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nterlochen Center for the Arts is unlike any other arts community in the world. What setsInterlochen apart? Since our first summer in 1928, our purpose has been singular: to ignite alifelong passion in the arts.

Every aspect of this institution – Interlochen Arts Camp and our vibrant summer programs;Interlochen Arts Academy; adult and professional education through the Interlochen College of Creative Arts; public broadcasting via Interlochen Public Radio; and the region’s most ambitious performance series, Interlochen Presents – is intended to help those who value the arts place them at the core of their being.

This report for fiscal year 2010 ( June 1, 2009 – May 31, 2010) will detail a remarkably successful year – a year in which Interlochen grew in both depth and quality. We grew programmatically, organizationally and financially. Perhaps more importantly, it was a year in which we spent a great deal of time thinking about the future, undertaking a year-long visioning process to ensure that Interlochen remains successful, innovative and secure.

There is no possibility for an organization such as ours to succeed without the vital commitmentof a community of people who support our mission. People like you. It is that depth ofcommitment that sustains our spirit and our achievement. We are grateful for what you bring toInterlochen, for it plays a determining role in what Interlochen brings to the world.

With deep thanks and appreciation,

Jeffrey S. KimptonPresident

Letter from the President, Jeffrey S. Kimpton

I

2

he report of finances for fiscal year 2010 ( June 1, 2009 – May 31, 2010), as developed by our external auditors, Plante & Moran, P.L.L.C., details a successful year for Interlochen Center for the Arts.

OPERATING BUDGETRevenue: $31,497,776 (up 6.4% from Fiscal Year 2009)Expenses: $28,289,358 (down 2.4% from Fiscal Year 2009)

FUNDRAISINGInterlochen Fund: $2,090,924Interlochen Public Radio: $1,222,064Total giving, including endowment and capital funds: $4,649,399Total number of donors: 8,933

STUDENT ENROLLMENTInterlochen Arts Camp: 2,460 students from 54 U.S. states and territories and 44 countries

Interlochen Arts Academy: 468 students from 48 U.S. states and territories and 25 countries

SCHOLARSHIPSInterlochen provided a record $8.9 million in financial assistance to Interlochen students

GOvERNMENT SUPPORT:Michigan Council for Arts and Cultural Affairs (General Operating Support): $ 20,000Corporation for Public Broadcasting (Interlochen Public Radio): $269,058

Comprehensive financial reports may be found on page 8 through12 of this report. Complete audited financial statements are available online at www.interlochen.org/support or by calling our advancement office at 231.276.7623.

Fiscal Year 2010 Finances in Review

T

3 4

What Sets Interlochen Apart?

he past year has been a successful one for Interlochen Center for the Arts. We met enrollment goals for Interlochen Arts Camp and Academy. Our performance series generated its highest net revenue in history, while auxiliary sales (lodging, food, clothing and gifts) remained stable or increased. Ticket sales and auxiliary income directly support our scholarship program; strong performance in these areas helped Interlochen meet the increased demand for financial assistance required by families this year. For the third year in a row, IPR was named “Public Radio Station of the Year” by the Michigan Association of Broadcasters.

Perhaps most importantly, Interlochen did not reduce or cut any core programs, people or salaries. Interlochen has remained stable during volatile times because the Interlochen community has remained stable: families have invested in a world class arts education for their children, and donors have contin-ued to recognize the importance of our mission in arts education, presentations and broadcasting.

At a time when nonprofit organizations are facing extraordinary challenges, Interlochen has continued to grow – strengthening our operations and extending our achievements. Several factors have helped us chart a steady course during times of uncertainty:

Flight to known quality during difficult times. Research has shown that people are hesitant to invest in unknown institutions during times of economic turmoil. As one of the oldest and most respected arts educationprograms in the nation, Interlochen has benefited from a long history of innovation and success.

Significant growth in visibility through web and online media. Until the early 2000s, Interlochen had no web presence and limited communications technology. We have invested significantly in online communications at precisely the right time. Our national webcasts and strong web videos help parents, friends and prospective students recognize the value of an Interlochen education.

Synergy of core programs. We have worked hard to build strong synergies between Interlochen’s core programs. Our summer Arts Camp, high school Academy, adult education, public broadcasting and year-round perfor-mance programs are all related in purpose and intent.

National and international recruiting pool. Interlochen is fortunate in that we draw from a national and worldwide pool of students – helping us overcome geographic bound-aries that limit other institutions.

All arts, all ages. While some organizations are specific to one art form or one age group, Interlochen provides comprehensive offerings across six disciplines (music, theatre, dance, visual arts, creative writing and film) and serves all ages – from 8 to 80 and beyond.

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5 6

Interlochen Students Earn National Recognition from the NFAAThirty-six Interlochen students and alumni were honored by the National Foundation for Advancement in the Arts during the 2009-10 YoungArts program. Fourteen Interlochen Campers and Arts Academy students were selected as finalists and 22 received honorable mentions.

Interlochen hosts policy forum on arts educationIn August 2009, Interlochen Center for the Arts partnered with Michigan Youth Arts to convene Michigan’s first Arts Education Policy Forum. The gathering took place on the Interlochen campus and included representatives from the Michigan Department of Education, the Michigan Council for Arts and Cul-tural Affairs and 18 arts education organizations. The group developed a statewide policy agenda to advance arts education in Michigan.

Performance Today visits Interlochen Arts CampFred Child, host of the nationally syndicated classical music program Performance Today, visited Interlochen for the final weekend of the summer 2009 Interlochen Arts Camp. Child produced two shows at Interlochen, featuring two hours of student and faculty performances, which were broadcast to more than 1.2 million weekly listeners on 237 public radio stations around the country.

Summer Arts Festival draws crowdsMore than 90,000 patrons attended an event dur-ing Interlochen’s 2009 Summer Arts Festival season. Shows exceeding 90 percent capacity included Willie Nelson; the Steve Miller Band; Paula Poundstone; the Interlochen Shakespeare Festival production, “The Taming of the Shrew”; Circo Comedia; and the high school musical theatre production, “Anything Goes.”

Highlights IPR named “Public Radio Station of the Year” AGAIN!For the third year in a row, Interlochen Public Radio was named “Public Radio Station of the Year” by the Michigan Association of Broadcasters. IPR received six individual Broadcast Excellence Awards, including Best of Category awards for “Hard News & Current Events,” “Mini-Doc-umentary or Series,” “Newscast,” “News Special or Public Affairs Program” and “Community Involvement.”

Mallory-Towsley Center for Arts LeadershipA one million dollar project has transformed the former costume shop into the Mallory-Towsley Center for Arts Leadership. The completely remodeled 8,000 square-foot conference center serves many purposes, including housing our adult education programs for the Interlochen College of Creative Arts.

visual Arts Building Earns Architectural Honor The Herbert H. and Barbara C. Dow Center for Visual Arts was one of 12 buildings honored by the American Institute of Architects in Michigan at its 2010 awards program. Designed by Cornerstone Architects, the 36,000 square foot building houses Interlochen’s visual arts studios, classrooms and galleries. In their comments, the jury called it “a perfect visual arts space….”

Math and Science Department Receives GrantInterlochen’s math and science department received a $150,000 grant from the science-focused R.B. Annis Foundation of Indianapolis, Indiana. The gift increased the Annis Endowment to $400,000, support-ing ongoing program costs including professional development and the purchase of computers, software and equipment. The gift also provides for the continuation of the Annis Student and Teachers Enrichment Program (A-STEP,) which promotes learning opportunities outside the classroom.

Theatre Department Hosts Agent ShowcaseAs the Academy year drew to a close, the theatre department held its first ever agent showcase, inviting casting professionals from New York City and Los Angeles to Interlochen to meet with students. In college and conservatory acting programs, such showcases are an important final step for theatre students as they begin to establish a career – giving students a chance to network and demonstrate their talents in front of industry professionals.Tenor saxophonist Rachel Mazer of Alamo, California, and guitar major

Max Bowen of Ann Arbor, Michigan were invited onstage to perform with the Steve Miller Band

7 8

Thinking Ahead for an Uncertain Future

Planning ahead is crucial for any organization in today’s world. Between 2005 and 2008, Interlochen conducted a brand audit, a web communications review and an 18-month-long scenarios planning project. These efforts positioned us to respond to the increasingly volatile environment of the last two years, by helping us learn to manage the unpredictable.

The U.S. War College uses the term VUCA to help military and government leaders anticipate and respond to global crises. The acronym stands for volatility, uncertainty, complexity and ambiguity; it’s a method of assessing the unpredictable that sheds light on the past year.

Volatility: Recent years have brought a devastating national and global recession, multiple natural disasters, climate change, a worldwide flu pandemic and an increasingly hostile political environment. This volatility has created an atmosphere in which both public and private investment in the arts have withered, causing substantial reductions in staff, programs and marketing at nonprofit organizations across the nation.

Uncertainty: Approximately 25 percent of Interlochen students travel here from another country. Last year, several Asian governments reacted to the H1N1 epidemic by banning foreign travel. The recession continues to hurt many Interlochen families and prospective students. Uncertainty about the future prevents people from making decisions about their investments in education, the arts, discretionary spending and philanthropy.

Complexity: The world is interconnected in ways never imagined 83 years ago, and the challenges faced by organizations today are increasingly complex. Decision making is compounded by highly polarized attitudes and opinions, by the speed and intensity of communication, by significant increases in new state and federal rules, and by an intensely litigious society.

Ambiguity: One by-product of the speed of communications technology is that people want to know the outcomes of their actions immediately. In an increasingly complex, uncertain and volatile world, this is an expectation that is difficult to fulfill. In the absence of clarity, many in today’s society are tending not to commit, to wait for the one “clear” answer.

9 10

At Interlochen, we’ve attempted to counter increasing volatility, uncertainty, complexity and ambiguity with vision and creativity. We’ve expanded educational opportunities at Interlochen Arts Camp with new singer-songwriter, recording arts and jazz programs; added a comparative arts major at the Academy; and made investments in technology that are fueling growth in web communications and social media. Building on a Board of Trustees initiative, Interlochen enrollments of students of color have increased from 8 to 18%. We’ve continued to develop our campus with the opening of the Mallory-Towsley Center for Arts Leadership, and launched a new radio station – 89.7 FM Manistee/Ludington – to meet the growing demand for IPR’s award-winning news service.

We also look to the core values that have guided the institution for 83 years. Over the past year, members of the Interlochen Board of Trustees conducted hundreds of interviews with employees, students, alumni, parents and friends as they worked to craft a vision for the organization’s future. These sessions have underscored five enduring traits of Interlochen that are as consistent today as they have been throughout the last eight decades:

Inspiring • Nurturing • Transformative • Enlightening • Enduring

These core values and the deep commitment of the Interlochen community give us strength and stability as we look to the future. The direction we must provide is clear: our programs must be strong and of high quality, our faculty the best, our students safe, well cared for and nurtured artistically and emo-tionally in a caring community. Our work must ensure that Interlochen continues to inspire and lead in the decades ahead, so that what we provide to the world arts community is right for our mission and right for our times. With your help, this is just what we intend to do.

Statement of Financial Position

May 31, 2010 May 31, 2009 ASSETS: Cash and cash equivalents $ 11,337,880 $ 8,819,385 Investments 57,629,904 49,682,276 Accounts receivable, net of allowance of $803,000 in 2010 and $772,000 in 2009 28,658 70,311 Gifts receivable 1,972,345 2,411,153 Prepaid expenses and other receivables 678,885 479,880 Inventories 1,368,216 1,349,092 Land, buildings, and equipment, net 40,541,664 41,320,129 Other assets 1,366,143 1,338,499

TOTAL $ 114,923,695 $ 105,470,725

LIABILITIES: Accounts payable - Trade $ 569,039 $ 347,782 Accrued liabilities 2,565,625 2,886,656 Tuition deposits and other 8,481,346 8,381,863 Annuities payable 620,230 644,054 Bonds payable 26,300,000 26,300,000

Total liabilities 38,536,240 38,560,355 NET ASSETS: Unrestricted 51,664,628 43,142,359 Temporarily restricted 3,831,869 2,668,310 Permanently restricted 20,890,958 21,099,701

Total net assets 76,387,455 66,910,370 TOTAL $ 114,923,695 $ 105,470,725

The Mallory-Towsley Center for Arts Leadership

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REvENUENet tuition accounted for more than two thirds of Interlochen’s operating income, which totaled $31,497,776 in fiscal year 2010. Gifts from donors accounted for approximately 11% of that total. Annual giving helps maintain our generous financial aid program and supports other critical operations, from performances to public radio. INvESTMENTS AND ENDOWMENT Investments at the end of fiscal year 2010 were up $7.1 million, recovering more than 40% of the value lost during the previous fiscal year. On average, investments are up 4.7% over the last six years, with the endowment/funds under manage-ment valued at $57.6 million.

By policy of the Board of Trustees, 4.6% of our endowment was returned to Interlochen Center for the Arts in fiscal year 2010 to support the needs of the institution. The amount allocated for operations and scholarships totaled $1,015,797. Along with capital and restricted donations of $1,110,369, we were able to invest in capital improve-ment projects, preservation of our aging facilities and new construction.

EXPENSESIn fiscal year 2010, our operational expenses totaled $28,289,358. This figure represents a decrease of 2.4% compared with the previous year. Our investment in people, the heart of the Interlochen experience, continues to be our biggest expense.

The Interlochen fiscal year runs June 1 through May 31. For a copy of our complete audited financial statements, prepared by Plante & Moran, P.L.L.C., call our advancement office at 231.276.7623.

Understanding Our Operations

13 14

HOW DO INTERLOCHEN DONORS DESIGNATE THEIR GIFTSNearly $4.7 million was given to Interlochen Center for the Arts in fiscal year 2010 by 8,933 individuals, corporations, founda-tions and small businesses. 45.0% of that total was directed to our annual fund program, the Interlochen Fund, which provides scholarship assistance to deserv-ing students from across the globe. Gifts to our endowment add to the long-term stability of Interlochen, while gifts to capital and restricted projects, includ-ing Interlochen Public Radio, help to strengthen our many programs and the facilities they rely upon. SCHOLARSHIPS$8.9 million was awarded in the form of scholarship and financial assistance for deserving students to attend Interlochen programs in fiscal year 2010. Our high school Academy students – 77% of whom receive financial assistance in some form – come from families with an averagehousehold income of $74,000. With Academy tuition at around $42,700, our ability to sustain a diverse, talented and highly motivated student body depends upon the generosity of individuals who support our scholarship program.

WHERE DO INTERLOCHEN FUND GIFTS COME FROM4,319 donors contributed a total of $2,090,924 to The Interlochen Fund in fiscal year 2010. Over the past decade, government support has decreased 94%, underscoring the increasing importance of giving from alumni, parents and friends.

Gifts10.5%

Ticket Sales4.9%

Earned Income(lodging,

retail sales, other)11.4%

Endowment Incomefor Financial Aid and Operations

3.2%

Net Tuition70.0%

REVENUE$31,497,776

Operations17.9%

Cost of Goods& Services 5.9%

General & Administrative

6.0%

Depreciation7.0%

Salaries Wages& Benefits 63.2%

EXPENSES$28,289,358

DONOR GIFTDESIGNATIONS

Total Giving: $4,649,399

INTERLOCHEN FUNDSOURCES

Interlochen Fund Total$2,090,924

Endowment11.5%

Capital, Restricted & Designated

17.2%

Interlochen Fund45.0%

InterlochenPublic Radio

26.3%

Government1.0%

Corporations &Foundations

37.3%

Alumni15.5%

Trustees7.1%

Friends25.6%

Parents11.1%

Employees2.4%