MESSAGE FROM THE CHIEF OPERATING OFFICER

In a year characterized by rising financial markets and continued strong financial support from alumni and friends, the Virginia Tech Foundation achieved record results in providing financial and strategic support to Virginia Tech.

Financial support of the university programs totaled $77.9 million as compared to $74.9 million in the previous year. Revenues for the year totaled $201.5 million, an increase of 20 percent over the previous year. Net gains on investments accounted for $59.9 million of this increase. Total assets increased to $940.9 million from $808.9 million. Net assets increased to $707.3 million from $609.1 million.

The value of the Virginia Tech endowment was $524.7 million at the end of the fiscal year. The consolidated endowment earned 18.9 percent for the year, comparing favorably with university endowments of similar size and considerably exceeded the benchmark return of 15.9 percent. During the past year, the Investment Committee increased allocation to marketable alternatives to 25 percent and reduced the fixed income allocation to 10 percent of the portfolio. Investment in real estate was reduced during the year and an allocation to inflation hedged assets was continued.

Real estate development to support strategic initiatives of the university moved forward with several projects. Work continued to provide research space in the National Capital Region proximate to federal research agencies that support substantial components of the university´s research agenda. Foundation and development offices scattered across the campus and in leased space in the town of Blacksburg were consolidated in the University Gateway Center, a foundation-developed and owned building adjacent to campus on Prices Fork Road. Agreement was reached with Armada-Hoffler and Bruce Smith Enterprises for the redevelopment of the former Red Lion Inn property, which will generate income to the foundation through a land-lease and carried interest. Two additional buildings were under construction in the Virginia Tech Corporate Research Center to provide facilities for university research centers.

Enhancement of the entrepreneurial involvement within and surrounding the university is critical to advancing technology transfer, quality of life in the region, and opportunities for students and graduates. The foundation played a leading role in establishing a Blacksburg/Roanoke chapter of the Virginia Angel Investor Network, which provides very early capital to start up ventures. The NewVa Investment Fund, a joint Virginia Tech Foundation and Carilion Clinic initiative, made an additional investment in a Virginia Tech Corporate Research Center company. VT KnowledgeWorks continues the successful nurture of very early stage companies and the Virginia Tech Business Technology Center assists a variety of businesses in the region and across the state.

All of us within the Virginia Tech community are encouraged daily by the support provided by the university´s many alumni and friends from around the world. Never has this been more so than in the days following the terrible tragedy and loss of April 16. The many faces of Virginia Tech were shown to the world and the response of encouragement, support, and recognition of the strength of our extended family was, and continues to be, a source of pride to us all.

Sincerely,

Raymond D. Smoot Jr.

Chief Operating Officer and
Secretary-Treasurer