Harvard University: Facts and Figures Research and Teaching Finances 12 primary academic units Approximately 21,000 degree candidates Approximately 2,400 instructional faculty More than 70 libraries and ~19 million volumes FY16 Operating revenue: $4.8 billion FY16 Operating expenses: $4.7 billion FY16 Endowment market value: $35.7 billion FY16 Capital expenditures: $567 million Employment Physical Plant One of the top five largest employers in Massachusetts with approximately 17,700 employees Current replacement value: ~$13 billion More than 650 buildings Approximately 25 million gross square feet Over 5,000 acres Capital expenditures includes capital projects and acquisitions, a 19% increase from 2012, driven by progress on HUAM, HBS’s Tata Hall, House Renewal (Stone Hall, Leverett-McKinlock), and the Science Center Plaza. Harvard in Context Not-for-profit Decentralized organizational structure Intense public and community scrutiny Long-term time horizon Increasingly global AAA/Aaa credit ratings

Harvard is in a strong financial position but is not immune to financial pressures Strengths Challenges Distinctive faculty, students, alumni (enabler of brand strength) Harvard Campaign Integrated, transparent financial management Strong balance sheet, anchored by the endowment, which provides a substantial cushion for the university Capital market and federal government dependencies during a time of increased uncertainty / volatility Large-scale capital expenditures Fixed cost structure

Harvard University is a large enterprise with diversified revenue sources FY16 Revenue: $4.8B Other 17% Distribution 36% Current Use Gifts 9% Other Income includes publications, rental and parking fees, royalties, sales and services income. 21% Income 12% 5% Revenue Revenue

Endowment distributions may be pressured if economists are correct about future market returns We are living in a low-return world, with future market returns likely to be lower than in recent history. Blackrock Investment Institute, 2016 The outlook for global stocks and bonds remains the most guarded since 2006. Vanguard, December 2015 …longer-term economic growth is looking very disappointing….the growth rate of potential G.D.P. … has declined from around 3.5 percent per year in the late 1990s to around 1.5 percent now. Paul Krugman, The New York Times, August 2016 …this is a long-term problem…. The bad news is that, precisely because this is a long-term problem, investors … will be tempted to leave it to their successors. That will only make the eventual funding crisis even bigger. The Economist, November 2015 The growth of future endowment distributions will be adversely affected by slower growth of endowment returns

If we see an economic downturn, almost all revenue sources would be further adversely affected Constrained endowment results Weak Economy Fewer current use gifts Lower levels of sponsored funding Pressure to keep gross tuition low and potential loss of continuing & executive education revenue More financial aid necessary Less retirements and attrition