2002 - 2003: Yale University Finance Annual Financial Report

President Levin has made a significant commitment to enhancing the University’s standing as one of the world’s premier research institutions in the fields of science and technology. As described in this annual report, Yale is making major investments in programs and facilities in science, medicine, and engineering to support the University’s current distinction in the sciences. A byproduct of this work is a growing biotechnology industry located near the University, a result of Yale’s success in technology transfer efforts and one of the important ingredients in the renaissance of New Haven. In fiscal year 2003, the University’s operating and investment results demonstrated continued resiliency in the less than robust economic environment confronting higher education. Yale balanced its budget by keeping spending within the limits of available resources. While contributions and interest income declined, there were increases in operating revenues from sponsored agreements, medical services, and the endowment which returned 8.8%, provided $470 million to operating activity, and grew to $11 billion for the first time in Yale’s history. Capital spending for fiscal year 2003 was $207.6 million, principally for research and student facilities. A major new research complex, the Anlyan Center for Medical Research and Education at the School of Medicine, was finished this year. Completion of the financing for this facility included a significant gift from Dr. A. John Anlyan ’42 b.s., ’45 m.d. and Betty Jane Anlyan. This 457,000 square foot building will allow Yale to maintain its position as one of the top recipients of life sciences research grants in the nation. The renovation of Yale’s residential colleges also continued with the completion this year of the $63.4 million Timothy Dwight College project. To help fund this continuing investment in physical infrastructure, the University’s debt load, which increased by $350 million during the year, is expected to grow. Management views the tax-exempt bond market as a prudent vehicle to finance these investments, but remains cognizant of the impact that the increase in debt has on operations and overall financial position. The University’s debt to net assets ratio remains strong and will continue to be closely monitored. With respect to administration, a major effort was initiated to improve management efficiency, streamline business practices, and reduce expenditures not directed to teaching and research. In September of 2003, the University and its two unions settled contract negotiations, with the Union membership receiving competitive wage and pension increases and the University an unprecedented eightyear agreement, an extended contract period which will be used to improve labor-management relations. In October 2003, the University issued Standards of Business Conduct, a statement that articulates the ethical and legal principles that have long governed business dealings by faculty and staff. It reflects the values to which Yale subscribes, and identifies the documents that set forth the University policies that address these matters. All faculty and staff have been encouraged to review this new statement, consider it carefully, and continue to act in accordance with its underlying principles and policies. Yale continues to strive to preserve and enhance its human, financial, and physical capital to ensure that the University has the resources available to fulfill its mission of acquiring and transmitting knowledge, and of preparing our students for service and leadership roles in society. Yale seeks to create a productive environment for its employees and provide financial incentives to attract and retain the finest research, teaching, and administrative staff. The University’s financial capital has in recent years been enhanced by the superior results of the management of the endowment, and the maintenance and improvement of our physical environment, the magnificent campus which supports research and learning, continues to be a priority of this administration. We are most grateful for the dedication of faculty, students, staff, trustees, alumni, and friends who work together to make Yale a preeminent institution and to ensure the University’s continuing excellence for future generations.

Bruce Donald Alexander ’65 Acting Vice President for Finance and Administration