The President’s Report on Philanthropy and Endowments
20 07–20 08
Penn State’s goal is to become the nation’s most comprehensive, student-centered research university.
Your support will help to make a Penn State education possible for thousands of men and women.
A Message from President Spanier
The extraordinary generosity shown to
Penn State for the year ending June 30, 2008, will benefit students, faculty, and staff for many years to come. On the pages that follow, you will learn more about the scope and impact of private giving. Let’s start with a few of the year ’s highlights. The University received gifts from 74,166 alumni, an all-time high that reflects a broad base of support for the capital campaign, For the Future: The Campaign for Penn State Students. The total number of alumni donors represents a 3 percent increase from the previous year, a remarkable achievement at a time when the number of alumni making gifts to their alma maters nationally is flat or in decline. Giving overall totaled $181.5 million, second only to the previous year’s $190.3 million as the highest philanthropic total in Penn State’s history. These numbers represent actual gifts received and exclude pledges. The number of gifts received— 281,155—also set a record. Many of these gifts came from first-time donors, who typically go on to become long-term benefactors. This trend points to a promising future for Penn State.
Endowments created through the Trustee Matching Scholarship Program, which aims to keep a Penn State education accessible to all qualified students, regardless of their financial means, passed the $50 million mark. In creating this important initiative, the Board of Trustees agreed to match 5 percent of the principal of each gift annually with University funds, and combine these matching funds with income from the endowment to effectively double the financial impact of the scholarship. More than 4,600 students benefited from Trustee Scholarships in 2007–08.
I would also call your attention to the performance of the University’s endowment and similar funds. The Penn State Investment Council maintained a disciplined approach to asset allocation during a year when the market environment was especially volatile. Please see pages 21–24 for a summary of how our endowment fared. I can assure you that the Investment Council will continue to act with prudence and care in its role as fiscal steward of endowed gifts. Because endowments are sources of funds that students and faculty can count on year after year, they play an especially critical role in Penn State’s ability to offer scholarships, graduate fellowships, faculty chairs and professorships, and the like. For those of you who have created endowments at the University, a back pocket in this report contains more detailed information about your investment in our students and faculty. June 30, 2008, marked eighteen months since the beginning of the For the Future campaign. My sincerest thanks go to Peter Tombros, who has done an extraordinary job as volunteer campaign chair, and to the remarkable team of Penn State alumni and friends that he has recruited to provide additional volunteer leadership. Please read Peter’s letter on page 3 to learn more about how the philanthropic events of 2007–08 have given the campaign powerful momentum in its initial phase. A Penn State education is a unique experience that challenges the mind, invigorates the spirit, and leaves an indelible imprint on alumni. Your support will help to make that experience possible for thousands of men and women, whether directly or indirectly. Thank you for your commitment to our University.
G r a h a m B. S pa n i e r , President T h e P e n n s y lva n i a S tat e U n i v e r s i t y
2007–2008
1
President’s Report on Philanthropy and endowments
Our vision is to affirm Penn State as the most comprehensive student-centered research university in America.
A Message from the Campaign Chair
I am deeply grateful to the many alumni and friends who invested in Penn State students and faculty in fiscal 2007–08, and in For the Future: The Campaign for Penn State Students. Over these past twelve months we have experienced great success in communicating the campaign’s vision: to affirm Penn State’s position as America’s most comprehensive student-centered research university. The enthusiasm with which Penn Staters have greeted the campaign— even though it is still in its leadership gifts phase and is not scheduled for a public launch until 2010—is a source of tremendous inspiration to me. I believe the campaign has resonated with donors because of the broad appeal of its six individual objectives: Ensuring student opportunity; Enhancing honors education; Enriching the student experience; Building faculty strength and capacity; Fostering discovery and creativity; Sustaining a tradition of quality.
You will find these objectives further defined in this report, and brought to life by personal examples of Penn Staters who chose to create endowments that support each of these six areas. As President Spanier has noted in his message, a record number of alumni made gifts in 2007–08. I am pleased to report that, with alumni leading the way, Penn State has successfully engaged strong support from all of our traditional constituent groups, as shown on page 14. When we go beyond the past fiscal year to include the eighteen months that have elapsed since the campaign began on January 1, 2007, we find these groups have given or pledged a total of $490 million toward the six objectives. As proud as all Penn Staters should be with these results, we must remember that the campaign still has a long way to go. Our nation and our University are certain to face economic challenges, yet I remain optimistic about the future. Broadly speaking, Americans’ generosity toward education has proved to be quite resilient, even in a recessionary climate. In only four of the last forty years has total philanthropy to education declined from the previous year. In addition, I know that Penn Staters realize the need for student support is never more critical than during a downward economic cycle. Privately funded scholarships can make an enormous difference to countless students at such times. I look forward to your continuing support, and together we will successfully meet any and all challenges. Thank you.
P e t e r G. T o m b r o s , Chair For the Future: The Campaign for Penn State Students
2007–2008
3
“As a single parent, I was terrified at the thought of going back to school to earn a degree because I have so many financial responsibilities at home. Scholarship money has lessened the burden of acquiring a college degree by giving me more time to study and more time to spend with my son.” —Nicole Gorke, scholarship recipient and Nursing student at Penn State Worthington Scranton
Ensuring Student Opportunity 6 Enhancing Honors Education
7
Enriching the Student Experience
8
Building Faculty Strength and Capacity
9
Fostering Discovery and Creativity
10
Sustaining a Tradition of Quality
11
“Being on the receiving end of a scholarship is humbling. I try to ‘repay’ the honor by doing my best athletically and academically. I feel so proud when I’m wearing that Penn State jersey.”—Kiersten Wood, scholarship recipient, Human Development and Family Studies major, and member of the Penn State field hockey team
Ensuring Student Opportunity
Private support for endowed scholarships and similar awards helps to keep a Penn State education within the financial reach of all students who have the ambition and ability to attend the University. There is a critical need for such support. Undergraduates who take out loans to help finance their Penn State education are graduating with an average debt of nearly $24,000—and that figure is rising each year. Robert and Catherine Quinnan of Dunmore, Pennsylvania, have taken a leadership role in increasing the financial resources available to students. They endowed the James P. and Catherine M. Gilligan Memorial Scholarship to benefit undergraduates enrolled at Penn State Worthington Scranton. The endowment, which assists those who have financial need and superior academic records, honors the memory of Catherine Quinnan’s parents, both of whom were employed by the Dunmore School District. Robert Quinnan is a graduate of the University of Detroit and chairs the Penn State Worthington Scranton advisory board. Catherine Quinnan received her undergraduate and graduate degrees from Marywood University in Scranton.
“We’ve been impressed by the ways that the Worthington Scranton campus helps its students who have financial need. When I attended Marywood, I did so with scholarship assistance. I was grateful for that help, and I’m now very grateful to give back what I received.” — C at h e r i n e Q u i nn a n
“Penn State Worthington Scranton is very similar to the type of universities Cathie and I each attended in that there are many first-generation students enrolled. The scholarship enabled us to aid those students and contribute to the economic development of northeastern Pennsylvania.” — R o b e r t Q u i nn a n
President’s Report on Philanthropy and endowments
Enhancing Honors Education
The Schreyer Honors College, which owes its creation in 1997 to a visionary endowed gift, is one of Penn State’s keystone academic programs, attracting undergraduates of exceptional ability from around the nation and abroad. Rich and Ann Marie Whitney of Manhattan Beach, California, know that in order to compete successfully for the very best students, the Schreyer Honors College needs additional private support. Rich himself was an honors student, graduating from Penn State in 1989 as a University Scholar in the Smeal College of Business. He now heads his own private equity investment firm. The Whitneys created the Rich and Ann Marie Whitney Trustee Scholarship to benefit honors students. Trustee Scholarships, designed to keep a Penn State education accessible to all qualified students regardless
of their financial means, have a unique matching component: The University matches 5 percent of the principal of each gift annually and combines these funds with income from the endowment to effectively double the financial impact of the scholarship.
“We view our gift as an investment in the future of exceptionally talented young men and women. For many, without some form of assistance, the cost of a Penn State education would be prohibitive or impose a very significant burden on their family. For each, their engagement with the honors college will put them on a path that offers the opportunity to impact the future of Penn State, their chosen professions, their communities, and quite possibly the world.” — R i c h a n d Ann M a r i e W h i t n e y
Fac ing Page To p: Meli ss a Cardone i s a 2007–08 re ci pient o f the Gilligan Me morial S c holar s hip. Fac ing Page Botto m: R ob ert and Catherine Q uinnan
2007–2008
Top right: R ich and A nn Marie Whit n e y Top le ft: Ryan Wood is a re cipient of the Rich and A nn Marie Whitney Tr us tee Sc holar ship.
7
Enriching the Student Experience
Students can reach their fullest potential for academic achievement and personal growth when they have opportunities for community service, creative expression, global involvement, and similar experiences that enrich their education. The Raymond A. Bowers Program for Excellence in Design and Construction of the Built Environment provides such enrichment for students in the Departments of Architectural Engineering, Architecture, and Landscape Architecture. Raymond Bowers, a 1931 Penn State graduate in Architectural Engineering, had a wealth of practical experience as head of Lewis C. Bowers & Sons, a leading New Jersey-based building design and construction firm. Years before he passed away, he used gift planning to establish the endowment that today bears his name in order to help students better prepare to become leaders in the design and construction industry. The endowment supports interdisciplinary programming and projects, and exposes students to best professional practices within the industry. Income from the Bowers endowment supported design and construction of MorningStar, a house built by the Penn State Solar Decathlon Team. MorningStar won fourth place in the Department of Energy’s 2007 Solar Decathlon. A team of students and faculty took two years to build an entirely solar-powered home to be entered into the international competition. The house will now be used as an educational tool at Penn State’s Center for Sustainability.
To p : C h i m ay J . An umb a, p ro f ess or and head o f t h e De pa rt m e n t of Ar c hite c tural Engineering, se rv e d as a d v is e r and m entor to the M o r n i n gs ta r t e a m. B o t t o m : Ray mo n d A. Bower s
8
President’s Report on Philanthropy and endowments
Building Faculty Strength and Capacity
A truly exceptional education is one that offers students opportunities to study with the finest teachers and researchers—scholars who have achieved preeminence in their fields and whose work can inspire similar achievements in their students. Endowed chairs and professorships enable Penn State to recruit and retain scientists, artists, engineers, and many other kinds of world-renowned scholars. Similarly, endowed graduate assistantships and fellowships enable the University to attract top-flight graduate students, who themselves are only a few years away from establishing distinguished careers in business and industry, public service, education, and many other fields.
Donald and Virginia Davis endowed the Don Davis Professorship in Ethics, in the College of Communications. Don Davis is a 1942 Penn State graduate in Journalism. The Davis Professor is Patrick Parsons, who coordinates an ethicsacross-the-curriculum program that encourages students and faculty to not only discuss ethical principles, but also live them.
“The whole impact of a professorship in ethics—not only the impact it would have on the College of Communications but how that impact would spread throughout the University—I just thought it would be a great idea.” — D o n D av i s
T op right: D on D avis T op left: Patri c k Pars on s, Don D av is Pro fess or in E thi cs , is a widely re c ognized a u thority on ma ss m e d i a ethi cs .
2007–2008
9
Fostering Discovery and Creativity
Penn State students and faculty thrive in an atmosphere of intellectual discovery. Pathways for discovery are especially diverse in an interdisciplinary environment, where traditional boundaries of learning are pushed aside in the quest for new knowledge and new solutions to old problems. Ultimately, such a commitment to innovation allows Penn State to better serve society. Philanthropy plays a critical role in encouraging and enabling interdisciplinary scholarship and creativity, as exemplified by the Nicholas and Gelsa Pelick Biotechnology Innovation Fund. The Pelick Fund provides seed grants to support short-term interdisciplinary research on high-risk and fundamentally new ideas in the life sciences, such as Melik Demirel’s investigations in biomaterials, polymers, nanofabrication, protein engineering, biosensors, and molecular modeling. Once they are up and running, the most promising research projects can then be positioned to receive long-term support from more traditional funding sources, such as public agencies and corporate foundations. Nicholas Pelick, who holds bachelor’s and master’s degrees from Penn State, is a retired co-founder of a research and development company.
“Dolly and I believe that this endowment is important to the life sciences at Penn State for the continuity of shortterm research of novel ideas to expansion to long-term research. This brings in much-needed outside funding to allow faculty to excel in the research of new ideas, and the opportunity to advance into new areas of biological and medical research.” — N i c h o l a s P e l i ck
10
Top: N ic hola s and Gel sa (“ Dolly”) Pelic k Bottom : Melik De mirel is a ss istant p rofess or of engineering sc ien c e and me chani cs .
President’s Report on Philanthropy and endowments
Sustaining a Tradition of Quality
Penn State Milton S. Hershey Medical Center has earned high marks in such diverse areas as patient care, operating efficiency, and specialized fields of research and treatment. Most recently, Penn State Hershey Children’s Hospital is listed in U.S. News & World Report’s 2008 edition of “America’s Best Children’s Hospitals.” But sustaining a tradition of quality requires continuous support. Penn State Hershey Medical Center aims to complete construction of a new children’s hospital by 2012 with the help of $65 million in philanthropy. The new facility gives high priority to a family-focused environment that affords more privacy for families and patients. In support of the new hospital, Edward and Jeanne Arnold of Lebanon, Pennsylvania, have created an endowment that provides seed money for the Hummingbird Program, a service that offers comprehensive medical, psychological, social, and spiritual support for children facing lifethreatening, complex medical conditions, and for their families. The Arnolds are vice chairs of the medical center campaign committee, and Jeanne Arnold serves on the Penn State Hershey Children’s Hospital executive committee.
“Ed and I became interested in supporting a program that would enhance patient care through our involvement with the Children’s Hospital. The opportunity for the Hummingbird Program was presented to us as a suggestion from parents who wanted a palliative-care program. We met with two mothers who shared their stories, and then we saw for ourselves the need for underwriting and funding a program like this. Dr. Ceneviva also was very interested in such a program. The hummingbird is such a beautiful, magical little bird—a little fighter—that we felt it was a perfect symbol for these kids.” — J e a nn e A r n o l d
2007–2008
Top: Edward and Jeanne Arnold Bottom: Gary D. Ceneviva, M. D., sta ff phy sician in the Pediatri c Inten sive Care Unit at Penn state Milton S. H ers hey Medi cal Center, i s dire ctor of the Humm ing bird Progra m.
11
“The Schreyer Honors College has given me the chance to learn from great professors and scientists—people who are proven experts in their field.” —Anthony scholarship recipient and Science major (Life Science option)
Tierno,
President’s Report on Philanthropy and endowments
Summary of Gifts
14
Planning for the Future
16
Endowment Stewardship
20
Budget Summaries
28
Executive Committee
30
Summary of Gifts
Sources of Gifts Received 2007–08
Where the $181.5 million came from 23%
52%
16%
SOURCES
NUMBER OF DONORS
Individuals $94,319,974 Alumni $64,472,983 Friends 29,846,991 Corporations 42,066, 747 Foundations 29,441,345 Organizations 15,642,675
9%
AMOUNTS
TOTAL
$181,470,741
153,594 74,166 79,428 6,124 490 2,903 163,111
Designated Purposes of Gifts Received 2007–08
Where the $181.5 million went 19%
24%
PURPOSES
Student aid
17%
1%
1%
3%
5%
Other Property, buildings,
44,216,016
Research Faculty resources Academic divisions Public service
31,144,190
34,374,122
8,583,589 5,917,787 5,060,144
and extension
1,661,413
Library resources
1,439,204
Unrestricted (University-wide)
14
$49,074,276
equipment
27% 3%
AMOUNTS
TOTAL
$181,470,741
President’s Report on Philanthropy and endowments
Gifts Designated to Specific Units 2007–08
College of Agricultural Sciences
Penn State Erie, The Behrend College
$11,473,585
$2,246,916
College of Arts and Architecture/University Arts Services
Penn State Fayette, The Eberly Campus
$5,287,578 Smeal College of Business
$8,413,119 College of Communications
$2,636,217 The Dickinson School of Law
$3,953,058 College of Earth and Mineral Sciences
$12,017,380 College of Education
$2,724,947 College of Engineering
$18,192,094 College of Health and Human Development
$9,018,584
$344,298
$587,392 $210,134
250
Penn State Schuylkill
$300,254 $548,699
N ew Gifts and
$1,315,158
Outreach and Cooperative Extension
213.3 198.8 197.9 196.4
200.9
170.3
173.0 163.4
150
Pl edges
100 50
Penn State York
$27,938,748
200
Comm itments :
$580,300
Penn State Abington
284.7 277.5
300
Penn State New Kensington
Intercollegiate Athletics
$464,776
(YEAR)
Penn State Mont Alto
$6,714,351
Penn State DuBois
01 02 03 04 05 06 07 08
$237,577
$510,102
$300,856
99 00
In millions of dollars
Penn State Lehigh Valley
Eberly College of Science
Penn State Brandywine
0
$466,386
Penn State Worthington Scranton
$432,263
100
50
Penn State Hazleton
$8,353,366
Penn State Berks
130.9
$725,993
$605,376
$234,432
Gifts Rece ived
Penn State Harrisburg
College of the Liberal Arts
Penn State Beaver
150
$1,403,552
Penn State Wilkes-Barre
$804,851
165.2
151.3
151.1
Penn State Greater Allegheny
$1,382,750
Penn State Altoona
190.3 181.5
181.3 180.7 176.9 170.8
Penn State Great Valley
College of Information Sciences and Technology
$23,281,594
200
$570,574
Penn State Shenango
College of Medicine/ Medical Center
Growth in Private Support and Donor Base
0
99 00 01 02 03 04 05 06 07 08
$6,484,507
163,111
Research and Graduate Studies
200
$1,655,747 $3,283,639 University Libraries
$2,234,936 $13,534,652
143,517 132,931 132,791
124,519 122,539 150 120,680 118,089 116,971 116,053
Schreyer Honors College
Other*
(YEAR)
In millions of dollars
Numbers
100
of Donors
50 *Includes University-wide scholarships, graduate fellowships, and student loan funds; International Programs; Office of Student Affairs; Office of Educational Equity.
2007–2008
0
99 00 01 02 03 04 05 06 07 08
(YEAR)
15
Planning for the Future Deferred Giving in 2007–08
Realized Bequests
$13,312,477 Gift Annuities
$2,016,841 Charitable Remainder Trusts
$6,067,917 Charitable Lead Trusts
$139,511
President’s Report on Philanthropy and endowments
Deferred Giving
A deferred gift is simply a commitment made today that will provide future
benefits to the University.
Deferred gifts accounted for 12 percent of all giving to Penn State in 2007–08. The University benefited from more than $8 million in gift annuities, charitable remainder trusts, and other life income gifts. Such gifts carry substantial income, estate, and gift tax advantages. In addition, they are often designated to establish endowments, which offer perpetual support for programs designated by donors. Endowment funds are usually named for donors or other individuals specified by donors.
One of the easiest ways for benefactors to ensure that their financial support will continue for years to come is by including Penn State in their wills. This past year, Penn State received more than $13 million in realized bequests from estate distributions, primarily designated for endowments.
Benefactors can work with the University to create a Statement of Intent, a simple document that indicates how the funds are to be used. Bequests, for example, are typically made in several ways: A specific amount, a percentage of an estate, or the entire remainder of an estate can be left to the University. One can also create a contingent bequest that specifies monies will come to Penn State upon the occurrence of certain circumstances. For example, a bequest can go to an individual or come to Penn State in the event the person named is no longer living. Bequests can be directed to a specific purpose or designated as “unrestricted” to Penn State.
Deferred Giving 1998–2008 (Year ending June 30)
$22.4
1998
27.6
1999
18.2
2000
26.6
2001
24.3
2002
48.1
2003
30.0
2004
14.4
2005
21.1
2006
25.2
2007 2008
21.5
0
10
20
30
40
50
Millions of dollars
2007–2008
17
A deferred gift can also perpetuate current giving. This is an effective way to transform an existing gift into an enduring legacy. For example, if a benefactor’s current giving is $5,000 a year, the creation of a $100,000 endowment through a bequest can generate approximately $5,000 in income annually so that current giving continues indefinitely. Such a gift serves as a lasting tribute to one’s belief in higher education and as the capstone of one’s legacy to Penn State. Thus, the impact of a benefactor’s generosity extends far beyond a lifetime.
A gift to Penn State through a will or a life income gift may have significant income tax benefits and qualify for an estate tax charitable deduction. For information about gift planning, contact Michael J. Degenhart, Director of Gift Planning, The Pennsylvania State University, 214 The 103 Building, University Park, PA 16802-7001; 1-888-800-9170; E-mail: giftplanning@psu.edu.
Creating Endowments Endowments are created by blending a donor’s vision with Penn State’s goals and objectives. 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
Endowment Category Minimum Gift
Faculty Support
the benefactor’s intent—now and
Chancellor’s Chair Dean’s Chair Department Head’s Chair Faculty Chair Professorship Career Development Professorship
in the future. These endowments
Graduate Student Aid
has established minimum support levels for various types of endowments to guarantee that income will be adequate to achieve
may be named in recognition of the generosity and vision of the donors, or in honor or memory of persons of the donors’ choice. Named endowments stand in perpetuity as landmarks.
Distinguished Graduate Fellowship Graduate Scholarship
$5,000,000 $5,000,000 $3,000,000 $2,000,000 $1,000,000 $500,000
$250,000 $50,000
Undergraduate Student Aid Trustee Matching Scholarship College/Campus Scholarship Honors College Scholarship Destiny Scholarship Enrichment Scholarship Renaissance Scholarship
$50,000 $50,000 $50,000 $50,000 $50,000 $30,000
Other Endowments Lectureship Research Program Support Libraries Program Award
18
$100,000 $50,000 $25,000 $25,000 $20,000
President’s Report on Philanthropy and endowments
“I’m inspired to work hard because someone has given me this opportunity, and I hope that I’ll be able to return the favor to future generations of Penn Staters.” —Alison Kilmartin, scholarship recipient and Penn State Dickinson School of Law student
Endowment Stewardship President’s Report on Philanthropy and endowments
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 is Penn State’s endowment portfolio into which endowed funds 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. And 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.
Penn State strives to be a good steward of its endowed gifts and fol-
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.
lows a prudent management philosophy in investing these gifts so that they maintain their value in real 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.
80 70 60 Gifts to Endow ment (Year ending June 30)
50
64.9
72.8 69.1 61.7 58.5
70.2 56.5
55.2 51.4
42.4
40 30 20 10 0
99 00 01 02 03 04 05 06 07 08
(YEAR)
In millions of dollars
2007–2008
21
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 investments, 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. However, given prospects for modest investment market returns, the payout rate will be reduced incrementally over a multiyear period. Beginning with 2007, the payout is being decreased 0.1 percent annually until 4.5 percent is achieved in 2012. The University’s spending policy balances 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 Endowment and Similar Funds (Fiscal year ending June 30)
LTIP
SIMILAR FUNDS
1998 580 47
$ 627
1999 731 60
791
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)
Millions of dollars
Long-Term Investment Pool (LTIP)
Similar funds
As of the end of fiscal 2008, endowment and similar funds were valued at $1.62 billion, of which $1.49 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 $128 million in assets that are not directly invested in the Long-Term Investment Pool. These amounts reflect the impact of investment returns and generous giving, net of consistent support for scholarships and University programs.
22
President’s Report on Philanthropy and endowments
At the end of fiscal year 2008, the endowment and similar funds were valued at nearly $1.6 billion. This represented a one-year net decrease of $53 million, and a fiveyear net increase of $509 million. Over this same period, the endowment has provided $284 million of program support, including $60 million in fiscal 2008. For the year ending June 30, 2008, the endowment returned -1.9 percent and has averaged 12.1 percent over the last five years. In the longer term, Penn State’s endowment has averaged 9.7 percent per year, net of gifts and expenses, since June 30, 1988.
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. This, in turn, has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflation-adjusted growth for future generations.
Looking toward the future, the steady growth of the world economy has heightened inflation concerns, 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.
Endowment Asset Mix
Where Penn State invested its endowed funds 23%
(As of June 30, 2008)
Public Equities Fixed Income Private Capital
50%
27%
The Penn State endowment portfolio is broadly diversified, with 23 percent in fixed income as of June 30, 2008; 50 percent in public equities (both U.S. and non-U.S.); and 27 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, 2008, investment market returns for equities turned negative after several years of positive performance, while fixed income returns were positive for the second consecutive year. Bonds, as measured by the Lehman Brothers Bond Index, earned a total return of 7.1 percent in fiscal 2008 while public equities, as measured by the All Country World Index, returned -6.6 percent. Penn State’s private capital, comprised of private partnership investments, outperformed both public equities and bonds, with private equity and venture partnerships gaining 12.4 percent and 11.5 percent, respectively.
2007–2008
23
Long-Term Investment Performance of Endowment Penn State’s endowment earned an investment return of -1.9 percent, 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 and expenses, the Penn State endowment has averaged 7.5 percent per year over the last ten years, and 9.7 percent over the last twenty years, allowing the endowment to maintain steady inflation-adjusted spending and to achieve long-term intergenerational equity.
12.1 9.7
Average annua lized total returns for per iods ending
7.5
June 30, 2008 (Net of fees)
20-year
Total returns include interest, dividends, and market appreciation
10-year -1.9
5-year 1-year
Penn State Investment Council
Council Members
Penn State’s Board of Trustees
Gary Schultz, Chair Senior vice president for finance and business/treasurer, The Pennsylvania State University
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.
David Branigan Executive director, Office of Investment Management, The Pennsylvania State University Timothy J. Crowe Managing director, Anchor Point Capital LLC Carmen Gigliotti Managing director, Private Market Group, DuPont Capital Management Edward R. Hintz Jr. President, HHR Asset Management Arthur D. Miltenberger Vice president and chief financial officer (retired), R. K. Mellon & Sons J. David Rogers Chief executive officer, J. D. Capital Management Linda B. Strumpf Vice president and chief investment officer, The Ford Foundation
24
President’s Report on Philanthropy and endowments
“Because of Scholarship support, I will be the first person in my family to graduate from an institution like Penn State.”—Mark Lowery, scholarship recipient and Agricultural and Extension Education major
“as an international student at Penn State Greater allegheny, I enjoyed great relationships with professors who really cared about my success. They offered a hands-on education that reinforced what I learned from the textbook.” —Antony Palocaren, scholarship recipient and Engineering Science major
“Thanks to generous donors who created my scholarship, I have to work only part-time during the academic year. And I can participate in extracurricular activities like Thon, which gives me a sense of purpose and pride.” —Lindsay Miller, scholarship recipient and Marketing major
Budget Summaries
Total University Operating Budget 2007–08
Income
26.1% 17.2%
MILLI O N S O F D O LL A R S
Tuition and fees
$1,128.5
Medical Center/Clinic Restricted funds* State appropriation
891.1
586.4
334.2
297.2
Philanthropy and other
155.7
Auxiliary enterprises
9.8%
33.1%
8.7%
Agricultural (federal)
4.6%
TOTAL
18.4
$3,411.5
0.5% *primarily sponsored contracts and research grants
Expenditures 15.4%
26.1%
MILLI O N S O F D O LL A R S
Instruction and academic support
Medical Center/Clinic Research Auxiliary enterprises Institutional support Physical Plant Public service Pennsylvania College of Technology
8.7%
7.5% 26.8%
5.2% 4.2% 2.6%
1.1%
2.4%
891.1 526.4 297.2 256.1 177.2 142.8 87.8
(General funds)
Student services Student aid
28
$912.5
TOTAL
81.9 38.5 $3,411.5
President’s Report on Philanthropy and endowments
The State’s Share of Penn State’s Budget
Y ear
tota l budget
state appropr i at i ons
percent of tota l
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
14.6%
2000–01 2,150,394,000 331,949,000
15.4%
1999–00 2,011,084,000 314,134,000
15.6%
*Excludes state and federal medical assistance funding provided to Penn State Milton S. Hershey Medical Center through the Pennsylvania Department of Public Welfare.
“When I received a scholarship, it made me feel like Penn State truly cared about my education and my future success. That is the kind of university I want to be part of.” —Rafiattinuke “Shade” Adebowale, scholarship recipient and Health and Human Development student
2007–2008
29
Executive Committee President’s Report on Philanthropy and endowments
Executive Committee For the Future: The Campaign for Penn State Students
Peter G. Tombros
E d w a r d J . B e ckw i t h
Linda J. Gall
Campaign Chair
Chair, Planned Giving Advisory Council
Chair, Stewardship Committee
Campaign Vice Chair
James S. Broadhurst
Steve A. Garban
Chair, Campus Committees
Chair, Board of Trustees, The Pennsylvania State University
Trustee Liaison
E. Lee Beard
Peter M. Carlino
Chair, The Penn State Milton S. Hershey Medical Center
2007–2008
Member, Board of Trustees, The Pennsylvania State University Edward R. Hintz
Honorary Campaign Chair
31
Martha B. Jordan
Bruce R. Miller
Robert E. Poole
Richard K. Struthers
Chair, Annual Giving Committee
Campaign Vice Chair
Chair, Leadership Gifts Committee
At-Large Member
E d w a r d P. J u nk e r III
At-Large Member J e ff e r y L . K i ng
At-Large Member
Chair, College Committees Arthur J. Nagle
Honorary Campaign Chair J o s e p h V. Pat e r n o
Honorary Campaign Chair
32
John K. Tsui C at h e r i n e S h u lt z R e i n
At-Large Member
Chair, Corporate Relations Committee W i l l i a m A . Sc h r e y e r
Honorary Campaign Chair
President’s Report on Philanthropy and endowments
Ex Officio Members
G r a h a m B . Spa n i e r
G a r y C . Sc h u lt z
President, The Pennsylvania State University
Senior Vice President for Finance and Business/Treasurer, The Pennsylvania State University
R o d n e y A . E r i ck s o n
Executive Vice President and Provost, The Pennsylvania State University
R o d n e y P. K i r s c h
Senior Vice President for Development and Alumni Relations, The Pennsylvania State University
33
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
This publication is available in alternative media on request. 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, gender identity, 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. Produced by the Penn State Department of University Publications. U.Ed. DEV 09-12
“My mother works very hard, and the scholarships I receive make her life so much easier and less stressful. And I’m able to get the most out of my education.”—Kristin MacLean, scholarship recipient and Psychology major
“The scholarship has shown me that alumni care about their alma mater and want current students to share in their success.�
The President’s Report o n PH i l a n t h r o p y and endowments 2007–2008