OREGON STATE UNIVERSITY FOUNDATION. Consolidated Financial Statements. June 30, 2014 and (With Independent Auditors Report Thereon)

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OREGON STATE UNIVERSITY FOUNDATION

Consolidated Financial Statements

June 30, 2014 and 2013

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OREGON STATE UNIVERSITY FOUNDATION

Table of Contents

Page(s)

Independent Auditors’ Report 1

Consolidated Financial Statements:

Consolidated Statements of Financial Position 2

Consolidated Statements of Activities 3–4

Consolidated Statements of Cash Flows 5

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Independent Auditors’ Report

The Board of Trustees

Oregon State University Foundation:

We have audited the accompanying consolidated statements of financial position of the Oregon State University Foundation as of June 30, 2014 and 2013, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; 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 auditors’ 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 entity’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 entity’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.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Oregon State University Foundation as of June 30, 2014 and 2013, and the changes in their net assets and their cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

Portland, Oregon September 19, 2014

KPMG LLP Suite 3800

1300 South West Fifth Avenue Portland, OR 97201

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Consolidated Statements of Financial Position June 30, 2014 and 2013

Assets 2014 2013

Cash and cash equivalents $ 13,692,554 30,160,947

Investments 545,952,323 446,185,561

Pledge receivable, net 33,181,217 42,019,129

Property and equipment, net 4,840,208 5,102,003

Assets held-for-sale 7,566,480 7,487,730

Assets held under split-interest agreements 58,310,799 53,300,237

Charitable trusts held outside the Foundation 14,583,061 13,169,387

Other assets 5,252,003 2,615,112

Total assets $ 683,378,645 600,040,106

Liabilities and Net Assets Liabilities:

Obligations under split-interest agreements $ 27,734,255 26,318,964

Other liabilities 14,788,346 6,244,404 Total liabilities 42,522,601 32,563,368 Net assets: Unrestricted: Other 23,941,777 18,177,374 Underwater endowments (10,623,105) (22,089,212) Total unrestricted 13,318,672 (3,911,838) Temporarily restricted 275,059,989 237,530,764 Permanently restricted 352,477,383 333,857,812

Total net assets 640,856,044 567,476,738

Total liabilities and net assets $ 683,378,645 600,040,106

See accompanying notes to consolidated financial statements.

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OREGON STATE UNIVERSITY FOUNDATION

Consolidated Statement of Activities Year ended June 30, 2014

Temporarily Permanently

Unrestricted restricted restricted Total

Revenue, gains, and other support:

Contributions $ 367,770 48,231,240 16,601,398 65,200,408

Interest and dividends 2,973,433 11,592,191 156,982 14,722,606

Other 13,820,685 3,871,627 68,469 17,760,781

Net gains on investments 14,954,139 46,165,325 5,351 61,124,815

Change in value of charitable annuities and trusts — 1,160,223 3,501,545 4,661,768

Net assets released from restrictions and other transfers 75,205,555 (73,491,381) (1,714,174) —

107,321,582 37,529,225 18,619,571 163,470,378

Expenses:

Direct university support 61,056,034 — — 61,056,034

Investment expenses 9,779,528 — — 9,779,528

Management, general, and development expenses 19,255,510 — — 19,255,510

90,091,072 — — 90,091,072

Change in net assets 17,230,510 37,529,225 18,619,571 73,379,306

Net (deficit) assets, beginning of year (3,911,838) 237,530,764 333,857,812 567,476,738

Net assets, end of year $ 13,318,672 275,059,989 352,477,383 640,856,044

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Consolidated Statement of Activities Year ended June 30, 2013

Revenue, gains, and other support:

Contributions $ 378,629 36,054,637 16,169,682 52,602,948

Interest and dividends 3,102,734 11,809,076 156,510 15,068,320

Other 12,250,807 2,813,620 139,272 15,203,699

Net gains on investments 6,002,244 21,327,916 8,517 27,338,677

Change in value of charitable annuities and trusts — 687,283 1,322,091 2,009,374

Net assets released from restrictions and other transfers 59,638,865 (58,508,826) (1,130,039) —

81,373,279 14,183,706 16,666,033 112,223,018 Expenses:

Direct university support 48,864,272 — — 48,864,272

Investment expenses 7,838,815 — — 7,838,815

Management, general, and development expenses 18,256,851 — — 18,256,851

74,959,938 — — 74,959,938

Change in net assets 6,413,341 14,183,706 16,666,033 37,263,080

Net (deficit) assets, beginning of year (10,325,179) 223,347,058 317,191,779 530,213,658

Net (deficit) assets, end of year $ (3,911,838) 237,530,764 333,857,812 567,476,738

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Consolidated Statements of Cash Flows Years ended June 30, 2014 and 2013

2014 2013

Cash flows from operating activities:

Change in net assets $ 73,379,306 37,263,080

Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities:

Gain on investments (61,124,815) (27,338,677)

Noncash contributions (6,650,956) (5,675,402)

Proceeds from sale of noncash contributions 2,200,573 2,728,435 Investment earnings on charitable gift annuity and remainder

trust agreements 2,913,282 2,912,051

Depreciation 360,013 376,186

Recovery (provision) for unfulfilled pledges, net 472,269 (312,736) Change in cash surrender value of life insurance (1,021) (16,661) Net change in value of charitable gift annuities and trusts (3,282,060) (28,404) Contributions restricted for permanent endowments (16,601,398) (16,169,682) (Increase) decrease in cash due to changes in assets and

liabilities:

Charitable trusts held outside the Foundation 87,879 1,643,896

Pledges receivable 12,610,239 5,500,494

Other assets 283,340 522,682

Other liabilities 8,543,942 (8,463,285)

Net cash provided by (used in) operating activities 13,190,593 (7,058,023) Cash flows from investing activities:

Proceeds from sale of investments 100,211,932 149,232,365

Purchase of investments (144,492,132) (137,478,179)

Change in note receivable from sale of investments 265,920 244,137 Proceeds from disposal of property, equipment, and assets

held-for-sale 991,500 741,000

Purchase of property, equipment, and assets held-for-sale (126,061) (524,210) Net cash (used in) provided by investing activities (43,148,841) 12,215,113 Cash flows from financing activities:

Additions to charitable gift annuity and remainder trust

agreements 881,717 2,297,000

Payments on charitable gift annuity and remainder trust

agreements (3,993,260) (3,971,716)

Contributions and income restricted for permanent endowments 16,601,398 16,169,682 Net cash provided by financing activities 13,489,855 14,494,966 Net (decrease) increase in cash and cash

equivalents (16,468,393) 19,652,056

Cash and cash equivalents, beginning of year 30,160,947 10,508,891 Cash and cash equivalents, end of year $ 13,692,554 30,160,947

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Notes to Consolidated Financial Statements June 30, 2014 and 2013

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(1) Description of Organization and Summary of Significant Accounting Policies (a) General

The Oregon State University Foundation (the Foundation) was incorporated in 1947 to encourage, receive, and administer gifts and bequests for the support of Oregon State University (the University).The Foundation is governed by a Board of Trustees with a membership of forty-two at June 30, 2014.

During 1999, the Foundation implemented an agreement with the University to assume all fundraising responsibilities for the University. As a result, the Foundation has added to its investment management and fiduciary responsibilities, those fundraising and related services such as marketing, donor relations, and stewardship.

The Foundation is an organization exempt from taxation under Section 501(c)(3), 509(a)(1) and 170(b)(1)(a)(iv) of the Internal Revenue Code and is generally not subject to federal or state income taxes. However, the Foundation is subject to income taxes on any net income that is derived from a trade or business, regularly carried on, and not in furtherance of the purposes for which it was granted exemption. No income tax provision has been recorded as the taxable net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the basic consolidated financial statements taken as a whole.

(b) Basis of Accounting

The consolidated financial statements of the Foundation have been prepared on the accrual basis of accounting.

(c) Basis of Presentation and Principles of Consolidation

The financial statements of the Foundation and operating affiliates and associates have been consolidated and all significant intercompany amounts and transactions have been eliminated. The operating affiliates and associates consist of the Our Beaver Nation Fund, Oregon 4-H Foundation, Trysting Tree Golf Club, Inc., and Harvey Ranch, Inc.

In the accompanying consolidated financial statements, net assets that have similar characteristics have been combined into similar categories as follows:

 Permanently Restricted – Net assets subject to donor-imposed stipulations that they be maintained permanently by the Foundation. Such assets consist primarily of the Foundation’s permanent endowment funds. Generally, the donors of these assets permit the Foundation’s use of all or part of the investment return on these assets.

 Temporarily Restricted – Net assets whose use by the Foundation is subject to donor-imposed stipulations that can be fulfilled by actions of the Foundation pursuant to those stipulations or that expire with the passage of time.

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OREGON STATE UNIVERSITY FOUNDATION Notes to Consolidated Financial Statements

June 30, 2014 and 2013

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contractual agreements with outside parties. Unless otherwise designated, unrestricted net assets are used for the support of University programs.

Revenue is reported as increases in unrestricted net assets unless their use is limited by donor-imposed restrictions. Expenses are generally reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations are reported as net assets released from restrictions. (d) Contributions and Pledges

Contributions, including unconditional pledges, are recognized as revenue in the period received. Unconditional pledges that extend beyond one year are recorded at present value, which approximates fair value, and an allowance for doubtful accounts is established based on the prior collection history of pledged contributions. Conditional pledges are not recognized until they become unconditional; that is, when the donor-imposed conditions are substantially met. Contributions of assets other than cash are recorded at their estimated fair value on the date of gift.

All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. When a temporary restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions.

(e) Investments

Investments are in marketable debt and equity securities, collateralized mortgage obligations, mutual funds, and investments in partnerships and are stated at fair value. Real estate is recorded at fair value on the date of the gift. Mortgage notes and contracts are initially recorded at face value and are collateralized by the associated real estate. Interest on mortgage notes receivable is recognized when earned. Mortgage notes and contracts are reviewed annually to assess credit risks. Uncollectible notes are written off upon approval of the Board of Trustees. As of June 30, 2014 and 2013, no mortgage notes or contracts were deemed to be uncollectible; therefore, no allowance for doubtful accounts was established.

Net gains and losses on investments include realized and unrealized gains and losses. Realized gains and losses from the sale of investments are computed based on the difference between the proceeds received and the carrying value of the asset. Unrealized gains and losses result from changes in the fair value of investments.

(f) Pooled Investment Program

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(g) Charitable Trusts Held Outside the Foundation

Charitable trusts held outside the Foundation are trusts established and administered by a donor or a third party. These trusts may be a lead, remainder, or perpetual trust. Charitable lead trusts are trusts established and funded by donors that provide distributions to the Foundation over a specified period. Lead trusts are measured at the present value of the future distributions expected to be received by the Foundation. The Foundation is also the recipient for charitable remainder trusts. Upon termination of a charitable remainder trust, the assets of the trust are transferred to the Foundation. These trusts are measured at their fair value. Perpetual trusts provide the Foundation the right, in perpetuity, to the income earned on the assets of the trust. The Foundation’s beneficial interest in a perpetual trust is measured at estimated fair value. Donors may restrict the use of lead, remainder, and perpetual trust contributions.

(h) Property, Equipment, and Assets Held-for-Sale

Real property and equipment are capitalized if the asset is expected to provide a benefit for more than one year. Real property, equipment, and assets held-for-sale are recorded at cost except for donated assets, which are recorded at fair value on the date of donation. Depreciation is computed for purchased operating equipment of the Foundation based on the straight-line method over the estimated useful lives of the related assets of 3 to 7 years. Real property and equipment held-for-sale or held-for-transfer to the University are not depreciated.

The property and equipment held by the Trysting Tree Golf Club, Inc. are depreciated over the estimated useful lives of the related assets.

Management reviews the carrying value of capitalized assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. This review considers, among other factors, (1) the net realizable value of each major classification of assets, (2) the cash flow associated with the asset, and (3) significant changes in the extent or manner in which major assets are used. Management believes the carrying value of assets is less than the estimated fair value.

Realized gains and losses from the sale or disposal of real property, equipment, and other assets are computed based on the difference between the proceeds received and the net carrying value of the asset.

(i) Assets Held under Split-Interest Agreements

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June 30, 2014 and 2013

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between 2.0% and 2.4% and 1.2% and 3%, respectively. The discount rate varied between 1.2% and 10.6% for the Foundation’s entire portfolio of gift annuities and remainder trusts at June 30, 2014 and 2013.

(j) Other Liabilities

Other liabilities consist of accrued reimbursements payable to the University, payroll and related liabilities, and other accrued operational expenses of the Foundation.

(k) Fundraising Costs

Fundraising costs totaled approximately $12,454,323 and $11,319,212 for the years ended June 30, 2014 and 2013, respectively, and are included in management, general, and development expenses on the consolidated statements of activities.

(l) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

(m) Reclassifications

Certain amounts in the 2013 consolidated financial statements have been reclassified to conform to 2014 presentation.

(2) Cash and Cash Equivalents

Cash and cash equivalents, with original maturities of 90 days or less when purchased, consist of the following at June 30:

2014 2013

Cash in interest-bearing accounts $ 9,741,494 26,428,349

Commercial paper 3,951,060 3,732,598

Total cash and cash equivalents $ 13,692,554 30,160,947

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(3) Investments

At June 30, 2014 and 2013, the fair and cost values of investments were:

2014 2013

Cost or Cost or amortized amortized Fair value cost Fair value cost

Marketable securities: Mutual funds:

Large cap domestic equities $ 19,086,262 13,525,551 45,818,812 37,009,544 Large cap international equities 72,362,028 59,036,606 58,575,619 53,998,302 Large Cap Blend 67,255,367 54,469,180 49,146,822 46,115,044 Natural resources 27,020,030 18,708,117 20,429,344 18,700,962

Balanced funds — — 10,627,556 11,323,334

Intermediate term bonds 58,913,196 59,794,457 63,737,222 66,240,550 High yield bonds 8,954,772 8,815,032 7,844,089 7,865,325

Nontraditional Bonds 15,726,307 15,904,768 — —

Direct equity holdings:

Small cap 1,311 2,830,961 1,311 2,830,961 Large cap 20,050,180 19,469,594 1,412,372 1,046,569 Other investments: Commingled funds: All asset 10,125,203 11,249,238 8,682,001 11,183,898 Global bonds 54,203,086 53,482,141 30,233,017 32,083,797 International equity 38,618,635 32,076,374 28,070,775 25,840,264 Limited partnerships: Hedge funds 71,058,586 60,456,110 52,898,038 47,057,110 Private equity 33,690,101 26,091,264 25,196,916 19,892,165 Real estate 15,162,239 17,332,759 14,388,016 17,563,123 Master Limited Partnership 16,146,645 11,117,348 11,978,444 10,890,650 Investment income receivable 124,852 124,852 176,261 176,261 Real Estate Held for Investment 6,675,000 6,675,000 6,675,000 6,675,000

Other 10,778,523 10,244,531 10,293,946 10,104,960

Total investments $ 545,952,323 481,403,883 446,185,561 426,597,819

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June 30, 2014 and 2013

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marketable, their estimated values are subject to uncertainty and, therefore, may differ from the value that would have been used had a ready market for such investments existed. Such differences could be significant.

The following schedule summarizes the investment return and its presentation in the consolidated statements of activities at June 30:

2014 2013

Interest and dividends $ 14,722,606 15,068,320

Net realized gains 16,164,117 11,602,624

Net unrealized gains 44,960,698 15,736,053

Total net realized/unrealized gains 61,124,815 27,338,677

Total investment return $ 75,847,421 42,406,997

Investment restrictions and designation at June 30 are summarized as follows:

2014 2013

Unrestricted:

Board designated $ 23,945,464 20,100,700

Temporarily restricted:

Departmental programs and activities 97,010,749 65,018,708

Endowment earnings for departmental programs and

activities 107,319,172 65,619,893 Other 1,644,729 831,495 205,974,650 131,470,096 Permanently restricted: Endowment 316,032,209 294,614,765 Total investments $ 545,952,323 446,185,561

(4) Endowment and Quasi-Endowment Funds

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(a) Board Interpretation of Relevant Law

The Board of Trustees of the Foundation has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) 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. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

a. The duration and preservation of the fund

b. The purposes of the Foundation and the donor-restricted endowment fund c. General economic conditions

d. The possible effect of inflation and deflation

e. The expected total return from income and the appreciation of investments f. Other resources of the Foundation

g. The investment policies of the Foundation

Endowments by net asset classification by type of fund as of June 30, 2014:

Donor-restricted endowment

funds $ (10,623,105) 169,484,379 303,939,668 462,800,942 Board-designated endowment

funds 30,282,007 — — 30,282,007

Assets held under split-interest

agreements — — 24,389,078 24,389,078

Charitable trusts held outside

the Foundation — — 9,240,913 9,240,913

Nonpooled investments — — 14,907,724 14,907,724 Total endowment

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June 30, 2014 and 2013

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Endowments by net asset classification by type of fund as of June 30, 2013:

Donor-restricted endowment $ (22,089,212) 138,069,398 287,421,605 403,401,791 funds

Board-designated endowment

funds 27,387,246 — — 27,387,246

Assets held under split-interest

agreements — — 21,513,295 21,513,295

Charitable trusts held outside

the Foundation — — 9,316,608 9,316,608

Nonpooled investments — — 15,606,304 15,606,304 Total endowment

funds $ 5,298,034 138,069,398 333,857,812 477,225,244

Changes in endowments by net asset classification for the fiscal years ended June 30, 2014 and 2013:

Endowment net assets, end

of the year, June 30, 2012 $ (2,301,803) 126,044,531 317,191,779 440,934,507 Investment return:

Interest and dividends — 11,469,576 156,510 11,626,086 Realized and unrealized

gains 7,419,221 20,082,824 8,517 27,510,562

Contributions 68,452 4,195,938 16,169,682 20,434,072 Appropriation of endowment

assets for expenditure (25) (21,307,528) — (21,307,553) Change in value of assets

held under split-interest

agreements — — 1,322,091 1,322,091

Other changes 112,189 (2,415,943) (990,767) (3,294,521) Endowment net assets, end of

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Investment return:

Interest and dividends $ — 11,212,092 156,982 11,369,074 Realized and unrealized gains 14,356,730 40,103,557 5,351 54,465,638 Contributions 115,886 5,376,967 16,601,398 22,094,251 Appropriation of endowment

assets for expenditure (61) (23,957,918) — (23,957,979) Change in value of assets held

under split-interest

agreements — — 3,501,545 3,501,545

Other changes (111,687) (1,319,717) (1,645,705) (3,077,109) Endowment net assets, end of

the year, June 30, 2014 $ 19,658,902 169,484,379 352,477,383 541,620,664

Permanently restricted net assets of the Foundation are comprised primarily of donor-restricted endowment funds. The funds are consolidated under the Pooled Investment Program. In addition to these funds, permanently restricted net assets contain charitable gift annuities and remainder trusts where the Foundation is the trustee. At the point that these annuities and remainder trusts terminate, the proceeds realized will be transferred to the Pooled Investment Program. Donors may also donate to the Foundation, physical assets such as property or funds held in trust outside the Foundation for permanently restricted purposes. The Foundation categorizes these assets as Nonpooled investments. At the point proceeds are realized from these assets held outside the Foundation, they are transferred either to the Pooled Investment Program or a specific program as designated by the donor.

(b) Pooled Endowment Funds with Deficiencies (Underwater)

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. As a result of the unfavorable financial market conditions over the past several years, the fair value of certain endowment assets was less than the related donor-restricted amounts. These deficiencies were determined to be $10,623,105 and $22,089,212 for the years ended June 30, 2014 and 2013, respectively. The reporting of such deficiencies as a reduction of Foundation controlled unrestricted net assets does not legally create an affirmative obligation of the Foundation to restore the fair value of those funds from Foundation controlled unrestricted assets. (c) Return Objectives and Risk Parameters

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June 30, 2014 and 2013

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(d) Strategies Employed for Achieving Objectives

To satisfy its long-term rate-of-return objectives, the Foundation 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 Foundation targets a diversified asset allocation that places a greater emphasis monetarily on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

(e) Pooled Investment Program Spending Policy and How the Investment Objectives Relate to Spending Policy

The Foundation has a policy of appropriating for distribution each year 4.5% of its pooled endowment fund’s average fair value over the prior 12 quarters through the quarter-end that precedes the quarter in which the distribution occurs. In establishing this policy, the Foundation considered the long-term expected return on its endowment and its objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment returns. Spending distributions are monitored and potentially limited for individual endowment accounts if the fair value of that account is less than the corpus.

(5) Fair Value Measurements

Investments are reported at estimated fair value as determined by the Foundation, based upon a fair value hierarchy, adopted in July 2008, which prioritizes the input techniques used to measure fair value. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements:

Level 1 – Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Foundation has the ability to access at the measurement date;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and

Level 3 – Inputs that are unobservable.

Inputs are used in applying valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. In addition to the underlying reported net asset values (NAV), which generally serve as the primary valuation input, other inputs may include liquidity factors and broad credit data. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

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using comparable market transactions, while the use of the income approach generally consists of net present value of estimated future cash flows, adjusted as appropriate for market and/or other risk factors. The following table presents the investments included on the consolidated statement of financial position by levels within valuation hierarchy as of June 30, 2014:

Assets at fair value as of June 30, 2014

Level 1 Level 2 Level 3 Total

Pooled investment program $ 227,995,129 — 217,068,780 445,063,909 Assets held under split-interest

agreements 57,263,748 — 1,047,051 58,310,799

Charitable trusts held outside the

Foundation — — 14,583,061 14,583,061

Investment property — — 6,675,000 6,675,000

Mortgages & contracts — — 6,445,639 6,445,639 Other nonpooled investments 65,648,060 — 22,119,715 87,767,775 Total nonpooled investments 65,648,060 — 49,823,415 115,471,475 Total investments $ 350,906,937 — 267,939,246 618,846,183

The following table presents the investments included on the consolidated statement of financial position by levels within valuation hierarchy as of June 30, 2013:

Assets at fair value as of June 30, 2013

Level 1 Level 2 Level 3 Total

Pooled investment program $ 207,635,000 — 171,447,206 379,082,206 Assets held under split-interest

agreements 52,253,186 — 1,047,051 53,300,237

Charitable trusts held outside the

Foundation — — 13,169,387 13,169,387

Investment property — — 6,675,000 6,675,000

Mortgages & contracts — — 6,758,535 6,758,535

Other nonpooled investments 53,669,820 — — 53,669,820 Total nonpooled investments 53,669,820 — 26,602,922 80,272,742 Total investments $ 313,558,006 — 199,097,179 512,655,185

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June 30, 2014 and 2013

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The following table presents a rollforward of the amounts for the year ended June 30, 2014 for the investment classified within Level 3:

Investments of the Foundation:

Balance at June 30, 2013 $ 199,097,179

Purchases/issuances 55,117,903

Sales/settlements (7,286,261)

Total net gains for the period 21,010,425

Balance at June 30, 2014 $ 267,939,246

The following table presents a rollforward of the amounts for the year ended June 30, 2013 for the investment classified within Level 3:

Investments of the Foundation:

Balance at June 30, 2012 $ 173,946,444

Purchases/issuances 35,246,117

Sales/settlements (19,946,409)

Total net gains for the period 9,851,027

Balance at June 30, 2013 $ 199,097,179

The following table presents information for investments where the NAV was used as a practical expedient to measure fair value at June 30, 2014 and 2013:

Redemption

Fair value Redemption notice

2014 2013 frequency period

Commingled funds $ 102,946,924 66,985,792 daily – monthly 7–15 days Limited partnerships 101,310,847 77,987,298 daily – biennially 2–180 days

The Foundation holds investments in private equity and real estate limited partnerships, where NAV was used as a practical expedient to measure fair value at June 30, 2014 and 2013. These partnerships do not allow for periodic redemptions, but rather liquidate upon the termination date as stated in the partnership agreement. At June 30, 2014, $33,690,101 of private equity limited partnerships and $1,056,623 of real estate partnerships had termination dates that ranged from 2014 to 2025. At June 30, 2013, $25,196,916 of private equity limited partnerships and $1,277,200 of real estate partnerships had termination dates that ranged from 2014 to 2022.

(6) Pledges Receivable

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18 (Continued)

date due. Annual giving pledges are charged off upon the start of the subsequent year’s campaign; the need for all other pledges is determined on a case-by-case basis.

Pledges receivable due in excess of one year are discounted between 0.63% and 6.69% depending upon the year and month the pledge receivable was recorded. The discounts on these accounts are computed using the five-year U.S. Treasury Securities interest rate applicable to the year and month in which the pledge is initially received. The schedule of payments at June 30, 2014 and 2013 is as follows:

2014 2013

In one year or less $ 14,353,481 17,119,362

Between one year and five years 19,640,670 26,507,451

More than five years 498,458 793,286

Total 34,492,609 44,420,099

Less allowance for uncollectible amounts (357,158) (829,427)

Less discount to present value of future cash flows (954,234) (1,571,543)

Total reductions (1,311,392) (2,400,970)

Total pledges receivable, net $ 33,181,217 42,019,129

(7) Property and Equipment

Property and equipment consisted of the following at June 30:

2014 2013

Operating assets:

Land and structures $ 6,924,303 6,958,435

Equipment and other 1,653,052 2,220,820

8,577,355 9,179,255

Less accumulated depreciation (3,737,147) (4,077,252)

Total property and equipment, net $ 4,840,208 5,102,003

Nonoperating assets:

Land, structures, and timber held-for-sale $ 7,566,480 7,360,480

Livestock held-for-sale — 127,250

Total assets held-for-sale $ 7,566,480 7,487,730

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June 30, 2014 and 2013

19 (Continued)

(8) Lease Commitments

The Foundation leases office space, event space, and land under noncancelable operating leases expiring through October 2038. The Foundation has the option to renew certain leases at various terms and amounts. Future minimum lease payments under these leases are as follows:

Year ending June 30:

2015 $ 666,620 2016 544,270 2017 552,743 2018 559,202 2019 565,790 Thereafter 160,000

Total lease commitments $ 3,048,625

Total rent expense amounted to approximately $764,000 and $768,000 for years ended June 30, 2014 and 2013, respectively, which is included in either Direct University Support or Management, general, and development expense depending on the intended use.

(9) Temporarily Restricted Net Assets

Temporarily restricted net assets are restricted primarily for departmental programs and activities, including capital projects. Charitable gift annuities and remainder trusts may also be temporarily restricted. These assets are subject to donor-imposed stipulations that may be or will be met either by the Foundation and/or the passage of time.

Temporarily restricted net assets at June 30, 2014 and 2013 are available for:

2014 2013

Facilities and equipment $ 38,233,955 34,637,773

Academic program support 94,227,277 85,590,728

Instruction and research 71,190,793 58,385,872

Student aid 62,723,904 50,662,240

Total University controlled activities 266,375,929 229,276,613

Foundation controlled activities 8,684,060 8,254,151

Total $ 275,059,989 237,530,764

(10) Permanently Restricted Net Assets

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20 (Continued)

part of the income earned on related investments for general or specific purposes, such as, scholarships or professorships.

Permanently restricted net assets at June 30, 2014 and 2013 are available for:

2014 2013

Facilities and equipment $ 2,090,936 2,006,437

Academic program support 85,533,366 81,789,758

Instruction and research 121,632,570 114,896,310

Student aid 138,410,165 130,317,909

Total University controlled activities 347,667,037 329,010,414

Foundation controlled activities 4,810,346 4,847,398

Total $ 352,477,383 333,857,812

(11) Retirement Plan

Employees of the Foundation participate in a money purchase retirement plan covering substantially all employees with at least one year of service, and vest generally after four years of service. The Foundation is obligated to contribute 17% of all eligible employees’ salaries, including the six-month period prior to eligibility, up to federal limits. The Foundation’s contributions to the employee directed accounts amounted to approximately $1,518,000 and $1,383,000 for the years ended June 30, 2014 and 2013, respectively.

(12) Assets Held under Split-Interest Agreements

The Foundation receives certain planned gift donations in the form of charitable gift annuities and remainder trusts. A charitable gift annuity is an arrangement between a donor and the Foundation in which the assets contributed by the donor are provided in exchange for a promise by the Foundation to pay a fixed amount for a period of time to the donor or designated beneficiary. Upon completion of the agreed term (usually the beneficiary’s death), the remaining value of the gift annuity reverts to the Foundation to be used in accordance with the original annuity agreement.

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June 30, 2014 and 2013

21 (Continued)

At June 30, the fair value and cost of assets held under split-interest agreements were as follows:

2014 2013

Fair value Cost Fair value Cost

Gift annuities: Mutual funds: Small cap $ 515,311 260,658 469,423 298,372 Large cap 3,495,092 2,204,839 3,196,471 2,465,178 International 2,527,870 2,149,182 2,265,930 2,303,763 Real estate 1,899,076 1,723,454 1,709,236 1,704,444 High-quality/intermediate bonds 4,706,906 4,583,795 4,505,087 4,454,373 Mid-quality/intermediate bonds 1,366,388 1,203,056 1,000,664 903,470 Total gift annuities 14,510,643 12,124,984 13,146,811 12,129,600 Remainder trusts: Mutual funds: Small cap 1,406,203 1,152,920 1,361,159 1,207,748 Large cap 9,807,289 6,538,247 8,687,924 6,779,037 International 6,834,191 5,981,680 5,863,130 6,104,917 Real estate 5,437,813 4,957,555 4,691,906 4,614,283 High-quality/intermediate bonds 15,258,342 13,949,877 15,927,461 14,954,693 Mid-quality/intermediate bonds 4,009,267 3,532,271 2,574,796 2,291,003 Other 1,047,051 1,047,051 1,047,050 1,047,051

Total remainder trusts 43,800,156 37,159,601 40,153,426 36,998,732 Total gift annuities and

remainder trusts $ 58,310,799 49,284,585 53,300,237 49,128,332

Obligations to beneficiaries under split-interest agreements at June 30:

2014 2013

Gift annuities $ 7,159,617 7,238,092

Remainder trusts 20,574,638 19,080,872

Total obligations under charitable gift annuities

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22 (13) Other Liabilities

Other liabilities consist of the following at June 30:

2014 2013

Accounts payables $ 446,649 577,913

Overdrafts payable 5,020,433 —

Accrued expenses 4,945,247 2,799,978

Accrued payroll and related liabilities 1,829,660 1,541,563

Other foundation operational expenses 2,546,357 1,324,950

Total other liabilities $ 14,788,346 6,244,404

(14) Commitments

During the year ended June 30, 2002, the Foundation entered into a commitment to invest $10,000,000 into domestic and international private equity partnerships. The Foundation has continued to make investments in similar vehicles since that time. As of June 30, 2014 and 2013, a total of $48,595,923 and $38,791,159 has been invested and commitments in the amount of $32,904,077 and $25,208,841 are still outstanding. The remaining funds will be invested as calls are made by the partnerships. The Foundation has invested the remaining portion of the commitments, until required, in corporate obligations and marketable securities.

(15) Related Party

The University is a related party of the Foundation. During 2014 and 2013, the Foundation recorded $13,568,473 and $11,970,090, respectively, as other revenue for fundraising, investment management, and other related services performed for the University.

Direct University support, included in expenses, consisted of the following for the years ended June 30:

2014 2013

Awards and scholarships $ 7,472,757 8,008,009

Capital programs 16,222,897 7,066,733

Instruction and research support 6,160,267 3,691,463

Other program support 18,191,666 14,870,918

Development support 13,008,447 15,227,149

Total direct university support $ 61,056,034 48,864,272

The amount payable or “due to” the University, including amounts in accrued expenses, totaled $4,961,778 and $2,781,650 at June 30, 2014 and 2013, respectively.

(16) Subsequent Events