2007 Annual Business Report

Dear Alumni, Parents and Friends,

It is my pleasure to once again provide a financial overview of the 2006-2007 school year at Blair Academy. Many favorable financial conditions helped contribute to another successful fiscal year at the Academy, resulting in our best fiscal outcome in many years.
     As I have stated in the past, the success of our operating budget begins with solid student enrollment figures to start the year and a consistent result in the Blair Fund. The 06-07 fiscal year saw great results in both of these categories, allowing Blair to exceed its budgeted revenues for the year. Given the importance of the School’s admission office and development office, the Board of Trustees has made significant efforts in recent years to ensure ample support to produce these positive outcomes. During the year, we were able to contain the operating expenditures to stay within our budget parameters, thereby producing an operating surplus for the 06-07 fiscal year. The Board of Trustees allocated all surplus funds to supplement the endowment and plant funds that help support the operation and maintenance of the School.
     As you will see in the graphs below, Blair continues to derive the majority of its revenues from current tuition. We must continue to work towards the goal of reducing our reliance on tuition so that we can attain more control over tuition increases for future generations of Blair students.

In addition to the successful results in our operating budget, we also experienced positive outcomes within both our physical plant fund and our endowment fund. The net result of our disciplined budgeting and strong endowment performance was a $15 million increase in Blair Academy’s net assets, so that we finished the fiscal year with slightly above $103 million in net assets; by comparison, our net assets in 2005 were $66 million.

     The table above shows the activity and results of the Blair Academy endowment over the past three year fiscal years. The total return (net of fees) of 19.43% on the endowment portfolio during the past year ranks as one of the school’s best results in recent years. The endowment portfolio outperformed our assigned benchmark (55% Russell 3000, 25% MSCI world equity ex. US & 20% Lehman Brothers Aggregate) which returned 18.6% for the year. The Investment Committee continues to employ the services of the Fund Evaluation Group in order to assist the committee in asset allocation models, manager selection and performance reviews. During the past year, the committee has shifted some of our allocation from real estate investments into several multi-strategy hedge funds. After some adjustments to the portfolio at the end of the year, the portfolio allocation is as shown below.
      The committee will continue to review the portfolio allocation and investment manager performance to ensure that the long-term investment objective of achieving a total return of endowment assets, net of manager fees, will meet the annual spending requirements of the School while maintaining the long-term growth of the endowment on an inflation adjusted basis. Blair Academy’s annual operating budget relies heavily upon the endowment draw to provide a quality education for our students. Currently, the endowment spending draw is calculated by taking 5% of the average market value for the 12 quarters ending June 30 preceding the current fiscal year. This policy is reviewed periodically in conjunction with the Budget Committee of the Board of Trustees to determine the most appropriate calculation in order to provide maximum support to the operating budget while also preserving the value of the endowment to provide for future generations of students. No withdrawals from the endowment other than to fund the spending policy will be permitted without the approval of the full Board of Trustees.
     After the acquisition of the new property was complete in the fall of 2006, the Board of Trustees made the decision to move forward with the first phase of our athletic facility expansion and renovation. During the spring of 2007, we broke ground on the outdoor facilities, which include a new track, new synthetic turf field, new tennis courts, new natural grass fields and a road to circulate traffic around the perimeter of campus which will eventually allow us to eliminate traffic through the center of campus. The second phase of our athletic facility expansion and renovation will include approximately 50,000 square feet of new athletic and support space as well as a renovation of approximately 20,000 square feet of student activity space. The construction schedule calls for phase one to be complete this fall.
     Upon the approval from the Board of Trustees, we will commence phase two late this fall with the anticipation of completing the new Activity and Athletic Center by December 2008. We have budgeted $23.5 million to complete these two projects, the funding for which will come from capital campaign contributions as well as $14.6 million from the proceeds of our Series 2007 School Revenue Bonds that were issued through the New Jersey Economic Development Authority on October 1, 2007. The school issued a total of $23,355,000 in bonds, using approximately $8.3M to call previously existing bonds. The new bonds will be amortized over a 30-year period. The current plans call for paying annual debt service through operations of the School, which has been the practice of the School for the past 10 years. The Board of Trustees has also approved the construction of two new faculty homes on the north side of campus along with the necessary infrastructure improvements to accommodate these homes. This construction is scheduled to begin late this year with completion of the first home to occur in the summer of 2008.
     Along with all of the new projects that we have planned for and started, we have also been careful not to allow any deferred maintenance to affect our beautiful campus. During the past fiscal year, the school has allocated approximately $1.6 million to improve our infrastructure, equipment and existing buildings. Many of these improvements are not always visible, but we believe that they are just as important as the new, more prominent projects on campus. Examples of these projects include re-pointing the stone exterior of several of the major historic buildings on campus, replacing steam lines, installing back-up generators, re-roofing several buildings, as well as numerous other smaller projects. The school was also fortunate to be able to purchase an additional faculty residence located adjacent to the new property, giving us a faculty presence on the north end of our newly extended campus.
     I hope this brief summary – along with the charts and graphs – of the financial side of Blair Academy, help give you an understanding of the financial impact that your gifts have on the school and on current and future students. As you can tell, it is a very busy time on campus, but it is also very exciting to see the long awaited enhancements come to fruition. I want to express my gratitude to the many people who have helped the School in so many ways. If you have any questions or comments please feel free to contact me either by phone at (908) 362-6121 ext. 5627 or e-mail at frickj@blair.edu.

Sincerely,
James Frick
Assistant Headmaster for Finance & Operations

return to top