2019 ANNUAL REPORT Leadership Transitions Heidi Anderson, Ph.D. President, University of Maryland Eastern Shore Dr. Heidi Anderson became president of the University of Maryland Eastern Shore (UMES) in September 2018 after serving as provost and vice president for academic affairs at Texas A&M University– Kingsville. Dr. Anderson is committed to educating students, expanding research capacity, and strengthening UMES’s footprint in the community. Tom Gilbert Chief Financial Officer, University System of Maryland Foundation In January 2019, Tom Gilbert joined the Foundation as chief financial officer, having previously worked as audit senior manager at PricewaterhouseCoopers. Tom brings his experience in asset management, digital technologies, and regulatory issues to the business operations team at the Foundation. Timothy McDonough Vice Chancellor for Communications and Marketing, University System of Maryland Timothy McDonough joined the System in May. Previously, Tim served as vice president for government and public affairs at the Association of Governing Boards of Universities and Colleges. He brings with him a deep understanding of higher education. Jeff Neal Vice Chancellor for Communications and Marketing, University System of Maryland Jeff Neal stepped down in February. While at the System, Jeff led a complete redesign of print publications, increased its digital footprint significantly, and cultivated local and national press contacts to enhance the USM’s stature and reputation. Ralph Partlow Vice President and General Counsel, University System of Maryland Foundation Ralph Partlow joined the Foundation in February 2019 as associate Contents general counsel. He comes to the Foundation from M&T Bank where he served as administrative vice president and deputy gen- Letter from the President and Chair 1 eral counsel with a focus on institutional investment management. Letter from the Chancellor 2 Pamela Purcell Vice President of Finance and General Counsel, University System A Look Back on 40 Years 4 of Maryland Foundation Pamela Purcell retired to Uzès, France, after 21 years with the Report on Investments 8 University System of Maryland and the Foundation. While at the Foundation, she was instrumental in professionalizing the Founda- Financial Highlights 12 tion Board and re-engineering business operations. Financial Statements 13 Maria Thompson, Ph.D. President, Coppin State University Leadership 30 In June 2019, Dr. Maria Thompson stepped down as president to return to Nashville, Tennessee. She joined Coppin in 2015 as the school’s first female president and while in office was committed to academic excellence, community impact, and service. Letter from the President and Chair

This year, we celebrated the 40th anniversary of the incorporation of the University System of Maryland (USM) Foundation. In 1979, a donation of 400 Black Angus cattle from Arthur A. Houghton, Jr., became the first gift to our Foundation, which was created to accept and hold this gift for the University of Maryland, College Park. As you can imagine, a lot has changed for the Foundation since, but throughout the years the USM Foundation has remained true to its original purpose: to support and strengthen students, faculty, staff, and campuses by building a culture of philanthropy. You can read more about the Foundation’s rich history starting on page four of this annual report. The past fiscal year was filled with important developments for the USM and the Foundation. Chancellor Robert Caret announced that he will step down from his position on June 30, 2020. Long a part of the USM family, Bob began his career Leonard R. Raley Bonnie B. Stein at Towson University as a faculty member and later served as dean, executive vice President and CEO Chair president, and provost, and then as president from 2003 to 2011. Prior to becoming president at Towson, Bob also served as president of San Jose State University from 1995 to 2003. He returned to the USM in 2015 as chancellor after serving as president of the University of Massachusetts System. During his USM tenure, Bob helped build the USM’s role as an economic engine for the state and oversaw efforts our policy benchmarks. The operating portfolio ended the fiscal year with a +3.1% that helped nearly 50 percent of undergraduate students graduate without debt. return. This favorable outperformance holds true for our three-, five-, and ten-year The USM Foundation unveiled its new strategic plan in June.Pioneers and returns for the endowment and operating portfolio against our policy benchmarks. Optimists: Strategic Plan 2024 outlines the USM Foundation’s plans to strengthen In fact, the portfolio had more positive performing months than major indexes partnerships to advance higher education in Maryland. The plan focuses on five (S&P 500, MSCI All Country World Index, and Barclay’s Aggregate Bond Index) main themes: Asset Management, Innovation and Entrepreneurship, Culture of for much of the last 36 months, further displaying our portfolio’s durability. Philanthropy, Sustaining a Great Foundation, and Communication and Advocacy, We are pleased with the defensive nature of our portfolio protecting capital during and features an ambitious goal to grow endowment to $2 billion by 2027. Our moments of market uncertainty while also participating in rising markets. Of thanks to all of you who helped us envision this new strategic plan. particular note, as of December 31, 2018, the endowment earned a positive +2.5% Sadly, we lost a great friend and leader this past year. Walter Fatzinger passed away 2018 calendar year return, when markets came under stress in the fourth quarter in November 2018. He served on our Board for 23 years, and was our Board Chair of 2018, with most global and domestic equity markets posting negative calendar from 2006 to 2010. Walter was an influential member of the trust and investment year results. banking community and he served on a number of corporate and non-profit boards We would like to thank our Foundation Board members, our staff, and the USM’s throughout the region. Many of us regard Walter as the architect of the current-day generous donors for their engagement, advocacy, and support. Thanks to you, we USM Foundation, in particular our asset management model. can build on our rich history and continue to support the USM and its institutions. Our investment portfolio continued its strong and consistent performance, with After reflecting on the 40 years since the Foundation’s incorporation, we are ready the endowment portfolio ending the fiscal year with a +6.8% return, well above to embrace the next chapter for the Foundation and our partners.

www.usmf.org 1 I am pleased to report on another year of progress and success for the University System of Maryland. This past Letter from the Chancellor year we markedly advanced our priorities of providing affordable access to high-quality higher education, graduating more students, and enhancing our overall workforce and economic development impact. As we build on this progress during my final year as chancellor, I want to reiterate that working with the USM Foundation has been an absolute pleasure. Your efforts help drive higher levels of giving and engagement across the USM, create a network of advocates to embrace the USM’s role as an educator and economic engine, and grow a sustainable culture of philanthropy Systemwide. I appreciate your commitment and dedication. I would also like to note that thanks to our team in Annapolis, the USM enjoyed another productive legislative session, particularly in terms of our budgets. USM’s operating budget of $1.49 billion in state support is an increase of $100 million—or 7%—over the FY 2019 revised budget. The budget will allow the USM to limit our tuition increase for in-state, undergraduate students to a modest 2%, and funds a number of critical initiatives. The capital budget provides $178 million for academic and research facilities across the USM, including numerous STEM facilities that fuel innovation and advance economic development. The legislature, with the support of the USM, also approved some significant changes to the composition and operation of the Board of Regents. The Board will expand, adding the Secretary of Commerce as anex officio member, a second student regent, and new members appointed by legislative leaders. The Board will add individuals with expertise in finance, diversity and workplace inclusion, as well as higher education administration. There are also requirements for video streaming of meetings, enhanced financial disclosure, and more. All of this is in alignment with the priorities of good governance and increased transparency that Linda Gooden established Robert L. Caret immediately after being named chair of the Board of Regents. Chancellor Last year also brought sad news. With the passing of Clifford Kendall and Donald Langenberg, we lost two true friends to higher education and the USM. Former Board of Regents Chair Cliff Kendall’s impact on higher education in Maryland is unsurpassed. His dedicated service to both the USM Board of Regents and the USM Foundation, as well as his incredible generosity to the University of Maryland, College Park and the Universities at Shady Grove underscore his commitment. Don—who served as chancellor from 1990 to 2002—helped to make the USM what it is today, driven by his efforts to delegate authority to the individual campuses, demand a high degree of accountability, and embrace the best principles of shared governance. Their intellect, warmth, and fundamental decency will be missed. As I have noted before, throughout my years as chancellor I have been impressed by the dedication and hard work of the USM Foundation. The Foundation has had a profound impact across the USM. Of course, there are significant challenges ahead. As I step down from my role, I am confident that the next USM chancellor—in partnership with the Foundation Board and staff—will help build the relationships and attract resources needed to support the USM’s federated capital campaign and grow the USM Foundation endowment to $2 billion by 2027. In my forty-five years serving in higher education, I have worked with a number of educational boards. The USM Foundation Board is by far one of the most professional and collegial champions of higher education that I have encountered. I will always value the relationships I have made while working with you to advance higher education in Maryland.

2 www.usmf.org USM Foundation Dinner and Board Meeting at Salisbury University June 13-14, 2019 Members of the USM Foundation and Salisbury University Foundation Boards gathered at Salisbury University’s Guerrieri Academic Commons for dinner and a USM Foundation Board meeting the following day. The evening’s dinner and subsequent meeting were a great way to meet members of the Salisbury University Foundation Board and to share thoughts on building support for public higher education in Maryland.

Bonnie Stein Leonard Raley and Bob Caret

USM and SU Board members

David Balcom and Eric McLauchlin Bonnie Stein, Bob Caret, Bill Wood Salisbury students Charles Wight

www.usmf.org 3 USM Foundation A Look Back on 40 Years

1979 1986 1979–2019 • The University of Maryland • Private support to the five-campus Foundation is created to accept University of Maryland increases and hold Arthur A. Houghton, Jr.’s 14 % over the previous year, with a donation of 400 Black Angus Cattle total of $16.6 million contributed by from the Wye Plantation Herd and more than 31,500 friends, alumni, to serve the five campuses of the corporations, and foundations. University of Maryland: Baltimore, Baltimore County, College Park, Eastern Shore, and University College. • Annual fundraising totals reach $20 million for the System, and • The first meeting of the Foundation’s 1988 private giving increases nearly Board of Directors convenes on April • The Foundation’s second campaign, 20%, totaling $75 million since 30, 1979 with a total The Minds of Maryland, launches 1983. The number of donors of 12 members. with a goal of $200 million. After across the System grows to • For the first time 1981 five years, the campaign surpasses nearly 40,000. ever, annual voluntary its goal by more than $64 million • The University of Maryland • The Jacob France family donates support for the five- Foundation launches the five-year and helps grow endowment and Hidden Waters to the Foundation, campus University of The Foundation’s first Business and Industry Campaign, operating budgets of the System’s which the Board of Regents Maryland tops the $10 visual identity with a goal of $5.75 million. The campuses and components. later designated as the official million mark, placing the University campaign raises close to $17 • The five University of Maryland residence of the chancellor. of Maryland among the top 25 public million, far surpassing its goal. The campuses and six campuses of institutions in private support. campaign results in the creation the State University and College of the A. James Clark Chair in System merge to become the Construction Engineering and The 1979 University of University of Maryland System. Maryland gift report calls Management, the first-ever chair Arthur A. Houghton’s endowed through the Foundation. gift, “a gift so unusual it is virtually impossible to value in terms of dollars.”

Hidden Waters

4 www.usmf.org A. James Clark 1993 1997 2000 • Due to budget cuts, the University • The University of Maryland System • The Foundation enters the of Maryland System’s funding is is renamed the University System twenty-first century and launches 33% below its funding level upon of Maryland. its first website. its formation in 1988. Private • The largest confederated campaign giving becomes more important yet, Make a Lasting Impression, and the Foundation’s assets under launches with a five-year goal of management approach $100 million, $700 million. By 2002, the cam- which places the Foundation in the paign exceeds its goal by $200 upper ranks of public institution million and is the most successful foundations in the United States. fundraising effort to support higher education in Maryland to date. More than 200,000 individual, corporate, and foundation gifts are received throughout the campaign. 2001 • The University of Maryland, College Park and the University of Maryland, Baltimore establish their own Foundations to strengthen volunteer organizations at the campus level. The USM Foundation shifts to a service model and takes on a more supportive Systemwide role, while continuing to manage assets for the University of Maryland, College 1998 Park and the University • The Foundation’s endowment of Maryland, reaches $200 million. Baltimore.

www.usmf.org 5 2004 2008 2016 • The University of Maryland Foundation •  The Foundation launches a five-year • A $50 million quasi-endowment, becomes known as the University strategic plan that focuses on established in 2014 with reserve System of Maryland Foundation and strengthening partnerships with funds from USM institutions and introduces a new visual identity. USM institutions, defining its role in the USM office, begins to provide supporting philanthropy and building resources to campus endowment- • The Foundation’s endowment reaches a more engaged Board. raising efforts. $300 million.

2006 • The largest federated University System of Maryland campaign to date launches with a goal to raise $1.7 billion. The campaign raises $2.1 billion with an unprecedented number of gifts made. 2013 • The Foundation launches a five- year strategic plan. The plan aims to steward private support, build a culture of philanthropy, and share expertise and best practices. • A new website for the Foundation is launched, separate from the USM’s domain at www.usmf.org.

6 www.usmf.org Assets Under Management Throughout the Years (in millions)

2019 $1,567

2014 $1,170

2009 $752.3

2004 $492.8 2019 and onward • The Foundation launches a new visual identity. 1999 $422 • A new five-year strategic plan,Pioneers and Optimists launches. The Foundation will continue to focus on asset management, 1994 $110 innovation and entrepreneurship, building a culture of philanthropy, communication and advocacy, and sustaining a great Foundation 1989 $58 in the years to come.

1984 $18.2

1979 $3.08

At its incorporation in 1979, the USM Foundation’s assets under management were comprised of the five-campus University of Maryland’s endowments and operating funds. Since then, the USM expanded, as did the Foundation’s role. Today, the Foundation’s assets under management encompass 23 organizations’ endowments and operating funds. The chart above reflects growth in assets under management as well as the addition of partners to the Foundation over the years.

www.usmf.org 7 Report on Investments

ENDOWMENT ASSETS UNDER MANAGEMENT As of June 30, 2019 USM FOUNDATION ENDOWMENT POOL (in millions)

USMF Funds (in thousands) $ 1,500 University of Maryland, College Park $ 107,654 $1,413 University of Maryland, Baltimore County 102,009 University of Maryland Eastern Shore 23,192 $ 1,250 $1,304 University of Maryland University College 18,462 University of Maryland, Baltimore 17,362 $1,100 $ 1,000 University System of Maryland Foundation 17,000 $986 $969 USMF Trusts and Annuities 5,862 $963 $874 University of Maryland Center for Environmental Science 3,466 $ 750 SUB-TOTAL $ 295,007 Affiliated Organizations (in thousands) University of Maryland College Park Foundation $ 395,540 $ 500 University System of Maryland Common Trust 364,027 University of Maryland Baltimore Foundation 223,819 $ 250 Frostburg State University Foundation 26,767 Frederick Community College Foundation 16,083

Allegany College of Maryland Foundation 13,240 $ 0 Community College of Baltimore County Foundation 11,912 June 2013 June 2014 June 2015 June 2016 June 2017 June 2018 June 2019 Hagerstown Community College Foundation 11,155 Harford Community College Foundation 11,077 ENDOWMENT FUNDS OPERATING FUNDS Towson University Foundation 9,550 The USM Foundation manages endowment funds for In addition to the endowment portfolio, the Coppin State University Development Foundation 9,037 the benefit of institutions and foundations affiliated Foundation manages operating funds for the benefit Bowie State University Foundation 8,009 with the USM, as well as six Maryland community of institutions and foundations affiliated with the Alumni Association International 5,028 college foundations. Our investment objective is USM. Our investment objective for these funds is Howard Community College Educational Foundation 5,007 to generate returns sufficient to meet spending to maintain a high level of liquidity with a very low requirements while preserving the purchasing power risk profile. Operating funds support scholarships, University of Baltimore Foundation 3,919 of the endowment over time. The endowment pool is research, faculty, academic programs, and various M-Club 2,524 made up of more than 4,000 individual endowment special initiatives, just like endowment funds. The key Managed Funds Annuities and Trusts 900 funds which support scholarships, research, faculty, difference is that endowment funds are meant to exist SUB-TOTAL $ 1,117,594 academic programs, and various special initiatives. in perpetuity, while operating funds are meant to be fully expended. TOTAL ENDOWMENT FUND $ 1,412,601

8 www.usmf.org INVESTMENT COMMITTEE Endowment Fund Review The Investment Committee, made up of volunteers from a wide range of business, financial, and investment backgrounds, is responsible for the oversight of both the endowment and operating In the fiscal year ending June 30, 2019, the endowment portfolio returned 6.8%. portfolios. The committee members meet formally throughout the year, but are in frequent We are pleased by the endowment’s relative performance to its portfolio benchmark, communication with the staff and with each other between meetings. The primary role of the which returned 4.7%. We consider the fiscal year results a success, as we created Investment Committee is to establish investment objectives and set asset allocations. long-term principal growth, outperforming our benchmark by approximately +210 basis points. Looking at return generation and risk mitigation in tandem, we earned Larry D. Boggs, Chair Viju Joseph attractive risk-adjusted performance. Funds under management totaled more than Managing Director – Investment Officer President and CIO $1.4 billion as of June 30, 2019. The Boggs Wealth Management Group Pefin, Inc. Joseph R. Hardiman, Vice Chair Robert Milkovich Private Investor CEO Charles W. Cole, Jr. rand* construction corporation Investment Strategy Retired Chairman and CEO Paul H. Mullan Legg Mason Trust Company Retired Vice Chairman and Our portfolio positioning is premised on risk tolerances and return objectives of a Gail Segal Elmore Strategic Partner traditional university endowment. Central to this concept is the idea that capital is Executive Vice President Charterhouse Group International, Inc. not immediately needed; therefore, a moderate portion of our portfolio is invested in LW Investment Management (USA), LLC Bruce Richards opportunities that materialize over longer timeframes. By locking up our capital, we CEO and Co-managing Partner aim to capture an extra risk premium, known as the illiquidity premium. This V. Raymond Ferrara premium is expected to enhance the portfolio’s return, while also reducing its Chairman and CEO Marathon Asset Management, LP longer-term risk profile. ProVise Management Group, LLC Thomas (Tim) Schweizer, Jr. President, Brown Advisory Securities However, to balance the portfolio’s need for current income, we invest a material Eric S. Francis amount of capital in shorter duration, liquid investments. In fact, approximately 58% Chairman and CEO Bonnie B. Stein of our investments can be converted to cash within less than one year, with a portion The CBMC Group Co-founder, President, and CEO of these assets being exchange-listed and traded. Thus, staff is able to invest in Jemma Financial Services attractive opportunities, when presented. Endowment funds are invested with a long-term perspective, and performance of the INVESTMENT STAFF portfolio is assessed over varied market cycles. These cycles can persist over several years, irrespective of the conclusion of a calendar or fiscal year. We purposely design Samuel N. Gallo Chad Mitchell our portfolio for long-term diversification among factors such as geographic, strategy, Chief Investment Officer Senior Investment Analyst–Private Markets sector, liquidity, and instrument or investment vehicle type. While equity risk is Sharcus Steen Charlie Sexton a large component of our asset allocation, the portfolio is not designed to match Director of Investments Investment Analyst U.S. equity market performance. Rather, the portfolio is constructed to provide less Chris Ingram Carrie Browne volatile year-over-year returns, capturing upside market potential and growth while Senior Sustainability and Investment Analyst Board Relations Associate protecting funds from downside losses. continues next page

www.usmf.org 9 Report on Investments

The portfolio can be divided into five broad asset classes: (1) safe assets, (2) public SAFE ASSETS broad diversification for the aggregate risk assets, (3) intermediate assets, (4) private risk assets, and (5) portfolio overlay. portfolio, while still earning high risk- Safe assets are defined as investments In the pie graph below, we have shown the composition of these allocations by policy adjusted returns—all the while muting with little-to-no principal risk. The target. Safe assets and public risk assets represent our more liquid asset classes. In general equity market volatility when current environment aside, we consider contrast, our longer term investments reside in intermediate assets and private risk possible. these to be U.S. Government securities, assets. We have outlined each of these strategies in the paragraphs to follow. cash-enhanced investment products, and cash. This portion of the portfolio is in place to provide capital preservation INTERMEDIATE ASSETS ASSET CLASS POLICY TARGET and stability to our returns during Intermediate assets represent private, volatile periods as well as facilitate our finite life investment vehicles whose term Safe Assets 2% spending and capital call requirements. is generally longer than public risk asssets, Maintaining safe assets minimizes the Public Risk Assets 48% but shorter than private risk assets. risk of becoming forced sellers of assets Since there is modest illiquidity within Intermediate Assets 15% during moments of market stress. While these investments, they seek to earn this allocation will be somewhat small, it returns above market lending rates, but Private Risk Assets 35% is a very important portion of our overall not as high as private risk assets. Many asset mix. Portfolio Overlay 0% strategies within this asset class have a credit or contractual yield orientation, with lower correlations to public equity PUBLIC RISK ASSETS markets. This includes strategies such TARGET WEIGHTS Safe Assets Public risk assets define our liquid as direct lending, distressed lending/ Portfolio 2% investments. These investments have sales, and niche credit opportunities. In Overlay one common theme—they are generally many cases, collateral is attached to these 0% traded in liquid markets/exchanges. investments and/or they seek a higher Within this section of the portfolio, we priority of payments within a stressed seek a number of uncorrelated objectives or distressed environment. They offer across equity and credit managers and idiosyncratic return/risk profiles that are Private Risk generally more predictable and consistent, Assets instruments. thereby aiming to reduce overall portfolio 35% Orientations vary as they seek growth, Public Risk risk in tandem with earning attractive Assets value, momentum, inflation protection, returns. 48% and/or catalyst-driven events. Some of these investments will track closely to market indices, with a goal to earn or Intermediate exceed the benchmark return, but with Assets less risk than the benchmark. Other 15% investments will not closely follow a market benchmark, as they seek to offer

10 www.usmf.org PRIVATE RISK ASSETS Operating Fund Private risk assets are the illiquid portion Funds under management in the of our portfolio, serving as the primary operating portfolio totaled approximately return enhancement over broad public $154.2 million as of June 30, 2019. equity markets. Because of the long- Operating funds are designed for current term nature of the endowment’s capital, use, as our account holders expect to be we have the ability to enter into illiquid able to withdraw their full amounts at investments that may take years for profit any given time. As a result, the risk realization. While we sacrifice the use tolerance on an individual account is of our capital during this timeframe, very low. we hold these investments to higher performance hurdles, as we expect to earn In the fiscal year ending June 30, 2019, a significant return premium over public the operating fund increased 3.1%. Its market equivalent investments. policy benchmark earned 2.3%. Given the relatively low yield environment, we are Thus, similar to public risk assets, private pleased that performance exceeded short- risk asset investments will also have term government lending rates, as defined orientations towards growth, momentum, by three-month U.S. Treasury bills, by 81 value, inflation protection, and/or basis points. We consider the fiscal year catalyst-driven events. Investments will results a success as, during a low yielding vary in structure as well as duration, period, we preserved capital and grew the all adding up to a broadly diversified operating fund balance via investment portfolio. profits. Similar to the endowment fund, PORTFOLIO OVERLAY operating fund investments are categorized as safe assets, public risk The portfolio overlay is another line assets, and portfolio overlay. Since of defense for our capital. Allocation investments are more liquid in nature, towards this asset class will be infrequent there are no intermediate assets or and in line with protecting the entire private risk assets categories within the portfolio from unwanted risks and operating portfolio. market shocks. While in most cases this is achieved by our investment managers, there are times when staff needs to protect the aggregate portfolio. Allocating capital to this asset class will be on an as-needed, opportunistic basis. That is why its target allocation is set to zero percent.

www.usmf.org 11 Financial Highlights

AUDIT COMMITTEE REPORT EXPENSES (in millions) REVENUES (in millions) The Audit Committee of the University June 2019 June 2018 % of Change $61.2 System of Maryland Foundation, Inc. (the Program Support $ 19.2 $ 17.9 7.3% $53.9 Foundation) has reviewed and discussed $49.7 $47.8 with the Foundation’s management and General and Administrative $ 4.4 $ 3.8 15.8% $43.0 BDO USA, LLP the audited financial Scholarship Support $ 6.6 $ 5.0 32.0% statements of the Foundation as of and for the year ended June 30, 2019, to be Fundraising $ 2.9 $ 2.2 31.8% included in the Foundation’s annual TOTAL $ 33.1 $ 28.9 $22.4 report. The Audit Committee has also discussed with BDO USA, LLP the matters Submitted by the Audit Committee required to be discussed pursuant to applicable Statements on Auditing J. Mitchell Neitzey, Chair FY19 FY18 FY17 FY16 FY15 FY14 Standards adopted by the American Michael E. Meegan, Vice Chair Institute of Certified Public Accountants, Joe N. Ballard Arthur S. Mehlman which matters include, among other Robert A. Bedingfield Neil Moskowitz INVESTMENTS HELD FOR OTHER FOUNDATIONS (in millions) things, matters related to the conduct of Joseph B. Gildenhorn Paul H. Mullan $1,209.7 the audit of the Foundation’s financial Albert E. Girod Bonnie B. Stein $1,108.0 statements. Barry P. Gossett John C. Weiss The Audit Committee has received and Linda Ellen Jones Sam A. Zappas $968.1 reviewed the letter from BDO USA, LLP $862.3 $873.1 $849.1 required by Independence Standards Board Standard No. 1 (“Independence Discussions with Audit Committees”), and has discussed with BDO USA, LLP its independence from the Foundation. Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors FY19 FY18 FY17 FY16 FY15 FY14 of the USM Foundation that the audited financial statements be included in the Foundation’s annual report.

12 www.usmf.org Financial Statements

MANAGEMENT’S FINANCIAL INDEPENDENT AUDITOR’S REPORT RESPONSIBILITY To the Board of Directors of the The Foundation’s management assumes University System of Maryland Foundation, Inc. and Subsidiary responsibility for the fair presentation Adelphi, Maryland of the consolidated financial statements, We have audited the accompanying consolidated financial statements of the University System of Maryland Foundation, Inc. and prepared in accordance with generally Subsidiary (the Foundation), which comprise the consolidated statements of financial position as of June 30, 2019 and 2018, and the accepted accounting principles (GAAP), related consolidated statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to and has full responsibility for their the consolidated financial statements. integrity and accuracy. Management, in concert with the Board Management’s Responsibility for the Consolidated Financial Statements of Directors, established and maintains Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with a strong ethical climate as we are accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance committed to ensuring that we properly of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material account for those funds we hold on misstatement, whether due to fraud or error. behalf of donors and the institutions we serve. In addition, we believe the system Auditor’s Responsibility of internal control in place provides Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits reasonable assurance as to the integrity in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and the accuracy of those financial and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material statements and the other activities misstatement. performed. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial Management recognizes its fiduciary statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement responsibility for the oversight of funds, of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers contributed by donors for the benefit of internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design the institutions of the University System audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Maryland, under its control and of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of investment management. accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the Our internal audit firm, Johnson and overall presentation of the consolidated financial statements. Lambert, maintains oversight over key We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. areas and reports on a regular basis to management and the Audit Committee. Opinion BDO USA, LLP, our independent auditor, reports directly to the Audit In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Committee. the University System of Maryland Foundation, Inc. and Subsidiary as of June 30, 2019 and 2018, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. September 16, 2019 Leonard R. Raley, President and CEO

FINANCIAL STATEMENTS www.usmf.org 13 CONSOLIDATED STATEMENTS OF Financial Position

June 30, 2019 and 2018 (in thousands)

ASSETS 2019 2018 LIABILITIES AND NET ASSETS 2019 2018

CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents $ 151 $ 310 Accounts payable and accrued expenses $ 4,280 $ 4,058 Accounts receivable 45 153 Deferred income 1,777 2,141 Accrued interest receivable 467 288 Total Current Liabilities 6,057 6,199 Contributions receivable — current portion 330 1,549 OTHER LIABILITIES Other current assets 273 67 Payables under split-interest agreements 3,025 3,254 Total Current Assets 1,266 2,367 Due to other foundations and affiliates 1,209,720 1,108,019 Total Other Liabilities 1,212,745 1,111,273 INVESTMENTS Total Liabilities 1,218,802 1,117,472 Endowment 296,031 285,509 Operating 61,822 60,495 COMMITMENTS AND CONTINGENCIES Held for other foundations 1,209,298 1,107,580 NET ASSETS Total Investments 1,567,151 1,453,584 Without Donor Restrictions Undesignated 48,582 51,187 OTHER ASSETS Designated by Board 15,259 12,779 Contributions receivable — long term portion 9,515 10,873 63,841 63,966 Contributions receivable from remainder trusts 800 807 With Donor Restrictions 310,690 300,750 Angus breeding herd, trademark, logo, records, and data bank 2,004 2,093 Total Net Assets 374,531 364,716 Real and personal property, net 12,141 11,997 Other assets 456 467 TOTAL LIABILITIES AND NET ASSETS $ 1,593,333 $ 1,482,188 Total Other Assets 24,916 26,237

TOTAL ASSETS $ 1,593,333 $ 1,482,188

See accompanying notes to consolidated financial statements.

14 www.usmf.org FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF Activities and Changes in Net Assets

For the year ended June 30, 2019 (in thousands) For the year ended June 30, 2018 (in thousands)

WITHOUT DONOR WITH DONOR TOTAL WITHOUT DONOR WITH DONOR TOTAL RESTRICTIONS RESTRICTIONS RESTRICTIONS RESTRICTIONS

REVENUES REVENUES Contributions and grants $ 2,200 $ 15,750 $ 17,950 Contributions and grants $ 2,177 $ 16,866 $ 19,043 Investment return, net 1,502 16,759 18,261 Investment return, net 2,152 21,593 23,745 Other program income 208 — 208 Other program income 399 — 399 Courses and conferences 1,236 2 1,238 Courses and conferences 1,312 2 1,314 Sales and services 5,268 — 5,268 Sales and services 5,284 — 5,284 Change in value of split-interest agreements — 45 45 Change in value of split-interest agreements — (79) (79) Net assets released from restrictions 22,541 (22,541) — Net assets released from restrictions 19,056 (19,056) — Total Revenues 32,955 10,015 42,970 Total Revenues 30,380 19,326 49,706

EXPENSES EXPENSES Program services Program services Wye herd 374 — 374 Wye herd 415 — 415 Academic 2,736 — 2,736 Academic 3,000 — 3,000 Scholarships 6,619 — 6,619 Scholarships 4,962 — 4,962 Chair program 1,510 — 1,510 Chair program 1,034 — 1,034 Research 4,042 — 4,042 Research 3,832 — 3,832 Department support 4,237 — 4,237 Department support 3,281 — 3,281 Other programs 6,221 — 6,221 Other programs 6,336 — 6,336 Total program services 25,739 — 25,739 Total program services 22,860 — 22,860 Supporting services Supporting services Management and general 4,410 — 4,410 Management and general 3,840 — 3,840 Fundraising 2,901 — 2,901 Fundraising 2,196 — 2,196 Total supporting services 7,311 — 7,311 Total supporting services 6,036 — 6,036 Total Expenses 33,050 — 33,050 Total Expenses 28,896 — 28,896 Change in net assets before transfers (95) 10,015 9,920 Change in net assets before transfers 1,484 19,326 20,810 Transfers to System affiliated foundations (30) (75) (105) Transfers to System affiliated foundations (347) (6) (353) Change in net assets (125) 9,940 9,815 Change in net assets 1,137 19,320 20,457 Net assets, beginning of year 63,966 300,750 364,716 Net assets, beginning of year 62,829 281,430 344,259 NET ASSETS, END OF YEAR $ 63,841 $ 310,690 $ 374,531 NET ASSETS, END OF YEAR $ 63,966 $ 300,750 $ 364,716

See accompanying notes to consolidated financial statements.

FINANCIAL STATEMENTS www.usmf.org 15 CONSOLIDATED STATEMENTS OF Cash Flows

For the year ended June 30, 2019 and 2018 (in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES 2019 2018 CASH FLOWS FROM INVESTING ACTIVITIES 2019 2018

Change in net assets $ 9,815 $ 20,457 Purchases of investments (279,063) (696,361) Adjustments to reconcile change in net assets to net cash Contributions restricted for long-term investment (4,704) (5,570) provided by operating activities: Proceeds from sales or distribution of investments 168,537 555,045 Change in unrealized gains on investments (3,008) (21,140) Purchases of real and personal property (234) (703) Change in unrealized losses (gains) on investments for split interest Net cash used in investing activities (115,464) (147,589) agreements and others 58 (31) Accretion on contribution receivable discount (146) (31) CASH FLOWS FROM FINANCING ACTIVITIES Loss on disposal on real and persoanl property 24 34 Depreciation 66 107 Proceeds from contributions restricted for long-term investment 4,704 5,570 Bad debt expense 233 1,203 Net cash provided by financing activities 4,704 5,570 Change in cash surrender value of life insurance 9 (14) (Decrease) increase in cash and cash equivalents (159) 168 (Increase) decrease in assets: CASH AND CASH EQUIVALENTS Accounts receivable 108 5 Beginning of year 310 142 Accrued interest receivable (179) (207) End of year $ 151 $ 310 Contributions receivable 2,490 1,906 Other current assets (206) (47) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Contributions receivable from remainder trusts 7 (11) Income taxes paid $ 63 $ 1,174

Increase (decrease) in liabilities: Accounts payable and accrued expenses 222 741 Deferred income (364) (178) Payables under split-interest agreements (229) (111) Due to other foundations and affiliates 101,701 139,504

Net cash provided by operating activities 110,601 142,187

See accompanying notes to consolidated financial statements.

16 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

1. Nature of Operations managers are classified with investments, individual fund managers or the ownership or losses are distributed monthly among the respectively. Cash equivalents include short-term percentage of the fund’s net assets approximate individual endowment accounts on the basis The University System of Maryland Foundation, U.S. Treasury securities and other short-term, the fair value of the investments. These of the number of units of the pool held by each Inc. (the “Foundation” or “USMF”, also known highly liquid investments and are carried at cost, estimated values do not necessarily represent individual endowment account. as The University of Maryland Foundation, Inc.), which approximates market value. the amounts that will ultimately be realized a separately incorporated independent Foun- See Note 3 for further details on valuation of upon the disposition of those assets, which dation, manages funds received for the benefit Accounts Receivable investments. may be materially higher or lower than values of the Institutions of the University System of Accounts receivable consists primarily of monies determined if a ready market for the securities Angus Breeding Herd, Trademark, Logo, Maryland (“USM”) or community colleges and due from affiliated institutions for payments existed. Records, and Data Bank affiliated educational organizations within the made by the Foundation on behalf of those Management’s policy for accounting for the State of Maryland. The Foundation also offers institutions. Accounts receivable are recorded Valuation of Investments Angus breeding herd, trademark, logo, records, the affiliated foundations associated with the net of any allowances. There are no allowances The Foundation carries its investments at market and data bank is to combine these asset groups Institutions of the USM and the community as of June 30, 2019 and 2018. The Foundation’s value to the extent that market quotations are and value them as a single group rather than colleges in the State of Maryland the opportu- policy is to write-off all receivables that are readily available and reliable. To the extent individually, due to the relationship of each one nity to invest their assets in the Foundation’s deemed to be uncollectible. Accounts receivable that market quotations are not available or to the others. These assets are related to the endowment pool. The Foundation is organized are written off if reasonable collection efforts are are considered to be unreliable, fair value is Wye Herd, a cattle and research facility. to receive, hold, invest, manage, use, dispose unsuccessful. estimated by the investment manager under of, and administer property of all kinds, whether the general oversight of the Board of Directors Real and Personal Property Contributions Receivable given absolutely or in trust, or by way of agency of the Foundation after consideration of factors Real and personal property is carried at cost. The contributions receivable balance is based or otherwise, for the benefit of the USM or for all considered to be relevant, including but not The Foundation’s policy is to charge all additions on management’s best estimate of the amounts of the education and support activities that may limited to, the type of investment, position over $1,000 (in dollars) to the asset account, expected to be collected. There are no allowances be conducted by the USM. size, marketability (or absence thereof), cost, but to charge the cost of repairs, maintenance as of June 30, 2019 and 2018. The amounts the restrictions on transfer, and available quotations and minor betterments to operations in the year The Foundation is comprised of two separately Foundation will ultimately realize could differ of similar instruments. Due to the uncertainty in which the cost is incurred. Depreciation is accounted-for divisions: the University System of from the amounts assumed in arriving at the inherent in the valuation process, such estimates calculated using the straight-line method over Maryland Foundation Funds and the Wye Herd, present value. Amounts due are recorded at the of fair value may differ significantly from the the estimated useful lives of the assets which as well as a wholly owned subsidiary for-profit net realizable value discounted using a discount values that would have been obtained had a are five years. Depreciation expense totaled corporation, the USMF Corporation (refer to Note rate of 6.50% and 6.00% for the years ended ready market for the investments existed, and $0.07 million and $0.1 million for the years 14 for a discussion on the USMF Corporation). June 30, 2019 and 2018, respectively. The Foun- the differences could be material. Additionally, ended June 30, 2019 and 2018, respectively. dation’s policy is to write-off all contributions changes in the market environment and other Asset and accumulated depreciation accounts 2. Basis of Presentation and Summary of receivable that are deemed to be uncollectible. events that may occur over the life of the are relieved when an asset is sold or otherwise Significant Accounting Policies Investments investments may cause the gains or losses disposed. Accumulated depreciation totaled $2.6 Basis of Consolidation and Presentation Investments are stated at fair value. Unrealized ultimately realized on these investments to be million and $2.5 million for the years ended June The consolidated financial statements of the and realized gains and losses are included in different than the valuations currently assigned. 30, 2019 and 2018, respectively. All artwork Foundation are presented in conformity with the consolidated statements of activities and There is no single standard for determining and land given to the Foundation are annually accounting principles generally accepted in changes in net assets. fair value in good faith, as fair value depends reviewed to determine if there is any impairment the United States of America (U.S. GAAP) upon circumstances of each individual case. and to determine that the asset’s book value Investments in publicly traded equity and debt and have been prepared on the accrual basis In general, fair value is the amount that the is still reasonable given these assets are not securities are stated at quoted market values. of accounting. As described in Note 1, the Foundation might reasonably expect to receive depreciated. For all of these investments, the Foundation has Foundation is comprised of two divisions as well upon the current sale of the investment in an concluded that the net asset values reported by Contributions of Real and Personal Property as a wholly owned subsidiary. The consolidated arms-length transaction in the investment’s the individual fund managers approximates the The Foundation receives various contributions of financial statements include the accounts of principal market. fair value of the investments. Changes in fair non-cash items. It is the Foundation’s policy to these entities. All significant intercompany values are reported as unrealized gains or losses The change in net unrealized gains or losses record those assets not intended for sale at fair transactions and accounts are eliminated in in the accompanying consolidated statements of on investment securities is reflected in the market value at the date of the gift. These assets consolidation. activities and changes in net assets. consolidated statements of activities and are held for investment purposes and are not Cash and Cash Equivalents changes in net assets. All gains and losses depreciated. Alternative investments may include absolute Cash and short-term investments with maturities arising from the sale, collection, or other return funds, long/short equity hedge funds and Due to Other Foundations and Affiliates at dates of purchase of three months or less are disposition of investments are accounted for private capital funds for which there may be no Due to other foundations and affiliates consists classified as cash equivalents, except that any on a specific identification basis calculated as ready market to determine fair value. For these of funds invested by the Foundation on behalf such investments purchased with funds held of the transaction date For endowment assets, investments, the Foundation has concluded of other foundations and the annuities and in trusts or by external endowment investment which are all held in a pool, investment gains that either the net asset values reported by the trusts administered for other foundations.

FINANCIAL STATEMENTS www.usmf.org 17 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

These funds are recorded on a per unit basis Foundation management, based on other Classification of Net Assets The Foundation reports gifts of land, buildings, and managed with funds of the Foundation. The foundations’ and affiliates’ requests, designates The Foundation classifies its net assets into the and equipment as support without donor Foundation assesses the affiliated foundations investments from all net asset classes two categories: net assets without donor restric- restrictions unless explicit donor stipulations an annual management fee which is comprised into operating and endowment categories. tions and net assets with donor restrictions. specify how the donated assets must be used. of a separate investment services fee and Administrative fees are charged by the Gifts of long-lived assets with explicit restrictions Net assets without donor restrictions an administrative fee. The fees are assessed Foundation to cover operating expenses, that specify how the assets are to be used are Net assets without donor restrictions are not in relation to the individual management depending on the type of investment portfolio reported as donor restricted support. subject to donor-imposed restrictions. These net contracts each affiliated foundation has with the into which the asset is placed. The fees assets generally result from providing services Unconditional promises to give with payments Foundation and are based on the fair value of assessed by the Foundation are for expenses and receiving contributions without donor due in future periods are reported as donor endowment and operating funds administered. related to the operation of the Foundation such restrictions, less expenses incurred in providing restricted support. Amounts outstanding are The Foundation also assesses an annual as management of the endowment, audit, services, raising contributions, and performing recorded at the net realizable value discounted management fee of 1% on the annuities and and accounting functions and development as administrative functions. based on the period of future payment, using trusts. Such management fees totaled $4.0 needed to assist USM institutions. Professional a rate of return that a market participant would million and $3.5 million for the years ended investment fees are paid to the investment These net assets also include board designated expect to receive at the date the pledge is June 30, 2019 and 2018, respectively, and are managers prior to the distribution of income. net assets. The Foundation’s Board of Directors received. included in sales and services in the consolidated has set aside amounts received from various The amounts due to other foundations and statements of activities and changes in net donors as designated fund assets and has Split-Interest Agreements affiliates at June 30, 2019 and 2018, were as assets. implemented an investment policy. These The Foundation also receives contributions in the follows (in thousands): amounts are not subject to donor restrictions. form of charitable gift annuities and charitable remainder unitrusts, for which the Foundation Net assets with donor restrictions 2019 2018 acts as trustee and holds the assets. When the Net assets with donor restrictions are subject trust’s obligations to all beneficiaries expire, the to stipulations imposed by donors. These net Allegany College of Maryland Foundation $ 13,240 $ 12,159 remaining assets will revert to the Foundation to assets generally result from contributions and be used according to the donor’s wishes. Alumni Association International 5,028 4,899 other inflows of assets, the use of which is Association of Writers and Writing Programs — 2,747 limited by donor-imposed stipulations that either The Foundation recognizes the estimated fair expire by passage of time or can be fulfilled and value of these agreements as contributions Bowie State University Foundation 8,458 7,777 removed by actions of the Foundation pursuant receivable and revenue from those trusts where Community College of Baltimore County Foundation 11,912 10,978 to those stipulations. Other donor restrictions the Foundation is not trustee. Where the Foun- are perpetual in nature, whereby the donor has dation is the trustee, the estimated fair value is Coppin State University Development Foundation 9,037 8,574 stipulated the funds be maintained in perpetuity. recognized as an asset and as contribution Generally, the donors of these assets permit the revenue. The fair value is based on the present Frederick Community College Foundation 16,083 15,720 Foundation to use the income earned on related value of estimated future distributions to be paid Frostburg State University Foundation 26,767 24,089 investments for general or specific purposes. over the expected term of the trust agreements. Hagerstown Community College Foundation 11,155 10,317 When a donor restriction expires as a result of Amortization of the related discount and a stipulated time restriction ending or purpose revaluation of expected cash flows are Harford Community College Foundation 11,077 9,999 restriction being accomplished, net assets with recognized as changes in the value of split- Howard Community College Educational Foundation 5,007 10,313 donor restrictions are reclassified to net assets interest agreements in the year in which they without donor restrictions and reported in the occur. M Club 2,524 2,464 accompanying consolidated statements of The Foundation recognizes a liability for the activities and changes in net assets as net Towson University Foundation 9,550 8,989 portion of the proceeds under the split-interest assets released from restrictions. UMB Foundation 292,826 268,023 agreements to be paid to the beneficiary under Contributions and Grants the terms of the agreements. The estimated UMCP Foundation 419,110 378,628 The Foundation reports gifts of cash and other annuity liabilities expected terms are based on assets as restricted support held in separate the Internal Revenue Service (IRS) actuarial University of Baltimore Foundation 3,919 3,691 accounts if they are received with donor stipu- tables. The discount rates used to compute the University System of Maryland Common Trust 364,027 328,652 lations that limit the use of the donated assets. present value of these receivables are the Contributions for which donors have stipulated original discount rates used at the time of the TOTAL $ 1,209,720 $ 1,108,019 restrictions, but which are met within the same gift under the Internal Revenue Code (IRC) reporting period, are reported as support without Section 7520 and range from 0.3% to 10.6%. donor restrictions.

18 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

Investment Return carrying amounts of existing assets and liabilities of underwater endowment funds and related In January 2016, the FASB issued ASU 2016-01, The Foundation’s net investment return is and their respective tax bases and operating disclosures, (c) requiring the use of the placed in Financial Instruments – Overall (Subtopic 825- reported in the consolidated statements of loss and tax credit carryforwards. Deferred tax service approach to recognize the expirations of 10), Recognition and Measurement of Financial activities and changes in net assets and consists assets and liabilities are measured using enacted restrictions on gifts used to acquire or construct Assets and Financial Liabilities. The update of interest and dividend income, net realized and statutory tax rates to apply to taxable income in long-lived assets absent explicit donor stipula- affects the accounting for equity investments unrealized gains and losses, less external and the years in which those temporary differences tions otherwise, (d) requiring that all nonprofits and financial liabilities, and the presentation direct internal investment expenses. are expected to be recovered or settled. The present an analysis of expenses by function and and disclosure requirements for financial effect on deferred tax assets and liabilities of a nature in either the statement of activities, a instruments. The ASU is effective for fiscal Functional Allocation of Expenses change in tax rates is recognized in income in separate statement, or in the notes and disclose years beginning after December 15, 2018. Early The Foundation expends certain funds considered the period that includes the enactment date. a summary of the allocation methods used to adoption is permitted and should be applied on as program related, general and administrative, or allocate costs, (e) requiring the disclosure of a retrospective transition method to each period fundraising in nature. Program related expenses For the years ended June 30, 2019 and 2018, quantitative and qualitative information regarding presented. Management is currently evaluating are in support of a USM institution’s or department the USMF Corporation generated an immaterial liquidity and availability of resources, (f) present- the impact of this ASU on its consolidated or program activity. General and administrative amount of taxable income and a corresponding ing investment return net of external and direct financial statements. expenses are for a USM institution’s or the tax liability was incurred. Income tax expenses internal investment expenses, and (g) modifying Foundation’s business operations. Fundraising for the years ended June 30, 2019 and 2018 In February 2016, the FASB issued ASU 2016- other financial statement reporting requirements expenses support a USM institution’s or the were immaterial. The USMF Corporation’s liability 02, Leases (Topic 842), to increase transparency and disclosures intended to increase the useful- Foundation’s efforts in raising contribution and was considered immaterial and therefore was not and comparability among organizations by ness of nonprofit financial statements. The Foun- grant revenue. See Note 15 for the schedule of recorded in the consolidated financial statements. recognizing lease assets and lease liabilities on dation has adopted the ASU and has adjusted functional expenses and allocation methodology. the statement of financial position and disclosing Authoritative guidance on accounting for uncer- the presentation of these consolidated financial key information about leasing arrangements for Estimates tainty in income taxes defines the threshold for statements accordingly. The ASU has been lessees and lessors. The new standard applies The preparation of the consolidated financial recognizing tax return positions in the financial applied retrospectively to all periods presented a right-of-use (ROU) model that requires, for statements in conformity with accounting statements as “more likely than not” that the except the Foundation has opted to present all leases with a lease term of more than 12 principles generally accepted in the United position is sustainable, based on its technical the liquidity and availability information for 2019 months, an asset representing its right to use States of America requires management to merits, and also provides guidance on the only as permitted under the ASU in the year of the underlying asset for the lease term and a make estimates and assumptions that affect the measurement, classification and disclosure of adoption. There was no effect on the changes in liability to make lease payments to be recorded. reported amounts of assets and liabilities and tax return positions in the financial statements. net assets reported at June 30, 2018. The ASU is effective for the Foundation’s fiscal disclosure of contingent assets and liabilities at No asset or liability has been recorded as of June Recent Accounting Pronouncements Not Yet years beginning after December 15, 2019 the date of the consolidated financial statements 30, 2019 and 2018 for uncertain tax positions. Adopted with early adoption permitted. Management is and the reported amounts of revenues and The Foundation and the USMF Corporation are In May 2014, the FASB issued ASU 2014-09, currently evaluating the impact of this ASU on its expenses during the reporting period. Significant no longer subject to U.S. federal or state exam- Revenue from Contracts with Customers (Topic consolidated financial statements. items subject to such estimates and assump- inations by tax authorities for years before fiscal 606), which is a comprehensive new revenue tions include the fair value of non-traditional year ended June 30, 2016. In June 2016, the FASB issued ASU 2016-13, recognition standard that will supersede existing investments and the net realizable value of the Financial Instruments – Credit Losses (Topic Reclassifications revenue recognition guidance. The core principle accounts and contributions receivable. Actual 326), Measurement of Credit Losses on Certain amounts presented in the 2018 of the guidance is that an entity should recognize results could differ from those estimates. Financial Instruments. The ASU changes the consolidated financial statements have been revenue to depict the transfer of promised goods impairment model for most financial assets that Income Taxes reclassified to conform to the 2019 presentation. or services to customers in an amount that are measured at amortized cost and certain other The Foundation is organized and operated ex- reflects the consideration to which the entity ex- Adoption of New Accounting Pronouncement instruments from an incurred loss model to an clusively for charitable and educational purposes pects to be entitled in exchange for those goods In August 2016, the Financial Accounting expected loss model. Entities will be required to within the meaning of the provisions of Section or services. FASB issued ASU 2015-14 that Standards Board (FASB) issued Accounting estimate credit losses over the entire contractual 501(c)(3) of the Internal Revenue Code. The deferred the effective date for the Foundation Standards Update (ASU) 2016-14, Not-for-Profit term of an instrument. The ASU is effective Foundation had no material unrelated business until annual periods beginning after December Entities (Topic 958) – Presentation of Financial for fiscal years beginning after December 15, income for the years ended June 30, 2019 and 15, 2018. Earlier adoption is permitted subject to Statements of Not-for-Profit Entities. The ASU 2020. Early adoption may be selected for fiscal 2018, therefore, no provision for income taxes certain limitations. The amendments in this up- amends the current reporting model for non- years beginning after December 15, 2018. An has been made. date are required to be applied retrospectively to profit organizations and enhances their required entity must apply the amendments in the ASU each prior reporting period presented or with the Income taxes are accounted for under the asset disclosures. The major changes include: (a) through a cumulative-effect adjustment to net cumulative effect being recognized at the date of and liability method in accordance U.S. GAAP. requiring the presentation of only two classes assets as of the beginning of the first reporting initial application. Management is currently eval- Deferred tax assets and liabilities are recognized of net assets now entitled “net assets without period in which the guidance is effective uating the impact of this ASU on its consolidated for the future tax consequences attributable to donor restrictions” and “net assets with donor except for certain exclusions. Management is financial statements. differences between the financial statement restrictions”, (b) modifying the presentation currently evaluating the impact of this ASU on its consolidated financial statements.

FINANCIAL STATEMENTS www.usmf.org 19 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

In June 2018, the FASB issued ASU 2018-08, but primarily affects not-for-profit entities such of what constitutes “observable” requires There were no transfers of assets between Not-for-Profit Entities (Topic 958), Clarifying as museums, historic sites, art galleries, etc. significant judgment on the part of the Levels 1, 2 or 3 classifications for the years the Scope and the Accounting Guidance for The ASU also requires certain incremental Foundation. The categorization of an investment ended June 30, 2019 and 2018. Contributions Received and Contributions disclosures. The ASU is effective for all entities within the hierarchy is based upon the pricing (1) The Foundation invests in money-market funds Made. This ASU was issued to standardize for fiscal years beginning after December 15, transparency of the investment and does not and short-term investments, including amounts how grants and other contracts received and 2019. Management is currently evaluating the necessarily correspond to the perceived risk of invested in accounts with depository institutions and managed accounts which are readily made are classified across the sector, as either impact of this ASU on its consolidated financial that investment. convertible to known amounts of cash. The Foun- an exchange transaction or a contribution. statements. Some of the Foundation’s investments may dation invests in money-market and short-term The standard provides guidance to assist in investments to maintain liquidity for spending be illiquid and the Foundation may not be able the determination of whether a transaction is 3. Fair Value Measurements needs and unfunded commitment liabilities. Total to vary the portfolio in response to changes in a contribution or an exchange transaction. If deposits maintained at these institutions at times The FASB ASC 820, Fair Value Measurement economic and other conditions. Some of the exceed the amount insured by federal agencies the transaction is deemed to be a contribution (ASC 820), defines fair value, requires investments that are purchased and sold are and therefore, bear a risk of loss. The Foundation the guidance provides factors to consider with disclosures about fair value measurements, traded in private, unregistered transactions and has not experienced such losses on these funds. regard to whether the contribution is conditional USMF has classified these investments as Level and establishes a three-level hierarchy for fair are therefore subject to restrictions on resale or or unconditional. For contributions received, if 1. Valuation is based on quoted market prices. value measurements based on the inputs to otherwise have no established trading market. determined to be an unconditional contribution, (2) The Foundation invests directly in common the valuations of an asset or liability at the In addition, if the Foundation is required to the determination will then need to be made stock, preferred stock and mutual funds. In gen- measurement date. Fair value is defined as liquidate all or a portion of its portfolio quickly, as to whether the contribution is restricted. eral, equity securities and mutual funds traded on the price that would be received to sell an the Foundation may realize significantly less than national securities exchanges are valued at the The ASU will assist in the determination of asset or paid to transfer a liability in an orderly the value at which it previously recorded those last quoted sales price, except securities traded the nature of the transaction which will then transaction between market participants at the investments. on the NASDAQ Stock Market, Inc. (“NASDAQ”), govern the revenue and expense recognition which are valued in accordance with the measurement date. The following three-level methodology and timing of the transaction. The The Foundation reports certain investments NASDAQ Official Closing Price. The Foundation hierarchy classifies the inputs used to determine ASU is effective for transactions in which the using the net asset value (NAV) per share as invests in equity securities to gain exposure to fair value: the overall direction of global equity markets. The entity serves as the resource recipient to annual determined by investment managers under the underlying securities within the account have periods beginning after December 15, 2018. Level 1 – Quoted prices are available in active so called “practical expedient”. The practical quoted prices available in active markets and The ASU is effective for transactions in which markets for identical investments as of the expedient allows net asset value per share have no redemption restrictions and therefore, the entity serves as the resource provider to reporting date. The type of investments included to represent fair value for reporting purposes USMF has classified these investments as Level annual periods beginning after December 15, in this category include listed equities and listed when the criteria for using this method are 1. Some other funds that are not actively traded and have some redemption restrictions have been 2019. Management is currently evaluating the mutual funds. met. These investment funds are held as classified as Level 2. impact of this ASU on its consolidated financial units or interest in institutional funds or limited Level 2 – Pricing inputs include market data (3) Absolute return investments track the statements. partnerships, which are stated at NAV or its which is readily available, regularly distributed or purchase and sale of shares in companies equivalent. The Foundation uses the NAV as a In August 2018, the FASB issued ASU 2018-13, updated, reliable and verifiable, not proprietary, that are the subject of publicly announced practical expedient to estimate the fair value, transactions, including corporate combinations Fair Value Measurement (Topic 820): Disclosure provided by multiple, independent sources that unless it is probable that all or a portion of the (for cash or exchange of shares), tender offers, Framework - Changes to the Disclosure are actively involved in the relevant market. investment will be sold for an amount different restructurings, liquidations, bankruptcies, Requirements for Fair Value Measurement. The Investments which are generally included in this capitalizations and deals in distressed securities, than NAV. The Foundation has not categorized update modifies certain disclosure requirements category include less liquid and restricted equity which are discounted securities of a company in these investments in levels within the fair value in Topic 820, Fair Value Measurement. The securities and fixed income securities. financial distress or bankruptcy. The fair value of hierarchy table. these investments has been estimated either by ASU is effective for fiscal years beginning Level 3 – Pricing inputs are unobservable for the using NAV per share of the investments or the after December 15, 2019. Management is The following tables present the financial investment and include situations where there ownership percentage of the fund’s net assets as currently evaluating the impact of this ASU on its investments held by funds in which USMF allowed as a practical expedient under fair value is little, if any, market activity for the investment. consolidated financial statements. invests. The following investments are carried guidance. The majority of these investments can The inputs into the determination of fair value at fair value as of June 30, 2019 and 2018, and be redeemed within one year. The remainder In March 2019, the FASB issued ASU 2019-03, require significant judgment or estimation. of these investments have liquidity provisions are presented by the fair value hierarchy defined Not-for-Profit Entities (Topic 958): Updating the Investments that are included in this category that extend past one year. The notice period above (in thousands): Definition of Collections. The ASU aligns the generally include investments in private equity for redemption of investments ranges from one month to six months. There are no outstanding definition of collections in the FASB Accounting and investment funds as well as offshore hedge unfunded commitments to this asset category. Standards Codification (ASC) Master Glossary funds. USMF has classified the investments’ fair values with the terms in the American Alliance of by ownership percentage of the fund’s net assets An investment’s level within the fair value Museums’ Code of Ethics for Museums. as Level 3. hierarchy is based on the lowest level of The ASU applies to all entities, including (4) Long/short strategies take long and short any input that is significant to the fair value business entities, that maintain collections, positions in publicly traded equity securities measurement. However, the determination

20 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

in an effort to achieve attractive returns with Quoted Prices in Significant Other Significant Investments Total moderate risk. Also included in these categories Active Markets for Observable Unobservable Reported Fair are offshore investment vehicles. Early in thousands Identical Assets Inputs Inputs at NAV* Value withdrawal carries a penalty. Therefore, even June 30, 2019 though the underlying assets in some of the (Level 1) (Level 2) (Level 3) vehicles are readily saleable in the open market, the Foundation does not have the ability and, Money-market funds and short-term investments 1 $ 59,438 $ — $ — $ — $ 59,438 therefore, has classified investments in those vehicles, excluding investments valued by NAV, Equities and mutual funds 2 480,652 42,740 — — 523,392 as Level 3. The fair value of these investments has been estimated either by using the net Absolute return 3 — — 111,853 38,303 150,156 asset value per share of the investments or the ownership percentage of the fund’s net assets as Long/short equity hedge funds 4 — — 92,466 163,326 255,792 allowed as a practical expedient under fair value guidance. The majority of these investments can Private capital 5 — — 499,298 79,075 578,373 be redeemed within one year. The remainder of these investments have liquidity provisions Total Investments $ 540,090 $ 42,740 $ 703,617 $ 280,704 $ 1,567,151 that extend past one year. Notice period for redemption ranges from one month to six months. There are no outstanding unfunded commitments * Certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value to this asset category. amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the accompanying consolidated statements of financial position. (5) Private capital consists of private equity and venture capital investments. Private equity investments represent purchases of all or a portion of the equity interest in a company and Quoted Prices in Significant Other Significant Investments Total the arrangement allows the purchasing group Active Markets for Observable Unobservable Reported Fair to take control. Venture capital investments are made in non-marketable securities of new June 30, 2018 in thousands Identical Assets Inputs Inputs at NAV* Value companies or companies considered to be in the (Level 1) (Level 2) (Level 3) early stages of growth. Investments in private capital are presented at fair value as approved Money-market funds and short-term investments 1 $ 123,600 $ — $ — $ — $ 123,600 by the Foundation’s management based, in part, on information and valuations provided by the 2 general partner of the partnerships or investment Equities and mutual funds 393,981 31,247 — — 425,228 manager. The general partner or investment 3 manager generally values their investments at Absolute return — — 130,851 57,051 187,902 fair value. The fair value of these investments 4 has been estimated either by using the NAV Long/short equity hedge funds — — 60,247 166,986 227,233 per share of the investments or the ownership 5 percentage of the fund’s net assets as allowed as Private capital — — 422,967 66,654 489,621 a practical expedient under fair value guidance. Securities with no readily available market Total Investments $ 517,581 $ 31,247 $ 614,065 $ 290,691 $ 1,453,584 are initially valued at cost, with subsequent adjustment to values which reflect either the * Certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value basis of meaningful third-party transactions amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the accompanying consolidated statements of financial position. in the private market or the fair value deemed appropriate by the Foundation’s management. In such instances, consideration is also given to the financial condition and operating results of the issuer, the amount that the investment company/fund can reasonably expect to realize upon the sale of the securities, and any other factors deemed relevant. Such value represents the Foundation’s proportionate share of the capital in the investment company/fund. These investments have been labeled as Level 3 based on their lock up periods and the transparency of their assets. As of June 30, 2019, unfunded commitments within the private capital category equal approximately $363 million.

FINANCIAL STATEMENTS www.usmf.org 21 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

The fair values of Level 3 investments have month lag. No performance adjustments are The following table is a roll forward Significant Unobservable Inputs (Level 3) been estimated by management based on all made to investments on a quarter lag given the of the consolidated statements of available data, including information provided unobservability of investment performance at financial position amounts for Fair value recorded at June 30, 2017 $ 557,287 by third-party pricing vendors, fund managers, the time of report issuance. financial instruments classified by custodians and general partners. The valuations the Foundation within Level 3 of Realized and unrealized gain, net 40,529 The Foundation believes the carrying value of of alternative investments are classified as the fair value hierarchy as defined alternative investments in the consolidated Level 3 due to the use of unobservable inputs above (in thousands): Purchase of portfolio investments 128,009 statements of financial position is a reasonable in their year-end fair value measurement. estimate of its ownership interest in the Realized and unrealized gains Unobservable inputs include 1) use of NAV or Proceeds from sale or distribution of investments (111,760) alternative investment funds. As part of and losses recorded for Level the ownership percentage of the fund’s net the Foundation’s overall valuation process, 3 investments are included in assets for alternative investment vehicles that Fair value recorded at June 30, 2018 $ 614,065 management evaluates these third-party investment return, net in the are private, 2) capital account activity during methodologies to ensure that they are consolidated statements of the gap period of the most recent investor Realized and unrealized gain, net 17,309 representative of exit prices in the security’s activities and changes in net assets. statement and the Foundation’s year-end, and 3) principal markets. Management performs a Total change in unrealized gains for Purchase of portfolio investments 158,478 known performance adjustments for alternative retroactive review of its fair value estimates Level 3 investments were $1.4 investments that hold securities with observable by comparing to actual year-end statements million and $3.4 million for the Proceeds from sale or distribution of investments (86,235) fair valuations. There were no changes in received subsequent to year-end. years ended June 30, 2019 and valuation methodologies as of June 30, 2019 2018, respectively. Fair value recorded at June 30, 2019 $ 703,617 and 2018. These valuation methods may produce a fair value estimate that may not be reflective Alternative investments are recorded at fair of future fair values. Furthermore, while value based on NAV as a practical expedient the Foundation believes that its valuation Fair Value and Cost of Investments provided by the respective general partner methods are appropriate and consistent with The fair value and cost of investments held by funds in which USMF invests at June 30 were as follows or fund administrator of the individual other market participants, the use of different (in thousands): alternative investment funds or the ownership methodologies or assumptions to determine percentage of the fund’s net assets. Due to Of the fair value of $1.6 and $1.5 billion at June 30, 2019 and 2018, respectively, $1.4 and $1.3 billion, fair value could result in a materially different the limited availability of valuation data as respectively, is invested in the endowment pool and $154.1 million and $148.5 million, respectively, is estimate of fair value at the reporting date. The of the Foundation’s year-end, management invested in the operating portfolio. There are $0.3 million in investments not invested with the pools at Foundation’s alternative investments are held utilizes the most recent NAV or ownership both June 30, 2019 and 2018. with sophisticated investment managers who percentage which may be on a month to received audited financial statements during The Foundation committed $1.268 and $1.174 billion to private capital as of June 30, 2019 and 2018, quarter lag. Management adjusts the net asset the year that aid in management’s ability to respectively, of which $905 and $778 million has been called as of June 30, 2019 and 2018, respectively. value or ownership percentage to be more approximate fair value. These commitments are to be funded through transfers from other Level 3 investments and new cash. representative of the year-end fair value by including capital contributions, and redemptions or returns of capital during the gap period. Net capital activity during the gap periods increased management’s estimates $6.7M and $7.3M Fair Value and Cost of Investments FAIR VALUE 2019 COST FAIR VALUE 2018 COST for years ended June 30, 2019 and 2018, respectively. Management will also adjust for known performance adjustments for alternative Money-market funds and short-term investments $ 59,438 $ 59,438 $ 123,600 $ 123,600 investments that hold publicly traded securities. Equities and mutual funds 523,392 489,709 425,228 394,418 Performance adjustments ranged from 0.12% to 0.74% for those investments on a one- Absolute return 150,156 56,970 187,902 88,756 Long/short equity hedge funds 255,792 155,155 227,233 140,247 Private capital 578,373 600,347 489,621 522,059 TOTAL $ 1,567,151 $ 1,361,619 1,453,584 $ 1,269,080

22 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

4. Concentration of Credit Risk Contributions receivable from remainder trusts conditional promises to give. In addition, the are trusts where the Foundation is not the Foundation is owner and beneficiary of policies The Foundation maintains cash in bank accounts trustee, but an irrevocable beneficiary. These with face amounts of $635,000 (in dollars) and iThe Foundation maintains cash in bank accounts trusts are valued at approximately $0.8 million $758,000 (in dollars) and cash surrender values in amounts that may exceed Federally insured at both June 30, 2019 and 2018. The difference of approximately $280,000 (in dollars) and limits at times. The Foundation has not experi- between the fair value of contributions $289,000 (in dollars) at June 30, 2019 and 2018, enced any losses in these accounts in the past receivable and the carrying value is deemed to respectively, and are included in other assets in and believes that it is not exposed to significant be immaterial for financial statement purposes. the consolidated statements of financial position. credit risks because the accounts are deposited with major financial institutions. Bequests and Intentions (Unaudited) 6. Conditional Promises to Give and Various contributors have informed the The Foundation believes that it has limited credit Intentions Foundation of their intentions to give risk associated with accounts receivable and approximately $15.8 million at June 30, 2019 contributions receivable due to the size of the To the extent the following items are conditional and 2018. These intentions relate primarily to amount owed and its donor base. promises to give, they are not recorded in the bequests and revocable trusts, which at the Foundation’s financial statements. contributor’s discretion may be changed and/or 5. Contributions Receivable Life Insurance Policies amended. These amounts are not recorded in The Foundation has been named as the The the consolidated financial statements as they are As of June 30, 2019 and 2018, the Foundation’s Foundation has been named as the beneficiary deemed to be conditional promises to give. contributors had unconditionally promised to give of various life insurance policies. These policies approximately $10.8 million and $13.5 million, had face amounts of approximately $2.0 million respectively. at both June 30, 2019 and 2018 and these Promised contributions are due as follows at amounts are not recorded in the consolidated June 30 (in thousands): financial statements as they are deemed to be

2019 2018 Contribution receivable $ 10,823 $ 13,546 Less: unamortized discount (978) (1,124) Net contributions receivable $ 9,845 $ 12,422

Amounts due in: 2019 2018 Within one year $ 330 $ 1,549 One to five years 10,493 11,997

Total $ 10,823 $ 13,546

The discount rates used to calculate the present value component are as follows: 2019 2018 1-5 Years 6.50% 6.00%

FINANCIAL STATEMENTS www.usmf.org 23 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

7. Endowments The Foundation’s endowment funds consist of the following as of June 30 (in thousands): The Foundation’s endowment consists of approximately 1,534 individual accounts established for a variety of purposes. The endowment includes both donor- WITHOUT DONOR WITH DONOR TOTAL restricted endowment funds and funds designated by the Board of Directors 2019 RESTRICTIONS RESTRICTIONS to function as endowment funds. The net assets associated with endowment funds, including funds designated by the Board to function as endowments, are Board-designated endowment funds $ 12,036 — $ 12,036 classified and reported based on the existence or absence of donor-imposed restrictions. Funds treated as endowment funds 11,409 — 11,409 The Board of Directors has interpreted the Maryland Uniform Prudent Donor-restricted endowment funds: Management of Institutional Funds Act (MUPMIFA) as requiring the preservation Original donor-restricted gift amount and amounts of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of required to be maintained in perpetuity by donor — 175,524 175,524 this interpretation, the Foundation classifies donor restricted net assets as (a) the Accumulated investment gains — 83,403 83,403 original value of the gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations Total $ 23,445 $ 258,927 $ 282,372 to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowments funds: WITHOUT DONOR WITH DONOR TOTAL 1. The duration and preservation of the endowment fund 2018 RESTRICTIONS RESTRICTIONS

2. The purposes of the Foundation and the endowment fund Board-designated endowment funds $ 6,990 — $ 6,990 3. The general economic conditions Funds treated as endowment funds 14,178 — 14,178 4. The possible effect of inflation or deflation Donor-restricted endowment funds: 5. The expected total return from income and the appreciation of investments Original donor-restricted gift amount and amounts 6. Other resources of the Foundation required to be maintained in perpetuity by donor — 173,897 173,897 7. The investment policies of the Foundation Accumulated investment gains — 74,549 74,549 Total $ 21,168 $ 248,446 $ 269,614

24 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

Changes in endowment net assets for the years ended June 30 (in thousands): Underwater Endowment Funds From time to time, the fair value of assets associated with individual donor- WITHOUT DONOR WITH DONOR TOTAL restricted endowment funds may fall below the level that the donor or 2019 RESTRICTIONS RESTRICTIONS MUPMIFA requires the Foundation to retain as a fund of perpetual duration. This deficit can result from unfavorable market fluctuations that occurred after the investment of new donor restricted contributions and continued Endowment net assets, beginning of year $ 21,168 $ 248,446 $ 269,614 appropriation for certain programs that was deemed prudent by the Board. The Investment return 2,573 17,230 19,803 Foundation allows for spending on underwater funds. Future market gains will be used to restore this deficiency. There were no deficits of this nature that Contributions 357 4,591 4,948 are reported in net assets with donor restrictions as of both June 30, 2019 and 2018. Courses and conferences — 2 2 Return and Risk Return Objectives Appropriation for spendable — (8,376) (8,376) USMF has adopted investment and spending policies for the endowment that seek to provide a steady and sustainable distribution of funds to support Appropriation of endowment assets for expenditure (46) (3,468) (3,514) operations at its various institutions. The Investment Committee governs Others (577) 577 — according to fundamental investment principles, approved by the Investment Committee and USMF Board of Directors, with the objective of achieving Transfers to System affiliated Foundations (30) (75) (105) superior risk-adjusted returns in order to grow the corpus of the capital base and provide capital for spending distributions for constituents. Specifically, Endowment net assets, end of year $ 23,445 $ 258,927 $ 282,372 the goal of the endowment is to achieve returns in excess of inflation plus spending plus fees. Within the context of risk-taking, specific risk metrics are outlined for staff and the Investment Committee to reassess the portfolio’s positioning if these levels are breached. WITHOUT DONOR WITH DONOR TOTAL 2018 RESTRICTIONS RESTRICTIONS Strategies Employed for Achieving Objectives To satisfy its objectives, USMF employs a diversified asset allocation that allows for investment in public risk assets (liquid investments), private risk Endowment net assets, beginning of year $ 20,385 $ 224,995 $ 245,380 assets (illiquid portion of the portfolio), intermediate assets (private assets with Investment return 2,273 20,931 23,204 shorter, finite illiquidity periods), and safe assets (cash and U.S. Government securities). In addition, on an as needed basis to further protect capital, Contributions 184 11,198 11,382 assets may be allocated to the portfolio overlay class (liquid, exchange traded instruments that aim to hedge against undesired risks). Courses and conferences — 2 2 The asset allocation target ranges inclusive of these securities as of June 30, Appropriation for spendable — (6,960) (6,960) 2019 and 2018 is as follows: Appropriation of endowment assets for expenditure (1,327) (1,714) (3,041) Asset Class Policy Target Minimum Maximum Transfers to System affiliated Foundations (347) (6) (353) Safe assets 2% 0% 25% Endowment net assets, end of year $ 21,168 $ 248,446 $ 269,614 Intermediate Assets 15% 15% 25% Portfolio Overlay 0% 0% 5% Public Risk Assets 48% 45% 75% Private Risk Assets 35% 20% 40%

FINANCIAL STATEMENTS www.usmf.org 25 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

The endowment portfolio is constructed based d) Public Risk Assets define the liquid than 10% of the endowment fund’s assets may b) Calculate an adjusted spending rate using on the following principles: investments. These investments are traded in be invested in one manager. The Investment the prior year’s percentage increased by the liquid markets/exchanges. Within this section Committee, however, may make an exception in Higher Education Price Index (HEPI). 1. Allocation: The overall goal of the Investment of the portfolio, a number of uncorrelated special circumstances. Committee in establishing the asset class ranges After considering the formulaic approach and objectives across equity and credit managers is to create balance across the portfolio between 3. Rebalancing: In order to reap the benefits other relevant inputs, an annual spending rate is and instruments are sought. sources of return, liquidity timeliness, and types of diversification, portfolio holdings will be established. The spending rates for both 2018 of risk. The purpose and definition of each asset Orientations vary as they seek growth, value, rebalanced as necessary to ensure that the and 2019 were 4.0%. The approved spending class and sub-class is as follows: momentum, inflation protection, and/or catalyst actual portfolio asset allocation does not deviate rate for 2020 is 4.0%. driven events. Some of these investments materially from policy target allocation ranges. a) Safe Assets are defined as investments Newly created individual endowment funds, in will track closely to market indices, with a with little-to-no principal risk. These assets are Spending Policy and Relationship of order to have annual spendable income, must goal to earn or exceed the benchmark return, U.S. Government securities and cash. This Spending Policy to Investment Objectives be invested for at least one year prior to the but with less risk than the benchmark. Other portion of the portfolio is in place to provide The Foundation has a spending rate policy for calculation date and have a minimum value of investments will not closely follow a market capital preservation and stability during volatile endowment funds in order to preserve the $10,000. In establishing this policy, the Spending benchmark, as they seek to offer broad periods as well as facilitate spending and capital purchasing power of the assets, to protect Policy Committee considered the long-term diversification for the aggregate portfolio, while call requirements. Maintaining safe assets against erosion of nominal principal and to expected return on the endowment and its goal still earning high risk adjusted returns, while minimizes the risk of becoming forced sellers promote stability and predictability of annual of preserving principal. Accordingly, over the long muting general equity market volatility when of assets during moments of market stress. budgeting. The spending rate determines the term, USMF expects the current spending policy possible. amount to be distributed for current spending. If to allow its endowment to grow at a rate that b) Intermediate Assets represent private, e) Private Risk Assets are the illiquid portion the agreement with the donor so provides, any protects capital on an inflation-adjusted basis. finite life investment vehicles whose term is of the portfolio, serving as the primary return amounts remaining after annual distributions are generally longer than public risk assets, but The Board approved a blanket carry over for 2 enhancement over broad public equity reinvested and become part of the corpus. If shorter than private risk assets. Since there is years of unspent appropriated funds as of June markets. Because of the long-term nature of the agreement is silent as to earnings in excess modest illiquidity within these investments, 30. A special request must be made to car- the endowment’s capital, the portfolio can of distributions, then under Foundation policy they seek to earn returns above market lending ry-over unspent appropriated funds from more hold illiquid investments that may take years any amounts remaining after the distributions rates, but not as high as private risk assets. than two prior years into subsequent fiscal years. for profit realization. While the use of capital are reinvested and available for future spending. Many strategies within this asset class have is sacrificed during this timeframe, these Some agreements provide that the corpus can a credit or contractual yield orientation, with investments are held to higher hurdles of be invaded to provide for spending stability. lower correlations to public equity markets. performance, as they are expected to earn a These include strategies such as direct The Foundation’s policy of appropriating as significant return premium over public market lending, distressed lending/sales, and niche of July 1 of the fiscal year was based on the equivalent investments. These investments credit opportunities. In many cases, collateral following: seek to invest in the debt and/or equity of is attached to these investments and/or they businesses as well as physical assets. A wide The Board of Directors has authorized a formu- seek a higher priority of payments within a variety of strategies are utilized across varied laic approach as an advisory tool to determine stressed or distressed environment. They geographies, sectors, and liquidity profiles, the annual spending rate. The approach is a offer idiosyncratic return/risk profiles that are so as to achieve market and vintage year combination of the following two factors by generally more predictable and consistent; diversification. weighting (a) 30% and (b) 70% to calculate a per thereby aiming to reduce overall portfolio risk in unit rate. Once calculated, the rate should be tandem with earning attractive returns. 2. Diversification: By allocating funds to asset between 4.5% and 3.5% of the moving average classes whose returns are not highly correlated c) Portfolio Overlay is another line of defense market value for the years ended June 30, 2019 over time, the Investment Committee aims for capital preservation. Allocation towards and 2018, respectively. Spending rates may not to mitigate some of the volatility inherent in this asset class will be infrequent and in violate any donor restrictions. equities and thereby provide greater stability in line with protecting the entire portfolio from spending distributions than might be possible a) Compute the average market value for the unwanted risks and market shocks. This is with a more concentrated portfolio. Although most recent period ending December 31 using achieved through a number of liquid exchange such diversification means the endowment may the previous twenty (20) quarters. Calculate 5% traded instruments that aim to hedge against not reap all of the benefits of equity bull markets, of this average market value. This is equivalent undesired risks. The target allocation is set it will also avoid the full brunt of bear markets. of using a moving average as each year the first to zero percent because allocating capital to No more than 5% of the endowment fund’s four quarters drop off and the most recent four this asset class will only be on an as needed, assets may be invested in one fund and no more quarters are added. opportunistic basis.

26 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

8. Net Assets Activities The Foundation has board-designated net assets for supporting the academic programs, Net assets with donor restrictions are restricted for the following purposes (in thousands): scholarships, department support, university support, and other programs. Net assets without donor restrictions — Board-designated net assets are designated for the following (in thousands): 2019 2018 2019 2018 Subject to expenditures for specific purpose: Academic programs $ 1,196 $ 1,089 Academic programs $ 26,505 $ 26,444 Scholarships 2,342 1,122 Student support 4,218 4,098 Department support 3,930 3,552 University advancement 2,520 3,755 University support 3,189 3,058 Research 18,347 17,653 Maryland Center for Performing Arts 1,668 1,651 Faculty support 173 354 51,763 52,304 Others 2,934 2,307 Endowments / Subject to the Foundation’s endowment spending policy: Total board-designated net assets $ 15,259 $ 12,779 Academic programs 47,969 48,320 Student support 150,924 143,928 9. Liquidity and Availability University advancement 2,787 1,057 Research 3,463 3,127 The Foundation manages its investment pool to ensure liquidity is provided to the affiliated Faculty support 53,784 52,014 institutions to meet their spending needs. The Total endowments 258,927 248,446 portfolio’s allocation to public risk assets provides market exposure and the liquidity needed to Total net assets with donor restrictions $ 310,690 $ 300,750 support recurring program expenditures as they become due. Liquidity is managed through the Net assets were released from donor restrictions when expenses were incurred to satisfy the construct of the investment policy highlighted in restricted purposes as specified by donors. Expenditures on donor restricted funds are released Note 7. out of the appreciation related to those funds to the extent allowed by the donors. Such net assets were released as follows during the years ended June 30 (in thousands): Funds available to meet general expenditures within one year are as follows (in thousands): 2019 2018 Satisfaction of purpose restrictions: June 30, 2019 Academic programs $ 5,038 $ 5,860 Cash and cash equivalents $ 151 Student support 2,335 1,255 Account receivable 45 University advancement 1,592 1,098 Research 4,282 3,468 Accrued interest receivable 467 Faculty support 918 415 Contributions receivable 330 Total satisfaction of purpose restrictions 14,165 12,096 Operating investments (Level 1 and 2) 61,400 Restricted-purpose spending rate distributions and appropriations: Total financial assets within one year $ 62,393 Academic programs 1,514 1,156 Less: Amounts unavailable for general expenditures Student support 4,933 4,120 Board-designated (15,259) University advancement 22 34 Research 81 50 Availability of assets within one year $ 47,134 Faculty support 1,826 1,600 Total restricted-purpose spending rate distributions and appropriations 8,376 6,960 Total net assets released from donor restrictions $ 22,541 $ 19,056

FINANCIAL STATEMENTS www.usmf.org 27 Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018

10. Retirement Plans 12. Charitable Gift Annuity Requirements 15. Functional Expenses • Management and General — These expenses relate to the day to day operation of the The Foundation maintains a defined contribution As required by the State of Maryland, the The consolidated financial statements report administrative, accounting and legal offices for plan for certain personnel provided by TIAA and Foundation internally reserves cash and certain categories of expenses that are attributed the organizations. CREF. The Foundation contributes 7.25% of investments associated with annuity liabilities to more than one program or supporting the employee’s compensation to a 401(a) plan. of approximately $3.0 million and $3.3 million function. Therefore, expenses require allocation • Fundraising — These expenses are associated Effective July 1, 2005 the Foundation revised its as of June 30, 2019 and 2018, respectively. on a reasonable basis that is consistently with all aspects of the advancement office in pension plan so that employees are fully and im- applied. The personnel expenses are allocated relation to fundraising initiatives and activities. mediately vested. In addition, eligible employees on the basis of estimates of time and effort. The 13. Related Party Transactions are entitled to make voluntary contributions to a following are functional expenses for the years 403(b) plan. The Foundation established a 457(b) Members of the Board of Directors of the ended June 30, 2019 and 2018: 16. Subsequent Events plan for top executives in 2002. Total retirement Foundation are affiliated with organizations • Wye Herd — This program is used to support Subsequent events have been evaluated by plan expense for the years ended June 30, 2019 which manage or invest a portion of the all activities related to the Wye Herd. management through September 16, 2019, and 2018 was approximately $211,000 (in Foundation’s assets. Members of the Board the date the consolidated financial statements dollars) and $193,000 (in dollars), respectively. of Directors do not participate in investment, • Academic — This program is used to provide were issued. There were no events noted that operational or other decisions by the Foundation supplemental educational experiences for required adjustment to or disclosure in these with respect to entities with which those students studying in the different departments. 11. Contributed Services and Office Space consolidated financial statements. directors are associated. Approximately $1.8 This program covers costs related to on and off As required by the State of Maryland, the million or 0.1% of the Foundation’s total assets campus learning opportunities. A number of unpaid volunteers contribute of $1.6 billion were invested in entities that have • Scholarships — This program assists students their time to the Foundation. In addition, the associations with members of the Foundation’s who are studying in all fields with tuition, books Foundation’s offices are located in the USM Board of Directors as of June 30, 2018. The and room and board expenses. Administration building under a quid pro quo investment is no longer affiliated with a voting arrangement. The Foundation’s President is also member of the Board as of June 30, 2019. • Chair program — This program assists with the USM Vice Chancellor for Advancement and various departments’ ability to fund the Chair of Further, members of the Board of Directors of USM provides space and computer equipment the department through salary and other related the Foundation may also sit on the Boards of in exchange. The value of these services has expenses incurred by the individual. affiliated organizations for which the Foundation not been included in the financial statements manages assets. • Research — This program is designed to as these services are overall immaterial to the assist departments with costs related to consolidated financial statements. expanding research in many academic fields. 14. USMF Corporation Costs such as lab equipment, materials and In November 2004, the Foundation established computer programs are included in this area. the USMF Corporation, a for-profit subsidiary, • Department Support — This program aids with for the purpose of holding investment assets the various costs associated with maintaining that potentially generate unrelated business and improving the different departments across income subject to federal and state income tax. the campuses. Costs related to this program At June 30, 2019 and 2018, this corporation are related to the day to day operations of the held $7.5 million and $10.6 million in net departments. assets, respectively, and has a net operating income/(loss) of $1.7 million and $(0.4) million • Other Programs — These assist various pro- for the years ended June 30, 2019 and grams to promote the interest of the individual 2018, respectively, which are reflected in the campuses, to support activities and facilities of consolidated financial statements. the buildings, to award students, to fund the purchases of equipment needed for the different campus field of studies, and to support the athletic programs.

28 www.usmf.org FINANCIAL STATEMENTS Notes TO CONSOLIDATED STATEMENTS June 30, 2019 and 2018 Program Services Wye Herd Academic Scholarships Chair Research Department Other Total Management Fundraising Total June 30, 2019 Program Support Programs Program and General Expenses in thousands Services

Transfers to USMF $ — $ 1,247 $ 312 $ 1,391 $ 1,319 $ 2,863 $ 2,167 $ 9,299 $ 140 $ 1,570 $ 11,009 Student support — 348 5,692 3 236 171 880 7,330 — — 7,330 Personnel 75 1 — — 186 221 84 567 2,039 44 2,650 Outside services 145 79 169 41 225 94 945 1,698 631 838 3,167 Research and special projects — 395 — — 1,721 — 452 2,568 — — 2,568 Public relations and promotions — 286 82 5 24 343 545 1,285 667 128 2,080 Educational programs 27 196 336 12 48 310 161 1,090 18 — 1,108 Equipment and software rental/maintenance 72 21 3 12 100 155 192 555 189 7 751 Travel — 82 23 46 145 46 212 554 82 3 639 Other expenses 55 81 2 — 38 34 583 793 644 311 1,748 Total Expenses $ 374 $ 2,736 $ 6,619 $ 1,510 $ 4,042 $ 4,237 $ 6,221 $ 25,739 $ 4,410 $ 2,901 $ 33,050

Wye Herd Academic Scholarships Chair Research Department Other Total Management Fundraising Total June 30, 2018 Program Support Programs Program and General Expenses in thousands Services

Transfers to USMF $ — $ 1,758 $ 268 $ 907 $ 1,405 $ 2,231 $ 2,129 $ 8,698 $ 244 $ — $ 8,942 Student support — 329 4,573 — 4 81 718 5,705 — — 5,705 Personnel 66 89 — — 209 204 33 601 1,838 92 2,531 Outside services 207 127 64 13 145 36 1,074 1,666 363 547 2,576 Research and special projects — 24 — — 1,737 (4) 98 1,855 — — 1,855 Public relations and promotions — 224 7 9 35 261 607 1,143 445 201 1,789 Educational programs 19 176 11 9 104 280 180 779 3 — 782 Equipment and software rental/maintenance 68 38 8 14 16 29 139 312 153 6 471 Travel — 84 27 59 129 56 204 559 98 5 662 Other expenses 55 151 4 23 48 107 1,154 1,542 696 1,345 3,583 Total Expenses $ 415 $ 3,000 $ 4,962 $ 1,034 $ 3,832 $ 3,281 $ 6,336 $ 22,860 $ 3,840 $ 2,196 $ 28,896

FINANCIAL STATEMENTS www.usmf.org 29 USM Foundation Board of Directors Alicia Wilson Dena Hudgins Gallagher Leadership Vice President of Economic Development Vice President of Administration Johns Hopkins University The Edgar Lomax Company OFFICERS Francis A. Contino William H. (Hassan) Murphy Thomas L. Wilson Jaye S. Gamble Managing Director Managing Partner Sector Vice President, Business Co-founder Bonnie B. Stein FAC&B Murphy, Falcon & Murphy Chair Development Blu Venture Investors Northrop Grumman Innovation Systems Co-founder, President and CEO William Couper Patricia D. Murray Petch Gibbons Jemma Financial Services Retired President, Mid-Atlantic Region Chief Officer, Disability and President and Managing Principal Bank of America Medical Assessment HONORARY DIRECTORS Summit Commercial Real Estate Leonard R. Raley U.S. Department of Veterans Affairs President and CEO Gail Segal Elmore Timothy J. Adams Joseph B. Gildenhorn University System of Executive Vice President J. Mitchell Neitzey President and CEO Founding Partner Maryland Foundation, Inc. LW Investment Management (USA), LLC President and CIO SA-TECH The JBG Companies EFO Capital Management, Inc. Joseph V. Bowen, Jr. V. Raymond Ferrara Gary R. Alexander William B. Grant Secretary Chairman and CEO Brian Nelson Senior Partner and Founder Retired Chairman and CEO Retired Senior Vice President ProVise Management Group, LLC President, Managing Director Alexander & Cleaver, P.A. First Union Bank & Trust for Operations Harborside Group McKissack & McKissack Eric S. Francis John J. Allen, Jr. Marian C. Hwang Chairman and CEO Creig Northrop Vice President Principal Charles W. Cole, Jr. The CBMC Group President and CEO Delmarva Power Miles & Stockbridge P.C. Vice Chair (Investment) The Creig Northrop Team of Retired Chairman and CEO Albert E. Girod Long & Foster Real Estate Alison L. Asti Kempton Ingersol Legg Mason Trust Company Founder and Managing Partner Associate Judge Managing Director, SSL Services Bruce Richards Anne Arundel County Circuit Court Senior Portfolio Manager B. Gary Dando CEO and Co-Managing Partner Brown Capital Management Treasurer Linda R. Gooden Marathon Asset Management, LP Robert A. Bedingfield Retired Partner Retired Executive Vice President Retired Partner Walter I. Jones Ernst & Young Lockheed Martin Information Alicia N. Ritchie Ernst & Young LLP President and CEO Systems and Global Solutions Principal ExecuTech – Strategic Consulting Joseph R. Hardiman Miles & Stockbridge, P.C. Roger R. Blunt, Sr. Vice Chair (Investment) H. Christopher Goodrich President and CEO Roger W. Kent Private Investor President and CEO Lonnie Robbins Blunt Enterprises, LLC Senior Vice President Cornerstone Defense, Inc. Chief Administrative Officer TD Bank Robert Milkovich Howard County Government George P. (Pat) Clancy Vice Chair (Investment) Barry P. Gossett Retired Executive Vice President Stephen A. Lazinsky CEO Principal Donald C. Scheeler Chevy Chase Bank President rand* construction corporation Gossett Group Senior Partner Comeq, Inc. Resource Solutions, Inc. Hugh F. Cole, Jr. Paul H. Mullan Cary Hatch Chairman Larry Letow Vice Chair (Investment) CEO, Brand Advocate Natalie B. Sherman Brantly Development Group President and COO Retired Vice Chairman and MDB Communications, Inc. Partner LG-TEK Gallagher, Evelius and Jones, LLP Harriet E. Cooperman Strategic Partner James N. Holzapfel Partner Pamela Love Manning Charterhouse Group International, Inc. Managing Director – Investments Molly Shock Saul Ewing President The Holzapfel Investment Group President, Board of Directors Thomas (Tim) Schweizer, Jr. DP Love Enterprises, LLC of Wells Fargo Advisors, LLC Towson University Foundation, Inc. Alfonso N. Cornish Vice Chair (Investment) System Vice President, Learning and William E. Mayer President C. Emmerson Small, II Organizational Development and Senior Partner Brown Advisory Securities Harry S. Johnson Partner Senior Vice President –Investments Chief Learning Officer Park Avenue Equity Partners Wells Fargo Advisors Norton Healthcare Whiteford, Taylor & Preston Sander Mednick DIRECTORS Linda E. Jones Francis S. Soistman, Jr. Philip B. Down CEO Executive Vice President of Joe N. Ballard Managing Director, Southeast Zone President Milestone Hotel Partners, LLC President and CEO Healthcare Leader Government Services Doctors Community Hospital Aetna Michael E. Meegan The Ravens Group, Inc. Marsh, USA John A. Driggs Retired Director Anirban Basu Viju Joseph Kimberly Stokes President CohnReznick Chairman and CEO President and CIO Vice President Fixed Income The Driggs Corporation T. Rowe Price Associates, Inc. Arthur S. Mehlman Sage Policy Group, Inc. Pefin, Inc. Robert E. Fischell Retired Partner Larry D. Boggs Ralph L. Lary, III Stacey Ullrich Chairman and CEO KPMG, LLP Head of Global Philanthropy and Fischell Biomedical, LLC Managing Director – Investment Officer Managing Partner David F. Mister The Boggs Wealth Management Group Arena Technical Resources, LLC Community Affairs Under Armour, Executive Director UA Michael A. Gaines, Sr. Senior Partner Alan C. Cason Eric E. McLauchlin Foundation Senior Associate Mister, Winter & Bartlett, LLC Trout Daniel & Associates Partner Partner Neil Moskowitz McGuireWoods, LLP Shaffer, McLauchlin & Stover, LLC Retired Chief Financial Officer Credit Suisse First Boston 30 www.usmf.org Jonathan Murray Brian DeFilippis Theresa Silanskis Senior Vice President Vice President for University Vice President for Institutional University System of Maryland UBS Advancement Advancement Towson University University of Baltimore J. William Murray Board of Regents President Stewart Edelstein Gregory E. Simmons The Murray Group Executive Director Vice President for 2019-2020 The Universities at Shady Grove Institutional Advancement Martin R. Resnick University of Maryland, Chairman Ahmed El-Haggan Baltimore County Linda R. Gooden, Chair Isiah “Ike” Leggett Martin’s Caterers Vice President of IT and Institutional Retired Executive Vice President Former Montgomery County Advancement Richee Smith Andrews David C. Saunders Lockheed Martin Information Executive Coppin State University Chief Advancement Officer Systems and Global Solutions CEO and Founder The Universities at Shady Grove Robert R. Neall K2 Advisors, LLC Peter Goodwin Gary L. Attman, Treasurer Secretary President Thomas J. Sullivan President and CEO Maryland Department of Health Robert B. Schaftel University of Maryland Center for Chief Philanthropy Officer Insurance Broker FutureCare Health and Environmental Science and Vice President Management Corporation Drew M. Needham, Riggs, Counselman, Michaels University of Maryland, Baltimore Student Regent & Downes, Inc. Mark Halsey Joseph Bartenfelder, University of Maryland, Baltimore Executive Director Cathy Sweet ex officio William R. Snyder University System of Maryland at Vice President for Louis M. Pope Retired Senior Vice President for Secretary of Agriculture Hagerstown Institutional Advancement Maryland Department of President and Owner Administration University of Maryland Global Campus Century 21 Trademark Realty, Inc. Crown Central Petroleum Corporation Freeman A. Hrabowski Agriculture President Brent Swinton Ellen R. Fish Robert D. Rauch John C. Weiss, III University of Maryland, Baltimore County Vice President for Institutional Assistant Secretary Assistant Professor Group Manager Advancement Revere Bank Principal University of Baltimore Merrick School Jacqueline Lewis Bowie State University RAUCH, Inc. of Business Vice President for University Relations Barry P. Gossett, Vice Chair University of Maryland, College Park Charles Wight Kelly M. Schulz, ex officio William T. Wood Principal President Gossett Group Secretary Attorney Wallace D. Loh Salisbury University Maryland Department of Wood Law Offices, LLC President Michelle A. Gourdine, Commerce University of Maryland, College Park Dennis R. Wraase Secretary STAFF OFFICERS CEO Robert L. Wallace Immediate Past Chair Javier Miyares Speaker, Author, Consultant Retired Chairman and CEO President Carrie Browne Michelle Gourdine & Associates Pepco Holdings, Inc. University of Maryland Global Campus Assistant Secretary James N. Holzapfel William T. Wood Board Relations Associate Attorney Sam A. Zappas David Nemazie Managing Director – Investments University System of Maryland The Holzapfel Investment Group Wood Law Offices, LLC Business Consultant Interim Vice President for Institutional Foundation, Inc. Advancement of Wells Fargo Advisors, LLC University of Maryland Center for Marianne Horrigan EX OFFICIO DIRECTORS D’Ana E. Johnson Environmental Science Vice President for Board Relations Partner Chief of Staff Heidi M. Anderson Ronald H. Nowaczyk Bonner Kiernan Trebach & President University System of Maryland Crociata LLP President Foundation, Inc. University of Maryland Eastern Shore Frostburg State University David Balcom Roy Hossler Jay A. Perman Assistant Treasurer Vice President for Advancement President University of Maryland Eastern Shore Director of Business Operations University of Maryland, Baltimore University System of Maryland Aminta Breaux Leonard R. Raley Foundation, Inc. President President and CEO Pamela Purcell The USM Foundation recognizes its obligation to respect and Bowie State University University System of Maryland Vice President for Finance and protect the privacy of our donors. Mickey Burnim Foundation, Inc. General Counsel Interim President Kim E. Schatzel Vice President for Finance and CFO Information about donations is handled with respect and Coppin State University University System of Maryland President confidentiality to the extent provided by law. Some donors Robert L. Caret Towson University Foundation, Inc. prefer anonymity. We will respect the wishes of contributors who Chancellor Kurt L. Schmoke Tom Gilbert University System of Maryland President Assistant Treasurer prefer their gifts to remain confidential. For more information, Jason Curtin University of Baltimore Chief Financial Officer please visit www.usmf.org or contact the USM Foundation office. Vice President for University University System of Maryland John T. Short Foundation, Inc. Advancement Vice President for University Salisbury University Advancement Frostburg State University www.usmf.org 31 32 www.usmf.org Contact Us

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