UNIVERSITY OF MARYLAND, COLLEGE PARK ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MARYLAND ECONOMIC DEVELOPMENT CORPORATION

UNIVERSITY OF MARYLAND, COLLEGE PARK ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MARYLAND ECONOMIC DEVELOPMENT CORPORATION Management's Discussion and Analysis and Financial Statements with Independent... 'YL..,""'''-'' For the Years Ended June 30, 2015 and 2014

UNIVERSITY MARYLAND, ENERGY AND UTILITY INFRASTRUCTURE A PROJECT OF MARYLAND ECONOMIC DEVELOPMENT CORPORATION (MEDCO) Table of Contents Page Management's Discussion and Analysis Independent Auditors' Report 1-6 7-8 Financial Statements: Statements of Net Position as of June 30, 20]5 and 2014 Statements of Revenues, Expenses, and Changes in Net Position for the Years Ended June 30, 2015 and 2014 Statements of Cash Flows for the Years Ended June 30, 2015 and 2014 Notes to Financial Statements 9 10 1] 12-21

UNIVERSITY OF COLLEGE ENERGY AND INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO Management's Discussion and Analysis For the Years Ended June 2015 and 2014 As management of the University of Maryland, College Park Energy and Utility Infrastructure Program (the Program), a project of Maryland Economic Development Corporation (MEDCO), we offer readers of the Program's financial statements this narrative overview and analysis of the financial activities of the Program for the fiscal years ended June 30,2015 and 2014. Management's Discussion and Analysis (MD&A) is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Program's financial activity, and (c) identify changes in the Program's financial position. We encourage readers to consider the information presented here in conjunction with the Program's financial statements and accompanying notes. Financial Highlights The financial highlights of the Program for the year ended June 30, 2015 were as follows: Total net position increased by $1,196,000 in 2015 primarily due to capital recovery charges and interest earned on deposits with the bond trustee in excess of depreciation and interest expense on the bonds, partially offset by the surplus funds distribution. Net position as of June 30, 2015 totaled $5,273,000. During 2015, management determined that the Program had generated $1,164,000 of excess surplus funds under the indenture governing the Program's bonds. These funds were returned to the University of Maryland, College Park (the University) and are included in the current financial statements as a non-operating expense. The financial highlights of the Program for the year ended June 30, 2014 were as follows: Total net position increased by $1,059,000 in 2014 primarily due to capital recovery charges and interest earned on deposits with the bond trustee in excess of depreciation and interest expense on the bonds, partially offset by the surplus funds distribution. Net position as of June 30, 2014 totaled $4,077,000. During 2014, management determined that the Program had generated $1,164,000 of excess surplus funds under the indenture governing the Program's bonds. These funds were returned to the University of Maryland, College Park (the University) and are included in the current financial statements as a non-operating expense. During the year ended June 30, 2014, the Company adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. Under this standard, certain debt issuance costs which were previously capitalized and amortized over the life of the related debt are now required to be expensed as incurred. This change is fuliher discussed in Note 1 to the financial statements. The change in accounting method has been applied by retroactively adjusting the financial statements for all periods presented in this MD&A. 1

INFRASTRUCTURE A PROJECT OF MEDCO Management's Discussion and Analysis For the Years Ended June 30, 2015 and 2014 Overview of the Financial Statements This MD&A is intended to serve as an introduction to the Program's financial statements. The Program is intended to be a self-supporting entity and follows enterprise fund reporting; accordingly, the financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Enterprise fund statements offer short-term and long-term financial information about the activities and operations of the Program. These statements are presented in a manner similar to a private business. The Program's statements consist of two patts: the financial statements and notes to the financial statements. The Financial Statements The Program's financial statements are designed to provide readers with a broad overview of its finances, in a manner similar to a private-sector business. The statements of net position present information on all of the Program's assets and defelted outflows of resources, and liabilities and defelted inflows of resources, with the difference reported as net position. In 2001, MEDCO issued limited obligation revenue bonds to provide capital financing for improvements to the steam, electric, and chilled water infrastructure (infrastructure improvements) serving the University. The proceeds were deposited with a trustee and invested, generally in United States Government or agency securities, and guaranteed investment contracts or repurchase agreements, until disbursed for the acquisition or construction of capital assets, or retained for the establishment of certain required reserves. In 2011, MEDCO issued a new series of limited obligation revenue bonds, the proceeds of which were utilized primarily to defease the bonds issued in 2001. The revenue bonds were issued in MEDCO's name; however, MEDCO has no obligation for the bonds beyond the resources of the Program. The statements of revenues, expenses, and changes in net position present the operating activities of the Program and sources of non-operating revenues and expenses. The statements of cash flows present summarized sources and uses of funds for the Program. Cash flows from operating activities generally represent payments received from the University under the Energy Services Agreement (the Agreement) and disbursements for the costs of operation and maintenance of the infrastructure improvements, exclusive of interest expense and interest income earned on investments. Cash flows from capital and related financing and investing activities generally reflect the incultence of debt obligations, the subsequent investment of debt proceeds in the Program, periodic principal and interest payments on the debt and earnings on investtnents of the Program. The Program is owned by MEDCO; however, at the end of the ground lease, ownership of the Program will revert to the University Systeln of Maryland. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes to the financial statements can be found on pages 12-21 of this repmt. 2

UNIVERSITY ENERGY AND INFRASTRUCTURE PROJECT OF MEDCO Management's Discussion and Analysis For the Years Ended June 2015 and 2014 Financial Analysis of University of Maryland, College Park Energy and Utility Infrastructure Program The following table summarizes the Program's financial position as of June 30: 2015 2014 2013 Current assets $ 11,312,562 $ 9,913,113 $ 9,985,444 Net capital assets 16,410,573 20,349,111 24,287,648 Other assets 6,268,400 6,347,329 6,329,131 Total Assets $ 33,991,535 $ 36,609,553 $ 40,602,223 Deferred outflow of resources 27,874 42,703 60,382 Current liabilities $ 8,917,481 $ 7,575,512 $ 7,639,213 Non-current liabilities 19,460,928 24,610,625 29,625,812 Total Liabilities $ 28,378,409 $ 32,186,137 $ 37,265,025 Deferred inflow of resources 368,247 389,472 380,204 Net investment in capital assets $ (7,727,481) $ (8,703,811) $ (9,547,782) Restricted under trust indenture 13,000,234 12,780,458 12,565,158 Total Net Position $ 5,272,753 $ 4,076,647 $ 3,017,376 Significant factors in the changes in the Program's financial position for the year ended June 30, 2015 include the following: Current assets increased $1,399,000 primarily due to an increase in accounts receivable due to increased capacity and consumption charges. Net capital assets decreased $3,939,000 due to depreciation. Current liabilities increased $1,342,000 primarily due to an increase in accounts payable due to increased utility expenses. Non-current liabilities decreased $5,150,000 primarily as a result of the scheduled debt service payment becoming current. Net position increased $1,196,000 due primarily to capital recovery charges and interest earned on deposits with the bond trustee in excess of depreciation and interest expense on the bonds. This increase was partially offset by the surplus funds distribution. 3

COLLEGE ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO Management's Discussion and Analysis For the Years Ended June 30, 2015 and 2014 Financial Analysis of University of Maryland, College Park Energy and Utility Infrastructure Program continued Significant factors in the changes in the Program's financial position for the year ended June 30,2014 include the following: Net capital assets decreased $3,939,000 due to depreciation. Non-culTent liabilities decreased $5,015,000 primarily as a result of the scheduled debt service payment becoming CUlTent Net position increased $1,059,000 due primarily to capital recovery charges and interest earned on deposits with the bond trustee in excess of depreciation and interest expense on the bonds, paliially offset by the surplus funds distribution. 4

AND INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO Management's Discussion and Analysis For the Years Ended June 2015 and 2014 Financial Analysis of University of Maryland, College Park Energy and Utility Infrastructure Program continued The following table smumarizes the Program's revenues and expenses for the years ended June 30: 2015 2014 2013 Operating Revenues: Capacity and consumption charges $ 7,954,551 $ 6,719,875 $ 6,857,870 Capital recovery charges 6,883,656 6,888,782 6,887,483 Charges for fees and expenses 678,896 457,174 492,130 Total Operating Revenues 15,517,103 14,065,831 14,237,483 Operating Expenses: Utilities 7,954,551 6,719,875 6,857,870 Management fees 81,489 75,375 83,865 Insurance 306,419 264,916 248,164 Other fees and expenses 291,088 116,984 160,201 Depreciation 3,938,538 3,938,537 3,938,538 Total Operating Expenses 12,572,085 11,115,687 11,288,638 Operating Income 2,945,018 2,950,144 2,948,845 Non-operating Expenses, net (1,748,912) (1,890,873) (2,048,763) Increase in Net Position 1,196,106 1,059,271 900,082 Net Position, beginning of year 4,076,647 3,017,376 2,117,294 Net Position, end of year $ 5,272,753 $ 4,076,647 $ 3,017,376 Significant factors in the results for the year ended June 30, 2015 include: Capacity and consumption charges and utility expenses increased $1,235,000 primarily as a result of an increase in energy consumption. Net non-operating expenses decreased $142,000 due to a decrease in interest expense due to bond principal payments. Significant factors in the results for the year ended June 30, 2014 include: Capacity and consumption charges and utility expenses decreased $138,000 primarily as a result of a decrease in energy consumption. Net non-operating expenses decreased $158,000 primarily due to a $135,000 decrease in interest expense due to bond principal payments. 5

UNIVERSITY ENERGY AND UTILITY INFRASTRUCTURE PROJECT OF MEDCO Capital Assets and Debt Administration Capital Assets Management's Discussion and Analysis For the Years Ended June 2015 and 2014 In 1999, MEDca was requested to assist in the development of an energy and utility infrastructure program for the University through issuance of its tax-exempt revenue bonds. The proceeds of the bonds were used for the initial design, construction and furnishing of the Program. The Program had no major capital asset events for the years ended June 30, 2015 and 2014. Debt As of June 30, 2015 and 2014, the Program had total bond debt outstanding, net of unamortized premiums and discounts of $24,166,000 and $29,096,000, respectively. None of this debt is backed by the full faith and credit of the State of Maryland, MEDCa or the University. The debt is secured solely by the revenues and assets of the Program. There were no major debt events during the years ended June 30, 2015 and 2014. Contacting Management of MEDCO This report is designed to provide Maryland citizens and taxpayers, and our customers, clients, investors and creditors, with a general overview of the finances of the University of Maryland, College Park Energy and Utility Infrastructure Program. If you have questions about this report or need additional information, contact Maryland Economic Development Corporation, 300 East Lombard Street, Suite 1000, Baltimore, MD 21202. 6

- STOUT, CAUS~Y & I-IORNING CERTIFIED PUBLIC N:C:()UNTANTS To the Board of Directors of Maryland Economic Development Corporation: Expertise That Works We have audited the accompanying financial statements of University of Maryland, College Park Energy and Utility Infrastructure Program (the Program), a project of Maryland Economic Development Corporation (MEDCO), which comprise the statements of net position as of June 30, 2015 and 2014, and the related statements of revenues, expenses, and changes in net position, and cash flows for the years then ended, and the related notes to 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 of and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. AuditoJrs' ResponsibiHty Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of ltiateriallidsstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers inten1al control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circultistances, but not for the purpose of expressing an opinion on the effectiveness of the entity's intell1al 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 ltiaterial respects, the financial position of University of Maryland, College Park Energy and Utility Infrastructure Program, a project of MEDCO, as of June 30, 2015 and 2014, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Main I 410-403-1500 Toll Free I 800-832-3008 Fax I 410-403-1570 Address I 910 Ridgebrook Road, Sparks, rv1 D 21152 Visit I www.scandh.com

Other Matter As discussed in Note 1, the accompanying financial statements present only the financial position, changes in financial position and cash flows of the Project and do not purport to, and do not, present the financial position of MEDea as of June 30, 2015 and 2014, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The management's discussion and analysis on pages 1 through 6, which is the responsibility of management, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. 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. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we do not express an opinion or provide any assurance on the supplementary information refened to above. ( September 12,2015

UNIVERSITY OF MARYLAND, COLLEGE PARK ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO As ofjune 30, Statements of Net Position 2015 2014 Assets Current Assets: Accounts receivable Unbilled accounts receivable Deposits with bond trustee - restricted Prepaid expenses Interest receivable $ 3,607,807 $ 2,374,613 1,171,234 1,163,868 6,262,383 6,113,212 269,781 260,606 1,357 814 Total Current Assets 11,312,562 9,913,113 Non-current Assets: Deposits with bond trustee - restricted Prepaid expenses Capital assets Equipment Less: Accumulated depreciation 6,169,934 6,218,462 98,466 128,867 63,286,331 63,286,331 46,875,758 42,937,220 Net Capital Assets 16,410,573 20,349,111 Total Non-current Assets 22,678,973 26,696,440 Total Assets 33,991,535 36,609,553 Deferred Outflow of Resources Deferred advance refunding costs 27,874 42,703 Liabilities and Net Assets Current Liabilities: i\ccounts payable and accrued expenses Related party payable Accrued interest Bonds payable Total Current Liabilities 3,649,541 2,415,352 6,334 6,429 556,606 668,731 4,705,000 4,485,000 8,917,481 7,575,512 Non-current Liabilities: Bonds payable 19,460,928 24,610,625 Total Liabilities 28,378,409 32,186,137 Deferred Inflow of Resources Deferred revenue 368,247 389,472 Commitments (Note 5) Net Position: Net investment in capital assets Restricted under trust indenture (7,727,481) 13,000,234 (8,703,811) 12,780,458 Total Net Position $ 5,272,753 $ 4,076,647 The accompanying notes are an integral part (~t'thesejlnancialstatements. 9

UNIVERSITY OF MARYLAND, COLLEGE PARK ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO Statements of Revenues, Expenses, and Changes in Net Position For the Years Ended June 30, 2015 2014 Operating Revenues: Capacity and consumption charges Capital recovery charges Charges for fees and expenses $ 7,954,551 6,883,656 678,896 $ 6,719,875 6,888,782 457,174 Total Operating Revenues 15,517,103 14,065,831 Operating Expenses: Utilities Management fees Insurance Other fees and expenses Depreciation Total Operating Expenses Operating Income Non-operating Revenues (Expenses): Interest expense Surplus funds distribution Interest income Non-operating Expenses, net Increase in Net Position Net Position, Beginning ofyear 7,954,551 6,719,875 81,489 75,375 306,419 264,916 291,088 116,984 3,938,538 3,938,537 12,572,085 11,115,687 2,945,018 2,950,144 (683,345) (824,954) (1,163,868) (1,164,194) 98,301 98,275 (1,748,912) (1,890,873) 1,196,106 1,059,271 4,076,647 3,017,376 Net Position, End ofyear $ 5,272,753 $ 4,076,647 The accompanying notes are an integralpart ofthese financial statements. 10

UNIVERSITY OF MARYLAND, COLLEGE PARK ENERGY AND UTILITY INFRASTRUCTURE PROGRAM, A PROJECT OF MEDCO Statements of Cash Flows For the Years Ended June 30, 2015 2014 Cash Flows from Operating Activities: Cash received from customer charges $ 14,276,543 $ 14,237,958 Cash paid for operating expenses (7,399,452) (7,349,102) Net Cash Provided by Operating Activities 6,877,091 6,888,856 Cash Flows from Capital and Related Financing Activities: Distribution ofsurplus funds (1,163,868) (1,164,194) Interest paid (1,225,338) (1,444,212) Principal payments on bonds payable (4,485,000) (4,270,000) Net Cash Used in Capital and Related Financing Activities (6,874,206) (6,878,406) Cash Flows from Investing Activities: Purchases ofdeposits with bond trustee - restricted, net (100,643) (108,725) Interest received 97,758 98,275 Net Cash Used in Investing Activities (2,885) (10,450) Net Change in Cash Cash, beginning ofyear Cash, end ofyear $ $ Reconciliation of operating income to net cash provided by operating activities: Operating income $ 2,945,018 $ 2,950,144 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 3,938,538 3,938,537 Changes in operating assets and liabilities: Accounts receivable (1,233,194) 171,801 Unbilled accounts receivable (7,366) 326 Related party receivable Prepaid expenses 21,226 (9,269) Accounts payable and accrued expenses 1,234,189 (171,713) Related party payable (95) (238) Deferred inflow of resources (21,225) 9,268 Net Cash Provided by Operating Activities $ 6,877,091 $ 6,888,856 Non-cash capital and related financing activities: Amortization of issue premium on bonds $ 474,772 $ 566,043 Amortization of issue discount on bonds 30,075 35,856 Amortization of deferred advance refunding costs 14,829 17,679 The accompanying notes are an integral part ofthese financial statements. 11

A PROJECT OF MEDCO Notes to Financial Statements For the Years Ended June 30, 2015 and 2014 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS Ownership and Management The University of Maryland, College Park Energy and Utility Infrastructure Program (the Program) is a project of Maryland Economic Development Corporation (MEDCO). The Program relates to the development, operation and maintenance of the chilled water, steam generation and distribution, and electric generation and distribution systems serving the University of Maryland, College Park (the University) campus. The Program commenced operations in August 1999. Under an Energy Services Agreement dated August 31, 1999, as amended through Change Order 4, MEDCO provides energy conversion and delivery services to the University. Under terms of the Agreement, the University makes monthly paylnents to MEDCO, as follows: (i) a reservation charge (which consists of two components: capacity charges and capital recovery charges), (ii) a volume-based consumption charge for each of the energy services, (iii) the fees and expenses of MEDCO, and (iv) amounts needed to replenish operating reserves. The Energy Services Agreement has a term of 20 years. On August 31, 1999, MEDCO entered into a Management, Operation, and Maintenance Agreement (the Management Agreement) and a Design and Construction Agreement (the Construction Agreement) with a private vendor, Trigen-Cinergy Solutions of College Park, LLC (subsequently Trigen Solutions of College Park, LLC and now College Park Energy, LLC) (Trigen) for the operation and maintenance of the existing steam and electric distribution systems and for the design, construction, operation, and maintenance of necessary improvements to such systems and a new chilled water generation and distribution system. Under the Management Agreement, as amended through Change Order 2, Trigen earns an energy service charge which consists of a system capacity charge and a consumption charge. The Management Agreement has a term of 20 years. On July 9, 1999, MEDCO entered into a Professional Services Agreement with Sebesta Blomberg and Associates (Sebesta) whereby Sebesta provides certain owner's representative and contract administration services to the Program. The Professional Services Agreement had an initial term of four years and through a series of subsequent amendments and extensions, cultently expires June 30, 2016. Sebesta's fees under the Professional Services Agreement were approximately $52,300 and $40,600 for the years ended June 30, 2015 and 2014, respectively. 12

OFMEDCO Notes to Financial Statements For the Years Ended June 2015 and 2014 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS - continued Basis of Presentation The accompanying financial statements present the financial position, changes in financial position and cash flows of the Program based on amounts specifically identifiable in MEDCa's accounting records. The Program is a project of MEDCa and, as such, all financial data presented herein is also included in the financial statements of MEDCa as of and for the years ended June 30, 2015 and 2014. However, the accompanying financial statements present only the Program and do not purp0l1 to, and do not, present the financial position of MEDCa as of June 30, 2015 and 2014, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. MEDCa utilizes the economic resources measurement focus and the accrual basis of accounting in preparing these financial statements, wherein revenues are recognized when earned and expenses are recognized when incuned. Recently Issued Accounting Pronouncem_ents During the year ended June 30, 2014, the Project adopted Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities (GASB 65). GASB 65 was issued to establish accounting and financial reporting standards that reclassify, as defened outflows of resources or defened inflows of resources, certain items that were previously rep0l1ed as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. During the year ended June 30, 2015, the Project adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value lvleasurelnent and Application (GASB 72). GASB 72 establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The adoption of GASB 72 did not have a material impact on the Project's financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses recognized during the rep0l1ing period. Actual results may differ from those estimates. 13

INFRASTRUCTURE A PROJECT OF MEDCO Notes to Financial Statements For the Years Ended June 2015 and 2014 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS - continued Accounts Receivable Accounts receivable consist of charges for operating revenues due from the University. The Program considers accounts receivable to be fully collectible as of June 30, 2015 and 2014. Accordingly, no allowance for doubtful accounts is recorded in the accompanying statements of net position. Included in accounts receivable at June 30, 2015 and 2014 are funds due from the University in the amount of $3,607,807 and $2,374,613, respectively. Upon receipt of the 2015 funds from the University, $953,331 is required to be transfened to the bond trustee, $2,501,280 is due to Trigen for capacity charges and fees and expenses, $6,866 is due to Sebesta for management fees, and $146,330 is due to MEDCa for fees and expenses, respectively. Upon receipt of the 2014 funds from the University, $954,242 was required to be transfened to the bond trustee, $1,380,866 was due to Trigen for capacity charges and fees and expenses, $7,966 was due to Sebesta for management fees, and $31,650 was due to MEDca for fees and expenses, respectively. UnbiHed Accounts Receivable As of June 30, 2015 and 2014, unbilled accounts receivable includes $1,171,234 and $1,163,868 of amounts due for capital recovery charges under the Energy Services Agreement that had not been billed to the University. These receivables were billed to the University and collected subsequent to year end. Energy Services Agreement As of June 30, 2015 and 2014, accounts payable and accrued expenses include a reserve for repairs of $1,000,000 in accordance with the Energy Services Agreement. Capital Assets and Depredation Capital assets are canied at cost including interest, canying charges, salaries and related costs, and preconstruction costs associated with the development of the Program. Capital assets are evaluated for impairment on an annual basis under GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries (GASB No. 42). GASB No. 42 requires an evaluation of prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occuned. Such events or changes in circumstances that may be indicative of impairment include evidence of physical damage, enactment or approval of laws or regulations or other changes in environmental factors, technological changes or evidence of obsolescence, changes in the ll1anner or duration of use of a capital asset, and construction stoppage. As of June 30, 2015 and 2014, management does not believe that the capital assets of the Program meet the criteria for impairment as set forth in GASB No. 42. 14

A PROJECT OF MEDCO Notes to Financial Statements For the Years Ended June 30, 2015 and 2014 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS - continued Capital Assets and Depreciation - continued Depreciation of equipment is computed using the straight-line method over the shorter of the estimated useful life of the asset or the term of the Energy Services Agreement. Deferred OutflowslInflows of Resources A deferred outflow of resources represents a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense) until a future period. As of June 30, 2015 and 2014, the Program recognized deferred advance refunding costs as a deferred outflow of resources on the accompanying statements on net position. A deferred inflow of resources represents an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that tilne. As of June 30, 2015 and 2014, the Program recognized revenues which do not meet the availability criteria as a defelted inflow of resources on the accompanying statements of net position. Net position Net position is presented as net investment in capital assets or restricted under the trust indenture. Net investment in capital assets, represents the difference between capital assets and the related debt obligations. Net position restricted under the trust indenture represent the remaining net position, as all surplus funds are restricted as to their use under the terms of the trust indenture. Classification of Revenues and Expenses Revenues and expenses related to the day-to-day activities of the Program are reported as operating revenues and expenses. Other revenues and expenses, consisting of interest income, surplus funds distributions and interest expense, are repolied as non-operating revenues and expenses. Income Taxes MEDCO qualifies for tax-exempt status under Section 501 (c)(4) of the Internal Revenue Code and Section 10-104 of the Tax-General Article of the Annotated Code of Maryland. Accordingly, no provision or benefit for income taxes is included in the accompanying financial statements. 15

A OFMEDCO Notes to Financial Statements For the Years Ended June 2015 and 2014 2. DEPOSITS WITH BOND TRUSTEE Pursuant to the provisions of the trust indenture relating to the bonds payable (see Note 4), deposits with the bond trustee include the following reserve funds and restricted accounts as of June 30: Current Assets: Operating reserve fund Revenue fund Bond fund - interest Bond fund - principal Casualty fund Current Portion Non-current Assets: Debt service reserve fund Dedicated reserve fund Surplus fund Non-Current Portion Total Deposits with Bond Trustee 2015 $ 1,000,000 557,357 4,705,023 3 6,262,383 4,019,500 2,150,395 39 6,169,934 $ 12,432,317 2014 $ 997,250 2,956 628,006 4,485,000 6,113,212 4,068,065 2,150,370 27 6,218,462 $ 12,331,674 The trust indenture authorizes MEDCO or its trustee bank to invest the deposits as detailed under Credit Risk below. Interest earned on these investments was $98,301 and $98,275 for the years ended June 30,2015 and 2014, respectively. Investments of deposits with trustee are carried at fair value, except that non-participating investment contracts (i.e., contracts which are not able to realize market-based increases or decreases in value under any circumstances) are carried at cost. Investments of deposits with trustees are summarized as follows at June 30: Non-participating Investment Contract: Natixis Funding guaranteed investment contract bearing interest at 2.43% and maturing on July 1, 2019 Mutual Funds Total Deposits with Bond Trustee 2015 $ 4,019,500 8,412,817 $ 12,432,317 2014 $ 4,019,500 8,312,174 $ 12,331,674 Natixis Funding Corp. was rated A2/A by three major rating agencies at June 30, 2015 and 2014. 16

2. DEPOSITS WITH BOND TRUSTEE - continued PROJECT OF MEDCO Notes to Financial Statements For the Years Ended June 2015 and 2014 The Deposits with bond trustee are subject to certain risks, including the following: Interest Rate Risk - The trustee has limited investments to mutual funds that invest in U.S. government securities that can be liquidated at any time to meet the cash flow requirements of the Program and a fixed rate investment contract agreement that is guaranteed as to the face of the investment as a means of managing interest rate risk. As a result, the Program is not subject to interest rate risk. Credit Risk - The Program's trust indenture limits MEDCO's investments to obligations of the United States of America (Government Obligations) and certain defined federal agencies obligations provided they are backed by the full faith and credit of the United States of America, are not callable before maturity by anyone other than the holder and are not subject to redemption at less than the par amount thereof; certificates of deposit and time deposits secured by GOVe111ment Obligations; obligations guaranteed as to principal and interest by the State of Maryland or any department, agency, political subdivision or unit thereof; United States dollar denominated deposit accounts with commercial banks in the State of Maryland; investment agreements, repurchase agreements and guaranteed investment contracts: and money market or short-term Government Obligations. As defined in the trust indenture, certain investments listed above must meet specific requirements to be a qualifying investment, such as high rating qualifications based on information from the major rating agencies, collateralization requirements, guaranteed repayment, and maturity requirements. The Program's investments were in compliance with these lilnitations as of June 30, 2015 and 2014. Concentration ofcredit Risk - MEDCO's investment policy does not limit the amount that may be invested in anyone issuer except for public sector pool funds as described under Credit Risk above. The Program held no investments in public sector pool funds or cow..mercial paper as of June 30, 2015 and 2014. Custodial Risk - MEDCa is not subject to custodial risk because the mutual funds are not evidenced by securities that exist in physical form and all other deposits are held in the Program's name. Investments are measured and reported at fair value and are classified and disclosed in one of the following categories: Level I - Quoted prices are available in active markets for identical investments as of the reporting date. Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Level III - Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. 17

A PROJECT MEDCO 2. DEPOSITS WITH BOND TRUSTEE - continued Notes to Financial Statements For the Years Ended June 30, 2015 and 2014 The following table sets folih by level, within the fair value hierarchy, the Project's investments at fair value as of June 30, 2015: Investments by fair value level Guaranteed investment contract Total investments by fair value level $ $ Levell - $ - $ Level 2 4,019,500 $ 4,019,500 $ Level 3 - $ - $ Total 4,019,500 4,019,500 The following table sets folih by level, within the fair value hierarchy, the Project's investments at fair value as of June 30, 2014: Investments by fair value level Guaranteed investment contract Total investments by fair value level $ $ Levell - $ - $ Level 2 4,019,500 $ 4,019,500 $ Level 3 - $ - $ Total 4,019,500 4,019,500 As described above, the Program's Level 2 investment is required to be invested in accordance with the trust indenture. As such it must meet specific requirements to be a qualifying investment, such as high rating qualifications, collateralization requirements, guaranteed repayment, and maturity requirements. The Program's investment was in compliance with these limitations as of June 30, 2015 and 2014. The Project also invests in a money market fund that has a remaining maturity of one year or less at the time of purchase. The investment in this fund is valued at cost, which approximates fair value, and totaled $8,412,817 and $8,312,174 as of June 30,2015 and 2014, respectively. 18

A PROJECT OF MEDCO Notes to Financial Statements For the Years Ended June 2015 and 2014 3. CAPITAL ASSETS Capital assets activity for the years ended June 30, 2015 and 2014 is summarized as follows: Beginning Ending 2015 Balance Additions Retirements Balance Equipment $ 63,286,331 $ $ $ 63,286,331 Less: accumulated depreciation (42,937,220) (3,938,538) (46,875,758) Net Capital Assets $ 20,349,111 $ (3,938,538) $ $ 16,410,573 Beginning Ending 2014 Balance Additions Retirements Balance Equipment $ 63,286,331 $ $ $ 63,286,331 Less: accumulated depreciation (38,998,683) (3,938,537) (42,937,220) Net Capital Assets $ 24,287,648 $ (3,938,537) $ $ 20,349,111 4. BONDS PAYABLE Bonds payable consist of the following as of June 30: Series 2011 Serial Bonds Unamortized premium Unamortized discount Total Bonds Payable Less: Current POliion of Bonds Payable Non-Current Portion of Bonds Payable 2015 $ 23,330,000 892,461 (56,533) 24,165,928 4,705,000 $ 19,460,928 2014 $ 27,815,000 1,367,233 (86,608) 29,095,625 4,485,000 $ 24,610,625 The bonds are secured by a leasehold deed of trust on the energy and utility infrastructure and a general assignment of related revenues and deposits with the bond trustee. The Series 2011 bonds bear interest at a weighted average fixed rate of 4.85% and mature in annual installments through July 1, 2019. The bonds are limited obligations of MEDca and are payable solely from the Program revenues, as defined in the bust indenture, or insurance proceeds. 19

Notes to Financial Statements For the Years Ended June 2015 and 2014 4. BONDS PAYABLE - continued On February 24, 2011, the Program issued $40,195,000 of Series 2011 bonds to refund $46,500,000 of outstanding Series 2001 bonds. The net proceeds of the Series 2011 issuance, including an original issue premium of $3,611,000 and underwriters discount of $229,000, along with funds from the Series 2001 bond trust accounts were placed in escrow to purchase $47,679,000 of State and Local Government Series (SLGS) securities to defease the Series 2001 bonds. As a result of the refunding the Program decreased its aggregate debt service payments by approximately $4,807,000 over the next 8 years and obtained an economic gain of approximately $3,626,000. The Program also recorded a deferred refunding cost of $112,768 in accordance with GASB Statement No. 23, Accounting and Financial Reporting for Refundings ofdebt Reported by Proprietary Activities. The deferred refunding cost is the difference between the reacquisition price and the net carrying amount of the old debt on the date of refunding. This deferred cost is being amortized to interest expense using the effective interest method over the term of the Series 2011 bonds. In accordance with GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the deferred refunding cost is classified as a deferred outflow of resources on the accompanying statements of net position. Interest on the Series 2011 bonds was $1,113,000 and $1,337,000 for the years ended June 30, 2015 and 2014, respectively. Future payments on the bonds payable are due as follows as of June 30,2015: Year ending June 30: Total Interest 2016 2017 2018 2019 2020 Plus: unamortized bond premium Less: unamortized bond discount $ 5,582,963 5,566,213 5,566,463 5,548,963 3,045,000 25,309,602 892,461 (56,533) $ 26,145,530 $ 4,705,000 4,935,000 5,195,000 5,450,000 3,045,000 23,330,000 892,461 (56,533) $ 24,165,928 $ 877,963 631,213 371,463 98,963 1,979,602 $ 1,979,602 In accordance with the trust indenture, the Program is required to produce a coverage ratio, as defined, of not less than 1.2 as of the last day of each fiscal year. The covenant requires operating revenues, as defined, to exceed operating expenses, as defined, by at least 120% of the debt service payments due on the bonds for the year. The Program complied with the rate covenant for the years ending June 30, 2015 and 2014. 20

A PROJECT MEDCO Notes to Financial Statements For the Years Ended June 30,2015 and 2014 4. BONDS PAYABLE - continued Activity in bonds payable for the years ended June 30, 2015 and 2014 is summarized as follows: Bonds Unanlortized Unamortized Payable Premium Discount Balance June 30, 2013 $ 32,085,000 $ 1,933,276 $ (122,464) Reductions (4,270,000) (566,043) 35,856 Balance June 30, 2014 27,815,000 1,367,233 (86,608) Reductions (4,485,000) (474,772) 30,075 Balance June 30, 2015 $ 23,330,000 $ 892,461 $ (56,533) 5. COMMITMENTS MEDea leases the facility that houses the energy and utility infrastructure at the University and the related land from the University System of Maryland under an operating lease expiring in 2019. The lease provides for annual rents of $100. 6. TURBINE FAILURE During April 2013, one of the Program's central heating plant units suffered an equipment failure. As a result of this damage, the turbine was shut down and Trigen performed repairs in accordance with the Management Agreement. Based on the terms of the Management Agreement, Trigen was liable for the repairs and related costs and, as such, the Program did not incur a liability or related loss. The Program accumulated the costs incurred and paid by Trigen as a result of the failure and submitted them to its insurance carrier. During the year ending June 30, 2014, the Program received $2,366,363 in insurance proceeds which were immediately transferred to Trigen. The Program acted as a flow-through entity in the transaction, and, accordingly, this event had no impact on the accompanying financial statements. 21