The President’s Report on Philanthropy and Endowments (2008–2009)

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The President’s Report on Philanthropy and Endowments 2008–2009



table of contents Message from the President

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Message from the Campaign Chair

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Ensuring Student Opportunity

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Enhancing Honors Education

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Enriching the Student Experience

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Building Faculty Strength & Capacity

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Fostering Discovery & Creativity

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Sustaining a Tradition of Quality

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Concepts in Philanthropy

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Awards and honors

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Endowment overview

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investment management update

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University budget summaries

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campaign executive committee

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A Message from the president

Penn Staters love a challenge. I’ve heard those words many times, and there is no better evidence of their truth than the extraordinary results of philanthropy to the University in fiscal year 2008-09. During a time of widespread economic uncertainty that challenged all levels of our society, Penn State received more gifts—more than 300,000—this past year than at any other time in its history. Moreover, a record number of alumni—77,658—made gifts. There is more good news. Giving totaled $182 million for the year ending June 30, 2009. That’s up slightly from the previous year and stands as the second-highest total in Penn State’s history. On behalf of faculty, students, and staff, I extend my deepest appreciation for this remarkable display of generosity. It shows that our donors recognize Penn State’s important contributions to the vitality of our nation, and that the value of a Penn State education is even greater during difficult economic times.

Philanthropy is never more important than when students and their families are facing economic challenges.


Maintaining broad accessibility to education is the top priority of For the Future: The Campaign for Penn State Students. Philanthropy is never more important than when students and their families are facing economic challenges. I am pleased to report that since the campaign was launched in its leadership gifts phase on January 1, 2007, the University has received more than $154 million in new scholarship commitments. Some of these commitments are for the more than 600 Trustee Scholarship endowments that have been created through a groundbreaking program whereby the University provides matching funds that effectively double the financial impact of each endowment. In 2008-09, more than 4,000 undergraduates benefited from these unique scholarships. Altogether, gifts and pledges to the For the Future campaign totaled $752 million as of June 30, 2009. We look forward to launching the campaign’s public phase in April 2010. I urge you to read Campaign Chair Peter Tombros’ message on page 4 of this report and learn more about the people whose generosity is helping the campaign to meet its objectives. I am deeply grateful to Peter and other campaign volunteer leaders for their dedication to Penn State. Working in an adverse financial climate, they have nevertheless placed the University in a strong position to launch the public segment of the campaign. Now we must sustain the momentum their efforts have built. It won’t be an easy task. Success will require the participation of even more Penn State alumni and friends. But students and faculty, now and in future generations, are depending on us. We will not let them down. Thank you for your support and all that you do for our University. Sincerely,

Graham B. Spanier, President The Pennsylvania State University

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

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A M e s s a g e f r o m t h e C a mpa i g n C h a i r

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ehind every gift to Penn State, there’s a story. It may begin on a donor’s first day as a freshman at the University, when he meets the faculty member who will inspire both a great career and an endowed chair. It may not unfold until years later, when an alumnus realizes just how valuable a study abroad or a research experience was—and creates a fund to help other students have the same kind of experience. The tale of a gift may open with a couple discovering how much Penn State enriches life in the community where they’ve chosen to raise a family or retire, or it might start with a father urging his son not only to earn a degree but also to make a difference. You’ll read all of these stories in the pages that follow, as the 2009 President’s Report on Philanthropy and Endowments highlights the reasons that some of Penn State’s alumni and friends have chosen to make gifts to the University. Their generosity—and yours—has a profound impact on our ability to serve our students and our world. Endowed gifts provide us with permanent resources that allow us to plan for the future of Penn State and help us to provide an extraordinary educational experience. They have also allowed us to aim higher,

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

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

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

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


E n s u r i n g s t u d e n t o pp o r t u n i t y

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

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

“Penn State is an integral part of what makes our community special,” says Linda, who currently chairs the stewardship committee of For the Future: The Campaign for Penn State Students. “We have been especially blessed to raise our daughters, Lauren and Andrea, here. Penn State alumni have a natural affinity and affection for the University, but as local citizens, our lives have also been enriched by the University.” The Galls’ interests and involvement have bridged town and gown, from the Centre County United Way and the Mount Nittany Conservancy to the Palmer Museum of Art and Penn State’s squash and tennis facilities. While their first gifts to Penn State focused on the University’s outreach programs, such as public broadcasting and the performing and visual arts, the couple became increasingly interested in helping students like themselves who needed

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private support to earn their degrees. “As we saw how much our children, who both enrolled at Penn State, enjoyed their experience here, we felt even more strongly about making that experience possible for other young people,” says Blake. Over the years, the Galls have created scholarship endowments across the University, including funds for students in the Schreyer Honors College, the College of Arts and Architecture, the College of Education, and Intercollegiate Athletics. They have also supported, and inspired others to support, a Renaissance Fund scholarship created in their honor in 2006 (the same year that Linda was named an honorary alumna of the University). Last year, they decided to create two more funds to honor the people who helped to make their own education possible. “We had read in the University’s campaign brochure about two young alumni, Ronald Gatehouse and Pratima Singh Gatehouse, who created scholarships in honor of their parents,” says Linda. “That was a very attractive idea to us. Our parents made significant sacrifices for us to attend college, and it seemed most fitting to recognize those acts of love and selflessness with scholarships tied to their interests.” The Arlene & E. Z. Jackson Scholarship in Musical Theatre honors Blake’s parents, who have been active in community musical theatre. The Pauline & Patrick Lamort Trustee Scholarship in Education—the fifth endowment that the Galls have created through the Trustee Matching Scholarship Program—celebrates Linda’s mother’s long career in teaching. Monica Kim (pictured above), a sophomore majoring in Secondary Education in Math, is one of the first recipients of the Lamort Trustee Scholarship, and she’s profoundly grateful for the Galls’ support. “My family and I were ecstatic when we learned about the scholarship,” she says. “I want to teach at my old high school someday, and the scholarship has allowed me to focus on my goals without so much financial stress.” For Blake and Linda, stories like Monica’s—and those of the many other Penn State students who have benefited from their scholarships—bring back memories of their own early days. “We know firsthand the critical importance of financial assistance,” says Blake. “I was a first-generation college student, and although my parents didn’t have degrees, they knew the overwhelming value of a strong education. Through these scholarships, we are able to honor both of our families and help other families to start on a new path.”

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A Penn State honors alumnus and his family remember a father who believed in achievement and character—and give students in the Schreyer Honors College an opportunity to carry on those values.


Enhancing Honors Educ ation

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blue-collar worker from South Philadelphia, Marty D’Ambrosio never had the opportunity to finish high school, but he was a passionate believer in the power of education. “My father was a man of great character and integrity. He wanted us to be successful in life and believed that education was the path to opportunity and choice,” reflects Louis A. D’Ambrosio ’86 Bus, a member of the Schreyer Honors College External Advisory Board and campaign committee. “I will never forget looking into my father’s eyes when I was fortunate enough to give the valedictorian speech for the Smeal College of Business. It meant everything. But success was more to him than personal accomplishments—it was about character, decency, integrity. It was about achieving so that you can give back.” Lou went on to earn an M.B.A. from Harvard, rise to the post of vice president at IBM, and become one of the youngest C.E.O.s of a Fortune 500 company, the global communications leader Avaya, and Marty “was with me every step of the way… He was my rock,” says Lou. When his father died suddenly in 2007, Lou and his wife, Kimberly (pictured opposite), decided to honor his memory by creating the Marty D’Ambrosio Honors Scholarship. “Marty was always so present in our lives,” says Kim. “This is a way that he can be present in the lives of others.” Directed to Schreyer Scholars from southeastern Pennsylvania studying in the Smeal College of Business, the scholarship is assisting a student in each class year, including junior Dan Levy (pictured right). Like Lou, he’s following his father’s example of hard work and perseverance. “My dad has gone from owning a hot dog stand in Philadelphia to owning his own art gallery,” says Dan, a Marketing and Psychology double major. “We’re still struggling to make ends meet, though, and receiving the Marty D’Ambrosio Honors Scholarship has been both a great relief and a great inspiration.” Dan and other recipients of the scholarship are given a document that describes Marty’s life and values. Lou says, “My mother has described my father as being our compass, and through the Marty D’Ambrosio Honors Scholarship, his example can help guide Schreyer Scholars as they thrive at Penn State and decide how they will make an impact in the world.”

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Enriching the Student Experience

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hen Louis A. Martarano graduated from Penn State with a degree in Chemistry in 1976, he was eager to see life beyond the laboratory. “Like many Penn State undergraduates, I was a kid from a small town, and I had never been out of the country before,” Lou (pictured below) remembers. “As a graduate student in the Yale School of Management, I had the opportunity for an internship in Paris, and it opened my eyes to the complex differences between countries and cultures. That experience shaped my life, both professionally and personally.” Over the next two decades, Lou’s work in project finance for Merrill Lynch and Kidder, Peabody took him around the world. In 1998, he decided to help other Eberly College of Science students prepare for their own international careers by establishing the Louis A. Martarano Endowment for Education Abroad. The award assists students like Megan Manno (pictured top right), a Biology major who graduated this spring and is headed to a research training program with the National Institutes of Health. Support from the Martarano Endowment helped Megan to spend a semester at the University of Leeds in England and to travel throughout Europe during her junior year. “My experience overseas really makes my Penn State education feel complete,” says Megan. “Finances are the main reason that many students can’t choose to study abroad, and Mr. Martarano’s generosity means that I now have a new perspective on the world.” Lou, who chairs the Board of Trustees of Marymount Manhattan College in addition to his service on several Penn State advisory boards and committees, decided to increase the size of the endowment last year. “Happily, more and more students are choosing to spend time overseas,” says Lou. “The days of being a scientist tucked away in the back of a lab somewhere are a thing of the past. Whether our graduates go into research or business, they’ll need the kind of global understanding that can only come from experience abroad.”

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Thanks to the global vision of a Chemistry alumnus, Penn State science students have the support they need to see the world for themselves.


B u i l d i n g Fa c u lt y S t r e n g t h & C a pa c i t y

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f you’ve ever enjoyed a day in one of Pennsylvania’s protected forests, you can thank Joseph E. Ibberson (pictured right). Over the course of six decades, the pioneering forester has been instrumental in preserving and managing the Commonwealth’s land. Although he officially retired from the Pennsylvania Department of Environmental Resources in 1977, Joe has continued to be a leader in the field, and he donated his own property to create the first conservation area in the Pennsylvania state park system in 1999. And none of it would have happened, he says, without the encouragement of the faculty members he met at Penn State. “That was the key to everything—they practically kicked me into my career,” says Joe, who began his education at the Mont Alto campus and earned his degree from the College of Agricultural Sciences at University Park in 1947. “The director of the forestry school almost forced me to go to Yale to earn my master’s degree, and another Penn State professor challenged me to create the first timber management plans for the two million acres of forest the state owned at that time.” Joe went on to create many programs that were among the first of their kind not only in the Commonwealth but also in the nation, including a pest control initiative and a service forester program that helps private citizens to manage their lands. Now he is committed to ensuring that new generations are prepared to steward the forests he has worked so hard to protect. “Teaching is what makes a good forester—it’s just that simple,” says Joe. “I want Penn State to have the best forestry school in the world, and you can’t do it without the very best faculty.” In 1997, he established the Joseph E. Ibberson Chair in Forest Resources Management. Dr. Harry V. Wiant, Jr., (pictured left) came to Penn State from West Virginia University to accept the position. “The funding has helped to further my teaching and research, and I’m honored to hold a chair that bears Joe’s name,” Dr. Wiant says. “I’ve had the opportunity to meet Joe, and I consider him a friend and an inspiration.”

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

As Penn State competes for the best educators and researchers, a forester remembers how great faculty helped him to grow.


A longtime friend of a Penn State campus brings students and faculty together with support for hands-on learning.


F o s t e r i n g D i s c o v e r y & C r e at i v i t y

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t sounds like a fascinating evening of programming on the Discovery Channel: the role of mosquitoes in transmitting malaria, the attitudes and approaches of real-life homicide detectives, the future of science and technology education. The investigations aren’t happening on television, though, but on the Penn State Schuylkill campus. Thanks to the generosity of Fred J. Wiest, Esq., (pictured far left) who created the Penn State Schuylkill Faculty and Student Research Endowment in 2007, these projects are taking education beyond the textbook and giving undergraduates hands-on experience in their fields. “When I was a student in the honors program at Swarthmore in the 1930s, we had the opportunity to work closely with faculty members on research,” recalls Fred, a Minersville resident who returned to the area after earning a law degree from Harvard and serving in World War II. He has volunteered on advisory boards for Penn State’s program in Schuylkill since 1954. “I have seen Penn State Schuylkill grow into a remarkable campus,” he says. “I thought that this research endowment could provide the kind of opportunity to our students that meant so much to me in my own education.” So far, three faculty members have received support from the endowment. Dr. Darcy Medica (pictured left) and her students are testing the characteristics of mosquitoes that make them efficient transmitters of malaria. “I’m a very strong supporter of involving undergraduates in research,” she says. “I think that they benefit tremendously by applying what they’ve learned in the classroom, and it gives them an edge in applying to graduate school and jobs.” That’s the kind of result that makes philanthropy satisfying, says Fred, who has also created a Trustee Scholarship at the campus. “I have gotten notes from students and faculty telling me what my gifts have made possible,” he says. “Through private support, we can get students here and make sure that they receive an excellent education.”

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Community leaders use gift planning and unrestricted support to set the stage for new outreach and arts programs at Penn State.

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

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S u s ta i n i n g a T r a d i t i o n o f Q u a l i t y

S u s ta i n i n g a T r a d i t i o n o f Q u a l i t y

“The thank-you letters we received from the children were just priceless—one told us how ‘cool’ it was to see the show in person,” says Honey Jaffe, who, with her husband Bill ’60 (pictured left), established the Honey and Bill Jaffe Endowment for Audience Development for the Center for the Performing Arts. The fund subsidizes the cost of transporting children from area schools to “informances” at Penn State. It’s one of several endowments that the Jaffes have created through charitable remainder trusts and launched through early activation. They have been especially generous to programs that serve the region they love. The Jaffes retired to State College in 1995 after careers that took them all over the country. “State College provided everything we wanted,” says Bill. “And because we live here, we want to see the community become even better.” Together, they have volunteered on numerous boards and created endowed funds to support Penn State Public Broadcasting, the Center for the Performing Arts, Pennsylvania Centre Stage, and the Palmer Museum of Art, as well as many other areas across the University. “These are programs that have a major impact and provide a lot for people in central Pennsylvania,” Bill says. The Jaffes are also advocates of unrestricted giving, and Bill serves as the volunteer chair of the President’s Club, Penn State’s recognition society for donors who make annual unrestricted gifts of $2,500 or more to any of more than fifty qualifying funds at Penn State. In acknowledgment of their efforts on behalf of the Center for the Performing Arts, Bill and Honey were jointly awarded the Center’s Distinguished Service Award last year, and Honey was named an honorary alumna of the University this spring. The theatre lovers don’t need the spotlight, though, to feel good about their philanthropy. Honey says, “When you see immediate help going to deserving people and causes, it’s very gratifying.”

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Concepts in Philanthropy

The Trustee Matching Scholarship Program and other matching programs Blake and Linda Gall are among the hundreds of donors who have become Penn State’s partners in supporting students in need through the Trustee Matching Scholarship Program. In this groundbreaking philanthropic model, the University matches 5 percent of the total pledge or gift at the time a Trustee Scholarship is created, making money available immediately for student awards. This University match is available to spend each year, in perpetuity, along with a payout equal to a percentage (currently, 4.5 percent) of the endowment’s market value. Therefore, when the endowment becomes fully funded, a Trustee Scholarship provides almost 10 percent of the endowment’s market value each year. “The power of the matching funds is very compelling,” says Linda. “Our gift has twice the power to help students and families struggling with the cost of higher education.” Penn State has established other programs, including the Distinguished Graduate Fellowship Program, that allow donors to leverage University funds with their gifts. To learn more, visit www.giveto.psu.edu/ReasonsforGiving.

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

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

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

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

Deferred Giving 2000–2009 (Fiscal year ending June 30) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

00

10 10

20 20

30 30

40 40

50 50

$18.2 26.6 24.3 48.1 30.0 14.4 21.1 25.2 21.5 24.6

in millions of dollars

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

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

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

MINIMUM GIFT

Faculty Support Chancellor’s Chair Dean’s Chair Department Head’s Chair Faculty Chair Professorship Career Development Professorship

$5,000,000 $5,000,000 $3,000,000 $2,000,000 $1,000,000 $ 500,000

Graduate Student Aid Distinguished Graduate Fellowship Graduate Fellowship Graduate Scholarship

$ 250,000 $ 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 Award

$ $ $ $ $

100,000  50,000  25,000  25,000  20,000

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aw a r d s a n d h o n o r s

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

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

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

Fundraising Volunteer of the Year: E. Lee Beard This award recognizes an individual or group who has served as fundraising volunteers, teachers, or mentors while demonstrating exceptional commitment and leadership in building philanthropic support for The Pennsylvania State University. On a single day last year, Lee Beard visited Penn State locations on opposite ends of the Commonwealth as part of her tireless effort to assist all twenty campuses she represents as co-vice chair of the For the Future campaign. Lee’s involvement with the University began

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

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

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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. The Long-Term Investment Pool (LTIP) is Penn State’s endowment portfolio into which endowed funds established at the University are invested. This comingled pool operates much like a mutual fund. Each endowment owns a number of units in the pool, just as an individual would purchase shares in a mutual fund. And as with a mutual fund, the value of each unit at the time funds are invested in the 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 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.

gifts to endowment (Fiscal year ending June 30) 80 80 70 70

69.1 $61.7

60 60

72.8

58.5

70.2 61.2

56.5

50 50

51.4

55.2

42.4

40 40 30 30 20 20 10 10 00

’00 ’01 ’02 in millions of dollars

24

’03

’04

’05

’06

’07

’08

’09

the president ’s report on phil anthropy and endowments | 2008–09


I n v e s t m e n t M a n a g e m e n t Up d at e

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

Market Value of Penn State’s Endowments and Similar Funds

(Fiscal year ending June 30) LTIP

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

927 899 842 882 1,007 1,128 1,280 1,537 1,488 1,184

Similar Funds

$ 1,004 (1 billion) 986 943 965 1,107 (1.11 billion) 1,231 (1.23 billion) 1,390 (1.39 billion) 1,669 (1.67 billion) 1,616 (1.62 billion) 1,281 (1.28 billion)

77 87 101 83 100 103 110 132 128 97

Millions of dollars 500

1000 n Long-Term Investment Pool (LTIP)

1500 n Similar Funds

2000

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

the president ’s report on phil anthropy and endowments | 2008–09

25


For the year ending June 30, 2009, the endowment declined $334 million, but it has increased a cumulative $50 million over the last five years. Over this same five-year period, the endowment has provided $296 million of program support, including $65 million in fiscal year 2009. These amounts reflect the impact of investment returns and generous giving, resulting in consistent support for scholarships and University programs. For fiscal year 2009, the endowment’s investment return was -20.1 percent, and it has averaged 4.1 percent per year, net of fees, over the last five years. In the longer term, Penn State’s endowment has averaged 7.8 percent per year, net of fees, since June 30, 1989. These results demonstrate long-term growth across various financial ups and downs, such as the bull market of the 1990s, the steep decline at the turn of the century and subsequent economic recovery, and the recent downturn due to the credit crisis. Penn State’s diversified approach has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflation-adjusted growth for future generations.

Endowment Asset Mix

(Fiscal year ending June 30, 2009)

28% 50%

Where Penn State invested its endowed funds

n Public Equities n Fixed Income n Private Capital Private Capital

22%

Fixed Income

The Penn State endowment portfolio is broadly diversified, with 22 percent fixed income as of June 30, 2009; 50 percent in public equities Public Equities (both U.S. and non-U.S.); and 28 percent in a variety of other (alternative) investments including real estate, private capital, venture capital, and energy. The majority of the endowment’s assets are equity-type investments that, over the long term, generate returns in excess of inflation in order to preserve the endowment’s purchasing power for future generations. In the year ending June 30, 2009, global equity markets continued their downward slide, compounding losses incurred during the twelve months ending June 2008, while fixed income returns were positive for the third consecutive year. Bonds, as measured by the Barclay Capital Aggregate Bond Index, earned a total return of 6.0 percent in fiscal year 2009 while public equities, as measured by the MSCI All Country World ex-US Index, returned -30.5 percent. Penn State’s private capital is comprised of private partnership investments, including private equity and venture partnerships which returned -24.3 percent and -17.3 percent, respectively. 26

the president ’s report on phil anthropy and endowments | 2008–09


Looking forward, 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.

Long-Term Investment Performance of Endowment Penn State’s endowment earned an investment return of -20.1 percent in fiscal year 2008–09, 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 4.1 percent per year over the last ten years, and 7.8 percent over the last twenty years, allowing the endowment to maintain steady inflationadjusted spending and to achieve long-term intergenerational equity.

average annualized total returns for periods ending june 30, 2009

-20.1 0 -5 -10 -15

10-year

-20

Council Members Al Horvath, Chair Senior vice president for finance and business/treasurer, The Pennsylvania State University David Branigan Executive director, Office of Investment Management, The Pennsylvania State University Timothy J. Crowe Managing director, Anchor Point Capital LLC

Edward R. Hintz Jr. President, Hintz Capital Management

20-year

-25

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.

Carmen Gigliotti Managing director, Private Market Group, DuPont Capital Management

7.8 5

4.1 4.1

10

(Net of fees)

Penn State’s Investment Council

5-year 1-year

Arthur D. Miltenberger Vice president and chief financial officer (retired), R.K. Mellon & Sons J. David Rogers Chief executive officer, J.D. Capital Management Gary Schultz Senior vice president for finance and business/treasurer emeritus Linda B. Strumpf Chief investment officer, The Helmsley Charitable Trust

the president ’s report on phil anthropy and endowments | 2008–09

27


u n i v e r s i t y b u d g e t s u mm a r i e s

income (Fiscal year ending June 30) 0.5% 4.8% 8.9%

Millions of dollars

33.5% 9.4%

16.9%

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

$1,208.2 939.2 611.1 338.4 320.2 171.2 19.1 $3,607.4

*primarily sponsored contracts and research grants Philanthropy and other

26.0%

Auxiliary enterprises State Appropriation

expenditure (Fiscal year ending June 30)

4.0%

2.6% 1.2% 2.6%

5.2%

Restricted Funds Medical Center/Clinic

17.8%

7.8%

8.9% 26.0%

8.8% 15.1%

Millions of dollars

n Instruction and academic support $642.6 Tuition and Fees n Medical Center/Clinic 939.3 n Research 544.6 n Auxiliary enterprise 320.2 n Academic support 320.0 n Institutional support 281.1 n Physical plant 185.9 n Public service 144.5 94.1 n Pennsylvania College of Technology services 93.6 n Student Student Aid 41.5 n Student aid Total $3,607.4 Student Services Pennsylvania College of Technology Public Service Physical Plant

28

the president ’s report on phil anthropy and endowments | 2008–09 Institutional Support Academic Support Auxiliary enterprises


The State’s Share of Penn State’s Budget Year

total budget state appropriation percent of total

2009–10

[as of press time, no state budget has been approved]

2008–09

$3,607,440,000

$338,375,000*

9.4%

2007–08

3,411,528,000

334,230,000*

9.8%

2006–07

3,209,165,000

327,715,000*

10.2%

2005–06

3,044,868,000

312,026,000*

10.2%

2004–05

2,786,403,000

317,179,000

11.4%

2003–04

2,560,309,000

307,844,000

12.0%

2002–03

2,402,717,000

322,592,000

13.4%

2001–02   2,294,015,000

334,813,000

15.4%

2000–01   2,011,084,000

314,134,000

15.6%

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

Sources of Gifts RecEived 2008–09 | Where the $182.1 million came from 10.6% Sources

15.7%

49.1%

Amounts

n Individuals

Number of donors

$89,342,735  $63,037,010 26,305,725 n Corporations 44,887,329 n Foundations 28,661,347 n Organizations 19,221,368 Total $182,112,779 Alumni Friends

173,092 77,658 95,434 6,228 484 2,114 181,918

Organizations

24.6% Foundations Corporations Indivuals

the president ’s report on phil anthropy and endowments | 2008–09

29


designated Purposes of gifts received 2008–2009 | Where the $182.1 million went

3.6%

.3% 2.1% .5% 2.7%

Purposes

31.9% 16.7%

n Other n Student aid n Research n Property, buildings, equipment n Faculty resources n Academic divisions n Public service and extension n Unrestricted

Amounts

$58,183,599 44,841,338 31,996,908 30,472,020 6,519,006 4,963,791 3,759,081 811,917

(University-wide)

17.6%

n Library resources Library resources

24.6%

Total

565,119 $182,112,779

Unrestricted Public service and extension

Gifts Designated to Specific Units 2008–09

Academic divisions

UNIT Abington Agricultural Sciences Altoona Arts & Architecture Beaver Behrend Berks Brandywine Communications Dickinson School of Law DuBois Earth & Mineral Sciences Eberly College of Science Education Educational Equity Engineering Fayette, The Eberly Campus Great Valley Greater Allegheny Harrisburg Hazelton Health & Human Development

Amount $283,604 6,524,108 1,598,340 7,449,549 432,751 3,419,114 1,145,064 233,577 1,160,373 1,010,352 547,976 9,993,058 6,754,266 1,202,970 451,803 14,229,271 491,078 163,034 501,178 3,816,655 807,069 7,955,325

30

the president ’s report on phil anthropy and endowments | 2008–09

Hershey Medical Center 33,557,517 Faculty resources Info Sciences & Technology 1,061,428 Intercollegiate Athletics 27,296,811 Property, buildings, equipment Lehigh Valley 114,202 Liberal Arts 5,450,656 Research Mont Alto 1,200,729 New Kensington 279,345 Student Aid Outreach 4,187,119 Research & Grad School 2,798,633 Other Schreyer Honors College 1,622,516 Schuylkill 441,940 Shenango 404,450 Smeal College of Business 6,416,427 Student Affairs 674,262 Undergraduate Education 7,667,526 University Libraries 3,180,460 University-wide 13,844,059 Wilkes-Barre 675,362 Worthington Scranton 596,576 York 472,246 TOTAL $182,112,779


Growth in Private support and donor base 200 200

190.3

180.7 181.3 $170.8 176.9

165.2

151.3

150 150

181.5 182.1

130.9

Dollars received

100 100 50 50

00 ’00

’01

’02

’03

’04

’05

’06

’07

’08

’09

in millions of dollars 300 300

284.7 277.5

265.2

250 250 200 200

200.9

$198.8 197.9 196.4 170.3

163.4

173.0

Commitments: cash gifts and pledge payments plus new pledges

150 150 100 100 50 50

00

’00

’01

’02

’03

’04

’05

’06

’07

’08

’09

in millions of dollars 181,918 163,111 143,517 132,791 150 150000 122,539 116,971 132,931 124,519 120,680 116,053 200 200000

100000 100

Number of donors

50 50000

00

’00

’01

’02

’03

’04

’05

’06

’07

’08

’09

the president ’s report on phil anthropy and endowments | 2008–09

31


campaign executive committee

Peter G. Tombros Campaign Chair E. Lee Beard Campaign Vice Chair Chair, Campus Committees Edward J. Beckwith Chair, Planned Giving Advisory Council

James S. Broadhurst Chair, Board of Trustees, The Pennsylvania State University Peter M. Carlino Chair, The Penn State Milton S. Hershey Medical Center Campaign Committee Linda J. Gall Chair, Stewardship Committee

32

Steve A. Garban Trustees Liason Vice Chairman, Board of Trustees, The Pennsylvania State University Edward R. Hintz Honorary Campaign Chair Martha B. Jordan Chair, Annual Giving Committee

the president ’s report on phil anthropy and endowments | 2008–09


William A. Jaffe At-large Member

Bruce R. Miller Campaign Vice Chair

Edward P. Junker III At-large Member

Chair, College Committees

Jeffery L. King At-large Member

Arthur J. Nagle Honorary Campaign Chair Joseph V. Paterno Honorary Campaign Chair

Robert E. Poole Chair, Leadership Gifts Committee

William A. Schreyer Honorary Campaign Chair

Catherine Shultz Rein Chair, Corporate Relations Committee

Richard K. Struthers At-large Member

Douglas L. Rock At-large Member

the president ’s report on phil anthropy and endowments | 2008–09

John K. Tsui At-large Member

33


Ex Officio Members

Graham B. Spanier President, The Pennsylvania State University Rodney A. Erickson Executive Vice President and Provost, The Pennsylvania State University

34

Albert G. Horvath Senior Vice President for Finance and Business/Treasurer, The Pennsylvania State University Rodney P. Kirsch Senior Vice President for Development and Alumni Relations, The Pennsylvania State University

the president ’s report on phil anthropy and endowments | 2008–09



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

For more information about philanthropy at Penn State, contact: Rodney P. Kirsch Senior Vice President for Development and Alumni Relations The Pennsylvania State University 116 Old Main University Park, PA 16802-1501 814-863-4826

rpk6@psu.edu

The Pennsylvania State University is committed to the policy that all persons shall have equal access to programs, facilities, admission, and employment without regard to personal characteristics not related to ability, performance, or qualifications as determined by University policy or by state or federal authorities. It is the policy of the University to maintain an academic and work environment free of discrimination, including harassment. The Pennsylvania State University prohibits discrimination and harassment against any person because of age, ancestry, color, disability or handicap, national origin, race, religious creed, sex, sexual orientation, or veteran status. Discrimination or harassment against faculty, staff, or students will not be tolerated at The Pennsylvania State University. Direct all inquiries regarding the nondiscrimination policy to the Affirmative Action Director, The Pennsylvania State University, 328 Boucke Building, University Park, PA 16802-5901; Tel 814-865-4700/V, 814-863-1150/TTY. U. Ed. DEV 10-09 ajs


Questions or comments about your report may be directed to: Kathleen Rider Director of Stewardship stewardship@psu.edu Office of Donor Relations The Pennsylvania State University 102 Old Main University Park, PA 16802 Phone (toll-free): 877-800-6113

Gifts to your endowment may be sent to the address below or made online at www.giveto.psu.edu Office of Donor Services The Pennsylvania State University 1 Old Main University Park, PA 16802 Phone (toll-free): 877-888-5646 Be sure to include the name of the endowment with your gift.


The President’s Report on Philanthropy and Endowments | 2008-2009


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