The President’s Report on Philanthropy and Endowments (2014–2015)

PRESIDENT’S REPORT ON PHILANTHROPY AND ENDOWMENTS 2014–15

TABLE OF CONTENTS Message from the President

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Interviews with Nicholas P. Jones, Executive Vice President and Provost Rodney P. Kirsch, Senior Vice President for Development and Alumni Relations Martha Barnhart Jordan, Volunteer Chair, Penn State Advisory Council on Philanthropy David J. Gray, Senior Vice President for Business & Finance/Treasurer Madlyn L. Hanes, Vice President for Commonwealth Campuses A. Craig Hillemeier, M.D., Senior Vice President for Health Affairs Damon Sims, Vice President for Student Affairs Sandy Barbour, Athletic Director Lee Beard, Chair, Volunteer Engagement Task Force

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Philanthropy Awards

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Endowment Overview

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Investment Management Update

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University Budget Summaries

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Penn State Advisory Council on Philanthropy

Two nighttime views: Old Main (opposite, above) and the Millennium Science Complex (opposite, below)

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“ W HAT ’ S NE X T ? ” It’s a question we’re asking every day at Penn State.

Students are wondering what their own futures hold as they prepare for lives and careers in a rapidly changing and increasingly interconnected world. Faculty are tackling shared challenges—and finding shared solutions—in fields ranging from health care to energy to homeland security. And those of us charged with leading the University forward are asking ourselves and the Penn State community how we can best fulfill our land-grant mission of education, research, and service in the twenty-first century.

In this special issue of The President’s Report on Philanthropy and Endowments, I have invited nine of my fellow Penn State leaders to share their thoughts about what’s next for the University—and how alumni and friends can be our partners in making it happen. A year after the successful conclusion of For the Future: The Campaign for Penn State Students, it’s a time for reflection on the vast importance of philanthropy at Penn State and the role that private gifts will play in furthering our ambitions and those of our students.

A time for reflection—but not a time for rest. As Martha Jordan says later in this issue, we can’t “hit the pause button” on Penn State’s progress or on the giving that supports it. In the following pages, you’ll find our fundraising results and endowment performance from the past year, and you’ll learn how private support today can determine what we’ll be tomorrow. At Penn State Hershey, for example, the new Institute for Personalized Medicine is gathering the data that will guide more effective treatment for conditions such as cancer and diabetes. The whole course of a student’s career may be shaped by international study, intercollegiate athletics, volunteer leadership, or hands-on research. Partnerships between Penn State campuses and local companies can drive prosperity for communities across the Commonwealth and beyond.

Philanthropy can fuel all of these efforts and countless other Penn State initiatives. Turn the page, and you’ll learn from Provost Nick Jones about the University’s ambitious new strategic plan. But while the plan may guide us, our supporters will lead us. What’s next for Penn State? That’s up to all of us, working and investing together. Thank you for inspiring our ambition with your past philanthropy, and thank you for being a part of our future.

Sincerely,

E Eric J. Barron

A student in a lab at Innovation Park (left) and the scene between classes at University Park (opposite) 2

A MESSAGE FROM

P R ESID ENT B A R R O N

FPO

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N ICHO L AS P. JON ES EXECUTIVE VICE PRESIDENT AND PROVOST

“Our future will depend upon our supporters…”

Nick Jones is a man with a plan—a University-wide strategic plan, two years in the making, that sets Penn State’s course through the end of this decade.

Almost from the moment that the former Johns Hopkins engineering dean set foot on campus in 2013, he has been guiding the effort to define the University’s priorities for the 2015–2016 to 2019–2020 academic years and position the institution’s current strengths to be a springboard for even greater success.

“One thing is clear: Our future will depend upon the leadership of our supporters as well as the leadership of our administration and faculty,” he says. “The vision that has emerged in the strategic planning process is ambitious, but it can’t become a reality unless the University’s alumni and friends are as inspired by it as those of us within the institution.”

To be released in January 2016, the strategic plan outlines five areas of focus that intersect with the goals of programs across the University as well as with imperatives outlined by President Barron. “The plan’s first priority is to use Penn State’s size, scope, and reach to transform higher education and make it accessible to all sectors of society,” says

Jones. “We have the intellectual capital and institutional will to pioneer new modes of teaching and learning. Private support will be essential to furthering those innovations and helping students from every economic background to discover their own potential for impact.”

That impact may come in the form of new approaches to managing and stewarding global resources and promoting human health. “Water, energy, food— our faculty and students have the capacity and commitment to lead the way in meeting the world’s needs, and donors can support them in that effort,” says Jones. “We also have a formidable set of talent focused on interdisciplinary approaches to personalized health and medical education. With the help of private support, we can keep those moving forward while we build partnerships that will improve health within Pennsylvania and elsewhere.”

shared possibilities,” says Jones.

“By investing in the arts and humanities, we can make Penn State a thought leader as well as a cultural destination for the people of Pennsylvania.”

And through the plan’s fifth priority, leveraging and maximizing Penn State’s digital assets, the full wealth of the University’s resources can be made available to new audiences and in new ways. “Enhancing our digital infrastructure may be a twenty-first century mandate, but it’s founded on Penn State’s historic mission of service,” says Jones. “In fact, every aspect of the strategic plan connects to that mission and represents an opportunity for Penn Staters to support our traditional values as well as our future strength.”

The plan also emphasizes both the oldest and the newest missions of higher education. “Even as we capitalize on our strengths in science and engineering, we must remember that every human advance has been guided by thinkers who can imagine our

The Verne M. Willaman Gateway to the Sciences in the spring (opposite) and an art class in the Peace Garden, the 1997 senior class gift, on an autumn day (right) 5

“A campaign isn’t just about raising money…”

When Rod Kirsch arrived at Penn State in 1996 to lead the University’s fundraising operation, he had to hit the ground running.

The Grand Destiny campaign was about to begin, and Kirsch and a team of staff and volunteers were charged with reaching a $1 billion goal. That goal was shattered when the campaign concluded in 2003 with nearly $1.4 billion raised. Four years later, For the Future: The Campaign for Penn State Students began quietly with a $1.65 billion behind-the-scenes target—and ended with a total of almost $2.2 billion. Why have the University’s campaigns been so successful?

“The Penn State family has come to define itself through giving back,” Kirsch says. “Whether it’s a gift to THON or a commitment to scholarships, supporting student-athletes through the Nittany Lion Club or supporting faculty through an endowment, Penn Staters really do experience their pride in the University as a call to action. As we work toward an even more ambitious vision for our future, Penn State can count on our graduates and others who believe in our mission.”

And that relationship has grown and deepened because of another phenomenon Kirsch credits

with the University’s fundraising success: the power of campaigns themselves. “Throughout higher education, we’ve recognized that a focused fundraising effort is a powerful way for an institution to communicate its ambitions and engage alumni and friends as partners,” says Kirsch. “A campaign isn’t just about raising money—it’s about raising awareness and envisioning what might be possible, too. After the For the Future campaign, our donors know more than ever about Penn State’s potential for leadership, and through their gifts, they’re challenging us to live up to that potential.”

Campaigns are also the means to “growing the family,” says Kirsch. In fiscal year 1985, as the University’s first major fundraising campaign began, 68,740 donors gave a total of $33 million. In fiscal year 2014, as the For the Future campaign came to an end, approximately 192,000 donors gave a total of $342 million.

Kirsch says, “Over three decades and three campaigns, Penn Staters have formed a culture of philanthropy and a community of support that are the envy of many institutions and that will be a source of strength for us far into the future.”

R O DN E Y P. K IR S C H ‘14h

SENIOR VICE PRESIDENT FOR DEVELOPMENT AND ALUMNI RELATIONS

And in Penn State’s next campaign, too. Planning is now underway for a new fundraising effort that will take its objectives from the institutional imperatives outlined by President Barron and the University’s emerging strategic plan.“We’re still in very early discussions about what a new campaign might look like and where it might take us,” says Kirsch. “What we do know, though, is that Penn State will be even stronger at the end of it.”

The rousing wrap-up of For the Future: The Campaign for Penn State Students (above) and the WE ARE sculpture, a gift from the Class of 2013 (below)

“We can’t hit the pause button…”

When Martha Jordan talks about philanthropy as “the margin of excellence,” her message is both personal and institutional. Scholarships allowed Jordan to earn her own degree from the Smeal College of Business and go on to a successful legal career. “It’s a life I couldn’t have imagined when I was growing up in Erie, Pennsylvania,” says the retired managing partner of Latham & Watkins LLP. Now, as Penn State’s lead fundraising volunteer, Jordan believes that private giving can inspire the University to imagine new possibilities for itself, too.

“Penn State’s history is a story of broadening horizons,” she says. “We started small, became renowned within the Common8

wealth, and then stepped onto the national stage as a model of what public higher education could be. Now we’re considered one of the top fifty universities in the world. This is the era when we must fulfill our potential as a global institution—not because we’re ambitious for the University’s reputation, but because we’re ambitious for our students and faculty. If we support them, they’ll create not just a better Penn State, but a better world.”

Jordan took the helm of the Penn State Advisory Council on Philanthropy when it was formed after the conclusion of the For the Future campaign last year, and the volunteer group is working to build upon the momentum of that effort’s success. “We can’t hit

the pause button on the excitement of students or the ideas of our faculty, and we can’t hit the pause button on fundraising, either,” she says. “Our job is to get the word out to our fellow alumni and supporters that if we want the University to be a vital force in the world, if we want even more reasons to be proud Penn Staters, we need to keep giving.”

Jordan is a donor and leader for many organizations, but she committed to her current Penn State role because of the impact that can be achieved through philanthropy to the University. “Among all the charitable institutions I’ve known, Penn State is the best at making sure that gifts are used as the donors intend,” she says.

“That’s especially important as

M A RT HA B AR N HART J O R DAN ‘76 VOLUNTEER CHAIR, PENN STATE ADVISORY COUNCIL ON PHILANTHROPY

we look toward more interdisciplinary approaches to excellence.

The University has the capacity to address complex challenges and manage complex initiatives while ensuring that supporters see results from their gifts.”

Jordan sees opportunities for this kind of investment across the University, from hands-on learning to the Invent Penn State initiative, which will create new bridges between the institution and industry. “Do you want Penn State students to bring clean water to Africa? That’s happening now, and you can support it,” she says. “Do you want our faculty to work together and solve big problems in energy, in agriculture? Your gift can break down academic walls and connect

Penn State with communities around the world. As we move forward, philanthropy might look different than in the past, but it

will play the same role in helping Penn State to lead the way.”

Penn State students at THON (opposite) and in the field overseas (above) 9

DAV ID J . GR AY ’7 7 , ’7 9g SENIOR VICE PRESIDENT FOR BUSINESS & FINANCE/TREASURER

“We wouldn’t be the institution we are today...”

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A lot has changed since David Gray was a Penn State student in the 1970s—not just music and fashion, but the economics of public higher education, too.

Back then, state appropriations covered most of the academic expenses at institutions like Penn State. Today, approximately 5 percent of the University’s operating budget comes from Pennsylvania government sources.

years ago,” says Gray, the University’s top financial officer. “Yet even as the state has gradually reduced its support, the University has increased the quality and relevance of our offerings, kept our programs accessible, and risen in global rankings. How has that been possible? It’s safe to say that without philanthropy, we wouldn’t be the institution we are today.”

“During the last fiscal year, we received exactly the same amount from the Commonwealth, about $290 million, that we received in fiscal year 1997, nearly twenty

As declining appropriations have shifted the burden of educational costs to students and families, private gifts have allowed the University to ease that burden,

according to Gray. “No student should assume that they can’t afford Penn State,” he says.

“Both donors and the University itself have made extraordinary commitments to scholarships. At the same time, support for faculty and programs has allowed us to pursue excellence while keeping tuition increases as low as possible. Maintaining access and affordability, in part through private gifts, will continue to be a top priority for the University in the future.”

Philanthropy’s impact is visible on Penn State’s campuses in the

form of facilities that wouldn’t exist without private support: the new Penn State Hershey Children’s Hospital building, Pegula Ice Arena, and the Pullo Center at Penn State York, among many others. Alumni and friends of the University have also offered a form of financial strength that will endure even beyond bricks and mortar. Gray says, “All support is vital and valued, but endowments—scholarships, professorships, program funds—carry a donor’s vision forward. By virtue of their permanence, these gifts allow Penn State to plan for a future in which other support may fluctuate.”

That’s why Gray and his colleagues on the Penn State

Investment Council, which he chairs, take their stewardship of the University’s endowed funds so seriously. The council’s membership includes Penn State alumni and other Wall Street professionals with the expertise to manage philanthropic assets for long-term stability and growth. The group’s investment performance has been superb: In the last fiscal year, returns on the University’s endowed funds placed in the top quartile compared to peer institutions, whether measured over one, three, five, or ten years. That’s a level of investment success that Gray and his colleagues are committed to maintaining.

“The role of philanthropy will

only increase as time goes on,” he says. “We don’t envision any long-term reversal of the declining state support trend, and that makes it all the more important to manage carefully the gifts we

receive and to continue engaging our alumni and friends in supporting the University’s excellence and keeping a Penn State education affordable.”

The William A. Schreyer Courtyard at University Park (top) and the Pullo Center at Penn State York (above) 11

“Private gifts can drive prosperity...”

Good neighbors, industry partners, gateways to educational opportunity: Penn State’s campuses play many roles in the life of the Commonwealth and the lives of students and citizens.

“The Commonwealth Campuses have always been stewards of Penn State in meeting the needs of the regions they serve,” says Madlyn Hanes. “Today they are still the largest access point for the University—60 percent of all Penn State students begin their education at our campuses, and an increasing number choose to finish their degrees there.

Our campuses advance the University’s land-grant mission of affordable access. They are also full partners with local communities to enhance economic growth. Philanthropy enables us to achieve these goals.”

Over the course of her career at the University—she served as a top leader at three campuses before assuming her present role—Hanes has helped citizens across Pennsylvania to recognize the value of the University’s presence in their region, and she has seen that impact grow through the gifts and volunteer leadership of local alumni and community members. Now,

charged with oversight of twenty Penn State campuses serving 31,500 students, Hanes believes that past successes are a good indicator of the vast potential for philanthropy’s impact.

“Throughout the Commonwealth, we have wonderful entrepreneurship programs made possible through philanthropic investment, including the Sheetz Center for Entrepreneurial Excellence at Penn State Altoona, the Graham Center for Entrepreneurial Leadership at Penn State York, the Center for Signal Integrity at Penn State Harrisburg, and the Ignite Erie initiative at Penn State Behrend,” she says. “Other private gifts help the campuses to drive economic prosperity for their regions as well. For example, enhancements to academic programs and laboratories— guided by industry input and support—encourage innovation by students and faculty and advance research collaboration with local businesses.”

otherwise be able to choose Penn State. “Nearly 90 percent of Commonwealth Campus students are from Pennsylvania, and almost 40 percent are the first in their families to attend college,” Hanes says. “Scholarships are critical. Scholarship support preserves the University’s tradition of affordable access by providing students the opportunity to study at Penn State, graduate on schedule and start their careers.”

Hanes also sees philanthropy as essential to fulfilling the Penn State commitment to assist students in reaching their greatest potential in a setting that supports their personal and academic growth. Private gifts have funded physical improve-

ments, from wellness centers to student unions, and supported co-curricular activities that enrich students’ Penn State experience.

“Hands-on, timely, and global learning has become the hallmark of a Penn State education.

Private support for study abroad, internships, entrepreneurial engagement, service learning, and other valuable—often transformative—experiences can profoundly enhance our students’ world view,” Hanes says. “The Commonwealth Campuses are an enduring success story, and philanthropy has placed extraordinary possibilities well within reach, enabling our students to realize their own personal success stories.”

As the Commonwealth Campuses develop their programs and facilities for a changing educational and economic landscape, scholarships can open the door for students who may not Two views of Penn State Altoona: on its campus (above) and in the community, at the Sheetz Center for Entrepreneurial Excellence (opposite)

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M A DLY N L . H A NE S

VICE PRESIDENT FOR COMMONWEALTH CAMPUSES

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“We wouldn’t exist without private support…”

It’s a conversation that has become a Penn State legend: Back in 1963, the Milton S. Hershey Foundation asked President Eric Walker how much it would cost to create a medical center for the people of central Pennsylvania— and then wrote the $50 million check. Through all the decades since, other supporters—grateful patients and families, community members and corporate partners, graduates of the medical college and other Penn State alumni—have been helping Penn State Hershey to grow into a leading academic medical center.

“We wouldn’t exist without private support, and so much of what defines us today, from the Penn State Hershey Children’s Hospital and Penn State Hershey Cancer Institute facilities to our patient-centered approach to

care, has been made possible by our donors,” says Dr. Craig Hillemeier. “As funding from other sources grows tighter and tighter, philanthropy will be essential for us to keep pace with the promise of medical science and the needs of the four million central Pennsylvanians we serve.”

Now, as medicine advances into a realm that would have seemed like science fiction back in 1963, private gifts are closing the gap between grant and government funding and the real cost of getting cutting-edge treatments to patients. Hillemeier points to philanthropic support that allows the pediatric oncology program to participate in trials for tumor drugs with life-saving potential for young patients. In the future, donors can speed the work taking place in the University Technology Center at Penn State Hershey, which will offer advanced data analysis and storage for research. The newly formed Institute for Personalized Medicine will draw upon genomic research to find the approaches to disease prevention, detection, and treatment that will be most effective for individual patients.

No matter how fast medical science progresses, though, patients won’t get the care they

Penn State College of Medicine students (above) and Penn State Hershey Children's Hospital (opposite) 14

need without the physicians to provide it. Hillemeier believes that our future health depends upon making medical education more affordable. “Scholarships will continue to be a top priority for Penn State College of Medicine,” he says. “An average debt burden of almost $200,000 for new graduates is driving away many talented students, especially those from socioeconomic backgrounds that are already underrepresented in medicine.

We have one of the most popular medical colleges in the country— one in every six prospective medical students applies here—so we have a special responsibility to keep our program affordable.”

Philanthropy will also help Penn State Hershey to fulfill its mission to serve the Commonwealth.

As one example of initiatives with broad reach and impact, Hillemeier hopes that donors will partner with the medical center in growing its telemedicine network, which uses advanced conferencing technology to link physicians and patients in emergency rooms across central Pennsylvania with specialists in Hershey. Hillemeier says, “Patients deserve the best care, no matter where they are, and philanthropy can help us to make sure they get it.”

A. CRAI G H I L L E M E I ER , M .D.

SENIOR VICE PRESIDENT FOR HEALTH AFFAIRS CEO, PENN STATE MILTON S. HERSHEY MEDICAL CENTER DEAN, PENN STATE COLLEGE OF MEDICINE

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“Our supporters can channel student energy and interest…”

Whether you call them Generation Y or Millennials, today’s college students are defining themselves with a different set of expectations and aspirations than earlier generations. “Over the last ten years, I’ve met more and more undergraduates who are driven by a real desire to be fully engaged all the time,” says Damon Sims. “They want to distinguish themselves not only in the classroom, but outside it, too, and private support can give them the opportunities they need.”

Sims, who spent more than twenty-five years in teaching and administrative roles at his alma mater, Indiana University, before taking on his Penn State position in 2008, believes that the shift in how students view the college

experience has been motivated in part by shared values. “This generation truly celebrates their diversity, and they want to work past differences and toward understanding,” he says. “They also have a genuine desire to do good in the world, starting now and starting with their own communities.”

Sims points to Project Cahir, funded and named in memory of Penn State graduate and U.S. Marine Bill Cahir, as an example of philanthropy’s ability to fuel student action. The group is committed to addressing the issue of poverty, beginning in Centre County. “It’s a program that never would have happened but for the seed planted by a private gift, and now it’s attracting other donors with its success,”

says Sims. “Our supporters can channel student energy and interest toward other issues, too, with gifts for this kind of handson volunteer program.”

Student engagement is also motivated by employer expectations, according to Sims.

“It’s not enough to have good grades—companies assume, when you graduate from a school of Penn State’s caliber, that you have the rudimentary tools and knowledge,” he says. “They want to know about your communication skills, your ability to work on a team, your sense of personal responsibility.” Philanthropy can support the organizations where students hone those abilities and qualities, and it can also give students the financial freedom, in the form of scholarship and

DA M O N SI M S VICE PRESIDENT FOR STUDENT AFFAIRS

awards, to take on leadership roles rather than working every spare minute to pay for their degrees.

tion. He says, “We want students to graduate with both the desire and the skills to thrive and to make a difference, and our supporters want that, too.”

A student educator at Shaver's Creek Environmental Center (below) and members of Project Cahir (bottom)

Balancing commitments inside and outside the classroom can be tough, and Sims hopes that in the future, alumni and friends will partner with the Division of Student Affairs to support the overall wellbeing of undergraduates. A private gift launched the recent “Show You Care” campaign, which raised awareness among students about Penn State Counseling and Psychological Services. Sims sees many other opportunities at the University— from the Stone Valley Recreation Area’s potential as a leadership training site to the need for life skills programs—where donors can enrich a Penn State educa-

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“We count on donors to make us strong…”

Penn State Intercollegiate Athletics may boast some of the finest state-of-the-art facilities in the country, but Sandy Barbour likes to talk about a homier kind of architecture when she’s discussing the role of sports at the University. “Our athletic program is really Penn State’s front porch,” she says.

“It’s what alumni and fans and the public see from outside the University, it’s a place to gather and celebrate, it’s a way in.

Sports can be the connection that keeps someone coming back to Penn State, and we have an opportunity, through 18

the achievements of our student-athletes, to represent Penn State excellence to the world.”

The ability of Penn State’s teams to fill that role depends upon private gifts, and Barbour wants supporters to understand how much their philanthropy is needed and valued. She says, “Not everyone is aware that Penn State Intercollegiate Athletics must be self-sustaining.

We depend upon ticket sales, corporate partnerships, media contracts, and post-season revenue—and upon philanthropy.

We count on donors to make us strong, and donors count on us to make them proud. The gifts of alumni and friends sends an inspiring message to our student-athletes that there’s a whole community behind them, believing that they can and will succeed.”

That message is communicated directly to students through scholarships. With more than 850 varsity athletes from a broad range of economic backgrounds, Penn State relies upon private support to help these young people focus on fulfilling their

potential on and off the field.

“I’ve had dozens of conversations with student-athletes who express deep gratitude to the donors who created their scholarships,” says Barbour. “They know that they couldn’t be having such an incredible Penn State experience, and getting such an incredible Penn State education, without that support.”

Through gifts to athletic facilities, donors also shape the Penn State experience of students who might never set foot in a locker room, but who will go on to be devoted alumni. “The

S AN D Y BA R B O UR ATHLETIC DIRECTOR

fondness of Penn Staters for this institution can grow out of the memories they make at Beaver Stadium or Pegula Ice Arena or Rec Hall or the Bryce Jordan Center, and none of those facilities would exist without philanthropy,” says Barbour. “And when students see our graduates coming back to campus, and our community members taking pride in Penn State sports, too, they understand that they’re part of something extraordinary.”

Sustaining that sense of shared pride and purpose is one of the goals that Barbour wants to

pursue in the years ahead, along with improving the academic performance, health, and welfare of athletes and enhancing the experiences of students, alumni, and fans. “As we take on the challenges that are facing intercollegiate sports today, Penn State can be a leader because we’ve got a whole community behind us,” says Barbour. “They support us in spirit as well as in resources, and they give us the passion to do what we do.”

Pegula Ice Arena (opposite) and Penn State’s championship women’s volleyball team (above) 19

LEE BEA R D ’ 99h

CHAIR, VOLUNTEER ENGAGEMENT TASK FORCE

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“A lifetime of giving back…”

Lee Beard’s “Penn State education” began in 1993—and although she was named an honorary alumna in 1999, she feels that she’s far from graduation. “I began learning about the University when my husband and I moved to Hazleton, Pennsylvania, from the Washington, D.C. area,” says Beard, a University of South Carolina graduate and the retired president and CEO of First Federal Bank in Hazleton. “We saw the impact of Penn State in our new community, and we wanted to be a part of that. Even now, after more than twenty years of volunteering on behalf of the University, I am still seeing new ways that Penn State can make a difference, and that keeps me motivated to give back.”

Beard, who served as vice cochair of the For the Future campaign, has spent the last year and a half leading an effort to understand what motivates other Penn State fundraising volunteers—at last estimate, more than 600 across the University.

With her fellow members of the Penn State Volunteer Engagement Task Force, she has been evaluating best practices to ensure that both the University and volunteers get the most out of their service and support.

“Volunteers at Penn State aren’t figureheads—we’re asked to do

real work, and we perform real functions for the University,” says Beard. “In planning processes, we can ask challenging questions from an ‘outside’ perspective and help Penn State to make the best decisions for its future. At the same time, we are ambassadors for the University, and we can highlight the positive role that Penn State plays in our communities. Much of that role depends upon philanthropy, and through our voices and our own support, we can show the connection between gifts to the University and impact in the community.”

ommendations of the Volunteer Engagement Task Force will help alumni and friends to find even more meaning in their service.

“Volunteers offer us the gifts of their time and talent, and we must steward those gifts as carefully as any others,” says Beard.

“I hope that in the future, even more alumni and friends will consider volunteer leadership a core part of their experience as Penn Staters.”

The Penn State Hazleton campus (opposite) and a meeting of the Penn State Alumni Association Alumni Council in the Hintz Family Alumni Center at University Park (below)

Volunteers also create a model and a culture for future generations of Penn Staters—and vice versa. “More than ever, students are aware that their Penn State experience doesn’t have to end when they leave campus,” says Beard. “Through participation in THON, many undergraduates get their first taste of how meaningful and rewarding it can be to serve something larger than themselves. Those of us who volunteer for the University can take inspiration from the example of our students, and we can challenge ourselves and them to a lifetime of giving back.”

As the importance of philanthropy grows at Penn State, so will the importance of volunteers, and Beard hopes that the rec-

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PH ILANTH R O PY AWA R DS

Philanthropist of the Year 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.

In 1956, John Leone graduated from Penn State with a bachelor’s degree in petroleum and natural gas engineering. Nearly sixty years later, he returns often to meet the students and faculty who benefit from his far-reaching philanthropy, which is enabling a new generation of Penn Staters to discover their own paths toward success.

Together with his wife, Willie Leone, who passed away in 2013, John has given generously to a range of areas across the University. In 2010, the couple endowed Penn State’s Depart-

ment of Energy and Mineral Engineering with a gift of $5 million, the largest individual gift in the history of the College of Earth and Mineral Sciences.

The faculty chair, undergraduate scholarships, and graduate fellowships they created are allowing Penn State to pioneer twenty-first century solutions in a traditional area of strength.

This support reflects John’s passions and interests as president and CEO of Bonney Forge, a company he has transformed into an international leader in steel and specialty engi-

A performance by Penn State’s Musical Theatre students

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neered products for the energy industries. The Leones are also longtime fans and supporters of Penn State Intercollegiate Athletics. In 2014, John made a $1.5 million commitment to name the John and Willie Leone Family Strength and Conditioning Center in the Lasch Football Building, providing Penn State student-athletes with the resources they need to compete at the highest levels.

In the College of Arts and Architecture, the Willie Leone Endowed Scholarship Fund in Music Theatre is allowing students who share Willie’s love and talent for dance to pursue their own passion for the performing arts. A Penn State Alumni Fellow, Earth and Mineral Sciences Centennial Fellow, and recipient of the Stahl Distinguished Achievement Award in Petroleum and Natural Gas Engineering, John is not only one of Penn State’s most accomplished alumni, but also one of its most loyal and dedicated supporters.

Corporate Partner of the Year This award recognizes a corporation that has demonstrated extraordinary generosity in promotion 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.

PPG Industries shares with Penn State a commitment to excellence and innovation, as well as a vision that is global in scope but local in impact. PPG is a worldwide leader in producing coatings and specialty materials for many of the devices, vehicles, and buildings that make up our high-tech society.

Though it maintains facilities in more than seventy countries, PPG remains a Pennsylvania company at its core: With its headquarters in Pittsburgh and five research and production facilities in the state, PPG stands alongside Penn State as a major contributor to the Commonwealth’s economy, and it has both supported and benefitted from the University’s expertise in materials research over many years. PPG continues to sponsor research projects and, through its philanthropic foundation, gives generously to educational initiatives at Penn State, such as an innovative annual fellowship program coordinated through the Mate-

rials Research Institute. In this ten-week program, undergraduate students participate in materials-related research under faculty guidance and take part in professional training and STEM outreach activities.

PPG has been very pleased with the program’s success and continues to be a strong and active supporter. PPG is also a long-standing member of the Center for Supply Chain Research, the Institute for the Study of Business Markets, the Smeal College of Business Cor-

porate Associate Program, and the IST Corporate Associates Program. With more than 200 of our alumni on its workforce, PPG knows the value of a Penn State education, and it maintains an active recruiting presence at the University. Because cutting-edge materials are indispensable to technology development, and both organizations are leaders in materials innovation, the Penn State-PPG partnership promises to remain vibrant far into the future.

The Materials Research Institute at Innovation Park

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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.

so that they maintain their value in real, inflation-adjusted terms over time. The University’s Board of Trustees 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 maintained in the face of economic fluctuations.

The Long-Term Investment Pool (LTIP) is Penn State’s investment portfolio into which endowed funds (Endowment Pool) established at the University are invested. This commingled 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. As with a mutual fund, the value of each unit at the time funds are invested in the pool determines how many units an individual fund acquires.

Basic Endowment Management Principles 1. Provide sufficient current and future income to meet the University’s spending objectives and enhance its mission.

2. Focus on long-term performance.

3. Accept a reasonable and prudent level of risk while maximizing “total” return.

4. Diversify investments to reduce risk.

Penn State strives to be a good steward of its endowed gifts and follows a prudent management philosophy in investing these gifts

GIFTS TO ENDOWMENT

(FISCAL YEAR ENDING JUNE 30)

136.3

130.3

92.2 76.2

70.2

51.4

’06

55.2

’07

in millions of dollars

24

61.2

’08

’09

73.9

62.5

’10

’11

’12

’13

’14

’15

ENDOWMENT ASSET MIX

The Penn State endowment portfolio is broadly diversified, with 16 percent in fixed income assets as of June 30, 2015; 52 percent in public equities (both U.S. and non-U.S.); and 21 percent in a variety of other (alternative) investments including real estate, private capital, venture capital, and energy. In addition, 3 percent is invested in commodities, while 8 percent is invested in diversifying assets.

Approximately half 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.

8% 3%

16%

52%

In the year ending June 30, 2015, global equity markets diverged, as US equities outpaced non-US Indexes, with the S&P 500 gaining 7.4 percent and the MSCI All Country World Index ex-US returning -5.3 percent. Fixed income markets posted an overall return of 1.9 percent.

n Public Equity n Private Capital n Fixed Income n Commodities n Diversifying

21%

11.5

8.6 7.8

3.1

1-year

5-year

10-year

20-year

Long-Term Investment Performance of Endowment Penn State’s endowment earned an investment return of 3.1 percent for the fiscal year ending June 30, 2015, excluding the impact of new gifts and spending. While stock market returns often fluctuate from year to year, the endowment’s well-diversified portfolio can weather short-term fluctuations and generate positive returns over long periods of time. Net of all fees, the Penn State endowment has averaged 7.8 percent per year over the last ten years, and 8.6 percent over the last twenty years, allowing the endowment to maintain steady, inflation-adjusted spending and to achieve long-term intergenerational equity.

AVERAGE ANNUALIZED TOTAL RETURNS

FISCAL YEAR ENDING JUNE 30, 2015 (NET OF FEES)

Total returns include interest, dividends, and market appreciation.

25

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

$115.9 million in assets that are not directly invested in the LongTerm Investment Pool.

The University provides 4.5 percent of the pooled endowment’s fiveyear average market value for spending on scholarships and educational programs. The University’s spending policy of using rolling fiveyear 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. This provides generous current spending while preserving future purchasing power, which is known as “intergenerational equity.”

As of the end of fiscal 2015, endowment and similar funds were valued at $2.49 billion, of which $2.38 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

For the fiscal year ending June 30, 2015, the endowment increased $91 million, and has increased a cumulative $1.769 billion over the last five years. Over this same period, the endowment has provided $368 million of program support, including $84 million in fiscal fiscal 2015. These amounts reflect the impact of investment returns and generous giving, net of consistent support for scholarships and University programs.

For fiscal year 2015, the endowment’s investment return was 3.1 percent and has averaged 11.5 percent per year over the last five years. In the longer term, Penn State’s endowment has averaged 8.6 percent per year, net of gifts and expenses, since June 30, 1995.

These results demonstrate long-term growth across various financial markets’ ups and downs. Penn State’s diversified approach has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflationadjusted growth for future generations.

MARKET VALUE OF PENN STATE’S ENDOWMENTS AND SIMILAR FUNDS (FISCAL YEAR ENDING JUNE 30) Total Value

Endowment Similar Pool Funds

2006

$1,280

$110

$ 1,390

2007 1,537 132 1,669 2008 1,488 128 1,616 2009 1,184

97 1,281 2010 1,341

98 1,439 2011 1,708 123 1,831 2012 1,765

90 1,855 2013 1,933

96 2,029 2014 2,285 114 2,399 2015

2,376 116 2,492 in millions of dollars

n Endowment Pool

n Similar Funds

The University now reports results for both endowed and similar funds and non-endowed funds as commingled assets of the Long-Term Investment Pool (LTIP). The non-endowed funds, formerly invested in Penn State’s operating pool of fixed-income securities, have been commingled with endowed funds to strategically fund the University’s liability covering post-retirement health care benefits for Penn State retirees. Additional income realized from the transfer to the LTIP relieves the University’s operating budget of this ongoing obligation. Penn State’s accounting practices follow the guidelines of the Financial Accounting Standards Board.

26

PENN STATE INVESTMENT COUNCIL Penn State’s Board of Trustees created the Investment Council in response to the University’s increasing asset base and complex investment strategies. The council provides direct oversight of the endowment and long-term investment program, and regularly reviews asset allocation, new asset classes, investment strategies, and manager performance.

COUNCIL MEMBERS for Fiscal Year 2015 David J. Gray, Chair Senior Vice President for Finance and Business/Treasurer The Pennsylvania State University David E. Branigan Chief Executive Officer, Office of Investment Management The Pennsylvania State University

Edward R. Hintz Jr. President Hintz Capital Management Inc.

Blake Gall Founder and President MicroPlusPlus Investment Management

Joseph B. Markovich Managing Director J.P. Morgan Private Bank

Carmen Gigliotti Managing Director (retired) DuPont Capital Management

Colleen Ostrowski Senior Vice President and Treasurer Mylan

Gary A. Glynn President and Chief Investment Officer (retired) US Steel & Carnegie Pension Fund

J. David Rogers Chief Executive Officer J.D. Capital Management, LLC

27

UNI VE R SIT Y BUD G ET S U M M A R I E S

.5% 4.6% 6.0% 34.5% 8.6%

INCOME

(FISCAL YEAR ENDING JUNE 30, 2015) dollars in thousands

n Tuition and fees n Medical Center/Clinic* n Restricted funds n Auxiliary enterprises n State appropriation n Philanthropy and other n Agriculture (federal) Total

13.8%

Agriculture

Agriculture

$1,599,550 1,487,979 640,975 398,355 277,931 212,165 21,838 $4,638,793

*Includes state and federal medical assistance funds, provided by the Pennsylvania Dept. of Public Welfare

Philanthropy and other

32.0%

Philanthropy and other

State appropriation

State appropriation

1.2% 2.4% 2.8%

Auxiliary enterprises

Auxiliary enterprises

2.5% 31.9%

4.8%

Restricted Funds

Restricted Funds EXPENDITURE (FISCAL YEAR ENDING JUNE 30, 2015) hospital clinic dollars in thousands

8.5%

8.6%

8.9% 17.1% 11.3%

n Medical Center/Clinic clinic $1,487,979 hospital n Instruction 791,462 tuition & fees n Research 522,445 n Academic support 414,276 tuition & fees n Auxiliary enterprise 398,355 n Institutional support 392,664 n Physical plant 224,636 n Student service 128,784 n Public service 114,196 Student Aid n Pennsylvania College of Technology

109,584 Student Aid n Student aid 54,412 Total $4,638,793 Pennsylvania College of Technology

Pennsylvania College of Technology

Public Service 28

Public Service Student services

10%

SOURCES OF GIFTS RECEIVED 2014–15 Where the $226 million came from

12%

Sources

50%

28%

n Individuals

Alumni

Friends n Corporations

Organizations n Foundations Organizations n Organizations

Foundations Total

Foundations

Amounts

Number of donors

$112,208,512 78,499,815

33,708,697 63,562,600 26,499,312

23,727,681

$ 225,998,105

176,220 71,440 104,780 6,064 473 1,086 183,843

Corporations

Corporations Indivuals

Indivuals

.5% .3% .02%

1.8% 4.9%

2.0%

13.2% 31.0%

DESIGNATED PURPOSES OF GIFTS RECEIVED 2014–15 Where the $226 million went n Other purposes*

n Student aid n Property, buildings, equipment n Research n Faculty resources n Academic divisions n Public services and extension n Unrestricted University-wide n Library resources n Physical plant maintenance Total

$ 70,154,823

61,399,422 43,162,459 29,800,296 10,996,944 4,692,882 4,142,167 1,023,787 582,484 42,841 $225,998,105

Physical plant maintenance

19.1%

Physical plant maintenance

27.2%

library

library

unrestricted

unrestricted

Public svc & ext

*This category includes gifts to the Children’s Miracle Network, THON, multipurpose funds, and gifts awaiting designation by donors.

Public svc & ext

Academic Div

Academic Div

29

GROWTH IN PRIVATE SUPPORT AND DONOR BASE

274.8

271.1 237.8

190.3 165.2

226.0

208.7

203.4 181.5 182.1

Gift receipts ’06

’07

’08

’09

’10

’11

’12

’13

’14

’15

in millions of dollars

353.3 284.7

277.5

342.5

265.2 273.8

263.6 223.7

’06

195.1

173.0

173.0

’07

’08

’09

’10

’11

’12

’13

’14

’15

New commitments

in millions of dollars

191,712 185,183

193,393 190,502 183,843

183,712

181,918

143,517 163,111 132,791

’06

30

’07

’08

’09

’10

’11

’12

’13

’14

’15

Number of donors

GIFTS DESIGNATED TO SPECIFIC UNITS 2014–15 Unit

Amount

Unit

Amount

Abington

$262,766

Information Sciences & Technology

Agricultural Sciences

9,150,665

Intercollegiate Athletics

28,323,355

Altoona

4,105,601

Lehigh Valley

242,951

Arts & Architecture

3,868,238

Liberal Arts

10,887,461

348,172

Mont Alto

301,826

11,626,095

New Kensington

353,002

Nursing

992,099

Beaver Behrend Berks

1,519,283

4,882,986

Brandywine

365,098

Outreach

Communications

781,835

Penn State Law 16,331

Dickinson School of Law

1,007,098

DuBois

850,125

4,072,056

Research & Graduate School

3,104,809

Schreyer Honors College

1,593,759

Earth & Mineral Sciences

17,939,438

Schuylkill

473,888

Eberly College of Science

13,732,356

Shenango

264,993

Education

1,299,047

Smeal College of Business

8,760,774

Educational Equity

1,836,887

Student Affairs

1,182,363

Undergraduate Education

4,668,168

Engineering

23,746,713

Fayette, The Eberly Campus

155,887

University Libraries

2,661,993

Great Valley

98,422

University-wide

6,773,146

151,570

Wilkes-Barre

456,426

1,594,234

Worthington Scranton

496,458

454,118

York

479,694

Greater Allegheny Harrisburg Hazleton Health & Human Development

13,776,874

Hershey

TOTAL

$36,339,344

$225,998,105

COMMITMENT GROWTH OVER THREE CAMPAIGNS Campaign for Penn State 207%

For the Future 96%

A Grand Destiny 105%

$342M

$173M

$84M

$84M

’90

’96

$175M

Percentage increases (in commitments) achieved over the course of major fundraising efforts

$27M

’84

’03

’06

’14

31

PENN STATE ADVISORY COUNCIL ON PHILANTHROPY

Martha B. Jordan ’76 Bus, Chair

John M. Arnold ’87g Bus

Richard J. Barry ’80 Lib

E. Lee Beard ’99h

Bryon G. Deysher ’77 Bus

Robert E. Fenza ’80 A&A, Vice Chair

Elizabeth A. Fetter ’80 Com

Not pictured: J. Roger Moyer Jr. ’70 Bus William A. Jaffe ‘60 Com 32

Richard S. Sokolov ’71 Lib

Ex Officio Members

James S. Broadhurst ’65 Lib

Richard K. Dandrea ’77 Lib

Eric J. Barron President, The Pennsylvania State University

David J. Gray Senior Vice President for Finance and Business/Treasurer, The Pennsylvania State University

Robert E. Poole ’72 Bus

Thomas J. Sharbaugh ’73 Bus

Nicholas P. Jones Executive Vice President and Provost, The Pennsylvania State University

Rodney P. Kirsch Senior Vice President for Development and Alumni Relations, The Pennsylvania State University

Richard K. Struthers ’77 Bus

Peter G. Tombros ’64, ’68g Ag

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

rpk6@psu.edu

Photos in this report were provided by: John Baranoski Antonella Crescimbeni Mark Golaszewski Tina Hay Avnish Katoch April Scimio

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