Text

Pennstate University - Audited Financial Statements - Fiscal Year Ending June 30, 2025 and Self-Guarantee Agreement
	ML25364A104
Person / Time
Site:	Pennsylvania State University
Issue date:	12/15/2025
From:	Thorndike S; Pennsylvania State Univ
To:	Lovett J; Office of Nuclear Reactor Regulation
References
	Download: ML25364A104 (0)
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Official U3e Oflly Proprietary Inforffiation Withhold Under 10 CPR 2.390

,Z, PennState December 15, 2025 Document Control Desk U.S. Nuclear Regulatory Commission Attn: Jessica Lovett One White Flint North 11555 Rockville Pike Rockville, MD 20852 Sara F. Thorndike Senior Vice President for Finance and Business/ Treasurer (814) 865-6574 FAX: (8141 863-8685 The Pennsylvania State University 208 Old Main University Park, PA 16802-1503 Subj: Audited Financial Statements - Fiscal Year Ending June 30, 2025 and Self-Guarantee Agreement License numbers:

R-2 Breazeale Nuclear Reactor Docket 050-00005

Dear Sir or Madam,

As required in 10 CFR 30.35.(f).(2), the financial test and self-guarantee method of 10 CFR 30 Appendix E will be used. The Pennsylvania State University (the "University") certifies the following:

(i) 10 CFR 30 Appendix E Paragraph II.A.(1)-The University currently holds a rating for its most recent bond issuance of AA as issued by Standard and Poor's, and a bond rating of Aal as issued by Moody's, and (ii)

The University is currently a going concern, and it possessed positive net assets in the amount of$14,816,795,000 on June 30, 2025. The calculation of the University's net assets on June 30, 2025 was derived from the university's independently audited, year-end financial statements and footnotes for the fiscal year ending June 30, 2025. The University is not required to file a Form 10-K with the Securities and Exchange Commission for the latest fiscal year.

(iii) 10 CFR 30 Appendix E Paragraph II.C.(1)-Audited financial statements are attached as Attachment A. In addition to the enclosed report, an electronic version may also be found at: https://budgetandfinance.psu.edu/public-reports.

Document transmitted herewith contains sensitive unclassified information.

When separated from enclosure (s), this document is uncontrolled.

Official U3e OfllJ Proprietar1 Informatiofl Withhold under 10 CPR 2.390

~\\) 20 rv, \\) ) !I-N Rsr,

Official Use Oflly Propri etary Iflformati on Wit hhold Under 10 CPR 2.390 Attachment B contains Penn State University's Self-Guarantee Agreement for Financial Assurance for Cost of Decommissioning Activities. Attachment C contains the Independent Accountant's Report on Applying Agreed-Upon Procedures for the year ended June 30, 2025. In addition, Attachment D contains an Affidavit regarding proprietary information.

As part of this submittal, the University acknowledges that rulemaking efforts are underway to potentially modify 10 CFR 30.3 5 (f) (2). Upon finalization of any modifications to these or other governing regulations, the University's approach to Financial Assurance for Decommissioning would be reviewed and modified, if necessary.

Please contact Aaron Wilmot (adw154@psu.edu)if you have any questions.

Sincerely, Dr. Sara F. Thorndike Senior Vice President for Finance & Business/Treasurer Attachment A - Audited financial statements Attachment B - Penn State University's self-guarantee agreement Attachment C - Independent Accountant's Report on Applying Agreed-Upon Procedures Attachment D - Affidavit cc:

Aaron Wilmot, Manager, Radiation Protection Office & Radiation Safety Officer Dr. Kenan Unlti, Director, Radiation Science and Engineering Center James Crandall, Senior Director of Environmental Health & Safety Lee Wagner, Controller, University Park Document transmitted herewith contains sensitive unclassified i nformation.

When separated from encl osure(s), thi s document i s uncontrolled.

Offici al Uge Only Propriet ary Iflforfflatiofl Withhe l d under 10 CFR 2. 390

ATTACHMENT A - Penn State University Audited Financial Statements

,Z, PennState Sarn F. Thorndike Senior Vice President for Finance and Business/ Treasurer AFFIDAVIT (814) 865-6574 FAX: (814) 863-8685 The Pennsylvania State University 208 Old Main University Park. PA 16802-1503 December 15, 2025 (1) I am the Senior Vice President for Finance & Business/Treasurer of The Pennsylvania State University (the "University"), and as such, I have been specifically delegated the function of reviewing confidential information sought to be withheld from public disclosure in connection with the University submittals to the Nuclear Regulatory Commission (the "Commission"), and am authorized to apply for its withholding on behalf of the University.

(2) I am making this Affidavit in conformance with the provisions of 10 CFR Section 2.390 of the Commission's regulations and in conjunction with the University's submission of the Independent Accountant's Report on Applying Agreed-Upon Procedures for the year ended June 30, 2025 related to the University's annual financial test and self-guarantee.

(3) Pursuant to the provisions of paragraph (b)(4) of Section 2.390 of the Commission's regulations, the following is furnished for consideration by the Commission in determining whether the information sought to be withheld from public disclosure should be withheld.

(i) The information sought to be withheld from public disclosure is owned and has been held in confidence by the University.

(ii) The information, off-balance sheet exposures disclosed within the Independent Accountant's Report on Applying Agreed-Upon Procedures for the year ended June 30, 2025 sought to be withheld from public disclosure is not available in public sources and is not required to be disclosed by the University for purposes other than as part of the Independent Accountant's Report on Applying Agreed-Upon Procedures for Commission purposes related to Appendix E to 10 CFR Part 30.

(iii) The information is being transmitted to the Commission in confidence and, under the provisions of 10 CFR 2.390; it is to be received in confidence by the Commission.

The facts set forth in this Affidavit are true and correct to the best of my knowledge, information, and belief.

Dr. Sara F. Thorndike Senior Vice President for Finance & Business/Treasurer The Pennsylvania State University Transmitted herewith are proprietary versions of documents furnished to the NRC in connection with requirements of Appendix E to 10 CFR Part 30 for Commission review and approval. Non-proprietary versions of the documents are not provided as they essentially would consist of blank pages.

University Senior Leadership THE PENNSYLVANIA STATE UNIVERSITY as of November 6, 2025 NEELI BENDAPUDI President ANDREW READ Senior Vice President for Research MICHAEL WADE SMITH Senior Vice President and Chief of Staff FOTIS SOTIROPOULOS Executive Vice President and Provost SARA THORNDIKE Senior Vice President for Finance and Business/Treasurer This publication is available In alternative media on request. Penn State Is an equal opportunity employer and is committed to providing employment opportunities to all qualified applicants without regard to race, color, religion, age, sex, sexual orientation, gender Identity, national origin, disability or protected veteran status. MPC S171147

Table of Contents University Senior Leadership..................................................................... inside front cover Letter from the Senior Vice President for Finance and Business/Treasurer...................... 2 Financial Overview................................................................................................................ 4 Operating Results................................................................................................................................................................................ 4 Financial Position................................................................................................................................................................................ 8 Investments........................................................................................................................................................................................ 1 O Capital Assets and Debt................................................................................................................................................................. 11 Research and Sponsored Programs........................................................................................................................................... 13 Looking Ahead.................................................................................................................................................................................. 14 Independent Auditor's Report............................................................................................ 16 Consolidated Financial Statements.................................................................................... 18 Notes to Consolidated Financial Statements..................................................................... 23 Board of Trustees........................................................................................ inside back cover

2 tiJ PennState Letter from the Senior Vice President for Finance and Business/Treasurer It is my pleasure to present the audited financial statements for The Pennsylvania State University for the fiscal year that ended on June 30, 2025. This report offers a comprehensive look at the University's financial health, Illustrating our continued commitment to sound financial stewardship in support of our core mission of teaching, research, and service.

This past fiscal year has been one of significant progress and notable achievements, building on the foundation established in fiscal year 2024. Our focus on operational effectiveness, strategic investments, and revenue enhancement has yielded positive results, positioning the University for continued success.

The key highlights and updates from the last fiscal year include:

Financial stewardship and budget management

Net assets increased by $1.06 billion in FY2025, driven by strong operating results at both the University and Penn State Health, as well as positive non-operating activities (notably unrealized investment gains).

As a result of diligent financial management, the University balanced the FY2025 Education and General (E&G) budget one year earlier than planned even with modest tuition increases and stagnant general support funding from the Commonwealth that hasn't increased since 2019-2020.

The University was able to transfer funds to the University's capital reserves to address deferred maintenance needs, helping to curb the growth of our maintenance backlog.

THE PENNSYLVANIA STATE UNIVERSITY

Strategic investments and initiatives Building on the success of the new budget allocation model introduced in FY2024, the University has continued to fund strategic priorities effectively.

Penn State invested $322 million of University funds on research in FY2025, an increase of $22 million on the record-breaking spend over the previous fiscal year.

The Office of Investment Management, under the oversight of the Penn State Investment Council, continued its strong performance. The 10-year annualized return as of June 30, 2025, for the long-term investment pool was 8.80%.

Targeted investments were made to attract and retain top faculty talent, including seed grants, retention packages, and professional development opportunities.

FY202 5 was a record-breaking year for fundraising, with notable increases in giving to Athletics (Beaver Stadium Revitalization), Engineering, and Outreach.

The Finance and IT Optimized Service Teams (OST) are reshaping administrative support services across the institution.

Capital projects and infrastructure enhancements The 2024-28 Capital Plan continues to guide investment in renewing and modernizing campus facilities.

Significant construction and renovation projects progressed across Penn State, including the Sackett Building renovation, the new Physics Building, the new Classroom Building, and the ongoing renewal of the Pollock Residence Halls at University Park and new academic buildings at Abington and Harrisburg campuses.

The University also moved forward with crucial infrastructure projects and system renewals.

Health system growth Penn State Health demonstrated strong financial performance throughout the fiscal year, driven by increased patient volumes and effective expense management.

Community hospitals within the system, such as Hampden and Lancaster Medical Centers, showed strong growth.

As we move forward, the University remains committed to strengthening its financial position through strategic investments, operational excellence, and sound fiscal practices. This continued focus will enable us to advance our mission and deliver on our commitments to our students, faculty, staff, and the Commonwealth of Pennsylvania.

AUDI TED FINANCIAL STATEMENTS FY2025 Sara F. Thorndike, Ed.D., MBA, CPA Senior Vice President for Finance and Business/Treasurer Chief Financial Officer 3

Financial Overview The following section provides summarized results of the financial performance and position of the Pennsylvania State University ("Penn State". or the "University"), and as a result it should be read alongside the accompanying consolidated financial statements and notes to the financial statements. All figures in this section are consolidated and - unless specifically noted - include the University, Penn State Health, and other subsidiaries (see note one to the financial statements).

OPERATING RESULTS Penn State's net assets increased by $1.06 billion during the fiscal year ended June 30, 2025 (FY2025), a result of strong operating results at both the University and at Penn State Health alongside positive non-operating activities, particularly in the form of unrealized investment gains. A condensed view of the consolidated statements of activities follows:

2025 2024 Operating revenues University - excluding health care related

$5,158

$4,890 Health care related 4,568 4,294 Total 9,726 9,184 Operating expenses University - excluding health care related 4,646 4,437 Health care related 4,496 4,231 Total 9,142 8,668 Operating income (loss)

University - excluding health care related 512 453 Health care related 72 63 Total 584 516 Nonoperating activities Related to postretirement benefit expense (36)

(6)

Related to investments 412 450 Other 85 37 Total 461 481 Increase in net assets - Penn State University 1,045 997 Change in noncontrolling interest 17 4

Increase in total net assets 1,062 1,001 Beginning net assets 13,755 12,754 Ending net assets

$ 14,81 7

$13,755 4

THE PENNSYLVANIA STATE UN IVERSITY

Exhibit 1, which follows. shows a breakdown of operating expenses and revenues for the last five fiscal years (distinguishing between healthcare related revenues/ expenses and the rest of the University).

$5,000

$4,000

$3,000

$2,000

$1,000 Operating Revenues Exhibit 1: Operating Revenues and Expenses

($ millions) 2021 2022 Revenues - excl. health care

Revenues - health care 2023 2024 Expenses - excl. health care Expenses - health care 2025 In FY2025, University operating revenues (excluding Penn State Health) topped $5 billion for the first time, exceeding FY2024 by $268 million, or 5.5%, with notable increases in gifts/pledges ($157 million), tuition/fees ($53 million), and grants/contracts ($52 million).

FY2025 was a record-breaking year for fundraising at Penn State, with significant increases in giving experienced in units including Intercollegiate Athletics (mostly connected to the Beaver Stadium Revitalization project), Engineering, and Outreach, to name a few.

Tuition/fee revenues reflect the rate increases approved by the Board of Trustees in July of 2023 (at which point the tuition and fee schedules for both fiscal years 2024 and 2025 were presented and approved): University Park tuition increased 2% and 4% for PA residents and non-residents, respectively, while Commonwealth Campus tuition rates were unchanged for PA residents and raised by 1% for non-residents. World Campus tuition increased by 1% for all students.

While grants and contracts revenue from the Commonwealth declined in FY2025 due to the timing of capital-project specific grants from the PA Department of General Services. federal and private grant revenues increased by

$53 million and $17 million. respectively, with the Applied Research Lab seeing the largest increase - up $46.8 million from FY2024 - in federal grants and contracts revenue.

Penn State last received an increase in the general support portion of its state appropriation in FY2020. Penn State receives appropriations of around $5,796 per Pennsylvania resident student, which is the lowest per-student appropriation of any public university in Pennsylvania and well below the national average.

AUDITED FINANCIAL STATEMENTS FY2025 5

Exhibit 2, which follows, shows the twenty-year trend of state appropriations to Penn State, through FY2026.

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 Exhibit 2: Commonwealth Appropriations Trends

$203

$1ff~

$261

$214

$14]S45I

$273

$276

$278

$328

$334

$318

$295

$230

$20§

$5211 $302

$305 i

$237

$23 ~

$242

$27 M SSS

$242 S27 - fSSJI

$242

$27 ~

$314

$324

$327

$330

$334

$242 S30 -

$58.

S242

$34 ~

-$242

$34.-sssw University General Support Penn CoUege of Technology c Agricutture

Lend Scrip In FY2025 Penn State Health operating revenues topped $4.5 billion for the first time, exceeding FY2024 by

$274 million, or 6.4%, with notable increases in net patient services revenues associated with patient volumes and mix of services.

Recent trends in consolidated operating revenues are illustrated below in exhibit 3:

6 SS,000

$4,500

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500 I

$1,000 Exhibit 3: Operating Revenues by Source

($ mllllons) 11 11.1111 ****

I ill l *.

I

$500 NII IUldon 111d Hullh 1ys1tm Gt1m1111d Auxiliary tnUrptlHI lnvOIVTIOl'II Com rnonwtollll 011,or 10\\IICII lncomt ot PA fotl

revenue, c:ontr&tl 2021 2022 2023 2024 2025 THE PENNSYLVA N IA STATE UN IVERSITY

Operating Expenses University operating expenses - excluding Penn State Health - increased by $209 million, or 4.7%, in FY2025.

Personnel expense makes up $156 million of the overall increase and is due to annual merit increases, rising group insurance expense, and voluntary separation payments for faculty and staff employed at Commonwealth Campuses.

Depreciation and interest expense increased by a combined $15 million, while other non-personnel expenses increased a total of $39 million due in large part to inflationary forces.

Penn State Health operating expenses increased by $256 million, or 6.3%, in FY2025. Personnel expense makes up $180 million of the overall increase and is due to annual merit increases and medical insurance expense. Medical supplies and drugs increased by $85 million and is directly attributed to the net revenues derived from patient mix and volumes, while other non-personnel expenses remained flat or slightly reduced from FY2024.

Recent trends in consolidated operating expenses are illustrated below in exhibits 4 and 5.

Exhibit 4: Operating Expenses by Natural Cla&Sification

($ mllllons)

Salaries and wages Benefits Supplies and services Depreciation Plant operation and maintenance Interest

$1,000

$2,000 2021 2022 2023 2024 2025

$3,000 Exhibit 5: Operating Expenses by Function

($ mllllons)

$4,500

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500 s-I I

I I

$-4,000 Academic and Health system Research Auxlllary lnstlrutlonal Public service student expen1es services enterprtse, support 2021 2022 2023 2024 2025 Non-Operating Activities Non-operating revenues had a significant impact on Penn State's overall increase in net assets during FY2025, with unrealized investment gains and other non-operating investment income specifically accounting for roughly 39% of the $1.06 billion net increase. Non-operating, endowed, gifts and pledges also added $107 million to the bottom line in FY2025.

AUDITED FINANCIAL STATEMENTS FY2025 7

FINANCIAL POSITION Penn State's assets totaled just under $22.5 billion at the end of FY2025, an increase of $1.78 billion, or 8.6%, from June 30, 2024. Contributing to the increase in assets, the University's liabilities increased by $715 million, of which

$532 million represents net additional debt on the balance sheet at year-end for planned capital projects.

Over the last ten fiscal years, Penn State's consolidated net assets (i.e. the residual of assets less liabilities) have grown at an annualized rate of 6.8%. Exhibit 6 illustrates ending consolidated net asset balances for the last ten fiscal years.

Exhibit 6: Consolidated Net Assets

($ billions)

$16.0

$14.8

$14.0

$12.4

$12.0

$9.9

$10.5

$10.0

- -- $12.9

$10.0

$11.0

$12.0

$8.0

$10.4

$10.5

$6.0

$7.8

$8.5

$9.0

$8.3

$7.3

$4.0

$2.0

$0.9

$1.1

$1.5

$1.6

$2.0

$1.9

$1.7

$1.8 S1.9 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 consolidated University and Other Subs.

Penn State Health 8

THE PENNSYLVAN IA STATE UNIVERSITY

A condensed version of Penn State' statement of financial position (i.e. balance sheet) follows, along with a graphical representation of the consolidated statement of financial position at June 30, 2025 in exhibit 7.

June 30, 2025 June 30, 2024 Assets Cash and cash equivalents

$1,321 Receivables, net 1,307 Investments 11,249 Property, plant, and equipment, net 7,225 Deposits held by bond trustees 661 Other assets 729 Total assets

$22,492 Liabilities Accounts payable and accrued expenses

$1,177 Debt 4,304 Accrued post-retirement liability 1,184 Other liabilities 1,010 Total liabilities 7,675 Net assets Without donor restrictions 9,992 With donor restrictions 4,825 Total net assets 14,817 Total liabilities and net assets

$2 2,492 Exhibit 7: Consolidated Financial Position at June 30, 2025

($ millions) 100%

90%

801/4 70,,

60%

50%

40%

30%

20%

10%

0%

Net Assets -

Unrestricted

$1,336 1,240 10,296 7,053 104 686

$20,715

$1,045 3,772 1,191 952 6,960 9,296 4,459 13,75 5

$20,715 Assets Llabllltles & Net Assets

Other assets in exhibit 7 above includes deposits held by bond trustees.

AUDITED FINANC IAL STATEMENTS FY2025 9

INVESTMENTS Penn State's Office of Investment Management (OIM) is tasked with the day-to-day management and administration of the University's long-term and operating investments. Under the governance and oversight of the Penn State Investment Council (PSIC) and Board of Trustees, OIM executes the University's investment policy statement and manages the University's investments by taking a reasonable amount of risk. The investment objective is to achieve returns, after fees and expenses, that meet the University's cash needs and keep up with inflation.

The Long-Term Investment Pool (LTIP) is the University's investment portfolio containing most of its donor-endowed funds, in addition to other funds functioning as endowments and University reserve funds, all with long-term investment objectives. This commingled pool operates similarly to a mutual fund, with each participating fund owning units of the pool.

Operating Investments are weighted heavily towards fixed income owing to less of a risk tolerance as that pool contains working capital of the University as well as a portion of its reserve funds. During FY2025 roughly $1.0 billion of the University's funds were moved from Operating Investments to the LTIP in order to deploy unrestricted investments to more optimally fund capital and deferred maintenance needs over the medium to long term.

10

$12,000

$10,000

$8,000

$4,000 I

11

Exhibit 8: Investments Growth

($ millions)

$3,507

$3,376

$6,484

$6,088

$6,242

$8,632.

7,218

$2,000 s-

$3,642 $3,9S7 $4,290

$4,548

$4,751 2016 2017 2018 2019 LTIP 2020 2021 2022 2023 2024 2025 Operating Investments THE PENNSYLVANIA STATE UNIVERSITY

The LTIP had a one-year return of 8.4% in FY2025 and annualized 3-, 5-, 10-, and 20-year returns of 8.1%, 10.5%, 8.8%,

and 8.8%, respectively. The 3-, 5-, 10-, and 20-year annualized returns all exceed the LTIP's tactical Strategic Allocation Benchmark (or "SAB"'). as well as a passive composite benchmark consisting of 70% MSCI All Country World Index and 30% Bloomberg US Aggregate Bond Index (a 70/30 stocks/bonds passive portfolio).

Exhibit 9: LTIP Annualized Returns vs. Benchmarks 1,.0%

12.5%

12.0%

11.5%

10.0o/.

6.0%

4.0%

2.03/4 0.0%

1-Year 3-Year 5-Year 10-Year 20-Year

LTIP

SAB 70/30 Portfolio CAPITAL ASSETS AND DEBT Penn State entered into year two of its current capital campaign in FY2025, which is expected to total roughly

$2.18 billion over the span of the campaign. The 2024-2028 capital plan is a maintenance-centric plan focused on system renewals, maximizing funding impact, and minimizing administrative burden; $1.19 billion of the plan is tied to self-supporting units, including Intercollegiate Athletics, Auxiliary and Business Services, and the Applied Research Laboratory.

Exhibit 10 illustrates recent trends in capital expenditure, assets under construction, and depreciation expense.

$1,600.0

$1,AOO.O

$1,200.0

$1,000.0

$800.0

$600.0

$400.0

$200.0 Exhibit 10: Assets Under Construction, Capital Expenditures, and Depreciation

($ mllllons) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Assets under construction c..,ital expenditures Depreciation 1 SAB consists of index returns representing the following asset classes: equities (54%), fixed income (18%), diversifying strategies (12%), and real assets (16%).

AUDITED FINANCIAL STATEMENTS FY2025 11

Major University capital expenditures in FY2025 included over $463 million in building construction costs, with the most significant projects - based on dollars spent in FY2025 - being the Beaver Stadium renovation ($113 million), the Engineering Collaborative Research and Education Building ($42 million), and the Susan Welch Liberal Arts Building

($27 million).

Improvements to land and infrastructure totaled $31 million in FY2025, and spend on equipment and information technology capital assets totaled $91 million.

Major capital expenditures for Penn State Health included construction on the 3rd Floor Hospital - Main and South Addition at the Hershey Medical Center ($35 million) and the Hampden Cancer Center ($19 million).

The University's portfolio of outstanding long-term debt is the result of borrowings to fund capital projects as well as specific borrowing made to prefund a significant portion of the University's unfunded actuarial liability with the Commonwealth of Pennsylvania's State Employees' Retirement System (SERS). In April of 2020, the University entered into an agreement with SERS to prefund $1.061 billion of its unfunded liability in exchange for credits against future contributions ($93.3 million of credits in both FY2025 and FY2024). The University issued bonds in May of 2020 (series 20200) in the amount of $1.065 billion in connection with this prefunding, and the resulting increase in the University's debt load is evident as illustrated on exhibit 11.

$5,000

$4,500

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500 Exhibit 11: Long-Term Debt

($ millions) iii 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 University($)

Penn Stato Health($)

-Total debt to not assets (%)

40%

35" 30%

25" 2°"

15" 10%

The University issued three new series of bonds in FY2025:

12 Series 2024, tax-exempt, in the amount of $157.9 million, issued in August 2024 to fund capital projects associated with the 2024-2028 capital plan.

Series 2025A, tax-exempt, in the amount of $515.7 million, issued in June 2025 to fund capital projects associated with the 2024-2028 capital plan and to refund the series 2015A and 2015B bonds.

Series 20258, taxable, in the amount of $60 million, issued in June 2025 to fund construction of the Applied Research Lab's Project Discovery building.

THE PENNSYLVANIA STATE UNIVERSITY

RESEARCH AND SPONSORED PROGRAMS Penn State is a top 30 U.S. research university, as designated by the National Science Foundation's Higher Education Research and Development (HERD) survey, with twelve disciplines - from psychology to atmospheric science and materials engineering - ranking in the top ten for research expenditures.

Exhibit 12 illustrates the growth in research expenses - based on functional expense classification - over the last ten fiscal years.

$1,300

$1,200

$1,100

$1,000

$900

$800

$700

$600

$500

$799 Exhibit 12: Research Expenses

($ millions)

$1,284 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Over the last ten years, research expenses have grown at an annualized rate of 5.4%; the annualized growth since fiscal year 2021, however, is 10.4%, with FY2025 research functional spend reaching $1.3 billion.2 The University's research expenses are funded by federal, private, state, and other sources; the largest federal sponsor is the Office of Naval Research (an executive branch agency within the U.S. Department of Defense). Penn State's investment of University funds for research increased by 6% in FY2025. The breakdown of FY2025 research funding follows in exhibit 13.

Exhibit 13: Research Funding In FY2025 Commonwealth of PA, 3%

2 There are certain reconciling items between research functional expenses in the audited financial statements and the total research spend amount reported externally based on industry standards, which is $1.4 billion.

AUD ITED FINANCIAL STATEMENTS FY2025 13

LOOKING AHEAD University Strategic Planning Penn State is underway with phase three of its strategic plan to elevate the University's standing as a world-class institution through the advancement of six priority areas:

Enhancing student success Growing (inter)disciplinary research excellence Fostering diversity, equity, inclusion and belonging Increasing land-grant impact Transforming health care through academic and clinical synergy Transforming internal operations In this third phase, feedback from the broader community has been incorporated into a revised institutional plan, and unit-level planning is underway through the remainder of 2025, with a goal to begin implementing institutional and unit-level plans starting in January 2026.

The various phases of the strategic planning process are illustrated in the graphic below.

14 THE PENNSYLVANIA STATE UNIVERSITY

Optimized Service Teams Penn State is progressing in its design and roll-out of cross-functional Optimized Service Teams, or OSTs, in the following areas: information technology, finance, facilities and safety.

Optimized service teams encourage communication and cooperation between units to consolidate expertise to deliver comprehensive solutions, promote best practices, and respond efficiently to the needs of the University community.

Within the OSTs, processes and procedures are standardized across units to reduce duplication, save time and resources, and improve consistency. Teams focus on delivering responsive, high-quality service and will regularly review operations and seek feedback to identify opportunities for enhancement.

The IT OST launched in July 2025, and the Finance OST is scheduled to begin a phased launch beginning in November 2025 and continuing through spring of 2026.

Future of Commonwealth Campuses In May 2025, the Board of Trustees approved the closures of seven3 of Penn State's Commonwealth Campuses at the end of the 2026-2027 academic year as part of a strategic effort to address ongoing financial challenges and to ensure the long-term sustainability of the institution. This decision was made following an in-depth review of enrollment trends.

demographic shifts, and financial pressures. Collectively, these campuses represent less than 4% of Penn State's student body and are among the smallest in terms of enrollment. Every student who begins a degree at a closing campus will have the opportunity to complete their degree at Penn State.

The University plans to continue to invest in the remaining thirteen Commonwealth Campuses. Operations at the closing campuses will continue as normal through June 2027, with no significant reduction in the use of facilities or services expected prior to closure.

3 Penn State DuBois, Fayette, Mont Alto, New Kensington, Shenango, Wilkes-Barre, and York.

AUDITED FINANCIAL STATE M ENTS FY2025 15

Qlante Thoran To the Board of Trustees The Pennsylvania State University Independent Auditor's Report Report on the Audits of the Consolidated Financial Statements Opinion Plante & Moran, PLLC Suttt 100 1111 ~

A,.

Eaot l.t>"""1g. Ml 48823 Toi: 5 17.332.6200 Fax* & 17.332.8502 p1qr,1emoron com We have audited the consolidated financial statements of The Pennsylvania State University and its subsidiaries (the "University"), which comprise the consolidated statement of financial position as of June 30, 2025 and 2024 and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the University as of June 30, 2025 and 2024 and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audits of the Consolidated Financial Statements section of our report. We are required to be independent of the University and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the University's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued or available to be issued.

Auditor's Responsibilities for the Audits of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that audits conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

~PRAXITY 16 THE PENNSYLVANIA STATE UNIVERSITY

To the Board of Trustees The Pennsylvania State University In performing audits in accordance with GAAS and Government Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audits.

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the University's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.

Additional Information Management is responsible for the accompanying list of university officers, letter from the senior vice president for finance and business/treasurer, financial overview, and list of the board of trustees, which are presented for the purpose of additional analysis and are not a required part of the consolidated financial statements. Our opinion on the consolidated financial statements does not cover such information, and we do not express an opinion or any form of assurance thereon.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 6, 2025 on our consideration of The Pennsylvania State University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of The Pennsylvania State University's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering The Pennsylvania State University's internal control over financial reporting and compliance.

November 6, 2025 AUDITED FINANCIAL STATEMENTS FY2025 17

Consolidated Financial Statements THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ASSETS Current assets:

Cash and cash equivalents Short-term investments Deposits held by bond trustees Deposits held for others Accounts receivable, net of allowances Contributions receivable, net Loans to students, net of allowances Inventories Prepaid expenses and other assets Total current assets Noncurrent assets:

Deposits held by bond trustees Contributions receivable, net Loans to students, net of allowances Total investment in plant, net Beneficial interest in perpetual trusts Investments Operating lease right-of-use assets, net Other assets Total noncurrent assets Total assets JUNE 30, 2025 AND 2024 (in thousands)

See notes to consolidoted finonciol statements.

June 30, 2025

$ 1,320,893 1,264,223 29,908 1,025,486 56,824 2,152 84,788 131,626 3,915,900 661,054 203,562 18,866 7,224,770 36,725 9,984,763 171,251 275,583 18,576,574

$22,492,474 t

I

$ 1,335,572 1,122,093 103,673 39,089 1,031,786 39,169 2,580 85,358 126,528 3,885,848 144,313 22,252 7,053,208 32,105 9,174,349 163,453 239,500 16,829,180

$20,715,028 18 THE PENNSYLVANIA STATE UNIVERS ITY

THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LIABILITIES AND NET ASSETS JUNE 30, 2025 AND 2024 (in thousands)

June 30, 2025 Current liabilities:

Accounts payable and other accrued expenses 1,177,469 Deferred revenue 214,907 Long-term debt 123,090 Present value of annuities payable 8,136 Accrued postretirement benefits 59,800 Refundable United States Government student loans 2,379 Operating lease liabilities 34,646 Total current liabilities 1,620.427 Noncurrent liabilities:

Deposits held in custody for others 26,467 Long-term debt 4,181,354 Present value of annuities payable 73,533 Accrued postretirement benefits 1,124,235 Refundable United States Government student loans 7,616 Operating lease liabilities 144,705 Other liabilities 497,342 Total noncurrent liabilities 6,055,252 Total liabilities 7,675,679 Net assets:

Without donor restrictions 9,991,926 With donor restrictions 4,824,869 Total net assets 14,816,795 Total liabilities and net assets

$22,492,474 See notes to consolldoted flnonclol statements.

AUDITED FINANCIAL STATEMENTS FY2025 1,044,501 229,993 121,436 8,522 56,600 3,200 30,661 1,494,913 29,689 3,651,284 62,154 1,133,636 10,107 141,046 437,437 5,465,353 6,960,266 9,296,274 4,458,488 13,754,762

$20,715,028 19

THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2025 (in thousands)

Without Donor Restrictions With Donor Restrictions Operating revenues and other support:

Tuition and fees, net of discounts of $308,220 2,064,455 Commonwealth of Pennsylvania -

Appropriations 333,777 Special contracts 119,704 Department of General Services projects 102,272 United States Government grants and contracts 884,673 Private grants and contracts 179.490 Gifts and pledges 206,650 93,419 Investment return, net 258,579 142,360 Sales and services of educational activities 114,374 204 Auxiliary enterprises 619,418 Health System revenue 4,567,539 Other sources 39,130 Net assets released from restrictions 147,000 (147,000)

Total operating revenues and other support 9,637,061 88,983 Operating expenses:

Educational and general -

Academic and student services 2,094,127 Research 1,284,348 Public service 240,563 institutional support 443,602 Total educational and general 4,062,640 Auxiliary enterprises 583,793 Health System expense 4,495.371 Total operating expenses 9,141,804 Increase In net assets from operating activities 495,257 88,983 Nonoperating activities:

Gifts and pledges 107,049 Current year investment returns 237,605 174,455 Changes in funds held by others In perpetuity 4,620 Loss on disposal of assets (7,509)

Nonperiodic change In postretirement benefit plan (62,508)

Other components of net periodic postretlrement benefit cost 26,266 Actuarial adjustment on annuities payable (19,133)

Net asset transfer due to donor intent (10,407) 10,407 Increase In net assets from nonoperating activities 183,447 277,398 Increase In net assets - The Pennsylvania State University 678,704 366,381 Noncontrolling Interest:

Excess of revenues over expenses 16,948 Increase In net assets - noncontrolling Interest 16,948 Increase In total net assets 695,652 366,381 Net assets at the beginning of the year 9,296,274 4,458,488 Net assets at the end of the year

$ 9,991,926

$ 4,824,869 See notes to consolidated flnonciol statements.

2,064,455 333,777 119,704 102,272 884,673 179,490 300.069 400,939 114,578 619,418 4,567,539 39,130 9,726,044 2,094,127 1,284,348 240,563 443,602 4,062,640 583,793 4,495,371 9,141,804 584,240 107,049 412,060 4,620 (7,509)

(62,508) 26,266 (19,133) 460,845 1,045,085 16,948 16,948 1,062,033 13,754,762

$ 14,816,795 20 THE PENNSYLVANIA STATE UNIVERSITY

THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2024 (in thousands)

Without Donor Restrictions With Donor Restrictions Operating revenues and other support:

Tuition and fees, net of discounts of $300,968 2,011,793 Commonwealth of Pennsylvania -

Appropriations 329,777 Special contracts 100,002 Department of General Services projects 139,456 United States Government grants and contracts 832,021 Private grants and contracts 162,542 Gifts and pledges 114,704 28,048 Investment return, net 287,761 136,375 Sales and services of educational activities 102,496 269 Auxiliary enterprises 608,084 Health System revenue 4,294,189 Other sources 36,546 Net assets released from restrictions 184,229 (184,229)

Total operating revenues and other support 9,203,600 (19,537)

Operating expenses:

Educational and general -

Academic and student services 2,034,611 Research 1,200,191 Public service 226,977 Institutional support 441,279 Total educational and general 3,903,058 Auxiliary enterprises 533,689 Health System expense 4,231,258 Total operating expenses 8,668,005 Increase (decrease) In net assets from operating activities 535,595 (19,537)

Nonoperating activities:

Gifts and pledges 82,528 Current year investment returns 226.730 223,069 Changes In funds held by others in perpetuity 3,988 Loss on disposal of assets (37,953)

Nonperiodic change In postretirement benefit plan (32,101)

Other components of net periodic postrelirement benefit cost 26.232 Actuarial adjustment on annuities payable (11,627)

Net asset transfer due to donor Intent (10,409) 10,409 Increase In net assets from nonoperating activities 172,499 308,367 Increase in net assets - The Pennsylvania State University 708,094 288,830 Noncontrolling Interest:

Excess of revenues over expenses 3,619 Increase In net assets - noncontrolling interest 3,619 Increase In total net assets 711,713 288,830 Net assets at the beginning of the year 8,584,561 4,169,658 Net assets et the end of the year

$ 9,296,274

$ 4,458,488 See notes to consohdated financial statements.

AUDITED FINANCIAL STATEMENTS FY2025 2,011,793 329,777 100,002 139,456 832,021 162,542 142,752 424,136 102,765 608,084 4,294,189 36,546 9,184,063 2,034,611 1,200,191 226,977 441,279 3,903,058 533,689 4,231,258 8,668,005 516,058 82,528 449.799 3,988 (37,953)

(32,101) 26,232 (11,627) 480,866 996,924 3,619 3,619 1,000,543 12,754,219

$ 13,754,762 21

THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2025 AND 2024 (in thousands)

June 30, 2025 Cash flows from operating activities:

Increase In net assets 1,062,033 Adjustments to reconcile change In net assets to net cash provided by operating activities -

Actuarial adjustment on annuities payable 19,133 Contributions restricted for long-term Investment (108,019)

Interest and dividends restricted for long-term Investment (108.305)

Net realized and unrealized gains on long-term Investments (639,863)

Depreciation and amortization expense 579,194 Noncash lease expense (153)

Write-offs and disposals of assets 13,516 Contributions of land, buildings and equipment (15,773)

Provision for bad debts 3,662 (Increase) decrease In deposits held for others (3,040)

Increase In receivables (73,195)

Decrease In Inventories 570 Increase in prepaid expenses and other assets (45,801)

Increase In accounts payable and other accrued expenses 192,873 (Decrease) Increase in deferred revenue (15,086)

Decrease in accrued postretirement benefits (6,201)

Net cash provided by operating activities 855,545 Cash flows from Investing activities*

Purchase of land, buildings and equipment (745,401)

(Increase) decrease In deposits held by bond trustees (557,055)

Repayments and advances on student loans (929)

Collections on student loans 3,210 Purchase of Investments (4,790,380)

Proceeds from sale of Investments 4,477.702 Net cash used in Investing activities (1,612,853)

Cash flows from financing activities*

Contributions restricted for long-term investment 108,019 Interest and dividends restricted for long-term investment 108,305 Payments of annuity obligations (8,141)

Proceeds from long-term debt 789,400 Principal payments on long-term debt (260,775)

Refundable federal student loans (2,851)

Net cash provided by financing activities 733,957 Net (decrease) Increase in unrestricted and restricted cash and cash equivalents (23,351)

Unrestricted and restricted cash and cash equivalents at the beginning of the year 1,369,127 Unrestricted and restricted cash and cash equivalents at the end of the year 1,345,776 Supplemental disclosures of cash flow Information (Notes 2 and 9).

See notes to consolldoted financial statements.

1,000,543 11,627 (79,664)

(78,710)

(730,887) 559,566 2,517 54,548 (1,438)

(11,995) 2,059 (77,902) 5,214 (35,649) 137,398 13,610 (30,773) 740,064 (654,877) 165,141 (909) 4,046 (2,757,868) 2,810,326 (434,141) 79,664 78,710 (8,524)

(122,799)

(3,174) 23,877 329,800 1,039,327 1,369,127 22 THE PENNSYLVANIA STATE UNIVERSITY

Notes to Consolidated Financial Statements FOR THE YEARS ENDED JUNE 30, 2025 AND 2024

1. THE UNIVERSITY AND RELATED ENTITIES The Pennsylvania State University ("University"), which was founded in 1855 as an instrumentality of the Commonwealth of Pennsylvania ("Commonwealth" or "Pennsylvania"), is organized as a non-profit corporation under the laws of the Commonwealth. As Pennsylvania's land grant university, the University is committed to improving the lives of the people of Pennsylvania, the nation and the world through its integrated, tri-part mission of high-quality teaching, research and outreach. In addition to its main campus located in University Park, PA, the University has a physical presence throughout the Commonwealth at its multiple commonwealth campuses, and a virtual presence globally via its World Campus.

As a state-related institution, the University receives an annual appropriation from the Commonwealth. The Commonwealth's General Assembly is not obligated to appropriate funding to the University, and there is no assurance that future appropriations will be made at either historical levels or to the extent requested by the University. The University's operating appropriation from the Commonwealth was $333.8 million and $329.8 million for the years ended June 30, 2025 and 2024, respectively.

Governance of the University, including oversight of administration and financial operations, is vested solely with the University's Board of Trustees (the "Board"). The Board is comprised of thirty-eight members. Thirty-six of the trustees are voting members, nine of whom are either appointed by the Governor of the Commonwealth or are cabinet-level members of the Governor's administration. The remaining voting members are elected by alumni (nine), elected by agricultural societies active in the Commonwealth (six), elected by the Board representing business and industry (six), elected by the Board as at-large members (three), a student trustee (one), an academic trustee (one), and the immediate past president of the Penn State Alumni Association (one).

BASIS OF PRESENTATION The financial statements of the University include, on a consolidated basis, the consolidated financial statements of Penn State Health ("Health System"), a Pennsylvania non-profit corporation, and its wholly owned subsidiaries (see Note 13 for additional information), and the financial statements of The Corporation for Penn State and its subsidiaries

("Corporation"). The Corporation is a non-profit member corporation organized in 1985 for the exclusive purpose of benefiting and promoting the interests of the University, the Corporation's sole member. The Corporation's financial statements consist primarily of the assets and revenues of The Pennsylvania College of Technology ("Penn College"),

a wholly owned subsidiary of the Corporation. All transactions among the University, the Health System, and the Corporation have been eliminated.

2.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The University's consolidated financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (GAAP). The Financial Accounting Standards Board (FASS) Accounting Standards Codification (ASC) is the source of authoritative GAAP.

The University's consolidated financial statements include statements of financial position, activities and cash flows.

In accordance with FASS ASC requirements. net assets and the changes in net assets are classified as with donor restrictions or without donor restrictions.

Net assets with donor restrictions are net assets subject to donor-imposed restrictions, either in perpetuity or for a specified time or purpose. Net assets with perpetual restrictions consist primarily of the historical amounts of endowed gifts. Additionally, contributions receivable and remainder interests which are required by donors to be retained in perpetuity are included at their estimated net present values. Net assets restricted by time or purpose consist of contributions receivable and remainder interests that are not required to be held in perpetuity. In addition, endowment appreciation and net unrealized losses on donor-restricted endowment funds for which historical cost exceeds market value are included.

AUDITED FINANCIAL STATEMENTS FY2025 2 3

Net assets without donor restrictions are net assets not subject to donor-imposed restrictions. These net assets may be designated for specific purposes at the discretion of management or may otherwise be limited by contractual agreements with outside parties. Revenue from donor-restricted sources is reclassified as revenue without donor restrictions when the circumstances of the restriction have been fulfilled. Donor-restricted contributions whose restrictions are met within the same fiscal year are reported as revenue without donor restrictions. All expenses from operations are reported as a reduction of net assets without donor restrictions since the use of restricted contributions in accordance with donors' stipulations results in the release of the restriction.

USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts on the financial statements and the disclosure of investments, fair value measurements, postretirement benefits, and contingencies and commitments. Actual results could differ from those estimates.

REVENUE RECOGNITION Tuition Tuition revenue is recognized over the course of each semester (summer, fall, spring) as instruction is provided to students. Tuition is due from students by the beginning of each applicable semester. Overdue payments are reflected in accounts receivable as the University has an unconditional right to payment.

Tuition receipts of $71.7 million, included in deferred revenue at June 30, 2024, were recognized during the year ended June 30, 2025. Tuition receipts of $72.0 million, included in deferred revenue at June 30, 2023, were recognized during the year ended June 30, 2024. Institutional financial aid provided by the University for tuition and fees is reflected as a reduction of tuition and fee revenue. As tuition contracts have a duration of one year or less, the University has elected to apply the optional exemption prescribed by ASC 606-10-50-14 and, as such, has not disclosed the aggregate transaction price allocated to unsatisfied performance obligations or the time at which the revenue associated with these unsatisfied performance obligations is expected to be recognized. At June 30, unsatisfied performance obligations under tuition contracts relate solely to summer semester instruction to be provided in July and August of the subsequent year. Transaction prices for tuition and fees are determined and allocated based on the applicable published tuition and fees schedules.

Grants and Contracts Grants and contracts revenue is recognized over time as the eligible grant activities are conducted. Grants and contracts deemed to be exchange transactions fall under the scope of ASC Topic 606, Revenue from Contracts with Customers. The performance obligation for each grant or contract is deemed to be the research or program work itself. Work completed under grants and contracts does not result in assets that can be sold to other customers and the University is entitled to payment for the work completed to date. Grants and contracts that are deemed to be contributions fall under the scope of ASC Topic 958, Not-for-Profit Entities. These are deemed to be conditional contributions, as eligible expenditures must be incurred in order to have a right of release of funding from the sponsor.

Most grants and contracts are cost reimbursement basis, and incurred expenditures are periodically billed to the customer for reimbursement.

Grants and contracts receipts of $51.2 million, included in deferred revenue at June 30, 2024, were recognized during the year ended June 30, 2025. Grants and contracts receipts of $40.3 million, included in deferred revenue at June 30, 2023, were recognized during the year ended June 30, 2024. The University has entered into numerous grants and contracts, with periods of performance ending at various dates from July 1, 2025 through June 30, 2052. The estimated performance obligations remaining under these grants and contracts as of June 30, 2025 total $1.579 billion.

Transaction prices for grants and contracts are determined and allocated based on the budgets included in the respective award agreements.

Sales and Services of Educational Activities and Auxiliary Enterprises Revenues from sales and services of educational activities and auxiliary enterprises consist primarily of health services, housing and food services, intercollegiate athletics, campus operations, and hospitality services. Performance obligations associated with these contracts consist of the provision of goods or services, and significant judgment is involved to determine whether the performance obligations are satisfied over time or at a point in time. Typically, revenue associated with semester-based contracts, such as housing and food services, is recognized over the course of the semester as services are provided. For other contracts, such as health services, athletic ticket sales, hotel room 24 THE PENNSYLVAN IA STATE UNIVERSITY

charges, and other campus operations, revenue is recognized at a point in time, when the good or service is provided.

Contracts included in sales and services of educational activities and auxiliary enterprises are typically one year or less in length. As such, receipts Included in deferred revenue at June 30, 2024 and 2023 were fully recognized during the years ended June 30, 2025 and 2024. In addition, the University has elected to apply the optional exemption prescribed by ASC 606-10-50-14 and, as such, has not disclosed the aggregate transaction price allocated to unsatisfied performance obligations or the time at which the revenue associated with these unsatisfied performance obligations is expected to be recognized. At June 30, unsatisfied performance obligations under sales and services of educational activities and auxiliary enterprises relate primarily to summer semester housing and food services to be provided in July and August of the subsequent year, as well as athletic events held during the fall semester. Transaction prices for sales and services of educational activities and auxiliary enterprises are typically straightforward and explicitly stated in the contract.

Health System Patient care service revenue is reported at the amount that reflects the consideration to which the Health System expects to be entitled in exchange for providing patient care. These amounts are due from patients, third-party payors (including health insurers and government programs), and others and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Health System bills the patients and third-party payors several days after the services are performed or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

Performance obligations are determined based on the nature of the services provided by the Health System. Revenue for performance obligations satisfied over time is recognized based on actual charges incurred in relation to total expected (or actual) charges. The Health System believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Generally, performance obligations satisfied over lime relate to patients in the Health System's hospital receiving inpatient acute-care services or patients receiving services in the Health System's outpatient centers or other clinical settings. The Health System measures the performance obligation from admission into the hospital, or the commencement of an outpatient services or other visit, to the point when it is no longer required to provide services to that patient, which is generally at the time of discharge or completion of the outpatient services or other visit. Revenue for performance obligations satisfied at a point in time is generally recognized when goods are provided to the Health System's patients and customers in a retail setting (for example, pharmaceuticals and medical equipment) and the Health System does not believe it is required to provide additional goods or services related to that sale.

Because all of its performance obligations relate to contracts with a duration of less than one year, the Health System has elected to apply the optional exemption provided in ASC 606-10-50-14(a) and, therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations referred to above are primarily related to inpatient acute-care services at the end of the reporting period. The performance obligations for these contracts are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.

The Health System determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payers, discounts provided to uninsured patients in accordance with the Health System's policy, and implicit price concessions provided to uninsured patients. The Health System determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies, and historical experience. The Health System determines its estimate of implicit price concessions based on its historical collection experience with this class of patients.

Generally, patients who are covered by third-party payors are responsible for related deductibles and coinsurance, which vary in amount. The Health System also provides services to uninsured patients and offers those uninsured patients a discount, either by policy or law, from standard charges. The Health System estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price Is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change.

For the years ended June 30, 2025 and 2024, changes in its estimates of implicit price concessions. discounts, and contractual adjustments for performance obligations satisfied in prior years were not significant. Subsequent changes that are determined to be the result of an adverse change in the patient's ability to pay are recorded as bad debt expense.

AUD ITED FINANCIAL STATEME NTS FY2025 25

Consistent with the Health System's mission, care is provided to patients regardless of their ability to pay. Therefore, the Health System has determined it has provided implicit price concessions to uninsured patients and patients with other uninsured balances (for example, copays and deductibles). The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts the Health System expects to collect based on its collection history with those patients.

Patients who meet the Health System's criteria for charity care are provided care without charge or at amounts less than established rates. Such amounts determined to qualify as charity care are not reported as revenue. The amount of charges foregone under the Health System's charity care policy was $98.7 million and $87.1 million for the years ended June 30, 2025 and 2024, respectively. The direct and indirect costs of charity care, based on a ratio of the Health System's operational costs to its gross charges, was $51.8 million and $43.9 million for the years ended June 30, 2025 and 2024, respectively.

The Health System has agreements with third party payers that provide for reimbursements at amounts different from its established rates. Cost report settlements result from the adjustment of interim payments to final reimbursement under the Medicare, Medicaid, Blue Cross/Blue Shield, and HMO programs that are subject to audit by fiscal intermediaries.

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care entities have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in entities entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation, as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Health System's compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Health System. In addition, the contracts the Health System has with commercial payers also provide for retroactive audit and review of claims.

Settlements with third-party payers for retroactive adjustments due to audits, reviews, or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payer, correspondence from the payer, and the Health System's historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available) or as years are settled or are no longer subject to such audits, reviews, and investigations. Adjustments arising from a change in transaction price were not significant in 2025. During 2024, as a result of the Supreme Court's decision in American Hospital Association

v. Becerra and the district court's remand to the agency, the Centers for Medicare & Medicaid Services (CMS) issued a final rule outlining the remedy for the invalidated OPPS 3408-acquired drug payment policy for calendar years 2019-2022. In total, the Health System received approximately $31.7 million in payments under this final rule. These payments were received and recognized within Health System revenue in 2024 as an adjustment arising from a change in the transaction price. The budget neutrality offset is expected to be realized between 2026 and 2041.

The Health System has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are affected primarily by payor. The composition of net patient service revenue by primary payor is as follows for the year ended June 30:

(in thousands of dollars) 2025 2024 Medicare

$ 1,161,857

$ 1,080,843 Medicaid 529,073 501,294 Blue Cross/Highmark 1,684,573 1,497,626 Managed care 431,860 402,585 Other 292,805 347,407 Total net patient service revenue 4,100,168 3,829,755 Other Health System revenue 467,371 464,434 Total Health System revenue

$ 4,567,539

$ 4,294,189 2 6 THE PENNSYLVANIA STATE UNIVERSITY

Additionally, during 2025 and 2024, the Health System recognized $6.7 million and $6.5 million, respectively, of net patient service revenue as a result of Medical Assistance payments made by the Commonwealth of Pennsylvania.

These payments are intended to help offset medical education costs.

The Health System recognizes revenue related to retail pharmacy at a point in time. Retail pharmacy sales are recognized within Health System revenue on the accompanying consolidated statements of activities and totaled

$212.0 million and $145.6 million during the years ended June 30, 2025 and 2024, respectively.

Overall The University has elected to use the practical expedient prescribed by ASC 606-10-32-18, in which the promised amount of consideration need not be adjusted for the effects of a significant financing component if the period between when promised goods or services are transferred to a customer and when the customer pays for the goods or services is expected to be one year or less at contract inception.

CONTRIBUTIONS Unconditional promises to give are recognized as revenues and receivables in the year made and consist of written or oral promises to contribute to the University in the future. Contributions receivable are recorded as donor-restricted revenue, either due to purpose restrictions and/or the implicit time restriction inherent in the future date at which the contribution is to be received. The amounts are present valued based on timing of expected collections.

FAIR VALUE OF FINANCIAL INSTRUMENTS The University has provided fair value estimates for certain financial instruments. Fair value information presented in the financial statements is based on information available at June 30, 2025 and 2024. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and other accrued expenses approximate fair value because of the terms and relatively short maturity of these financial instruments. The carrying values of the University's loans to students are also reasonable estimates of their fair value, as the total outstanding loans to students as of June 30, 2025 and 2024 have been made at the rates available to students for similar loans at such times. Investments are reported at fair value as disclosed in Note 4. The fair value of the University's bonds payable is disclosed in Note 8.

See Note 6 for further discussion of fair value measurements.

CASH FLOWS The following items are included as supplemental disclosure to the statements of cash flows for the years ended June 30:

(In thousands of dollars) 2025 Supplemental reconciliation data:

Cash and cash equivalents as shown on the statements of financial position

$ 1,320,893 Restricted cash and cash equivalents included in deposits held by bond trustees 4,431 Restricted cash and cash equivalents included in deposits held for others 20,452 Total unrestricted and restricted cash and cash equivalents as shown in the statements of cash flows

$ 1,345,776 Other supplemental data:

2025 2024 1,335,572 4,104 29,451 1,369,127 2024 Interest paid 138,482 134,221 Capitalized costs accrued related to construction are $125.5 million and $92.6 million as of June 30, 2025 and 2024, respectively. Taxes paid for 2025 and 2024 are considered immaterial. Cash and cash equivalents include certain investments in highly liquid instruments with remaining maturities of 90 days or less, except for such assets held by the University's investment managers as part of their long-term investment strategies. Short-term investments include other current investments held for general operating purposes with maturities greater than 3 months but less than 12 months.

AUDITED FINANC IAL STATEMENTS FY2025 27

ACCOUNTS RECEIVABLE Accounts receivable at June 30 consists of the following:

(in thousands of dollars) 2025 2024 Grants and contracts, net of allowance of $500 and $3,100 259,113 270,362 Patient accounts receivable 619,980 619,638 Student receivables, net of allowance of $55,639 and $50,484 67,674 61,128 Other, net of allowance of $7 and $0 78,719 80,658 Total accounts receivable, net

$ 1,025,486

$ 1,031,786 An allowance for credit losses is established for amounts expected to be uncollectible over the contractual life of the receivables. The University calculates the allowance using an expected loss model that considers actual historical loss rates adjusted for current economic conditions and reasonable and supportable forecasts. Receivables are written off when management determines they will not be collected.

Changes in the allowance for credit losses related to student receivables for the years ended June 30, 2025 and 2024 were as follows:

(in thousands of dollars)

Balance as of June 30, 2023 63,525 Provisions (1,382)

Write-offs, net of recoveries (11,659)

Balance as of June 30, 2024 50,484 Provisions 5,580 Write-offs, net of recoveries (425)

Balance as of June 30, 2025 55,639 LOANS TO STUDENTS Loans to students are disbursed to qualified students based on need and include loans granted by the University from institutional resources and under federal government loan programs. Students enter a grace period upon ceasing at least half-time enrollment status. The grace period varies depending on the type of loan. Upon expiration of the grace period, interest begins to accrue, and repayment begins one month thereafter. Repayments of these loans are made directly to the University. Loans to students are uncollateralized and carry default risk.

Funds advanced by the federal government of $10.0 million and $13.3 million at June 30, 2025 and 2024, respectively, are ultimately refundable to the government and are classified as liabilities in the consolidated statements of financial position. The federal liability related to the Perkins loan program will be reduced through the return of funds as required by the Department of Education.

28 THE PENNSYLVANIA STATE UNIVERSITY

Loans to students consisted of the following at June 30:

(in thousands of dollars) 2025 2024 Loans to students:

Federal government loan programs:

Perkins loan program 8,875 10,905 Institutional loan programs 16,887 17,613 25,762 28,518 Less allowance for doubtful accounts:

Balance, beginning of year (3,686)

(3,923)

Provision for doubtful accounts (1,058) 237 Balance, end of year (4,744)

(3,686)

Loans to students, net 21,O1s I 24,832 An allowance for credit losses is established for amounts expected to be uncollectible over the contractual life of the loans. The University calculates the allowance using an expected loss model that considers actual historical loss rates adjusted for current economic conditions and reasonable and supportable forecasts. Further, the University does not evaluate credit quality of student loans receivable after the initial approval of the loan. Loans to students are considered past due when payment is not received by the due date, and interest continues to accrue until the loan is paid in full or written off.

The University considers the age of the amounts outstanding in determining the collectability of loans to students. The aging of the loans to students based on days delinquent and the related allowance for doubtful accounts at June 30 are as follows:

(in thousands of dollars) 45days 46-75 76-105 Over 2025 or less days days 105days Total Loans to students:

Federal government loan programs 7,314 9

9 1,543 8,875 Institutional loan programs 12,258 8

5 4,616 16,887 Total loans to students

$ 19,5721 11 1 14 1 6,1591

$ 25,762 Allowance for doubtful accounts:

Federal government loan programs (1,523)

Institutional loan programs (3,221)

Total allowance for doubtful accounts (4,744)

Total loans to students, net

$ 21,018 AUDITED FINANCIAL STATEMENTS FY2025 29

(in thousands of dollars) 2024 Loans to students:

Federal government loan programs Institutional loan programs Total loans to students Allowance for doubtful accounts:

Federal government loan programs Institutional loan programs Total allowance for doubtful accounts Total loans to students, net INVENTORIES 45days or less 10,617 13,984

$ 24,601 46-75 days 15 18 33 76-105 days 15 17 32 Over 105days 258 3,594 3,852 Total 10,905 17,613

$ 28,518 (1,008)

(2,678)

(3,686)

$ 24,832 Inventories are stated at the lower of cost or net realizable value on the first-in, first-out basis.

INVESTMENTS The University's noncurrent investments are comprised of the University's endowment and other investments held for general operating purposes. The University's investments are reported at fair value in the accompanying financial statements with gains and losses included in the consolidated statement of activities. The University believes that the estimated fair value is a reasonable estimate of market value as of June 30, 2025 and 2024. The fair value estimations include assumptions and methods that were reviewed by University management. The estimated fair value amounts for public securities held by the University with readily determinable fair values have been based on information as supplied by the various financial institutions that act as trustees or custodians for the University.

Because private investments are not readily marketable, the estimated fair value is subject to uncertainty and, therefore, may differ from the value that would have been used had a ready market existed, and such differences could be material. The fair values of these private investments are determined based upon financial information provided by the investment manager.

The University authorizes certain investment managers to purchase derivative securities to attain a desired market position; and the University may directly invest in derivative securities to attain a desired market position. The University does not trade or issue derivative financial instruments other than through the Investment management practices noted above. The University records derivative securities at fair value with gains and losses reflected in the consolidated statements of activities.

BENEFICIAL INTEREST IN PERPETUAL TRUSTS The University is the beneficiary of certain perpetual trusts held and administered by outside trustees. The fair value of these trust assets has been recorded as net assets with donor restrictions and related beneficial interest In perpetual trusts in the consolidated financial statements.

30 THE PENNSYLVANIA STATE UNIVERS ITY

INVESTMENT IN PLANT Total investment in plant as of June 30 is comprised of the following:

(in thousands of dollars) 2025 2024 Land 194,299 187,221 Buildings 10,261,786 9,656,329 Improvements other than buildings 956,401 936,864 Equipment 2,259,327 2,159,513 Assets under construction 717,132 784,534 Total plant 14,388,945 13,724,461 Less accumulated depreciation (7,164,175)

(6,671,253)

Total investment in plant, net 7,224,770 7,053,208 The value of land, buildings, and equipment is recorded at cost or, if received as gifts, at fair value at date of gift commitment. The University does not capitalize the cost of library books. Depreciation is computed over the estimated useful lives of the assets using the straight-line method. Useful lives range from 4 to 50 years for buildings, 10 to 20 years for improvements other than buildings, and 1 to 20 years for equipment. Depreciation expense was

$579.2 million and $559.6 million for the fiscal years ended June 30, 2025 and 2024, respectively. The University has certain building and equipment lease agreements in effect which are considered finance leases that are included as long-term debt In the statements of financial position. Buildings and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease terms or the estimated useful lives of the assets.

Total Investment in plant associated with these leases was $32.1 million and $43.2 million at June 30, 2025 and 2024, respectively.

LEASES The University determines if an arrangement is or contains a lease at inception of the contract. The right-of-use (ROU) assets represent the right to use the underlying assets for the lease term and the lease liabilities represent the obligation to make lease payments arising from the leases. ROU assets are recognized at commencement date based on the present value of lease payments over the lease term, adjusted for any initial direct costs incurred and lease incentives received, with the subsequent measurement based on lease classification. The lease liability is initially measured as the present value of unpaid lease payments and is subsequently measured using the effective interest method. The value of an option to extend or terminate a lease is reflected to the extent it is reasonably certain the University will exercise that option. The University has used the incremental borrowing rate when measuring its leases as the rate implicit in the lease is not readily determinable. The University's incremental borrowing rate is determined based on the Tax-Exempt Bloomberg Valuation Services (BVAL) Municipal AAA Curves Index Rate. The Index is constructed using hourly trades from the Municipal Securities Rulemaking Board (MSRB) AAA-rated municipal bonds normalized for differences in credit, optionality, and coupon size. ASC 842 defines a short-term lease as a lease with a term of twelve months or less that does not include a purchase option that is reasonably certain of being exercised

("short-term leases"). The University has elected, for all asset classes, the short-term lease recognition exemption provided in the standard that eliminates the requirement to recognize on the statements of financial position any short-term leases. The lease expense for these short-term leases is recognized on a straight-line basis over the lease term within operating expenses in the consolidated statements of activities and is not considered material to the consolidated financial statements. Finance lease ROU assets are included in total investment in plant, net, with the related liabilities included in current and noncurrent long-term debt in the consolidated statements of financial position.

Operating lease ROU assets and related current and long-term liabilities are separately presented in the consolidated statements of financial position. Expenses for operating leases, amortization of assets held under finance leases, and finance lease interest expense are recognized within operating expenses in the consolidated statements of activities.

The University has elected, for all asset classes, the practical expedient to not separate lease and nonlease components. Certain of the University's lease agreements include payments based on actual maintenance, taxes, insurance, and utilities. Other agreements include rental payments adjusted periodically for inflation. These are deemed to be variable lease payments and are recognized in operating expenses as incurred but are not included in the ROU asset or liability balances. These variable lease payments are not considered material to the consolidated financial statements. The University's lease agreements do not contain any material residual value guarantees, restrictions, or covenants.

AUDITED FINANCIAL STATEMENTS FY2025 3 1

ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES Accounts payable and other accrued expenses at June 30 consist of the following:

(in thousands of dollars) 2025 2024 Accounts payable (non-Health System) 346,595 285,410 Health System accounts payable and other accrued expenses 681,352 614,987 Accrued payroll and other related liabilities 114,083 107,702 Accrued interest 33,521 34,107 Student deposits 1,918 2,295 Total accounts payable and other accrued expenses

$ 1,177,469

$ 1,044,501 IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, which include investment in plant and definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.

An impairment loss is recognized in change in net assets in the period that the impairment occurs.

In May 2025 the Board approved the closure of seven of the University's Commonwealth Campuses upon conclusion of the 2026-2027 academic year. Operations at the closing campuses will continue as normal during the 2025-2026 and 2026-2027 academic years, with no significant reduction in the use of facilities or services expected prior to closure. The net book value of capital assets associated with the closing campuses was $127.2 million as of June 30, 2025. Based on current information, no impairment loss has been recognized. However, the University continues to evaluate the impact associated with these campus closures, and future information and events may result in recognition of impairment loss in a future period.

ASSET RETIREMENT OBLIGATIONS The University has recognized liabilities for asset retirement obligations. The University has identified asbestos abatement and the decommissioning of the Breazeale Nuclear Reactor as conditional asset retirement obligations.

These obligations are reported as part of other noncurrent liabilities within the consolidated statements of financial position. The following table details the change in liabilities:

(in thousands of dollars)

Balance as of June 30, 2023 109,509 Adjustment to liability 1,995 Accretion expense 4,452 Liabilities settled (4,982)

Balance as of June 30, 2024 110,974 Adjustment to liability 4,445 Accretion expense 5,080 Liabilities settled (10,262)

Balance as of June 30, 2025 110,237 ANNUITIES PAYABLE Annuities payable consist of annuity payments currently due and the actuarial amount of annuities payable. The actuarial amount of annuities payable is the present value of the aggregate liability for annuity payments over the expected lives of the beneficiaries.

32 THE PENNSYLVANIA STATE UNIVERSITY

NET ASSETS Net assets consist of the following at June 30:

{in thousands of dollars) 2025 Net assets by category:

Endowment funds University capital activities Operating general funds carryforward Other unit non-general fund reseNes University other Pledges Split-interest agreements Student loan funds Net investment in plant Postretirement benefits and pension prefunding Penn State Health operations Non-controlling interest in Penn State Health Total net assets

{in thousonds of dollars) 2024 Net assets by category:

Endowment funds University capital activities Operating general funds carryforward Other unit non-general fund reseNes University other Pledges Split-interest agreements Student loan funds Net investment in plant Postretirement benefits and pension prefunding Penn State Health operations Non-controlling interest in Penn State Health Total net assets INCOME TAXES Without donor restrictions 958,553 2,100,854 812,140 617,131 70,919 29,001 3,818,790 (256,193) 1,551,596 289,135

$ 9,991,926 Without donor restrictions 906,988 1,925,170 812,173 543,134 62,706 27,679 3,630,194 (374,208) 1,490,251 272,187

$ 9,296,274 With donor restrictions 4,116,971 10,036 282,830 260,386 132,705 21,941

$ 4,824,869 With donor restrictions 3,876,918 14,616 246,311 183,482 116,900 20,261

$ 4,458,488 Total 5,075,524 2,110,890 812,140 899,961 70,919 260,386 132,705 50,942 3,818,790 (256,193) 1,551,596 289,135 14,816,795 Total 4,783,906 1,939,786 812,173 789,445 62,706 183,482 116,900 47,940 3,630,194 (374,208) 1,490,251 272,187 13,754,762 The University files U.S. federal and state tax returns. The statute of limitations on the University's federal returns generally remains open for three years following the year they are filed. In accordance with ASC Topic 740, Income Taxes, the University continues to evaluate tax positions and has determined there is no material impact on the University financial statements.

AUDITED FINANCIAL STATEMENTS FY2025 33

RECENT ACCOUNTING PRONOUNCEMENTS In September 2025, the FASB issued Accounting Standards Update (ASU) No. 2025-06, "lntangibles-Goodwlll and Other-Internal-Use Software.* This update changes the capitalization criteria for internally developed software costs to better align with various software development methods and is effective for the University beginning July 1, 2028.

The University is currently evaluating the impact this guidance may have on its consolidated financial statements.

3. LIQUIDITY AND AVAILABILITY OF FINANCIAL ASSETS The University regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the University considers all expenditures related to its ongoing mission-related activities to be general expenditures.

Student loans receivable are not considered to be available to meet general expenditures because principal and interest on these loans are used solely to make new loans.

In addition to financial assets available to meet general expenditures over the next 12 months, the University anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restricted resources.

Refer to the statements of cash flows, which identifies the sources and uses of the University's cash and shows positive cash generated by operations for the years ended June 30, 2025 and 2024.

The University has various sources of liquidity at its disposal, Including cash and cash equivalents and fixed income and equity securities.

The University has designated a portion of its resources without donor restrictions for endowment and other purposes.

These funds are invested for long-term appreciation and current income but remain available and may be spent at the discretion of management.

The following reflects the University's financial assets as of June 30, 2025 and 2024, reduced by amounts not available for general use within one year. Certain long-term investments could be liquidated if needed based on the terms of their agreements.

(in thousands of dollars)

Total assets Less:

Inventories Prepaid expenses and other assets Total investment in plant, net Beneficial interest in perpetual trusts Operating lease right-of-use assets Other assets Total financial assets Less:

Noncurrent investments Contractual or donor-imposed restrictions:

Deposits held by bond trustees Deposits held for others Receivables subject to time restrictions Receivables subject to donor-imposed restrictions Loans to students, net Financial assets available to meet cash needs for general expenditures within one year 34 2025 2024 22,492,474 20,715,028 (84,788)

(85,358)

(131,626)

(126,528)

(7,224,770)

(7,053,208)

(36,725)

(32,105)

(171,251)

(163,453)

(275,583)

(239,500) 14,567,731 13,014,876 (9,984,763)

(9,174,349)

(661,054)

(103,673)

(29,908)

(39,089)

(109,804)

(44,672)

(118,074)

(121,187)

(21,018)

(24,832) 3,643,110 3,507,074 THE PENNSYLVANIA STATE UNIVERSITY

4. INVESTMENTS Investments by major category as of June 30 are summarized as follows:

(In thousands of dollars) 2025 2024 Fixed income 3,515,291 3,416,894 Equity investments 5,265,487 4,793,916 Real assets 1,222,940 994,576 Opportunistic 1,245,268 1,091,056 Total

$ 11,248,986

$ 10,296,442 Fixed income investments are comprised of public and private fixed income strategies such as government and corporate debt, mortgage-backed, and other asset-backed related debt. Equity includes investments such as public and private strategies across the globe. Real asset strategies include real estate, natural resources, and commodities.

Opportunistic includes investments such as public and private strategies utilizing both equity and debt structures that are expected to achieve absolute returns over longer periods of time and do not classify well into the other three investment types.

Equity index futures contracts comprise the University's derivative instruments as of June 30, 2025 and 2024, and are included in the fair value of the University's investments. These contracts are fully cash collateralized and marked to market daily. Futures contracts have minimal credit risk because the counterparties are the exchanges themselves and are employed as a low-cost investment vehicle with daily liquidity which allows the University to maintain desired market exposure considering irregular cash flows. Fully cash collateralized derivative securities were immaterial as of June 30, 2025 and 2024.

5. ENDOWMENT NET ASSETS The University's endowment includes both donor-restricted endowment funds and funds designated to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.

The ASC Not-for-Profit Entities Presentation of Financial Statements Subtopic (ASC Subtopic 958-205) provides guidance on the net asset classification of donor-restricted endowment funds for not-for-profit organizations subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and improves disclosure about an organization's endowment funds regardless of whether the organization is subject to UPMIFA. The Commonwealth of Pennsylvania has not adopted UPMIFA but rather has enacted Pennsylvania Act 141 ("PA Act 141").

PA Act 141 permits an organization's trustees to define expendable income as a stipulated percentage of endowment assets (between 2% and 7% of the fair value of the assets averaged over a period of at least three preceding years) without regard to actual interest, dividend, or realized and unrealized gains.

The University has interpreted PA Act 141 to permit the University to spend the earnings of its endowment based on a total return approach, without regard to the fair value of the original gift. As a result of this interpretation, the University classifies as net assets with donor restrictions the original value of gifts donated to the permanent endowment, the original value of subsequent gifts to the permanent endowment, and accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. Also included in net assets with donor restrictions are gains and losses attributable to permanent endowments and deficiencies associated with funds where the value of the fund has fallen below the original value of the gift. Funds functioning as endowments are established at the direction of University management, on behalf of the Board, and are classified as net assets without donor restrictions due to the lack of external donor restrictions. Also included in net assets without donor restrictions are gains and losses attributable to funds functioning as endowments.

From time to time, due to unfavorable market fluctuations, the fair value of some assets associated with individual donor-restricted endowment funds may fall below the level that donors require to be retained as a perpetual fund, while other assets are unaffected to the same extent and maintain or exceed the level required. Such deficiencies are reported as net assets with donor restrictions. As of June 30, 2025 and 2024, funds with an original gift value of $12.2 million and $96.8 million were "underwater" by $2.3 million and $3.8 million, respectively. Subsequent investment gains will be used to restore the balance up to the fair market value of the original gift.

AUDITED FINANCIAL STATEMENTS FY2025 35

Endowment net asset composition by type of fund as of June 30:

(in thousands of dollars)

Without donor With donor 2025 restrictions restrictions Total Donor-restricted endowment funds 4,116,971 4,116,971 Funds functioning as endowments 958,553 958,553 Total net assets 958,553 4,116,971 5,075,524 (in thousands of dollars)

Without donor With donor 2024 restrictions restrictions Total Donor-restricted endowment funds 3,876,918 3,876,918 Funds functioning as endowments 906,988 906,988 Total net assets 906,988 3,876,918 4,783,906 Changes in endowment net assets for the years ended June 30:

(in thousands of dollars)

Without donor With donor 2025 restrictions restrictions Total Endowment net assets, beginning of the year 906,988 3,876,918 4,783,906 Endowment return, net 58,891 286,343 345,234 Contributions 96,732 96,732 Endowment spending (32,653)

(143,022)

(175,675)

Transfers to create funds functioning as endowments 25,327 25,327 Endowment net assets, end of the year 958,553 4,116,971 5,075,524 (in thousands of dollars)

Without donor With donor 2024 restrictions restrictions Total Endowment net assets, beginning of the year 851,333 3,606,007 4,457,340 Endowment return, net 79,008 333,470 412,478 Contributions 75,112 75,112 Endowment spending (33,879)

(137,671)

(171,550)

Transfers to create funds functioning as endowments 10,526 10,526 Endowment net assets, end of the year 906,988 3,876,918 4,783,906 The University has adopted investment and spending policies for endowment assets that attempt to provide a relatively stable stream of annual funding to programs supported by its endowment while seeking to maintain, over time, the purchasing power of the endowment assets.

36 THE PENNSYLVANIA STATE UNIVERSITY

The overall investment objective for the University's pooled endowment funds is to grow the real (inflation adjusted) purchasing power of the assets through a prudent long-term investment strategy. To satisfy its long-term objective, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation and income. The University targets a diversified asset allocation, with prudent risk constraints, which places a greater emphasis on equity-based investments to achieve its long-term return objectives.

The University expects the spending policy to provide generous current spending while preserving "intergenerational equity". The policy spending amount for both fiscal years 2025 and 2024 was based on 5.0% of the endowment plan's average fair market value over the prior twenty quarters preceding the fiscal year in which the distribution was planned and was net of administrative expenses.

6. FAIR VALUE MEASUREMENTS The University utilizes the following fair value hierarchy, which prioritizes into three broad levels the inputs to valuation techniques used to measure fair value:

Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets as of the measurement date.

Such instruments valued at Level 1 primarily consist of securities that are directly held and actively traded in public markets.

Level 2 - Inputs other than unadjusted quoted prices that are observable for the asset or liability, directly or indirectly, including quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means.

Level 3 - Unobservable inputs that cannot be corroborated by observable market data.

In Instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The University's assessment of significance of a particular item to the fair value measurement in its entirety requires judgment, including consideration of inputs specific to the asset.

NOTE: The remainder of this page Is Intentionally left blank.

AUDITED FINANCIAL STATEMENTS FY2025 3 7

The following table presents information about the University's financial assets and liabilities, as categorized by level of the fair value hierarchy according to the lowest level of inputs significant to each measurement or net asset value (NAV) per share as of June 30, 2025 and 2024:

(in thousands of dollars) 2025 Assets:

Long-term Investment Pool:

Fixed income Public separate accounts Public funds Private funds Equity investments Public separate accounts Private funds Real assets Public separate accounts Public funds Private funds Opportunistic Private funds Total Operating Investments:

Fixed income Public separate accounts Public funds Private funds Equity investments Public separate accounts Private separate accounts Public funds Private funds Real assets Private funds Opportunistic Public funds Private funds Total Deposits held by bond trustees:

Fixed Income Public funds Deposits held for others Beneficial Interest in perpetual trusts Liabilities:

Present value of annuities payable 3 8 Level 1 Levell 625,803 445,342 1,788,494 90,223 231,840

$ 2,555,899 625,803

$ 1,435,348 195,779 42,884 332,669 14,951

-I

-I 137 571,469

$ 1,450,299 656,6231

-I $

9,456 Level 3 NAV Total 625,803 445,342 732,316 732,316 1,788,494 2,954,388 2,954,388 90,223 231,840 900,597 900,597 863,389 863,389

$ 5,450,690

$ 8,632,392 1,435,348 195,779 80,703 80,703 42,884 4,381 4,381 332,669 3,667 124,053 142,671

-I 280 137 381,742 381,742 8,048 586,778 2,616,594

-I $

656,623 9,456 36,725 36,725 81,669 8 1,669 THE PENNSYLVANIA STATE UNIVERSITY

(In thousands of dollars) 2024 Assets:

Long-term Investment Pool:

Fixed income Public separate accounts Public funds Private funds Equity investments Public separate accounts Private funds Real assets Public separate accounts Public funds Private funds Opportunistic Private funds Total Operating Investments:

Fixed income Public separate accounts Public funds Private funds Equity investments Public separate accounts Private separate accounts Public funds Private funds Real assets Public funds Private funds Opportunistic Public funds Private funds Total Deposits held by bond trustees:

Fixed Income Public funds Deposits held for others Beneficial interest in perpetual trusts Liabilities:

Present value of annuities payable Level 1 137,200 1,648,365 81,812 165,314

$ 2,032,691 211,279 36,137 276,589 899 84 524,988 99,5691

-I AUDITED FINANCIAL STATEMENTS FY2025 Level2 466,166 466,166

$ 2,014,001

-I 9,6381 Level3 NAV Total 466,166 137,200 493,183 493,183 1,648,365 2,729,585 2,729,585 81,812 165,314 746,389 746,389 750,644 750,644

$ 4,719,801

$ 7,218,658

$ 2,014,001 211,279 95,065 95,065 36,137 4,405 4,405 276,589 3,834 95,001 98,835 899 7

155 162 84 340,328 340,328 8,246 530,549

$ 3,077,784

-I $

99,569

-I $

-I 9,638 32,105 32,105 70,676 70,676 39

Public separate accounts hold public fixed income and equity investments owned directly by the University. Some of these investments may be valued using matrix pricing which is based on the price or yield of a similar, more actively traded security. Private separate accounts hold private fixed income and equity investments owned directly by the University. Public funds are commingled investment structures that are publicly listed and whose valuations are readily available. Private funds comprise commingled investment structures that are not publicly listed and are managed collectively following a prescribed investment strategy.

The Long-Term Investment Pool (LTIP) is structured similarly to a mutual fund and is used for investing the University's endowment funds, funds functioning as endowments, and other operating funds that are expected to be held long-term. A unit method of accounting for the LTIP is utilized by the University. Each participating pool enters and withdraws from the LTIP based on monthly unit values.

The following tables present information related to changes in Level 3 for each category of financial assets and liabilities for years ended June 30, 2025 and 2024:

(in thousands of dollars)

Assets:

Balance as of June 30, 2023 Gifts Purchases Sales Total realized and unrealized (losses) gains Net transfers in Balance as of June 30, 2024 Gifts Purchases Sales Total realized and unrealized (losses) gains Net transfers out Balance as of June 30, 2025 Liabilities:

Balance as of June 30, 2023 Actuarial adjustment of liability Gifts Sales Balance as of June 30, 2024 Actuarial adjustment of liability Gifts Sales Balance as of June 30, 2025 40 Operating Investments 7,416 260 (161)

(209) 940 8,246 1,785 (940)

(160)

(883) 8,048 Present Value of Annuities Payable 67,573 5,952 691 (3,540) 70,676 455 10,646 (108) 8 1,669 Beneficial Interest in Perpetual Trusts 28,117 2,611 1,377 32,105 2,673 1,947 36,725 THE PENNSYLVANIA STATE UNIVERSITY

The following table presents the fair value and redemption frequency for private funds' investments whose fair value is not readily determinable and is estimated using NAV or its equivalent as of June 30:

Fair Value Unfunded Commitments Redemption Redemption (in thousands of dollars) 2025 I

2024 At June 30, 2025 Frequency Notice Period Private Funds With Redemption Ability:

Fixed income investments 471,125 431,400 Various 2-90 days Equity investments 1,522,413 1,333,700 Various 2-90 days Real asset investments 407,421 396,962 55,888 Various 2-90 days Opportunistic investments 1,046,716 929,168 Various 2-90 days Subtotal

$ 3,447,675

$3,091,230 55,888 Private Funds Without Redemption Ability:

Fixed income investments 341,894 156,848 337,362 Equity investments 1,556,028 1,490,886 790,510 Real asset investments 493,456 349,582 346,666 Opportunistic investments 198,415 161,804 142,552 Subtotal

$ 2,589,793

$2,159,120 1,617,090 Total 1 $ 6,037,46s I $ s.2so,3so 1 $

1,672,9781 Private funds with redemption ability include private funds that the University has some discretion as to the timing of withdrawing money from the commingled fund. Redemptions vary from daily to three years with required notification of 90 days or less.

Private funds without redemption ability include private funds that the University has no or very little discretion as to the timing of withdrawing money from the commingled fund. Realizations from these funds are received as the underlying investments are liquidated or distributed, typically within 10-15 years after initial commitment.

Unfunded commitments represent remaining commitments of the LTIP's private funds as of June 30, 2025 that may be invested in the future.

7. CONTRIBUTIONS RECEIVABLE Contributions receivable are summarized as follows as of June 30:

(in thousands of dollars) 2025 2024 In one year or less 60,376 42,009 Between one year and five years 92,870 44,746 More than five years 178,893 164,005 Contributions receivable, gross 332,139 250,760 Less allowance (1,896)

(1,842)

Less discount (69,857)

(65,436)

Contributions receivable, net 260,386 183,482 Contributions received during the years ended June 30, 2025 and 2024 are discounted at rates ranging from 3.68% to 4.54% and 4.33% to 5.09%, respectively. The discount rates for prior periods ranged from 0.11% to 6.28%.

At June 30, 2025 and 2024 the University has received bequest intentions of $1.023 billion and $927.7 million, respectively, and certain other conditional promises to give of $69.8 million and $88.1 million, respectively. These intentions and conditional promises to give are not included in the consolidated financial statements.

AUDITED FINANCIAL STATEMENTS FY2025 41

8. LONG-TERM DEBT The various bond issues, notes payable and finance lease obligations that are included in long-term debt in the statement of financial position consist of the following at June 30:

(in thousands of dollars)

The Pennsylvania State University Bonds Series 2025A Series 20258 Series 2024 Series 2023 Series 2022A Series 20228 Series 2020A Series 20208 Series 2020D Series 2020E Series 2019A Series 20198 Series 2018 Series 2017 A Series 20178 Series 2016A Series 20168 Series 201 SA Series 20158 Series 20078 Pennsylvania Higher Educational Facilities Authority University Revenue Bonds (issued for The Pennsylvania State University)

Series 2006 Series 2004 Penn State Health Taxable Bonds Series 2019 Cumberland County Municipal Authority Revenue Bonds (issued for Penn State Health)

Series 2019 Lancaster County Hospital Authority Revenue Bonds (issued for Penn State Health)

Series 2021 Lycoming County Authority College Revenue Bonds (issued for Penn College)

Series 2021A Series 20218 Series 2016 Series 2015 2025 2024 515,730 60,000 157,860 201,005 203,990 121,665 123,605 24,695 25,610 75,340 76,725 281,505 292,740 961,370 987,835 37,370 42,600 98,275 100,200 105,630 108,430 57,660 58,870 137,840 140,955 105,345 108,340 97,700 10 1,300 144,900 157,140 52,070 78,485 16,965 22,050 695 420 200.0001 200,000 222,000 222,000 2ss.s401 288,840 21,960 24,290 19,445 20,345 38,390 40,575 465 42 THE PENNSYLVANIA STATE UNIVERS ITY

(in thousands of dollars)

Total bonds payable Unamortized bond premiums Unamortized deferred bond costs Notes payable and finance leases Notes payable Finance lease obligations Total notes payable and finance leases Total long-term debt Debt issuance Interest rate mode Interest rates The Pennsylvania State University Bonds Series 2025A Fixed 5.00%

5.50%

Series 20258 Fixed 4.207% - 5.585%

Series 2024 Fixed 5.00%

5.25%

Series 2023 Fixed 5.00%-5.25%

Series 2022A Fixed 5.00%-5.25%

Series 20228 Fixed 3.315%

4.673%

Series 2020A Fixed 4.00%

5.00%

Series 20208 Fixed 1.780%

2.888%

Series 2020D Fixed 1.645%

2.84%

Series 2020E Fixed 5.00%

Series 2019A Fixed 5.00%

Series 20198 Fixed 2.40%

3.50%

Series 2018 Fixed 5.00%

Series 2017A Fixed 5.00%

AUDITED FINANCIAL STATEMENTS FY2025 Payment ranges and maturity (in thousands of dollars) 2025 3,991,845 266,783 (17,589) 29,404 34,001 63,405 4,304,444 1

$12,650 to $19,690 through September 2045 with

$90,585 and $118,565 due September 2050 and 2055, respectively

$1,835 to $3,585 through September 2040 with

$21,245 due September 2045

$2,320 to $6,000 through September 2044 with

$34,940 and $45,165 due September 2049 and 2054, respectively

$3,135 to $7,715 through September 2043 with

$45,220 and $58,795 due September 2048 and 2053, respectively

$2,040 to $4,770 through September 2042 with

$27,765 and $35,890 due September 2047 and 2052, respectively

$945 to $1,550 through September 2037 with

$8,940 due September 2042

$1,460 to $3,090 through September 2040 with

$17,980 and $22,490 due September 2045 and 2050, respectively

$5,895 to $13,910 through September 2035 with

$67,170 and $89,310 due September 2040 and 2050, respectively

$26,885 to $33,545 through September 2035 with $304,225 and $328,000 due September 2043 and 2050, respectively

$5,495 to $7,010 through March 2031

$2,025 to $6,720 through September 2049

$2,870 to $3,720 through September 2034 with

$20,455 and $52,515 due September 2039 and September 2049, respectively

$1,275 to $2,320 through September 2037 with

$16,650 and $18,255 due September 2043 and September 2048. respectively

$3,275 to $5,965 through September 2037 with

$34,750 and $44,620 due September 2042 and September 2047, respectively 2024 3,478,575 239,027 (16,029) 31,810 39,337 71,147 3,772,720 43

I Interest rate Debt issuance mode Interest rates Series 2017B Fixed 2.755%- 3.793%

Series 2016A Fixed 5.00%

Series 2016B Fixed 4.00% - 5.00%

Series 2007B Fixed 5.25%

Pennsylvania Higher Educational Facilities Authority University Revenue Bonds Series 2006 Fixed 5.125%'

Payment ranges and maturity (in thousands of dollars)

$3,075 to $3,830 through September 2032 with

$21,305 and $56,595 due September 2037 and September 2047, respectively

$3,780 to $6,465 through September 2036 with

$37,520 due September 2041

$7,165 to $22,195 through September 2036

$5,360 to $5,955 through August 2027

$1,61 O due September 2025

Annual interest costs to the University for interest rates greater than 3.00% are subsidized by PHEFA.

Penn State Health Bonds Series 2019 Fixed 3.806%

$200,000 due November 2049 Cumberland County Municipal Authority Revenue Bonds Series 2019 Fixed 3.00% - 5.00%

$4,915 to $9,315 through November 2039 with $52,355 and

$63,940 due November 2044 and November 2049, respectively Lancaster County Hospital Authority Revenue Bonds

$5,780 to $13,690 through November 2041 with $79,750 and Series 2021 Fixed 5.00%

$152,421 due November 2046 and November 2051, respectively Lycoming County Authority College Revenue Bonds Series 2021A Fixed 5.00%

$2,015 to $4,565 through July 2030 Series 20218 Fixed 0.782% - 3.014% $900 to $1,930 through January 2038 Series 2016 Fixed 2.125% - 5.00%

$1,545 to $4,075 through October 2037 The Series 2025A Bonds are general obligation bonds issued in June 2025 for the purpose of financing various construction and renovation projects and the current refunding and defeasance of all of the outstanding Series 2015A and Series 2015B Bonds. The Series 2025A Bonds are subject to early redemption provisions, at the option of the University, beginning September 2035. The bonds maturing September 2050 and September 2055 are subject to mandatory sinking fund redemption. In conjunction with the issuance of the Series 2025A Bonds, the University legally defeased the Series 2015A and 20158 Bonds by irrevocably depositing the required funds in an escrow fund to be used to pay interest accrued, maturing principal, and redemption prices of the refunded bonds.

The Series 20258 Bonds are taxable general obligation bonds issued in June 2025 for the purpose of financing various construction and renovation projects. The Series 20258 Bonds are subject to early redemption provisions at the option of the University. The bonds maturing September 2045 are subject to mandatory sinking fund redemption.

The Series 2024 Bonds are general obligation bonds issued in August 2024 for the purpose of financing various construction and renovation projects. The Series 2024 Bonds are subject to early redemption provisions, at the option of the University, beginning September 2034. The bonds maturing September 2049 and September 2054 are subject to mandatory sinking fund redemption.

The University believes it has complied with all financial debt covenants for the years ended June 30, 2025 and 2024.

44 THE PENNSYLVANIA STATE UN IVERSITY

Maturities and sinking fund requirements on bonds payable for each of the next five fiscal years and thereafter are summarized as follows:

I Annual Installments Year (in thousands of dollars) 2026 100,520 2027 118,885 2028 123,200 2029 127,545 2030 132,305 Thereafter 3,389,390 Total

$ 3,991,845 The fair value of the University's bonds payable is estimated based on current rates offered for similar issues with similar security, terms and maturities using available market information as supplied by the various financial institutions who act as trustees or custodians for the University. At June 30, 2025, the carrying value and estimated fair value of the University's bonds payable, including issuance premiums and deferred bond costs, are $4.241 billion and $3.678 billion, respectively. At June 30, 2024, the carrying value and estimated fair value of the University's bonds payable, including issuance premiums and deferred bond costs, are $3.702 billion and $3.187 billion, respectively. Certain bond issues have associated issuance premiums; these issuance premiums total $266.8 million and $239.0 million at June 30, 2025 and 2024, respectively, and are presented within the statements of financial position as long-term debt. These issuance premiums will be amortized over the term of the respective outstanding bonds. Certain bond issues have associated deferred bond costs; these deferred bond costs total $17.6 million and $16.0 million at June 30, 2025 and 2024, respectively, and are presented within the statements of financial position as a reduction in long-term debt. These deferred bond costs will be amortized over the term of the respective outstanding bonds.

NOTES PAYABLE The University has three notes payable included within the consolidated statements of financial position at June 30, 2025 with balances of $1.0 million, $5.3 million, and $21.5 million. These notes have payments due through March 2026, August 2039, and September 2040 and bear interest at 2.80%, 2.65%, and 2.65%, respectively.

Penn College has two notes payable included in the consolidated statements of financial position at June 30, 2025 with balances of $1.1 million and $0.5 million. These notes have payments due through August 2028 and August 2029 and bear interest at 4.68% and 3.88%, respectively.

Maturities on notes payable for each of the next five fiscal years and thereafter are summarized as follows:

Annual Installments Year (in thousands of dollars) 2026 2,868 2027 1,887 2028 1,945 2029 2,004 2030 1,757 Thereafter 18,943 Total 29,404 LINE OF CREDIT In April 2024, the Health System entered a revolving line of credit agreement with PNC Bank in the amount of

$150 million. The line of credit expires in April 2027. This credit bears interest at the Secured Overnight Financing Rate plus 85 basis points (0.85%). The Health System did not draw on this line of credit in 2024 or 2025. The effective interest rate as of June 30, 2025 was 5.3%.

AUDITED FINANCIAL STATEMEN TS FY2025 45

9. LEASES The University leases certain equipment and buildings under operating and finance leases expiring at various dates through 2043. Rentals generally include insurance, taxes and maintenance costs.

Future maturities of lease liabilities at June 30, 2025 are as follows:

(in thousands of dollars)

Year Finance Leases Operating Leases 2026 8,223 40,978 2027 7,192 34,956 2028 3,163 27,144 2029 2,949 17,872 2030 2,499 12,499 Thereafter 16,027 81,960 Total lease payments 40,053 215,409 Less amount representing Interest (6,052)

(36,058)

Total lease obligations 34,001 17 9,351 Current portion 7,337 34,646 Long-term portion 26,664 144,705 Supplemental lease activity for the years ended June 30 is as follows:

(in thousands of dol/ors) 2025 2024 Components of Lease Expense Finance lease expense:

Amortization of ROU assets 8,870 10,208 Interest on lease liabilities 1,185 1,365 Total finance lease expense 10,055 11,573 Operating lease expense 41,216 38,709 Total lease expense 51,271 50,282 The weighted-average remaining lease term and weighted-average discount rate at June 30 were as follows:

University:

Finance leases Operating leases Health System:

Finance leases Operating leases 46 Weighted-Average Remaining Lease Term (Years) 2025 I

2024 11.18 11.12 7.37 4.42 3.20 3.90 9.20 9.30 Weighted-Average Discount Rate 2025 I

2024 4.19%

4.00%

3.02%

2.99%

1.80%

2.00%

4.60%

4.70%

THE PENNSYLVANIA STATE UNIVERS ITY

Supplemental cash flow information related to leases for the years ended June 30 is as follows:

(in thousands of dollars) 2025 ROU assets acquired in exchange for finance lease liabilities 3,113 ROU assets acquired in exchange for operating lease liabilities 43,050 Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from finance leases 1,185 Operating cash outflows from operating leases 41,340 Financing cash outflows from finance leases 8,434

10. FUNCTIONAL AND NATURAL CLASSIFICATION OF EXPENSES Functional expenses by natural classification as of June 30 are as follows:

(in thousands of dollars)

Educational Auxiliary Health 2025 and General Enterprises System Salaries and wages 2,049,156 184,989 2,028,366 Benefits 754,340 67,108 535,324 Depreciation 359,610 50,961 168,623 Plant operations and maintenance 149,060 20,257 90,335 Other components of net periodic postretirement benefit cost (26,266)

Interest 37,732 41,865 33,712 Supplies, services, and other 712,742 218,613 1,639,011 Total

$ 4,036,374 583,793

$ 4,495,371 (in thousands of dollars)

Educational Auxiliary Health 2024 and General Enterprises System Salaries and wages 1,963,270 166,476 1,907,286 Benefits 707,504 62,714 476,173 Depreciation 340,504 45,663 173,399 Plant operations and maintenance 159,548 20,450 88,183 Other components of net periodic postretirement benefit cost (26,232)

Interest 50,139 39,259 28,113 Supplies, services, and other 682,093 199,127 1,558,104 Total

$ 3,876,826 533,689

$ 4,231,258 2024 9,596 38,135 1,365 37,919 9,151 Total

$ 4,262,511 1,356,772 579,194 259,652 (26,266) 113,309 2,570,366

$ 9,115,538 Total

$ 4,037,032 1,246,391 559,566 268,181 (26,232) 117,511 2,439,324

$ 8,641,773 Education and general is comprised of academic and student services (which consists of instruction, academic support and student services), research, public service and institutional support. The costs of plant operations and maintenance, depreciation, and interest have been allocated across all functional expense categories to reflect the full cost of those activities. Plant operations and maintenance and depreciation expense are allocated based on the total proportionate expenses of each functional classification. Interest expense is allocated based on the proportionate share of total debt-financed construction.

AUDITED FINANCIAL STATEMENTS FY2025 47

11. RETIREMENT BENEFITS The University provides retirement benefits for substantially all regular employees, primarily through either contributory defined benefit plans administered by the Commonwealth of Pennsylvania State Employees' Retirement System (SERS) and The Public School Employees' Retirement System (PSERS) or defined contribution plans administered by the Teachers Insurance and Annuity Association (TIAA). The University is billed for its share of the estimated actuarial cost of the defined benefit plans ($56.6 million and $54.3 million, net of applied setoff credits of $93.3 million for the years ended June 30, 2025 and 2024, respectively). The Health System provides retirement benefits for substantially all employees through one of three defined contribution plans. The University's total cost for retirement benefits, included in expenses. is $266.2 million and $260.5 million for the years ended June 30, 2025 and 2024, respectively.

The SERS is the administrator of a cost-sharing, multi-employer retirement system established by the Commonwealth of Pennsylvania to provide pension benefits for employees of state government and certain independent agencies. As provided by statute, the SERS Board of Trustees has exclusive control and management responsibility of the funds and full power to invest the funds. The SERS funding policy provides for periodic member contributions at statutory rates and employer contributions at actuarially determined rates (expressed as a percentage of annual gross pay) that are sufficient to accumulate assets to pay benefits when due. In April 2020, the University entered into an agreement with SERS to prefund $1.061 billion of the University's unfunded actuarial accrued liability in exchange for credits against future contributions. The University's contributions to this plan for the years ended June 30, 2025 and 2024 were

$50.8 million and $50.3 million, respectively (net of applied setoff credits of $93.3 million) and represent approximately 5.8% of total contributions to the plan based on projections for fiscal years 2025 and 2024. The funded ratio of the plan was 70.3% as of December 31, 2024.

12. POSTRETIREMENT BENEFITS The University sponsors a retiree medical plan covering eligible retirees and eligible dependents. This program includes a Preferred Provider Organization (PPO) plan (both a traditional and a qualified high deductible option) for retirees and their dependents who are not eligible for Medicare. and a Medicare Advantage PPO plan. In addition, the University provides certain retiree life insurance benefits to eligible retirees as described below.

Employees who were hired prior to January 1, 2010 are eligible for medical coverage after they retire if either of the following requirements are satisfied:

they are at least age 60 and have at least 15 years of continuous regular full-time employment and participation in a University-sponsored medical plan immediately preceding the retirement date regardless of age, if they have at least 25 years of regular full-time service. The last 10 of those 25 years of University service must be continuous, and they must participate in a University-sponsored medical plan during the last 10 years immediately preceding the retirement date.

Non-union employees retiring on or before December 31, 2020 received a $5,000 term life insurance policy benefit at no cost to the employee. For certain union employees, a $5,000 term life insurance policy is provided at no cost to the employee regardless of their retirement date.

The retiree PPO medical plan is a self-funded program, and all medical claims and other expenses are paid from net assets without donor restrictions of the University. The Medicare Advantage PPO plan and life insurance program are fully insured. The retirees pay varying amounts for coverage under the medical plan.

For those employees who were hired after December 31, 2009, the University will contribute funds each month on their behalf to a Retirement Healthcare Savings Plan. This plan is designed to help pay for qualified medical and health-related expenses in retirement, including the purchase of a health insurance policy.

Retirees will be eligible to access their Retirement Healthcare Savings Plan account when they are no longer actively employed at Penn State and have satisfied either of the following requirements:

completed 25 years of continuous full-time service and are age 60 or older completed a minimum of 15 years of continuous full-time service and are age 65 or older 48 THE PENNSYLVANIA STATE UNIVERSITY

The following sets forth the plan's benefit obligation, plan assets and funded status reconciled with the amounts recognized in the University's consolidated statements of financial position at June 30:

(in thousands of dollars)

Change in benef'rt obligation:

2025 2024 Benefit obligation at beginning of year

$ 1,190,236 1,221,009 Service cost 11,813 14,057 Interest cost 61,634 60,518 Actuarial gain (46,617)

(33,379)

Benefits paid (54,255)

(50,700)

Plan amendment 883 Plan assumptions 21,224 (22,152)

Benefit obligation at end of year

$ 1,184,035

$ 1,190,236 Change in plan assets:

Fair value of plan assets at beginning of year Employer contributions 54,255 50,700 Benefits paid (54,255)

(50,700)

Fair value of plan assets at end of year Funded status

$ (1,184,035)

$ (1,190,236)

Unrecognized prior service cost (benefit)

Unrecognized net actuarial loss Accrued postretirement benefit expense

$ (1,184,035)

$ (1,190,236)

Net periodic postretirement cost includes the following components for the years ended June 30:

(in thousands of dollars)

Operating expenses:

2025 2024 Service cost 11,813 14,057 Nonoperating activities:

Interest cost 61,634 60,518 Amortization of prior service cost 92 92 Amortization of unrecognized net loss (87,992)

(87,634)

Net periodic postretirement cost (14,453)

(12,967)

The assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation was 8.10% and 7.60% for the years ended June 30, 2025 and 2024, respectively, reduced to an ultimate level of 4.50% and 4.50%, respectively. The postretirement benefit obligation discount rate was 5.68% and 5.52% for the years ended June 30, 2025 and 2024, respectively. During 2025 and 2024, the plan had favorable claims experience compared to assumptions, and the liability decreased due to the increase in discount rates.

AUDITED FINANCIAL STATEMENTS FY2025 49

Gains and losses in excess of 10% of the accumulated postretirement benefit obligation are amortized over the average future service to assumed retirement of active participants.

Postretirement benefits expected to be paid for the years ended June 30 are as follows:

l (in thousands of dollars) 2026 59,800 2027 64,120 2028 67,923 2029 71,438 2030 74,201 2031-35 407,431

13. PENN STATE HEALTH Penn State Health was organized exclusively to promote, support and further the chari1able, educational, and scientific purposes of the University. These purposes are defined and limited by Section 501(c)(3) of the Internal Revenue Code of 1986. The Health System is controlled by the University with a 20% membership by Highmark Health (HH). The University has recorded noncontrolling interest related to this membership, which is included in net assets without donor restrictions within the consolidated statements of financial position with a value at June 30, 2025 and 2024 of

$289.1 million and $272.2 million, respectively.

The wholly owned subsidiaries of the Health System include the Milton S. Hershey Medical Center {MSHMC). Saint Joseph's Regional Health Network and Medical Group {SJRHN/SJMG), Penn State Community Medical Group (PSCMG),

Holy Spirit Medical Center {HSMC), Nittany Health, Inc. {"Nittany"), Central PA Health Network {CIN), Penn State Health Hampden Medical Center {"Hampden"), Penn State Health Lancaster Medical Center {LMC), Penn State Health Life Lion, LLC (PSHLL), and Pennsylvania Psychiatric Institute {PPI), which was acquired during the year ended June 30, 2024. These subsidiaries provide a variety of health care services in the Dauphin, Centre, Berks, Cumberland, and Lancaster county regions of Pennsylvania.

The Health System, through its medical groups, operates a non-acute and ambulatory network that consists of a number of patient care sites in nine counties. The Heath System, through PSCMG and Nittany, jointly holds ownership interest in ambulatory surgical centers.

During 2025 and 2024, the Health System recorded $1.092 billion and $951.3 million, respectively, of net patient service revenue received from HH. During 2025 and 2024, the Health System paid HH $349.0 million and

$276.9 million, respectively, of employee benefits expense. As of June 30, 2025 and 2024, the Health System has a liability due to HH in the amount of $3.1 million. This liability is included in accounts payable and other accrued expenses in the consolidated statements of financial position.

14. CONTINGENCIES AND COMMITMENTS CONTRACTUAL OBLIGATIONS The University has contractual obligations for the construction of new buildings and for additions to existing buildings in the amount of $2.265 billion, of which $1.527 billion has been paid or accrued as of June 30, 2025. The contract costs are being financed from available resources and from borrowings.

LETTERS OF CREDIT The University has available letters of credit in the amount of $32.9 million and $32.7 million as of June 30, 2025 and 2024, respectively. These letters of credit are used primarily to comply with minimum state and federal regulatory laws that govern various University activities. The fair value of these letters of credit approximates contract values based on the nature of the fee arrangements with the issuing banks.

50 THE PENNSYLVAN IA STATE UNIVERSITY

GUARANTEES The University has a contract with a third party whereby the third party acts as an agent of the University in connection with the procurement of electricity. The University guarantees the payment of the obligations of the third party incurred on behalf of the University to counterpart.ies.

SELF-INSURANCE The University has a coordinated program of commercial and self-insurance for medical malpractice claims for the Health System through the use of a qualified trust and a domestic captive insurance company in combination with a self-insured retention layer and is supplementing this program through participation in the Pennsylvania Medical Care Availability and Reduction of Error Fund, in accordance with Pennsylvania law. An estimate of the present value, discounted at 2% for the years ended June 30, 2025 and 2024, of the medical malpractice claims liability in the amount of $278.1 million and $235.0 million is recorded as of June 30, 2025 and 2024, respectively.

The subsidiaries of the Health System are self-insured for all medical malpractice claims asserted on or after July 1, 2001 that are below the coverage of excess insurance policies and not included in the insurance coverage of the Pennsylvania Medical Care Availability and Reduction of Error Fund. Under the self-insurance program, the Health System is required by the Commonwealth to maintain a malpractice trust fund in an amount equal to or greater than the expected loss of known claims. The balance of this trust fund was $45.4 million and $42.4 million at June 30, 2025 and 2024, respectively. The Health System intends to fund any claim payments due during the next year with cash flows from operations.

With approval from the Pennsylvania Department of Labor and Industry (PA-DU), the University elected to self-insure potential obligations applicable to Pennsylvania workers' compensation. Claims under the program are contractually administered by a third-party administrator. The University purchased insurance coverage from a commercial insurer for claims in excess of $600,000 per incident. An estimate of the self-insured workers' compensation claims liability in the amount of $6.7 million and $6.5 million, discounted at 3.79% and 4.33%, respectively, is recorded as of June 30, 2025 and 2024, respectively. The University has established a trust fund, in the amount of $15.3 million and

$14.4 million at June 30, 2025 and 2024, respectively, as required by PA-DU, to collateralize and to provide for the payment of claims under this self-insurance program. The Health System is also approved by the PA-DU to self-insure Pennsylvania workers' compensation claims and has purchased an excess policy through a commercial insurer for claims in excess of $750,000 per incident.

The University and the Health System are self-insured for certain health care benefits provided to employees. The University and the Health System have purchased excess insurance policies which cover employee health benefit claims in excess of $1.3 million per employee per year. The University and the Health System provide for reported claims and claims incurred but not reported.

RELATED PARTY TRANSACTIONS During 2025 and 2024, the University paid HH, a related party as defined in Note 13, $405.1 million and $338.7 million, respectively, of employee benefits expense. As of June 30, 2025 and 2024, the University has a liability due to HH in the amount of $39.5 million and $17.8 million, respectively.

LITIGATION AND CONTINGENCIES Various legal proceedings have arisen in the normal course of conducting University business. The outcome of such litigation is not expected to have a material effect on the financial position of the University.

Based on its operation of the Health System (see Note 13), the University, like the rest of the healthcare industry, is subject to numerous laws and regulations of federal, state and local governments. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory actions. Government activity has continued with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Although the University believes it has done its best to comply with these numerous regulations, such government reviews could result in significant repayments of previously billed and collected revenues from patient services.

AUDITED FINANCIAL STATEMENTS FY2025 51

15. SUBSEQUENTEVENTS The University has evaluated subsequent events through November 6, 2025, the date on which the consolidated financial statements were issued, and no subsequent events requiring disclosure were identified.

52 THE PENNSYLVANIA STATE UNIVERSITY

Board of Trustees THE PENNSYLVANIA STATE UNIVERSITY os of June 30, 2025 SUZAN T. COLLINS Director of Family Off,ce Collins and Ganley, PC KENNETH C. KANE Senior Advisor Generotlons Forest,y

'NEELI BENDAPUDI President The Pennsylvania State University "Non-Voting Trustee

'JOSHUA D. SHAPIRO Governor Commonweolth of Pennsylvania

Non-Voting Trustee EDWARD B. BROWN, 111 President & CEO KETCHConsulUng, Inc.

ANTHONY P. LUBRANO President A.P. Lubrano & Company, Inc.

JOSEPH V. PATERNO, JR.

President Blue Line 409 LLC APPOINTED BY THE GOVERNOR DAVID M. DAVIS Mansglng Director Accenture DAVID M. KLEPPINGER Chairman Emeritus McNees Wallace & Nu~ck LLC MEMBERS EX OFFICIO CYNTHIA A. DUNN Secretary Pennsylvania Department of Conservation and Natural Resources RUSSELL C. REDDING Secretary Pennsylvania Department of Agriculture ELECTED BY ALUMNI CHRISTA A. HASENKOPF Director, Alr Ouollty Programs & AQLI Energy Polley Institute. Univ. of Chicago MATTHEW J. MCGLOIN Wealth Counselor Abundance Wealth Counselors DANIEL J. DELLIGATTI President and Owner/Operator M&J Management Corporation DANIEL A. ONORATO Executive VP & Chief COrporate Affairs Officer Highmark Health CARRIE ROWE Acting Secretary Pennsylvania Department of Education "EVAN MYERS Governo(s Non-Voting Representative Sr. Vice President AccuWeather. Inc.

.. Non-Voting Rep,esentatlve ALI KRIEGER ESPN Analyst Former Professional Soccer Player CARL P. NASSIB Founder & CEO Ray,e Inc.

BRANDON D. SHORT Executive Director. Portfolio PGIM Real Estate El.ECTED BY DELEGATES FROM AGRICULTURAL SOCIETIES RANDALL E. BLACK CEO & President First Citizens community Bank Citizens Financial Services. Inc.

LYNN A. DIETRICH Retired Professional Engineer {PE)

CHRIS R. HOFFMAN President Pennsytvania Farm Bureau Owner Lazy Hog Farm DONALD W. CAIRNS Owner/Operator Cairns Fomily Farm VALERIE L DETWILER Senior Vice President Senior Business Banker Reliance Bank Owner/Operator, Golden Rule Equipment LLC d/b/a Forshays AG & Industrial M. ABRAHAM HARPSTER Co-Owner Evergreen Farms, Inc.

ELECTED BY THE BOARD - REPRESENTING BUSINESS AND INDUSTRY ROBERT F. BEARD Retired Chief Operating Offocer UGI Corporation KAREN L OUINTOS Retired Chief Customer and Marketing Officer Dell Technologies JULIE ANNA POTTS President and Chief Executive Off,cer North American Meat Institute STUDENT TRUSTEE KEVIN F. SCHUYLER Student The Pennsylvania State University DONALD G. COTNER Officer, Cotner Farms. Inc.

Partner. Don Cotner Farms, LP Partner, Boyd Station, LLP MARK H. DAMBLY Chief Executive Officer Pennrose Properties, LLC DAVIDC.HAN Professor Emeritus Penn State Colleges or Medicine and Engineering BARBARA L. DORAN CEO/CIO 808 Capital Partners, LLC GEORGE T. HENNING, JR.

Retired Business Executive ROBERT E. FENZA NAREN K. GURSAHANEY Retired Chief Operating Off,cer Retired PresidenL CEO & Director Liberty Property Trust ADT Corporation MARY LEE SCHNEIDER RICHARD S. SOKOLOV Retired President and CEO Vice Chairman SG360' Simon Property Group Independent Director ELECTED BY THE BOARD N AT-LARGE TRACY A. RIEGEL Senior Project Manager The Vanguard Group Asst Finance Manager J Scott Catering ACADEMIC TRUSTEE NICHOLAS J. ROWLAND Professor of Sociology Penn State Altoona EMERITI TRUSTEES IRA M. LUBERT Chairman and Co-Founder Independence Capital Partners and Lubert Adler Partners, LP ALICE W. POPE Associate Professor, Department of Psychology St John's University WALTER C. RAKOWICH Retired Chief Executive Officer Prologls ROBERT C. JUBELIRER Partner Next Generation Partners, Inc.

J. ALEX HARTZLER Managing Partner and Founder WCI Partners, LP MATTHEW W. SCHUYLER Chief People Off,cer CAA IMMEDIATE PAST PRESIDENT ALUMNI ASSOCIATION KELLEY M. LYNCH Chief Rnancial Officer sovaSage, Inc.

KATHLEEN L. CASEY Senior Advisor Patomak Global Partners. LLC KLC Consulting Group, LLC KEITH E. MASSER Chairman and Chief Executive Officer Sterman Messer. Inc.

ROBERT J. TRIBECK Chief Legal Officer Post Acute Medical, LLC RICHARD K. DANDREA Attorney Eckert Seamans Cherin & Mellott LLC WILLIAM F. OLDSEY Retired Educational Publishing Executive

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ATTACHMENT B - Penn State University Self-Guarantee Agreement

The Pennsylvania State University Financial Assurance for Cost of Decommissioning Activities Self-Guarantee Agreement with the Nuclear Regulatory Commission December 15, 2025 (Source: NUREG-1757, Vol. 3, Rev 1, Appendix A, Section A.9.12)

Guarantee made by The Pennsylvania State University, a nonprofit university, organized under the laws of the Commonwealth of Pennsylvania, herein referred to as "guarantor," to the U.S.

Nuclear Regulatory Commission, on behalf of the university as licensee.

The following license is covered under this guarantee:

License number: R-2 Breazeale Nuclear Reactor Docket 050-00005 Recitals

1. The guarantor has full authority and capacity to enter into this self-guarantee by the bylaws of the Trustees of the Pennsylvania State University.

2. This self-guarantee is being issued to comply with regulations issued by NRC, an agency of the U. S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in Title I 0, Chapter I of the Code of Federal Regulations, Parts 30, 50, and 70, which require that a holder of, or an applicant for, a materials license issued pursuant to 10 CFR Parts 30, 50, and 70 provide assurance that funds will be available when needed for required decommissioning activities.

3. The self-guarantee is issued to provide financial assurance for decommissioning activities for the license and facilities shown. The decommissioning costs for these activities are as follows:

License#

License Description Certified Amounts or Current Cost (Docket #)

and Method Estimates - 2025 R-2 Research Reactor Dec. 2019 base estimate (050-00005) of$21,480,473 plus 5% per year

$28,785,889 comoounded increase. 1 25% contingency fund

$7,196,472 Total Estimated Costs:

$35,982,361 1 The 2019 value with 5%/year escalation is used here. This is because approval has not yet been received for the 2022 value ($18,541,855) submitted as part of Penn State University's decommissioning funding plan submittal. If the 2022 value were to be used, with 5% per year compounded escalation, the certified annual current cost estimate for 2025 would be smaller ($21,464,5 15) than that presented in the table above. Therefore, without having yet received approval, the largest of the two values is used in this document.

4. The guarantor meets or exceeds the following financial test criteria for a nonprofit university that issues bonds, and agrees to comply with all notification requirements as specified in 10 CFR 30 and 10 CFR 30 Appendix E.

Financial Test: The current rating for our most recent uninsured, uncollateralized, and unencumbered bond issuance is AA as issued by Standard & Poor's and Aal as issued by Moody's.

5. The guarantor does not have a parent company holding majority control of its voting stock.

6. Decommissioning activities as used below refer to the activities required by 10 CFR Part 30, 50, and 70 for decommissioning of the facilities identified above.

7. Pursuant to the guarantor's authority to enter into this guarantee, the guarantor guarantees to the NRC that the guarantor shall:

(a) Carry out the required decommissioning activities, as required by the licenses listed above.

8. The guarantor agrees to submit revised financial statements, financial test data, and an auditor's special report and reconciling schedule annually within 180 days of the close of its fiscal year.

9. Not applicable.

10. The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee financial test criteria, it shall send within 90 days of the end of the fiscal year, by certified mail, notice to the NRC that it intends to provide alternative financial assurance as specified in l 0 CPR Part 30, 50, or 70. Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance.

11. The guarantor also agrees to notify the NRC in writing in advance of any proposed change in or transfer of ownership of the licensed activity and to maintain this guarantee until the new licensee provides alternative financial assurance acceptable to the beneficiary.

12. The guarantor agrees that if it determines, at any time other than as described in Reci ta!

10, that it no longer meets the self-guarantee financial test criteria or it is disallowed from continuing as a self-guarantor, it shall establish alternative financial assurance as specified in 10 CFR Parts 30, 50, or 70 within 30 days.

13. The guarantor, as well as its successors and assigns and agrees to remain bound jointly and severally under this guarantee notwithstanding any or all of the following:

amendment or modification of the license or NRC-approved decommissioning funding plan for that facility, the extension or reduction of the time of performance of required 2

activities, or any other modification or alteration of an obligation of the licensee pursuant to 10 CFR Parts 30, 50, or 70.

14. The guarantor agrees that it shall be liable for all litigation costs incurred by the NRC in any successful effort to enforce the agreement against the guarantor. Such litigation costs shall not be deducted from or otherwise reduce the financial assurance provided by this guarantee.

15. The guarantor agrees to remain bound under this self-guarantee for as long as it, as licensee, must comply with the applicable financial assurance requirements of 10 CFR Part 30, 50, or 70, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to the NRC, such cancellation to become effective not before an alternative financial assurance mechanism has been put in place by the guarantor.

16. The guarantor agrees that if it, as licensee, fails to provide alternative financial assurance as specified in IO CFR Part 30, 50, or 70 and obtain written approval of such assurance from the NRC within 90 days after a notice of cancellation by the guarantor is received by the NRC from the guarantor, the guarantor shall make full payment under the self-guarantee.

17. The guarantor expressly waives notice of acceptance of this self-guarantee by the NRC.

The guarantor also expressly waives notice of amendments or modifications of the decommissioning requirements.

18. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its independent auditor and to NRC during each year in which this self-guarantee is in effect.

19. The guarantor agrees that if the guarantor admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors, or any proceeding is instituted by or against the guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking dissolution, liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for the guarantor or for any substantial part of its property, or the guarantor takes any action to authorize or effect any of the actions stated in this paragraph, then the Commission may:

(a) Declare that the financial assurance guaranteed by the guarantee agreement is immediately due and payable to the standby trust set up to protect the public health and safety and the environment, without diligence, presentment, demand, protect, or any other notice of any kind, all of which are expressly waived by guarantor; and (b) Exercise any and all of its other rights under applicable law.

3

20.

The guarantor agrees to notify the NRC, in writing, immediately following the filing of a voluntary or involuntary petition for bankruptcy under any chapter of Title 11 (Bankruptcy) of the United States Code, or the occurrence of any other event listed in paragraph 19 of this guarantee and by or against the guarantor; the licensee; an entity (as that term is defined in 11 U.S.C. 101(14)) controlling the licensee or listing the 1 icense or licensees as property of the estate; or an affiliate ( as that term is defined in 11 U.S.C. 101(2)) of the licensee. This notification must include: a description of the event, including major creditors, the amounts involved, and the actions taken to assure that the amount of funds guaranteed by the guarantee for decommissioning wi 11 be transferred to the standby trust as soon as possible; if a petition of bankruptcy was filed, the identity of the bankruptcy court in which the petition for bankruptcy was filed; and the date of filing of any petitions.

21. Not applicable.

22. The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceases to be rated in any category of" A-" and above by Standard and Poor's or in any category of "A3" and above by Moody's, the licensee will notify the Commission in writing within 20 days after publication of the change by the rating service.

I hereby certify that this self-guarantee is true and correct to the best of my knowledge.

Effective date:

f:l. If 5 li2 5

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Pennsylvania State University:

Dr. Sara F. Thorndike Senior Vice President for Finance & Business/Treasurer Signature of witness or notary: gf!J,d lt(Ld,.1) fl-Ll.

4

Official Use Only Proprietary Information Withhold under 10 CFR 2. 390 ATTACHMENT C-lndependent Accountant's Report on Applying Agreed-Upon Procedures Official Use Only Proprietary Information Withhold under 10 CFR 2. 390

Qlante Thoran Offieial Use OAI:,* PFer,rietary IAfeFfflatioA WithholEI uHEler 19 CFR 2.399 Independent Accountant's Report on Applying Agreed-upon Procedures To Dr. Sara F. Thorndike, Senior Vice President for Finance and Business/Treasurer The Pennsylvania State University 208 Old Main University Park, PA 16802 Plante & Moran, PLLC SUl!e300 "634 Front Avenue N.W.

Grand Rapids, Ml 49504 Tel: 616.774.8221 F"~* 6 16.4S9 :t<;94 plantemorm.com We have performed the procedures enumerated below on The Pennsylvania State University's (the "University") compliance with the U.S. Nuclear Regulatory Commission's (the "NRC") financial assurance regulations, Appendix E to 10 CFR Part 30, related to the University's use of financial tests and self-guarantee for providing reasonable assurance of funds for decommissioning the Breazeale Reactor Facility and Special Nuclear Material for research and teaching (the "Regulations") as of June 30, 2025 (the "subject matter"). The University's management is responsible for the subject matter.

The University has agreed to the procedures performed and acknowledged that they are appropriate to meet the intended purpose of assisting the University and the NRC in evaluating the subject matter. No other parties have agreed to and acknowledged the appropriateness of the procedures. This report may not be suitable for any other purpose. The procedures performed may not address all items of interest to a user of this report and may not meet the needs of all users of this report, and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. We make no representation regarding the sufficiency of these procedures, either for the purpose intended or for any other purpose.

An agreed-upon procedures engagement involves performing specific procedures that the engaging party has agreed to and acknowledged to be appropriate for the intended purpose of the engagement and reporting on findings based on the procedures performed. Those procedures and findings are as follows:

1. For the University's most recent uninsured, uncollateralized, and unencumbered bond issuance, which is $575,730,000 of series 2025A and 20258 bonds, we compared the rating of AA from S&P Global Ratings and the rating of Aa1 from Moody's Investors Service, reported in the 2025 NRC Annual Certification Letter prepared by the University, to the letter dated June 6, 2025 from S&P Global Ratings to the University and to the letter dated June 3, 2025 from Moody's Investors Service to the University, respectively.

2.

We found no exceptions as a result of the procedures.

We recalculated the total figure of off-balance-sheet exposures for mathematical accuracy. We compared the total of off-balance-sheet exposure included in the schedule provided by the University's management to the total net assets of $14,816,795,000 reported in the 2025 NRC Annual Certification Letter prepared by the University and confirmed the total off-balance-sheet exposure was less than the total net assets reported in the 2025 NRC Annual Certification Letter.

We found no exceptions as a result of the procedures.

We were engaged by the University to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA). We were not engaged to, and did not, conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the subject matter. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

Offieial Use o,~1, P~or,rie~fll) lt~feflflfltiOH W ithl~olEI uHEler 19 CFR 2.399

Offieiol Use OHly PFei,rie~OI)' lnfoFll'!olieR Will~kela tlfl80f IO CFR 2.390 To Dr. Sara F. Thorndike, Senior Vice President for Finance and Business/Treasurer The Pennsylvania State University We are required to be independent of the University and to meet our other ethical responsibilities in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the University and the NRC and is not intended to be and should not be used by anyone other than those specified parties.

December 15, 2025 Offieiol LJ9e o,~I) P~p* ielary lnfofll'IO!ieA

\\\\'ilkkela t1Aaer IO CFR 2.390

Official Use OAly PFepFietary IF1ft>Fmetim1 WithhelEI uAElef 19 CfR 2.399 Schedule for Reconciling Amounts Contained in the NRC Annual Certification Letter with Amounts in the Consolidated Financial Statements Total positive net assets The Pennsylvania State University Year Ended June 30, 2025 Per Consolidated Financial Statements

$14,816,795,000 Reconciling items

$0 Official Use OAly ~P* iota,, IAfoFmetieA Witl~helEI under 19 CFR 2.399 Per NRC Annual Certification Letter

$14,816,795,000

ATTACHMENT D - Affidavit

ML25364A104

Text

Dear Sir or Madam,

SUMMARY

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