ML14015A390

Attachment a: Penn State University Audited Financial Statements

ML14015A390
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Site:	Pennsylvania State University, 07000113
Issue date:	06/30/2013
From:	Pennsylvania State Univ, University Park, PA
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0 C I /V,,l C(o ATTACHMENT A -Penn State University Audited Financial Statements PENNSTATE Audited Financial Statements The Pennsylvania State University Fiscal Year Ended June 30, 2013 THE PENNSYLVANIA STATE UNIVERSITY UNIVERSITY OFFICERS as of November 1, 2013 RODNEY A. ERICKSON President DAVID J. GRAY Senior Vice President for Finance and Business/Treasurer NICHOLAS P. JONES Executive Vice President and Provost RODNEY P. KIRSCH Senior Vice President for Development and Alumni Relations HAROLD L. PAZ Chief Executive Officer, Penn State Milton S.Hershey Medical Center; Senior Vice President for Health Affairs, Penn State University; and Dean, Penn State College of Medicine

CONTENTS Operating Revenues by Source 2 Operating Expenses by Function 3 Letter of Transmittal 5 Independent Auditors' Report 6 Consolidated Financial Statements:

Statements of Financial Position 8 Statements of Activities 10 Statements of Cash Flows 12 Notes to Consolidated Financial Statements 13 OPERATING REVENUES BY SOURCE ($4.9 billion)For the Year Ended June 30, 2013 ($ in Millions)Government grants and contracts$619.1 (12.7%)Medical Center$1372.5 (28.2%) /Private gifts, grants and contracts$273.9 (5.6%)Commonwealth of Pennsylvania appropriation

$272.4 (5.6%)Endowment spending and other investment income$172.1 (3.5%)Recovery of indirect costs$153.7 (3.1%)Other sources$82.1 (1.7%)Tuition and fees, net of discount$1,549.0 (31.8%)2 OPERATING EXPENSES BY FUNCTION ($4.5 billion)For the Year Ended June 30, 2013 ($ in Millions)Research$806.4 (18.1%)Medical Center$1,232.7 (27.6%)Auxiliary enterprises

$347.6 (7.8%)Academic support$327.3 (7.3%)Student services$167.1 (3.7%)Instruction

$1,129.4 (25.3%)3 This Page is Intentionally Blank.4 PENNSTATE Vg (814) 865-1355 (814) 863-0701 Joseph J. Doncsecz Associate Vice President for Finance and Corporate Controller The Pennsylvania State University 408 Old Main University Park, PA 16802-1505 November 1, 2013 Dr. Rodney A. Erickson, President The Pennsylvania State University

Dear Dr. Erickson:

The audited consolidated financial statements of The Pennsylvania State University and subsidiaries (the "University")

for the fiscal years ended June 30, 2013 and 2012 are presented on the accompanying pages. These financial statements represent a complete and permanent record of the finances of the University as of and for the years then ended.These financial statements have been audited by Deloitte & Touche LLP, independent auditors, and their report has been made a part of this record.Respectfully submitted, Joseph J. Doncsecz Associate Vice President for Finance and Corporate Controller David J. Gray Senior Vice President for Finance and Business, and Treasurer An Equal Opportunity University 5

eloitte Deloitte & Touche LLP 1700 Market Street Philadelphia, PA 19103-3984 USA Tel: 215 246 2300 Fax: 215 569 2441 www~deloitte~com INDEPENDENT AUDITORS' REPORT To the Board of Trustees of the Pennsylvania State University University Park, Pennsylvania We have audited the accompanying consolidated financial statements of The Pennsylvania State University and its subsidiaries (the "University"), which comprise the consolidated statements of financial position as of June 30, 2013 and 2012, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.

The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements 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 Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.Member of 6 Deloitte Touche Tohmatsu Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the University as of June 30, 2013 and 2012, 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.November 1, 2013 7 THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ASSETS JUNE 30, 2013 AND 2012 (in thousands)

Current assets: Cash and cash equivalents Short-term investments Deposits held for others Accounts receivable, net of allowances of $66,974 and $62,217 Contributions receivable, net Loans to students, net of allowances of $584 and $486 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 of $2,497 and $2,247 Deferred bond costs, net Total investment in plant, net Beneficial interest in perpetual trusts Investments Other assets Total noncurrent assets June 30, 2013$ 983,256 200,273 44,166 492,404 50,411 10,683 31,406 115,463 1,928,062 2,551 127,726 48,161 5,181 3,730,764 13,252 4,816,961 17,958 8,762,554 June 30, 2012$ 1,599,863 256,882 26,016 383,173 67,038 10,317 30,769 94,562 2,468,620 2,551 117,375 47,693 6,241 3,547,803 12,891 3,794,668 23,147 7,552,369 Total assets See notes to consolidated financial statements.

8 THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LIABILITIES AND NET ASSETS JUNE 30, 2013 AND 2012 (in thousands)

Current liabilities:

Accounts payable and other accrued expenses Deferred revenue Long-term debt Present value of annuities payable Accrued postretirement benefits Total current liabilities Noncurrent liabilities:

Deposits held in custody for others Deferred revenue Long-term debt Present value of annuities payable Accrued postretirement benefits Refundable United States Government student loans Other liabilities Total noncurrent liabilities Total liabilities Net assets: Unrestricted

-Undesignated Designated for specific purposes Net investment in plant Total unrestricted

-The Pennsylvania State University Noncontrolling interest Total unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets June 30, 2013$ 660,096 264,727 43,650 5,276 51,390 1,025,139 50,804 6,969 961,758 36,979 1,643,651 45,300 210,919 2,956,380 3,981,519 June 30, 2012$ 524,705 244,104 44,671 5,536 42,470 861,486 47,556 9,487 1,108,035 37,631 1,822,429 44,478 222,889 3,292,505 4,153,991 1,635 2,757,846 2,246,228 5,005,709 831 5,006,540 484,375 1,218,182 6,709,097$10.690.616 1,617 2,193,627 2,044,408 4,239,652 774 4,240,426 482,208 1,144,364 5,866,998$ 10.020.989 See notes to consolidated financial statements.

9 THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2013 (in thousands)

Temporarily Permanently Unrestricted Restricted Restricted Operating revenues and other support: Tuition and fees, net of discounts of $127,987 Commonwealth of Pennsylvania

-Appropriations Special contracts Department of General Services projects United States Government grants and contracts Private grants and contracts Gifts and pledges Endowment spending Other investment income Sales and services of educational activities Recovery of indirect costs Auxiliary enterprises Medical Center revenue Other sources Net assets released from restrictions Total operating revenues and other support Operating expenses: Educational and general -Instruction Research Public service Academic support Student services Institutional support Total educational and general Auxiliary enterprises Medical Center expense Total operating expenses Increase/(decrease) in net assets from operating activities Nonoperating activities:

Gifts and pledges Current year investment returns Endowment appreciation utilized Changes in funds held by others in perpetuity Write-offs and disposals of assets Nonperiodic change in postretirement benefit plan Actuarial adjustment on annuities payable Increase in net assets from nonoperating activities Increase in net assets- The Pennsylvania State University Noncontrolling interest: Excess of revenues over expenses Increase in net assets noncontrolling interest$ 1,548,974 272,431 65,712 49,890 503,517 182,661 74,454 71,459 100,094 66,054 153,662 378,290 1,372,500 15,998 76,783 4,932,479 1,129,431 806,333 82,221 327,327 167,061 376,602 2,888,975 347,606 1,232,710 4,469,291$$Total$ 1,548,974 272,431 65,712 49,890 503,517 19) rel 16,827 91,281--71,459 592 100,686--66,054 153,662 378,290 1,372,500--15,998 (76,783) -(59,3641 4,873,115--1,129,431 806,333 82,221 327,327 167,061 376,602 2,888,975 347,606 1,232,710 4,469,291 463,188 (59,364)403,824 56,633 (35,180)(2,000)283,416 302,869-68,521 68,521 62,315 8,103 127.051 S- (35.180)424 353 777--(2,000)283,416 (1,208) (3,159) (4,367 61,531 73,818 438,218 766,057 2,167 73,818 842.042 57 57 57 57 Increase in total net assets 766,114 2,167 73,818 842,099 Net assets at the beginning of the year Net assets at the end of the year 4,240,426 482,208 1.144,364 5,866,998$ 5,006,540

$ 484,375 $ 1,218,182

$ 6,709,097 See notes to consolidated financial statements.

10 THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 (in thousands)

Temporarily Permanently Unrestricted Restricted Restricted Operating revenues and other support: Tuition and fees, net of discounts of $121,979 Commonwealth of Pennsylvania

-Appropriations Special contracts Department of General Services projects United States Government grants and contracts Private grants and contracts Gifts and pledges Endowment spending Other investment income Sales and services of educational activities Recovery of indirect costs Auxiliary enterprises Medical Center revenue Other sources Net assets released from restrictions Total operating revenues and other support Operating expenses: Educational and general -Instruction Research Public service Academic support Student services Institutional support Total educational and general Auxiliary enterprises Medical Center expense Total operating expenses Increasel(decrease) in net assets from operating activities Nonoperating activities:

Gifts and pledges Current year investment returns Endowment appreciation utilized Changes in funds held by others in perpetuity Write-offs and disposals of assets Nonperiodic change in postretirement benefit plan Actuarial adjustment on annuities payable (Decrease)/increase in net assets from nonoperating activities Increase/(decrease) in net assets -The Pennsylvania State University

$ 1,508,843

$261,046 67,949 28,142 476,987 173,401 80,765 70,843 59,303 60,297 151,452 377,375 1,261,690 28,438 55,669 4,662.200 1,080,767 756,608 87,212 304,846 158,649 277,147 2.665,229 387,120 1,195,695 4,248,044 9.927 553 Total$ 1,508,843 261,046 67,949 28,142 476,987 173,401 90,692 70,843 59,856 60,297 151.452 377.375 1,261,690 28,438 4,617,011 (55,669)(45,189)1,080,767 756,608 87,212 304,846 158,649 277,147 2,665,229 387,120 1,195.695 4,248,044 414,156 49,555 (33,131)(6,407)(295,287)(285,2701 (45,189)(27,795)375 33,653 5,125 51 33.653 26,885 (33,131)426 (6.407)(295,287)(4,294 (278,155)90,812 368.967 (558) (3,736)(27,978) 35,093 128.886 (73.167)35,093 Noncontrolling interest: Excess of revenues over expenses Increase in net assets noncontrolling interest Increase/(decrease) in total net assets Net assets at the beginning of the year 80 80--80--80 128,966 (73,167)555,375 35,093 1,109,271 90,892 5,776,106 4,111,460 Net assets at the end of the year$ 4,240,426 See notes to consolidated financial statements.

$ 482,208 $ 1,144,364

$ 5,866,998 11 THE PENNSYLVANIA STATE UNIVERSITY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2013 AND 2012 (in thousands)

June 30, 2013 Cash flows from operating activities:

June 30, 2012 Increase in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities:

Actuarial adjustment on annuities payable Contributions restricted for long-term investment Interest and dividends restricted for long-term investment Net realized and unrealized gains on long-term investments Depreciation expense Amortization expense (Gain)/loss on early extinguishment of debt Write-offs and disposals of assets Contributions of land, buildings and equipment Buildings and equipment provided by Pennsylvania Department of General Services Contribution to government student loan funds Provision for bad debts Increase in deposits held for others Increase in receivables (Increase)/decrease in inventories Decrease/(increase) in prepaid expenses and other assets Increase in accounts payable and other accrued expenses Increase in deferred revenue (Decrease)/increase in accrued postretirement benefits Net cash provided by operating activities Cash flows from investing activities:

Purchase of land, buildings and equipment Decrease in deposits held by bond trustees Advances on student loans Collections on student loans Decrease in investments held under securities lending program Decrease in liability under securities lending program Purchase of investments Proceeds from sale of investments Net cash used in investing activities Cash flows from financing activities:

Contributions restricted for long-term investment Interest and dividends restricted for long-term investment Payments of annuity obligations Proceeds from issuance of bonds Bond issuance costs Principal payments on notes, bonds and capital leases Proceeds related to government student loan funds, net of collection costs Net cash (used in)/provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Supplemental disclosures of cash flow information (Note 2)$ 842,099 $ 90,892 4,366 (100,126)(61,553)(132,907)251,407 480 (213)16,000 (14,821)(1,293)154 49,433 (40,601)(90,238)(503)14,598 80,820 18,564 (169,858)665,808 (434,933)(9,836)8,320 4,294 (97,224)(23,206)(37,231)242,531 505 567 6,407 (2,755)154 57,555 (1,563)(44,410)4,821 (4,164)125,353 8,424 385,855 716,805 (402,654)57,100 (10,482)7,025 219,524 (219,524)(34,460,283) 34,056,053 (753,241)95,934 23,206 (5,558)26,256 (301)(72,864)611 67,284 30,848 1,569,015$ 1,599,863 (40,907,840) 40,068,438 (1,275,851) 100,126 61,553 (5,297)(163,604)658 (6,564)(616,607)1,599,863$ 983,256 See notes to consolidated financial statements.

12 THE PENNSYLVANIA STATE UNIVERSITY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2013 AND 2012 1. THE UNIVERSITY AND RELATED ENTITIES The Pennsylvania State University

("the University"), which was created as an instrumentality of the Commonwealth of Pennsylvania

("the 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.Basis of Presentation The financial statements of the University include, on a consolidated basis, the combined financial statements of The Milton S. Hershey Medical Center ("TMSHMC" or "Medical Center"), a not-for-profit corporation and Penn State Hershey Health System, Inc. ("Health System") and The Corporation for Penn State and its subsidiaries

("the Corporation").

See Note 11 for additional information about TMSHMC and the Health System. 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 significant transactions between the University, TMSHMC 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 (FASB) 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 FASB ASC requirements, net assets and the changes in net assets are classified as permanently restricted, temporarily restricted or unrestricted.

Permanently restricted net assets consist primarily of the historical amounts of endowed gifts. Additionally, contributions receivable and remainder interests, which are required by donors to be permanently retained, are included at their estimated net present values.Temporarily restricted net assets consist of contributions receivable and remainder interests whose ultimate use is not permanently restricted.

In addition, the excess of current market value over the historical cost of permanently restricted endowments is classified as temporarily restricted net assets.Unrestricted net assets are all the remaining net assets of the University.

Net unrealized losses on permanently restricted endowment funds for which historical cost exceeds market value are recorded as a reduction to unrestricted net assets.Revenue from temporarily restricted sources is reclassified as unrestricted revenue when the circumstances of the restriction have been fulfilled.

Donor-restricted revenues whose restrictions are met within the same fiscal year are reported as unrestricted income.13 Notes to Consolidated Financial Statements 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 contingencies and commitments.

Actual results could differ from those estimates.

Revenue Recognition Tuition revenue is recognized in the fiscal year in which the substantial portion of the educational term occurs.Institutional financial aid provided by the University for tuition and fees is reflected as a reduction of tuition and fee revenue. Revenues for auxiliary enterprises are recognized as the related goods and services are delivered and rendered.

Grant revenues are recognized as the eligible grant activities are conducted.

Payments received in advance for tuition, goods and services are deferred.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 with the revenue assigned to the appropriate category of restriction.

The amounts are present valued based on timing of expected collections.

TMSHMC and Health System have agreements with third-party payors that provide for payments to TMSHMC and Health System at amounts different from their established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges and per diem payments.

Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. In addition, net patient service revenue is net of provision for bad debts of $43.6 million and $51.6 million for the years ended June 30, 2013 and 2012, respectively.

Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined or such estimates change.TMSHMC provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than established rates. The Medical Center does not pursue collection of amounts determined to qualify as charity care; they are not reported as net patient service revenue. The amounts of direct and indirect costs for services and supplies furnished under the Medical Center's charity care policy totaled approximately

$20.0 million and $17.6 million for the years ended June 30, 2013 and 2012, respectively and is based on a ratio of the Medical Center's operational costs to its gross charges. The amount of charges foregone for services and supplies furnished under the Medical Center's charity policy during 2013 and 2012 totaled approximately

$54.9 million and $51.7 million, respectively.

Fair Value of Financial Instruments The University has provided fair value estimates for certain financial instruments in the notes to the financial statements.

Fair value information presented in the financial statements is based on information available at June 30, 2013 and 2012. 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, 2013 and 2012 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 3. The fair value of the University's bonds payable is disclosed in Note 7. See Note 5 for further discussion of fair value measurements.

14 Notes to Consolidated Financial Statements 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) 2013 2012 Interest paid $ 46,798 $ 48,569 Taxes paid 7 1,500 Non-cash acquisitions of land, buildings and equipment 32,723 11,638 Capitalized construction costs accrued are $44.8 million and $61.3 million as of June 30, 2013 and 2012, respectively.

Cash and cash equivalents include certain investments in highly liquid instruments with initial 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 three months but less than 12 months.Accounts Receivable Accounts receivable, net at June 30 consists of the following: (in thousands of dollars) 2013 2012 Grants and contracts, net of allowance of $1,241 and $1,241 $ 166,963 $ 149,397 Patient accounts receivable, net of allowance of $54,759 and $51,544 173,582 146,034 Student receivables, net of allowance of $6,434 and $5,418 33,178 42,805 Investment and interest receivable 78,419 16,967 Other, net of allowance of $4,540 and $4,014 40,262 27,970 Total accounts receivable, net 492$404 $ 383173 The University maintains allowances for doubtful accounts to reflect management's best estimate of probable losses inherent in receivable balances.

Management determines the allowances for doubtful accounts based on known factors, historical experience, and other currently available evidence.

Receivables are written off when management determines they will not be collected.

Related to patient accounts receivable associated with services provided to patients who have third-party coverage, management analyzes contractually due amounts and provides an allowance for doubtful accounts (for example, for expected uncollectible deductibles and copayments or for payors who are known to be having financial difficulties that make the realization of amounts due unlikely).

For receivables from self-pay patients the Medical Center and Health System records a provision for bad debts in the period of service on the basis of its past experience, which indicates that many patients are unable or unwilling to pay the portion of their bill for which they are financially responsible.

In estimating the allowance for doubtful accounts, account age is taken into consideration.

The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted is charged off against the allowance for doubtful accounts.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 have a grace period until repayment is required based upon the earlier of graduation or no longer achieving at least half-time enrollment status. The grace period varies depending on the type of loan. Loans accrue interest after the grace period and are repaid directly to the University.

Loans to students are uncollateralized and carry default risk. At June 30, 2013 and 2012, respectively, student loans represent 0.6% of total assets.15 Notes to Consolidated Financial Statements The availability of funds for loans under federal government revolving loan programs is dependent on reimbursements to the pool from repayments of outstanding loans. Funds advanced by the federal government of $45.3 million and $44.5 million at June 30, 2013 and 2012, respectively, are ultimately refundable to the government and are classified as liabilities in the consolidated statements of financial position.

Outstanding loans cancelled under the program result in a reduction of the funds available to loan and a decrease in the liability to the federal government.

At June 30, 2013 and 2012, loans to students consisted of the following: (in thousands of dollars)2013 2012 Loans to students: Federal government loan programs: Perkins loan program Health Professions Student Loans and Loans for Disadvantaged Students Federal government loan programs Institutional loan programs Less allowance for doubtful accounts: Balance, beginning of year Provision for doubtful accounts Balance, end of year 42,789 197 42,986 18,939 61,925 (2,733)(348)(3,081)$ 42,294 285 42,579 18,164 60,743 (2,753)20 (2,733)$ 58.010 Loans to students, net Allowances for doubtful accounts are established based on prior collection experience and current economic factors which, in management's judgment, could influence the ability of loan recipients to repay the amounts according to the terms of the loan. 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. When loans to students are deemed uncollectible, an allowance for doubtful accounts is established.

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, 2013 and 2012 are as follows: 30 days or less (in thousands of dollars)31-60 days 61-90 days Over 91 days Total 2013 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$ 41,367 $ 656 $ 86 $ 877 $ 42,986 18,310 280 23 326 18,939 59,677 936 109 1,203 61,925 (1,432)(1,649)(3,081)&-5&8-844 16 Notes to Consolidated Financial Statements (in thousands of dollars)30 days Over or less 31-60 days 61-90 days 91 days Total 2012 Loans to students: Federal government loan programs $ 41,069 $ 506 $ 111 $ 893 $ 42,579 Institutional loan programs -17,781 173 28 182 18,164 Total loans to students 58,850 679 139 1,075 60,743 Allowance for doubtful accounts: Federal government loan programs (1,562)Institutional loan programs (1171)Total allowance for doubtful accounts (2.733)Total loans to students, net Inventories Inventories are stated at the lower of cost or market, generally on the first-in, first-out basis.Investments The University's noncurrent investments represent 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.

Investments in equity securities with readily determinable fair values and all investments in debt securities are reported at fair values with gains and losses included in the consolidated statements of activities.

In the management of investments, 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.

The estimated fair value amounts for marketable debt, equity and fixed income securities held by the University have been reviewed by the University and determined using available market information as supplied by the various financial institutions that act as trustees or custodians for the University.

For non-liquid holdings, generally limited partnership investments in private real estate, venture capital, private equity, natural resources, and private debt, estimated fair value is determined based upon financial information provided by the general partner. This financial information includes assumptions and methods that were reviewed by University management.

The University believes that the estimated fair value is a reasonable estimate of market value as of June 30, 2013 and 2012. Because the limited partnerships are not readily marketable, the estimated 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.Income on operating investments and income used for the annual distribution under the annual spending policy for endowments are reported in operating revenues within the consolidated statement 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 permanently restricted net assets and related beneficial interest in perpetual trusts in the consolidated financial statements.

17 Notes to Consolidated Financial Statements Investment in Plant Total investment in plant as of June 30 is comprised of the following: (in thousands of dollars)2013 2012 Land Buildings Improvements other than buildings Equipment Total plant Less accumulated depreciation Total investment in plant, net$ 116,050 5,043,463 559,877 1,100,431 6,819,821 (3,089,057)

$ 3,730,764$ 115,127 4,740,770 534,029 1,032,923 6,422,849 (2,875,046)

$ 3,547Z80 The value of land, buildings, and equipment is recorded at cost or, if received as gifts, at fair value at date of gift. 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 $251.4 million and $242.5 million for the fiscal years ended June 30, 2013 and 2012, respectively.

The University has certain building and equipment lease agreements in effect which are considered capital leases that are included as long-term debt in the statements of financial position.

These leases have been capitalized at the lower of fair market value or net present value of the minimum lease payments.

Buildings and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. The capitalized cost and accumulated depreciation of the leases at June 30, 2013 and 2012 was $135.5 million and $41.8 million, and $108.3 million and $33.4 million, respectively.

Accounts Payable and Other Accrued Exnenses Accounts payable and other accrued expenses at June 30 consist of the following: (in thousands of dollars)2013 2012 Accounts payable (non-Medical Center)Medical Center accounts payable and other accrued expenses Accrued payroll and other related liabilities Accrued bond interest Student deposits Total accounts payable and other accrued expenses 366,637 187,667 87,300 13,674 4,818$ 246,127 177,063 82,211 14,398 4,906$ 524.705 Asset Retirement Obligations Under ASC 410-20, Asset Retirement and Environmental Obligations

-Asset Retirement Obligations, organizations must accrue for costs related to legal obligations to perform certain activities in connection with retirement, disposal, or abandonment of assets. The obligation to perform the asset retirement activity is not conditional even though the timing or method may be conditional.

18 Notes to Consolidated Financial Statements 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 statement of financial position.

The following table details the change in liabilities for the years ended June 30: Balance as of June 30, 2011 Accretion expense Liabilities settled Balance as of June 30, 2012 Accretion expense Liabilities settled Balance as of June 30, 2013 (in thousands of dollars)$ 60,270 5,430 (3,766)61,934 7,651 (4,293)$ -65ý292 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.

Income Taxes 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 740 Income Taxes Topic, the University continues to evaluate tax positions and has determined there is no material impact on the University financial statements.

Reclassification Certain 2012 amounts have been reclassified to conform with the 2013 presentation of the nonperiodic change in postretirement benefit plan as a nonoperating activity within the consolidated statement of activities.

Operating expenses: Educational and general -Instruction Research Public service Academic support Student services Institutional support Total educational and general Nonoperating expenses: Nonperiodic change in postretirement benefit plan As previously presented$ 1,234,581 777,752 101,683 355,795 176,398 314,307$ 2,960,516 Updated presentation

$ 1,080,767 756,608 87,212 304,846 158,649 277,147$ 2,665,229 Chancge$ (153,814)(21,144)(14,471)(50,949)(17,749)(37,160)$ (295,287)$(295,287)

$ (295,287)19 Notes to Consolidated Financial Statements Recent Accounting Pronouncements In September 2011, the FASB issued ASU 2011-08, Intangibles

-Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two step goodwill impairment test described in Topic 350. The guidance provided in this ASU is effective for annual tests performed for fiscal years beginning after December 15, 2011. The adoption of this standard on July 1, 2012 had no impact on financial condition, results of operations or cash flows.In December 2011, the FASB issued ASU 2011-11, "Disclosures About Offsetting Assets and Liabilities." This guidance contains new disclosure requirements regarding the nature of an entity's rights of setoff and related arrangements associated with its financial instruments and derivative instruments.

This guidance is effective for the University beginning July 1, 2013 and retrospective application is required.

The University does not expect this guidance to have an impact on its consolidated financial statements.

In January 2013, the FASB issued ASU 2013-01, "Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities." This guidance provides clarification on the scope of the offsetting disclosure requirements in ASU 2011-11. This guidance is effective for the University beginning July 1, 2013 with early adoption permitted.

The University does not expect this guidance to have a material impact on its consolidated financial statements.

In October 2012, the FASB issued ASU 2012-05, "Statement of Cash Flows (Topic 230): Not-for-Profit Entities:

Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows." This guidance provides clarification on how entities classify cash receipts arising from the sale of certain donated financial assets in the statement of cash flows. This guidance is effective for the University beginning July 1, 2013 with early adoption permitted.

The University does not expect this guidance to have a material impact on its consolidated statement of cash flows.In February 2013, the FASB issued ASU 2013-04, "Obligations Resulting From Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date." This guidance requires entities to measure obligations resulting from the joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This guidance is effective for the University beginning July 1, 2014 with early adoption permitted.

The University has not yet evaluated the impact this guidance may have on its consolidated financial statements.

In April 2013, the FASB issued ASU 2013-06, "Services Received from Personnel of an Affiliate".

This update specifies guidance for not-for-profit entities to apply in recognizing and measuring services received from personnel of an affiliate.

This guidance is effective for the University beginning after June 15, 2014 with early adoption permitted.

The University has not yet evaluated the impact this guidance may have on its consolidated financial statements.

3. INVESTMENTS Investments by major category as of June 30 are summarized as follows: (in thousands of dollars) 2013 2012 Money markets $ 371,987 $ 251,782 Fixed income: U.S. government/agency 1,174,609 1,230,097 U.S. corporate 706,291 639,456 Foreign 372,515 219,852 Other 146,617 108,140 Equities 1,342,487 887,826 Private capital 902,728 714,397 Total $ 5.017.234

$ 4.051.550 20 Notes to Consolidated Financial Statements Other fixed income investments consist of collateralized mortgage obligations, mortgage-backed securities and asset-backed securities.

Equity investments are comprised of domestic and foreign common stocks. Private capital consists primarily of interests in private real estate, venture capital, private equity, natural resources, private debt, commodities and hedge fund limited partnerships.

Futures contracts, which are fully cash collateralized, comprise the University's directly held derivative instruments at June 30, 2013 and 2012, respectively, are marked to market daily and are included in the fair value of the University's investments.

The fair value of derivative instruments is included in the fair value of the University's investments within the money market category.

Futures contracts have minimal credit risk because the counterparties are the exchanges themselves.

Fully cash collateralized derivative securities comprised

$270.5 Million, 5.4% of total investments, and $175.0 Million, 4.3% of total investments at June 30, 2013 and 2012, respectively.

The University's derivatives consist of S&P 500 and Treasury futures and are employed as a low cost, passive investment vehicle with daily liquidity which allows the University to maintain desired market exposure in light of irregular cash flows.The following schedules summarize the investment return and its classification in the consolidated statement of activities for the years ended June 30: (in thousands of dollars) Temporarily Permanently 2013 Unrestricted Restricted Restricted Total Dividends and interest $ 136,373 $ 592 $ 8,103 $ 145,068 Net realized gains 38,563 21,898 -60,461 Net unrealized gains 18,070 40,417 58,487 Total returns $ 193.006 $ 62.907 $ 8,10 $ 264"016 (in thousands of dollars) Temporarily Permanently 2012 Unrestricted Restricted Restricted Total Dividends and interest $ 97,015 $ 553 $ 5,125 $ 102,693 Net realized gains/(losses) 44,212 (12,172) -32,040 Net unrealized gains/(losses) 5,343 (15,623) (10,280)Total returns 146,570 $ $ 512 $ 124,453 4. 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 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 permanently restricted net assets 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. Funds functioning as endowments are established at the direction of University management and are classified as unrestricted net assets due 21 Notes to Consolidated Financial Statements to the lack of external donor restrictions.

Gains and losses attributable to permanent endowments are recorded as temporarily restricted net assets and gains and losses attributable' to funds functioning as endowments are recorded as unrestricted net assets.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.

The aggregate amount of deficiencies at June 30, 2013 and 2012 was $2.5 million and $4.9 million, respectively, reported in unrestricted net assets on the consolidated statement of activities.

Subsequent investment gains will be used to restore the balance up to the fair market value of the original gift. Subsequent gains above that amount will be recorded as temporarily restricted net assets.Endowment net asset composition by type of fund as of June 30: (in thousands of dollars)2013 Donor-restricted endowment funds Funds functioning as endowments Total net assets Temporarily Restricted Permanently Restricted Unrestricted Total$ (2,530) $ 338,970 $ 1,067,081$ 1,403,521 520,622 S1,924.143a 520,622$ 518,092 (in thousands of dollars)2012 Donor-restricted endowment funds Funds functioning as endowments Total net assets Temporarily Restricted Permanently Restricted Unrestricted Total$ (4,935) $ 284,539 $ 1,001,580$ 1,281,184 491,737$ 1.772.921 491,737$ 486,802$ 284.539 Changes in endowment net assets for the years ended June 30: (in thousands of dollars)2013 Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of the year Endowment return: Endowment earnings Net realized gains Net unrealized gains Reclassification of funds with deficiencies Total endowment return Contributions Endowment spending Transfers to create funds functioning as endowments Endowment net assets, end of the year$ 486,802 $ 284,539 $ 1,001,580 36,279 35,180 20,830 2,405 94,694 (71,459)8,055 80 21,351 34,900 (2,405)53,926 505 3,605 3,605 61,896$ 1,772,921 39,964 56,531 55,730 152,225 62,401 (71,459)8,055$ 1.924.143$ 1,06,08 22 Notes to Consolidated Financial Statements (in thousands of dollars)2012 Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of the year Endowment return: Endowment earnings Net realized gains/(losses)

Net unrealized losses Reclassification of funds with deficiencies Total endowment return Contributions Endowment spending Transfers to create funds functioning as endowments Endowment net assets, end of the year$ 472,068 $ 314,769 $ 951,006 $ 1,737,843 37,712 33,131 (4,444)(1,674)64,725 (70,843)20,852$ 486.802 74 (12,229)(20,754)1,674 (31,235)1,005 3,109 3,109 47,465 40,895 20,902 (25,198)36,599 48,470 (70,843)20,852$ 1,772,921$ 284.539 $ 1,001,580 The University has adopted investment and spending policies for endowment assets that attempt to provide a relatively predictable stream of funding to programs supported by its endowment while seeking to maintain, over time, the purchasing power of the endowment assets. The overall management objective for the University's pooled endowment funds is to preserve or grow the real (inflation-adjusted) purchasing power of the assets through a prudent long-term investment strategy.

This objective would be achieved on a total return basis. Under these policies, as approved by the Board of Trustees and the Penn State Investment Council, the primary investment objective of the University's pooled endowment is to attain a real total return (net of investment management fees) that at least equals a total annual effective spending rate of 5.25% (program spending of 4.5% plus administrative costs of 0.75%) over the long term.To satisfy its long-term rate-of-return objectives, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends).

The University targets diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

The endowment assets of the University are invested in a broad range of equities and fixed income securities, thereby limiting the market risk exposure in any one institution or individual investment.

The University has a policy of appropriating for distribution each year a certain percentage (4.5% for 2013 and 2012) of its pooled endowment fund's average fair market value over the prior five years preceding the fiscal year in which the distribution is planned. Accordingly, over the long term, the University expects the current spending policy to allow its endowment to provide generous current spending while preserving"intergenerational equity". This is consistent with the University's objective to maintain the purchasing power of the endowment assets held in perpetuity as well as to provide additional real growth through new gifts and investment returns.23 Notes to Consolidated Financial Statements

5. 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 2 measures include University interests in certain debt instruments and commingled investment funds which NAV is used as a practical expedient.

These funds are redeemable at NAV as of the measurement date, generally within 90 days.Level 3 -Unobservable inputs that cannot be corroborated by observable market data. Level 3 instruments primarily consist of investment funds for which NAV is used as a practical expedient.

The University does not have the ability to redeem the funds at NAV as of the measurement date.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.24 Notes to Consolidated Financial Statements The following table presents information as of June 30, 2013 about the University's financial assets and liabilities that are measured at fair value on a recurring basis: Quoted Prices in Active Markets For Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 (in thousands of dollars)Total Fair Value Assets: Long-term Investment Pool: Money markets Fixed income U.S. government/agency U.S. corporate Foreign Other Equities Private capital Total Operating investments:

Money markets Fixed income U.S. government/agency U.S. corporate Foreign Other Equities Private capital Total Deposits held by bond trustees: Fixed income U.S. government/agency Total Beneficial interest in perpetual trusts Liabilities:

Present value of annuities payable$ 86,754 $ 261,667 $84,168 4,229 60,260 822,353$ 1.057.764 29,967 83,480 174,985 8,913 373,406 307,741$ 1,240,159 63,157 588,922$ 652,079$ 23,360 $206 $$ 348,421 114,135 87,709 235,245 8,913 1,258,916 896,663$ 2,950,002$ 23,566 1,060,474 618,582 137,270 137,704 83,571 6,065$ 2.067.232$ 2,551$ 2,55-1 574,415 81,470$ 679,245 485,921 618,582 137,270 134,890 798$ 1.377.667$ 2,551$ 2.551 138 2,814 1,303 6,065$ 10,320$$$ 13,252 $ 13,252$$$ 42,255$ 42,255 25 Notes to Consolidated Financial Statements The following table presents information as of June 30, 2012 about the liabilities that are measured at fair value on a recurring basis: University's financial assets and Quoted Prices in Active Markets For Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Total Fair Value (in thousands of dollars)Assets: Long-term Investment Pool: Money markets Fixed income U.S. government/agency U.S. corporate Foreign Other Equities Private capital Total Operating investments:

Money markets Fixed income U.S. government/agency U.S. corporate Foreign Other Equities Private capital Total Deposits held by bond trustees: Fixed income U.S. government/agency Total Beneficial interest in perpetual trusts Liabilities:

Present value of annuities payable$228,931 $-$ 228,931 108,848 4,263 17,930 600,109$ 731,150 11,700 84,240 43,471 7,465 208,043 100,177$ 684,027 120,548 88,503 61,401 7,465 808,152 707,584$ 2,022.584 607,407 22,635 $216 $-$ 22,851 607,895 9,661 3,679 77,435$ 721,305 501,529 541,292 154,772 98,207 867$ 1.296,883$ 2,551$ 2,551 125 2,468 1,372 6,813$ 10,778 1,109,549 550,953 158,451 100,675 79,674 6,813$ 2,028966$ 2,551$ 2,551$$$12,891 $ 12,891$ 43,167$ 43,167 The Long-term Investment Pool (LTIP) is a mutual fund-like vehicle 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 share method of accounting for the LTIP is utilized by the University.

Each participating fund enters into and withdraws from the LTIP based on monthly share values. At June 30, 2013 and 2012, fair value of endowment funds and funds functioning as endowments within the LTIP totaled $1,941.1 million and $1,780.6 million, respectively.

At June 30, 2013 and 2012, fair value of operating funds included in the LTIP totaled $1,008.9 million and $242.0 million, respectively.

26 Notes to Consolidated Financial Statements The following tables present information related to changes in Level liabilities for year ended June 30, 2013: 3 for each category of assets and (in thousands of dollars)Assets: Beginning balance Total realized and unrealized gains Purchases Sales Transfers into (out of) Level 3 Ending balance Liabilities:

Beginning balance Actuarial adjustment of liability Gifts Sales Withdrawal from program Ending balance Long-term Investment Pool Operating Investments Beneficial Interest in Perpetual Trusts$ 607,407 $ 10,778 $ 12,891 60,065 165,678 (135,294)(45,777)$ 652,079 Present Value of Annuities Payable$ 43,167 4,679 642 (6,233)$ 42,255 (388)75 (145)$ 10.320 361 The following tables present information related to liabilities for year ended June 30, 2012: changes in Level 3 for each category of assets and Investments Held Under Securities Lending (in thousands of dollars)Assets: Beginning balance Total realized and unrealized gains Purchases Sales Transfers into Level 3 Ending balance Liabilities:

Beginning balance Actuarial adjustment of liability Gifts Sales Withdrawal from program Ending balance Long-term Investment Pool Operating Investments Beneficial Interest in Perpetual Trusts$ 520,605 $ 9,245 $22,361 133,811 (69,370)$ 607,407 Present Value of Annuities Payable$ 44,425 (1,860)722 (120)1,150 417 (36)2$ 10,778 Liability Under Securities Lending$ 219,524 (219,524)219,524 $ 12,843 48 (219,524)$ 12,891 For the year ended June 30, 2013, $45.8 million of Level 3 assets were transferred to Level 2 as a result of the expiration of lock-up periods for two marketable alternative funds; now these investments may be redeemed within 90 days of June 30.There were no transfers of investments between Level 1 and Level 2 in 2013 and 2012.27 Notes to Consolidated Financial Statements The following table presents the fair value and redemption frequency for those investments whose fair value is not readily determinable and is estimated using the net asset value per share or its equivalent as of June 30, 2013: Unfunded Fair Value Commitment (in thousands of dollars)Commingled Funds: Non-U.S. Equity Subtotal Marketable Investment Partnerships:

Absolute Return Private Debt/Distressed Commodities Opportunistic Directional Long/Short Subtotal Non-Marketable Investment Partnerships:

Private Real Estate Venture Capital Private Equity Natural Resources Private Debt Subtotal$ 362,061$ 362,061$ 20,173 52,152 84,271 140,181 27,580$ 324,357$ 88,567 144,712 234,203 91,306 19,583$ 578,371 Redemption Frequency Quarterly/

Daily/Monthly Quarterly Quarterly/

Semi Annual Monthly Quarterly Quarterly Redemption Notice Period 5-90 days 65 days 60-90 days 30-60 days 30 days 30-90 days$ 19,788 83,095 141,606 69,809 20,031$ 334,329 Total $ 1,264,789

$ 33432 The following table presents the fair value and redemption frequency for those investments whose fair value is not readily determinable and is estimated using the net asset value per share or its equivalent as of June 30, 2012: Unfunded Fair Value Commitment (in thousands of dollars)Commingled Funds: Non-U.S. Equity Subtotal Marketable Investment Partnerships:

Absolute Return Private Debt/Distressed Opportunistic Directional Long/Short Subtotal Non-Marketable Investment Partnerships:

Private Real Estate Venture Capital Private Equity Natural Resources Private Debt Subtotal$ 148,068$ 148,068$ 20,738 60,101 25,034 69,324$ 175,197$ 86,567 129,354 229,766 74,782 12,656$ 533,125$ 856,390 Redemption Frequency Daily/Monthly Quarterly Quarterly/

Semi Annual Quarterly Quarterly Redemption Notice Period 5-15 days 65 days 60-90 days 30 days 30-90 days$ 22,407 92,911 80,808 33,364 15,700$ 245,190$ 245,19 Total 28 Notes to Consolidated Financial Statements Commingled funds include investments that aggregate assets from multiple investors and are managed collectively following a prescribed strategy.

Redemptions vary from daily to quarterly with required notification of 90 days or less. The non-U.S. equity strategy is invested in developed and developing countries outside of the United States, and spans the entire equity capitalization spectrum.

These collective portfolios preclude the need to obtain securities registration in foreign countries.

During the last fiscal year, one commingled fund was added with a 3 year gate, approximately 17.4% of commingled.

Marketable Investment Funds include several hedge funds whose underlying positions are traded via public securities markets. Liquidity terms range from quarterly to annually with advance notification for redemption ranging from 30 to 90 days. The fair values of the investments for each fund in this category have been estimated using the net asset value of the Long Term Investment Pool's share holdings in the fund. Five major investment strategies are included within this category.

Absolute Return refers to relative value strategies.

Directional refers to equity long/short strategies in both U.S. and non-U.S. markets. Opportunistic refers to global multi-strategy.

Private Debt/Distressed refers to securities rated below investment grade, along with non-rated debt. Commodities refer to publicly traded commodity instruments primarily including futures and options.Nonmarketable Investment Partnerships include limited partnership interests in a variety of illiquid investments.

The fair values of the investments for each fund in this category have been estimated using the net asset value of the Endowment's ownership interest in partner's capital and cannot be redeemed.Realizations from each fund are received as the underlying investments are liquidated or distributed, typically within 10 years after initial commitment.

Unfunded commitments represent remaining commitments of the Endowments drawdown funds as of June 30, 2013 and 2012, respectively.

Five major investment strategies are included within this category.

Private Real Estate includes properties primarily located in the U.S. Venture Capital includes non-public startups and enterprises in early stages of growth located globally.

Private Equity includes buyouts of previously public companies as well as enterprises that are planning to go public in the near future, including funds focusing on opportunities outside the U.S. Natural Resources largely include companies primarily involved in oil and natural gas in addition to a variety of other natural resources.

Private Debt includes global private credit securities rated below investment grade as well as non-rated debt.6. CONTRIBUTIONS RECEIVABLE Contributions receivable are summarized as follows as of June 30: (in thousands of dollars) 2013 2012 In one year or less $ 57,002 $ 75,753 Between one year and five years 63,742 53,998 More than five years 119,990 118,130 240,734 247,881 Less allowance (5,704) (7,739)Less discount (56,893) (55,729)Contributions receivable, net $ 178,137 $s 84,41a Contributions receivable are discounted at rates ranging from 0.15% to 2.87% and 0.21% to 2.06% at June 30, 2013 and 2012, respectively.

The discount rates for prior periods ranged from 0.19% to 6.28%.At June 30, 2013 and 2012, the University has received bequest intentions and certain other conditional promises to give of $85.8 million and $69.0 million, respectively.

These intentions and conditional promises to give are not included in the consolidated financial statements.

29 Notes to Consolidated Financial Statements The following table summarizes the change in contributions receivable, net during the year ended June 30, 2013: Balance beginning of year New pledges Collections on pledges Decrease in allowance Increase in unamortized discounts Balance at the end of year (in thousands of dollars)$ 184,413 81,477 (88,624)2,035 (1,164)$ 178,137 7. LONG-TERM DEBT The various bond issues and capital lease obligations that are included in long-term debt in the statements of financial position consist of the following at June 30: (in thousands of dollars)2013 2012 The Pennsylvania State University Bonds Series 2010 Series 2009A Series 2009B Series 2008A Series 2008B Series 2007A Series 2007B Series 2005 Series 2004A Refunding Series 2003 Series of 2002 Refunding Series 2002 Pennsylvania Higher Educational Facilities Authority University Revenue Bonds (issued for The Pennsylvania State University)

Series 2006 Series 2004 Series 2002 Lycoming County Authority College Revenue Bonds (issued for Penn College)Series 2012 Series 2011 Series 2008 Series 2005 Series 1993$ 135,035 114,075 74,235 77,670 3,980 88,125 63,515 85,700 52,835 41,655$135,035 120,075 74,235 77,670 4,890 88,645 66,255 87,665 54,135 15,890 100,000 56,540 3,545 3,905 4,020 3,745 4,145 4,375 24,685 39,050 55,000 11,085 5,250 24,685 39,050 55,000 12,020 7,000 Total bonds payable Unamortized bond premiums Capital lease obligations 883,365 38,008 1,031,055 41,317 84,035$ 1,005,408 80,334$ 1.152.706 Total long-term debt 30 Notes to Consolidated Financial Statements Interest rate mode Debt issuance Interest rates Payment ranges and maturity (in thousands of dollars)The Pennsylvania State University Bonds Series 2010 Series 2009A Series 2009B Series 2008A Series 2008B Fixed Fixed Variable Fixed Fixed 3.375% -5.00%4.00% -5.00%0.22%5.00%3.50% -3.75%$3,655 to $6,595 through March 2030 with $21,805 and $44,245 due March 2035 and 2040$6,235 to $9,320 through March 2029 June 2031$1,840 to $7,695 through August 2029$945 to $1,050 through August 2016$530 to $700 through August 2022, with$11,115 and $70,905 due August 2028 Series 2007A Fixed 3.65% -4.50% and 2036 Series 2007B Fixed 5.00% -5.25% $2,885 to $5,955 through August 2027$2,050 to $2,745 through September 2019 with $15,990, $20,550, and $32,485 Series 2005 Fixed 3.50% -5.00% due September 2024, 2029, and 2035$1,360 to $1,825 through September 2019, with $10,625, $13,635, and $17,515 Series 2004A Fixed 4.50% -5.00% due September 2024, 2029, and 2034 Refunding Series 2003 Fixed Paid in full during May 2013 Series of 2002 Variable Paid in full during December 2012 Refunding Series 2002 Fixed 5.25% $4,585 to $16,540 through August 2016 Pennsylvania Higher Education Facilities Authority

("PHEFA")

University Revenue Bonds$210 to $280 through 2020, with $1,610 Series 2006 Fixed 4.00% -5.125%* due September 2025$250 to $325 through 2019, with $1,905 Series 2004 Fixed 4.15% -5.00%* due September 2024$370 to $425 due through 2017, Series 2002 Fixed 4.30% -5.00%* with $2,435 due March 2022* Annual interest costs to the University for interest rates greater than 3.00% are subsidized by PHEFA.Lycoming County Authority College Revenue Bonds Series 2012 Fixed 2.00% -5.00% $410 to $2,635 through May 2032 Series 2011 Fixed 3.00% -5.50% $70 to $5,230 through July 2030 Series 2008 Fixed 3.50% -5.50% $1,455 to $4,140 through October 2037 Series 2005 Fixed 4.00% -5.00% $505 to $1,855 through January 2025 Series 1993 Fixed 6.10% -6.15% $450 to $513 through November 2015 The Series 2009B Bonds are currently paying interest on a variable rate basis at a long term rate for the period June 1, 2013 through May 31, 2014. The University has the option to convert to another variable rate (daily, weekly, monthly or flexible) or to a fixed rate basis (such rates are generally determined on a market basis) at respective conversion dates. The bonds currently pay interest at 0.22% with adjustment on the respective date to the rate the remarketing agent believes will cause the bonds to have a market value equal to the principal.

The 2009B bondholders have the right to tender bonds on the purchase dates while such bonds bear interest at the daily, weekly or monthly rate. The 2009B Bonds were issued subject to the self-liquidity program established by the University on the date of issuance pursuant to which the University will provide liquidity for the 2009B Bonds from its general funds in the event of insufficient remarketing proceeds.31 Notes to Consolidated Financial Statements Maturities and sinking fund requirements on bonds payable for each of the next five fiscal years and thereafter are summarized as follows: Year 2014 2015 2016 2017 2018 Thereafter Annual Installments (in thousands of dollars)$ 33,305 35,330 24,320 28,780 24,455 737,175 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, 2013, the carrying value and estimated fair value of the University's bonds payable, including issuance premiums, are $921.4 million and$939.4 million, respectively.

At June 30, 2012, the carrying value and estimated fair value of the University's bonds payable, including issuance premiums, were $1,072.4 million and $1,118.5 million, respectively.

Certain bond issues have associated issuance premiums, these issuance premiums total $38.0 million and $41.3 million at June 30, 2013 and 2012, respectively and are presented within the statement of financial position as long-term debt. These issuance premiums will be amortized over the term of the respective outstanding bonds.Capital leases The University has certain building and equipment lease agreements in effect which are considered capital leases. Future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2013 are as follows: Year 2014 2015 2016 2017 2018 Thereafter Total minimum lease payments Less imputed interest Capital lease obligation Current portion Long-term portion (in thousands of dollars)$ 13,188 12,018 11,033 10,194 8,819 140,557 195,809 (111,774)84,035 7,763$ 76,272 32 Notes to Consolidated Financial Statements

8. OPERATING LEASES The University has certain lease agreements in effect which are considered operating leases. During the year ended June 30, 2013, the University recorded expenses of $22.0 million for leased equipment and $22.6 million for leased building space. During the year ended June 30, 2012, the University recorded expenses of$19.0 million for leased equipment and $23.6 million for leased building space.Future minimum lease payments under operating leases as of June 30, 2013 are as follows: Year (in thousands of dollars)2014 $ 20,111 2015 17,333 2016 14,086 2017 11,118 2018 8,486 Thereafter 41,328 Total minimum lease payments $ 12462 9. 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 and The Public School Employees' Retirement System or defined contribution plans administered by the Teachers Insurance and Annuity Association

-College Retirement Equity Fund and Fidelity Investments.

The University is billed for its share of the estimated actuarial cost of the defined benefit plans ($35.9 million and $25.1 million for the years ended June 30, 2013 and 2012, respectively).

The University's total cost for retirement benefits, included in expenses, is $146.6 million and $130.9 million for the years ended June 30, 2013 and 2012, respectively.

10. POSTRETIREMENT BENEFITS The University sponsors a retiree medical plan covering eligible retirees and eligible dependents.

This program includes a Preferred Provider Organization

("PPO") plan for retirees and their dependents who are not eligible for Medicare, a Medicare Advantage PPO plan and a Medicare Supplement plan. In addition, the University provides retiree life insurance benefits at no cost to the retiree.Employees who were hired prior to January 1, 2010 are eligible for medical coverage and life insurance after they retire if either of the following requirements are satisfied:

• they are at least age 60 and have at least 15 years of 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.The retiree PPO medical plan and the life insurance coverage are self-funded programs, and all medical claims, death benefits and other expenses are paid from the unrestricted net assets of the University.

The Medicare Advantage PPO plan and the Medicare Supplement plan 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.33 Notes to Consolidated Financial Statements Retirees will be eligible to access their Penn State Retirement Savings 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.Included in unrestricted net assets at June 30, 2013 and 2012 are the following amounts that have not yet been recognized in net periodic postretirement cost: unrecognized prior service cost (benefit) of ($86.3) million and ($108.0) million and unrecognized actuarial loss of $547.6 million and $852.7 million, respectively.

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: Change in benefit obligation: (in thousands of dollars)2013 2012 Benefit obligation at beginning of year Service cost Interest cost Actuarial gain Benefits paid Plan assumptions Benefit obligation at end of year$ 1,864,899 56,194 77,943 (95,754)(43,840)(164,401)$ 1,479,043 45,124 80,779 (15,784)(42,813)318,550$ 1,864,899 Change in plan assets: (in thousands of dollars)2013 2012 Fair value of plan assets at beginning of year Employer contributions Benefits paid Fair value of plan assets at end of year Funded status Unrecognized prior service cost (benefit)Unrecognized net actuarial loss Accrued postretirement benefit expense Net periodic postretirement cost includes the following (in thousands of dollars)$43,840-(41,841)$ (1,695,041)

$42,813 (42,813)$ (1,864,899)

$ (1,695,041)

$ (1,864.899) components for the years ended June 30: 2013 2012 Service cost Interest cost Amortization of prior service cost Amortization of unrecognized net loss Net periodic postretirement cost$ 56,194 77,943 (21,699)44,960$ 157,398$ 45,124 80,779 (21,699)29,178$ 113338 The assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation was 8.00% and 8.50% for the years ended June 30, 2013 and 2012, respectively, reduced by 0.50% per year to a fixed level of 5.00%. The weighted average postretirement benefit obligation discount rate was 5.00%and 4.50% for the years ended June 30, 2013 and 2012, respectively.

If the healthcare cost trend rate assumptions were increased by 1% in each year, the accumulated postretirement benefit obligation would be increased by $318.1 million and $595.2 million as of June 30, 2013 and 2012, respectively.

The effect of this change on the sum of the service cost and interest cost components of the net periodic postretirement benefit cost would be an increase of $32.3 million and $42.2 million as of June 30, 2013 and 2012, respectively.

If the healthcare cost trend rate assumptions were decreased by 1% in 34 Notes to Consolidated Financial Statements each year, the accumulated postretirement benefit obligation would be decreased by $256.6 million and$327.0 million as of June 30, 2013 and 2012, respectively.

The effect of this change on the sum of the service cost and interest cost components of the net periodic postretirement benefit cost would be a decrease of$24.5 million and $23.1 million as of June 30, 2013 and 2012, respectively.

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: (in thousands of dollars)2014 $ 51,390 2015 55,312 2016 59,517 2017 63,945 2018 68,198 2019-23 408,966 11. THE MILTON S. HERSHEY MEDICAL CENTER AND PENN STATE HERSHEY HEALTH SYSTEM The University's wholly-owned subsidiary, TMSHMC, owns the assets of the clinical enterprise of the Hershey Medical Center complex. The University owns the Hershey Medical Center complex, including all buildings and land occupied by the Medical Center and operates the College of Medicine.

The clinical facilities of the Hershey Medical Center complex are leased to TMSHMC and TMSHMC makes certain payments to support the College of Medicine.The Health System is a corporate investor in healthcare joint ventures, which are supportive of the missions of the Medical Center. The Health System was organized in 1995 as a wholly-owned subsidiary of the Corporation for the purpose of organizing components of an integrated health care delivery system. The Health System recorded non-controlling interest related to the acquisition of additional ownership interest in a joint venture. This noncontrolling interest is recorded in the net assets within the consolidated statements of financial position with a value at June 30, 2013 and 2012 of $831,000 and $774,000, respectively.

12. 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 $775.1 million of which $651.4 million has been paid or accrued as of June 30, 2013. 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 $20.5 million and $18.2 million as of June 30, 2013 and 2012, 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.Guarantees The University has a contract with a third party whereby the third party acts as an agent of the University in connection with procurement of electricity.

The University guarantees the payment of the obligations of the third party incurred on behalf of the University to counterparties.

No liabilities related to guarantees have been recorded as of June 30, 2013.35 Notes to Consolidated Financial Statements Self-Insurance The University has a coordinated program of commercial and self-insurance for medical malpractice claims at TMSHMC 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 ("Mcare Fund"), in accordance with Pennsylvania law.An estimate of the present value, discounted at 2% for the years ended June 30, 2013 and 2012, respectively, of the medical malpractice claims liability in the amount of $96.7 million and $101.1 million is recorded as of June 30, 2013 and 2012, respectively.

On July 1, 2003, TMSHMC became self-insured for all medical malpractice claims asserted on or after July 1, 2003, for all amounts that are below the coverage of the TMSHMC's excess insurance policies and not included in the insurance coverage of the Mcare Fund. Under the self-insurance program, TMSHMC is required to maintain a malpractice trust fund in an amount at least equal to the expected loss of known claims.The balance of this trust fund was $20.7 million and $21.3 million at June 30, 2013 and 2012, respectively.

TMSHMC intends to fund any claims due during the next year from cash flows from operations.

With approval from the Pennsylvania Department of Labor and Industry ("PA-DLI"), the University elected to self-insure potential obligations applicable to workers' compensation.

Certain claims under the program are contractually administered by a private agency. The University purchased insurance coverage for excess obligations over $600,000 per incident.

An estimate of the self-insured workers' compensation claims liability in the amount of $10.9 million and $12.4 million, discounted at 1.25%, is recorded as of June 30, 2013 and 2012, respectively.

The University has established a trust fund, in the amount of $12.7 million at June 30, 2013 and 2012, respectively, as required by PA-DLI, to provide for the payment of claims under this self-insurance program. TMSHMC is self-insured for workers' compensation claims and has purchased an excess policy through a commercial insurer which covers individual claims in excess of $500,000 per incident for workers' compensation claims.The University and TMSHMC are self-insured for certain health care benefits provided to employees.

The University and TMSHMC have purchased excess policies which cover employee health benefit claims in excess of $500,000 and $350,000 per employee per year, respectively.

The University and TMSHMC provide for reported claims and claims incurred but not reported.Litigation and Contingencies In November 2011, the University was made aware of certain allegations in a Commonwealth of Pennsylvania Grand Jury presentment.

Various legal proceedings and investigations have arisen as a result of such allegations, including criminal proceedings against former officers and employees of the University.

Certain claims and civil litigation have been filed against the University with anticipation that other complaints could be filed. At June 30, 2013, the University has accrued $59.7 million for 26 of 32 known claims, 24 of which have been settled subsequent to June 30, 2013. Such costs are included in institutional support within the consolidated statement of activities.

Of the remaining six claims, two have been deemed to have no merit through the due diligence process. Without having knowledge of the number and nature of unknown claims and in view of the inherent difficulty of predicting the outcome of our remaining four known claims, each with their own unique circumstances that give rise to their alleged claims, and given the various stages of the proceedings, we are unable to predict the outcome of these matters or the ultimate legal and financial liability, and at this time cannot reasonably estimate the possible loss or range of loss. Accordingly, no amounts have been accrued in the 2013 financial statements for these claims although a loss is reasonably possible in future periods which could have a material adverse effect on our current and future financial position, results of operations and cash flows.For the years ended June 30, 2013 and 2012, the University has incurred costs, net of insurance reimbursements totaling $17.3 and $16.1 million, respectively, for internal investigation, legal, communications and other related costs. These costs are included in institutional support within the consolidated statement of activities.

Insurance reimbursements for the years ended June 30, 2013 and 2012 totaled $249,000 and $153,000, respectively.

Amounts paid directly by insurance carriers for the years ended June 30, 2013 and 2012 totaled $2,994,000 and $626,000, respectively.

36 Notes to Consolidated Financial Statements The University has submitted claims to insurance carriers at June 30, 2013 related to the claims settled and certain legal costs incurred to date. Amounts of future insurance reimbursement are unknown as of June 30, 2013 and as a result no insurance recovery accruals have been recorded in the 2013 financial statements.

Based on its operation of the Medical Center (see Note 11), 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. Recently, government reviews of healthcare providers for compliance with regulations have increased.

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.Various other 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.

13. SUBSEQUENT EVENTS The University has evaluated subsequent events through November 1, 2013, the date on which the consolidated financial statements were issued. It did not identify any subsequent events to be disclosed other than those below or previously noted.On July 12, 2013, the University received a preliminary report from the U.S. Department of Education based on the program review of the University's compliance with the Clery Act, a federal law related to campus safety. The Department of Education will make a final program review determination after the process is complete.

The outcome and financial impacts of the program review are unknown as of the date the consolidated financial statements were issued..37

THE PENNSYLVANIA STATE UNIVERSITY BOARD OF TRUSTEES as of June 30, 2013 APPOINTED BY THE GOVERNOR ALVIN H. CLEMENS Senior Partner Agility-Partners LLC MARK H. DAMBLY President Pennrose Properties, LLC PETER A. KHOURY Graduate Student The Pennsylvania State University IRA M. LUBERT Chairman and Co-founder Independence Capital Partners and Lubert Adler Partners L.P.PAUL H. SILVIS Head Coach SilcoTek MEMBERS EX OFFICIO THOMAS W. CORBETT JR.Governor Commonwealth of Pennsylvania*

RODNEY A. ERICKSON President The Pennsylvania State University GEORGE D. GREIG Secretary Pennsylvania Department of Agriculture RICHARD J. ALLAN Secretary Pennsylvania Department of Conservation and Natural Resources RONALD J. TOMALIS Secretary Pennsylvania Department of Education*JENNIFER BRANSTETTER Governor's Non-Voting Representative Director of Policy and Planning Office of the Governor ELECTED BY BOARD REPRESENTING BUSINESS AND INDUSTRY JAMES S. BROADHURST Chairman Eat'n Park Hospitality Group, Incorporated KENNETH C. FRAZIER Chairman, President

& Chief Executive Officer Merck & Company, Incorporated EDWARD R. HINTZ, JR.President Hintz Capital Management, Incorporated KAREN B. PEETZ Vice Chairman, CEO of Financial Markets and Treasury Services, Bank of New York Mellon LINDA B. STRUMPF Retired Chief Investment Officer The Helmsley Charitable Trust JOHN P. SURMA Chairman and Chief Executive Officer United States Steel Corporation ELECTED BY DELEGATES FROM AGRICULTURAL SOCIETIES DONALD G. COTNER President Cotner Farms, Inc.KEITH W. ECKEL Sole Proprietor and President Fred W. Eckel and Sons Farms, Incorporated SAMUEL E. HAYES, JR.BETSY E. HUBER Immediate Past Master, Pennsylvania State Grange KEITH E. MASSER Chairman & Chief Executive Officer Sterman Masser, Incorporated ELECTED BY ALUMNI MARIANNE E. ALEXANDER President Emerita of the Public Leadership Education Network H. JESSE ARNELLE Attomey STEPHANIE N. DEVINEY Attorney at Law Fox Rothschild LLP ANTHONY P. LUBRANO President, A.P. Lubrano & Company, Inc.RYAN J. MCCOMBIE Retired, United States Navy JOEL N. MYERS President AccuWeather, Incorporated PAUL V. SUHEY Orthopedic Surgeon Martin & Suhey Orthopedics ADAM J. TALIAFERRO Healthcere Alliance Liaison Bristol Myers Squibb CARL T. SHAFFER President Pennsylvania Farm Bureau EMERITI TRUSTEES CYNTHIA A. BALDWIN Retired Justice Supreme Court of Pennsylvania CHARLES C. BROSIUS Retired President Mariboro Mushrooms WALTER J. CONTI Retired Owner Cross Keys Inn/Pipersville Inn DONALD M. COOK, JR.Retired President SEMCOR, Incorporated MARIAN U. BARASH COPPERSMITH Retired Chairman of the Board The Barash Group ROBERT M. FREY Attomey-at-Law Frey & Tiley, P.C.STEVE A. GARBAN Senior Vice President for Finance and Operations/Treasurer Emeritus The Pennsylvania State University EDWARD P. JUNKER IlI Retired Vice Chairman PNC Bank Corporation ROGER A. MADIGAN Retired State Senator 23rd Senatorial District ROBERT D. METZGAR Former President North Penn Pipe & Supply. Incorporated ANNE RILEY Teacher BARRY K. ROBINSON Chief Counsel for Economic Affairs U.S. Department of Commerce L J. ROWELL, JR.Retired Chairman and Chief Executive Officer Provident Mutual Life Insurance CECILE M. SPRINGER President, Springer Associates HELEN D. WISE Former Deputy Chief of Staff for Programs and Secretary of the Cabinet Govemor's Office BOYD E. WOLFF Retired, Owner and Operator Wolfden Farms QUENTIN E. WOOD Retired Chairman of the Board and Chief Executive Officer Quaker State Corporation EDWARD P. ZEMPRELLI Attorney This publication is available In alternative media on request.The Pennsylvania State University is committed to the policy that all persons shall have equal access to programs, facilities, admission and employment without regard to personal characteristics not related to ability, performance, or qualifications as determined by University policy or by state or federal authorities.

It is the policy of the University to maintain an academic and work environment free of discrimination, including harassment.

The Pennsylvania State University prohibits discrimination, harassment against any person because of age, ancestry, color, disability or handicap, genetic information, national origin, race, religious creed, sex, sexual orientation, gender identity or veteran status and retaliation against faculty, staff or students will not be tolerated at The Pennsylvania State University.

Direct all inquiries regarding the nondiscrimination policy to the Affirmative Action Office, The Pennsylvania State University, 328 Boucke Building, University Park, PA 16802-5901, Tel (814) 865-4700N, (814) 863-0471/TTY.