MINUTES OF THE ANNUAL MEETING OF THE BOARD OF TRUSTEES OF THE UNIVERSITY OF PITTSBURGH June 28, 2019 The Annual Meeting of the Board of Trustees was held on Friday, June 28, 2019, at 10:30 a.m., in the Assembly Room of the William Pitt Union at the University of Pittsburgh. Alumni, Commonwealth, and Term Trustees in attendance were Jane Bilewicz Allred, John A. Barbour, Eva Tansky Blum (Chairperson), Gary T. Brownlee, Michael A. Bryson, Mary Ellen Callahan, Vaughn S. Clagette, James P. Covert, Bradley J. Franc, Patrick Gallagher (Chancellor and Chief Executive Officer), Sy Holzer, S. Jeffrey Kondis, Robert G. Lovett, Roberta A. Luxbacher, John A. Maher III, Martha Hartle Munsch, Thomas E. Richards, Jack D. Smith, William E. Strickland Jr., Stephen R. Tritch, Thomas L. VanKirk, Peter C. Varischetti, and John J. Verbanac. Ex Officio and Special Trustees in attendance were Douglas M. Browning, David C. Chavern, the Honorable Rich Fitzgerald, Deborah J. Gillotti, Robert M. Hernandez, Thomas M. Kurtz, Marlee S. Myers, Jeannine T. Schoenecker, the Honorable Shawndya L. Simpson, Michael G. Wells, and Marna Cupp Whittington. Emeritus Trustees in attendance were John G. Conomikes, Catherine D. DeAngelis, J. Roger Glunt, Alfred L. Moyé, and Charles M. Steiner. Attending as a representative of the Secretary of the Pennsylvania Department of Education was Reuben Mills. University Officers in attendance included Ann E. Cudd, Kathy W. Humphrey, Paul Lawrence, Arthur S. Levine, Cynthia C. Moore, Rob A. Rutenbar, Narahari Sastry, Gregory G. Schuler, and Gregory A. Scott. Staff in attendance included Kenyon Bonner, Pamela W. Connelly, Kristin Davitt, Kimberly L. Honath, Heather Lyke, Ellen Moran, Amy E. Service, Paul Supowitz, and Kevin Washo. Eva Tansky Blum, Chairperson of the Board of Trustees, convened the meeting at which a quorum was present. In keeping with the Sunshine Act, the meeting was duly advertised as a public meeting. Welcome and Remarks of the Chairperson. Chairperson Blum welcomed the Trustees to the meeting and acknowledged Reuben Mills, who was attending as a representative for Pedro Rivera, Pennsylvania Secretary of Education. Chairperson Blum also recognized, and congratulated Trustee James P. Covert on being named one of the Chicago Bears’ Top 100 Players in the team’s history and on being selected as a member of the 2019 Pitt Athletics Hall of Fame Class. Moment of Silence. At the request of Chairperson Blum, the Trustees observed a moment of silence in memory of A. Alice Kindling, who passed away on June 9, 2019. She earned both a bachelor’s and master’s degree from the University’s School of Nursing and a master’s degree from the University’s Graduate School of Public Health. Ms. Kindling had a long and distinguished career as a public health administrator for the Allegheny County Health Department. Ms. Kindling served on the Board for close to five decades. During that time, she was a member of numerous Board Committees – including chairing the Student Affairs Committee for 13 years – and served on several Boards of Visitors. Ms. Kindling was honored by the University as a Distinguished Alumnae and received both the Bicentennial Medallion of Distinction and the 225th Anniversary Medallion. Approval of Minutes. The minutes of the February 22, 2019 Winter Meeting of the Board of Trustees were approved. Report of the Investment Committee. Investment Committee member Bradley J. Franc provided the Board with a report on the Committee’s recent information and public meetings. At the June 13, 2019 information meeting, Gregory G. Schuler, Chief Investment Officer, reviewed the investment performance for the period ending March 31, 2019. At that time, the Consolidated Endowment Fund had a market value of $4.2 billion, with a one-year return of 3.29% compared to a one-year return benchmark return of 2.82% and a ten-year return of 9.91% compared to a benchmark return of 8.31%. At the June 24, 2019 public meeting, the Committee approved an update to the Statement of Governance, Investment Objectives and Policies for the Consolidated Endowment Fund (the “Statement of Governance”). There were four primary revisions, which encompassed the following: Asset Allocation. The target exposure for illiquids exposure was increased to 49% from 34%. It will take roughly seven to eight years to implement this adjustment to the portfolio. Spending Policy. One of the primary revisions to the Statement of Governance is the establishment of a separate income percentage distribution rate for the University’s Operating Funds Quasi-Endowment, which will be used to support student financial aid. Derivatives and Co-Investments. The existing language was revised to clarify authorized activity pertaining to the use of derivatives and co-investments. Portable Alpha. The Statement of Governance was amended to implement a Portable Alpha program for US Equity. This program will be capped at 6% of Consolidated Endowment Fund’s balance, which is roughly 37% of the University’s existing US equity exposure. The Committee also approved two spending distribution rates for the Consolidated Endowment Fund: (i) for Fiscal Year 2020, the income percentage for the Operating Funds Quasi-Endowment will be 4.75% of the three-year average market value, an increase of .50% from Fiscal Year 2019; and (ii) the distribution rate for the other funds in the Consolidated Endowment Fund in Fiscal Year 2020 will continue to be 4.25% of the three-year market value. Mr. Franc noted that the primary investment objective for the Consolidate Endowment Fund is a nominal return equal to or greater than 7.7%, which reflects the approved income distribution percentage for donor-restricted endowment assets + Higher Education Pricing Index (“HEPI”), as well as administrative fees and expenses. Report of the Property and Facilities Committee. Committee Chairperson John A. Barbour provided an overview of actions taken by the Property and Facilities Committee at public meetings held on April 29 and June 27, 2019, which included seven capital projects and two leases. Mr. Barbour highlighted a few of the most notable capital projects, which included: -2- Scaife Hall. The Committee approved the first phase of a major renovation of Scaife Hall. When completed, the two-phase project will modernize and improve the quality of teaching, research, and student space for the University’s School of Medicine. Phase 1 of the project has an estimated cost of $120 million and will include the construction of a seven-story West Wing Addition and incorporate a 600-seat lecture auditorium, classrooms, and teaching laboratories. Petersen Sports Complex. The construction of an addition to the Petersen Sports Complex will allow the Athletic Department to consolidate the baseball, softball, soccer, and women’s lacrosse teams and coaches in one building. The project, which has an estimated cost of $16.5 million, will add a third floor to the existing building and expand the first and second floors. Bigelow Boulevard. The renovation of Bigelow Boulevard and the William Pitt Union grounds will play an important role in the implementation of the Campus Master Plan. The project, valued at $23.7 million, will improve the streetscape and landscape of this high- profile corridor and will increase the safety of pedestrian, vehicular, and bicycle traffic. The project will also create a more student-oriented, accessible outdoor space for events and activities and serve a critical supporting role to enable future campus development. Mr. Barbour advised the Board that the Committee also approved two leases for space for: (i) the Learning Research and Development Center in the former Pittsburgh Athletic Association facility; and (ii) the School of Medicine’s Immunologic Monitoring and Cellular Products Laboratory in the Riviera Building. Mr. Barbour stated that taken together, the seven approved capital projects will generate approximately 1,400 construction and support jobs, while the two leases will add $128,000 to the City of Pittsburgh property tax rolls. In addition, the Committee received updates on the implementation of the Campus Master Plan, including a review of key transformative projects. A number of projects are moving forward to address near-term priorities in student recreation, campus housing, academic facilities, and Athletics, as well as critical infrastructure upgrades to support new development. The Committee discussed how these near-term priorities will impact the Fiscal Year 2020 Capital Budget, which will be presented to the Budget and Executive Committees for consideration in July. Mr. Barbour noted that there are several major projects that are driving a higher level of capital investment than has been customary in recent years. In order to prepare for that expected increase in project workload, the University has hired a new Assistant Vice Chancellor for Campus Planning. Report of the Governance and Nominating Committee. Committee Chairperson James P. Covert reminded the Board that the Committee is charged with the responsibility of identifying, cultivating, and recommending candidates for election as Trustees of the University of Pittsburgh, as well as for filling other offices. The Committee met in executive sessions earlier this year where full discussions were held, but no actions were taken. At a duly advertised public meeting on June 10, 2019, the Governance and Nominating Committee endorsed the recommendations contained in the resolutions being presented to the Board. -3- Background Statement for Resolution Re-electing and Electing Members of the Board of Trustees and Filling Other Offices. Mr. Covert introduced the Background Statement for Resolution Re- electing and Electing Members of the Board of Trustees and Filling Other Offices, which is included as page 10 of these minutes. Resolution Re-electing and Electing Trustees of the University of Pittsburgh. The Resolution Reelecting and Electing Trustees of the University of Pittsburgh is included as pages 11 through 12 of these minutes. Mr. Covert stated that the Governance and Nominating Committee endorsed the re-election of incumbent Trustees G.