixed assets 1,100,760 --

Net Cash From Investing Activities (4,343,352) (5,672,750) Financing Activities:

Payments of government advances for student loans (260,262) (485,723) Payments of long-term debt (2,713,007) (3,206,595) Restricted non-operating contributions 3,743,297 3,334,757

Net Cash From Financing Activities 770,028 (357,561) Net Change in Cash and Cash Equivalents 4,780,378 1,637,306 Cash and Cash Equivalents, Beginning of Year 27,139,118 25,501,812 Cash and Cash Equivalents, End of Year $ 31,919,496 $ 27,139,118 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $ 407,911 $ 413,860

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 1 – The University and Related Entities Mississippi College (the “University”) is a private, not-for-profit institution of higher education. The University is governed by a thirty member Board of Trustees elected by the Mississippi Baptist Convention. The University provides educational services at the undergraduate, graduate, and postdoctoral levels. Founded in 1826, the University is the oldest institution of higher learning and the largest private university in the state of Mississippi. As a Christian institution, the University values the integration of faith and learning throughout the educational process. The University has two campuses. The main campus is located in Clinton, Mississippi, and the School of Law is located approximately twenty miles away in Jackson, Mississippi. The University’s revenues are predominantly derived from student tuition, room, and other fees. The majority of students come from the southeast United States, however, the University attracts students throughout the country and abroad. The Mississippi College Foundation, Inc. (the Foundation) was formed in 2004. The Foundation is composed of members selected and approved by the Board of Trustees. The Foundation does not own any assets and the University is the only voting member. The Foundation provides advisory management of the University’s investment property and endowment assets to the Board of Trustees.

Note 2 – Summary of Significant Accounting Policies BASIS OF PRESENTATION The financial statements of the University have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”), which require it to report information regarding its financial position and activities according to the following net asset classifications: Net assets without donor restrictions: Net assets that are not subject to donor-imposed restrictions and may be expended for any purpose in performing the primary objectives of the organization. These net assets may be used at the discretion of the University’s management and Board of Trustees. Net assets with donor restrictions: Net assets subject to stipulations imposed by donors and grantors. Some restrictions are temporary in nature; those restrictions will be met by actions of the University or by the passage of time. Other restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained in perpetuity. MEASURE OF OPERATIONS The Statements of Activities reports all changes in net assets, including changes in net assets from operating and nonoperating activities. Operating activities consist of those items attributable to the University’s ongoing educational activities and supporting services. Nonoperating activities are limited to resources that generate return from investments and other activities considered to be of a more unusual or nonrecurring nature.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 2 – Summary of Significant Accounting Policies – continued

ASSET RETIREMENT OBLIGATIONS Asset Retirement Obligations (“ARO”) are legal obligations associated with the retirement of long-lived assets. These liabilities are initially recorded at fair value and the related assets by the same amount as the liability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the University records changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The University eliminates ARO liabilities when the related obligations are settled. The ARO liability is included in other liabilities in the Statements of Financial Position. LIQUIDITY Assets are presented according to their nearness to cash, and liabilities are presented according to their nearness of payment or use of cash. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. CASH AND CASH EQUIVALENTS The University’s cash consists of cash on deposit with banks. Cash equivalents represent money market funds or short-term investments with original maturities of three months or less from the date of purchase, except for funds on deposit with bond trustees or held in the investment portfolio which are invested for long-term purposes.

CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the University to concentrations of credit risk consist principally of cash and cash equivalents and investments. The University maintains its cash and cash equivalents in various bank accounts that, at times, may exceed federally insured limits. The University’s cash and cash equivalents accounts have been placed with high, credit-quality financial institutions. The University has not experienced, nor does it anticipate, any losses with respect to such accounts. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. The University’s financial instruments principally consist of cash and cash equivalents, short-term receivables and payables, and various debt instruments. Due to their short-term nature, the carrying value of cash and cash equivalents, receivables, and payables approximates their fair value. The fair value of the various debt instruments has been estimated using interest rates currently offered to the University for borrowings having similar character, collateral,l and duration. The carrying amount of such debt instruments approximates the fair value at May 31, 2018 and 2017. USE OF ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 2 – Summary of Significant Accounting Policies - continued STUDENT RECEIVABLES, LOANS AND CREDIT POLICIES The University reports accounts receivable, net of an allowance for doubtful accounts, at the amount which represents management’s estimate of the amount that will be ultimately collected. The University reviews the adequacy of its allowance for uncollectible accounts on an ongoing basis, using historical payment trends and analysis of receivables aging, and makes adjustments in the allowance as necessary. The University assesses a late penalty each semester on accounts that are not paid in accordance with University guidelines. Accounts are written off to bad debt expense and sent to a collection agency after the University has exhausted reasonable efforts to collect the balance owed. Any monies received as payment of old debts is recorded as miscellaneous income in the period received. Loans receivable are primarily related to student financial aid programs funded principally with federal advances to the University under the Perkins Loan Program and certain other programs. The amount advanced to the University from the federal government is reported as government advances for student loans on the Statements of Financial Position. The allowance is based upon historical collection experience, management’s judgment, and other relevant factors. Past due or delinquency is determined based on original contractual terms. Loans are charged off to bad debt only after all attempts for collection have been reasonably exhausted.

INVESTMENTS Investments are recorded at estimated fair value. In the case of less marketable investments, principally real estate, venture capital, and private investments, value is based on either external events which substantiate a change in fair value or a reasonable methodology that exists to capture and quantify changes in fair value. In some instances, those changes in fair value may require the use of estimates. Accordingly, such values may differ from the values that would have been used had a ready market for the investments existed. The University’s investments include various types of investment securities and investment vehicles. Investment securities are exposed to several risks, such as interest rate, currency, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the University’s financial statements. Investments received by gift are recorded at fair value at the date of donation and are adjusted to fair value annually. COLLECTIONS The University has capitalized its collections since its inception. If purchased, items accessioned into the collection are capitalized at cost, and if donated, they are capitalized at their fair value on the accession date. Gains or losses on the sale of collection items are reported in the Statements of Activities as with or without donor restrictions depending on donor restrictions, if any, placed on the item at the time of accession.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 2 – Summary of Significant Accounting Policies - continued CONTRIBUTIONS RECEIVABLE Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Discount amortization is included in contribution revenue. Conditional promises to give are not included as support until conditions are met. Allowance is made for uncollectible contributions based upon historical collection experience, management’s judgment, and other relevant factors. BENEFICIAL INTEREST IN EXTERNAL TRUSTS The University is the beneficiary of various trusts created by donors, the assets of which are not in the possession of the University. The University has legally enforceable rights or claims to such assets, including the right to income therefrom. The fair value of these interests is recorded in the net assets with donor restrictions class, and the investment income (losses) of beneficial interest in external trusts are recorded in the with donor restrictions portion of the Statements of Activities. DEPOSITS WITH TRUSTEES Deposits with trustees consist of debt service prepaid principal and interest required under certain debt issuance agreements. These cash deposits are recorded at cost, which approximates fair value and are reported as other assets.

LONG-LIVED ASSETS AND DEPRECIATION Land, buildings, and equipment are shown at 1947 appraised values with subsequent additions at cost or at fair value at the date of gift. The University capitalizes all capital purchases with a unit cost greater than $5,000 and an expected useful life of more than one year. Purchases of books and other library media with lives extending beyond one year are capitalized as a group in the year purchased and depreciated over five years. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 40 years. Interest cost incurred during construction is capitalized as part of the cost of capital projects. Fully depreciated assets are written off the books in the year following the final depreciation expense. DEPOSITS HELD FOR OTHERS Deposits held for others include deposits from various organizations for which the University serves as an agent as of May 31, 2018 and 2017. FUNDRAISING ACTIVITIES Fundraising activities are recorded as institutional support expenditures as incurred and approximated $1,145,000 and $1,096,000 in 2018 and 2017, respectively. DEFERRED REVENUE Revenues that relate to summer school activities or other future activities are deferred to the period in which they are earned and are included in other liabilities in the Statements of Financial Position.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 2 – Summary of Significant Accounting Policies - continued CONTRIBUTIONS Contributions received are recorded as net assets without donor restrictions or net assets with donor restrictions, depending on the existence and/or nature of any donor-imposed restrictions. Contributions that are restricted by the donor are reported as an increase in net assets without donor restrictions if the restriction expires in the reporting period in which the contribution is recognized. All other donor restricted contributions are reported as an increase in net assets with donor restrictions, depending on the nature of restriction. When a 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 Statements of Activities as net assets released from restrictions. Contributed property and equipment are recorded at fair value at the date of donation. Contributions with donor-imposed stipulations regarding how long the contributed assets must be used are recorded as net assets with donor restrictions; otherwise, the contributions are recorded as net assets without donor restrictions. DEBT ISSUANCE COSTS Debt issuance costs are amortized by the straight-line method over the remaining terms of the related debt, approximately seventeen years, and are included in bonds and notes payable on the Statements of Financial Position.

SELF-FUNDED INSURANCE The University maintains a self-funded health insurance benefit plan. Specific and aggregate stop-loss coverage on the health plan is maintained to limit the ultimate exposure of the University. A liability of $445,887 and $338,844 as of May 31, 2018 and 2017, respectively, is provided for estimated claims incurred but not reported and employee premiums withheld in advance. The liability is included in accounts payable and accrued expenses in the Statements of Financial Position. Management reviews this accrual on an ongoing basis and believes that it is adequate to cover such claims. A portion of net assets without donor restrictions has been designated for the specific use of the plan. The amount is approximately equal to the cash on hand for the plan less the liabilities as described above. SIGNIFICANT DONOR The University is affiliated with the Mississippi Baptist Convention Board (“MBCB”) and receives contributions for general operating purposes and capital needs. Contributions received from the MBCB totaled approximately $2,577,000 and $2,624,000 for the years ended May 31, 2018 and 2017, respectively. SPLIT INTEREST AGREEMENTS The University manages various gift annuities as a trustee. Gift annuities consist of non-trust assets donated to the University in exchange for a fixed payment for the life of the beneficiary(s). Gift annuity assets are recorded at their fair value. These assets are included in investments. The associated liabilities to beneficiaries are calculated based on various actuarial assumptions and are recorded in other liabilities.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 2 – Summary of Significant Accounting Policies - continued The University’s charitable remainder trusts held by third parties are shown at fair value of the underlying assets, which approximates the discounted present value of the anticipated cash flows, as of May 31, 2018 and 2017. REVENUE RECOGNITION The University recognizes revenues from student tuition and fees within the fiscal year in which the academic term is predominantly conducted. Deferred tuition and fees are reported as deferred revenue and are included in other liabilities on the Statements of Financial Position. Tuition and fees revenue, which is included as student income on the Statements of Activities, is generated from an enrolled student population of approximately 5,300. Student income is shown on the Statements of Activities net of tuition discounts of $31,818,010 and $29,878,813 in 2018 and 2017, respectively. A tuition discount represents the difference between the stated charge for tuition and fees and the amount that is billed to the student and/or third parties making payments on behalf of the student. INCOME TAXES The University is exempt from income tax under IRC Section 501(c)(3), though it is subject to tax on income unrelated to its exempt purpose, unless that income is otherwise excluded by the Code. The University has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; to determine its filing and tax obligations in jurisdictions for which it has nexus; and to identify and evaluate other matters that may be considered tax positions. The University has determined that there are no material uncertain

tax positions that require recognition or disclosure in the financial statements. NEW PRONOUNCEMENTS On August 18, 2016, FASB issued ASU (“ASU”) 2016-14, Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities. This standard changes presentation and disclosure requirements of not-for-profit entities. The primary changes are a decrease in the number of net asset classes from three to two, requiring disclosures of qualitative and quantitative information on how the University manages its liquid available resources and liquidity risks and requiring reporting of expenses by function and nature, as well as enhanced net asset disclosures. This standard is effective for all fiscal years beginning after December 15, 2017. The University has elected to adopt ASU 2016-14 early and has retrospectively applied the updates to all periods presented. On May 1, 2015, the FASB issued ASU 2015- 07, Fair Value Measurement (Topic 820) – Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The amendments in ASU 2015-07 remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Instead, the amounts measured using the net asset value per share (or its equivalent) must be provided to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The University has elected to adopt ASU 2015-07 and has removed all investments for which fair value is measured using the net asset value per share practical expedient. The ASU has been applied retrospectively to all periods presented.

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 3 – Availability and Liquidity The following table represents the University’s financial assets as of May 31, reduced by amounts not available for general use because of contractual, donor-imposed restrictions, or board designations within one year of the Statement of Financial Position date.

2018 2017 Financial assets at year end: Cash and cash equivalents $ 31,919,496 $ 27,139,118 Accounts receivable 1,085,178 966,651 Loans receivable 1,449,804 1,701,346 Investments 79,409,532 73,693,059 Contributions receivable, net 3,787,265 1,709,481 Beneficial interests 7,953,560 7,730,489 Total financial assets 125,604,835 112,940,144 Less amounts not available to be used within one year: Restricted by donors with purpose restrictions (11,898,929) (12,212,650) Subject to appropriation and satisfaction of donor restrictions (76,165,269) (70,039,411) Assets held in trust by others (7,853,560) (7,630,489) Student loans receivables (1,449,804) (1,701,346) Contributions receivable due in greater than one year or subject To purpose restrictions (3,687,265) (1,695,750) Board designated for self-funded insurance (1,147,914) (792,083) Financial assets available to meet general expenditures over the Next twelve months $ 23,402,094 $ 18,868,415

The University’s goal is generally to maintain financial assets to meet 90 days of operating expenses (approximately $19 million). As part of its liquidity plan, excess cash is invested in short-term investments, including money market accounts. In addition, the University operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures not covered by donor- restricted resources. The University also has a $7,500,000 line of credit available, if needed, to meet cash flow obligations.

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Note 4 – Accounts Receivable Accounts receivables are summarized as follows as of May 31:

2018 2017 Student receivables $ 1,291,854 $ 1,252,636 Less: allowance for uncollectible accounts (550,000) (550,000) Student receivables, net 741,854 702,636 Other receivables 343,324 264,015 $ 1,085,178 $ 966,651

Note 5 – Loans Receivable Loans receivable are summarized as follows as of May 31:

2018 2017 Perkins loan program $ 1,031,435 $ 1,244,352 Nursing loan program 100,494 106,699 Institutional loan program 1,319,108 1,302,809 2,451,037 2,653,860 Less: allowance for uncollectible loans Beginning of year (952,514) (923,653) Increases (48,719) (28,861) Write-offs -- -- (1,001,233) (952,514) $ 1,449,804 $ 1,701,346

The University made uncollateralized loans which were funded through the revolving loan funds for Federal Perkins Loans and Federal Nursing Loans for which the University acted as an agent for the federal government in administering the loan program. The University also has a similar institutional loan program created by the University to assist students in funding their education. Currently, no new loans are being made under the Perkins or Nursing Loan programs and the University is refunding excess cash back to the federal government as loan payments are received. The interest rates on these loans range from 0% to 7%. Maturity dates range up to ten years, but with potential cancellations and deferrals beyond that range, calculation of an average term to maturity is not practical. At May 31, 2018 and 2017, student loans represented approximately 0.6% and 0.7% of total assets, respectively. Remaining funds advanced by the federal government of approximately $1,133,000 and $1,393,000 as of May 31, 2018 and 2017, respectively, are classified as liabilities in the Statements of Financial Position. Outstanding loans cancelled under the programs result in a decrease in the liability to the government.

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Note 5 – Loans Receivable - continued

Aging of Loans Receivable as of May 31, 2018:

Perkins Loans

Nursing Loans

Institutional Loans

In default: Less than 60 days $ 45,753 $ 3,495 $ 34,760 Greater than 60 days but less than 90 days 35,946 -- 14,452 Greater than 90 days but less than 120 days 10,625 -- 5,728 Greater than 120 days 479,061 66,091 1,013,871 Total Past Due 571,385 69,586 1,068,811 Current 460,050 30,908 250,297 Gross Loans Receivable $ 1,031,435 $ 100,494 $ 1,319,108

Aging of Loans Receivable as of May 31, 2017:

Perkins Loans

Nursing Loans

Institutional Loans

In default: Less than 60 days $ 41,011 $ 12,015 $ 15,713 Greater than 60 days but less than 90 days 42,573 -- 7,038 Greater than 90 days but less than 120 days 36,278 -- 8,715 Greater than 120 days 485,509 63,152 979,142 Total Past Due 605,371 75,167 1,010,608 Current 638,981 31,532 292,201 Gross Loans Receivable $ 1,244,352 $ 106,699 $ 1,302,809

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Note 6 – Investments Fair value of investments is summarized as follows as of May 31:

2018 2017 Cash and cash equivalents (a) $ 1,870,165 $ 1,694,405 Mutual Funds: (b) Bond Funds 545,592 565,876 Domestic Equity Funds 3,137,279 2,933,161 International Equity Funds 486,328 704,358 Other Mutual Funds 417,221 179,151 4,586,420 4,382,546 Multi Strategy Bond Fund (c) 12,796,754 11,716,404 Multi Strategy Equity Fund (d) 38,617,259 32,292,995 Domestic Equities (e) 52,362 73,707 Private Equity Fund (f) 98,489 128,240 Real Estate Fund (g) 241,400 338,807 Real Estate – Land (h) 16,809,202 16,951,659 Real Estate - Timber (i) 3,016,625 3,849,897 Investments Held by Others (j) 571,264 1,514,807 Other Various 749,592 749,592 $ 79,409,532 $ 73,693,059

a) Cash and Cash Equivalents This category includes assets that are cash or readily convertible to cash, such as money market funds and certificates of deposit. b) Mutual Funds This category includes investments in mutual funds that invest in long positions in publicly traded equities and fixed income securities. The majority of the investments are in U.S. focused companies. The public nature of the securities makes this category very liquid. c) Multi Strategy Bond Fund This category includes an investment in an actively managed, multi-manager mutual fund that invests in global debt markets. The fair value of the investment has been estimated using the net asset value per share. Redemptions may be made monthly with five business days’ notice. d) Multi Strategy Equity Fund This category includes an investment in an actively managed, multi-manager mutual fund that invests in global equity markets. The fair value of the investment has been estimated using the net asset value per share. Redemptions may be made monthly with five business days’ notice. e) Domestic Equities This category includes investments directly in publicly traded equities of companies in the United States. The public nature of the securities makes this category very liquid. f) Private Equity Fund This category includes an investment in a private equity fund that invests across the private equity class, diversifying by industry, investment type, geography, and vintage year. Further, the fund seeks to enhance returns through secondary and co-investments. The University has unfunded commitments to the fund totaling $34,618. The investment in this fund is for a fourteen-year term subject to two one-year extensions. The University invested in the fund in FY07. Redemptions are automatic. The fair value of the investment in this category has been estimated using the net asset value per share.

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Note 6 – Investments – continued g) Real Estate Fund This category includes an investment in a private real estate equity vehicle which seeks to identify high quality real estate managers pursuing strategies that will benefit from current global market opportunities and enable high net worth and institutional investors to participate in a high quality broadly diversified portfolio across managers, investment strategies, geographies, property types and fund sizes. The University has unfunded commitments to the fund totaling $105,000. The investment in the fund is for a ten-year term subject to three one-year extensions. The University invested in this fund in FY07. Redemptions are automatic. The fair value of the investment in this category has been estimated using the net asset value per share. h) Real Estate - Land This category includes approximately 16,000 acres of land located in various counties in Mississippi. The majority of the land is leased to others or is planted in pine plantations. The land is valued approximately every three years by a qualified appraiser utilizing the comparable sales method of appraisal. An annual review of comparable land sales in each county is performed to insure no material decrease in value has occurred since the date of the last appraisal. Approximately 90% of the land was donated to the University and is permanently restricted for use as timberland. i) Real Estate - Timber This category includes 6,246 acres of plantation managed pine timber ranging in age from 2 to 31 years. The timber is valued using a discounted present value based on a projected stream of income over the estimated life of the timber. A discount rate of 6.5% and 7.3%, for 2018 and 2017, respectively, was used in determining the present value. j) Investments Held by Others This category includes investments that have been placed with the Mississippi Baptist Foundation (“MBF”) which maintains the investments with various broker dealers. The funds are invested in pooled funds of primarily common stock equities, bonds, and fixed income securities. Investments also include fund managers that invest in private investment funds as an alternative investment strategy with the purpose of increasing the diversity of the holdings and being consistent with overall investment objectives. Investments include donated gift annuity funds and other endowments designated to be invested at MBF by the donors. The fair value of the investment in this category has been estimated using the net asset value per share.

Investment income, net, includes the following for the years ended May 31: 2018 2017 Investments: Dividends and interest $ 1,127,635 $ 834,460 Realized gains 370,913 567,042 Unrealized gains 2,433,089 4,712,137 Other income 469,064 518,419 Management fees (153,529) (219,130) 4,247,172 6,412,928 Beneficial interests in external trusts: Dividends and interest 170,877 175,173 Realized gains 601,116 57,327 Unrealized gains (losses) (378,045) 234,728 393,948 467,228 Subtotal 4,641,120 6,880,156 Less: investment income designated for operations (450,722) (127,171) Investment income, net $ 4,190,398 $ 6,752,985

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Note 7 – Contributions Receivable Contributions receivable are summarized as follows as of May 31: May 31, 2018

Related Parties

Unrelated Parties Total

Unconditional promises expected to be collected: Less than one year $ 374,000 $ 219,708 $ 593,708 One year to five years 616,500 681,667 1,298,167 More than five years 400,000 2,300,000 2,700,000 1,390,500 3,201,375 4,591,875 Less: discount to present value (range from 2.40% to 2.83%) (141,392) (600,243) (741,635) Less: allowance for uncollectible contributions (30,000) (32,975) (62,975) $ 1,219,108 $ 2,568,157 $ 3,787,265

May 31, 2017

Related Parties

Unrelated Parties Total

Unconditional promises expected to be collected: Less than one year $ 410,500 $ 121,350 $ 531,850 One year to five years 1,183,011 150,325 1,333,336 1,593,511 271,675 1,865,186 Less: discount to present value (range from 1.28% to 1.75%) (68,997) (4,372) (73,369) Less: allowance for uncollectible contributions (47,011) (35,325) (82,336) $ 1,477,503 $ 231,978 $ 1,709,481

The related parties include Board of Trustee members, Foundation Board members, and employees.

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Note 8 – Beneficial Interests in External Trusts At May 31, 2018 and 2017, the University had claims to various perpetual trust assets that are being managed by other outside trustees. The University’s portion of these perpetual trust assets at May 31, 2018 and 2017 was $7,953,560 and $7,730,489, respectively. At May 31, 2018 and 2017, approximately $7,061,000 and $6,849,000, respectively, of these trust assets are being managed by the Mississippi Baptist Foundation, an agency of the Mississippi Baptist Convention, which manages investment funds for Mississippi Baptist institutions. Note 9 – Investment in The Baptist Healthplex, Inc. The University has entered into an agreement with Mississippi Baptist Health Systems, Inc. to operate a health facility (“the Healthplex”) on the University campus. The Healthplex is incorporated as a separate tax-exempt, not-for- profit organization under Section 4947(a)(1) of the Internal Revenue Code with the University and MBHS as two equal tax-exempt members. The University has recorded its pro rata share of a non-operating gain related to this arrangement of $64,058 and $78,790, respectively, in the fiscal years ended May 31, 2018 and 2017. The carrying value of the investment is accounted for using the equity method of accounting and is $326,999 and $302,941 at May 31, 2018 and 2017, respectively, and included in other assets.

Note 10 – Land, Buildings, and Equipment Land, buildings, and equipment are summarized as follows as of May 31: 2018 2017 Land and improvements $ 14,287,029 $ 13,914,743 Buildings 170,408,132 169,423,522 Equipment 9,808,811 10,963,546 Construction in process 183,430 19,963 Total 194,687,402 194,321,774 Less: accumulated depreciation (83,721,338) (79,277,355) $ 110,966,064 $ 115,044,419

Depreciation expense during the years ended May 31, 2018 and 2017 approximated $6,596,000 and $6,704,000, respectively. During the years ended May 31, 2018 and 2017, the University removed approximately $2,133,000 and $1,573,000, respectively, of fully-depreciated equipment from its records.

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Note 11 – Other Assets Other assets are summarized as follows as of May 31:

2018 2017 Deposits and prepaid expenses $ 354,161 $ 210,474 Investment in Healthplex 326,999 302,941 Deposits with trustees -- 228,406 Other 253,281 252,761 $ 934,441 $ 994,582

Note 12 – Bonds and Notes Payable Bonds and notes payable consist of the following as of May 31:

2018 2017 Series 2001 Bonds $ -- $ 680,000 Notes payable- Healthplex 268,172 356,233 Notes payable- Science Lab 1,667,312 2,862,258 Series 2015 Bonds 13,000,000 13,750,000 14,935,484 17,648,491 Less: Net debt issuance costs (121,844) (189,041) $ 14,813,640 $ 17,459,450

Interest expense during the years ended May 31, 2018 and 2017 approximated $408,000 and $414,000, respectively.

Series 2001 Bonds The University issued bonds totaling $13,400,000 under two separate agreements (Series 2001A and Series 2001B) for the construction of the Healthplex (Note 9 - Investment in The Baptist Healthplex, Inc.). At May 31, 2017, the Series 2001A tax-exempt bond had borrowings that totaled $680,000, with a variable interest rate, adjusted weekly based on market conditions, of 1.16% at May 31, 2017. The bond was paid off in February 2018. Notes Payable – Healthplex The Series 2001B taxable bond was paid off during the year ended May 31, 2009 and replaced with a note payable to a commercial bank. The note payable has a fixed interest rate of 3.45%, monthly installments of $8,261, and a maturity date of February 2021. Notes Payable – Science Lab During the year ended May 31, 2013, the University borrowed $8,000,000 on a note payable with a commercial bank for the construction of a medical science laboratory building on the Clinton campus. The note payable has a fixed interest rate of 2.85%, monthly installment payments of $105,166, and a maturity date of September 28, 2019. The Medical Science Lab building is pledged as collateral on the outstanding note. Its approximate net carrying value is $7,037,000 and $7,241,000 at May 31, 2018 and 2017, respectively.

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Note 12 – Bonds and Notes Payable - continued Series 2015 Bonds In April 2015, the University issued $15,000,000 in bonds for the construction of residential housing located on the main campus. Monthly interest and principal payments began on October 1, 2015. Monthly principal payments of $62,500 plus interest at a variable rate, adjusted daily based on market conditions, of 2.70% and 2.11% at May 31, 2018 and 2017, respectively; continue until September 30, 2025. The residential housing units are pledged as collateral on the outstanding bonds and had a net carrying value of $14,647,000 and $15,038,000 as of May 31, 2018 and 2017, respectively. Line of Credit The University has a $7,500,000 revolving line of credit with a commercial bank at May 31, 2018. No amounts were outstanding at May 31, 2018 and 2017. Aggregate maturities of all the University’s borrowing arrangements for the next five years and thereafter are as follows:

Years ending May 31: 2019 $ 2,070,966 2020 1,281,594 2021 831,038 2022 751,886 2023 750,000 Thereafter 9,250,000 Total $ 14,935,484

Future amortization of debt issuance costs at May 31, 2018 is as follows:

Years ending May 31: 2019 $ 7,029 2020 7,029 2021 7,029 2022 7,029 2023 7,029 Thereafter 86,699 Total $ 121,844

Note 13 – Operating Leases The University leases two facilities under operating leases expiring in 2019. Rent expense related to these leases was $426,089 and $406,260 for the years ended May 31, 2018 and 2017, respectively. Minimum future rental payments under these non-cancelable operating leases are $363,828.

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Note 14 – Retirement Plans The University has a non-contributory defined benefit retirement plan covering all full-time employees with one year of continuous service and who have reached the age of 21. Effective December 31, 2002, benefits related to this plan were frozen in accordance with a resolution passed by the University’s Board of Trustees on August 15, 2002. The following table sets forth the plan’s benefit obligations, fair value of plan assets, and funded status as of May 31: 2018 2017 Accumulated benefit obligation $ 34,674,184 $ 36,424,695 Projected benefit obligation for services rendered to date $ (34,674,184) $ (36,424,695) Plan assets at fair value 14,422,839 15,406,190 Accrued pension obligation recognized in Statements of Financial Position $ (20,251,345) $ (21,018,505)

Following is an analysis of the fair value of plan assets by category: 2018 2017 Equity Securities $ 1,943,036 $ 2,018,211 Debt Securities 12,072,909 13,249,323 Other 406,894 138,656 $ 14,422,839 $ 15,406,190

As of May 31, 2018 and 2017, the fair value for debt securities in plan assets were measured at Level 2 inputs that include quoted prices for similar assets and liabilities in active markets. All other plan assets were measured at Level 1, quoted prices in active markets for identical assets, under FASB ASC 820, Fair Value Measurements. The following table sets forth the plan’s net periodic pension cost, additional pension cost, the University’s contribution, and benefits paid during the years ended May 31: 2018 2017 Interest costs on projected benefit obligation $ 1,340,251 $ 1,407,205 Expected return on plan assets (888,536) (922,729) Net amortization and deferral 1,843,183 1,769,659 Net periodic pension cost 2,294,898 2,254,135 Additional minimum pension (asset) liability (1,862,057) (839,957) Total pension cost $ 432,841 $ 1,414,178 University contributions $ 1,200,000 $ 1,200,000 Benefit payments $ 2,309,882 $ 2,324,723

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Note 14 – Retirement Plans - continued At May 31, 2018 and 2017, there was no unrecognized prior service cost, and accordingly, no intangible asset was recognized. Items not yet reflected in net periodic benefit cost:

2018 2017 Net Actuarial Loss $ 14,019,147 $ 15,881,205 Estimated amounts to be reclassified next year as net periodic benefit cost $ 2,173,831 $ 2,336,688

No plan assets are expected to be returned to the University during the year ending May 31, 2019. The change in the minimum pension asset and liability for the years ended May 31, 2018 and 2017 was $1,862,057 and $839,957, respectively. The net periodic pension cost for both years is included in expenses in the Statements of Activities and the change in the additional minimum pension liability for both years is included in non-operating activities. The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 3.90% and 3.80% in 2018 and 2017, respectively. The weighted average discount rate used in determining the net periodic pension cost was 3.80% and 3.95% in 2018 and 2017, respectively.

As a result of the plan being frozen, assumptions regarding the rate of increase in future compensation levels were not applicable in 2018 or 2017. The expected long-term rate of return of plan assets was 6% in 2018 and 2017. Pension plans are generally invested with the long-term objective of earning sufficient amounts to cover expected benefit obligations while assuming a prudent level of risk. The expected long-term rate of return on plan assets reflects consideration of both historical performance and future expectations. The future expectations of the long-term rate of return are developed with consideration of plan asset allocation, economic conditions, the period over which benefits will be paid, and other relevant market data. The University expects to contribute approximately $1,200,000 to its pension plan in fiscal 2019. The benefits that are expected to be paid for the pension plan for each year ended May 31: 2019 $ 2,722,835 2020 2,787,385 2021 2,828,464 2022 2,850,165 2023 2,867,967 2024 – 2028 11,832,545

The University also has a defined contribution plan covering substantially all of its employees. The University made contributions of approximately $2,723,000 and $2,545,000, respectively, during the years ended May 31, 2018 and 2017.

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Note 15 – Other Liabilities Other liabilities are summarized as follows as of May 31: 2018 2017 Gift annuities payable $ 143,409 $ 260,444 Deferred revenue 1,102,004 1,098,109 Environmental remediation liability 2,450,000 2,450,000 Other miscellaneous 311,415 323,558 $ 4,006,828 $ 4,132,111

Note 16 – Other Non-operating Changes Other non-operating changes as reported in the Statements of Activities include the following for the years ended May 31: 2018 2017 Changes in split interest obligations $ 85,804 $ 137,195 Equity income in Healthplex 64,058 78,790 $ 149,862 $ 215,985

Note 17 – Fair Value Measurements Fair value is defined as the price that would be received to sell an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. Fair value should be based on the assumptions market participants would use when pricing an asset. US GAAP establishes a fair value hierarchy that prioritizes investments based on those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets (observable inputs) and the lowest priority to an entity’s assumptions (unobservable inputs). The University groups assets at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Unadjusted quoted market prices for identical assets or liabilities in active markets as of the measurement date.

Level 2 – Other observable inputs, either directly or indirectly, including:

 Quoted prices for similar assets/liabilities in active markets;

 Quoted prices for identical or similar assets in non-active markets;

 Inputs other than quoted prices that are observable for the asset/liability; and

 Inputs that are derived principally from or corroborated by other observable market data.

Level 3 – Unobservable inputs that cannot be corroborated by observable market data.

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Note 17 – Fair Value Measurements - continued The following tables summarize the valuation of the University’s financial assets and liabilities measured at fair value on a recurring basis as of May 31, based on the level of input utilized to measure fair value:

Fair value measurements at May 31, 2018 Fair Value Level 1 Level 2 Level 3 ASSETS

Investments Cash and cash equivalents $ 1,870,165 $ 1,870,165 $ -- $ -- Mutual funds 4,586,420 4,586,420 -- -- Domestic Equities 52,362 52,362 -- -- Real estate – land and timber 19,825,827 -- 19,825,827 -- Other various 1,320,856 -- 1,320,856 -- Subtotal investments 27,655,630 $ 6,508,947 $ 21,146,683 $ -- Alternative investments(a) 51,753,902 Total investments $ 79,409,532 Contributions receivable, net $ 3,787,265 $ -- $ -- $ 3,787,265 Beneficial interests in perpetual trusts

$ 7,953,560 $ -- $ -- $ 7,953,560

Fair value measurements at May 31, 2017 Fair Value Level 1 Level 2 Level 3 ASSETS

Investments Cash and cash equivalents $ 1,694,405 $ 1,694,405 $ -- $ -- Mutual funds 4,382,546 4,382,546 -- -- Domestic Equities 73,707 73,707 -- -- Real estate – land and timber 20,801,556 -- 20,801,556 -- Other various 2,264,399 -- 2,264,399 -- Subtotal investments 29,216,613 $ 6,150,658 $ 23,065,955 $ -- Alternative investments(a) 44,476,446 Total investments $ 73,693,059 Contributions receivable, net $ 1,709,481 $ -- $ -- $ 1,709,481 Beneficial interests in perpetual trusts

$ 7,730,489 $ --

$ -- $ 7,730,489

(a) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

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Note 17 – Fair Value Measurements - continued For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, the following table provides a reconciliation of beginning and ending balances for the year ended May 31, 2018:

Contributions Receivable

Beneficial Interests in

Perpetual Trusts

Beginning of year

$ 1,709,481

$ 7,730,489

Realized and unrealized gains -- 213,574 Contributions 3,145,000 -- Payments (400,300) -- Withdrawals/adjustments (666,916) 9,497 End of year $ 3,787,265 $ 7,953,560

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, the following table provides a reconciliation of beginning and ending balances for the year ended May 31, 2017:

Contributions Receivable

Beneficial Interests in

Perpetual Trusts

Beginning of year

$ 1,930,200

$ 7,271,793

Realized and unrealized gains -- 285,760 Contributions 300,000 -- Payments (507,755) -- Withdrawals/adjustments (12,964) 172,936 End of year $ 1,709,481 $ 7,730,489

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Note 18 – Endowment The University’s Endowment (“Endowment”) consists of approximately 600 individual endowment funds established for a variety of purposes. As required by US GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

The University also owns approximately 15,000 acres of donated land designated for use by the donor as timber land to be held in perpetuity. The University holds and manages these assets separately from what is normally considered Endowment under its endowment investment and spending policies. Currently, the University is using the net income generated by these properties for management and reforestation of the land.

Interpretation of Relevant Law In approving Endowment spending and related policies, as part of the prudent and diligent discharge of its duties, the Board of Trustees of Mississippi College, as authorized by the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), has relied upon the actions, reports, information, advice, and counsel taken or provided by its duly constituted committees and the duly appointed officers of the University, including University counsel, and in doing so has interpreted the law to expand spending flexibility by allowing, subject to a standard of prudence, the University to spend from an endowment fund without regard to the book value of the corpus of the fund. This flexibility allows an expenditure that lowers the value of the corpus of an endowment fund below its book value.

As a result of this interpretation, the University classifies as net assets with donor restrictions the historic dollar value of gifts donated as donor-restricted endowment, including any subsequent gifts and any accumulations to donor-restricted endowments made in accordance with the direction of the applicable gift instruments. The remaining portion of the donor-restricted endowment is also included until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the University considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund (2) The purposes of the University and the

donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income

and the appreciation of investments (6) Other resources of the University (7) The investment policies of the University

Funds with Deficiencies From time to time, the fair value of the assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the University to retain as a fund of perpetual duration. There were no deficiencies as of May 31, 2018 or 2017.

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Note 18 – Endowment - continued Spending Policy and How the Investment Objectives Relate to Spending Policy The University’s Board of Trustees establishes a spending policy that determines how endowment distributions are made. The spending policy is designed to balance current and future spending requirements by ensuring that a portion of investment return is distributed for current expenditure with the remainder reinvested to shield against inflation. The payout rate is approved annually by the Board of Trustees. Currently, the University has a policy of appropriating for distribution each year up to five percent of its endowment three year average inflation adjusted fair value as of May 31st. In establishing this policy, the University considered the long-term expected return on its endowment. Accordingly, over the long term, the University expects its endowment to grow in excess of its annual appropriation. This is consistent with the University’s objective to maintain the purchasing power of the endowment assets held in perpetuity as well as provide additional real growth through new gifts and investment return. The University approved a 4.0% and 3.0% spending rate for years ended May 31, 2018 and 2017, respectively. Return Objectives and Risk Parameters The University has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets.

To satisfy its long-term rate-of-return objectives, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The University targets a diversified asset allocation to achieve its long- term return objectives within prudent risk constraints. The University had the following endowment- related activities as follows: Year Ended May 31, 2018 Endowment net assets, June 1, 2017 $ 73,414,538 Investment return: Investment income 915,109 Unrealized and realized gains 3,459,895 Total investment return 4,375,004 Contributions 3,137,918 Amounts appropriated for expenditure (1,899,593) Endowment net assets, May 31, 2018 $ 79,027,867

Year Ended May 31, 2017 Endowment net assets, June 1, 2016 $ 66,486,233 Investment return: Investment income 1,321,542 Unrealized and realized gains 4,609,483 Total investment return 5,931,025 Contributions 2,331,810 Amounts appropriated for expenditure (1,334,530) Endowment net assets, May 31, 2017 $ 73,414,538

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 19 – Net Assets Net assets with donor restrictions were as follows for the years ended May 31: 2018 2017 Subject to expenditure for specified purpose: Capital projects $ 2,044,843 $ 1,802,531 Educational programs 5,941,200 5,823,310 Financial aid 4,590,073 4,989,844 12,576,116 12,615,685 Subject to the passage of time: Beneficial interest in trusts 7,696,679 7,473,608 Endowment pledges -- 22,800 Promises to give that are not restricted by donors, but which are unavailable for expenditure until due 2,404,282 -- 10,100,961 7,496,408 Subject to University spending policy and appropriation: Investments in perpetuity (including amounts above original gifts of $62,229,684 and $60,100,419), which once appropriated, is expendable to support: Financial aid 61,268,733 56,795,691 Educational programs 13,732,150 12,826,522 Any activities of the University 4,026,984 3,792,325 79,027,867 73,414,358 $ 101,704,944 $ 93,526,631 Net assets without donor restrictions were as follows for the years ended May 31: 2018 2017 Designated for self-funded insurance plan $ 1,240,327 $ 1,128,959 Undesignated 90,038,644 86,492,856 Total $ 91,278,971 $ 87,621,815

Net assets released from net assets with donor restrictions are as follows: 2018 2017 Satisfaction of purpose restrictions Instruction and other support $ 2,445,003 $ 2,270,044 Financial aid 2,838,994 1,722,940 Capital acquisitions 664,334 1,040,283 $ 5,948,331 $ 5,033,267

Mississippi College Notes to the Financial Statements Years Ended May 31, 2018 and 2017

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Note 20 – Commitments and Contingencies The University receives grants under various federal and state sponsored programs. Specific requirements are to be met by the University concerning the grants, the most common being maintenance of a proper level of documentation. The programs are subject to audit by either the agency administering the program or another agency. The University believes a repayment amount, if any, would not be material to its financial position or results of operations. The University is involved in various legal proceedings and claims that arise in the ordinary course of its business. While the result of any litigation contains an element of uncertainty, the University believes that the outcome of any known, pending, or threatened legal proceeding will not have a material adverse effect on its financial statements. Note 21 – Subsequent Events Subsequent to May 31, 2018, the University entered in additional contracts for various building and renovation projects on both the main campus and the law school. The contracts total approximately $1,362,000 and will be funded from operations and gifts. Subsequent events have been evaluated through August 29, 2018, which is the date the financial statements were available to be issued.

Mississippi College Schedule of Expenditures of Federal Awards Year Ended May 31, 2018

See accompanying notes to schedule of expenditures of federal awards. 32

Federal Federal Grantor/Pass-Through CFDA Federal Grantor/Program or Cluster Title Number Expenditures Major Program: Student Financial Aid-Cluster: U.S. Department of Education: Federal Supplemental Educational Opportunity Grants (FSEOG) 84.007 $ 132,954 Federal Work-Study (FWS) 84.033 411,607 Federal Perkins Loans (Perkins) 84.038 1,244,353 Federal Pell Grant Program (PELL) 84.063 4,555,727 Federal Direct Student Loans (DIRECT LOAN) 84.268 50,455,866 Teacher Education Assistance for College and Higher Education Grants (TEACH) 84.379 81,931 Department of Health and Human Services: Nursing Student Loans (NSL) 93.364 106,699 Total Major Federal Program Expenditures $ 56,989,137

Mississippi College Notes to Schedule of Expenditures of Federal Awards Year Ended May 31, 2018

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Note 1 – Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Mississippi College (the “University”) and is presented in accordance with the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.

Note 2 – Summary of Significant Accounting Policies Indirect Cost Rate – The University has elected not to use the 10% de minimis indirect cost rate as allowed under Uniform Guidance.

Note 3 – Federal Direct Student Loan Programs During fiscal year ended May 31, 2018, the University processed the following amount of new loans under the Federal Direct Student Loan Program:

CFDA# Amount

Expended Subsidized Stafford loans 84.268 $ 5,132,753 Unsubsidized Stafford loans 84.268

29,013,207

Graduate PLUS loans 84.268 13,421,690 Parents’ loans for undergraduate students 84.268 2,888,216 $50,455,866

Note 4 – Federal Student Loan Programs The Federal Perkins Loan Program is administered directly by the University, and balances and transactions relating to this program are included in the University’s financial statements. The balance of loans outstanding under the Federal Perkins Loan Program was $1,031,435 at May 31, 2018. The Nursing Student Loan Program is administered directly by the University, and balances and transactions relating to this program are included in the University’s financial statements. The balance of loans outstanding under the Nursing Student Loan Program was $100,494 at May 31, 2018. The University is responsible only for the performance of certain administrative duties with respect to the Federal Direct Loan Program and, accordingly, these loans are not included on the University’s financial statements; furthermore, it is not practical to determine the balance of loans outstanding to students and former students of the University under these programs at May 31, 2018. Note 5 – Administrative Cost Allowance The accompanying schedule of expenditures of federal awards includes $5,395 from the Federal Pell Grant Program, $28,545 from the Federal Work Study Program and $1 from the Federal Supplemental Education Opportunity Grant Program as administrative cost allowances.

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Report of Independent Auditor on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit

of Financial Statements Performed in Accordance with Government Auditing Standards

The Board of Trustees Mississippi College Clinton, Mississippi We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Mississippi College (the “University”) which comprise the statement of financial position as of May 31, 2018, and the statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated August 29, 2018. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the University's internal control over financial reporting (“internal control”) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control. Accordingly we do not express an opinion on the effectiveness of the University’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the University’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the University’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the University’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Charlotte, North Carolina August 29, 2018

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Report of Independent Auditor on Compliance for Each Major Federal Program and Internal Control over Compliance

Required by the Uniform Guidance The Board of Trustees Mississippi College Clinton, Mississippi Report on Compliance for Each Major Federal Program We have audited Mississippi College’s (the “University”) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the University’s major federal program for the year ended May 31, 2018. The University’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for the University’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Those standards and the Uniform Grant Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the University’s compliance. Opinion on Each Major Federal Program In our opinion, the University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended May 31, 2018.

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Report on Internal Control over Compliance

Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Grant Guidance. Accordingly, this report is not suitable for any other purpose.

Charlotte, North Carolina August 29, 2018

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Year ended May 31, 2018 Section I. Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: unmodified Internal control over financial reporting:

 Material weakness(es) identified? Yes X No  Significant deficiency(ies) identified Yes X None reported

Noncompliance material to the financial statements noted? Yes X No Federal Awards Internal control over major programs:

 Material weakness(es) identified? Yes X No  Significant deficiency(ies) identified? Yes X None reported

Type of auditor’s report issued on compliance for major programs: unmodified Any audit findings disclosed which are required to be reported in accordance with Section 200.516(a) of Uniform Guidance? Yes X No Identification of major federal programs: CFDA Numbers Name of Federal Program or Cluster Student Financial Aid Cluster: 84.007 Federal Supplemental Educational Opportunity Grants 84.033 Federal Work-Study Program 84.038 Federal Perkins Loans Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans

84.379 Teacher Education Assistance for College and Higher Education Grants 93.364 Nursing Student Loans

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS - Continued

Year ended May 31, 2018 Section I. Summary of Auditor’s Results (continued) Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as a low-risk auditee? X Yes No Section II. Financial Statement Findings and Questioned Costs NONE Section III. Federal Award Findings and Questioned Costs NONE Section IV. Prior Year Federal Award Findings NONE

Mississippi College Statements of Net Assets Without Donor Restrictions, Exclusive of Plant and Plant Related Debt (Unaudited) Years Ended May 31, 2018, 2017 and 2016

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2018 2017 2016

Net assets without donor restrictions $ 91,278,971 $ 87,621,815 $ 86,526,980 Less: plant assets (110,964,165) (115,042,519) (116,647,292) Add plant related debt 14,813,640 17,459,450 20,262,367 Net assets without donor restrictions, exclusive of plant and debt $ (4,871,554) $ (9,961,254) $ (9,857,945)

Net tuition $ 52,684,118 $ 53,344,000 $ 53,649,655 Gifts 4,661,913 2,886,254 2,837,575 Auxiliary enterprises 17,068,599 16,140,958 15,298,974 Investment income 450,722 127,171 163,029 Federal financial aid grants 6,572 100,092 104,201 Other income 1,782,821 2,153,213 2,634,568 Net assets released from restrictions 5,283,997 3,992,984 7,055,440

Total revenues 81,938,742 78,744,672 81,743,442

Instructional 38,415,499 38,010,851 39,107,732 Academic support 4,388,545 4,393,605 4,379,844 Student services 13,450,582 13,701,880 13,636,763 Institutional support 14,023,433 13,973,235 13,980,570 Student aid 2,845,994 1,723,577 1,662,303 Auxiliary enterprises 8,439,168 8,229,258 8,242,546

Total expenses 81,563,221 80,032,406 81,009,758 Other changes (2,196,001) (2,382,569) (965,103)

Subtotal expenses and other changes 79,367,220 77,649,837 80,044,655

Add: additions to property and construction in process (“CIP”) 2,532,422 5,080,078 7,552,870 Add: transfer of completed CIP to unrestricted -- 19,400 38,211 Add: payments of long-term debt related to property and CIP 2,713,007 2,825,990 2,559,667 Less: proceeds from sale of property (1,100,760) -- -- Less: issuance of long-term debt related to property and CIP -- -- (5,265,178) Less: depreciation and amortization (6,662,847) (6,727,324) (6,565,390) Total expenses 76,849,042 78,847,981 78,364,835 Change in net assets without donor restrictions,

exclusive of plant and debt $ 5,089,700 $ (103,309) $ 3,378,607