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From the Business Manager

FINANCIAL OPERATIONS

We have continued the trend of balanced budgets with the surplus in the most recent fiscal year. The favorable results were due principally to stronger enrollment than had been anticipated. The Board voted this year to reserve the surplus to help cushion anticipated future budget strains.

In the area of planning, and specifically in response to the economic turmoil that has been occurring in the current fiscal year, we continue to work closely with the Finance and Audit Committee of the Board to examine our long-term financial model, testing the significant budget drivers to provide consistent support for operations.

Since the market value of our endowment investments has dropped significantly and other impacts on giving, enrollment and financial aid are yet unknown, the Board has directed us to make selected reductions and to restrain expenditures as we complete the current fiscal year and develop next year’s budget. We are currently avoiding any core program area reductions in order to protect our primary educational mission, but we will continue to monitor and test our models as events unfold in order to ensure both the short and long-term financial stability of the institution.

ENDOWMENT and INVESTMENT MANAGEMENT

For the fiscal year ended June 30, 2008, the total return of the endowment was 4.1%, which was towards the high end of the endowment universe, as measured by our consultant, Cambridge Associates. In addition, the past three and five year return figures are in the top quartile of comparable funds. However, since the end of the fiscal year, virtually all asset classes have fallen in value, some quite sharply. Last year, while we warned that long term expectations of return should be more cautious than previous years’ returns, we did not anticipate the extent of the present economic and fiscal crisis.

Going forward, it will be very important to consider whether and by how much to revise our expectations for long-term rates of growth from the endowment. The Investment Committee will examine this question and report its conclusion by the end of the current School fiscal year.