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Financial Review 2009–2010

Harvey Mudd College (the “College”) has experienced a positive fiscal year primarily due to a gain in its pooled investment funds and higher than budgeted enrollment. Following are highlights of the year just ended.

Financial Position Harvey Mudd College ended the fiscal year with assets in excess of $326 million. This total is composed primarily of investments of $235 million and land, buildings and equipment of $60 million. Liabilities of $19 million consist primarily of long-term bonds payable and payables to annuitants and trust beneficiaries. During the 2009–10 fiscal year, total net assets increased by $13 million. This increase in net assets was caused by an increase in the value of the investment pool resulting from both realized and unrealized gains in the value of investments and improved returns on pooled investments. As of June 30, 2010, net assets totaled $307 million, composed of three net asset categories: unrestricted (those over which the College has full discretion) of $101 million; temporarily restricted (those given to the College for a specific purpose) of $106 million; and permanently restricted (those given to the College to be held in perpetuity) of $100 million.

Financial Operations Total revenues were $51 million for fiscal year 2009–10 compared to $82 million for fiscal year 2008–09. This decrease is due in large part to a significant contribution received in the prior year, a $25 million gift/pledge from a major donor. Total expenses for fiscal year 2009–10 were approximately $48 million. For the year ending June 30, 2010, the College experienced an

operating surplus of approximately $187,000, after a number of transfers to high priority areas as approved by the Trustee Budget and Financial Planning Committee: $800,000 of additional support for the renewal and replacement fund, $65,000 to support the activities of the Advancement Department to prepare for a capital campaign, $250,000 of additional support for the faculty housing program, $365,000 of additional support for design development costs not covered by contributions, and $215,000 of additional support for academic department needs and start-up funds for new faculty. The key factors influencing the positive balance were higher than budgeted enrollment, salary savings from unfilled positions, and departments diligently conserving operating budgets wherever possible.

Students and family members work together during Family Weekend.

Endowment Investments In an atmosphere in which equity markets registered severe declines and most endowments suffered significant negative returns, the College’s endowment produced a total return of 11.8 percent for the fiscal year ending June 30, 2010. This total return compares with the Standard & Poor 500 index return of 14.2 percent and the Barclays Aggregate Bond index return of 9.2 percent. Market value of the endowment was $208 million at year end, representing an equivalent of $277,000 per student. Endowment payout provided 24 percent of the College’s

operating revenues during the fiscal year. The College employs a formula that governs the annual payout of endowment earnings to support operations. Endowment payout will decline in the next several years and will impact the endowment’s ability to provide funding for operations. The formula is designed to balance the need for endowment resources to support current activities with the equally important goal of preserving the value of endowment funds for future generations of students and faculty. As we enter the next fiscal year, the endowment has partially

rebounded as general market conditions have improved. There may still be significant financial and economic challenges to come, and the College continues to monitor any developments. The endowment is positioned well both to manage further economic uncertainty and to participate in market improvements.

Summary Harvey Mudd College has been able to weather the economic storm through conservative and fiscally responsible budgets. The College’s administration and trustees have and will continue to prepare for various potential scenarios that may occur as a result of economic uncertainty. With the leadership of President Maria Klawe and the continued focus of the Board of Trustees on the HMC 2020 Strategic Vision, Harvey Mudd College is well positioned and will be able to continue its mission of recruiting and educating the best and brightest college students in the fields of engineering, science and mathematics.

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H a r v e y Mu d d C o l l e g e F A L L /WI N T E R 2 0 1 0

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