2009 Annual Report Investing in People and Ideas

C O R P O R A T I O N rand Board of Trus t e e s

December 2009

Paul G. Kaminski (Chairman) Michael Lynton Chairman and Chief Executive Officer, Technovation, Inc.; Chairman and Chief Executive Officer, Sony Pictures Entertainment Former U.S. Under Secretary of Defense for Acquisition and Technology Ronald L. Olson Karen Elliott House (Vice Chairman) Partner, Munger, Tolles & Olson LLP Former Publisher, The Wall Street Journal; Former Senior Vice President, Dow Jones and Company, Inc. Paul H. O’Neill Former U.S. Secretary of the Treasury Barbara Barrett President and Chief Executive Officer, Triple Creek Ranch; Michael K. Powell Former U.S. Ambassador to Finland Former Chairman, Federal Communications Commission; Senior Advisor, Providence Equity Capital; Chairman, MK Powell Group Richard J. Danzig Chairman, Center for New American Security; Donald B. Rice Former U.S. Secretary of the Navy President and Chief Executive Officer, Agensys, Inc.; Former U.S. Secretary of the Air Force Francis Fukuyama Bernard L. Schwartz Professor of International Political Economy, James E. Rohr Paul H. Nitze School of Advanced International Studies, Chairman and Chief Executive Officer, The PNC Financial Johns Hopkins University Services Group Richard Gephardt James F. Rothenberg President and Chief Executive Officer, Gephardt Group Chairman and Principal Executive Officer, Capital Research Government Affairs; Former U.S. Congressman and Management Company John W. Handy Hector Ruiz Former Executive Vice President, Horizon Lines, Inc.; Chairman, GLOBALFOUNDRIES General, United States Air Force, Retired Carlos Slim Helú Jen-Hsun Huang Honorary Life Chairman, Grupo CARSO, S. A. de C.V. President and Chief Executive Officer, NVIDIA Corporation Donald Tang John M. Keane Chief Executive Officer, CITIC Securities International Partners Senior Managing Director and Cofounder, Keane Advisors, LLC; General, United States Army, Retired James A. Thomson President and Chief Executive Officer, RAND Corporation Lydia H. Kennard Former Executive Director, Los Angeles World Airports Robert C. Wright Former Vice Chairman, General Electric; Former Chairman and Philip Lader Chief Executive Officer, NBC Universal; Chairman and Cofounder, Chairman, The WPP Group; Former U.S. Ambassador Autism Speaks; Senior Advisor, Lee Capital to the Court of St. James’s

Peter Lowy Trustees Emeriti Chief Executive Officer, Westfield, LLC Harold Brown Counselor, Center for Strategic and International Studies; Former U.S. Secretary of Defense Frank C. Carlucci Chairman Emeritus, The Carlyle Group; Former U.S. Secretary of Defense Contents

Message from the Chairman and the President 3 Investing in People and Ideas Healthy Societies Strategy & Diplomacy Children & Families Energy & Environment Conflict & Instability Global Recession

16 Outreach

18 Our People

20 Educational Opportunities

22 Philanthropy at RAND

24 Policy Circle

28 RAND Advisory Boards

36 Clients and Grantors

38 Financial Report

C O R P O R A T I O N Message from the Chairman and the President Investing in People and Ideas he year 2009 was a productive one for the RAND Corporation. We remain, as always, committed to research and analysis that is of the highest quality, decidedly nonpartisan, and rich in its T potential to solve some of the world’s most vexing problems. This, despite some challenging trends—such as unprecedented partisanship among U.S. policymakers and a global financial environment in which we see ever-greater competition for funding among nonprofit institutions such as RAND.

The vast majority of the policy research at RAND is supported by our clients and sponsors. But sometimes we need to move beyond that work, to integrate it, supplement it, and sometimes break new ground in policy areas outside the boundaries of sponsored research. We do that with our “Investments in People and Ideas.” The program, largely bolstered Message from the Chairman and the President through philanthropic support, helps RAND continue to lend an objective, evidence-based voice to big, often divisive issues; to engage the most Investing in People and Ideas talented individuals to be a part of that effort; and to reach the broadest possible audience to ensure our research and analysis can be used to shape decisions and improve outcomes.

Our work in 2009 rests upon more than 60 years of sustained investment in people and ideas, and demonstrates how this investment has helped build and will contribute to building a better world. Our investments in healthy societies paid off with solid projections for U.S. health care reform and timely preparations for pandemic flu. Our investments in children and families evaluated charter schools and appraised the challenges facing children in military families. Our investments in understanding the global recession found fraud and error in the social safety nets of developing countries and took stock of the coping mechanisms of U.S. households.

Our investments in energy and the environment are helping Israel to maintain its energy self-sufficiency and exploring how commercial buildings can become more energy efficient. Finally, our broad portfolio in global security and conflict abatement has produced valuable insights for promoting security in Mexico and the United States, dealing with nuclear proliferation, understanding China, facing Iran, and stabilizing Iraq and Afghanistan.

In these and other areas, it is RAND’s adherence to our core values of quality and objectivity that gives confidence to our clients and philanthropic supporters—and makes RAND a trusted resource for the policymakers who use the ideas we generate.

We believe our investment in people and ideas makes communities around the world safer, healthier, and more prosperous. We thank our clients and donors for supporting our research endeavors in 2009, and we look forward to continuing in this tradition with their support in the years to come.

James A. Thomson Paul G. Kaminski President and Chief Executive Officer Chairman, RAND Board of Trustees Providing Evidence to Support Healthy Societies

RAND ideas are helping to improve the health of people around the world. Researchers examine what works, what doesn’t, and where we should channel resources to yield the best possible outcome. RAND’s investment in improving health in 2009—ranging from health care reform in the United States and patient safety in Europe to influenza preparedness throughout the world— results in long-term dividends for us all. A+

F INDINGS

U.S. Health Care Reform Giving California physicians financial In 2009, RAND launched incentives to improve COMPARE (Comprehensive the quality of medi- Assessment of Reform Efforts), cal care stimulates changes in practice a transparent, evidence-based that advance quality. approach to help decisionmakers assess the effects of reform proposals on health care system performance In a first-of-its-kind (such as access, quality, and cost). $ effort to construct COMPARE offers objective analyses of policy options being 23 a comprehensive national assessment used, considered, or discussed by public and private policymakers. Billion of the costs of the COMPARE was developed over many years in anticipation of the methamphetamine problem in enormous consequences and considerations for dramatically revising the United States, a study by the way health care in the United States is delivered and managed. the RAND Drug Policy Research Center revealed the economic The COMPARE resources and tools were briefed widely to cost to be $23.4 billion in 2005. Congress and other key stakeholders and its analytic features were The analysis considers a wide used to help evaluate proposed reform bills and variations among range of consequences of meth use, including the burden of them. Designed to be comprehensive, user-friendly, and flexible, addiction, premature death, drug COMPARE is a tool that has innumerable applications and can treatment, and lost productivity, be used by a wide variety of stakeholders to better understand and among other factors. evaluate this complex issue.

Use of radio frequency Responding to H1N1 identification technology in For years, RAND has been at the Europe to track forefront of policy discussions to help patients and their conditions can increase patient safety improve preparedness for a potential and reduce costs. influenza pandemic. RAND’s contributions helped facilitate a unified global response to the H1N1 $18 billion could influenza pandemic in 2009. A set be saved in annual of RAND global exercises helped health care costs if Americans reduce strengthen regional disease surveillance response capability in sodium intake to recommended three regions: The countries and two provinces of China that share amounts. the Mekong Delta of Southeast Asia; a Middle East consortium involving Jordan, Israel, and the Palestinian Authority; and a similar group involving India, Pakistan, and Bangladesh. RAND People in poor also worked with the U.S. Department of Health and Human physical and mental health suffer Services and the Centers for Disease Control and Prevention to disproportionately clarify the roles of national and local agencies during a pandemic, from disasters, develop a guide for managing critical decisions that will be needed revealing the need for public prior to and during a pandemic, and improve essential data health agencies to collaborate with community partners and collection on matters such as the incidence and severity of seasonal care providers on improving influenza and the supply and effectiveness of vaccines. preparedness among chronically vulnerable populations.

Investing in People and Ideas 5 Sharing Expertise to Advance Strategy & Diplomacy

Old patterns of state-to-state and bloc-to-bloc relations are now eclipsed by global concerns that cut across functional disciplines and regional boundaries. With a focus on world political, economic, social, and military trends, RAND activities in 2009 helped provide a better understanding of pressing issues impacting global relations. COMMENTARy

Iran—Dangerous But Not Omnipotent RAND researchers are important In recent years, Iran has con- opinion leaders on international policy sistently been at odds with the issues. In addition to dozens of international community, with monographs, reports, books, and its challenges to U.S. inter- articles, they published commentary ests being notably aggressive in 2009 that included the following:

and urgent. To some, Iran’s Defeating Hamas Will Not provocative positions on its Defeat Iran by Dalia Dassa Kaye Strategy & Diplomacy nuclear program, support for (ForeignPolicy.com, January 14) nonstate militants, and development of threatening military capabili- Asia’s Nonproliferation Laggards: ties suggest that it is trying to effect far-reaching changes on both the China, India, Pakistan, Indonesia, regional and global stage. Within this context, a 2009 RAND report and Malaysia by Charles Wolf, Jr. (Wall Street Journal Asia, aims to provide policy planners with a new framework for anticipating February 9) and preparing for the strategic challenges Iran will present over the next 10–15 years. The study assesses four critical areas—the Iranian regime’s Obama’s Foreign Policy Team perception of itself as a regional and global power; Iran’s conventional and U.S.–Korean Relations by Chaibong Hahm (Joangang Ilbo, military buildup and aspirations for asymmetric warfare; its support to February 16) Islamist militant groups; and its appeal to Arab public opinion. RAND researchers offer a new U.S. policy paradigm that seeks to manage the To Talk With Iran, Stop Not Talking by James Dobbins challenges Iran presents by exploiting regional barriers to its power and (WashingtonPost.com, March 3) vulnerabilities in the regime’s strategic calculus. Obama’s Turkish Dilemma by F. Stephen Larrabee Understanding China (CNN.com, April 6) N.K. Provocation Suggests As China evolves from a Regime in Trouble by Bruce centrally planned communist Bennett (The Korea Herald, April 9) dictatorship to a less authori- European Union at Cross tarian state with an increas- Purposes in Kosovo by ingly market economy and Christopher S. Chivvis rising economic clout, it is (GlobalSecurity.org, April 27) no longer appropriate to talk How Russia Can and Can’t Help of integrating China into the Obama by Brian Michael Jenkins international system. By and (ForeignPolicy.com, August 26)

large, it is already there—active in regions and on issues that were once G-20 Growing Pains by Lowell H. only peripheral to its interests. Chinese policymakers and analysts refer Schwartz (Pittsburgh Post-Gazette, to China’s rise as a “revitalization” and “rejuvenation,” but its goal to September 24)

reclaim its status as a great power remains poorly defined or articulated. China: Self-Perception vs. Outside RAND experts studying the issue put China’s transition into context, Perception by Michael J. Lostumbo examining how China views its security environment; how it defines its (World Journal, October 2) international objectives; how it is pursuing these objectives; and the Keeping Our Allies on Our Side consequences for U.S. economic and security interests. One of China’s in Afghanistan by Leo Michel and greatest challenges as it defines its future security role in the region and Robert E. Hunter (Los Angeles Times, October 27) the world is to harmonize its own view of its security intentions with that of the outside world: China’s future political evolution remains Take the War to Pakistan by Seth uncertain, and that leaves other nations uncertain about its future role. G. Jones (The New York Times, December 4)

Investing in People and Ideas 7 Improving Outcomes for Children & Families

RAND has long explored ways to improve policies that affect the well-being of children and families. In 2009, RAND addressed a range of issues, including the mental health of students exposed to trauma, the effect of the economic crisis on parents and children, and cultivating academic improvement among primary school students in communities as distinct as New york City and Qatar. RAND’s people and ideas are trained on improving outcomes for children and families. F INDINGS

Evaluating Charter Schools of American children have already had As the number of charter schools sex by the time their parents initiate “the talk,” in the United States grows, according to a 2009 RAND study. debate continues about whether The analysis suggests that parents charter schools provide a better educate their children earlier in education experience than life about sexually transmitted diseases, birth control, and what traditional public schools. A 2009 to do if a partner refuses RAND study examining charter a condom. schools in Chicago, San Diego, Philadelphia, Denver, Milwaukee, Findings about the socioeconomic, and the states of Ohio, Texas, health, safety, and and Florida was the first to use educational disparities longitudinal, student-level data to faced by boys and examine the issue across multiple men of color are being used by The California Endowment to help communities and varied charter the foundation determine how to laws. Researchers found that charter schools do not generally draw most effectively allocate funds to the top students away from or substantially affect achievement in serve these populations. traditional public schools; and that charter middle and high schools RAND produced produce test-score achievement gains that are, on average, similar to research briefs for those of traditional public schools. The data indicate, however, that the incoming Obama high school students in charter schools had a higher probability of administration graduating high school and attending college. and the 111th Congress on five key education priorities: Improving Accountability in Public Education; Increasing Participation Challenges for Military Children in No Child Left Behind School Choice; Designing Effective A 2009 RAND study Pay-for-Performance in K–12 Education; Promoting Effective examined the wartime well- Preschool Programs; and The Role being of 1,500 children from of Charter Schools in Improving military families—the largest Education. study to date that explores how these children are One-on-one work between teachers and faring academically, socially, students played an and emotionally during an important role in the extended period of parental deployment. Researchers found that, ongoing success of the nation of & Qatar’s education reform efforts, Children Families compared with other American youths, these children may suffer according to a 2009 study of from more emotional and behavioral difficulties, with older children independent schools that adopted and girls struggling the most when a parent is deployed. Although new curricula and teaching the study found no significant differences among children based on methods. what service a parent served in or whether the parent was part of the Depression in teens active or reserve component of the military, the longer the period is linked to lower of time a parent had been deployed over the previous three years, grades; more days the greater the likelihood that a child reported deployment-related of impairment; and coexisting emotional difficulties. The project was commissioned by the National Military and behavioral problems, Family Association, an independent nonprofit group that provides such as anxiety, post-traumatic support and services to military families. stress disorder, hyperactivity, drug use, and aggressive behavior.

Investing in People and Ideas 9 Improving the Use of Energy & Environment

RAND work in energy and the environment builds on a long history of research on the interrelated issues of natural resources and economic development. Researchers with a variety of backgrounds—economists, physicists, chemists, and engineers—contribute to projects that address a broad range of concerns from environmental regulation, climate change, and energy resources to agriculture, natural hazards and disasters, and national security. F INDINGS

Israel’s Energy Future In a study for the U.S. Federal Aviation Administration LEBANON Israel is running out of capacity to meet conducted jointly by SyRIA its electricity demands. Its power grid is RAND and the Massachusetts not connected to that of any other na- Institute of Technology, researchers found that three West tion, making it an electricity “island.” Bank In a project commissioned by the alternatives to petroleum-based Gaza jet fuel may be available in Strip Nazarian Family Foundation, RAND commercial quantities in the next researchers built analytic tools that decade. However, limited biomass Israel’s planners can use to enhance en- and plant oil resources severely JORDAN restrict the quantity of those ergy supply security while still meeting alternatives that might reduce goals for cost, environmental protec- aviation’s impact on climate. EGyPT tion, and land use—especially when the economic, technological, political, In a study on and energy future is so uncertain. Key findings from the RAND imported oil and Energy & Environment U.S. national analysis indicate that Israel can make natural gas usage a bigger part security, RAND of its energy portfolio without jeopardizing its security, but the single researchers conclude that most important factor to having a successful energy policy is for Israel attempting to curtail terrorist to slow the growth in demand for electricity and use its energy more financing through measures affecting the oil market will efficiently. not be effective, because terrorist attacks cost so little to perpetrate.

Green Buildings A multiyear body of RAND work was In developed presented to the U.S. countries, more Senate Committee on Energy than a third of and Natural Resources, outlining the benefits of enhanced all energy is used federal support for research and to heat, cool, technology development directed and illuminate at how the United States produces buildings—often and uses fossil fuels. inefficiently. A RAND Europe analysis A 2009 RAND is helping environmental study examines policymakers improve the European Union’s and Australia’s experiences driving energy long-term thinking about complex efficiency in the building sector. The study profiles various public environmental issues by refining the utility of scenario planning in policy approaches Europeans and Australians have used to overcome decisionmaking. market imperfections and drive investment in efficiency. Both Europe and Australia accord special roles to public buildings to build In research efficiency awareness and support innovation. Tighter building codes commissioned by are slow to work but, if they are clear and consistently enforced, several Chinese agencies, RAND can make a difference. Systems to rate the efficiency and design found that China can characteristics of buildings can give consumers information about best spur regional development expected energy performance and serve to increase the value of high- and economic growth in China’s Tianjin municipality, its newest performing buildings, but only with a cadre of well-trained inspectors. megalopolis, by focusing on And successful energy efficiency programs for buildings can create emerging high-technology well-paying “green jobs.” applications, one of which is green manufacturing.

Investing in People and Ideas 11 Evaluating Options to Mitigate Conflict& Instability

RAND is renowned for helping policymakers better understand regional conflicts and providing evidence-based guidance on policies to restore stability. RAND research in 2009 offered input to the ongoing conflicts in Iraq and Afghanistan, the declining security situation in Mexico, and a range of other military and strategic concerns that critically impact security around the world. F INDINGS

The Wars in Iraq and Afghanistan In conflict areas, effective civilian relief, RAND made several contributions reconstruction, and economic development to U.S. policy considerations for work can help convince populations this troubled region in 2009. The to support their government against RAND National Defense Research insurgency. Insurgents know this, Institute released its congressionally and typically target civilian relief work in order to weaken the will mandated analyses of the timetable to fight. Too often, this results in a for withdrawal of U.S. forces from postponement of reconstruction Iraq. These analyses covered logistical efforts and/or excessive reliance on force to defeat insurgents. It constraints, base closures, the composition of the residual U.S. forces, is important to conduct civilian and the ability of Iraqi security forces to successfully counter insurgent counterinsurgency where the activity. A parallel analysis by the RAND Arroyo Center of logistics population resides and despite the capabilities in Southwest Asia led U.S. Central Command to conclude persistence of violence. that a drawdown in Iraq could occur more rapidly than previously believed. In support of operations in Afghanistan, RAND provided The Afghan National Army (ANA) is critical to the a series of briefings on Taliban strategy and tactics and its shadow stabilization of Afghanistan. government to the Marine Corps and throughout the U.S. Intelli- A RAND study assessing gence Community. RAND analyst Seth Jones wrote In the Graveyard the ANA’s progress in of Empires: America’s War in Afghanistan (W.W. Norton), in which he the areas of recruitment, training, facilities, and operational capacity harnesses important new historical research, thousands of declassified finds that though it has come a long government documents, and interviews with prominent figures to re- way since the outset of the current veal how the siphoning of resources to Iraq left Afghanistan vulnerable war, coalition forces will continue to a “war of a thousand cuts.” Jones argues for a radically new approach. to play a crucial role in the security of Afghanistan for the foreseeable future. Bolstering Mexican Security & RAND’s national security Conflict Instability divisions contributed to the Drug violence in Mexico, frequently ongoing U.S. Department centered in border towns, topped of Defense quadrennial headlines in 2009. Researchers at review of defense strategy RAND, supported by RAND’s and programs, known as the QDR. The Army Vice Chief of Staff has Investment in People and Ideas noted that a RAND Arroyo Center program (see page 23), looked at study of the recent experience with narco-violence and other issues to deployments in Iraq and Afghanistan investigate the broader problem of Mexico’s decaying security systems. and the implications for future deployments was having a major Drawing on interviews with a wide range of Mexican and U.S. officials impact on QDR deliberations. and nongovernmental experts, as well as other sources, researchers

identified a range of prevalent challenges from human trafficking and Large multinational corruption to weapons smuggling and gang violence. But the chief corporations operating security threat to the United States from Mexico, they found, is orga- in violent conflict zones nized crime, which has infiltrated all levels of Mexico’s government and are often motivated to engage in typical police forces, and is involved in many illegal activities that are on the counterinsurgency activities to rise. The RAND study points to a historic window of opportunity for protect their infrastructure and the United States to forge a strategic security partnership with Mexico personnel. Policymakers looking to that emphasizes reform and long-term institution-building. Study mitigate conflict may be tempted to leverage ongoing corporate coauthor Ben Bahney concludes, “The real threat to the United States activities, but should be cautious is that Mexicans lose their political will for the fight, and the cartels’ given the lack of transparency and organized violence and bribery will permanently subvert Mexican insti- accountability involved. tutions, suppressing real political and economic progress.”

Investing in People and Ideas 13 Contextualizing the Global Recession

In the wake of the global economic recession, RAND explored new ideas for strengthening corporate governance, compliance, and ethics practices; understanding the spending, saving, and consumer habits of individuals; and avoiding waste in public expenditures. RAND experts also examined whether the recession would have lasting geopolitical consequences; and, most importantly, what policy levers could be identified to avoid future crises. COLLABORATIONS

Mending Holes in the Safety Net RAND is partnering with the Wharton School of Countries throughout Business and Dart- mouth College to de- the world have safety net velop and operate the programs to assist the Financial Literacy Center, an online poor. Ensuring that safety resource backed by the latest net resources reach the empirical data to help Americans at various stages of their working intended beneficiaries lives, including current retirees, is vital—not only for prepare financially for old age. those in need but also for maintaining government The RAND Behavioral and public support for Finance Forum hosted such programs. In 2009, the U.S.–UK Confer- ence on Behavioral a RAND Europe project Finance and Public focused on the impact Policy, which focused on helping of error, fraud, and consumers make better financial decisions. Held in Washington, corruption (EFC) on the D.C., the conference was attended safety net systems needed by members of Congress and their to support some of the world’s most vulnerable individuals and staffs; academics; members of families. Drawing on work conducted in collaboration with the the financial industry; and other policymakers. World Bank, RAND Europe designed a toolkit to help diagnose EFC issues in safety net programs, consider options for mitigating In March, RAND con- the problem, and improve governance. The diagnostic tools were vened a conference in Global Recession piloted in the Ukraine, Kyrgyzstan, and Bangladesh; on the basis Washington, D.C., on of the study findings, all three countries have since taken steps the role and perspec- to reduce the occurrence of EFC. tives of corporate chief ethics and compliance officers (CECOs) in helping their organizations detect and prevent corporate misdeeds. The conference brought together Helping Each Other CECOs and stakeholders in the in Times of Need nonprofit sector, academia, and government. A team of researchers at RAND is tracking the effects of the economic The Kauffman-RAND recession using the American Life Institute for Entre- preneurship Public Panel, a nationally representative Policy collaborated longitudinal survey of 2,500 with the Indian School households. Several waves of data of Business and the LEGATUM have been collected since the Institute on the first International Conference on Entrepreneurship. recession began, which provide a detailed picture of how spending, Held in Hyderabad, India, the housing, employment, retirement savings, and future expectations t w o - d a y s y m p o s i u m f o c u s e d o n are being affected by the financial crisis. A 2009 analysis shows “Catalysts of Entrepreneurship: Policies for Growth.” Policymakers, that one way U.S. households are coping with the global economic industry leaders, researchers, and downturn is by offering financial help to family members. The entrepreneurs presented research analysis details patterns of giving and receiving financial help in on and discussed policy issues af- response to the economic crisis, and how these patterns vary by fecting the growth of entrepreneur- ship in India, with special empha- age and income. Among the key findings are that many more sis on education and the effective households are giving financial help than receiving it and that help utilization of infrastructure. most frequently flows from parents to children.

Investing in People and Ideas 15 Enriching the Debate Outreach

A PUBLIC RESOURCE DELIVERING INSIGHT

In 2009, RAND findings and recommen- Each year, RAND experts make hundreds of dations were published in more than 700 presentations to decisionmakers and thought leaders policy reports, journal articles, and re- on issues of local, national, and global concern. search briefs. RAND research is available A selection of 2009 presentations includes for free download from our Web site; more than President Obama and the Middle East: 4.2 million documents were downloaded in 2009. Challenges for the New Administration

Greenhouse Gas Reduction: What Constitutes an RAND also shares research findings widely Effective Cap-and-Trade Program? through media. More than 4,000 unique media reports featuring RAND research or Relationship Between Financial Literacy and researchers were published or broadcast by Individuals’ Investment Decisions influential media outlets around the world in Civilian Earnings of Reservists Following Deployment 2009. RAND researchers also provide informed insight into current events via published op-ed commentaries. North Korean Power: Myths and Realities In 2009, RAND commentaries appeared in outlets such Public Safety in Los Angeles as CNN.com, FinancialTimes.com, International Herald Tribune, Shanghai Daily, and the New York Times. Getting Health Care Where you Shop: Do Retail Medical Clinics Offer Comparable Care?

RAND helps provide timely input on Revitalizing the Transatlantic Security Partnership decisions confronting government officials Imported Oil and U.S. National Security around the world including policymakers in Europe and the Middle East, as well as Equal Opportunity Entrepreneurship U.S. officials in the Executive Branch, in Congress, The H1N1 Pandemic and Investments to Improve and at the state and local level. RAND lends analytical Community Readiness expertise to Capitol Hill lawmakers via expert testimony and an extensive array of nonpartisan briefings and Cybersecurity and Human Behavior meetings. In 2009, RAND experts delivered more than New Directions for U.S. Drug Policy 400 presentations to congressional audiences.

Expanded multimedia offerings in 2009 allowed a broader audience to experience RAND briefings and expertise. Presentations of the RAND Congressional Briefing Series, conducted for a live audience in Washington, D.C., are now available in streaming video on www.rand.org or as an audio podcast. RAND on popular sites such as Facebook, Twitter, and YouTube helped policy observers discover and share RAND research findings.

16 Investing in People and Ideas CONVENING THOUGHT LEADERS

In 2009, RAND cohosted the Leadership for Health changing geopolitics of energy. Ambassador James Dob- Summit, the first conference of African First Ladies held bins, director of the RAND International Security and De- in the United States. The summit brought together 13 fense Policy Center, participated in a separate educational First Ladies along with seven country delegations to dis- forum during which he discussed the impact of the wars in cuss ideas and strategies for improving the health and Iraq and Afghanistan on the world economy and the chal- education of Africa’s women and girls. RAND research- lenges in implementing economic assistance programs in ers provided expertise to frame discussions around those regions. HIV/AIDS, maternal and child health, and education. As the social landscape in Africa improves with regard In 2009, RAND Europe cosponsored the first cross-party to women’s issues, RAND is launching the African First debate on UK science policy involving all three mainstream Ladies initiative to demonstrate the role research and British political parties. RAND Europe President Jona- analysis can play in informing public policy. than Grant joined Lord Drayson, Minister for Science and Innovation; Conservative spokesman Adam Afriyie; and The RAND Center for Middle East Public Policy (CMEPP) the Liberal Democrats’ Evan Harris on a panel discussion convened two conferences in 2009 to address chal- covering topics such as research funding, independent lenges in Afghanistan. The first, held in Vienna, included scientific advice, and the central role of science to the leading analysts from Afghanistan, China, Denmark, economy. Grant drew on RAND Europe’s experience India, Iran, Pakistan, Russia, the United States, and the evaluating scientific research and providing evidence European Union, as well as representatives of non- to inform science and technology policymaking across governmental and private-sector organizations. Called Nation-Building and the Futures of Afghanistan: An Ex- amination of Alternative Outcomes and Policies from a Regional and International Perspective, the conference was cohosted with the Royal Danish Defence College and the Austrian Ministry for European and International Affairs. The Washington, D.C., meeting, held on Capitol Hill, brought together more than 250 policy experts, government officials, and journalists for a discus- sion of assumptions and alternatives for U.S. policy in Afghanistan. Former National Security Advisor Zbigniew Brzezinski, Ambassador Zalmay Khalilzad, Senator Carl Levin, and Ambassador James Dobbins and Brian Mi- the European Union (EU). RAND Europe also convened chael Jenkins, both of RAND, led a distinguished roster representatives from the European Commission, EU, and of speakers in addressing topics such as military troop private and charitable sectors in Brussels to hear from Carl levels needed to support a counterinsurgency strategy, Bildt, Sweden’s Minister for Foreign Affairs, on European the role of Afghan security forces, and potential costs of foreign relations following the rotation of the EU presidency increased military operations. to Sweden in July.

During the lead-up to the G-20 summit in Pittsburgh, The RAND-Qatar Policy Institute was a partner to the World RAND researchers helped inform media and policy ob- Innovation Summit for Education (WISE) in Doha, Qatar, servers on top summit agenda issues. At a conference organized by the Qatar Foundation under the leadership on summit outcomes coordinated by RAND, the World of Her Highness Sheikha Mozah Bint Nasser Al Missned. Affairs Council of Pittsburgh, and research centers RAND researchers joined hundreds of education experts at Carnegie Mellon University and the University from around the world to address issues of sustainability, of Pittsburgh, Andrew Weiss, director of the RAND pluralism, and innovation in education policy. Center for Russia and Eurasia, spoke about the

Investing in People and Ideas 17 The Key to Our Success Our People

DIVERSITy LEADERSHIP

Diversity at RAND promotes creativity, deepens RAND senior management guides and supports staff understanding of the practical effects of policy, and as they carry out our mission to help improve policy and ensures multiple viewpoints and perspectives. decisionmaking through research and analysis.

Approximately 1,600 people James A. Thomson Eugene C. Gritton work at RAND from one of nine President and Vice President, RAND National office locations around the Chief Executive Officer Security Research Division world. Our staff is diverse in work experience Director, RAND National Defense Michael D. Rich Research Institute and academic training; political and ideological Executive Vice President outlook; and race, gender, and ethnicity. Andrew R. Hoehn Vivian J. Arterbery Vice President and Director, Corporate Secretary á RAND Project AIR FORCE Tackling complex policy issues Karen Treverton Patrick Horrigan Special Assistant, requires multiple disciplines and Vice President, Office of Services experiences. RAND researchers President’s Office hold advanced degrees in political Jeffrey Isaacson Vice President and Director, science and international relations; economics; Susan Bodilly RAND Arroyo Center behavioral science; engineering; law and Director, RAND Education (military leave) business; math, operations research, and Arie Kapteyn statistics; policy analysis; life sciences; social Timothy M. Bonds Acting Director, Director, RAND Labor and sciences; arts and letters; physical sciences; RAND Arroyo Center Population and computer sciences. Robert H. Brook Debra Knopman Vice President and Director, Vice President and Director, With more than 50 nationalities RAND Health RAND Infrastructure, Safety, and Environment á represented by RAND Lynn Davis staff, many of our people Director, Washington Office Lindsey C. Kozberg are multilingual. Languages spoken include Vice President for External Affairs Spanish, French, Chinese, Arabic, Russian, Jim Dertouzos Director, RAND Institute for Susan L. Marquis German, Korean, and Japanese. Civil Justice Dean, Pardee RAND Graduate School Susan Everingham RAND’s focus is global: Our staff Director, Pittsburgh Office Bruce Nardulli Director, are committed to helping people Richard Fallon RAND-Qatar Policy Institute and societies throughout the world Vice President and be safer, healthier, and more Chief Financial Officer Adele R. Palmer prosperous. Vice President, Staff Development Jonathan Grant and Management Office President, RAND Europe

AS OF DECEMBER 2009

á

18 Investing in People and Ideas ExCELLENCE

President’s Awards recognize RAND staff who have made outstanding contributions to the RAND community while exemplifying our core values of quality and objectivity. Made possible by the generosity of donors to the RAND Policy Circle, the awards provide staff with research time and support to pursue activities related to career development or exploratory research.

John Birkler, senior management systems analyst and Rosalie Pacula, senior economist; codirector of the RAND manager of Maritime Programs in the RAND National Drug Policy Research Center; acting director of RAND Security Research Division, for his intellectual leadership Health’s Economics, Finance, and Organization program; of RAND’s research program for the Office of the and professor of health economics at the Pardee RAND Secretary of Defense, the U.S. Navy, the U.S. special Graduate School, for her influential research on the global operations community, and foreign defense ministries drug market, the economic cost of methamphetamine on issues involving the modernization and operation of use, and the legalization of marijuana and for her skill at naval forces. disseminating research findings to both policymakers and the general public. Dennis Flieder, associate director of Contract and Grant Services, for the professionalism and integrity with which Michael Rayfield, program manager for Information he assists in establishing new collaborative relationships Services and Technology, for developing and between RAND and other organizations and for his implementing the continuous improvement program within commitment to the training and skill development of the Office of Services, which has led to improvements RAND’s contract administrators. in both effectiveness and efficiency at RAND, as well as adoption by other institutions. Krishna Kumar, senior economist and professor of economic development and leader of the Rosenfeld Jennifer Rubin, director for Emerging Areas, RAND Program on Asian Development at the Pardee RAND Europe, for her sustained and successful entrepreneurship Graduate School, for his multifaceted efforts to in developing new research areas for RAND Europe, such strengthen RAND’s expertise on and presence in Asia, as pan-European collaboration in comparative criminal through both his research and entrepreneurial activities, justice and assessing interventions to reduce crime and and his commitment to strengthening the international violence in Europe; for her delivery of high-impact and curriculum of the Pardee RAND Graduate School. high-quality research on a broad range of policy issues; and for her recruitment of outstanding analysts. Joy Moini, senior project associate, for the full range of her contributions during her three and a half years Gery Ryan, senior behavioral scientist and professor of in RAND’s Doha office, especially her many varied political and social science, qualitative research, and research projects, her initiative and effectiveness in public policy analysis at the Pardee RAND Graduate advancing RAND’s capacity-building programs, and her School, for his many contributions to both the school skill at representing RAND in new settings. and RAND’s international research agenda, including, especially, his innovative leadership of the internal Melinda Moore , senior natural scientist, for her creative reaccreditation task force; his research on education research on effective preparedness planning for reform in Qatar; and his initiative in helping to launch pandemics around the world, including in the Mekong the Leadership for Health Summit, the first conference of Delta Basin in Southeast Asia, the Middle East, and the African First Ladies held in the United States. United States, and for her efforts on behalf of RAND’s preparations for H1N1 influenza.

Investing in People and Ideas 19 The Next Generation of Policy Leaders Educational Opportunities

PARDEE RAND GRADUATE SCHOOL

The Pardee RAND Graduate School (PRGS) is the world’s leading producer of Ph.D.’s in public policy analysis.

PRGS is unique in American higher education. The school is colocated at RAND’s headquarters campus in Santa Monica, California; and its graduate students are given the rare opportunity to study at one of the world’s most prestigious policy research institutions while working on current RAND projects alongside top policy thinkers. In this way, PRGS students get to be part of an intellectual community that doesn’t just write about problems but actually helps government and other decisionmakers solve those problems.

In 2009, PRGS students contributed to RAND projects that are addressing topics such as health care reform, climate change, immigration, national security planning, and international development.

PRGS students are highly accomplished and come to the school with a range of different educational backgrounds and a passion for public service. In the fall of 2009, PRGS welcomed 22 new students, from the United States, Canada, China, Korea, Nepal, Togo, and Turkey.

For the first time, all entering students in 2009 are scholarship recipients. PRGS is working to provide full scholarships for all first-year students and partial scholarships for all second-year students to ensure that each PRGS student can graduate with minimal debt and be able to pursue a public service career.

Additionally, thanks to the generosity of PRGS board members, friends, and alumni, PRGS was able—as part of its annual dissertation award competition—to award nearly $394,000 in dissertation grants to more than 20 students on dissertation status.

EARLy CAREER RESEARCH AWARD RECIPIENT

PRGS student Meena Fernandes recently received the Judy K. Black Early Career Research Award from the American Academy of Health Behavior (AAHB). The award recognizes innovative, rigorous early-career health behavior research that makes an important contribution to science or practice. The selection was based on her paper, “The Role of School Physical Activity Programs in Child Obesity Trajectory,” coauthored with senior economist and PRGS faculty member Roland Sturm. The award was presented in March at the AAHB’s annual conference in Hilton Head, South Carolina, during which Fernandes shared her findings.

20 Investing in People and Ideas POSTDOCTORAL & PROf ESSIONAL PROGRAmS SUmmER ASSOCIATES

RAND partners with several leading universities to offer health- and For more than 50 years, a select group of health care–related programs for postdoctoral students. Physicians at the outstanding graduate students from around Robert Wood Johnson Clinical Scholars Program at UCLA collaborate on the world has been invited to RAND for an research projects with leading RAND Health researchers. RAND Health also intensive mentorship experience working sponsors a program with the UCLA School of Public Health to offer training with RAND senior staff. Summer associates in health services research methods and policy analysis. Participants in the have gone on to become influential thought RAND–University of Pittsburgh Scholars Program work on health services leaders in government, the private sector, research and health policy–related projects with a multidisciplinary group of and academia. A sample of summer experienced faculty mentors from RAND Health, the University of Pittsburgh, associate research projects in 2009 includes and affiliated research units. development of an “early- Through the Military Fellows Program, active-duty service members from warning” program for the U.S. the Army, Navy, Marine Corps, Coast Guard, and Air Force are stationed National Intelligence Council at RAND for a year to participate in studies and other activities to advance their understanding of analytical policy research. Each year, the U.S. Department of Homeland Security (DHS) and RAND select a senior DHS a study examining whether analyst to work on critical issues through the DHS Fellowship Program. built and social characteristics New Security Challenges, offered by PRGS, is an intensive course that of neighborhoods predict the equips participants with an understanding of the most critical current development of cardiovascular policy challenges in the areas of security and defense and the most up- disease in women to-date analytical techniques for addressing them. RAND is also one of the participating institutions in the Transatlantic Postdoctoral Fellowship an analysis of the for International Relations and Security, which engages recent doctoral complex relationships students in social and political science to work on cutting-edge topics as among drug use, part of an intensive rotational tour through three leading research institutes criminal activity, and the criminal on both sides of the Atlantic. The Nuclear Security Fellows Program, justice system announced in 2009 and sponsored by the Stanton Foundation, will bring scholars to RAND to conduct interdisciplinary, policy-relevant research that an assessment of the advances understanding of issues related to nuclear security. institutional and operational RAND convenes two annual conferences on aging sponsored by the capacity of several African National Institute on Aging and the National Institutes of Health Office of armies Behavioral and Social Sciences Research. Known collectively as the RAND Summer Institute, the conferences include a Mini-Medical School for Social an examination of the patterns Scientists and a workshop on Demography, Economics, and Epidemiology of technology diffusion of Aging. The sessions address biology, genetics, patient care, psychiatry, and their consequences for and other areas to help non–medically trained scholars whose research health costs, outcomes, and disparities relates to the aging process and the medical treatment of the elderly better understand how medicine can inform and improve social science research. an exploration of the theoretical RAND Labor and Population also offers a Postdoctoral Training Program foundations for arms control in the Study of Aging for outstanding junior scholars in demographic and in the 21st century in support aging research. of the U.S. Air Force’s engagement in potential arms-control negotiations with Russia and other states

Investing in People and Ideas 21 Philanthropy at RAND An Investment in People and Ideas

mAKING A DIffERENCE

Philanthropic support is vital to RAND and has made possible some of RAND’s most visionary work.

Through generous contributions of financial resources and the volunteer leadership of distinguished advisors, RAND is able to

• attract top intellectual talent from around the world and support their efforts to address complex matters for the public good; and

• develop new, innovative ideas for addressing critical, but often underappreciated policy areas.

RAND is grateful to the individuals, corporations, and foundations that make gifts of financial support and lend us their wisdom and expertise as members of RAND advisory boards and the RAND Policy Circle. Their generosity has helped to grow RAND as an enterprise that is simultaneously broad in scope, multidisciplinary in approach, international in reach, and unparalleled in quality. And at a time when creative, crosscutting solu- tions to complex challenges are needed most—yet resources for generating innovative ideas are increasingly hard to come by—RAND’s philanthropic supporters enable RAND to continue to take on the biggest ques- tions, apply the long view, and attract and engage the most talented individuals to be a part of that effort.

WH y PEOPLE SUPPORT OUR WORK

Public policy need not be inaccessible. It is about real people, real places, real organizations, real solutions. It is work that seeks to have a lasting, positive effect on you, your family, your community, and the world.

22 Investing in People and Ideas SUPPORTING TALENT INSPIRING IDEAS

RAND uses philanthropy to support Distinguished Philanthropic contributions, combined with earnings from Chairs for outstanding researchers recognized as RAND’s endowment, make possible RAND’s Investment world-class among peers. Distinguished Chairs in People and Ideas program, which is used to support conduct innovative research, outreach, and mentoring innovative research on issues crucial to the policy debate of junior policy analysts. Also made possible by but that reach beyond the boundaries of traditional client philanthropic support, RAND President’s Awards funding. Projects currently being funded by this program provide outstanding staff with time to pursue include analysis of climate change geo-engineering; exploratory research and career development rethinking disposal of nuclear waste; health systems for the activities (see page 19 for a list of 2009 recipients). 21st century; counterinsurgency in Pakistan’s tribal areas; RAND corporate fellows are individuals who have revitalizing the Middle East peace process; and public completed distinguished government or other policy education in America’s cities. analysis service and, as a result of philanthropic support, are available to devote a portion of their time Philanthropic contributions were essential to RAND research activities. to the COMPARE initiative—RAND’s multiyear, multimillion dollar effort to bring In 2009, philanthropic support from The Korea fact-based analysis to the complex debate over U.S. health Foundation and other donors helped launch an care reform. Dozens of RAND researchers from a variety initiative to establish a Korea Policy Chair at RAND. of disciplines worked together over several years to create The Korea Policy Chair will bring heightened visibility the microsimulation model that enables analyses of the and impact to RAND’s research on Korean domestic, impact of a variety of proposed policies. Through extensive foreign policy, and security issues, and also support outreach, COMPARE is helping policymakers make critical a program of activities at RAND aimed at promoting decisions that will determine who has access to care, the mutual understanding and cooperation between quality of that care, and the management of costs. Korea and the United States.

In 2009, RAND also launched an effort to create an The world watched in late 2008 as terrorist endowed scholarship in the Pardee RAND Graduate attacks unfolded across Mumbai, India. School to support the studies and research activities Flexible funds enabled a team of experienced of an incoming graduate fellow from a former Soviet RAND terrorism experts to set to work state. The scholarship will honor the late Jeremy immediately to assess the distinguishing and novel Azrael—under whose leadership the RAND Business features of the Mumbai attacks and the implications of Leaders Forum helped Russian, European, and North those attacks for the United States, India, and Pakistan. American corporate executives and political figures The resulting RAND study, The Lessons of Mumbai, was understand opportunities for and challenges published in early 2009.

to economic growth in the 21st century. EXTRE The annual Rockwell Policy Analysis Prize, made possible through a generous philanthropic donation from RAND alumnus Marshall (Tom) Rockwell, was awarded in 2009 ISM to Angel Rabasa to explore disengagement and deradicalization of Islamist extremists. Rabasa will use the prize funding to identify and analyze the processes through which militants leave Islamist extremist groups, assess the effectiveness of certain deradicalization programs, and evaluate policies to help promote and accelerate deradicalization.

Investing in People and Ideas 23 Inside the Policy Circle

The RAND Policy Circle is a group of philanthropic individuals who share RAND’s dedication to public policy research that is objective, analytical, and nonpartisan. Members regularly interact with RAND’s leading experts through special events, roundtable discussions, conference calls, and more. Concerns of Policy Circle members are, like RAND’s research agenda, wide in scope. What unites them is their commitment to making a difference by investing in RAND’s people and ideas.

24 Investing in People and Ideas Investing in People and Ideas 25 Policy Circle

RAND gratefully acknowledges gifts made by the following donors during calendar year 2009.

Visionary The Port Authority of New York Kraft Foods, Inc. California Community and New Jersey Foundation $1,000,000+ Steven Lazarus Port of Los Angeles Capital Research and The Martin Foundation Charles Lifland Management Company The SahanDaywi Foundation Frank Litvack Marcia and Frank C. Carlucci Siguler Guff & Company Breakthrough William R. Loomis, Jr. CERA $500,000–$999,999 Leland R. Speed Los Angeles Police Foundation Chicago Police Department Y & S Nazarian Family Wal-Mart Stores, Inc. Miami-Dade Police Department Foundation Civil Justice Reform Group Theresa and Charles Wolf, Jr. Santiago Morales Anne and James F. Rothenberg Crane Co. Lawrence Zicklin Munich Re DuPont Leadership New York State Office of Trailblazer Thomas Epley and Linnae $100,000–$499,999 Children and Family Services $25,000–$49,999 Anderson Anonymous O’Melveny & Myers LLP Anonymous FMC Corporation His Excellency Dr. Omar Bin Frederick S. Pardee Richard A. Abdoo Garrison Litigation Abdul Muniem Al Zawawi Robert and Kelley Petkun Management Group American Association for Allstate Insurance Company Paul M. Pohl Justice General Electric Co. William F. Benter Anthony N. Pritzker Chris Andersen Georgia-Pacific Chartis William Recker Neal Baer Ellen Hancock ExxonMobil Corporation James E. and Sharon C. Rohr Marcia Bird Frank Holder Juridica Investments Ltd. John J. Rydzewski Daniel M. Bradbury Karen Elliott House Korea Foundation Leonard D. Schaeffer Business Roundtable The Robert and Ardis James Bonnie McElveen-Hunter Lucille Ellis Simon Foundation Foundation Jane Cavalier Pfizer Inc Robert Simonds Koret Foundation Robert A. Clifford Risk Management Solutions, David Singer Lindsey C. Kozberg Coalition for Litigation Justice, Inc. Inc. Douglas J. Smith Arthur and Marylin Levitt Tom and Laura Rockwell Communities Foundation of Kenin M. Spivak Los Angeles County Sheriff’s Maxine and Eugene S. Department Texas State of Missouri Department of Rosenfeld Michael Critelli Social Services Dana G. Mead State Farm Insurance Janet Crown Joseph P. and Carol Z. Sullivan Munger, Tolles & Olson LLP Takeda Pharmaceuticals North The Doctors Company Suzanne S. and Michael E. Robert B. Oehler America, Inc. Tennenbaum Jacques E. Dubois Jane and Ronald L. Olson Thomas Lord Charitable Trust Explorer The Family Connection Paul H. and Nancy J. O’Neill $50,000–$99,999 Partnership, Inc. ValueOptions, Inc. William A. Owens Anonymous Kenneth R. Feinberg Enzo Viscusi, ENI Owens-Illinois, Inc. Alcoa Inc. Michael W. Ferro, Jr. Vital Projects Fund Inc. Patricia Salas Pineda Ally Foundation Arnie Fishman David I. J. Wang Paul D. Rheingold The Harold and Colene Brown Fortum Corporation Warburg Pincus LLC Donald B. and Susan F. Rice Family Foundation The Fred Rogers Company Westfield Corporation, Inc. RPM International Inc. John M. Cazier The Funari Family Foundation John A. Wright Saint-Gobain Corporation The Chubb Corporation A. Frederick Gerstell Robert C. Wright Selvyn Seidel The Dow Chemical Company Goldman Sachs Daniel Yun Irvin Stern Foundation Mary Kay and James D. Farley Grantmakers for Children, Darlene and James A. Farmers Insurance Group/ Youth & Families Pathfinder Thomson Zurich U.S. Gerald Greenwald $10,000–$24,999 The Gail and Lois Warden Fund The Hauser Foundation Kip and Mary Ann Hagopian Robert J. Abernethy Roberta Weintraub and Ira Jen-Hsun and Lori Huang Hands on Gulf Coast S. Ward Atterbury Krinsky JL Foundation Leslie Hill Paul and Evelyn Baran Groundbreaker Karen L. Katen Benny T. Hu Gurminder S. Bedi $5,000–$9,999 Liberty Mutual Insurance Susan Hullin The Sheri and Les Biller Family Companies Foundation Anonymous Ray R. Irani James B. Lovelace Donna C. Boehme Odeh F. Aburdene Suzanne Nora Johnson Maiden Re Brad D. Brian Mark Benjamin/Morley Builders Spencer H. Kim Merck & Co., Inc. Burford Advisors LLC Margery A. Colloff Bud and Betsy Knapp James A. Greer Joseph and Mirit Konowiecki Roy A. Hunt Foundation

26 Investing in People and Ideas Palmer G. Jackson Paul G. Kaminski Thomas L. McNaugher Donna and H. Norman Saurage, III Daniel and Marcy Schlessinger Michael I. Schneider Gerald J. Sullivan Donald Tang Robert and Marjorie Templeton Glenn and Jack Ellis Charles J. Zwick Ed and Connie Engler Karen Wolk Feinstein, Jewish Innovator Ellen Palevsky Legacy gifts were received $1,000–$4,999 Healthcare Foundation of Pittsburgh Malcolm A. Palmatier from the following Anonymous Kara Fox Kathleen Flynn Peterson Estate of William B. Graham David G. Adishian Mr. and Mrs. H. M. Goern Arnold Porath Robert and Peggy Alspaugh Eugene C. and Gwendolyn O. Michael K. Powell Matching Gifts gifts were Gritton Yılmaz Argüden, ARGE A.S. Vicki Reynolds Pepper and received from the following Mr. and Mrs. David J. Daniel Grunfeld Murray Pepper AK Steel Foundation Armstrong John Handy Debra Granfield and Michael The Intermec Foundation Vincent Autiero/Westwood Fred Hayman Family D. Rich College Merrill Lynch & Co. Foundation, Foundation Stephen G. Robinson, Donald Inc. Wally Baker, Green Tech The Hillman Company & Sylvia Robinson Family Foundation Foundation The Morrison & Foerster Richard Hundley Foundation Eleanor and Max H. Baril Daniel Rose William and Janet Hunt State Farm Companies Barbara Barrett Louis N. Rowell Foundation IBEW Local Union No. 5 Alan R. Batkin Henry and Beverly Rowen Unihealth Foundation John J. Kallenborn Maurine Bernstein Stanley M. Rumbough Matthew D. Kanin Nancy Block Reid Charles A. Schliebs Gifts were given in memory Sabrina Kay Charitable of the following Bill and Pamela Bohnert Foundation Margaret Schumacher Lynn A. Booth John M. Keane Michael Segal, Fred Segal Mary Anderson Santa Monica Louis L. Borick Lydia Kennard John Autiero Donald W. Seldin Brent and Linda Bradley Sarah Ketterer Jeremy R. Azrael Dorothy R. Sherwood Robert H. Brandow Fred Kipperman and Hien Anne Boren The Sikand Foundation, Inc. G. Edward Bryan Nguyen Don Emerson The H. Russell Smith David M. Konheim Lawrence Fisher Waldo and Jean Burnside Foundation Rini and Arthur D. Kraus Nena Flournoy Frank V. Cahouet Mr. and Mrs. Joseph E. Smith Karen J. Kubin William B. Graham Robin and Albert Carnesale Will Steger Louis M. and Jane Castruccio, Laborer’s District Council of Elwyn Harris Western Pennsylvania Jeanne C. Thayer Castruccio Family Foundation Larry Hill Philip Lader Christine J. Toretti Sara Muller-Chernoff and Patricia Kirkwood Dennis Chernoff Sherry Lansing Karen and Gregory F. Treverton Kevin N. Lewis Gordon B. Crary Anne Lewis Roberta and Terry Turkat Gus Shubert Natalie W. Crawford Diana and J. Thomas Lewis John and Andrea Van de Kamp Susan Way-Smith Richard J. and Mildred M. Leon S. Loeb, Ph.D. Tracy and Hui Wang Cross Al Williams John Lu Willis H. Ware Greg and Simin Curtis Jeffrey and Winnie Wasserman Raymond E. Mabus, Jr. Gifts were given in honor of Richard Danzig Linda G. Martin Betsy A. Way the following Kate Dewey, McCrory & Glenn and Judy Weirick McDowell Michael M. May The Bruck Family James Q. Wilson Mary Jane Digby Alden J. McDonald, Jr. Bob Petkun Arthur Winter Ann Dugan, Institute for G. G. Michelson Jennie Buchanan and Tyler Entrepreneurial Excellence Joel R. Mogy Linda Tsao Yang Kennedy Bobbi Elliott Lloyd and Mary Morrisett Eugene and Ruth Ellis Edward R. Muller and Patricia E. Bauer

Investing in People and Ideas 27 RAND Advisory Boards

Members of RAND advisory boards enrich RAND by adding their diverse experience, perspective, and knowledge to our efforts to improve public policy. Our advisory boards include distinguished individuals in the public and private sectors who have demonstrated leadership and a commitment to transcending partisan conflicts and political ideologies. Their balanced input helps us achieve our mission to help improve policy and decisionmaking through research and analysis.

Pardee RAND Graduate School Board of Governors

Jane Cavalier Robert E. Grady Santiago Morales Founder and Chief Executive Officer, Managing Director, The Carlyle President, Maxiforce Inc. BrightMark Corporate Directioning Group; Member, AuthenTec Board and Brand Consulting of Directors Frederick S. Pardee Investor Don R. Conlan Pedro José Greer, Jr., M.D. Retired President, The Capital Assistant Dean of Academic Affairs, Eugene S. Rosenfeld Group Companies Florida International University President, ForestLane Group College of Medicine Thomas E. Epley David I. J. Wang Partner, Vance Street Capital Daniel Grunfeld Senior Operating Partner, Atlas Donald B. Rice (Chair) LLC; Chief Executive Officer, Partner, Kaye Scholer LLP Holdings, LLC President and Chief Executive Semicoa Corporation; Chairman, Officer, Agensys, Inc.; Former U.S. Secure Communication Systems B. Kipling Hagopian Faye Wattleton Secretary of the Air Force; Trustee, Corporation; Chairman, Micross Managing Partner, Apple Oaks President, Center for the RAND Corporation Components Corporation Partners, LLC Advancement of Women

Gurminder S. Bedi Francis Fukuyama Lydia H. Kennard James Q. Wilson Retired Vice President, Ford North Bernard L. Schwartz Professor Former Executive Director, Los Senior Fellow, Clough Center for the America Truck of International Political Angeles World Airports; Trustee, Study of Constitutional Democracy, Economy, Paul H. Nitze School RAND Corporation Boston College Kakha Bendukidze of Advanced International Studies, Founder, Knowledge Fund Johns Hopkins University; Trustee, James B. Lovelace Ex OFFICIO RAND Corporation Director, Capital Group Companies, Michael J. Boskin Inc.; Senior Vice President, Capital Senior Fellow, Hoover Institution; Francisco Gil Díaz Research Global Investors James A. Thomson President and Chief Executive T.M. Friedman Professor Chief Executive Officer, Telefónica Officer, RAND Corporation of Economics, Stanford Moviles Mexico S.A. de C.V. Dana G. Mead University Chairman, The MIT Corporation AS OF DECEMBER 2009

Promising Practices Network on Children, Families and Communities Board of Advisors

James A. Thomson (Chair) Bill Dent Nancy Martinez Mark Real President and Chief Executive Manager, Missouri Community Director, Strategic Planning and President and Chief Executive Officer, RAND Corporation Partnerships; Staff Director, The Policy Development, New York Officer, KidsOhio.org Family and Community Trust State Office of Children and Family Gary Brunk Services Gaye Morris Smith President and Chief Executive Catherine Gautier Executive Director, Georgia Family Officer, Kansas Action for Children Executive Director, Hands On Gulf Stephanie McGencey- Connection Partnership Coast Washington Shannon Cotsoradis Executive Director, Grantmakers AS OF DECEMBER 2009 Executive Vice President and Chief William H. Isler for Children, Youth and Families Operating Officer, Kansas Action for Executive Director, Family Children Communications, Inc. Susan Mitchell-Herzfeld Director, Bureau of Evaluation and Research, New York State Office of Children and Family Services

28 Investing in People and Ideas RAND Center for Asia Pacific Policy Advisory Board

Chris Andersen Partner, G. C. Andersen Partners, LLC

Chey Tae-wan Chairman and Chief Executive Officer, SK Holdings Company Ltd.

Roy Doumani Professor, Molecular and Medical Pharmacology, University of California, Los Angeles

Lalita D. Gupte Chair, ICICI Venture Funds Management Co. Ltd

Benny T. Hu Chairman, CDIB BioScience Venture Management, Inc.

Wyatt R. Hume Provost, United Arab Emirates University Robert Oehler Donald Tang Daniel Yun Jianzhong Zhuang President and Chief Executive Chief Executive Officer, CITIC Managing Partner and Founder, Professor and Vice Director, Officer, Pacific Alliance Bank Securities International Partners; Belstar Group Shanghai Jiao Tong University Trustee, RAND Corporation William Owens Spencer Kim Chairman and Chief Executive Michael Tang Ex OFFICIO Chairman, CBOL Corporation Officer, AEA Holdings Asia Chief Executive Officer, National Material L.P. James A. Thomson N. Jay Liang Anthony N. Pritzker President and Chief Executive President and Chief Executive President and Chief Executive Michael Tennenbaum Officer, RAND Corporation Officer, Etech Securities, Inc. Officer, The Pritzker Company Senior Managing Partner, Tennenbaum Capital Partners, LLC Robin Meili William R. Loomis, Jr. Eugene S. Rosenfeld Director, International Programs, Corporate Financial Advisor President, ForestLane Group Marsha Vande-Berg RAND Corporation Chief Executive Officer, Pacific Ming Hsieh Leonard Sands Pension Institute Thomas McNaugher Chairman, President, and Chief Founding Partner and Chairman, Director, RAND Center for Asia Executive Officer, Cogent, Inc. Alchemy Worldwide Edward Wanandi Pacific Policy, RAND Corporation Chief Executive Officer, Mong-Joon Chung George Siguler International Merchants, LLC AS OF DECEMBER 2009 Member of the National Assembly, Managing Director, Siguler Guff & The Republic of Korea Company Linda Tsao Yang Chairman, Asian Corporate Governance Association

RAND Center for Corporate Ethics and Governance Advisory Board

Larry Zicklin (Chair) Robert Deutschman Matthew Lepore Kenin Spivak Clinical Professor of Business President, Cappello Partners, LLC Vice President, Chief Counsel— Chairman and Chief Executive Ethics, Leonard N. Stern Corporate Governance, and Officer, Spivak Management Inc. School of Business, New York Jeff Gearhart Assistant General Counsel, University Executive Vice President and Pfizer Inc Richard Thornburgh General Counsel, Wal-Mart Former Attorney General and Donna Boehme Stores, Inc. Arthur Levitt Governor, Commonwealth of Principal, Compliance Strategists Former Chairman, U.S. Securities Pennsylvania; General Counsel, LLC Jeanine Jiganti and Exchange Commission Kirkpatrick & Lockhart LLP Vice President, Chief Lovida H. Coleman, Jr. Compliance Officer, Takeda Bradley Lucido Lynne Yowell Partner, Sutherland, Pharmaceuticals Chief Compliance Officer, Associate General Counsel, Asbill & Brennan LLP MassMutual Financial Group State Farm Insurance

AS OF DECEMBER 2009

Investing in People and Ideas 29 RAND Advisory Boards

RAND Center for Global Risk and Security Advisory Board

Harold Brown (Chair) Albert Carnesale Henry Kissinger Ronald Simms Counselor, Center for Strategic Former Chancellor, University of Former U.S. Secretary of State President, Simms Commercial and International Studies; Former California, Los Angeles Development; Vice President and U.S. Secretary of Defense; Trustee Cleon “Bud” T. Knapp Treasurer, The Simms/Mann Family Emeritus, RAND Corporation Carl Covitz Chief Executive Officer and Foundation President and Chief Executive President, Talwood Corporation Robert Abernethy Officer, Landmark Capital Robert Simonds President, American Standard Peter Norton Chairman, The Robert Simonds Development Co. Jacques Dubois President, Norton Family Office Company Former Chairman, Swiss Re America Holding Corporation AS OF DECEMBER 2009

RAND Center for Health and Safety in the Workplace Advisory Board

Christine Baker Cameron Mustard Ken Wengert Ex OFFICIO Executive Officer, California President, Institute for Work and Safety Director, Kraft Inc. Commission on Health and Safety Health John Mendeloff and Workers’ Compensation Frank White Director, RAND Center for Health Jeff Shockey Senior Vice President, ORC and Safety in the Workplace John Howard, M.D. Director, Safety and Regional Worldwide Director, National Institute for Services, Alcoa AS OF DECEMBER 2009 Occupational Safety and Health Mike Wright Kimberly Tum Suden Director, Health, Safety, and Manager of Facility Safety, Walt Environment, United Steelworkers Disney Parks & Resorts Worldwide

younes and Soraya Nazarian: “Our family is proud to sponsor recent RAND work in Israel to explore energy alternatives and to aid the Israeli government with long-range planning. We are heartened to see that Israeli officials are now eager for RAND to conduct more research there on a variety of subjects and that the Israeli government and others are now investing in this work. This collaboration is good for RAND, good for Israel, and good for our family.”

younes Nazarian is a member of the RAND Center for Middle East Public Policy Advisory Board.

30 Investing in People and Ideas RAND Center for Middle East Public Policy Advisory Board

Zbigniew Brzezinski (Chair) L. Paul Bremer Ann Kerr-Adams Donald Ellis Simon Trustee and Counselor, Center for Former Presidential Envoy to Iraq Fulbright Coordinator, UCLA President, The Lucille Ellis Simon Strategic and International Studies International Institute Foundation Alexander L. Cappello Frank C. Carlucci (Vice Chair) Chairman and Chief Executive Zalmay Khalilzad Enzo Viscusi Chairman Emeritus, The Carlyle Officer, Cappello Group Inc. Chairman and Chief Executive Group Senior Vice President, ENI Group; Former U.S. Secretary of Officer, Khalilzad Associates, LLC Americas Defense; Trustee Emeritus, RAND George N. Chammas Corporation Co-President and Chief Financial Younes Nazarian Officer, NavLink Inc. President, The Nazarian Ex OFFICIO Richard A. Abdoo Companies President, R. A. Abdoo & Co., LLC Arnie Fishman James A. Thomson Chairman and Founder, Lieberman Edward R. Pope President and Chief Executive Odeh F. Aburdene Research Worldwide Chairman and Chief Executive Officer, RAND Corporation President, OAI Advisors Officer, DexM Corporation Guilford Glazer Robin Meili Nancy A. Aossey Chairman, Guilford Glazer William Recker Director, International Programs, President and Chief Executive Associated Companies Managing Partner, Iron Bridge RAND Corporation Officer, International Medical Corps Ray R. Irani David K. Richards David L. Aaron William F. Benter Chairman and Chief Executive Private Investor Director, RAND Center for Chairman and International Chief Officer, Occidental Petroleum Middle East Public Policy, Executive Officer, Acusis Corporation Hasan Shirazi RAND Corporation Managing Director, Citi Private Bank AS OF DECEMBER 2009

RAND Gulf States Policy Institute Advisory Board

Oliver H. Delchamps, Jr. R. King Milling Ex OFFICIO Retired Chairman Emeritus, Retired Vice Chairman, Whitney Delchamps, Inc. National Bank James A. Thomson President and Chief Executive Cordell Haymon John N. Palmer Officer, RAND Corporation Vice President, SGS Chairman, GulfSouth Capital, Inc.; Former U.S. Ambassador to Melissa Flournoy Beverly Wade Hogan Portugal Director, RAND Gulf States Policy President, Tougaloo College Institute Sean Reilly John J. Kallenborn Chief Operating Officer, Lamar Gerald Greenwald President New Orleans Region, JP Advertising Managing Partner, Greenbriar Reuben V. Anderson Morgan Chase Bank, NA Equity Group LLC; Chair, RAND Senior Partner, Phelps Dunbar LLP Donna Saurage Infrastructure, Safety, and Michael B. Lee Civic Leader, Baton Rouge, Environment Advisory Board Donald “Boysie” Bollinger President, Page & Jones Louisiana Chairman, President, and Chief Lynne Yowell Executive Officer, Bollinger Diana Lewis Leland Speed Associate General Counsel, State Shipyards, Inc. Civic Leader, New Orleans, Chairman, East Group Properties Farm Insurance; Member, RAND Louisiana Center for Corporate Ethics and Kim M. Boyle Vera B. Triplett Governance Advisory Board Partner, Phelps Dunbar LLP Alden J. McDonald, Jr. Chief Operating Officer, President and Chief Executive Capital One-UNO Charter AS OF DECEMBER 2009 Officer, Liberty Bank and Trust School Network Company

Investing in People and Ideas 31 RAND Advisory Boards

RAND Health Board of Advisors

Joseph P. Sullivan (Chair) Private Investor

John J. Rydzewski (Vice Chair) Managing Director, Christofferson, Robb & Company, LLC

Neal A. Baer, MD Executive Producer, Law & Order: Special Victims Unit

Daniel M. Bradbury President and Chief Executive Officer, Amylin Pharmaceuticals, Inc. Karen Hein, MD Mary D. Naylor, PhD, FAAN Patrick Soon-Shiong, MD David Brailer, MD Immediate Past President, William Director, NewCourtland Center Founder, Chairman, and Chief Chairman, Health Evolution T. Grant Foundation for Transitions and Health, Executive Officer, Abraxis Partners University of Pennsylvania School BioScience, Inc. Susan Hullin of Nursing Denis A. Cortese, MD Managing Partner, Hullin Metz & Gail L. Warden President and Chief Executive Co. LLC Paul H. O’Neill President Emeritus, Henry Ford Officer, Mayo Clinic Former U.S. Secretary of Health System Suzanne Nora Johnson the Treasury; Trustee, RAND Michael Critelli Former Vice Chairman, The Corporation William C. Weldon Executive Chairman, Pitney Goldman Sachs Group, Inc. Chairman, Board of Directors, Bowes, Inc. Sir Michael Rawlins, MD and Chief Executive Officer, Karen L. Katen Chairman, National Institute for Johnson & Johnson Ronald I. Dozoretz, MD Chair, Pfizer Foundation Health and Clinical Excellence Chairman, ValueOptions Phyllis M. Wise, PhD Cleon “Bud” T. Knapp Ian C. Read Provost and Executive Mary Kay Farley Chief Executive Officer and President, Worldwide Vice President, University of Trustee, Hospital for Special President, Talwood Corporation Pharmaceutical Operations, Washington Surgery, New York; Northern Pfizer Inc Michigan Hospital Foundation Joseph S. Konowiecki Managing Partner, Moriah David K. Richards Ex OFFICIO Michael W. Ferro, Jr. Partners, LLC Private Investor Chairman and Chief Executive James A. Thomson, PhD Officer, Merrick Ventures LLC Sherry Lansing Marshall A. “Tom” President and Chief Executive Founder and Chief Executive Rockwell, MD Officer, RAND Corporation Robert G. Funari Officer, The Sherry Lansing General Partner, Cyrcon Chairman and Chief Executive Foundation Builders Robert H. Brook, MD, Officer, Crescent Healthcare ScD, FACP David M. Lawrence, MD Leonard D. Schaeffer Vice President, RAND Corporation; Frederick W. Gluck Retired Chairman and Chief Senior Advisor, TPG Capital, LP Director, RAND Health Former Managing Director, Executive Officer, Kaiser McKinsey & Company, Inc. Foundation Health Plan, Inc. and Sir Maurice Shock Paul Koegel, PhD Kaiser Foundation Hospitals Retired Chairman, The Nuffield Trust Associate Director, Pedro José Greer, Jr., MD RAND Health Assistant Dean of Academic Steven Lazarus David B. Singer Affairs, Florida International Managing Director Emeritus, ARCH Limited Partner, Maverick Elizabeth A. McGlynn, PhD University College of Medicine Venture Partners Capital, Ltd. Associate Director, RAND Health

Frank Litvack, MD, FACC AS OF DECEMBER 2009 Cardiologist

32 Investing in People and Ideas RAND Infrastructure, Safety, and Environment Advisory Board

Gerald Greenwald (Chair) Lovida H. Coleman, Jr. Ellen M. Hancock Rodney E. Slater Managing Partner, Greenbriar Partner, Sutherland, Asbill & Former Chairman and Chief Partner, Patton Boggs, LLP Equity Group LLC Brennan LLP Executive Officer, Exodus Communications Douglas J. Smith S. Ward Atterbury Margery Colloff Director of Construction and Partner, Mergers & Acquisitions Partner, Emmet, Marvin & Martin, Leslie Hill Facilities Management, Jons Practice, White & Case LLP LLP Retired Airline Captain, Marketplace American Airlines; Former Director, Harold Brown Janet Crown Dow Jones & Company, Inc. John K. Van de Kamp Counselor, Center for Strategic Owner, Burn 60 Fitness Studio Former Attorney General, State and International Studies; Former Frank Holder of California; Of Counsel, Dewey U.S. Secretary of Defense; Trustee A. Frederick Gerstell President, FTI Consulting & LeBoeuf LLP Emeritus, RAND Corporation Former Chairman and Chief Executive Officer, CalMat Co. Michael I. Schneider John A. Wright Managing Partner, InfraConsult Managing Partner, Rollins Scott M. Gordon LLC Capital Management, LLC Superior Court Commissioner, Los Angeles County Superior Court AS OF DECEMBER 2009

RAND Institute for Civil Justice Board of Overseers

Brad D. Brian (Chair) Kenneth R. Feinberg Charles Lifland Paul M. Pohl Partner, Munger, Tolles & Olson Founder and Managing Partner, Partner, O’Melveny & Myers LLP Partner, Jones Day LLP Feinberg Rozen LLP Christopher C. Mansfield Arturo Raschbaum Richard E. Anderson Richard W. Fields Senior Vice President and General Chief Executive Officer, Chairman and Chief Executive Chief Executive Officer, Juridica Counsel, Liberty Mutual Insurance Maiden Re Officer, The Doctors Company Capital Management Limited Company Paul D. Rheingold Sheila L. Birnbaum Deborah E. Greenspan Consuelo B. Marshall Partner, Rheingold, Valet, Partner, Skadden, Arps, Slate, Partner, Dickstein Shapiro LLP United States District Court Judge, Rheingold, Shkolnik & Meagher & Flom LLP Central District of California McCartney LLP James A. Greer II James L. Brown Charles W. Matthews, Jr. Dino E. Robusto Director, Center for Consumer Patrick E. Higginbotham Vice President and General Executive Vice President and Affairs, University of Wisconsin- Circuit Judge, U.S. Court of Counsel, ExxonMobil Corporation Chief Administrative Officer, Milwaukee Appeals, Fifth Circuit The Chubb Corporation Michele Coleman Mayes Kim M. Brunner Alan J. Kreczko Senior Vice President and General Lee H. Rosenthal Executive Vice President, Chief Executive Vice President and Counsel, The Allstate Corporation United States District Judge, Legal Officer, and Secretary, State General Counsel, The Hartford Southern District of Texas, Farm Insurance Robert E. McGarrah, Jr. Houston Division Bruce N. Kuhlik Counsel, Office of Investment, Robert A. Clifford Senior Vice President and General AFL-CIO Charles R. Schader Partner, Clifford Law Offices, P.C. Counsel, Merck & Co., Inc. Senior Vice President and Michael G. Mills Chief Claims Officer, Chartis Alexander Dimitrief Christian Lahnstein Partner, Freehills Insurance Vice President and Senior Head of the Department, Risk, Counsel, Litigation and Legal Liability & Insurance, Munich Re Robert S. Peck Hemant H. Shah Policy, General Electric Company President, Center for Constitutional President and Chief Executive Bradley E. Lerman Litigation Officer, Risk Management Dan C. Dunmoyer Senior Vice President and Solutions, Inc. Senior Vice President, Associate General Counsel, Kathleen Flynn Peterson Government and Industry Pfizer Inc Partner, Robins, Kaplan, Miller & Georgene M. Vairo Affairs; Head of State Legislative Ciresi LLP Professor of Law and and Regulatory Affairs, USA, William M. Rains Fellow, Zurich and Farmers Financial Loyola Law School Services AS OF DECEMBER 2009

Investing in People and Ideas 33 Oversight Boards

These are the oversight boards for the federally funded research and development centers (FFRDCs) at RAND, all three of which are sponsored by the U.S. Department of Defense. FFRDCs are independent entities that assist the United States government with scientific research, analysis, and development.

Arroyo Center Policy Committee

GEN Peter W. Chiarelli GEN Ann E. Dunwoody LTG Ricky Lynch LTG Jack C. Stultz, Jr. (Cochair) Commanding General, U.S. Army Assistant Chief of Staff for Installation Chief, Army Reserve/Commanding Vice Chief of Staff, U.S. Army Materiel Command Management/Commanding General, General, U.S. Army Reserve Installation Management Command, Command Dean G. Popps (Cochair) Terrence C. Salt U.S. Army Assistant Secretary of the Army Principal Deputy Assistant Secretary LTG James D. Thurman (Acquisition, Logistics, and of the Army (Civil Works)/Deputy LTG John F. Mulholland Deputy Chief of Staff, G-3/5/7, Technology) ASA (Legislation) Commanding General, U.S. Army U.S. Army Special Operations Command Thomas R. Lamont Robert M. Speer LTG Richard P. Zahner Assistant Secretary of the Army Principal Deputy Assistant Secretary LTG Eric B. Schoomaker Deputy Chief of Staff, G-2, U.S. Army (Manpower and Reserve Affairs) of the Army (Financial Management Commanding General, U.S. Army and Comptroller) (Controls) Medical Command/The Surgeon MG Gina B. Farrisee GEN Charles C. Campbell General Acting Deputy Chief of Staff, G-1, Commanding General, U.S. Army LTG Benjamin C. Freakley U.S. Army Forces Command Commanding General, U.S. Army LTG Jeffrey Sorenson Accessions Command Chief Information Officer, G-6, MG William T. Grisoli GEN Martin E. Dempsey U.S. Army (Executive Agent) Commanding General, U.S. Army LTG Robert P. Lennox Director, Program Analysis and Training and Doctrine Command Deputy Chief of Staff, G-8, U.S. Army LTG Mitchell H. Stevenson Evaluation Deputy Chief of Staff, G-4, U.S. Army AS OF DECEMBER 2009

RAND National Defense Research Institute Advisory Board

Ashton Carter (Chair) Sharon Cooper Regina Dugan Benjamin Riley Under Secretary of Defense Deputy Under Secretary of Defense Director, Defense Advanced Principal Deputy, Rapid Fielding for Acquisition, Technology, for Program Integration, Office of Research Projects Agency Directorate and Logistics the Under Secretary of Defense for Personnel and Readiness Christine Fox Philip Rodgers Arthur “Trip” Barber Director, Cost Assessment and Principal Deputy Director, Deputy Director, Capability, Lisa Disbrow Program Evaluation, Office of the Acquisition Resources and Analysis, Analysis, and Assessment Division, Vice Director, Force Structures, Secretary of Defense Office of the Under Secretary of Office of the Deputy Chief of Resources, and Assessment Defense for Acquisition, Technology, Naval Operations Directorate (J-8), Joint Staff Jim Miller and Logistics Principal Deputy Under Secretary Gary Bliss Amanda Dory of Defense for Policy Nancy Spruill Deputy Director, OSD Studies and Deputy Assistant Secretary (Executive Agent) FFRDC Programs, Office of the of Defense for Strategy, Office of Brad Millick Director, Acquisition Resources Under Secretary of Defense for the Under Secretary of Defense Director, Forecasting and and Analysis, Office of the Acquisition, Technology, for Policy Evaluation, Office of the Under Under Secretary of Defense and Logistics Secretary of Defense for for Acquisition, Technology, Intelligence and Logistics

AS OF DECEMBER 2009

USAF Project AIR FORCE Steering Group

Gen Carroll H. Chandler Lt Gen Richard Y. Newton III Lt Gen William T. Lord Maj Gen C. Donald Alston (Chair) Deputy Chief of Staff for Manpower Chief of Warfighting Integration and Assistant Chief of Staff, Strategic Vice Chief of Staff, Headquarters and Personnel, Headquarters U.S. Chief Information Officer, Office of Deterrence and Nuclear Integration, U.S. Air Force Air Force the Secretary of the Air Force, Headquarters U.S. Air Force The Pentagon Lt Gen David A. Deptula Lt Gen Mark D. Shackelford Brig Gen Richard C. Deputy Chief of Staff for Intelligence, Military Deputy, Office of the Lt Gen (Dr.) Charles B. Green Johnston Surveillance, and Reconnaissance, Assistant Secretary of the Surgeon General of the Air Force, Director, Strategic Planning, Headquarters U.S. Air Force Air Force for Acquisition, The Headquarters U.S. Air Force Deputy Chief of Staff for Strategic Pentagon Plans and Programs, Lt Gen William L. Shelton Lt Gen Philip M. Breedlove Headquarters U.S. Air Force Assistant Vice Chief of Staff Lt Gen Loren M. Reno Deputy Chief of Staff for Operations, and Director, Air Force Staff, Deputy Chief of Staff for Logistics, Plans, and Requirements, Jacqueline R. Henningsen Headquarters U.S. Air Force Installations, and Mission Headquarters U.S. Air Force Director for Studies and Analyses, Support, Headquarters U.S. Air Assessments and Lessons Learned, Force Lt Gen Christopher D. Miller Headquarters U.S. Air Force Deputy Chief of Staff for Strategic Plans and Programs, Headquarters AS OF DECEMBER 2009 U.S. Air Force

34 Investing in People and Ideas RAND Europe is an independent subsidiary of the RAND Corporation with offices in Cambridge, United Kingdom, and Brussels, Belgium.

RAND Europe Board of Trustees

James A. Thomson (Chair) Lord Crisp KCB President and Chief Executive Independent Crossbench Officer, RAND Corporation Member of the House of Lords United States United Kingdom

Philippa Foster Back OBE Sir Lawrence Freedman Director, Institute of KCMG Business Ethics Professor of War Studies United Kingdom and Vice Principal, King’s College London Sir John Boyd KCMG United Kingdom Retired Master, Churchill College, University of Cambridge; Jonathan Grant Former British Ambassador President, RAND Europe to Japan United Kingdom United Kingdom Frank Kelly FRS Philip Lader Michael Portillo Laurens Jan Brinkhorst Master, Christ’s College, Chairman, The WPP Group; Former Cabinet Minister Professor of International University of Cambridge Former U.S. Ambassador to the United Kingdom and European Law, University United Kingdom Court of St. James’s; Trustee, of Leiden; Former Deputy RAND Corporation AS OF DECEMBER 2009 Minister of the Netherlands Gunvor Kronman United States The Netherlands Chief Executive Officer, Hanaholmen–Cultural Cooperation Center for Finland and Sweden Finland

The RAND-Qatar Policy Institute (RQPI) is a collaboration between the RAND Corporation and the Qatar Foundation that is focused on helping to improve policy and decisionmaking across the Middle East, North Africa, and South Asia. The Qatar Foundation for Education, Science and Community Development is a private, chartered, nonprofit organization with a mission to prepare the people of Qatar and the region to meet the challenges of an ever-changing world.

RAND-Qatar Policy Institute Board of Overseers

Her Highness His Excellency Dr. Hamad David L. Aaron Ex OFFICIO Sheikha Mozah Bint Nasser Abdulaziz Al-Kawari Director, RAND Center for Middle Al Missned (Cochair) Minister of Culture, Arts, and East Public Policy, Rashid Al Naimi Chairperson, Qatar Foundation Heritage, State of Qatar RAND Corporation Vice President for Administration, for Education, Science, and Qatar Foundation Community Development Sheikh Hamad Bin Faisal Bin Thani Al-Thani I NDEPENDENT MEMBER Bruce Nardulli Michael Rich Chairman, Al Khalij Commercial Director, RAND-Qatar (Cochair) Bank Naguib Sawiris Policy Institute Executive Vice President, Chairman and Chief Executive RAND Corporation Karen Elliott House Officer, Orascom Telecom AS OF DECEMBER 2009 Former Publisher, The Wall Street Journal; Former Senior Vice President, Dow Jones and Company, Inc.

Investing in People and Ideas 35 Clients and Grantors

U.S. Government Agency for Healthcare Medicare Payment Advisory Mott MacDonald Group Research and Quality Commission Administrative Office of the Surveymeter U.S. Courts Centers for Medicare and National Aeronautics and Medicaid Services Space Administration Techniker Krankenkasse Department of Commerce Centers for Disease Control National Science Foundation Tianjin Economic-Technological National Institute of and Prevention Development Area Standards and Technology National Institute for Social Security Administration National Oceanic and Occupational Safety and U.S. Postal Service Atmospheric Administration Health State and Local Department of Defense National Institutes of Health Governments Non-U.S. Governments, Defense Logistics Agency National Cancer Institute State of California Agencies, and Ministries Department of the Air Force National Heart, Lung, and California Energy Blood Institute Commonwealth of Australia Commission Department of the Army National Institute on Aging Commission on Health Medical Research European Commission and Safety and Workers’ Acquisition Activity National Institute on Alcohol Abuse and Directorate-General for Compensation Department of the Navy Alcoholism Employment, Social Affairs and Equal Opportunities Department of Corrections Joint Staff National Institute of Allergy and Rehabilitation Directorate-General for National Defense and Infectious Diseases Information Society and California Municipal Agencies University National Institute of Media Los Angeles County Office of the Secretary Child Health and Human Directorate-General for of Defense Development Los Angeles County Freedom, Security and Probation Department Assistant Secretary National Institute of Justice of Defense for Diabetes and Digestive Los Angeles Unified School Networks and and Kidney Disease Mexico District Information Integration National Institute on Drug Institute for Science and Western Riverside County Deputy Assistant Abuse Technology of the Federal Regional Conservation Secretary of Defense for National Institute of District (ICyTDF) Authority Russia/Ukraine/Eurasia Environmental Health State of Yucatan City of Cincinnati Deputy Secretary of Sciences Republic of Korea Army Defense National Institute of Mental Commonwealth of Massachusetts Joint Improvised Health Republic of Singapore Explosive Device National Institute of Institute of Mental Health Commonwealth of Pennsylvania Defeat Organization Nursing Research Ministry of Defence Allegheny County Under Secretary of Office of the National Ministry of Health Department of Human Defense for Acquisition, Coordinator for Health Services Technology, and Information Technology State of Qatar Allegheny Intermediate Unit Logistics Department of Homeland National Health Authority Department of Community Defense Advanced Security Supreme Education Council and Economic Development Research Projects Agency U.S. Coast Guard Supreme Council for Family Pennsylvania Legislative Affairs Budget and Finance Under Secretary of Department of Justice Committee Defense for Personnel United Kingdom and Readiness Federal Bureau of Pittsburgh Public Schools Investigation Department of Health Under Secretary of District of Columbia Defense for Policy National Institute of Justice Department for Transport Department of Health Unified Combatant Office of Justice Programs Ministry of Defence Department of Mental Health Commands Department of Labor National Audit Office Executive Office of the Mayor Department of Education Department of State State of Maryland Institute of Education International Department of the Treasury Sciences Organizations New York City Department of Energy Department of Veterans Affairs Andrew T. Huang Medical Department of Education National Energy Sepulveda VA Medical Education Promotion Fund Technology Laboratory Center Dubai Community Ventures LLC Colleges and Universities National Renewable Environmental Protection Energy Laboratory Agency Fox Center Boston University Department of Health and Federal Communications Infectious Diseases Institute Brunel University, West London Human Services Commission Health Economics The King’s Fund Administration for Children Federal Reserve Bank of Research Group and Families Boston Local Better Regulation Office Carnegie Mellon University Office of Planning, Federal Reserve Bank of Mitsubishi Research Columbia University Research, and New York Institute, Inc. Medical Center Evaluation Intelligence Community Dartmouth College

36 Investing in People and Ideas Drew University The Ford Foundation GlaxoSmithKline Association of Public Health Laboratories Georgetown University Bill and Melinda Gates Guardians of Honor, LLC Foundation Battelle Pacific Northwest The Johns Hopkins University Halcrow Group Ltd. National Laboratory Hartford Foundation Louisiana State University Health Services Advisory Group Beaver Valley Intermediate Unit Agricultural and Mechanical The Health Foundation College HighMark, Inc. Bipartisan Policy Center The William and Flora Hewlett National University of Foundation ICF International BlueCross BlueShield / Blue Singapore Plus of Minnesota Japan Foundation Joint Commission International Qatar University Brookings Institution The Robert Wood Johnson KRA Corporation Stanford University Foundation Mathematica Policy Research Center for Health Care Strategies, Inc. Temple University Ewing Marion Kauffman Merck & Co., Inc Foundation Center for Health Improvement Tilburg University, CentERdata National Pharmaceutical Korea Foundation Children’s Hospital Boston Tulane University Council Henry Luce Foundation National Projects Holding Co. Children’s National Medical University College, Dublin Center MacArthur Foundation Native American Industrial University of Arizona Community Care Behavioral McCormick Tribune Foundation Distributors University of California, Health Organization Berkeley The Meth Project Foundation Ortho-McNeil Janssen Scientific Affairs, LLC Council for Aid to Education University of California, Los New York City Police PepsiCo Inc. District of Columbia Primary Angeles Foundation Care Association Pfizer Inc University of Florida New York State Health ECRI Institute Foundation Risk Management Solutions University of Kent Educational Testing Service Open Society Institute Roche University of Maryland Filene Research Institute The David and Lucile Packard Sanofi Pharmaceuticals, Inc. University of Medicine and Foundation The Fund for Public Schools Dentistry of New Jersey Schering-Plough The Ralph M. Parsons Humanity United University of Michigan Foundation STERIS Corporation Los Alamos National Laboratory University of North Carolina, William Penn Foundation Tatweer Dubai Chapel Hill Merck Childhood Asthma The Pew Charitable Trusts UnitedHealthcare Services Inc. Network, Inc. University of North Texas Qatar Foundation U.S. Chamber of Commerce Missouri Foundation for Health University of Pittsburgh The Rockefeller Foundation WSP UK The MITRE Corporation University of Rochester Rosenberg Foundation Motion Picture Association University of Southern California Smith Richardson Foundation Professional Associations National Bureau of Economic Research University of Texas at Dallas United Health Foundation American Medical Association National Military Family Vanderbilt University Wallace Foundation Kidney Disease Program Association of Glendale New England Medical Center Mehlman Vogel Castagnetti Inc. Foundations Industry Hospitals The Real Estate Roundtable Arthritis Research Campaign Accent Marketing and New Leaders for New Schools Research Amgen Foundation Nuclear Threat Initiative Analytical Services, Inc. Other Nonprofit Oklahoma City National BEST Foundation for a Drug Organizations Free Tomorrow ASDC Memorial Institute for the AARP Prevention of Terrorism California Community Berkeley Policy Associates Foundation Altarum Institute Partnership for Prevention BioReliance Invitrogen The California Endowment Bioservices American Colleges of Primary Care Coalition of Physicians Montgomery County California HealthCare Blue Cross of California Foundation American Red Cross Quantum Foundation, Inc. Brown and Caldwell Carnegie Corporation Arkansas Tobacco Settlement Samueli Institute of New York Cambridge Systematics, Inc. Commission UPMC for You Casey Family Programs CSSI, Inc. Arts Education Collaborative U.S. Institute of Peace The Commonwealth Fund Deloitte & Touche LLP World Bank Ethicon Endo-Surgery Inc. World Security Institute Florida Medical Quality Assurance, Inc.

Investing in People and Ideas 37 Financial Report

PricewaterhouseCoopers LLP 350 South Grand Avenue Los Angeles CA 90071 Telephone (213) 356 6000 Facsimile (813) 637 4444

Report of Independent Auditors

To the Board of Trustees The RAND Corporation

In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of activities and changes in net assets, and cash flows present fairly, in all material respects, the financial position of the RAND Corporation and its subsidiary at September 27, 2009, and the changes in their net assets and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the RAND Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the RAND Corporation’s September 28, 2008 consolidated financial statements, and in our report dated January 26, 2009, we expressed an unqualified opinion on those financial statements. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2, the RAND Corporation adopted the new accounting and disclosure guidance related to endowment funds in the year ended September 27, 2009.

January 29, 2010

38 The RAND Corporation consolidated stateMents oF Financial P osition with summarized financial information for the year ended September 28, 2008 (in thousands)

September 27, 2009 September 28, 2008

ASSETS Current assets Cash and cash equivalents $ 29,501 $ 27,092 Receivables, net Billed and unbilled costs and fees 41,200 41,072 Other receivables 3,153 2,640 Prepaid expenses and other current assets 3,953 3,964 Total current assets 77,807 74,768 Property and equipment Land 1,334 1,334 Buildings and improvements 108,702 107,546 Leasehold improvements 15,279 15,016 Equipment 51,600 47,712 Construction in progress 3,249 3,336 180,164 174,944 Less: Accumulated depreciation and amortization (54,776) (46,469) Net property and equipment 125,388 128,475

Long-term investments 174,516 183,752 Building project fund investments 1,114 1,105 Other assets 5,382 5,965 Total assets $ 384,207 $ 394,065

LIABILITIES AND NET ASSETS Current liabilities Accounts payable and other liabilities $ 17,682 $ 17,580 Unexpended portion of grants and contracts received 12,192 14,506 Accrued compensation and vacation 15,833 15,025 Current portion of long-term debt 1,845 1,560 Total current liabilities 47,552 48,671 Deferred rent 10,509 12,065 Accrued postretirement benefit liability 16,211 12,136 Other long-term liabilities 14,256 8,070 Long-term debt, less current portion 124,735 126,580 Total liabilities 213,263 207,522 Commitments and contingencies (Note 9) Net assets Unrestricted Operations — — Designated for investment 104,901 117,187 Designated for special use 3,486 9,063 Total unrestricted 108,387 126,250

Temporarily restricted 18,873 17,985 Permanently restricted 43,684 42,308 Total net assets 170,944 186,543 Total liabilities and net assets $ 384,207 $ 394,065

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

39 40

The RAND Corporation consolidated stateMents oF actiV ities and cHanGes in net assets with summarized financial information for the year ended September 28, 2008 (in thousands) For the Years Ended September 27, 2009 September 28, 2008 Total Temporarily Permanently Operations Designated Unrestricted Restricted Restricted Total Total

REVENUE, GAINS, AND OTHER SUPPORT Contracts and grants $ 228,738 $ — $ 228,738 $ — $ — $ 228,738 $ 225,342 Fees 12,001 — 12,001 — — 12,001 11,561 Income on investments, net — 2,554 2,554 868 — 3,422 8,926 Net realized gains on investments — 1,728 1,728 717 — 2,445 4,337 Net unrealized (losses) gains on investments — (6,871) (6,871) 1,279 — (5,592) (33,117) Contributions 6,325 — 6,325 1,895 1,376 9,596 15,477 Other investment income 42 — 42 — — 42 119 Transfer of designated net assets to operations (Note 2) 7,180 (7,180) — — — — — Net assets released from restrictions 7,951 — 7,951 (7,951) — — — Total revenues, gains, and other support 262,237 (9,769) 252,468 (3,192) 1,376 250,652 232,645

EXPENSES AND LOSSES

Research 191,929 — 191,929 — — 191,929 192,937 Management and general 64,362 — 64,362 — — 64,362 66,662 Total expenses 256,291 — 256,291 — — 256,291 259,599 Change in net assets before other items 5,946 (9,769) (3,823) (3,192) 1,376 (5,639) (26,954)

Other items: Change in fair value of derivative instruments (Note 8) (6,186) — (6,186) — — (6,186) (4,445) Cumulative effect of accounting change (Note 10) — (4,262) (4,262) 4,262 — — — Adjustment to accrued postretirement benefit liability (other than net periodic postretirement benefit cost) (Note 7) (3,774) — (3,774) — — (3,774) 1,834 Net asset transfers (Note 2) 4,014 (3,832) 182 (182) — — — Change in net assets — (17,863) (17,863) 888 1,376 (15,599) (29,565) Net assets at beginning of year — 126,250 126,250 17,985 42,308 186,543 216,108 Net assets at end of year $ — $ 108,387 $ 108,387 $ 18,873 $ 43,684 $ 170,944 $ 186,543

The accompanying notes are an integral part of these consolidated financial statements. The RAND Corporation consolidated stateMents oF casH FloWs with summarized financial information for the year ended September 28, 2008 (in thousands) For the Year Ended For the Year Ended September 27, 2009 September 28, 2008 Cash flows from operating activities: Change in net assets $ (15,599) $ (29,565) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 8,548 8,558 Loss on debt extinguishment — 3,090 Net realized/unrealized losses 3,147 28,781 Permanently restricted contribution revenue (1,376) (2,142) Change in fair value of derivative instruments 6,186 4,445 Foreign exchange gain (4) (82) Loss on disposition of property and equipment — 16 Changes in assets and liabilities: Increase in billed and unbilled costs and fees (128) (3,517) Decrease in other receivables 157 1,710 Decrease in prepaid and other current assets 11 370 Decrease (increase) in other long-term assets 543 (163) Increase (decrease) in accounts payable and other liabilities 102 (3,216) Decrease in unexpended portion of grants and contracts received (2,314) (5,646) Increase in accrued compensation and vacation 808 673 Decrease in deferred rent (1,556) (711) Increase (decrease) in postretirement benefit liability 4,075 (1,405) Net cash provided by operating activities 2,600 1,196

Cash flows from investing activities: Purchases of investments (54,048) (76,414) Sales of investments 60,128 71,997 Purchases of property and equipment (5,421) (5,791) Net cash provided by (used in) investing activities 659 (10,208)

Cash flows from financing activities: Payment of bonds through refinancing — (127,105) Proceeds from bond issuance — 128,140 Payments of bond issuance costs — (1,499) Principal payments on long-term debt (1,560) (1,870) Contributions restricted for purchase of property and equipment — 50 Permanently restricted contributions received in cash 691 2,166 Net cash used in financing activities (869) (118) Effect of currency exchange rate changes on cash 19 48 Net increase (decrease) in cash and cash equivalents 2,409 (9,082) Cash and cash equivalents at beginning of year 27,092 36,174 Cash and cash equivalents at end of year $ 29,501 $ 27,092

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

41 The RAND Corporation notes to consolidated Financial stateM ents 1. Corporate Organization: RAND Corporation (RAND) is a nonprofit, tax-exempt corporation performing research and analysis funded primarily by contracts, grants, and contributions. In addition, RAND conducts educational programs that provide graduate training. The consolidated financial statements of RAND include the accounts of a controlled affiliate: RAND Europe, a charity domiciled in the United Kingdom. All intercompany balances and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies: Fiscal Year. RAND’s fiscal year is based on a 52- or 53-week year ending on the Sunday closest to September 30. Fiscal years 2009 and 2008 were based on a 52-week period.

Basis of Presentation. The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets are classified into three categories according to donor-imposed restrictions, as follows: Permanently restricted—Net assets subject to donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or removed by actions of RAND. Temporarily restricted—Net assets whose use by RAND is subject to donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of RAND. Unrestricted—Net assets that are not subject to donor-imposed stipulations. The financial statements include certain prior year summarized comparative information in total but not by net asset category. Such prior year information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with RAND’s financial statements for the year ended September 28, 2008, from which the summarized financial information was derived. 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 and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amount of revenues, expenses, or other changes in net assets during the reporting period. Actual results could differ from these estimates. Revenue and Expense Recognition. Contract and grant revenues are recognized as the related services are performed in accordance with the terms of the contract or grant using the proportional performance method. Contributions, including unconditional promises to give, are recognized as revenue in the period received and are reported as increases in the appropriate category of net assets. Donor-restricted contributions that are received and spent within the same fiscal year are reported as unrestricted revenue. Expenses are generally reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations or of board designations that simultaneously increase one class of net assets and decrease another are reported as transfers between the applicable classes of net assets. Concentrations of Risk. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and therefore bear minimal credit risk. RAND derived 80 percent and 78 percent of its research revenues in fiscal years 2009 and 2008, respectively, from contracts, grants, and fees with agencies of the federal government.

Cash and Cash Equivalents. RAND considers all highly liquid financial instruments purchased with an original maturity of three months or less, and whose purpose is not restricted, to be cash equivalents.

Property and Equipment. Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the following estimated useful lives of the assets: 5 to 40 years for buildings and improvements

42 and 3 to 20 years for equipment. Leasehold improvements are amortized by the straight-line method over the shorter of the estimated useful lives of the assets or the term of the lease. Construction in progress will be amortized over the estimated useful lives of the respective assets when they are ready for their intended use. Certain computer systems and software are internally developed. Costs associated with the application development stage are capitalized and depreciated over the useful life of the system or software. All other costs are expensed as incurred. Included in Equipment on the Consolidated Statements of Financial Position was $8,649,000 and $7,068,000 of computer systems and software at September 27, 2009, and September 28, 2008, respectively.

When assets are retired, the assets and related allowances for depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations. As of September 27, 2009, and September 28, 2008, approximately $19,789,000 and $17,175,000, respectively, of fully depreciated assets were in use.

Investments. All investments of permanently restricted net assets, board-designated unrestricted net assets, and certain temporarily restricted net assets are pooled in a long-term investment fund (the LTIF). Income on the LTIF is allocated to individual funds based on the average balance for each fund.

The percentage of board-designated funds distributed for unrestricted use was 5.0 percent in fiscal years 2009 and 2008 based on the average of the trailing 12-quarter market values of the funds. The total distribution was $7,180,000 and $6,804,000 for fiscal years 2009 and 2008, respectively (see also Note 10).

Gains and losses on investments and investment income are reported as increases or decreases in unrestricted net assets and temporarily restricted net assets, unless otherwise stipulated by the donor.

Building Project Fund Investments. The net proceeds from the 2002 tax-exempt bond issuance (see Note 8) are invested in short-term AAA-rated 30-day commercial paper and/or a money market fund.

These proceeds are subject to arbitrage rebate and yield restriction rules under the U.S. Internal Revenue Code in which excess earnings on tax-exempt bond proceeds must be rebated to the federal government if the yield on the investments exceeds the effective yield on the related tax-exempt bonds. The liability, if any, is accrued on an annual basis and must be remitted to the Internal Revenue Service after the end of every fifth bond year and upon full retirement of the bonds. RAND’s liability was immaterial as of September 27, 2009, and September 28, 2008.

Income Tax Status. RAND is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code and corresponding California provisions and has qualified for the 50 percent charitable contributions limitation. RAND has been classified as an organization that is not a private foundation under Section 509(a)(1) and has been designated a “publicly supported” organization under Section 170(b)(1)(A)(vi) of the U.S. Internal Revenue Code.

Foreign Currency Translation. The assets and liabilities of RAND Europe are translated at year-end exchange rates; transactions are translated at the average exchange rates during the year. The effects from the translation of foreign currencies in the current and prior year are cumulatively immaterial to the consolidated financial statements.

Supplemental Cash Flow Information. Cash paid for interest was $3,299,000 in fiscal year 2009 and $4,658,000 in fiscal year 2008.

New Accounting Pronouncements. In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification (Codification) to become the sole source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by all nongovernmental entities (except SEC registrants who are subject to additional authoritative guidance published by the SEC). The Codification does not change GAAP (except in limited circumstances) but modifies the GAAP hierarchy to include only two levels of GAAP: authoritative and non-authoritative. As a result of RAND’s adoption of the Codification, references to legacy GAAP accounting pronouncements in the financial statement footnotes have been modified to reflect plain English descriptions.

Effective September 29, 2008, RAND adopted the authoritative accounting guidance for fair value measurements, for all financial assets and liabilities and for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption did not require an adjustment to the opening balance of net assets. See also Note 6.

43 Concurrent with the enactment of a new California law (the Uniform Prudent Management of Institutional Funds Act, or UPMIFA) that was effective January 1, 2009, RAND adopted the associated authoritative accounting guidance issued by the FASB. UPMIFA requires that all donor-restricted assets not designated as permanently restricted be designated as temporarily restricted until appropriated for spending, including earnings on temporarily restricted net assets which prior to UPMIFA were classified as board-designated unrestricted net assets. As a result of the UPMIFA implementation, RAND transferred $4,262,000 from board- designated unrestricted net assets to temporarily restricted net assets during fiscal year 2009. See also Note 10.

Net Asset Transfers. Noncash transfers from unrestricted net assets designated for investment to unrestricted net assets from operations totaling $4,014,000 and $5,913,000 were required during fiscal years 2009 and 2008, respectively, due to the change in fair value of derivative instruments (see Note 8) and the adjustment to accrued postretirement benefit liability (see Note 7). An additional noncash transfer of $2,096,000 from unrestricted net assets designated for investment to temporarily restricted net assets was recorded as of September 28, 2008, as the decline in the market value of investments for certain funds resulted in the value of those funds being lower than the amount donated.

All current and prior year noncash net asset transfers are reversed as unrestricted net assets from operations become available and as the market value of the investment recovers. During fiscal year 2009, $182,000 of temporarily restricted net assets were transferred back to unrestricted net assets designated for investment due to market value recovery of the investments.

Reclassifications. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. These include a reclassification of contract and grant revenue to fee revenue and a reclassification of research expense to management and general expense. These reclassifications had no effect on net assets. Subsequent Events. Subsequent events have been evaluated through January 29, 2010, the date the financial statements were issued.

3. Billed and Unbilled Costs and Fees: The following table summarizes the components of billed and unbilled contract and grant costs and fees (in thousands): September 27, 2009 September 28, 2008 U.S. government agencies Billed $ 13,894 $ 13,557 Unbilled 13,296 15,177 27,190 28,734 State, local, and private sponsors Billed 6,874 6,533 Unbilled 7,388 6,232 14,262 12,765 Allowance for bad debt (252) (427) $ 41,200 $ 41,072

Unbilled amounts principally represent recoverable costs and accrued fees billed in the first quarter of fiscal year 2010 and fiscal year 2009, respectively.

No significant contract terminations are anticipated at present, and past contract terminations havenot resulted in significant unreimbursed costs.

4. Contributions Receivable: Unconditional promises to give were $4,691,000 and $4,824,000 at September 27, 2009, and September 28, 2008, respectively. The receivables are recorded net of the discount for future cash flows, and allowance for bad debt using the credit-adjusted rate of return appropriate for the expected term of the promise to give determined at the time the unconditional promise to give is initially recognized (5%). Receivables expected in one year or less are included in Other receivables and receivables expected after one year are included in Other assets on the Consolidated Statements of Financial Position. The carrying amount of the receivables is deemed a reasonable estimate of their fair value.

44 Realization of the pledges is expected in the following periods (in thousands):

September 27, 2009 September 28, 2008 In one year or less $ 2,832 $ 2,600 Between one year and five years 2,180 2,393 5,012 4,993 Less discount (146) (169) Allowance for bad debt (175) — $ 4,691 $ 4,824

As more fully described in Note 11, contributions receivable are primarily intended for the following uses (in thousands):

September 27, 2009 September 28, 2008 Temporarily restricted $ 3,767 $ 4,593 Permanently restricted 924 231 $ 4,691 $ 4,824

During the fiscal year ended September 27, 2009, RAND received payments of prior year pledges in the amount of $1,746,000.

Donors have made conditional promises to give of $2,933,000 and $3,304,000 as of September 27, 2009, and September 28, 2008, respectively. These conditional pledges, which include revocable deferred gifts, are not recorded in these consolidated financial statements.

5. Long-Term Investments: Cash and cash equivalents included in long-term investments consist of money market funds and other short- term investments and are carried at fair value.

Long-term investments are presented at fair value and all related transactions are recorded on the trade date. The investments consist of cash and money market funds, domestic and foreign equity funds, bond funds, and alternative investments. Approximately 29 percent of the long-term investments consist of foreign investment holdings.

As of September 27, 2009, RAND had commitments outstanding to purchase alternative investments of $18,449,000; of these commitments, approximately $4,202,000 is due within one year.

Investment income is shown net of related expenses of $321,000 and $441,000, for the fiscal years ended September 27, 2009, and September 28, 2008, respectively.

Long-term investments consist of the following (in thousands):

September 27, 2009 September 28, 2008

Cash and cash equivalents $ 2,648 $ 5,464 Shares of fixed income funds, at fair value (cost, 2009—$60,946, and 2008—$65,641) 61,102 65,319 Shares of equity funds, at fair value (cost, 2009—$68,162, and 2008—$66,162) 65,351 68,582 Alternative investments (cost, 2009—$40,370, and 2008—$38,503) 45,415 44,387 $ 174,516 $ 183,752

45 6. Fair Value Measurements: The authoritative accounting guidance for fair value measurement clarifies the definition of fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands the required disclosures about the use of fair value measurements.

Under the guidance, fair value is defined as the price that would be received to sell an asset (or paid to transfer a liability), or the “exit price.” The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into levels:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable or whose significant value drivers are observable.

Level 3 – Significant inputs are supported by little or no market activity and are thus unobservable.

As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. RAND’s assessment of the significance of particular inputs to the fair value measurement requires judgment and may affect the selection of the hierarchy level and the valuation itself. RAND’s own creditworthiness has been considered in the fair value measurements contained herein.

Long-Term Investments – RAND’s portfolio of long-term investments consists of cash/money market funds, fixed income funds, equity funds, and alternative investments. Quoted market prices are used to determine fair value for fixed income funds and equity funds when available. All such funds are considered Level1. Certain equity funds are not actively traded but the underlying investments have inputs that are observable. Such funds are considered Level 2. Alternative investments include RAND’s share of private equity funds and limited partnership arrangements, which are not actively traded. Identical or similar instruments are difficult to identify as underlying investment components may not be publicly available. Some of these investments have restrictions that limit RAND’s ability to withdraw funds as specified in the arrangements. Fair value measurement for alternative investments considers all available information for each investment fund, including its annual audited financial statements, known activity subsequent to its financial statement date, and valuation information from the fund manager. All alternative investments are considered Level 3.

Building Project Fund Investments – RAND’s remaining proceeds from its tax-exempt bond issuance are invested in a money market fund. This fund is considered Level 1.

Derivative Financial Instruments – RAND uses two interest rate swaps to fix the interest rate on its 2008A and 2008B variable rate bonds. Dealer quotes, based on cash flow models discounted at relevant market interest rates, are used to determine the fair value of the swaps, both of which are considered Level 2.

RAND’s assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of September 27, 2009, were as follows (in thousands): Balance as of Level 1 Level 2 Level 3 September 27, 2009 Assets Investments Cash/Money Market Funds $ 3,762 $ — $ — $ 3,762 Fixed Income Funds 61,102 — — 61,102 Equity Funds 30,507 34,844 — 65,351 Alternative Investments — — 45,415 45,415

Liabilities Derivatives $ — $ 14,256 $ — $ 14,256

46 Changes in Level 3 assets measured at fair value on a recurring basis for the fiscal year ended September 27, 2009, were as follows (in thousands): Realized and Unrealized Beginning Gains Purchases Balance (losses) and Sales Ending Balance

Alternative Investments $ 44,387 $ (766) $ 1,794 $ 45,415

7. Postretirement Benefits Other Than Pensions:

In addition to providing certain other retirement benefits, RAND provides health care benefits to certain employees who retire having met the required age and years of service with RAND. This coverage also applies to their dependents. Retirees may elect coverage under the Preferred Provider Organization, various HMOs, or reimbursement of individually purchased Medigap policies. Medicare becomes the primary coverage for retirees when they reach age 65. Retirees and dependents share substantially in the cost of coverage. RAND retains the right, subject to existing agreements, to change or eliminate these benefits.

RAND’s retiree medical program includes prescription drug coverage for retirees over age 65 that equals or exceeds the benefit provided by Medicare. As long as the retirees remain in the Company medical plan rather than enrolling in the new Medicare prescription drug coverage, Medicare will share the cost of the plan with the Company and the employees. RAND’s share of the obligations for future retiree medical benefits is reduced due to this subsidy from Medicare.

The following table sets forth the plan’s funded status as shown in the Consolidated Statements of Financial Position (in thousands):

September 27, 2009 September 28, 2008 Change in benefit obligation Benefit obligation at beginning of year $ 19,088 $ 20,692 Service cost 634 701 Increase due to passage of time 1,400 1,319 Plan participants’ contributions 523 501 Actuarial loss (gain) 3,446 (3,046) Benefits paid (1,179) (1,079) Benefit obligation at end of year 23,912 19,088 Change in plan assets Fair value of plan assets at beginning of year 6,952 7,151 Actual return on plan assets 231 (647) Employer contributions 1,174 1,026 Plan participants’ contributions 523 501 Benefits paid (1,179) (1,079) Fair value of plan assets at end of year 7,701 6,952 Unfunded obligation $ 16,211 $ 12,136

The following table provides the relevant weighted-average assumptions used: September 27, 2009 September 28, 2008

Discount rate used to determine benefit obligation 5.50% 7.50% Discount rate used to determine net periodic postretirement benefit cost 7.50% 6.50% Long-term rate of return on plan assets 8.00% 8.00%

47 Assumed health care cost trend rates are as follows: September 27, 2009 September 28, 2008

Health care cost trend rate assumed for next year 9.50% 9.50%

Rate to which the cost trend rate is assumed to decline 5.00% 5.00% Year that the rate reaches the ultimate trend rate 2015 2014

The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rate by one percentage point would increase by $339,000 the service cost and passage-of-time components of the fiscal year 2009 expense and increase by $3,580,000 the accumulated postretirement benefit obligation as of September 27, 2009. Decreasing the assumed health care cost trend rate by one percentage point would decrease by $277,000 the service cost and passage-of-time components of the fiscal year 2009 expense and decrease by $2,954,000 the accumulated postretirement benefit obligation as of September 27, 2009.

The net periodic postretirement benefit cost for fiscal years ended September 27, 2009, and September 28, 2008, included the following components (in thousands):

2009 2008 Service cost-benefits attributed to service during the period $ 634 $ 701 Increase in the accumulated postretirement benefit obligation to recognize the effects of the passage of time 1,400 1,319 Expected return on plan assets (561) (574) Recognition of prior service cost and net gain/loss on amortization 2 10 Net periodic postretirement benefit cost $ 1,475 $ 1,456

As required annually by the authoritative accounting guidance, RAND recorded an adjustment to the accrued postretirement benefit liability (other than net periodic postretirement benefit cost) in Other items onthe Consolidated Statements of Activities and Changes in Net Assets for the period ended September 27, 2009, a net loss of $3,774,000. The corresponding adjustment for the period ended September 28, 2008, was a net gain of $1,834,000. Both adustments were driven by the change to the associated discount rates.

The following benefit payments, which reflect expected future service and Medicare Part D subsidies, as appropriate, are expected to be paid (in thousands):

Gross Benefit Medicare Part Net Benefit Payments D Subsidies Payments 2010 $ 912 $ 56 $ 856 2011 1,018 69 949 2012 1,098 82 1,016 2013 1,160 97 1,063 2014 1,261 109 1,152 Next five years 7,530 745 6,785

Asset allocations at September 27, 2009, and September 28, 2008, by asset category are as follows:

2009 2008 Cash and short term 13.5% 10.0% Shares of bond funds, at fair value 32.2 36.0 Shares of equity funds, at fair value 34.8 34.0 Alternative investments 19.5 20.0 100.0% 100.0%

48 RAND contributes to a Voluntary Employee Benefit Association irrevocable trust that is used to partially fund health care benefits for future retirees. In general, retiree health benefits are paid as covered expenses are incurred.

8. Borrowing Arrangements: Revenue Bonds. In 2002, RAND issued $130,000,000 of tax-exempt revenue bonds to finance the construction of its Santa Monica headquarters facility ($32,500,000 Series 2002A fixed rate and $97,500,000 Series 2002B variable rate). During fiscal year 2007, RAND refinanced its 2002A fixed rate bonds resulting in the issuance of $34,975,000 of variable rate tax-exempt revenue bonds (Series 2007) and the defeasance of the original Series 2002A bonds. The proceeds from the Series 2007 bonds, net of issuance costs of $1,006,000, were irrevocably deposited into an escrow fund and invested in U.S. Treasury Securities in an amount sufficient to service the principal and interest payments on the Series 2002A bonds through the redemption date of April 1, 2012.

In May 2008, RAND issued $34,575,000 of tax-exempt variable rate revenue bonds (Series 2008A) to refinance the Series 2007 tax-exempt variable rate revenue bonds. Costs incurred in connection with the issuance of the Series 2008A bonds of approximately $379,000 were paid by RAND. The initial rate of interest was 1.65% and annual principal payments ranging from $450,000 to $1,825,000 are due from April 1, 2009 to April 1, 2042. Included in management and general expenses on the Consolidated Statements of Activities and Changes in Net Assets for fiscal year 2008 is $935,000, recognized as a loss on extinguishment of the Series 2007 variable rates bonds.

In June 2008, RAND issued $93,565,000 of tax-exempt variable rate revenue bonds (Series 2008B) to refinance the Series 2002B tax-exempt variable rate revenue bonds. Included in the par amount of the Series 2008B bonds was approximately $1,035,000 of costs incurred in connection with issuance. The initial rate of interest was 1.15% and annual principal payments ranging from $1,110,000 to $4,935,000 are due from April 1, 2009 to April 1, 2042. Included in management and general expenses on the Consolidated Statements of Activities and Changes in Net Assets for fiscal year 2008 is $2,155,000, recognized as a loss on extinguishment of the Series 2002B variable rate bonds.

The Series 2008A and Series 2008B bonds contain various covenants including compliance with the following financial measures: maximum debt-to-capitalization ratio, minimum cushion ratio, and minimum debt service coverage ratio. RAND is in compliance with all covenants as of September 27, 2009.

The payment of principal and interest on both the Series 2008A and Series 2008B bonds is collateralized by direct-pay letters of credit.

Interest Rate Swaps. Concurrent with the issuance of the Series 2007 variable rate bonds, RAND entered into an interest rate swap agreement with a counterparty whereby RAND agreed to pay the counterparty a fixed rate of interest of 3.955% and the counterparty agreed to pay RAND the Series 2007 variable rate until April 1, 2012, and 67% of one-month LIBOR thereafter. Simultaneously, RAND entered into an additional interest rate swap agreement with another counterparty for $42,350,000 of its Series 2002B variable rate bonds whereby RAND agreed to pay the counterparty a fixed rate of interest of 3.955% and the counterparty agreed to pay RAND 67% of one-month LIBOR. Both swaps remain in effect with the new Series 2008A and Series 2008B bonds, with the same terms (except the first counterparty has agreed to pay RAND the Series 2008A variable rate in place of the Series 2007 variable rate) and terminate on April 1, 2042, the maturity date of the Series 2008A and Series 2008B bonds. Included in Other items on the Consolidated Statements of Activities and Changes in Net Assets and in Other long-term liabilities on the Consolidated Statements of Financial Position is $6,186,000 and $4,445,000, for fiscal years 2009 and 2008, respectively, recognized as the change in fair value of these derivative instruments.

49 Long-term debt is as follows (in thousands): September 27, September 28, 2009 2008 California Infrastructure and Economic Development Bank Variable Rate Revenue Bonds, Series 2008A, issued in the original principal amount of $34,575,000, in connection with the refunding of the Series 2007 bonds, in May 2008; average interest rate of 0.66% and 1.85% for the fiscal years ending September 27, 2009, and September 28, 2008, respectively; annual principal payments ranging from $450,000 to $1,825,000, beginning April 1, 2009, and ending April 1, 2042 $ 34,125 $ 34,575 California Infrastructure and Economic Development Bank Variable Rate Revenue Bonds, Series 2008B, issued in the original principal amount of $93,565,000, in connection with the refunding of the Series 2002B bonds, in June 2008; average interest rate of 0.40% and 1.96% for the fiscal years ending September 27, 2009, and September 28, 2008, respectively; annual principal payments ranging from $1,110,000 to $4,935,000, beginning April 1, 2009, and ending April 1, 2042 92,455 93,565 126,580 128,140 Less current portion (1,845) (1,560) $ 124,735 $ 126,580

Annual bond principal payments are required in the following fiscal years (in thousands):

2010 $ 1,845 2011 1,930 2012 2,005 2013 2,130 2014 2,215 Thereafter 116,455 $ 126,580

Accrued interest payable relating to the bonds was $256,000 and $454,000 as of September 27, 2009, and September 28, 2008, respectively. RAND’s total interest expense was $3,109,000 and $4,814,000 for the fiscal years ended September 27, 2009, and September 28, 2008, respectively. The fair value of RAND’s revenue bonds approximates par value as all of RAND’s revenue bonds are variable rate bonds.

Line of Credit. RAND has an uncollateralized line of credit in the principal amount of $18,000,000 at September 27, 2009, which expires in August 2010. The line of credit contains covenants that require RAND to achieve the same financial measures as the Series 2008A and 2008B revenue bonds. There were no amounts outstanding at September 27, 2009, and September 28, 2008. Under the terms of the credit agreement, interest is payable monthly at (i) the prime rate less .75 percent, (ii) the LIBOR rate plus 1.5 percent, or (iii) the IBOR rate plus 1.5 percent as selected by RAND. No amounts were drawn on the line of credit agreement in fiscal years 2009 or 2008.

9. Commitments and Contingencies: Lease Commitments. Operating lease commitments, net of $4,807,000 representing subleases, are as follows (in thousands):

2010 $ 8,211 2011 8,778 2012 8,557 2013 8,446 2014 8,233 Thereafter 7,120 $ 49,345

Future minimum rentals are comprised of office and equipment leases. Certain of RAND’s office leases contain rent escalation clauses and fair-market renewal options. All property leases generally require RAND to pay for utilities, insurance, taxes, and maintenance. RAND’s net rental expense was $7,967,000 and $7,358,000 for the fiscal years ended September 27, 2009, and September 28, 2008, respectively.

50 Other Commitments. Contract costs billed to government clients are subject to audit by the Defense Contract Audit Agency (“DCAA”). Resulting indirect cost adjustments, if any, are prorated to all contracts. Contract costs billed prior to September 28, 2008, have been audited and accepted. To date, there have been no significant cost disallowances. In the opinion of management, contract costs billed subsequent to September 28, 2008, are allowable, and any potential cost disallowance would not materially affect RAND’s consolidated financial position, results of operations, or cash flows.

RAND has certain contingent liabilities with respect to claims arising from the ordinary course of business. In the opinion of management, such contingent liabilities will not result in any loss that would materially affect RAND’s financial position, results of operations, or cash flows.

Environmental Remediation. Under the terms of an agreement with the City of Santa Monica (the “City”) for the sale of land owned by RAND, RAND was responsible for the demolition of existing buildings on the site and environmental remediation with respect to the underlying land. Under the terms of the agreement with the City, RAND must indemnify the City for claims related to the presence of hazardous materials at the site for a period until ten years after the demolition of the old buildings and completion of soil and groundwater remediation. There can be no assurance that future claims for indemnity will not have a material adverse effect on RAND’s consolidated statements of activities or of cash flows.

10. Endowment: RAND’s endowment consists of approximately 30 individual funds established for a variety of purposes. It has both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowment funds. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

Absent explicit donor stipulations to the contrary, RAND classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted—all investment earnings and temporarily restricted gifts—is classified as temporarily restricted until those amounts are appropriated for expenditure by RAND in a manner consistent with the standard of prudence prescribed by UPMIFA (see also Note 2, New Accounting Pronouncements).

The following table summarizes the components of the endowment by net asset class as of September 27, 2009: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted funds $ — $ 9,018 $ 42,816 $ 51,834 Board-designated funds 122,682 — — 122,682

End of year $ 122,682 $ 9,018 $ 42,816 $ 174,516

The following table summarizes the activity in the endowment during fiscal year 2009: Temporarily Permanently Unrestricted Restricted Restricted Total Beginning of year $ 137,149 $ 4,478 $ 42,125 $ 183,752 Investment return (2,572) 2,865 — 293 Contributions — 50 691 741 Appropriations (7,815) (2,455) — (10,270) Other changes—UPMIFA (4,262) 4,262 — — Other changes—net asset transfer 182 (182) — —

End of year $ 122,682 $ 9,018 $ 42,816 $ 174,516

Investment and Spending Policies. RAND’s investment and spending policies are in compliance with UPMIFA. In accordance with UPMIFA, RAND considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: the duration and preservation of the fund, the mission of RAND, general economic conditions, the possible effect of inflation and deflation, the expected total return from income and the appreciation of investments, the investment policies of the organization, and RAND’s other resources.

51 Per RAND’s investment policy, endowment assets are invested in a manner that is intended to produce results that exceed the Employment Cost Index plus 5.5%. RAND 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). RAND targets a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints.

Per RAND’s spending policy, a percentage of its endowment fund’s average fair value over the prior 12 quarters through June 30 is appropriated for distribution each year. In establishing this policy, RAND considered the long- term expected return on its endowment. Accordingly, over the long term, RAND expects the current spending policy to allow its endowment to grow at a rate equal to or in excess of inflation.

Funds with Deficiencies. From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires RAND to retain as a fund of perpetual duration. In accordance with GAAP, deficiencies of this nature that are reported in unrestricted net assets were $1,913,000 and $2,096,000 as of September 27, 2009, and September 28, 2008, respectively (see also Note 2, Net Asset Transfers). These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that was deemed prudent by the Board of Trustees.

11. Net Assets: Board-Designated Net Assets. Board-designated net assets (net of cumulative net asset transfers) are available for the following purposes (in thousands):

September 27, 2009 September 28, 2008 Designated for investment $ 104,901 $ 117,187 Designated for special use: RAND Education 3,235 3,332 National Security Research and Training — 2,486 RAND Institute for Civil Justice — 1,728 Other 251 1,517 3,486 9,063 $ 108,387 $ 126,250

Temporarily Restricted Net Assets. Temporarily restricted net assets (both within and outside of the endowment and including net asset transfers) are available for the following purposes (in thousands):

September 27, 2009 September 28, 2008 National Security Research and Training $ 3,181 $ 1,202 Pardee RAND Graduate School 2,506 2,849 RAND Institute for Civil Justice 1,811 638 President’s Fund 1,616 1,712 RAND Center for Middle East Public Policy 1,262 2,554 Bing Center for Health Economics 1,043 1,288

RAND Health 921 1,181

RAND Center for Asia Pacific Policy 689 1,201 RAND Center for Russia and Eurasia 499 1,077 Other 5,345 4,283 $ 18,873 $ 17,985

52 Permanently Restricted Net Assets. Permanently restricted assets (including pledges) are shown below by the purpose designated by the donor. The assets are invested in perpetuity and the income is available to support the restricted activities (in thousands):

September 27, 2009 September 28, 2008 Pardee RAND Graduate School General support $ 12,585 $ 12,478 Awards and scholarships 3,435 3,211 National Security Research and Training 4,500 4,500 RAND Institute for Civil Justice 4,134 4,134 RAND Pardee Center for Longer Range Global Policy 3,670 3,670 RAND—general support 3,565 3,565 Tang Institute for U.S.–China Relations 3,000 3,000 Samueli Institute Fund for Policy Studies in Integrative Medicine at RAND 3,000 3,000 Paul O’Neill Alcoa Professorship in Policy Analysis 2,479 2,479 Research Position Endowment 1,500 1,500 Korea Chair 1,045 — Other 771 771 $ 43,684 $ 42,308

12. Employee Retirement Plans: RAND has four defined contribution employee plans: a Qualified Retirement Plan (“QRP”), a Supplemental Retirement Annuity Plan (“SRAP”), a Nonqualified Deferred Compensation Plan (“NDCP”), and a Nonqualified Supplementary Plan (“NSP”). Most full-time, regular employees are eligible to participate in the QRP and SRAP. Certain employees are eligible to participate in the NSP and NDCP. RAND has reserved the right to terminate the plans at any time, but in such an event, the benefits already purchased by the participant and contributions already made by RAND would not be affected. The QRP and the NSP are entirely RAND-financed. RAND’s contributions to the Plans for eligible employees range from 5 percent to 14 percent of salaries, depending on the level of wages and age of the participating employee. RAND’s contributions to the QRP vest at the earlier of retirement or four years of service. Vesting begins after two years of service and increases weekly to 100 percent at the end of four years of service. The NSP and NDCP vest under various conditions specified in the plan. All contributions made by RAND are charged to operations. RAND’s contributions were $10,751,000 and $10,511,000 for the fiscal years ended September 27, 2009, and September 28, 2008, respectively. The SRAP and NDCP only require employee contributions and RAND does not contribute to these plans.

53 References

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54 Investing in People and Ideas “Impact of Teen Depression Near-Term Feasibility of Conflict & Stability Global Recession on Academic, Social, and Alternative Jet Fuels, James Physical Functioning,” Lisa I. Hileman, David S. Ortiz, Withdrawing from Iraq: Helping Each Other in H. Jaycox, Bradley D. Stein, James T. Bartis, Hsin Min Alternative Schedules, Times of Need: Financial Susan Paddock, Jeremy N. Wong, Pearl E. Donohoo, Associated Risks, and Help as a Means of Coping V. Miles, Anita Chandra, Lisa Malcolm A. Weiss, and Ian Mitigating Strategies, Walter with the Economic Crisis, S. Meredith, Terri Tanielian, A. Waitz, RAND Corporation, L. Perry, Stuart E. Johnson, Susann Rohwedder, Scot Hickey, and M. Audrey 2009 Keith Crane, David C. RAND Corporation, 2009 Burnam, Pediatrics, Vol. 124, Gompert, John Gordon No. 4, pp. e596–e605 Imported Oil and U.S. IV, Robert E. Hunter, Dalia U.S.-U.K. Conference National Security, Keith Dassa Kaye, Terrence K. on Behavioral Finance “Perceived Barriers to Crane, Andreas Goldthau, Kelly, Eric Peltz, and and Public Policy, RAND Treatment for Adolescent Michael Toman, Thomas Howard J. Shatz, Behavioral Finance Forum, Depression,” Lisa S. Light, Stuart E. Johnson, RAND Corporation, 2009 http://www.rand.org/ Meredith, Bradley D. Stein, Alireza Nader, Angel pubs/conf_proceedings/ Susan M. Paddock, Lisa H. Rabasa, and Harun Dogo, In the Graveyard of CF264/#welcome_and_ Jaycox, Virginia P. Quinn, RAND Corporation, 2009 Empires: America’s War in opening_remarks Anita Chandra, and Audrey Afghanistan, Seth G. Burnam, Medical Care, Vol. Research Priorities for Fossil Jones, W.W. Norton & Perspectives of Chief Ethics 47, No. 6, pp. 677–685 Fuels, James T. Bartis, Company, Inc., 2009 and Compliance Officers RAND Corporation, 2009 on the Detection and “Improving Treatment Security in Mexico: Prevention of Corporate Seeking Among Adolescents Looking Back on Looking Implications for U.S. Policy Misdeeds: What the Policy with Depression: Forward: A Review of Options, Agnes Gereben Community Should Know, Understanding Readiness Evaluative Scenario Schaefer, Benjamin Bahney, Michael D. Greenberg, for Treatment,” Terri Tanielian, Literature, European and K. Jack Riley, RAND Corporation, 2009 Lisa H. Jaycox, Susan M. Environment Agency RAND Corporation, 2009 Paddock, Anita Chandra, technical report based International Conference Lisa S. Meredith, and M. on a study by Robert Reconstruction Under Fire: on Entrepreneurship— Audrey Burnam, Journal of Lempert, Michael Unifying Civil and Military Catalysts of Adolescent Health, Vol. 44, Hallsworth, Stijn Hoorens, Counterinsurgency, David Entrepreneurship: Policies No. 5, pp. 490–498 and Tom Ling C. Gompert, Terrence for Growth, Elizabeth D. K. Kelly, Brooke Stearns Brown, Amy R. Coombe, The Global Technology Lawson, Michelle Parker, and Fred Kipperman, Krishna B. Energy & Environment Revolution China, In-Depth Kimberly Colloton, Kumar, Tewodaj Mengistu, Analyses: Emerging RAND Corporation, 2009 Arnab Mukherji, Neeraj Natural Gas and Israel’s Technology Opportunities Sood, and Joanne K. Energy Future: Near-Term for the Tianjin Binhai New The Long March: Building Yoong, RAND Corporation, Decisions from a Strategic Area (TBNA) and the Tianjin an Afghan National Army, 2009 Perspective, Steven W. Economic-Technological Obaid Younossi, Peter Popper, Claude Berrebi, Development Area (TEDA), Dahl Thruelsen, Jonathan James Griffin, Thomas Richard Silberglitt and Anny Vaccaro, Jerry M. Sollinger, Light, Endy Y. Min, and Keith Wong, with S. R. Bohandy, and Brian Grady, Crane, RAND Corporation, Brian G. Chow, Noreen RAND Corporation, 2009 2009 Clancy, Scott Hassell, David R. Howell, Gregory S. Jones, Corporations and Improving the Energy Eric Landree, and Parry Counterinsurgency, William Performance of Buildings: Norling, RAND Corporation, Rosenau, Peter Chalk, Renny Learning from the European 2009 McPherson, Michelle Parker, Union and Australia, and Austin Long, Charles P. Ries, Joseph RAND Corporation, 2009 Jenkins, and Oliver Wise, RAND Corporation, 2009

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