UNIVERSITY OF VIRGINIA Quarterly Financial Report

(Unaudited) Six Months Ended December 31, 2015

UNIVERSITY OF VIRGINIA Quarterly Financial Report

(Unaudited) Six Months Ended December 31, 2015

Table of Contents Executive Summary ...................................................................................................................................... 1 UVA Consolidated Financial Statements

Statement of Net Position ....................................................................................................................... 2 Statement of Revenue, Expenses, and Changes in Net Position ........................................................... 4

Academic Division and Wise Statement of Revenue, Expenses, and Changes in Net Position ................... 6 Medical Center Statement of Revenue, Expenses, and Changes in Net Position ......................................... 8 Academic Division Sources and Uses Statement, Budget vs. Actual ......................................................... 10 Other Key Reports and Dashboards

Treasury Dashboard ............................................................................................................................. 12 UVA Endowment and Long-term Investments .................................................................................... 13 Report on Quasi Endowment Actions .................................................................................................. 14 Research Dashboard ............................................................................................................................. 15 Cornerstone Plan Update ...................................................................................................................... 18 Organizational Excellence Update ....................................................................................................... 19 UVA Key Facts .................................................................................................................................... 20 UVIMCO Quarterly Report ................................................................................................................. 21

University of Virginia Quarterly Financial Report (Unaudited)

For the Six Months Ending December 31, 2015 Executive Summary The University of Virginia (UVA) December 31, 2015 quarterly financial report is comprised of the following statements, along with supporting charts and schedules:

UVA’s Consolidated Statement of Net Position (on page 2) is prepared on an accrual basis in accordance with generally accepted accounting principles (GAAP) and includes the Academic Division, the Medical Center, and the College at Wise. Net position at the end of the second quarter is $8.3 billion, an increase of $17.2 million since June 30, 2015, primarily due to the Medical Center’s operating return and the recognition of the state general fund appropriation for the year.

UVA’s Consolidated Statement of Revenues, Expenses, and Changes in Net Position (on page 4) is prepared on an accrual GAAP basis and includes all three divisions. The Governmental Accounting Standards Board (GASB) treats the state appropriation, spendable gifts, and the endowment distribution as non-operating revenues. These non-operating revenues all support operating expenses, so UVA’s operating margin will be negative. Through December 31, 2015, the operating margin is a negative $183.1 million, fully offset by the state appropriation and spendable gifts. UVA has an investment loss through December 31, which is explained in the University of Virginia Investment Management Company (UVIMCO) quarterly report beginning on page 21. The change in net position is positive ($17.2 million) due to the Medical Center’s operating return and the recognition of the state general fund appropriation.

The Academic Division and College at Wise’s Statement of Revenues, Expenses, and Changes in

Net Position (on page 6) is prepared on an accrual GAAP basis. Similar to the consolidated report, the operating margin is a negative $195.7 million but is fully offset by the state appropriation and spendable gifts in non-operating revenues. The change in net position is negative due to the investment loss through December 31, 2015.

The Medical Center’s Statement of Revenues, Expenses, and Changes in Net Position (page 8) is

prepared on an accrual GAAP basis. Through six months, the Medical Center is reporting an operating margin of $36.2 million. The volume of activity is higher this year as compared to last year as the result of the acquisition of the Culpeper Regional Hospital in fiscal year 2015.

The Academic Division’s Statement of Operating Sources and Uses, Budget vs. Actual (page 10)

is a cash-based management report which compares current results to the budget. It is not GAAP-based and differs in various ways from a GAAP-based financial statement. For the second quarter ended December 31, 2015, revenues are in excess of budget by $77.7 million or 6.9% primarily related to the endowment distribution and a timing difference related to a planned allocation from the Medical Center to the School of Medicine. Uses are $12.4 million or 1.6% below budget to date.

The UVA Health System financial report (combining the Medical Center, the School of Medicine, and University Physicians’ Group) are available in the Health System Operating Board materials.

1

As of 12/31/15 As of 6/30/15ASSETSCurrent Assets

Cash and short term investments 716,333$ 722,021$ Receivables (accounts, notes, pledges, other) 528,425 276,293 Inventories, prepaids and other 49,402 44,663 Total current assets 1,294,160 1,042,977

Noncurrent AssetsEndowment and other long-term investments 5,908,873 5,964,082 Notes and pledges receivables 43,601 42,647 Capital assets, net 3,296,601 3,260,314 Goodwill and other 12,753 12,698 Total noncurrent assets 9,261,828 9,279,741

Deferred Outflows of Resources 10,745 19,906

Total Assets and Deferred Outflows of Resources 10,566,733$ 10,342,624$

LIABILITIESCurrent Liabilities

Accounts payable and accrued liabilities 187,641$ 208,408$ Unearned revenues and deposits 119,239 156,533 Unearned revenues, spring tuition 282,820 - Commercial Paper 70,345 50,645 Total current liabilities 660,045 415,586

Noncurrent LiabilitiesLong-term debt 1,370,211 1,397,166 Other long-term liabilities 208,246 203,230 Total noncurrent liabilities 1,578,457 1,600,396

Deferred Inflows of Resources - 15,660

Total Liabilities and Deferred Inflows of Resources 2,238,502 2,031,642

NET POSITIONNet investment in capital assets 1,867,137$ 1,811,232$ Restricted:

Nonexpendable 617,143 608,894 Expendable 3,427,392 3,503,522

Unrestricted 2,416,559 2,387,333 Total Net Position 8,328,231 8,310,982

Total Liabilities, Deferred Inflows of Resources and Net Position 10,566,733$ 10,342,624$

UNIVERSITY OF VIRGINIA - ConsolidatedStatement of Net Position (Unaudited)

(in 000s)

2

UVA’s Consolidated Statement of Net Position This statement provides UVA’s net positions as of December 31, 2015 and June 30, 2015. The unaudited statement is accrual based and developed in accordance with GAAP. The December 31, 2015 UVA Statement of Net Position shows a stable financial picture with a steady net position. Unrestricted net position increased due to the Medical Center operating return and recognition of state appropriation, while restricted expendable net position decreased by about 1.7% due to the negative investment return for the period and the July 2015 endowment distribution. The $528.4 million in current receivables are primarily comprised of tuition and other student charges ($287.9 million) billed in December for the spring semester, Medical Center patient service billings ($209.7 million), sponsored research ($20 million), and auxiliary operations and other receivables ($10.8 million). Past due receivables over 120 days were $1.96 million for the Academic Division, or 0.6% and well within the Commonwealth of Virginia’s management standard of 10%. The Medical Center had $43.1 million over 120 days for patient service billings. The University's $5.9 billion endowment and long term investments (see page 13 for detail) declined slightly during the first six months of FY16, reflecting the negative market return of just under 1%, as well as the July endowment spending distribution. The University of Virginia Investment Management Company (UVIMCO)’s monthly commentary on its earnings may be found on page 21. All quasi-endowment actions from July 1, 2015 through December 31, 2015 approved by the Executive Vice President and Chief Operating Officer or the Assistant Vice President for Finance and University Comptroller are outlined on page 14. Included in the $43.6 million non-current receivables are the Federal Perkins Loan Program ($19.0 million) and the Federal Nursing Student Loan Program ($1.1 million). In addition, the University manages $20.5 million in loan programs through endowments given for this purpose. The default rates by University students on the federal loan programs are below required thresholds: 1.8% for Perkins versus the federal requirement of 15% and 1.4% for Nursing versus the 5% federal threshold. Collectively, the default rate on University managed loan programs stands at 3.8%. Long-term debt at December 31, 2015 totals $1.4 billion. The Treasury Dashboard on page 12 provides a quick glance at the long-term debt structure which reflects debt structure changes executed in April 2015. Net position totals $8.3 billion, an increase of $17.2 million since June 30, 2015.

3

12/31/2015 12/31/2014OPERATING REVENUES AND EXPENSES:Operating Revenues

Student tuition and fees, net 276,793$ 260,772$ Patient services, net 755,787 680,050 Grants and contracts (federal, state, nongovernmental) 155,667 149,126 Auxiliary enterprises revenues, net 103,582 99,292 Sales and services of educational departments 14,177 13,446 Other operating income 12,316 28,723

Total operating revenues 1,318,322 1,231,409

Operating ExpensesCompensation and benefits 840,840 767,343 Supplies and other services 505,843 481,114 Student aid 39,430 37,815 Depreciation 113,470 102,190 Other operating expenses 1,793 1,497

Total operating expenses 1,501,376 1,389,959

Operating revenues less operating expenses (183,054) (158,550)

NONOPERATING REVENUES AND EXPENSESNonoperating Revenues

State appropriations 159,523 160,127 Gifts, current 84,558 89,843 Capital appropriations, gifts, and grants 37,324 30,173 Investment income (loss) (55,563) 44,224 Additions to permanent endowments 7,459 10,823 Pell grants 4,362 4,458 Other nonoperating revenues 1,350 -

Total nonoperating revenues 239,013 339,648

Nonoperating ExpensesInterest on capital asset related debt, net 28,749 25,836 Loss on capital assets (gain) 755 395 Other nonoperating expenses 9,206 15,795

Total nonoperating expenses 38,710 42,026

Nonoperating revenues less nonoperating expenses 200,303 297,622

Total revenues 1,557,335 1,571,057 Total expenses 1,540,086 1,431,985 Increase in net position 17,249 139,072

NET POSITIONNet position - July 1 (Beginning) 8,310,982 7,747,295 Net position - December 31 (Ending) 8,328,231$ 7,886,367$

UNIVERSITY OF VIRGINIA - ConsolidatedStatement of Revenues, Expenses and Changes in Net Position (Unaudited)

Six Months Ended

(in 000s)

4

UVA’s Consolidated Statement of Revenues, Expenses, and Changes in Net Position This statement includes the University’s revenues, expenses, and other changes in net position for the six months ended December 31, 2015 as compared to the same six months period in the prior year. It is developed based on GAAP but is unaudited. The December 31, 2015 net position is just up $17.2 million. The operating margin, as usual, is negative due to the Governmental Accounting Standards Board (GASB) treatment of the state appropriation, spendable gifts, and endowment earnings as non-operating although the revenues fund operating expenses. This is consistent with other public GASB university peers (but not with private Financial Accounting Standards Board (FASB) peers). Operating revenues are $1.3 billion, up 7% over the same time period a year ago. Increases in patient services revenues (partially related to the acquisition of Culpeper Regional Hospital) and tuition charges are the primary drivers of the increase. Several large new federal grants account for most of the increase for grants and contracts revenue (see Research Dashboard beginning on page 15). A slight increase in athletic ticket revenue and new contract revenues have resulted in the increase in auxiliary enterprises revenue. Total operating expenses are $1.5 billion, up by 8%, primarily from increases in compensation and benefits. Pay increases for faculty and staff, as well as payouts for the University's Early Retirement Incentive Plan, went into effect in the first half of the fiscal year. The Medical Center’s increase in volume, driving compensation and medical/pharmaceutical supplies is also a contributor to the increased operating expenses. As mentioned previously, a 1% decline in the market value of the University’s endowment and long-term investments resulted in a $55.6 million loss for the six month period.

5

12/31/2015 12/31/2014OPERATING REVENUES AND EXPENSES:

Operating RevenuesStudent tuition and fees, net 276,793$ 260,772$ Grants and contracts (federal, state, nongovernmental) 155,667 149,126 Auxiliary enterprises revenues, net 103,582 99,292 Sales and services of educational departments 14,177 13,446 Other operating income 22,701 8,450

572,920 531,086 Operating Expenses

Compensation & benefits 504,089 471,191 Supplies & other services 161,337 160,805 Student aid, net 39,430 37,815 Depreciation 61,954 57,518 Other operating expenses 1,793 1,497

768,603 728,826 Operating revenues less operating expenses (195,683) (197,740)

NONOPERATING REVENUES AND EXPENSESNonoperating Revenues

State appropriations 159,523 160,127 Gifts 83,033 66,922 Capital appropriations, grants and gifts 37,324 30,173 Investment income (loss) (45,117) 41,176 Additions to permanent endowments 7,459 10,823 Pell grants 4,362 4,458 Other 1,350 14

Total nonoperating revenues 247,934 313,693

Nonoperating ExpensesInterest on capital asset related debt, net 18,727 15,730 Loss on capital assets & other 753 578 Other nonoperating expenses 2,671 1,394

Total nonoperating expenses 22,151 17,702 Nonoperating revenues less nonoperating expenses 225,783 295,991

Total revenues 820,854 844,779 Total expenses 790,754 746,528 Increase in net position 30,100 98,251

NET POSITIONNet position - July 1 (Beginning) 6,859,723 6,336,857 Net position - December 31 (ending) 6,889,823$ 6,435,108$

UNIVERSITY OF VIRGINIA - Academic Division and College at WiseStatement of Revenues, Expenses, and Changes in Net Position (Unaudited)

(in 000s)

Six Months Ended

6

Academic Division and College at Wise’s Statement of Revenues, Expenses, and Changes in Net Position This statement outlines the Academic Division and Wise’s revenues, expenses, and other changes in net position for the six months ended December 31, 2015 as compared to the same period last year. It is developed based on GAAP but is unaudited. The operating margin, as previously mentioned, is negative due to the GASB treatment of the state appropriation, spendable and all endowment earnings as non-operating even though they fund operating expenses. Operating revenues for the period were $572.9 million, an increase of 8% over the last year. There were modest changes in most revenue categories. Net student tuition and fees are up 6.1% as compared to last, due to undergraduate enrollment growth and increases in undergraduate, graduate, and professional tuition and fees approved by the Board of Visitors in March 2015. Grants and contracts revenue had an increase (4.4%) due to several new federal grants (see dashboard on page 15). Auxiliary revenues increased by 4.3% primarily due to additional ACC revenue distribution to Athletics and other auxiliary activity increases. Operating expenses were up 5.4% as compared to the same period last year. The August 2015 pay increase for faculty (average of 4.5%) and staff (average of 3%) account for most of the increase. In addition to salary increases, there were increased expenditures related to incentive pay-outs through the Early Retirement Plan which went into effect in the fall of 2016 as well as expenditures to date towards Cornerstone Plan initiatives (see page 18). In non-operating revenues, gift revenues are up over $16 million due to receipt of several large new gifts and distributions from charitable remainder trusts. Investment return was negative $45 million as compared to a positive return of $41 million over the same period last year.

7

12/31/2015 12/31/2014

OPERATING REVENUES AND EXPENSESOperating Revenues Net patient service revenue 755,787 680,050 Other 23,741 20,273 Total operating revenue 779,528 700,323

Operating Expenses Salaries and wages 266,222 233,708 Fringe benefits 70,529 62,444 Supplies 181,478 161,189 Purchased services and other expenses 160,971 145,687

Tele-Ld-Other 115 113 Utilities 12,610 13,432 Provision for depreciation and amortization 51,516 44,672 Total operating expenses 743,326 661,132

Operating revenues less operating expenses 36,202 39,191

NONOPERATING REVENUES (EXPENSES) Gifts 1,524 22,921 Investment income 4,526 4,239 Net increase (decrease) in the fair value of investments (13,484) (7,346) Net gain (loss) from investments in affiliated companies 2,314 7,127 Noncontrolling Interest in Subsidiary Income (947) (972) Interest expense (10,021) (10,106) Loss on disposal of fixed assets (2) 183 Gain Sharing School of Medicine (4,307) (385) Other (4,205) (4,906) Net nonoperating revenues (expenses) (24,602) 10,755

Income before other revenues, expenses, gains or losses 11,600 49,946Transfers (22,256) (9,124)

Increase (decrease) in net position (10,656) 40,822

NET POSITION Net position - July 1 (beginning) 1,451,260 1,433,022 Net position - December 31 (ending) 1,440,604$ 1,473,844$

Six Months Ended

UNIVERSITY OF VIRGINIA - Medical CenterStatement of Revenues, Expenses, and Changes in Net Position (Unaudited)

(in 000s)

8

Medical CThis stateDecemberrevenues primarily Hospital (last year wincreased The table Center’s a12.5% higCenter’s arespective

Center’s Statment outlinesr 31, 2015 as for the periodrelated to inc

(Culpeper) in with increasesvolumes.

below providadjusted admigher, again pradjusted admiely.

tement of Res the Medicalcompared to

d were $779.5creased net pa2014. Operat

s in salary and

des key statistissions are uprimarily relateissions, inpati

evenues, Exp Center’s revlast year. It is

5 million, an iatient revenueting expensesd wages and m

tics at a glancp by 8.3%, acued to the acquient days and

penses, and Cenues, expenss developed bincrease of 11es related to ths are up 12.4%medical/ phar

ce. As comparute inpatient duisition of Cul

surgical case

Changes in Nses, and otherbased on GAA1.3% over thehe acquisition% thus far as crmaceutical su

red to the samdays are up 6lpeper. Exclu

es were up 0.4

Net Position r changes in nAP but is unae same periodn of Culpepercompared to tupplies in ord

me period last6.1%, and surguding Culpepe4%, 2.8% and

net position aaudited. Operad last year, r Regional the same perider to support

t year, the Megical cases arer, the Medicd 3.2%,

as of ating

iod t the

edical re al

9

2015-16 Annual Budget

Budget Through

12/31/2015

Actuals Through

12/31/2015Over (Under)

BudgetAs a % of

BudgetSOURCES OF AVAILABLE FUNDS:

Tuition and Fees Undergraduate 318,917$ 321,000$ 317,283$ (3,717)$ -1.2% Less: Tuition to financial aid (54,359) (26,000) (27,185) (1,185) 4.6%

Net Undergraduate 264,558 295,000 290,098 (4,902) -1.7%

Graduate 64,076 66,000 52,402 (13,598) -20.6%Less: Tuition to financial aid (36,071) (21,000) (15,826) 5,174 -24.6%Net Graduate 28,005 45,000 36,576 (8,424) -18.7%

Professional (Law, Darden, McIntire & SEAS Exec.) 98,972 99,000 107,608 8,608 8.7%Less: Tuition to financial aid (9,059) (5,000) (4,080) 920 -18.4%Net Professional 89,913 94,000 103,528 9,528 10.1%

School of Medicine 34,763 35,000 30,282 (4,718) -13.5%Less: Tuition to financial aid (522) - (432) (432) n/aNet School of Medicine 34,241 35,000 29,850 (5,150) -14.7%

Other 89,601 86,000 101,134 15,134 17.6%Less: Tuition to financial aid (1,188) (1,000) (685) 315 -31.5%Net Other 88,413 85,000 100,449 15,449 18.2%

Total Net Tuition & Fees 505,129 554,000 560,501 6,501 1.2%

State Appropriations 144,737 144,000 142,778 (1,222) -0.8%Grants & Contracts 221,571 118,000 122,811 4,811 4.1%Facilities & Administrative Cost Recoveries 59,585 33,000 36,267 3,267 9.9%Endowment Distribution & Fee 188,311 85,000 99,517 14,517 17.1%Gifts-Via Affiliated Foundations 115,797 56,000 63,440 7,440 13.3%Expendable Gifts 23,683 10,000 15,214 5,214 52.1%Sales, Investment & Other 196,724 127,000 164,206 37,206 29.3%Operating Cash Balances 48,027 - - - n/a

Total Sources of Available Funds 1,503,564$ 1,127,000$ 1,204,734$ 77,734$ 6.9%

USES OF AVAILABLE FUNDS:Direct Instruction 420,635$ 204,000$ 190,682$ (13,318)$ -6.5%Research & Public Service 300,656 160,000 165,602 5,602 3.5%Academic Support 149,100 84,000 83,227 (773) -0.9%Student Services 46,208 25,000 25,668 668 2.7%General Administration 110,622 53,000 63,587 10,587 20.0%Operation & Maintenance of Physical Plant 110,653 63,000 55,552 (7,448) -11.8%Scholarships, Fellowships, & Other 106,335 54,000 57,201 3,201 5.9%Auxiliary Enterprises 172,383 89,000 88,376 (624) -0.7%Internal Debt Service/Transfers 83,475 31,000 20,676 (10,324) -33.3%

Total Uses of Available Funds 1,500,067$ 763,000$ 750,571$ (12,429)$ -1.6%

SOURCES IN EXCESS OF USES 3,497$ 364,000$ 454,163$ 90,163$ 24.8%

UNIVERSITY OF VIRGINIA - Academic DivisionStatement of Sources and Uses of Funds, Budget vs. Actual

(in 000s)

Through December 31, 2015

10

Academic Division Comparative Statement of Sources and Uses of Funds This report reviews actual results for the six months ended December 31, 2015 compared to budgeted sources and uses of funds of the Academic Division. The cash-based statement of sources and uses differs from the GAAP-based statements presented earlier in the following ways:

• External debt service, UVa Health Plan activity, and endowment investment performance are excluded, while internal debt repayments and the endowment distribution are included.

• Depreciation is excluded; equipment purchases are a use of funds and are not capitalized. • Only collected gifts are included. Pledges, non-cash gifts, gifts transferred to the endowment or

capital program, and gifts held at foundations are excluded. • Mandatory fees collected for auxiliaries and revenues collected from internal departments as

sales, investment, and other revenue. • Unrealized gains are excluded.

Through December 31, 2015, sources are ahead of target by $77.7 million, primarily due to an increase in the endowment distribution, an increase in gifts over that projected, and an earlier than planned distribution to the School of Medicine’s Fund for the Future from the Medical Center. Total uses of available funds for the Academic Division totaled $750.6 million which is 1.6% below the amount budgeted for the period, partially attributable to the rate of spending on Cornerstone initiatives as explained on page 18. The Academic Division budget also reflects projected organizational excellence projects generating $16.7 million in fiscal year 2016 savings. The report on page 19 provides a brief update on these projects.

11

Uni

vers

ity o

f V

irgin

ia M

onth

ly T

reas

ury

Das

hboa

rd 1

2/3

1/2

01

5*

Tot

al

Tot

al

Tar

get

Act

ual

Cas

h &

Cas

h Eq

uiv

$104

Endo

wm

ent &

Ope

ratin

g B

alan

ces

$5,8

02D

ays C

ash

on H

and

>180

231.

1xD

aily

Liq

uidi

ty> 1

.5x

5.11

xSp

enda

ble

Cas

h an

d In

vest

men

ts/O

E>2

.0x

5.2x

Dra

wn

Ava

ilab

leO

pera

ting

Line

s

Ban

k of

Am

eric

a$0

$100

TD

Ban

k$0

$100

W

ells

Farg

o$0

$50

U

S B

ank

$0$5

0

Tota

l Ope

ratin

g Li

nes

$0$3

00

Com

mer

cial

Pap

e r$7

3$2

27D

edic

ated

Lin

es fo

r Deb

t$0

$200

S/T

Sour

ces

$73

$727

Add

t'l U

VIM

CO

Liq

uidi

ty*

$580

Tot

al L

i qu

idit

y$1

,307

*Per

Agr

eem

ent w

/UV

IMC

O a

nnua

l red

empt

ions

are

lim

ited

to 1

0% o

f tot

al U

VA

Ass

ets

(app

rox.

$60

0m)

Ou

tsta

nd

ing

Deb

tA

mou

nt (

mm

's)

WA

CC

% o

f T

otal

Deb

tC

omm

erci

al P

aper

$73

5.5%

Fixe

d-R

ate

Deb

t$1

,259

4.12

%94

.5%

Tot

al D

ebt

$1,3

324.

12%

100%

Inte

rest

Rat

e SW

APS

$228

3.14

%T

otal

WA

CC

inc

Sw

a ps

4.03

%

Deb

t P

olic

y R

atio

: D

ebt

Svc

/Op

erat

ing

Exp

Targ

et <

10%

2.80

%

Op

erat

ing

Fu

nd

s &

Liq

uid

ity

Liq

uidi

ty P

rofi

leU

nive

rsit

y F

unds

Inv

este

d w

/UV

IMC

OL

iqu

idit

y P

olic

y T

arge

ts

Liq

uidi

ty S

ourc

es

Un

iver

sity

Deb

t

0

100,00

0,00

0

200,00

0,00

0U

nive

rsit

y C

ash

Flo

w F

orec

ast

* Presen

ted on

 a pro fo

rma ba

sis after im

plem

entatio

n of Board app

roved liquidity policy in Ja

nuary 2016.

12

Invested @ UVIMCO

Invested Elsewhere

Total Rector & Visitors

Invested @ UVIMCO

Invested Elsewhere

Total Foundation and Agency

The University of Virginia Medical School and related foundations 969,333$ -$ 969,333$ 69,113$ -$ 69,113$ 1,038,446$ The College of Arts and Sciences and related foundations 446,350 - 446,350 101,355 5,172 106,527 552,877 The University of Virginia Law School and related foundation 54,243 - 54,243 300,716 103,999 404,715 458,958 Darden School and related foundation 134,260 - 134,260 281,854 9,812 291,666 425,926 Batten School of Leadership and Public Policy 132,573 - 132,573 - - - 132,573 School of Engineering and related foundation 113,823 - 113,823 13,138 1,976 15,114 128,937 The McIntire School of Commerce and related foundation 55,852 - 55,852 53,123 629 53,752 109,604 University of Virginia's College at Wise and related foundation 59,540 - 59,540 19,716 - 19,716 79,256 Graduate School of Arts and Sciences 64,297 - 64,297 - - - 64,297 School of Nursing 53,033 - 53,033 2,586 - 2,586 55,619 Curry School of Education and related foundation 16,474 - 16,474 11,391 - 11,391 27,865 School of Architecture and related foundation 21,998 - 21,998 4,830 - 4,830 26,828 School of Continuing and Professional Studies 2,461 - 2,461 - - - 2,461

University of Virginia Medical Center and related foundations 557,690 56,244 613,934 79,845 20,527 100,372 714,306 Jefferson Scholars Foundation - - - 276,469 13,813 290,282 290,282 Centrally Managed University Scholarships 221,301 - 221,301 - - - 221,301 Athletics and related foundation 48,714 - 48,714 69,347 - 69,347 118,061 Provost 114,826 - 114,826 - - - 114,826 Alumni Association (Funds Held for Others) - - - 101,443 10,017 111,460 111,460 University of Virginia Foundation and related entities - - - 88,978 - 88,978 88,978 Alumni Association - - - 62,642 25,736 88,378 88,378 University Libraries 73,584 - 73,584 238 - 238 73,822 Miller Center and related foundation 59,650 - 59,650 12,341 - 12,341 71,991 Alumni Board of Trustees - - - 65,918 - 65,918 65,918 University Investment Management Company - - - 6,208 - 6,208 6,208

University - Unrestricted but designated 376,403 - 376,403 - - - 376,403 University - Unrestricted 382,871 33,722 416,593 - - - 416,593 University - Restricted 142,751 3,656 146,407 - - - 146,407 University Charitable Remainder Trusts 62,259 13,181 75,440 - - - 75,440 Non-University funds held on behalf of agencies - - - 24,870 - 24,870 24,870

Rector and Visitors Endowment at UVIMCO (see page 32) 4,164,286$ Rector and Visitors Long-term Investments at UVIMCO (see page 32) 1,637,784 1,637,784

Total Endowment and long-term investments 5,802,070$ 106,803$ 5,908,873$ 1,646,121$ 191,681$ 1,837,802$ 7,746,675$ (see page 2) (see page 32)

UNIVERSITY OF VIRGINIA - ConsolidatedEndowment and Long-Term Investments, Including Related Foundations

December 31, 2015(in 000s)

Rector and Visitors Funds Foundation and Agency Funds Total University

Related Funds

13

Additions from Gifts AmountAccess UVA Scholarships 230,250$ Buchanan, Carol P. Quasi-Endowment Fund 5,213 President's Fund for Excellence Unrestricted Quasi-Endowment 137,138 University Quasi-Endowment Fund 1 361,535 Total Additions from Gifts to Quasi-Endowments 734,136$

Additions from Endowment Income (Capitalizations)Antrim, Lottie C. Income Capitalization Quasi-Endowment 11,874$ Athletics General Operations Quasi-Endowment 108,458 Chrysler, W. P. Fund for Engineering Library 2,035 Coulter, Wallace H. Endowment Match 30,524 Dermatology General Investment Fund 40,563 Hecht-Cruachem Chemistry Quasi-Endowment #3 1,885 HOPE Physician Incentive Quasi-Endowment 83,580 Hughes Endowment Income Capitalization Quasi-Endowment 2,472 Jordan, Harvey E. Lectureship 1,858 Low, Emmet F. and N. Alyce Chair Quasi-Endowment 1,595 McIntire, Howard Quasi-Endowment in Neurology 29,331 Medical Center Capital Assets Quasi-Endowment 2 8,786,737 Miller, Mae W. Cancer Research Quasi-Endowment 7,872 Moyston, Vernah Scott Professorship in Ophthalmology Investment Quasi-Endowment 5,668 Plastic Surgery Quasi-Endowment Fund 23,990 Radiology Fund Special Diagnostic 5,716 Samuels, Bernard Ophthalmology Library Quasi-Endowment 3,239 School of Medicine Quasi-Endowment 161,810 Shea, Eleanor Quasi-Endowment Professorship in Music 5,868 Shea, Eleanor Quasi-Endowment Professorship in Art History 5,644 Southwest-Dishner Gift Quasi-Endowment Fund 20,369 Strategic Investment for Anesthesiology Research Chair Quasi-Endowment 28,926 Taylor, Henry N. Fund 420 Virginia Quarterly Review - Anonymous 728 Total Additions from Endowment Income to Quasi-Endowments 9,371,162$

DivestmentsCohen, Morris Fund for School of Medicine 20,582$ Jones, D. Lung Cancer Research Quasi-Endowment 266,000 Miller Center Endowment for Eminent Scholars Income 1,600,000 Thaler, Myles H. Quasi-Endowment for HIV Research 100,000 Total Divestments from Quasi-Endowments 1,986,582$

Notes:

UNIVERSITY OF VIRGINIAQuasi-Endowment Actions

July 1, 2015 -- December 31, 2015

1 Includes current unrestricted gifts to the University which, under a standing Board of Visitors resolution, are required to be added to the University's Unrestricted Endowment Fund.

The quasi-endowment actions listed below were approved by either (1) the Executive Vice President and Chief Operating Officer, under the following Board of Visitors' resolutions or (2) the Assistant Vice President for Finance and University Comptroller, under the delegation of authority from the Executive Vice President and Chief Operating Officer:In October 1990 and June 1996 the Board of Visitors approved resolutions delegating to the Executive Vice President and Chief Operating Officer the authority to approve quasi-endowment actions, including establishments and divestments of less than $2,000,000, with regular reports on such actions.In February 2006, the Board of Visitors approved a resolution permitting approval of quasi-endowment transactions, regardless of dollar amount, in cases in which it is determined to be necessary as part of the assessment of the business plan for capital projects. Additionally, to the extent that the central loan program has balances, they may be invested in the long term investment pool managed by UVIMCO or in other investment vehicles as permitted by law.

14

Sponsored Research Expenditures and Facilities & Administrative (F&A) Cost Recoveries

Sponsored Research Dashboard and Report

Sponsored Research Expenditures through December 31, 2015The financial reports on the previous pages include actual expenditures for research activity for the period. Expenditures include the direct cost of research, as well as the indirect/overhead costs associated with faclities and administrative costs. The graphs below demonstrate the recent trends related to base expenditures as well as the facilities and administrative (F&A) costs that are recovered from sponsors. Fiscal year 2015 and thus far in fiscal year 2016 indicate overall continued positive growth in research activity that is occurring at the University.

15

SponsoredKey indicthat are grDecemberincrease ototal awar2015 versmid-year considerin Based on grant fundresearch pcontinuedto the Uni Comprisinsupport toabout 9% related to funding agHuman SeThe declinFoundatiooffset by afoundatioimportanta large $1the federathe next q The mid-yof sponsomake up 42015. Agaof awards

d Research Acators of upcoranted to fundr 31, 2015 the

of 4.3% in awrds. The numbsus 1,056 awatotals have nong the year-to

the federal buding availablepriorities. Facd success in faiversity and c

ng 57% of spo UVA throug

over the sama decline in fgency, the Deervices (downnes here and ion and the Dea 52% increasns, industry, at to note, the S2 million gra

al decline. Thiquarterly upda

year federal dred activity. T4% of our graain, we anticis and may be

wards througoming sponsord future reseae University r

ward dollars fober of awardsarded throughot necessarilyo-year variati

udget outlooke. However, thculty hiring, inaculty proposacontinue this p

onsored activgh December

me period last funding from epartment of Hn 10% to $60in the Nationa

epartment of Ese in funding and subcontraSchool of Meant early in 20is award will ate.

decline was ofThis is an incrants and contrpate that the fully recovere

gh December red grants andrch activity. Areceived sponor the same pes is also slighth December 3y been predicions in the tim

k, we do not ahere are focunvestment thrals could, of cpositive trend

vity, federal 2015 is downyear primarilour largest Health and .9 million). al Science Energy were from

acts. It is edicine receiv016 that offsetbe reflected i

ffset by foundrease of 52%racts and decrfederal declined with the ne

31, 2015 d contracts acAs shown on nsored programeriod in fiscaltly higher wit1, 2014, an intive of perfor

ming of the fed

anticipate signs areas (e.g., brough the Corcourse, impac

d.

n ly

ed ts in

dation, industto $65.5 mill

reased nearly ne through theext update.

The Scaward SciencApplieof EdudistribuUniver

ctivity are thepage 17, throm awards total year 2014, wth 1,101 awarncrease of 4.3rmance for thederal budget

nificant overabrain, resilienrnerstone Planct the proport

try, and subcolion. State an30% to $7.5

e first six mon

chool of Medidollars, followes (17.4%), th

ed Sciences (1ucation (10%)uted among vrsity.

e number and ough the six maling $168.6 which saw $1rded through 3%. It is impoe full year, espapproval pro

all changes innce) which arn, strategic artion of federa

ontracts, whicnd other gover

million throunths is the res

icine was awawed by the Che School of 11.6%), and th). The remainivarious areas w

value of awamonths endedmillion. This 58.9 million December 31

ortant to note specially ocess.

n future federare explicit fedreas of focus al funding awa

ch comprise 3rnmental awaugh Decembersult of the tim

arded 57.4% College of Art

Engineering he Curry Sching 3.6% waswithin the

ards d

is an in

1, that

al deral and arded

39% ards r

ming

of all ts and and

hool s

16

Dep

t. o

f H

ealt

h &

H

uman

Se

rvic

es

Nat

ion

al

Sci

ence

F

oun

dat

ion

Dep

t. O

f E

du

cati

onD

ept.

of

Def

ense

Dep

t. o

f E

nerg

yN

ASA

Oth

er

Fed

eral

Su

bto

tal

Fed

eral

Fou

nd

atio

ns,

In

du

stry

, an

d

Su

bco

ntr

acts

Sta

te,

Loc

al,

For

eign

G

ov't

s

Six

Mon

th

Tot

al

Th

rou

gh

12/3

1/15

% o

f Si

x M

onth

T

otal

T

hro

ugh

12

/31/

15

Six

Mon

th

Tot

al

Th

rou

gh

12/3

1/14

% o

f Si

x M

onth

T

otal

T

hro

ugh

12/3

1/14

% I

nc/

Dec

O

ver

Pri

or

Yea

r

Scho

ol o

f Med

icin

e53

.1$

0.3

$

-$

2.

8$

-

$

-$

-

$

56.2

$

38

.2$

2.

2$

96

.6$

57.4

%90

.6$

56.9

%6.

6%C

olle

ge o

f Arts

& S

cien

ces

5.4

5.3

0.9

1.6

0.9

0.5

1.1

15.7

13

.3

0.

4

29

.4

17.4

%18

.7

11.8

%57

.2%

Engi

neer

ing

and

App

lied

Scie

nces

1.4

3.7

-

3.

4

0.

7

0.

9

0.

9

11

.0

7.7

0.

9

19

.6

11.6

%28

.8

18.1

%-3

1.9%

Cur

ry S

choo

l of E

duca

tion

0.6

2.7

7.0

-

-

-

-

10.3

4.

0

2.6

16.9

10

.0%

12.8

8.

1%32

.0%

Scho

ol o

f Nur

sing

0.4

-

-

-

-

-

-

0.4

0.2

0.

2

0.

8

0.

5%1.

8

1.

1%-5

5.6%

Oth

er 1

-

1.

3

0.

3

-

-

-

0.4

2.0

2.1

1.

2

5.

3

3.

1%6.

3

4.

0%-1

5.9%

Tot

al t

hro

ugh

12/

31/2

015

60.9

$

13

.3$

8.2

$

7.8

$

1.6

$

1.4

$

2.4

$

95.6

$

65

.5$

7.

5$

16

8.6

$

N

umbe

r of A

war

ds th

roug

h 12

/31/

1517

4

55

19

30

15

14

21

32

8

72

5

48

1,

101

Tot

al t

hro

ugh

12/

31/2

014

67.7

$

14

.7$

7.0

$

6.9

$

3.9

$

1.3

$

3.5

$

105.

0$

43.1

$

10.8

$

15

8.9

$

N

umbe

r of A

war

ds th

roug

h 12

/31/

1417

6

54

18

26

19

13

21

32

7

67

0

59

1,

056

% I

ncr

ease

/Dec

reas

e-1

0.0%

-9.5

%17

.1%

13.0

%-5

9.0%

7.7%

-31.

4%-9

.0%

52.0

%-3

0.6%

4.3%

N

umbe

r of A

war

ds-1

.1%

1.9%

5.6%

15.4

%-2

1.1%

7.7%

0.0%

0.3%

8.2%

-18.

6%4.

3%

UN

IVE

RS

ITY

OF

VIR

GIN

IA -

Con

soli

dat

edS

pon

sore

d P

rogr

ams

Gra

nts

an

d C

ontr

acts

Aw

ard

sA

s of

Dec

emb

er 3

1, 2

015

(in m

illio

ns)

1 Incl

udes

: Sch

ool o

f Law

, Sch

ool o

f Arc

hite

ctur

e, C

ente

r for

Pub

lic S

ervi

ce, E

xecu

tive

Vic

e Pr

esid

ent a

nd P

rovo

st, B

atte

n Sc

hool

of L

eade

rshi

p an

d Pu

blic

Pol

icy,

Hea

lth S

cien

ces L

ibra

ry, M

cInt

ire S

choo

l of

Com

mer

ce, M

iller

Cen

ter,

Stud

ent H

ealth

, Uni

vers

ity L

ibra

rian,

UV

a's C

olle

ge a

t Wis

e, V

ice

Pres

iden

t and

Chi

ef S

tude

nt A

ffairs

Offi

cer,

Vic

e Pr

esid

ent f

or R

esea

rch,

Vic

e Pr

ovos

t for

Aca

dem

ic A

ffairs

, Vic

e Pr

ovos

t for

Aca

dem

ic O

utre

ach,

Vic

e Pr

ovos

t for

the

Arts

, Virg

inia

Fou

ndat

ion

for t

he H

uman

ities

17

UNIVERSITY OF VIRGINIA Cornerstone Plan Update As of December 31, 2015

The Cornerstone Plan and its associated strategic priorities continue to be implemented. A summary of activity for this fiscal year, related to a new funding commitment of $41.5 million, is shown in the table below. This commitment does not include re-allocated funds or private philanthropic funds that are being used to support implementation of many Cornerstone strategies. Of this $41.5 million, approximately $7.3 million (or 18%) of the allocated funds have been expended through the end of the calendar year. Many of the commitments are for programmatic activities which will take some start-up time and will not be drawn down on a consistent basis. In addition:

Approximately $4.7 million has been expended to date, with another $9 million

committed for two major projects: the Managerial Reporting Project and the Human Resources Strategic Re-design.

The August 2015 faculty salary increase was implemented, so about $1.1 million of that $2.2 million commitment has been expended in the first semester.

Approximately $1.6 million has been expended on other Cornerstone plan initiatives, with other spending expected over the remainder of the fiscal year.

Twelve million dollars to support the Generational Turnover of Faculty and associated research core support will be deferred until later this spring when tenure-track faculty offers and any associated start-up packages are finalized. Actual expenditure of these commitments will fall over the summer and into the next fiscal year.

Two million is reserved for the next pan-university research institute; this selection process is underway.

Budget Allocated Q1 FY15-16

YTD as of 9/30/15 Q2 FY15-16

YTD As of 12/31/15

Cornerstone Allocations 41,495,843$ 586,200$ 586,200$ 6,004,317$ 7,305,055$

Cornerstone Allocation Spending Totals FY 15-16

18

ORGANIZATIONAL EXCELLENCE ENGAGE. SIMPLIFY. ENABLE THE MISSION.

Organizational Excellence (OE) drives high-quality and value-added service delivery and promotes a culture of excellence. Measurable benefits include increased performance, reduced complexity, standardization, automation, enhanced stakeholder satisfaction, and strategic reinvestment of time and savings to support core mission activities.

QUARTERLY UPDATE October 2015 – January 2016

Key OE Projects HR Strategic Design * Managerial Reporting * Research Administration * Travel and Expense

Strategic Sourcing * IT Email Consolidation * Data Center Centralization * Gift Processing

Project Highlights Ufirst: Human Resource Strategic Design

14 future processes mapped 5 centers of expertise in design + Redesign of organization structure and policies 4 enterprise HR system demos + Prioritization of early service improvements

Research Administration – ResearchUVA 47,518 documents imaged for accessibility 650 faculty/staff using ResearchUVA 6 research units analyzed for staffing needs + Enhanced reporting /analytical capabilities + Evaluating enterprise pre-award systems

Strategic Sourcing Major Contracts $2-3 m annual savings 3 contracts complete: office supplies,

inbound freight, travel 3 contracts in-progress: office furniture,

housekeeping supplies, computer hardware

Travel Booking – Launched Jan 4 Single provider for better pricing Standardization and simplified policies + Online booking, dedicated customer service 24/7 global monitoring + Traveler alerts and assistance + Enhanced export control compliance

Creating a Culture of Quality 350+ Members Quality Core Network, Community of Practice 225+ attended most-recent four events Increase in school and unit consultations (SEAS, SOM, Treasury) OE Project Alliance established to better align major institutional projects, and coordinate resources

NEAR-TERM PRIORITIES 1. Design/build future state HR Model, procure enabling technology, begin implementation 2. Operationalize Center of Excellence for gift processing on March 1st (single processing center, standard

processes to serve UVA, foundations and community) 3. Implement expense management system, integrate with travel system, 82% reduction in

processing time and effort (expected)

19

Research | Teaching | Public Service | Healthcare

We are a public institution of higher learning guided by a founding vision of discovery, innovation, and

development of the full potential of talented students from all walks of life.

3 state agencies

21,985 Fall 2015 on Grounds enrollment

including 15,669 undergraduates

Fall 2015 On Grounds Enrollment by School

Architecture 300 undergrad/ 171 grad

Arts & Sciences 10,905 undergrad/ 1,241 grad

Batten 144 undergrad/ 104 grad

Cont. & Prof. Studies 221 undergrad / 39 grad

Curry 310 undergrad/ 697 grad

Darden 857

Engineering 2,662 undergrad/ 630 grad

Law 1,004

McIntire 693 undergrad/ 232 grad

Medicine 626 M.D./ 232 grad

Nursing 407 undergrad/ 360 grad

Data Science Institute 53

15,879 full time equivalent

employees (FTEs)

Academic Division: 8,527 FTEs

Medical Center: 7,010 FTEs

Wise: 342 FTEs

2015-16 Undergraduate Tuition & E&G Fees

First-Year Virginian: $12,347

Other Virginia Undergrads: $11,347

Out of State Students: $41,643

TOTAL RESEARCH

$285 million

includes $187 million federal & $26

million corporate partner research

surgical cases

30,648 842,489 60,646 23,087 1,476

UVa Health System 2015

inpatient visits

outpatient visits

emergency visits

live births

45,000

people on Grounds

on a typical day.

City of Charlottesville population: 40,000

foundations, most with fundraising

& alumni relations functions 25

20

faculty members hold prestigious

membership in national academies

Our federal research expenditures

are 8.2 times the combined state

& institutional research expenditures,

compared with a national average of 2.7 times

for all public universities.

UVa is #1 among our peer group in this

research performance metric. (NSF data)

3,388 547

acres of land holdings in Charlottesville

and elsewhere

Buildings or major facilities

612 hospital beds

1.5 million square feet of research,

lab, & studio space

3 Research parks support research/ academic mission:

Fontaine Research Park, UVA Research Park, &

Blue Ridge property (for future development)

Academic Division: $1.52 billion

Medical Center: $1.51 billion

UVa-Wise: $41.3 million

2015-16 OPERATING BUDGET

$3.07 billion

$55.5 million budgeted for

institutionally-funded grants in 2015-16

34% of students receive financial

aid; 100% of need met; $4,000 TOTAL loan cap for low-income

Virginians; $18,000 TOTAL loan

cap for other Virginians with need

AccessUVa

170 events, 35 basketball games

with 192,935 attendees,

24 ticketed events, 4 full-house

concerts; 352,711 total attendees

JPJ Arena 2014-15

Charlottesville Area Transit annual ridership:

approximately 2.5 million.

33 transit buses; 1 mini charter

coach; 3 full-size charter coaches;

approximate UTS annual ridership

3.1 million

16,715 parking spaces including

7,435 in 11 parking garages

11 schools

UVa is efficient. A 2013 comparison of our

SCHEV peer group (both public & private

institutions) ranks UVa 14th in administrative

spending ($3,121) per student & 16th in

academic spending ($22,406) per student.

(49.2%) (49.5%)

(1.3%)

As of February 2016 20

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY Commentary on the Long Term Pool Six Months Ended December 31, 2015

21

  University of Virginia Investment Management Company December 31, 2015 Investment Commentary

 

 

SUMMARY The following commentary provides an overview of the current market environment and the asset allocation, performance (unaudited), and liquidity position of the Long Term Pool as of and for periods ending December 31, 2015. We also summarize our risk management strategy for the Long Term Pool, which remains focused on market, manager, and liquidity risk. The Long Term Pool generated a return of 6.0% in 2015, outperforming by 640 basis points the 0.4% loss generated by our long-term policy portfolio of 60% global public equity, 10% global public real estate, and 30% global investment grade fixed income. The market exposure of the Pool trended slightly down during 2015, but remained consistent with that of the policy portfolio. Private investments were cash flow positive in 2015, as distributions of $683 million from private equity, real estate, resources, and credit well outpaced capital calls of $330 million, resulting in net cash inflows of $353 million for the year. The Long Term Pool’s assets under management grew from $7.0 billion to $7.4 billion during 2015. While the following commentary provides color on the market environment and Pool performance in 2015, we prefer to focus on long-term and not short-term results. For the twenty-year period ending December 31, 2015, the Long Term Pool returned 11.7% versus the policy portfolio return of 6.6%. MARKET ENVIRONMENT Reflections on 2015

Despite generally strong equity returns in the fourth quarter, 2015 was a lackluster year for most asset classes. Falling commodity prices, weak emerging market performance, and a strong dollar impacted returns across the board. Persistent deflationary pressures including China’s economic slowdown and the pricing in of an anticipated U.S. interest rate rise dominated markets, especially during the second half of 2015. After two years of below-average volatility, the year ended on a negative note with heightened volatility in global equities and renewed weakness in crude oil prices. Some developed markets registered positive returns in local-currency terms, but U.S. dollar strength was a detractor for a large majority of countries and regions. Overall, the MSCI All-Country World Index (MSCI ACWI) fell 1.8% during the year.

Following several years of solid gains, U.S. equities posted mixed performance in 2015, with a relatively narrow group of large-cap growth stocks driving overall returns. The large-cap growth index (Russell 1000 Growth) outperformed the small-cap value index (Russell 2000 Value) by over 13%. The benchmark S&P 500 Index returned a very modest 1.4% for the year, as the U.S. unemployment rate fell to a seven-year low of 5.0%. However, this low unemployment figure clouds structural imbalances in the labor market as the strong dollar hurt the increasingly sluggish domestic manufacturing industry. U.S. GDP growth fell to 2.0% in the third quarter, but well outpaced Europe, where growth in the region slowed to just 0.3%. European

22

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

stocks were buoyed in the fourth quarter by hopes that the European Central Bank (ECB) would announce substantial further monetary policy easing. However, the announcement in early December left the market disappointed as the timetable for purchases was extended to March 2017 from September 2016, while the €60 billion per month amount was left unchanged. Japanese stocks performed well in 2015 supported by strong profit growth. However, the Japanese economy shrank again in the third quarter, as Prime Minister Shinzo Abe continued his attempt to engineer a sustainable recovery.

Within emerging markets, China’s slowdown remained at the forefront of investor minds and late October saw another interest rate cut by the People’s Bank of China (PBoC), the sixth such cut in a year. Third quarter GDP growth came in at 6.9% year-on-year, falling below 7% for the first time since 2009. Economic data in Brazil also continued to deteriorate and the downgrade of Brazil to junk status by two ratings agencies prompted the Brazilian finance minister to resign. Current account deficits for emerging economies, especially commodity-dominated economies, continued to weigh heavily on their currencies, helping push the MSCI Emerging Markets Index down over 14% for the year.

Government bond market movements in 2015 reflected the diverging policy trajectories of the world’s major central banks. While the Fed hiked rates in December for the first time in almost a decade, China boosted stimulus and depreciated its currency, and Europe continued its monetary easing. The market’s expectations of the Fed rate hike pushed up yields across fixed-income categories in the latter half of the year. While the long end of the curve remained anchored around 3%, the Fed’s December rate hike jump-started the shorter end of the curve with the two-year Treasury note yield rising 40 basis points to 1.05% during 2015. Meanwhile, the 10-year Treasury yield rose just slightly during the year from 2.17% to 2.27%. The Barclays U.S. Aggregate Bond Index returned 0.6% for the year, while the Barclays U.S. High Yield Index fell by 4.5% as yields soared the last two months of the year as concerns over credit quality mounted. Investors shied away from the riskier sections of the bond market, a major player in the junk bond mutual fund market “gated” investors, and some market participants view reduced bond market liquidity as a sign of future economic turmoil. Meanwhile, in the Eurozone, the ECB delivered on its promise to extend policy accommodation, but the measures ultimately fell short of market hopes. Sovereign yields remain low in the Eurozone as the 10-year German Bund finished the year yielding 0.63%.

Commodity markets suffered again in 2015, with numerous commodities including copper, oil, and natural gas hitting multi-year lows. The overhang of oil supply continued and pushed the oil futures curve down, with WTI crude oil finishing the year at approximately $37 per barrel. OPEC’s decision to forego a production target exacerbated the decline. In a move considered unthinkable a few years ago, U.S. Congressional leaders agreed to lift the nation’s 40-year ban on oil exports in December, reflecting political and economic shifts driven by the boom in U.S. oil drilling. Commodity-linked investments were also wounded in 2015 as investors recalibrated their expectations for natural resource equities (down 24%), MLPs (down 37%), and gold (down 10%). The broad based S&P Goldman Sachs Commodity Index (S&P GSCI) fell 33% in 2015 to its lowest level in nearly 13 years.

Positioning for 2016 The same concerns over global growth that plagued the markets in 2015 spilled over dramatically into 2016. When U.S. investors sat down at their desks for the first trading day of the year, they were greeted by a worldwide sell-off, which continued into the first few weeks of January. China experienced two emergency market shutdowns within the first four trading days of 2016, oil fell to a 12-year low, and safe-haven buying pushed the 10-year Treasury yield below 2% for a brief period. As of this writing, many markets and

23

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

commodities are down over 10% in January and it seems quite likely that volatility will continue into the rest of 2016. Although investors are growing increasingly bearish, just 12% believe a global recession will occur in the next 12 months according to a recent survey by Bank of America/Merrill Lynch.

For years investors have complained about high valuations and the lack of “low hanging fruit,” but today that fruit is beginning to appear. However, today’s “cheap” investments are largely cyclical, leveraged, low quality, and often missing a catalyst for improvement. We continue to keep a close eye on commodity-related assets, where we believe opportunities will exist to put capital to work. On a similar note, emerging markets have been hit hard due to their relatively high commodity exposure, and valuations (11x forward P/E for the MSCI Emerging Markets Index), especially relative to U.S. equities (16x forward P/E for the S&P 500), look attractive. In addition, recent market moves have started to make opportunities in credit, especially high yield, more interesting.

Although the current environment seems more uncertain relative to the past few years, the Long Term Pool must continue to outperform the policy portfolio to support the future spending needs of the University. We maintain our approach of investing with only the most talented investment managers and we continue to use the same extensive diligence process for new investments. We are currently exploring opportunities to increase exposure with our highest-conviction managers who are newly excited about their opportunity sets. Meanwhile, we are making the difficult decisions to move on from managers where we lack the same level of conviction, even if that results in selling in a down market. We continue to respect the myriad risks of global investments and are assiduously avoiding being too aggressive in deploying new capital.

ASSET ALLOCATION UVIMCO’s policy portfolio continues to be an allocation of 60% global public equity, 10% global public real estate, and 30% global investment grade fixed income. This portfolio is designed to provide long-term growth from equities, an inflation hedge from real assets, and a deflation hedge from fixed income. The Long Term Pool’s actual allocation as of December 31, 2015 is 64.3% to equity managers, 10.4% to real asset managers, and 25.3% to fixed income (including marketable alternatives, credit, and cash). Looking through to our managers’ underlying investments, the Long Term Pool has a 51.1% allocation to equities, 13.1% allocation to real assets, and 35.8% allocation to credit, fixed income, and cash as of December 31, 2015. The market risk of the Long Term Pool continues to be consistent with the risk of the policy portfolio benchmark. PERFORMANCE The Long Term Pool generated a return of 6.0% in 2015, 640 basis points more than the policy benchmark return of -0.4%. There was significant return dispersion amongst our portfolios, as private equity and real estate recorded gains of over 20% during the year, while our resource portfolio fell over 20%. Public equity and long/short equity earned respectable returns of 1.1% and 6.3% respectively, while the marketable alternatives & credit portfolio fell by 2.2%. The 15.4% of the Long Term Pool held in cash and bonds earned a very low return, but helped us maintain the appropriate level of risk in the Pool and provided the liquidity needed for shareholder distributions, capital calls, and new investments.

24

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

EQUITIES Public Equity The public equity portfolio gained 1.1% during the year ended December 31, 2015, compared to a decline of 1.8% for the MSCI ACWI. As noted earlier in this commentary, macro issues driving market uncertainty including slowing growth in China, declining commodity prices, and the global implications of an increase in U.S. interest rates played prominent roles in the global equity market decline of 2015. Emerging markets were especially hard hit, and the MSCI Emerging Markets Index fell 14.6% for the calendar year. UVIMCO’s outsized exposure to emerging markets was a headwind for the year, but was offset by our public equity managers’ overweight to quality consumer companies. Our portfolio’s performance for the period also benefited from outstanding stock selection by some of our largest public equity relationships. From a longer-term perspective, UVIMCO’s public equity portfolio continues to generate attractive results. On a five- and ten- year basis, our portfolio has compounded at rates of 12.4% and 10.3%, respectively, compared to the MSCI ACWI’s five- and ten-year annualized gains of 6.7% and 5.3%, respectively. While equity investments have long been the first choice of investors seeking exemplary long-term returns, those days may be over. For the past two decades, global equities have earned only about 6.0% per year, and we expect somewhat lower market returns may be the norm for global equities going forward. We will continue to focus on finding exceptional fundamental managers who we believe can generate outsized net returns beyond those of passive equity market participants. As of December 31, 2015, the public equity portfolio accounted for 23.5% of the Long Term Pool, up slightly from 22.7% at the end of calendar 2014. One new manager relationship was added during the year, and we increased or reduced the size of several existing relationships based on valuations and the current opportunity set. As we move into 2016, we will continue to look for opportunities to either exit from, or meaningfully increase, some of our smaller relationships within the public equity portfolio, using market volatility to our advantage. Long/Short Equity The long/short equity portfolio gained 6.3% in the twelve months ending December 31, 2015, compared to the 1.8% decline in the MSCI ACWI and a gain of 3.6% for the Dow Jones Credit Suisse Long/Short Equity Index (DJCS Long/Short Index). Broadly speaking, many hedge funds delivered good results in the first half of 2015, but gave back those gains during the second half of the calendar year. However, UVIMCO’s long/short managers bucked the industry trends, and performed quite well in 2015 as the wider dispersion in global markets provided fertile hunting grounds on both the long and short side. We ask our long/short managers to provide protection to the Long Term Pool in times of market turmoil, and they accomplished that objective quite well in 2015. Over longer time periods, the long/short portfolio has also performed well. On a five- and ten-year basis, our portfolio has generated annualized gains of 9.8% and 8.5%, respectively, outpacing the annualized gain of 5.2% and 5.8% for the DJCS Long/Short Index over both periods. Five- and ten-year returns for the MSCI ACWI were 6.7% and 5.3%, respectively. The long-term outperformance of our long/short equity managers versus the fully invested global index has been generated through good security selection and alpha as our long/short equity managers typically have an average net exposure to the market of roughly 50%. UVIMCO’s commitment to cultivating relationships with long/short equity managers for more than a

25

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

decade in combination with strong manager selection has been an important component of the strong long-term returns of this segment of the portfolio. Long/short equity managers currently represent 22.5% of the Long Term Pool and we anticipate that long/short equity investment strategies will continue to play an important role in the endowment in the future. In addition to security selection and alpha generation, we expect our long/short equity managers to serve as a source of downside protection during marketing dislocations due to their lower equity market exposure and the ability of these managers to generate returns from shorting securities. Long/short equity managers’ exposures are driven from bottoms-up, in-depth fundamental research on both the long and the short side. During 2015, the equity market exposure of our long/short portfolio fell from 50% at the beginning of the year to just below 40% at year end, suggesting a more conservative posture going into 2016. As global equity markets have sold off in early 2016, we expect our managers to capitalize on the increased opportunity sets in both long and short ideas. Private Equity The private equity portfolio generated a return of 23.6% for the twelve-months ending December 31, 2015, compared to the -1.8% return for the MSCI ACWI. Our overall private equity return is a composite of our buyout portfolio, which gained 9.9%, our growth equity portfolio, which returned 30.2%, and our venture capital portfolio, which had another banner year in 2015 with a 41.3% gain. Longer-term results for the private equity portfolio remain strong. Over the past ten years, the portfolio has appreciated 14.2% on an annual basis versus 5.3% for the MSCI ACWI. One of the major trends that developed during the year was the number of companies that chose not to test the public markets with an Initial Public Offering (“IPO”), but raised large rounds of late-stage private financing instead. Venture capital-backed companies raised close to $31 billion in these so-called “private IPOs” in 2015 compared to $8 billion raised in venture-backed IPOs. Private financings allow companies to continue growing while not having to worry about the complexities of public company reporting requirements. The negative for investors, however, is that the companies remain illiquid for longer periods of time. Given the abundance of capital available in the private markets, it is not surprising that 2015 was not a strong year for IPOs. Many companies that went public struggled coming out of the gate and failed to live up to investor expectations. Technology IPOs were hit particularly hard, with high-profile startup companies like Box and Square priced below their highest private valuations and trading 50% below their offering price by the end of the year. Another highly-anticipated IPO was that of First Data, a payment processing firm that went public in October and raised $2.8 billion. The shares priced at $16, which was below expectations and declined in the first day of trading. The share price had recovered to roughly the offering price by the end of 2015, but it was quite a volatile ride. Fitbit, which makes wearable fitness tracking devices, performed considerably better. It went public in June and raised $732 million, pricing at $20 per share, which was above expectations. Demand was heavy and the share price gained close to 50% before falling back to $29.50 at year-end. Overall, the lackluster performance of IPOs in 2015 led a number of companies to push their IPO plans into 2016. Throughout 2015, the word “bubble” permeated just about any discussion on venture capital. Unicorns (companies valued over $1 billion) seemed to sprout with a degree of regularity and became, if not common place, then at least not unusual. While there are generally two distinct camps in the bubble conversation, the sentiment shifted late in the year to a belief that the venture capital industry is definitely exhibiting bubble

26

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

characteristics. Unless there is a downturn or pullback in the overall equity markets, this will continue to be a topic of discussion in 2016. Domestic venture-backed M&A activity was also muted in 2015. According to Thomson Reuters, 353 venture-backed U.S. companies were acquired during the year, and some large deals in December helped push the total venture-backed M&A activity to $20.8 billion. The activity for the year, however, was well below 2014 when sales of WhatsApp, Nest Labs, and Oculus VR helped drive the venture-backed M&A activity to almost $53 billion. On a global basis, it was a very different story for M&A as 2015 was the busiest year ever, according to data from Thomson Reuters. Global M&A deals totaled $4.7 trillion with 41% of the deals having a valuation of $10 billion or more. Over 40,000 global M&A deals occurred in 2015, a 41% increase over 2014. Targets in the U.S. accounted for $2.3 trillion, up 64% from 2014, while Asia totaled $1.1 trillion. The largest deals of the year included the $55 billion merger of H.J. Heinz Company and Kraft Foods, Pfizer’s $160 billion purchase of Allergan, and the takeover of SABMiller by Anheuser Busch InBev. Cambridge Associates reported that U.S. private equity managers distributed an all-time high of $147 billion to investors in 2015. Distributions to UVIMCO were strong, with $426 million received during the year. Capital calls from our managers totaled $166 million, resulting in a net cash flow to the Long Term Pool of $260 million. During the year we committed $228 million to new and existing managers across the buyout, growth equity, and venture capital portfolios, and invested $11 million in three co-investments. The private equity allocation was 18.3% of the Long Term Pool as of the end of 2015 compared to 19.1% at December 31, 2014. REAL ASSETS Real Estate The real estate portfolio returned 24.4% in 2015 versus the 2.5% return generated by the real estate component of our policy portfolio benchmark, an equally weighted index of publicly traded U.S. and international real estate securities. UVIMCO’s portfolio has low international exposure and is predominantly invested in real estate private equity funds, which can result in a large degree of tracking error versus its benchmark. While the longer-term performance of the real estate portfolio has been poor on both an absolute and relative basis, more recent performance has been solid. Over the last five years our real estate portfolio has returned 13.1%, outperforming the benchmark by 370 basis points. Meanwhile, we have been busy implementing the revised real estate investment strategy referenced in previous commentaries. In 2015, we initiated an investment with an activist public REIT manager, passed on the subsequent funds of many of our existing managers, and opportunistically committed to a new private real estate manager that we believe has the ability to generate returns competitive with our other illiquid investments. Throughout 2015, U.S. REITs were impacted by continuing fears of an interest rate hike as well as concerns over slowing growth in some sectors such as hotels. However, U.S. REITs held their ground after the Fed increased short-term rates in December, although REITs sold off along with global equities in January. Global real estate securities as measured by the FTSE EPRA/NAREIT Developed Index returned 6.2% in

27

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

2015. This outperformance versus U.S. REITs is largely attributable to tightening fiscal policy in the U.S. versus easing fiscal policies in most of the rest of the developed world. Bloomberg data shows that U.S. REIT cap rate spreads relative to 10-year Treasuries remain in line with historical norms at approximately 300 basis points. However, cap rate spreads relative to the J.P. Morgan B index narrowed late in 2015 as the high yield market traded off, suggesting investor preference for real estate credit over corporate credit. Per data from Green Street Advisors, domestic REITs ended the year trading at an approximately 6% discount to their NAV, significantly cheaper than their long term average premium of 2.9%. Green Street Advisors’ Commercial Property Index increased 9.6% in 2015, marking the sixth consecutive year of increased property values and now stands at an all-time high. U.S. property values continue to be supported by strong foreign and U.S. institutional investor demand. In 2015, cash distributions from our real estate portfolio totaled $183 million. These higher inflows reflect a strong exit environment for our managers, supported by robust demand for domestic real estate and accommodating financing sources. Capital calls were $49 million, resulting in net cash inflows of $134 million for the year. We committed $82 million to two new managers and one existing manager (including co-investments) during 2015. As of December 31, 2015, real estate represented 6.6% of the Long Term Pool. Resources UVIMCO’s resources portfolio lost 25.2% of its value in 2015 versus an increase of 2.5% for the formal real assets benchmark, the blended MSCI Real Estate Index. While the resources portfolio performed poorly in 2015, its 12.1% return over the last ten years has outperformed the benchmark by 650 basis points. The S&P GSCI, a broad-based index of commodities, declined 33% in 2015, while the S&P North American Natural Resources Equity Index declined 24% over the same time period. Comparatively, the S&P Oil and Gas Exploration and Production ETF, which is comprised solely of exploration and production companies as opposed to the broader based energy companies in the S&P North American Natural Resources Equity Index, lost 37% in 2015. The price of Brent and WTI crude oil declined 35% and 30% respectively in 2015. These price declines were driven by a persistence in the oversupplied condition of the global oil market. While U.S. rig counts have decreased meaningfully in response to lower prices, production volumes have been slower to come down as producers continue to drive costs lower, realize drilling efficiencies, and target their best acreage. Saudi Arabia’s predatory pricing behavior coupled with its dominant market position placed further pressure on oil prices in 2015. Oil price declines were exacerbated by increasing concerns over emerging market growth driven in large part by the slowing Chinese economy. Lastly, a strong U.S. dollar has also dulled the potential benefit of lower oil prices on many foreign economies. The WTI to Brent price discount has largely gone away as the U.S. government continued to allow U.S. producers to utilize exceptions to the oil export ban. Many expect a full repeal of the ban after the 2016 U.S. presidential election. Natural gas has been under pressure from production increases driven by the prolific Marcellus shale, and the price of Henry Hub natural gas declined 22% in 2015. Like domestic oil producers, U.S. natural gas producers have decreased the number of active rigs by over 50% since 2014 in response to lower prices. However, according to the EIA, total U.S. natural gas production was 79.1 bcf/day for the full-year 2015, just shy of the record 80 bcf/day set in September 2015, and well above 2014 levels. By the end of the year, natural gas storage levels stood at an all-time high, providing little relief for prices.

28

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

In response to the precipitous oil and gas price declines, our resource managers are focused on driving down costs or negotiating lease extensions despite the challenged returns on drilling new wells. While the E&P acquisitions market was dormant for most of 2015, our managers have recently been acquiring assets or investing in companies at attractive prices, particularly in in the lower end of the middle market. Some of our larger managers are actively working with public companies to provide growth or rescue capital as the public markets are becoming less receptive to dilutive secondary offerings. While our managers are highly skilled at driving value in oil and gas investments, the duration of current low prices will be a significant driver of returns in the short term. In 2015, cash distributions for resources totaled $32 million. Capital calls were $84 million, resulting in net cash outflows of $52 million for the year. We committed $74 million to one new manager and three existing managers (including co-investments) during the year. As of December 31, 2015, resources represented 3.8% of the Long Term Pool. FIXED INCOME AND MARKETABLE ALTERNATIVES Marketable Alternatives and Credit The marketable alternatives and credit portfolio lost 2.2% in the twelve months ended December 31, 2015, outperforming the Barclays High Yield Index and the HFRI Event Driven Index, which fell 4.5% and 3.3%, respectively. The environment for credit investors was difficult throughout much of 2015, as high yield bond spreads widened from 488 bps to 690 bps. Some, but not all, of the spread widening was attributable to the commodity-sensitive energy, metals, and mining sectors. Particularly in the fourth quarter, a broader array of industries began to see spread widening. The average high yield bond yielded 8.74% at year-end, the highest since 2011. Recent market moves are beginning to create interesting investment opportunities in the credit space. Still, the number of stressed and distressed credit issuers in the U.S. remains limited due to generally healthy corporate balance sheets and benign U.S. economic conditions. Many of UVIMCO’s marketable alternatives and credit managers are deep value investors with a focus on distressed credit or special situations. These managers are deploying capital gradually, as a more attractive environment for distressed credit strategies may still be yet to come. Despite the negative return in 2015, the intermediate term performance of our marketable alternatives and credit portfolio has been solid. The portfolio outperformed the Barclays High Yield Index by 450 basis points over the past three years (6.2% vs. 1.7%) and by 130 basis points over the past five years (6.3% vs. 5.0%). Though the ten-year and twenty-year annualized returns of the portfolio were below that of the High Yield Index, the composition of the portfolio has changed significantly over the last several years. During the year, our marketable alternatives and credit managers that employ drawdown fund structures called $32 million of capital and distributed $43 million, resulting in a net cash inflow of $11 million. As of December 31, 2015, UVIMCO’s marketable alternatives and credit investments represented 9.9% of the Long Term Pool.

29

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

Bonds and Cash As of December 31, 2015, the government bond and cash portfolios comprised 15.4% of the Long Term Pool, inclusive of $150 million of accrued short-term investments. Throughout the year, healthy distributions from our private equity portfolio and opportunistic rebalancing of our public equity portfolio kept cash and bond holdings at the higher end or above our preferred 8% to 12% range. We are comfortable with this level of liquidity as it helps us maintain a level of market risk that is consistent with our policy portfolio and provides us with sufficient dry powder for new investments. Our government bond portfolio continues to be positioned in U.S. Treasury securities with a duration of just under two years. This portfolio returned 0.4% in 2015, underperforming the longer duration Barclays U.S. Treasury Index return of 0.8%. Our shorter duration positioning was beneficial at several points during the year, as we saw increased volatility in government bond markets leading up to the historic Fed funds rate increase in December. We continue to believe that investors are not currently compensated appropriately for taking duration risk. The 10-year U.S. Treasury yielded 2.27% at year end, anchored by low government bond yields across the globe. The cash portfolio is invested in U.S. Treasury bills and notes with an average duration of 0.2 years. This portfolio returned 0.0% for the year reflective of current short-term interest rates, which remain near zero. RISK MANAGEMENT Investors may be willing to bear risk if they are adequately compensated with higher future returns. At UVIMCO, we are willing to bear certain risks, but others must be eliminated if we are unable to absorb the downside losses or if we do not earn a sufficient risk premium from assuming those risks. We consider three broad portfolio risks when managing the Long Term Pool – market risk, manager risk, and liquidity risk – and evaluate these factors relative to the risk tolerance of the Long Term Pool shareholders. Market Risk The largest risk factor present in the Long Term Pool is equity market risk. On a long-term basis, we manage this position by re-allocating capital across a broad set of diversified managers. On a short-term basis, we monitor our equity exposure and rebalance using portfolio overlays through the option and futures markets. A common definition of market risk is the standard deviation or volatility or a portfolio’s return. Volatility provides a useful proxy for market risk if returns are normally distributed. However, it is clear that both the broad market as well as individual investment strategies are not normally distributed, but rather are subject to a much higher probability of negative “tail” events. Since investment returns are subject to “tail risk”, it is useful to complement the standard deviation statistic with an estimate of drawdown risk. We manage market risk in the Long Term Pool by diversifying across three broad asset classes: equity, fixed income, and real assets. Our objective is to maintain estimated market risk in the Long Term Pool that is consistent with the estimated market risk of the policy portfolio. Our current estimate of the volatility of the Long Term Pool returns is 10.3% versus 11.2% for the policy portfolio. In addition, the one-percentile tail annual drawdown on the Long Term Pool is estimated to be -24.5%, less than the drawdown estimate of -26.0% on the policy portfolio.

30

UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY 

Commentary    December 2015 

Manager Risk The Long Term Pool invests with more than one hundred external managers. We seek to maintain a portfolio of managers that generate sufficient returns to compensate us for being both market risk and the additional risk inherent in working with individual managers. Manager risk includes tracking error or active bets away from the benchmark, operational or business risks, lack of transparency, and leverage. UVIMCO mitigates manager risk by diversification and employing extensive and ongoing due diligence to assess both the investment and operational aspects of our external fund managers. Our Investment Policy Statement ensures a minimum level of diversification by limiting our exposure to any single manager to 7.5% of the Long Term Pool. As of December 31, 2015, our largest manager exposure was 3.8% of the Long Term Pool. Liquidity Risk At UVIMCO, we define liquidity risk as an inability to meet any of the following four primary liquidity requirements: (i) withdrawals by the University and foundation investors, (ii) the excess of capital calls over expected capital distributions from private funds, (iii) the need to rebalance exposures following a market decline, and (iv) the ability to deploy cash as new investment opportunities arise. We manage this risk by maintaining a portfolio of Treasury bills and bonds, maintaining sufficient liquidity with our public equity and hedge fund managers, and managing the pace of commitments to private investments. Given our four primary liquidity requirements, we believe that an appropriate target for liquidity is to have 10% of the Long Term Pool invested in assets that are safe and highly liquid, at least 20% of the Pool available for conversion to cash within one quarter, and at least 30% of the Pool available for conversion to cash in any 12-month period. As of December 31, 2015, we had 15% of the Long Term Pool invested in Treasuries, 31% of the Long Term Pool that could be turned into cash within one quarter, and 46% of the Pool that could be turned into cash within one year. We also limit our unfunded commitments to private investments to be no more than 25% of the Long Term Pool, with the goal of maintaining unfunded commitment levels that average 15% of the Pool. As of December 31, 2015, unfunded commitments were 13% of the Long Term Pool.

31

Investment Activity

Beginning Net Asset Value (NAV)Beginning SharesNAV Per Share at Beginning of Period

+ Contributions– Redemptions+ Investment Return– Fees

Ending Net Asset Value (NAV)Ending Shares NAV Per Share at End of Period

Shareholder Summary

University of Virginia EndowmentAffiliated OrganizationsUniversity Operating FundsTotal

Performance

$ Millions % MO FYTD 1 YR 3 YR 5 YR 10 YR 20 YR

Long Term Pool 7,448 100.0 (0.4) (0.7) 6.0 11.0 10.9 9.1 11.7

Policy Benchmark (3) 100.0 (1.0) (1.8) (0.4) 6.5 6.2 5.5 6.6Equity

Public 1,750 23.5 (1.8) (5.4) 1.1 11.9 12.4 10.3 11.5Long / Short 1,676 22.5 0.3 2.2 6.3 10.5 9.8 8.5 11.1Private 1,362 18.3 0.0 1.3 23.6 22.9 20.4 14.2 20.6

Total Equity 4,788 64.3 (0.6) (0.8) 9.0 14.4 13.7 11.0 14.1MSCI All Country World Equity 60.0 (1.8) (4.7) (1.8) 8.3 6.7 5.3 6.4

Real Assets Real Estate 490 6.6 0.6 4.7 24.4 16.3 13.1 (2.5) 4.0Resources 285 3.8 (0.8) (8.0) (25.2) (2.4) 5.4 12.1 --

Total Real Assets 775 10.4 0.1 0.1 2.7 8.8 10.9 6.5 11.0

MSCI Real Estate (4) 10.0 1.3 6.1 2.5 7.6 9.4 5.6 8.3Fixed Income, Cash & MAC

Marketable Alternatives & Credit 741 9.9 (0.4) (1.9) (2.2) 6.2 6.3 6.2 6.8Government Bonds 877 11.8 (0.1) (0.2) 0.4 0.3 0.3 3.8 5.9Cash & Currency 267 3.6 0.0 (0.0) 0.0 0.0 0.0 -- --

Total Fixed Income, Cash & MAC 1,885 25.3 (0.2) (0.9) (0.7) 3.1 3.2 5.0 6.3

Barclays Aggregate Bond (5) 30.0 (0.3) 1.0 0.8 2.1 3.6 4.4 5.4

$4,164,286,182

856,445

55.9%22.1%

856,445

$29,350,792$6,094,098($42,483,490)($54,424,754)

($8,245,928)

($1,247,088)

$8,696.64

($30,935,445)

% of NAV

($12,600,406)

$7,448,191,686 $7,448,191,686

$8,696.64

Long Term Pool

Investment ReportDecember 31, 2015

Month$7,482,526,049

$8,760.15856,836

FYTD 2016(1)

$7,528,349,543859,386

$8,732.74

Market Value(2)

22.0%$1,646,121,020$1,637,784,485$7,448,191,686

Time-Weighted Returns Annualized

100.0%

INVESTMENT MANAGEMENT COMPANY

Post Office Box 400215 • Charlottesville, Virginia 22904-4215434-924-4245 • Fax: 434-924-4092

http://www.virginia.edu/uvimco

32

Short-Term Liquidity(6)

Weekly Monthly Quarterly Semi-Annually Annually

Public Equity 4% 6% 8% 12% 15%Long / Short Equity - 0% 7% 9% 11%Marketable Alternatives & Credit - - 0% 2% 3%Real Estate - - 1% 1% 1%Government Bonds 12% 12% 12% 12% 12%Cash 4% 4% 4% 4% 4%

Total 19% 21% 31% 39% 46%

Available Liquidity ($ in Millions) 1,419 1,571 2,322 2,900 3,401

Market and Currency Exposure Estimates(7)

(% of NAV) Policy Ranges

Actual Exposure

North America Europe Asia LAMA(8)

Equity 40 - 70 51.1 27.6 6.4 14.2 2.8Real Assets 5 - 20 13.1 11.0 1.8 0.1 0.2Credit 0 - 20 3.5 2.9 0.3 0.0 0.3Government Bonds 5 - 20 11.8 11.8 - - -

Total Market Exposure 70 - 100 79.5 53.3 8.5 14.3 3.4

Policy Ranges -- -- 25 - 75 0 - 40 0 - 40 0 - 20

Cash & Currency 0 - 30 20.5 23.0 (1.7) (0.5) (0.3)Currency Exposure -- 100.0 76.2 6.8 13.9 3.1

Policy Ranges -- -- 50 - 100 0 - 30 0 - 30 0 - 20

Private Investments Market Values and Uncalled Commitments(9)

($ in Millions)% of NAV Amount % of NAV

Public Equity 0% 26 0%Long / Short Equity 0% 60 1%Private Equity 18% 454 6%Real Estate 6% 169 2%Resources 4% 180 2%Marketable Alternatives & Credit 3% 80 1%

Total 32% 970 13%

Uncalled Commitments

Actual Liquidity (Cumulative Total % of NAV)

Investment ReportDecember 31, 2015

Market Value of Private Investments

285 254

2,403

Amount

35 21

1,362 445

0%

10%

20%

30%

40%

50%

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

% o

f NA

V

Historical MV of Private Investments

Target: 30%

0%

5%

10%

15%

20%

25%

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Historical Uncalled Commitments

Maximum: 25%

Target: 15%

33

Investment Activity

Beginning Net Asset Value (NAV)Beginning SharesNAV Per Share at Beginning of Period

+ Net Contributions / (Redemptions)+ Investment Returns– Expenses

Ending Net Asset Value (NAV)Ending Shares NAV Per Share at End of Period

Plan Account Summary

Long Term Pool CashAffiliated OrganizationsUniversity Operating FundsTotal Short Term Pool

Performance

MO FYTD CYTD 1 YR Annualized Cumulative

Short Term Pool 0.00 0.01 0.05 0.05 0.06 0.20 0.25

3-Month Treasury Bills 0.03 0.04 0.05 0.05 0.06 0.20 0.16

Time-Weighted Returns

$23,326,348$80,076,399

$179,277,811

Yield to Maturity

44.7%13.0%

100.0%

Since Inception (Oct 2012)

$1,001.79

% of NAV42.3%

$1,001.79

Short Term Pool$75,875,063

$17,684($13,020)

$179,277,811178,958

$179,277,811178,958

$55,520($77,756)

Short Term Pool

December 31, 2015

FYTD 2016(1)

$264,017,186Month

$300,904,522263,544

$1,001.79($84,717,139)

300,382$1,001.74

($121,631,376)

44.0%

56.0%

0% 20% 40% 60% 80% 100%

OvernightFunds

U.S. Treasuries

Portfolio Composition

44.1%

0.0% 0.0% 0.0% 0.0%

16.8%

5.6%

33.5%

0%

10%

20%

30%

40%

50%

60%

70%

0-4Days

5-14Days

15-29Days

30-59Days

60-89Days

90-179Days

180-364Days

TreasuryFRN

Maturity Distribution

Records compiled specifically and exclusively for consideration in closed session. Further distribution prohibited.

34

Investment ReportDecember 31, 2015

Endnotes

(1) UVIMCO's fiscal year runs from July 1 through June 30.(2) All investments are recorded at estimated fair market value in accordance with UVIMCO's valuation policy. (3) The Policy Benchmark is the geometrically linked monthly average of the underlying asset classes' benchmarks, weighted by

the Fiscal Year 2016 policy target allocations: 60% Equity, 10% Real Assets, 30% Fixed Income.(4) The Real Estate component of our Fiscal Year 2016 policy portfolio is comprised of 50% MSCI U.S. Real Estate Index and

50% MSCI All Country World Real Estate Index. Prior to January 1995, the benchmark is comprised of 100% FTSE National Association of Real Estate Investment Trusts Equity Index.

(5) The Fixed Income component of our Fiscal Year 2016 policy portfolio is comprised of 50% Barclays Capital U.S. AggregateBond Index and 50% Barclays Capital Global Aggregate Bond Index (Hedged in U.S. Dollars). Prior to January 1990, the benchmark is comprised of 100% Barclays Capital U.S. Aggregate Bond Index.

(6) Represents securities and funds that may be readily sold for cash within the designated time periods.(7) Market and currency exposures are estimated by looking through managers and funds to the underlying security positions.

Policy ranges express the expected variation in asset class, regional, and currency exposures during normal market circumstances. Totals may not add due to rounding.

(8) Latin America, Middle East, and Africa.(9) Represents the market values and uncalled commitments of investments where capital calls and distributions are at the sole

discretion of the managers.

35