The President’s Report on Philanthropy and Endowments

2008–2009 table of contents

Message from the President | 2

Message from the Campaign Chair | 4

Ensuring Student Opportunity | 6

Enhancing Honors Education | 8

Enriching the Student Experience | 10

Building Faculty Strength & Capacity | 12

Fostering Discovery & Creativity | 14

Sustaining a Tradition of Quality | 16

Concepts in Philanthropy | 18

Awards and honors | 22

Endowment overview | 24 investment management update | 25

University budget summaries | 28 campaign executive committee | 32 A Message from the president

Penn Staters love a challenge.

I’ve heard those words many times, and there is no better evidence of their truth than the extraordinary results of philanthropy to the University in fiscal year 2008-09. During a time of widespread economic uncertainty that challenged all levels of our society, Penn State received more gifts—more than 300,000—this past year than at any other time in its history. Moreover, a record number of alumni—77,658—made gifts.

There is more good news. Giving totaled $182 million for the year ending June 30, 2009. That’s up slightly from the previous year and stands as the second-highest total in Penn State’s history.

On behalf of faculty, students, and staff, I extend my deepest appreciation for this remarkable display of generosity. It shows that our donors recognize Penn State’s important contributions to the vitality of our nation, and that the value of a Penn State education is even greater during difficult economicPhilanthropy times. is never more important than when students and their families are facing economic challenges. Maintaining broad accessibility to education is the top priority of For the Future: The Campaign for Penn State Students. Philanthropy is never more important than when stu- dents and their families are facing economic challenges. I am pleased to report that since the campaign was launched in its leadership gifts phase on January 1, 2007, the University has re- ceived more than $154 million in new scholarship commitments. Some of these commitments are for the more than 600 Trustee Scholarship endowments that have been created through a groundbreaking program whereby the University provides matching funds that effectively double the financial impact of each endowment. In 2008-09, more than 4,000 undergradu- ates benefited from these unique scholarships.

Altogether, gifts and pledges to the For the Future campaign totaled $752 million as of June 30, 2009. We look forward to launching the campaign’s public phase in April 2010. I urge you to read Campaign Chair Peter Tombros’ message on page 4 of this report and learn more about the people whose generosity is helping the campaign to meet its objectives.

I am deeply grateful to Peter and other campaign volunteer leaders for their dedication to Penn State. Working in an adverse financial climate, they have nevertheless placed the Univer- sity in a strong position to launch the public segment of the campaign. Now we must sustain the momentum their efforts have built. It won’t be an easy task. Success will require the par- ticipation of even more Penn State alumni and friends. But students and faculty, now and in future generations, are depending on us. We will not let them down.

Thank you for your support and all that you do for our University.

Sincerely,

Graham B. Spanier, President The Pennsylvania State University

The articles in this report not only tell the stories behind important gifts to the University—they also highlight ideas and approaches that have enabled many donors to fulfill their philanthropic goals. To learn more about the concepts appearing in bold throughout the text, please see the Concepts in Philanthropy section, which begins on page 18.

the president’s report on philanthropy and endowments | 2008–09 3 A Message from the Campaign Chair

ehind every gift to Penn State, there’s a story. It may begin on a donor’s first day as a Bfreshman at the University, when he meets the faculty member who will inspire both a great career and an endowed chair. It may not unfold until years later, when an alumnus real- izes just how valuable a study abroad or a research experience was—and creates a fund to help other students have the same kind of experience. The tale of a gift may open with a couple dis- covering how much Penn State enriches life in the community where they’ve chosen to raise a family or retire, or it might start with a father urging his son not only to earn a degree but also to make a difference.

You’ll read all of these stories in the pages that follow, as the 2009 President’s Report on Philanthropy and Endowments highlights the reasons that some of Penn State’s alumni and friends have chosen to make gifts to the University. Their generosity—and yours—has a profound impact on our ability to serve our students and our world. Endowed gifts provide us with permanent resources that allow us to plan for the future of Penn State and help us to provide an extraordinary educational experience. They have also allowed us to aim higher,

As the University grows in stature, so do we all, and private giving will determine what Penn State can achieve, now and in the future.

to create new opportunities so that our students and our programs are ready to compete in a changing global economy.

The need for private support has never been greater, and as we move toward the public launch of For the Future: The Campaign for Penn State Students in 2010, we are asking all of our alumni and friends to consider what role you can play in the campaign’s success. Scholar- ships are our top priority, as students and their families struggle with job losses and dwindling college savings. Through the campaign, we are aiming to contain the educational debt of our graduates (currently almost $27,000) and keep more students from every economic back- ground on track toward their degrees. Gifts to the campaign will also help us to build upon the success of the , create new learning and leadership opportunities beyond the classroom, nurture a community of exceptional teachers and researchers, lead the

4 the president’s report on philanthropy and endowments | 2008–09 way in discoveries across all disciplines, and continue the Penn State tradition of excellence and access.

All of the following stories tell you about the beginning of a gift to the University, but there are no endings—these endowments will exist in perpetuity, for as long as Penn State endures, and they will continue to benefit our students and our institution for generations to come. As a Penn State graduate as well as the campaign chair, I am profoundly grateful to you for your philanthropic support. As the University grows in stature, so do we all, and private giving will determine what Penn State can achieve, now and in the future. Thank you.

Peter G. Tombros, Chair For the Future: The Campaign for Penn State Students Ensuring student opportunity

As the financial need of Penn State students grows, a Centre County couple is making scholarships a very personal priority.

cholarships brought Blake and Linda Gall together nearly forty years ago, and scholar- Sships continue to be one of the couple’s shared passions. Without financial aid, neither would have been able to enroll at Princeton University, where they met in 1970. After many adventuresome years in New York City and the birth of their first child, Blake took a posi- tion at an investment firm in Bellefonte, Pennsylvania, and the couple (pictured below) relocated to Centre County in 1985. They soon became leading volunteers and advocates for the institution at the heart of their new hometown.

“Penn State is an integral part of what makes our community special,” says Linda, who currently chairs the stewardship committee of For the Future: The Campaign for Penn State Students. “We have been especially blessed to raise our daughters, Lauren and Andrea, here. Penn State alumni have a natural affin- ity and affection for the University, but as local citizens, our lives have also been enriched by the University.”

The Galls’ interests and involvement have bridged town and gown, from the Centre County United Way and the Conservancy to the Palmer Museum of Art and Penn State’s squash and tennis facilities. While their first gifts to Penn State focused on the University’s outreach programs, such as public broadcasting and the performing and visual arts, the couple became increasingly interested in helping students like themselves who needed

6 the president’s report on philanthropy and endowments | 2008–09 private support to earn their degrees. “As we saw how much our children, who both enrolled at Penn State, enjoyed their experience here, we felt even more strongly about making that experience possible for other young people,” says Blake.

Over the years, the Galls have created scholarship endow- ments across the University, including funds for students in the Schreyer Honors College, the College of Arts and Architecture, the College of Education, and Intercollegiate Athletics. They have also supported, and inspired others to support, a Renaissance Fund scholarship created in their honor in 2006 (the same year that Linda was named an honorary alumna of the University). Last year, they decided to create two more funds to honor the people who helped to make their own education possible.

“We had read in the University’s campaign brochure about two young alumni, Ronald Gatehouse and Pratima Singh Gatehouse, who created scholarships in honor of their par- ents,” says Linda. “That was a very attractive idea to us. Our parents made significant sacri- fices for us to attend college, and it seemed most fitting to recognize those acts of love and selflessness with scholarships tied to their interests.”

The Arlene & E. Z. Jackson Scholarship in Musical Theatre honors Blake’s parents, who have been active in community musical theatre. The Pauline & Patrick Lamort Trustee Scholarship in Education—the fifth endowment that the Galls have created through the Trustee Matching Scholarship Program—celebrates Linda’s mother’s long career in teaching. Monica Kim (pictured above), a sophomore majoring in Secondary Education in Math, is one of the first recipients of the Lamort Trustee Scholarship, and she’s profoundly grateful for the Galls’ support. “My family and I were ecstatic when we learned about the scholarship,” she says. “I want to teach at my old high school someday, and the scholarship has allowed me to focus on my goals without so much financial stress.”

For Blake and Linda, stories like Monica’s—and those of the many other Penn State stu- dents who have benefited from their scholarships—bring back memories of their own early days. “We know firsthand the critical importance of financial assistance,” says Blake. “I was a first-generation college student, and although my parents didn’t have degrees, they knew the overwhelming value of a strong education. Through these scholarships, we are able to honor both of our families and help other families to start on a new path.”

the president’s report on philanthropy and endowments | 2008–09 7 A Penn State honors alumnus and his family remember a father who believed in achievement and character—and give students in the Schreyer Honors College an opportunity to carry on those values. Enhancing Honors Education

blue-collar worker from South Philadelphia, Marty D’Ambrosio never had the opportu- Anity to finish high school, but he was a passionate believer in the power of education. “My father was a man of great character and integrity. He wanted us to be successful in life and be- lieved that education was the path to opportunity and choice,” reflects Louis A. D’Ambrosio ’86 Bus, a member of the Schreyer Honors College External Advisory Board and campaign com- mittee. “I will never forget looking into my father’s eyes when I was fortunate enough to give the valedictorian speech for the Smeal College of Business. It meant everything. But success was more to him than personal accomplishments—it was about character, decency, integrity. It was about achieving so that you can give back.”

Lou went on to earn an M.B.A. from Harvard, rise to the post of vice president at IBM, and become one of the youngest C.E.O.s of a Fortune 500 company, the global communications leader Avaya, and Marty “was with me every step of the way… He was my rock,” says Lou. When his father died suddenly in 2007, Lou and his wife, Kimberly (pictured opposite), decided to honor his memory by creating the Marty D’Ambrosio Honors Scholarship. “Marty was always so present in our lives,” says Kim. “This is a way that he can be present in the lives of others.”

Directed to Schreyer Scholars from south- eastern Pennsylvania studying in the Smeal College of Business, the scholarship is assisting a student in each class year, including junior Dan Levy (pictured right). Like Lou, he’s following his father’s ex- ample of hard work and perseverance. “My dad has gone from owning a hot dog stand in Philadelphia to owning his own art gal- lery,” says Dan, a Marketing and Psychol- ogy double major. “We’re still struggling to make ends meet, though, and receiving the Marty D’Ambrosio Honors Scholarship has been both a great relief and a great inspiration.”

Dan and other recipients of the scholarship are given a document that describes Marty’s life and values. Lou says, “My mother has described my father as being our compass, and through the Marty D’Ambrosio Honors Scholarship, his example can help guide Schreyer Scholars as they thrive at Penn State and decide how they will make an impact in the world.”

the president’s report on philanthropy and endowments | 2008–09 9 Enriching the Student Experience

hen Louis A. Martarano graduated from Penn State with a degree in Chemistry in W1976, he was eager to see life beyond the laboratory. “Like many Penn State under- graduates, I was a kid from a small town, and I had never been out of the country before,” Lou (pictured below) remembers. “As a graduate student in the Yale School of Manage- ment, I had the opportunity for an internship in Paris, and it opened my eyes to the complex differences between countries and cultures. That experience shaped my life, both professionally and personally.”

Over the next two decades, Lou’s work in project finance for Merrill Lynch and Kidder, Peabody took him around the world. In 1998, he decided to help other Eberly College of Science students prepare for their own international careers by establishing the Louis A. Martarano Endowment for Educa- tion Abroad. The award assists students like Megan Manno (pictured top right), a Biol- ogy major who graduated this spring and is headed to a research training program with the National Institutes of Health. Support from the Martarano Endowment helped Megan to spend a semester at the University of Leeds in England and to travel throughout Europe during her junior year.

“My experience overseas really makes my Penn State education feel complete,” says Megan. “Finances are the main reason that many students can’t choose to study abroad, and Mr. Martarano’s generosity means that I now have a new perspective on the world.”

Lou, who chairs the Board of Trustees of Marymount Manhattan College in addition to his service on several Penn State advisory boards and committees, decided to increase the size of the endowment last year. “Happily, more and more students are choosing to spend time overseas,” says Lou. “The days of being a scientist tucked away in the back of a lab some- where are a thing of the past. Whether our graduates go into research or business, they’ll need the kind of global understanding that can only come from experience abroad.”

10 the president’s report on philanthropy and endowments | 2008–09 Thanks to the global vision of a Chemistry alumnus, Penn State science students have the support they need to see the world for themselves. Building Faculty Strength & Capacity

f you’ve ever enjoyed a day in one of Pennsylvania’s pro- Itected forests, you can thank Joseph E. Ibberson (pictured right). Over the course of six decades, the pioneering forester has been instrumental in preserving and managing the Com- monwealth’s land. Although he officially retired from the Penn- sylvania Department of Environmental Resources in 1977, Joe has continued to be a leader in the field, and he donated his own property to create the first conservation area in the Penn- sylvania state park system in 1999. And none of it would have happened, he says, without the encouragement of the faculty members he met at Penn State.

“That was the key to everything—they practically kicked me into my career,” says Joe, who began his education at the Mont Alto campus and earned his degree from the College of Agricultural Sciences at University Park in 1947. “The director of the forestry school almost forced me to go to Yale to earn my master’s degree, and another Penn State professor chal- lenged me to create the first timber management plans for the two million acres of forest the state owned at that time.”

Joe went on to create many programs that were among the first of their kind not only in the Commonwealth but also in the nation, including a pest control initiative and a service forester program that helps private citizens to manage their lands. Now he is committed to ensuring that new generations are prepared to steward the forests he has worked so hard to protect. “Teaching is what makes a good forester—it’s just that simple,” says Joe. “I want Penn State to have the best forestry school in the world, and you can’t do it without the very best faculty.”

In 1997, he established the Joseph E. Ibberson Chair in Forest Resources Management. Dr. Harry V. Wiant, Jr., (pictured left) came to Penn State from West Vir- ginia University to accept the position. “The funding has helped to further my teaching and research, and I’m honored to hold a chair that bears Joe’s name,” Dr. Wiant says. “I’ve had the opportunity to meet Joe, and I consider him a friend and an inspiration.”

12 the president’s report on philanthropy and endowments | 2008–09 Through irrevocable commitments in his estate plans, Joe has laid the groundwork for two additional endowments for faculty, the Joseph E. Ibberson Chair in Urban and Community Forestry and the Joseph E. Ibberson Chair in Silviculture Research for Pennsylvania. In- creasing support for Penn State faculty is a key objective of the University’s current fundrais- ing campaign, and the Faculty Endowment Challenge was launched this year to encourage other donors to follow Joe’s example. “I consider these endowments to be investments in the future of our forests,” says Joe. “The profession of forestry is always facing new challenges, and I want Penn State to be leading the way.”

As Penn State competes for the best educators and researchers, a forester remembers how great faculty helped him to grow. A longtime friend of a Penn State campus brings students and faculty together with support for hands-on learning. Fostering Discovery & Creativity

t sounds like a fascinating evening of programming on the Discovery Channel: the role Iof mosquitoes in transmitting malaria, the attitudes and approaches of real-life homicide detectives, the future of science and technology education. The investigations aren’t happen- ing on television, though, but on the campus. Thanks to the generos- ity of Fred J. Wiest, Esq., (pictured far left) who created the Penn State Schuylkill Faculty and Student Research Endowment in 2007, these projects are taking education beyond the textbook and giving undergraduates hands-on experience in their fields.

“When I was a student in the honors program at Swarthmore in the 1930s, we had the opportunity to work closely with faculty members on research,” recalls Fred, a Minersville resident who returned to the area after earning a law degree from Harvard and serving in World War II. He has volunteered on advisory boards for Penn State’s program in Schuylkill since 1954. “I have seen Penn State Schuylkill grow into a remarkable campus,” he says. “I thought that this research endowment could provide the kind of opportunity to our students that meant so much to me in my own education.”

So far, three faculty members have received support from the endowment. Dr. Darcy Medica (pictured left) and her students are testing the characteristics of mosquitoes that make them efficient transmitters of malaria. “I’m a very strong supporter of involving undergraduates in research,” she says. “I think that they benefit tremendously by applying what they’ve learned in the classroom, and it gives them an edge in applying to graduate school and jobs.”

That’s the kind of result that makes philan- thropy satisfying, says Fred, who has also cre- ated a Trustee Scholarship at the campus. “I have gotten notes from students and faculty telling me what my gifts have made possible,” he says. “Through private support, we can get students here and make sure that they receive an excellent education.”

the president’s report on philanthropy and endowments | 2008–09 15 Community leaders use gift planning and unrestricted support to set the stage for new outreach and arts programs at Penn State.

he audiences for Penn State’s Center for the Performing Arts are often aficionados Tand connoisseurs, but for many in the crowd at Eisenhower Auditorium one day this spring, it was their first encounter with the magic of live theatre. Fourth-graders from Dickey Elementary School in Lock Haven gasped and cheered as they watched the story of Harriet Tubman and the Underground Railroad unfold through dance, dialogue, and traditional African American spirituals in Freedom Train, produced and performed by Theatreworks USA. The event was the culmination of a unit on slavery for the young stu- dents, and it was made possible by a pair of theatre fans who want to share their passion with future generations.

16 the president’s report on philanthropy and endowments | 2008–09 Sustaining a Tradition of Quality Sustaining a Tradition of Quality

“The thank-you letters we received from the children were just priceless—one told us how ‘cool’ it was to see the show in person,” says Honey Jaffe, who, with her husband Bill ’60 (pictured left), established the Honey and Bill Jaffe Endowment for Audience Develop- ment for the Center for the Performing Arts. The fund subsidizes the cost of transporting children from area schools to “informances” at Penn State.

It’s one of several endowments that the Jaffes have created through charitable remainder trusts and launched through early activation. They have been especially generous to pro- grams that serve the region they love. The Jaffes retired to State College in 1995 after ca- reers that took them all over the country. “State College provided everything we wanted,” says Bill. “And because we live here, we want to see the community become even better.”

Together, they have volunteered on numerous boards and created endowed funds to support Penn State Public Broadcasting, the Center for the Performing Arts, Pennsylva- nia Centre Stage, and the Palmer Museum of Art, as well as many other areas across the University. “These are programs that have a major impact and provide a lot for people in central Pennsylvania,” Bill says. The Jaffes are also advocates of unrestricted giving, and Bill serves as the volunteer chair of the President’s Club, Penn State’s recognition society for donors who make annual unrestricted gifts of $2,500 or more to any of more than fifty qualifying funds at Penn State.

In acknowledgment of their efforts on behalf of the Center for the Performing Arts, Bill and Honey were jointly awarded the Center’s Distinguished Service Award last year, and Honey was named an honorary alumna of the University this spring. The theatre lov- ers don’t need the spotlight, though, to feel good about their philanthropy. Honey says, “When you see immediate help going to deserving people and causes, it’s very gratifying.”

the president’s report on philanthropy and endowments | 2008–09 17 Concepts in Philanthropy

The Trustee Matching Scholarship Program and other matching programs

Blake and Linda Gall are among the hundreds of donors who have become Penn State’s partners in supporting students in need through the Trustee Matching Scholarship Pro- gram. In this groundbreaking philanthropic model, the University matches 5 percent of the total pledge or gift at the time a Trustee Scholarship is created, making money available immediately for student awards. This University match is available to spend each year, in perpetuity, along with a payout equal to a percentage (currently, 4.5 percent) of the endow- ment’s market value. Therefore, when the endowment becomes fully funded, a Trustee Scholarship provides almost 10 percent of the endowment’s market value each year. “The power of the matching funds is very compelling,” says Linda. “Our gift has twice the power to help students and families struggling with the cost of higher education.”

Penn State has established other programs, including the Distinguished Graduate Fellow- ship Program, that allow donors to leverage University funds with their gifts. To learn more, visit www.giveto.psu.edu/ReasonsforGiving.

Honoring others through giving

For many donors, like the Galls and the D’Ambrosios, philanthropy is a way to bridge past and future, celebrating the people who have been important in their own lives and making a difference in the lives of others. “We want to make sure that many students, for many genera- tions, will always remember my father, his unwavering commitment to education, and his love of Penn State,” says Lou D’Ambrosio. Donors may choose to name endowments after their own families, faculty members who have been important in their education, friends and business associates—anyone whose life, achievements, and values they wish to recognize. Like the D’Ambrosios, donors may also request that those who benefit from the endowment also receive information about the individuals who inspired the gift. Because endowments exist in perpetuity, they can be an enduring expression of gratitude and respect.

Special endowments and awards

Lou Martarano and Fred Wiest have created special endowments that embody their own vision for what a Penn State education should be. “Money can be a dead thing, if it just sits there in the bank,” says Lou. “Making this gift has enriched my life as well as the lives of students.” Donors can work with Penn State’s development staff to establish unique funds that meet specific needs at the University and connect with their own experiences and

18 the president’s report on philanthropy and endowments | 2008–09 values. These endowments have the greatest impact when they offer a broad opportunity for students and faculty to pursue their goals. For example, the Martarano Endowment for Education Abroad doesn’t specify particular countries where recipients can travel; instead, it has helped students to enroll in those programs that are the best fit for their academic and personal interests. Development officers can assist in determining criteria for endowments that will allow them to make a difference at Penn State now and in the future.

Estate planning and deferred gifts

“I believe in doing my research and planning ahead,” says Joe Ibberson. It’s an approach that has helped to secure the future of Pennsylvania’s forests, and it’s also helped him to achieve his philanthropic goals. Like many donors, he has worked with Penn State’s Office of Gift Planning to create a Statement of Intent that indicates how his bequests to the University will be used. By completing further documents that have made these commitments irrevo- cable, Joe has qualified for membership in the Elm Circle, Penn State’s society for donors at the very highest level. The Office of Gift Planning also assists donors in making other kinds of deferred gifts—commitments made today that will provide future benefits to the Uni- versity. These gifts, which include gift annuities and charitable remainder trusts, can carry substantial income, estate, and gift tax advantages for our donors, and they have an impor- tant impact on Penn State—last year, Penn State received almost $20 million in realized bequests and more than $4.8 million from life income gifts. For more information, please contact Penn State’s Office of Gift Planning (1-888-800-9170 or [email protected]).

Deferred Giving 2000–2009 (Fiscal year ending June 30)

2000 $18.2 2001 26.6 2002 24.3 2003 48.1 2004 30.0 2005 14.4 2006 21.1 2007 25.2 2008 21.5 2009 24.6 010 1002200330044005500 in millions of dollars

the president’s report on philanthropy and endowments | 2008–09 19 The Penn State Faculty Endowment Challenge

“Students choose Penn State for the opportunity to work with educators, scholars, and scien- tists who can help them to succeed, and our reputation as an institution depends upon the achievements and dedication of our faculty,” says President . “The Faculty Endowment Challenge will help to ensure that we can compete for rising academic stars.” Through the program, alumni and friends of Penn State can leverage a 1:2 match from the University for commitments that establish Early Career Professorships, rotating awards that support faculty in the first decade of their careers. These endowments typically require a minimum commitment of $500,000, but as of July 1, 2009, donors may establish new Early Career Professorships for any of the University’s colleges or campuses with a commitment of $334,000, equivalent to approximately 2/3 of the minimum level required. The University will commit the remaining 1/3 of the necessary funds, approximately $166,000, from a $5 million pool of unrestricted endowment resources. The program will end on June 30, 2014, or when the full pool of matching funds has been designated to specific endowments.

Unrestricted giving

Over 99 percent of the gifts received by Penn State are designated for a specific use, and this support is essential in fulfilling the University’s mission and goals. When new challenges and opportunities arise, however, Penn State’s leadership relies upon unrestricted gifts. “We’re big proponents of unrestricted giving,” says Bill Jaffe. “Gifts that aren’t targeted to a specific purpose allow the University to use the money where it’s needed most.” This support provides Penn State’s leadership with the flexibility to respond to unexpected opportunities and needs. More than fifty units at Penn State, including all colleges and campuses, have funds which pool unrestricted gifts from alumni and friends. In recent years, these resources have helped students affected by natural disasters, brought prominent artists and schol- ars to our campuses, and supported emerging public service initiatives. Whether it helps students in crisis to continue their education or enriches the experience Penn State offers, unrestricted support is vital to the University’s strength.

20 the president’s report on philanthropy and endowments | 2008–09 creating endowments

Endowments are created by blending a donor’s vision with Penn State’s goals and objec- tives. While endowments strengthen the University now, their premise is to plan for and strengthen Penn State’s future. Endowments can be created through gifts of cash, stock, or deferred gifts.

Endowment minimums

Penn State’s Board of Trustees has established minimum support levels for various types of endowments to guarantee that income will be adequate to achieve the benefactor’s intent— now and in the future. The endowments may be named in recognition of the generosity and vision of the donors, or in honor or memory of persons of the donor’s choice. Named endow- ments stand in perpetuity as landmarks.

ENDOWMENT CATEGORY MINIMUM GIFT Faculty Support Chancellor’s Chair $5,000,000 Dean’s Chair $5,000,000 Department Head’s Chair $3,000,000 Faculty Chair $2,000,000 Professorship $1,000,000 Career Development Professorship $ 500,000 Graduate Student Aid Distinguished Graduate Fellowship $ 250,000 Graduate Fellowship $ 250,000 Graduate Scholarship $ 50,000 Undergraduate Student Aid Trustee Matching Scholarship $ 50,000 College/Campus Scholarship $ 50,000 Honors College Scholarship $ 50,000 Destiny Scholarship $ 50,000 Enrichment Scholarship $ 50,000 Renaissance Scholarship $ 30,000 Other Endowments Lectureship $ 100,000 Research $ 50,000 Program Support $ 25,000 Libraries $ 25,000 Award $ 20,000

the president’s report on philanthropy and endowments | 2008–09 21 awards and honors

Each year, the Division of Development and Alumni Relations honors those individuals and companies that have been instrumental in our fundraising success. In 2009, we cel- ebrated the following award winners.

Philanthropists of the Year: Edward H. Arnold and Jeanne Donlevy Arnold

This award recognizes an individual, couple, or family who has demonstrated exceptional generosity in the promotion and support of The Pennsylvania State University. Through their philanthropy, the recipients have helped to shape Penn State’s future and enabled us to better serve students and citizens.

Over the last several years, the Penn State Milton S. Her- shey Medical Center and its youngest patients have found extraordinary new friends in Ed and Jeanne Arnold. Their belief in the value of family-centered medical care inspired their gift to create the Hummingbird Program for chroni- cally ill children, and they recently became the leading individual donors to the new Penn State Hershey Chil- dren’s Hospital building. As vice chairs of the fundraising campaign for the proposed facility, Ed and Jeanne are also reaching out to the communities that they have served dur- ing their careers—Ed, as chairman of Arnold World Indus- tries and Arnold Logistics, and Jeanne, as senior vice president of patient care services at Good Samaritan Hospital—to inspire others who share their heartfelt commitment to improving children’s health.

Fundraising Volunteer of the Year: E. Lee Beard

This award recognizes an individual or group who has served as fundraising volunteers, teachers, or mentors while demonstrating exceptional commitment and leadership in build- ing philanthropic support for The Pennsylvania State University.

On a single day last year, Lee Beard visited Penn State locations on opposite ends of the Commonwealth as part of her tireless effort to assist all twenty campuses she represents as co-vice chair of the For the Future campaign. Lee’s involvement with the University began

22 the president’s report on philanthropy and endowments | 2008–09 when she moved to the Hazleton area in 1993 as president and C.E.O. of First Federal Bank. Along with her husband, William W. Beard, she became a passionate supporter of , and as volunteer committee chair, Lee led the campus to success in the Grand Destiny cam- paign. She has continued to be a top volunteer for fund- raising initiatives at Penn State Hazleton and throughout the University, even while heading up her own financial advisory company, The Henlee Group. In her current role, she is an invaluable advocate and advisor for Penn State’s campuses.

Corporate Partner of the Year: The Boeing Company

This award recognizes a corporation that has demonstrated extraordinary generosity in pro- motion and support of The Pennsylvania State University. Recipients are chosen on the basis of consistency of giving, support to areas of greatest needs, and impact across Penn State.

For nearly fifty years, The Boeing Company has been a leading supporter of Penn State programs and students, and the connection between the University and the world’s larg- est aerospace company has deepened over the past decade. In 2002, Boeing named Penn State as one of approximately two dozen Enterprise Schools, leading to the company’s investment in grants, scholarships, research, recruiting, and academic relations across the University. The program’s goals include increasing the number of women and students from underrepresented groups in engineering and related fields, and Boeing’s targeted support has had a major impact on diversity programs at Penn State. With nearly 600 alumni currently employed at the company, and continuing research collaborations with Penn State students and faculty, the relationship between the University and Boeing is a model for corporate engagement in higher education.

the president’s report on philanthropy and endowments | 2008–09 23 Endowment overview

Endowed gifts are held by Penn State in perpetuity. The initial gift is invested and a portion of the average annual investment return is spent for the purpose designated by the donor. The remaining income is added to the principal as protection against inflation. Thus an endowed gift today will have relatively the same value for future generations.

The Long-Term Investment Pool (LTIP) is Penn State’s endowment portfolio into which endowed funds established at the University are invested. This comingled pool operates much like a mutual fund. Each endowment owns a number of units in the pool, just as an individual would purchase shares in a mutual fund. And as with a mutual fund, the value of each unit at the time funds are invested in the Basic Endowment Management Principles pool determines how many units an individual 1. Provide sufficient current and future income to fund acquires. meet the University’s spending objectives and enhance its mission. Penn State strives to be a good steward of its en- 2. Focus on long-term performance. dowed gifts and follows a prudent management 3. Accept a reasonable and prudent level of risk philosophy in investing these gifts so that they while maximizing “total” return. maintain their value in real, inflation-adjusted 4. Diversify investments to reduce risk. terms over time. The University’s Board of Trust- ees has established four basic endowment management principles to guide the University’s Investment Council.

These four principles ensure that the spending power of each endowment gift will be main- tained in the face of economic fluctuations.

gifts to endowment (Fiscal year ending June 30)

80 80 72.8 69.1 70.2 7070 $61.7 61.2 58.5 6060 56.5 55.2 51.4 5050 42.4 4040

3030 2020 1010 00 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 in millions of dollars

24 the president’s report on philanthropy and endowments | 2008–09 Investment Management Update

Penn State’s endowment investments consist of a diversified portfolio of public equities, bonds, private capital, and hedge funds in addition to real assets. In managing our invest- ments, we adhere to a prudent, rational, long-term strategy that seeks to maintain steady growth while minimizing the effects of volatile market fluctuations.

For many years the University has, as a rule, provided 5 percent of the pooled endowment’s five-year average market value for spending on scholarships and educational programs. However, given prospects for modest investment market returns, the payout rate has been reduced incrementally over the last several years. As a consequence of the recent market turmoil, the rate was lowered to 4.5 percent for fiscal year 2010. The University’s spending policy of using rolling five-year average balances is intended to smooth out the “peaks” and “troughs” in the investment markets, saving a portion of the earnings in the good years to offset the less profitable years—thus providing generous current spending while preserving future purchasing power. This is known as “intergenerational equity.”

Market Value of Penn State’s Endowments and Similar Funds (Fiscal year ending June 30)

LTIP Similar Funds 2000 927 77 $ 1,004 (1 billion) 2001 899 87 986 2002 842 101 943 2003 882 83 965 2004 1,007 100 1,107 (1.11 billion) 2005 1,128 103 1,231 (1.23 billion) 2006 1,280 110 1,390 (1.39 billion) 2007 1,537 132 1,669 (1.67 billion) 2008 1,488 128 1,616 (1.62 billion) 2009 1,184 97 1,281 (1.28 billion) 0 Millions of dollars 500 n Long-Term Investment1000 Pool (LTIP) n Similar Funds1500 2000

As of the end of fiscal year 2009, endowment and similar funds were valued at $1.28 billion, of which $1.18 billion was invested in the Long-Term Investment Pool. Similar funds, which include charitable remainder trusts, charitable gift annuities, and other life income funds in addition to some donor-restricted funds, represented $97.4 million in assets that are not directly invested in the Long-Term Investment Pool.

the president’s report on philanthropy and endowments | 2008–09 25 For the year ending June 30, 2009, the endowment declined $334 million, but it has in- creased a cumulative $50 million over the last five years. Over this same five-year period, the endowment has provided $296 million of program support, including $65 million in fiscal year 2009. These amounts reflect the impact of investment returns and generous giving, resulting in consistent support for scholarships and University programs.

For fiscal year 2009, the endowment’s investment return was -20.1 percent, and it has aver- aged 4.1 percent per year, net of fees, over the last five years. In the longer term, Penn State’s endowment has averaged 7.8 percent per year, net of fees, since June 30, 1989. These results demonstrate long-term growth across various financial ups and downs, such as the bull market of the 1990s, the steep decline at the turn of the century and subsequent economic recovery, and the recent downturn due to the credit crisis. Penn State’s diversified approach has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflation-adjusted growth for future generations.

Endowment Asset Mix (Fiscal year ending June 30, 2009)

28% Where Penn State invested its endowed funds 50%

n Public Equities n Fixed Income n Private CapitalPrivate Capital 22% Fixed Income

The Penn State endowment portfolio is broadly diversified, with 22 percent Publicfixed income Equities as of June 30, 2009; 50 percent in public equities (both U.S. and non-U.S.); and 28 percent in a variety of other (alternative) investments including real estate, private capital, venture capital, and energy. The majority of the endowment’s assets are equity-type investments that, over the long term, generate returns in excess of inflation in order to preserve the endowment’s purchasing power for future generations.

In the year ending June 30, 2009, global equity markets continued their downward slide, compounding losses incurred during the twelve months ending June 2008, while fixed income returns were positive for the third consecutive year. Bonds, as measured by the Barclay Capital Aggregate Bond Index, earned a total return of 6.0 percent in fiscal year 2009 while public equities, as measured by the MSCI All Country World ex-US Index, returned -30.5 percent. Penn State’s private capital is comprised of private partnership investments, including private equity and venture partnerships which returned -24.3 percent and -17.3 percent, respectively.

26 the president’s report on philanthropy and endowments | 2008–09 Looking forward, the steady growth of the world economy has heightened inflation con- cerns, especially natural resources such as oil and gas. With approximately 15 percent of our investments regarded as inflation-sensitive, Penn State’s diversified endowment portfolio continues to be appropriately invested for long-term growth and sustainable spending.

Long-Term Investment Performance of Penn State’s Investment Council Endowment Penn State’s Board of Trustees created the Investment Council in Penn State’s endowment earned an investment return of -20.1 response to the University’s increasing asset base and complex percent in fiscal year 2008–09, excluding the impact of new investment strategies. The council provides direct oversight gifts and spending. While stock market returns often fluctuate of the endowment and long-term investment program, and from year to year, the endowment’s well-diversified portfolio regularly reviews asset allocation, new asset classes, investment can weather short-term fluctuations and generate positive strategies, and manager performance. returns over long periods of time. Net of all fees and expenses, the Penn State endowment has averaged 4.1 percent per year Council Members over the last ten years, and 7.8 percent over the last twenty Al Horvath, Chair years, allowing the endowment to maintain steady inflation- Senior vice president for finance and business/treasurer, adjusted spending and to achieve long-term intergenerational The Pennsylvania State University equity. David Branigan Executive director, Office of Investment Management, The Pennsylvania State University average annualized total returns for periods ending june 30, 2009 Timothy J. Crowe

(Net of fees) 10 Managing director, Anchor Point Capital LLC

7.8 Carmen Gigliotti 4.1 4.1 Managing director, Private Market Group, DuPont Capital Management -20.1 05 Edward R. Hintz Jr. President, Hintz Capital Management

Arthur D. Miltenberger Vice president and chief financial officer (retired), 20-year R.K. Mellon & Sons

10-year J. David Rogers Chief executive officer, J.D. Capital Management 5-year Gary Schultz Senior vice president for finance and business/treasurer 1-year emeritus

Linda B. Strumpf -25 -20 -15 -10 -5 Chief investment officer, The Helmsley Charitable Trust the president’s report on philanthropy and endowments | 2008–09 27 university budget summaries

income (Fiscal year ending June 30)

0.5% 4.8% 8.9% Millions of dollars 33.5% n Tuition and fees $1,208.2 9.4% n Medical Center/Clinic 939.2 n Restricted funds* 611.1 n State appropriation 338.4 n Auxiliary enterprises 320.2 n Philanthropy and other 171.2 n Agriculture (federal) 19.1 16.9% Total $3,607.4 Agriculture *primarily sponsored contracts and research grants 26.0% Philanthropy and other

Auxiliary enterprises

State Appropriation expenditure (Fiscal year ending June 30) Restricted Funds 2.6% 1.2% 2.6% Medical Center/Clinic 4.0% 17.8% Millions of dollars 5.2% n InstructionTuition and and Fe academices support $642.6 n Medical Center/Clinic 939.3 n Research 544.6 7.8% n Auxiliary enterprise 320.2 n Academic support 320.0 n Institutional support 281.1 8.9% n Physical plant 185.9 n Public service 144.5 n Pennsylvania College of Technology 94.1 26.0% n Student services 93.6 8.8% Student Aid n Student aid 41.5 Total $3,607.4 15.1% Student Services

Pennsylvania College of Technology

Public Service

Physical Plant

28 the president’s report on philanthropy and endowments | 2008–09 Institutional Support

Academic Support

Auxiliary enterprises

Research

Medical Center/Clinic

Instruction and academic support The State’s Share of Penn State’s Budget

Year total budget state appropriation percent of total 2009–10 [as of press time, no state budget has been approved] 2008–09 $3,607,440,000 $338,375,000* 9.4% 2007–08 3,411,528,000 334,230,000* 9.8% 2006–07 3,209,165,000 327,715,000* 10.2% 2005–06 3,044,868,000 312,026,000* 10.2% 2004–05 2,786,403,000 317,179,000 11.4% 2003–04 2,560,309,000 307,844,000 12.0% 2002–03 2,402,717,000 322,592,000 13.4% 2001–02 2,294,015,000 334,813,000 15.4% 2000–01 2,011,084,000 314,134,000 15.6%

*Excludes state and federal medical assistance funding provided by Penn State Milton S. Hershey Medical Center through the Pennsylvania Department of Public Welfare.

Sources of Gifts RecEived 2008–09 | Where the $182.1 million came from

10.6%

Sources Amounts Number of donors 15.7% 49.1% n Individuals $89,342,735 173,092 Alumni $63,037,010 77,658 Friends 26,305,725 95,434 n Corporations 44,887,329 6,228 n Foundations 28,661,347 484 n Organizations 19,221,368 2,114 Total $182,112,779 181,918 Organizations 24.6% Foundations

Corporations

Indivuals

the president’s report on philanthropy and endowments | 2008–09 29 designated Purposes of gifts received 2008–2009 | Where the $182.1 million went .3% 2.1% .5% 2.7% 3.6% Purposes Amounts 31.9% n Other $58,183,599 n Student aid 44,841,338 16.7% n Research 31,996,908 n Property, buildings, equipment 30,472,020 n Faculty resources 6,519,006 n Academic divisions 4,963,791 n Public service and extension 3,759,081 n Unrestricted 811,917 (University-wide) 17.6% n LibraryLibrar resourcesy resource s 565,119 Total $182,112,779 24.6% Unrestricted

Public service and extension Gifts Designated to Specific Units 2008–09 Academic divisions UNIT Amount Abington $283,604 Hershey MedicalFaculty Center resource s 33,557,517 Agricultural Sciences 6,524,108 Info Sciences & Technology 1,061,428 Altoona 1,598,340 IntercollegiateProper Athleticsty, buildings , equipment27,296,811 Arts & Architecture 7,449,549 Lehigh Valley 114,202 Beaver 432,751 Liberal ArtsResear ch 5,450,656 Behrend 3,419,114 Mont Alto 1,200,729 Berks 1,145,064 New Kensington 279,345 Student Aid Brandywine 233,577 Outreach 4,187,119 Communications 1,160,373 Research & Grad School 2,798,633 Other Dickinson School of Law 1,010,352 Schreyer Honors College 1,622,516 DuBois 547,976 Schuylkill 441,940 Earth & Mineral Sciences 9,993,058 Shenango 404,450 Eberly College of Science 6,754,266 Smeal College of Business 6,416,427 Education 1,202,970 Student Affairs 674,262 Educational Equity 451,803 Undergraduate Education 7,667,526 Engineering 14,229,271 University Libraries 3,180,460 Fayette, The Eberly Campus 491,078 University-wide 13,844,059 Great Valley 163,034 Wilkes-Barre 675,362 Greater Allegheny 501,178 Worthington Scranton 596,576 Harrisburg 3,816,655 York 472,246 Hazelton 807,069 TOTAL $182,112,779 Health & Human Development 7,955,325

30 the president’s report on philanthropy and endowments | 2008–09 Growth in Private support and donor base

200200 190.3 176.9 180.7 181.3 181.5 182.1 $170.8 165.2 151.3 150150 130.9

100100 Dollars received

5050

0 0 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 in millions of dollars

300300 284.7 277.5 265.2 250250 $198.8 197.9 196.4 200.9 200 200 173.0 170.3 163.4 Commitments: 150150 cash gifts and pledge 100100 payments plus new pledges 5050

00 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 in millions of dollars

200000200 181,918 163,111 143,517 132,791 150 150000 116,971 122,539 132,931 124,519 116,053 120,680 100000 100 Number of donors

5000050

00 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

the president’s report on philanthropy and endowments | 2008–09 31 campaign executive committee

Peter G. Tombros James S. Broadhurst Steve A. Garban Campaign Chair Chair, Board of Trustees Liason Trustees, Vice Chairman, Board E. Lee Beard The Pennsylvania Campaign Vice Chair State University of Trustees, The Pennsylvania Chair, Campus State University Peter M. Carlino Committees Chair, The Penn State Milton S. Hershey Edward R. Hintz Honorary Campaign Edward J. Beckwith Medical Center Chair, Planned Giving Chair Campaign Committee Advisory Council Linda J. Gall Martha B. Jordan Chair, Stewardship Chair, Annual Giving Committee Committee

32 the president’s report on philanthropy and endowments | 2008–09 William A. Jaffe Bruce R. Miller Robert E. Poole William A. Schreyer At-large Member Campaign Vice Chair Chair, Leadership Gifts Honorary Campaign Committee Chair Edward P. Junker III Chair, College Committees At-large Member Catherine Shultz Rein Richard K. Struthers Chair, Corporate At-large Member Jeffery L. King Arthur J. Nagle Relations Committee At-large Member Honorary Campaign John K. Tsui Chair Douglas L. Rock At-large Member At-large Member Joseph V. Paterno Honorary Campaign Chair

the president’s report on philanthropy and endowments | 2008–09 33 Ex Officio Members

Graham B. Spanier Albert G. Horvath President, Senior Vice President The Pennsylvania for Finance and State University Business/Treasurer, The Pennsylvania Rodney A. Erickson State University Executive Vice President and Provost, Rodney P. Kirsch The Pennsylvania Senior Vice President State University for Development and Alumni Relations, The Pennsylvania State University

34 the president’s report on philanthropy and endowments | 2008–09

This publication can also be found on the Web at: president.psu.edu/philanthropy

For more information about philanthropy at Penn State, contact:

Rodney P. Kirsch Senior Vice President for Development and Alumni Relations

The Pennsylvania State University 116 Old Main University Park, PA 16802-1501

814-863-4826 [email protected]

The Pennsylvania State University is committed to the policy that all persons shall have equal access to programs, facilities, admission, and employment without regard to personal characteristics not related to ability, performance, or qualifications as determined by University policy or by state or federal authorities. It is the policy of the University to maintain an academic and work environment free of discrimination, including harassment. The Pennsylvania State University prohibits discrimination and harassment against any person because of age, ancestry, color, disability or handicap, national origin, race, religious creed, sex, sexual orientation, or veteran status. Discrimination or harassment against faculty, staff, or students will not be tolerated at The Pennsylvania State University. Direct all inquiries regarding the nondiscrimination policy to the Affirmative Action Director, The Pennsylvania State University, 328 Boucke Building, University Park, PA 16802-5901; Tel 814-865-4700/V, 814-863-1150/TTY.

U. Ed. DEV 10-09 ajs Questions or comments about your report Gifts to your endowment may be sent to may be directed to: the address below or made online at www.giveto.psu.edu Kathleen Rider Director of Stewardship Office of Donor Services [email protected] The Pennsylvania State University 1 Old Main Office of Donor Relations University Park, PA 16802 The Pennsylvania State University 102 Old Main Phone (toll-free): 877-888-5646 University Park, PA 16802 Be sure to include the name of the Phone (toll-free): 877-800-6113 endowment with your gift. The President’s Report on Philanthropy and Endowments | 2008-2009