Address to Faculty Senate

September 13, 2005

Jared L. Cohon

State of the University, 2005

Students

Sponsored Research

Financial Highlights

Capital Campaign

Highlights and Updates

Students

Overview of the Freshman Class

Fall 2005 - Undergradaute Admission Data - Pittsburgh

15,777

6135 (39%)

1422 (23%)

-2,0004,0006,0008,000

10,00012,00014,00016,00018,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Applications Admitted Enrolled

SAT Score Graph

Average Math and Verbal SAT Scores1996 - 2005 Freshmen Cohorts

600

620

640

660

680

700

720

740

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Average Math Average Verbal

Fall 2005 Freshman Enrollment - Pittsburgh 2003 2004 2005

•Class Size 1367 1381 1422•International Students –Non US Citizens 228 (17%) 156 (11%) 216 (15%)

•Minorities–African American 73 74 79–Hispanic 90 73 67–Native American 10 10 4–Sub-total 173 (13%) 157 (11%) 150 (11%)–Asian 473 458 340–TOTAL 646 (48%) 615 (44%) 490 (35%)

• •Gender• Women 533 (39%) 512 (37%) 537 (38%)• Men 834 (61%) 869 (63%) 885 (62%)

• Council of Graduate Schools Survey of 126 Universities• % Change ’03 to 04 % Change ’04 to

’05• All international students -28% - 5%• China -45% -13%• India -28% - 9%• Korea -14% 0%

• Selected Fields• Engineering -36% - 7%• Life Sciences -24% - 1%• Physical Sciences -22% - 3%• Business -24% - 8%• CMU• SCS Ph.D. -15% -18%• CIT Ph.D. -21% -16%

Decline in International Student Applications for Graduate Study in the United States

Business CS Total

Applications 119 85 204

Admit 34 25 59

Enroll 28 20 48

Gender:

30 women, 18 men

Citizenship:

Egypt-3, Kuwait -1, Pakistan-1, Saudi Arabia-1, UAE-3,

Qatar-37 (77%), USA-2

Qatar CampusAdmission Data – Fall 2005

Sponsored Projects Revenue(in millions)

$166 $170 $168 $178

$188

$246 $242

$281

$292

$

$50

$100

$150

$200

$250

$300

$350

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05

Note: Includes both direct and indirect sponsored project revenues

Sp

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FINANCIAL UPDATE

FY05 Budget

FY05

Operating Budget

Revenues $ 661.5

Expenses 663.8

Results of Operations $ (2.3)

Endowment Values

($ Thousands) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Opening Value 404,531 414,700 453,539 524,305 608,300 653,919 719,320 829,121 756,930 667,807 654,678 768,990 Gifts/Transfers 6,176 8,658 20,213 14,901 23,368 22,956 67,132 36,900 11,779 12,405 19,641 28,320 Draw 22,434 23,840 24,544 25,817 28,204 32,708 35,192 41,923 42,770 41,737 36,482 36,327 Investment Performance 28,602 53,223 75,097 84,999 50,455 75,153 77,861 (67,168) (58,132) 16,203 131,153 76,736 Closing Value 414,700 453,539 524,305 608,300 653,919 719,320 829,121 756,930 667,807 654,678 768,990 837,719

Draw DetailsTotal Operations 343,918 356,541 375,021 376,965 406,673 426,213 462,048 500,109 551,006 559,755 620,076 679,300 Draw % of Operations 6.5% 6.7% 6.5% 6.8% 6.9% 7.7% 7.6% 8.4% 7.8% 7.5% 5.9% 5.3%

Draw % of Opening Value 5.5% 5.7% 5.4% 4.9% 4.6% 5.0% 4.9% 5.1% 5.7% 6.2% 5.6% 4.7%Draw Policy (%) 6.5% 5.9% 5.9% 5.5% 5.5% 5.5% 5.4% 5.3% 5.2% 5.1% 5.0% 5.0%

Fiscal Year

Endowment Values

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

$ T

ho

usa

nd

s

Endow ment 414,700 453,539 524,305 608,300 653,919 719,320 829,121 756,930 667,807 654,678 768,990 837,719

Gifts 6,176 8,658 20,213 14,901 23,368 22,956 67,132 36,900 11,779 12,405 19,641 28,320

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Rates of Return

Endowment ROR

Composite Benchmark*

RORS & P 500

Performance

Fiscal Year End

6/30/1999 11.90% 12.00% 22.76%6/30/2000 10.90% 9.90% 7.25%6/30/2001 -8.50% -10.50% -14.83%6/30/2002 -8.00% -8.00% -17.99%6/30/2003 2.30% 3.14% 0.25%6/30/2004 20.00% 16.83% 19.11%6/30/2005 10.55% 9.26% 6.32%

Compound Average Growth Rate 5.12% 4.20% 2.56%

*Composite Benchmark comprised of 65% Willshire 5000, 20% Lehman Government, 15% MSCI All World.

FY 06 Budget Challenges - Revenues

• FY06 budgeted undergraduate tuition increase of 3.26% is the smallest increase in more than 25 years.

• FY03 endowment distribution ($41.3M) was 7.5% of operations • FY06 budgeted endowment distribution ($36.1M) is 5.1% of operations

• Gift revenue utilized in operations is projected to decrease as cash receipts are directed toward endowment and restricted net assets– FY05 Forecast to FY06 Budget reflects $2.5M decrease– FY03 Actuals to FY06 Budget reflects $10.5M decrease

FY03 Actuals

FY04 Actuals

FY05 Forecast

FY06 Budget

Tuition (net) 196.2$ 217.2$ 229.1$ 238.5$ Sponsored Projects 243.9 278.9 301 299.9Gifts/Releases 27.7 23.8 19.7 17.2Distribution from Endowment 41.3 36.2 36.1 36.7Other Investment Income 9.3 6 7.5 8

Auxiliary/Other 58.6 69.6 79 98.1Qatar Management Fees 0 0 3 4.6

577.0$ 631.7$ 675.4$ 703.0$

Budget Challenges - Expenses

• With the rise of interest rates and the $50M swap transaction in FY2005, interest expense is increasing

• Significant increases in electric rates resulting from industry deregulation - $1M increase FY05; $1M increase FY06

• Increased investment in University Advancement for the capital campaign - $10.4M of incremental expense in Operating Budget over FY03

• Disproportionate growth in the cost of health care benefits– FY03 to FY06 salaries have increased 26% while benefits have increased 64% ($35.1M)– Impact of the increase in health care costs not passed to employees, and not recovered from

sponsored projects, from FY03 to FY06 is $9.5M on operating budget

FY03 Actuals

FY04 Actuals

FY05 Forecast

FY06 Budget

ExpensesCompensation 296.6 325.6 345.1 372.5Benefits 55.2 66.6 74.7 90.3Other Costs 163.4 182.5 212.0 206.6

New Commitments to Depts 0.5Depreciation 38.8 40.2 40.1 40.4Interest Expense 5.8 5.2 7.4 11.0 Total Expenses 559.8$ 620.1$ 679.3$ 721.3$

Capital Campaign (As of June 30, 2005)

Phase I: 7/1/03 - 12/31/04

Goal: $130 million

Raised: $211 million

Phase II: 1/1/05 - 6/30/08

Goal: $500 million (cumulative)

Raised: $229 million (as of 6/30/05)

Phase III: ?

Fundraising Progress by Fiscal YearProjected vs. Actual (in millions) As of June 30, 2005 Preliminary Report

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

Cash Goal $38.0 $48.0 $61.7 $54.7 $64.4 $71.5

Cash Received $43.4 $57.6 $78.8

Commitment Goal $47.0 $60.3 $76.8 $86.3 $95.7 $105.0

Commitments Rec'd $51.8 $104.3 $92.9

Cumulative Cash Goal $38.0 $86.0 $147.7 $202.4 $266.8 $338.3

Cumulative Cash Rec'd $43.4 $101.0 $179.8

Cumulative Commitment Goal $47.0 $107.3 $184.1 $270.4 $366.1 $471.1

Cumulative Commitments Rec'd $51.8 $156.1 $249.0

FY03 FY04 FY05 FY06 FY07 FY08

Includes all cash and commitments received FY03-present—most but not all of which counts in campaign totals. FY03: $42M in FY03 commitments—gifts made in anticipation of the campaign—count toward campaign progress. FY04: Formal campaign counting period begins. All FY04 commitments counted in campaign. FY05: $10M from Qatar Foundation, included on this report (cash received), is not yet being counted in campaign totals.

Gift Range Prospects Identified

Gifts Needed

(Phases One + Two)

Dollars Needed

# Gifts Pledged/ Received

Total Dollars Pledged/Received

Principal ($5M+)

86 19 $178,000,000 6 $98,555,787

Leadership ($1M - $4.99M)

212 70 $124,200,000 32 $62,236,661

Baseline ($50K to $999K)

7,203 850 $152,700,000 261 $54,499,101

SUBTOTAL 7,501 939 $454,900,000 299 $215,291,549

Under 50K Many Many $45,100,000 Many $13, 916, 426

TOTAL $500,000,000 $229,207,975

Draft Gift Table – Phases One plus Two – Goal $500M (Projected End Date 6/08) by Cumulative Giving As of June 30, 2005 Preliminary Report

Figures above do not yet include $10 million from Qatar Foundation

$54,400,000

$53,100,000$138,000,000

$164,700,000

$6,928,6923%

$81,852,33336%

$8,489,8454%

$26,120,72711%

$105,816,37846%

50%

40%

10%

Expendable

Endowment

Facilities

UndesignatedUnrestricted

Campaign Goals by PurposeAs of June 30, 2005 Preliminary Report

Projected Total New Campaign

Endowment

Expendable

Facilities

Centennial Campaign(total raised $410.2 million)

Facilities Expendable

Endowment

Undesignated

Phase I & II: $229,207,975(pie shows total commitments;

see cash totals below)

Paid to DateFacilities $24,997,840 95.7%Endowment $35,112,994 33.2%Expendable $66,199,670 80.9%Undesignated $1,335,715 15.8%Unrestricted $6,392,935 92.2%

34%

40%

13%

13%

HIGHLIGHTS AND UPDATES

1. Harvard University

Princeton University

3. Yale University

4. University of Pennsylvania

5. Duke University

Massachusetts Institute of Technology

Stanford University

8. California Institute of Technology

9. Columbia University

Dartmouth University

11.Northwestern University

Washington University in St. Louis

13.Brown University

14.Cornel University

John Hopkins University

University of Chicago

17.Rice University

18.University of Notre Dame

Vanderbilt University

20.Emory University

21.University of California – Berkeley

22. Carnegie Mellon UniversityUniversity of MichiganUniversity of Virginia *Source: “America’s Best Colleges 2005,” US News and World Report. 8/26/05

25.Georgetown University

Best National Universities AY2005

AY2005 AY2006

Overall: #6 #5

MIS: #2 #2

Ops. Management: #3 #2

Quantitative Analysis: #2 #2

Finance: #10 #9

Supply Chain Management: #6 #5

General Management: #21 #24

Entrepreneurship: #20 #19*Source: “America’s Best Colleges 2005,” US News and World Report. 8/26/05

Undergraduate Business Rankings

AY2005 AY2006

Overall: #8 #8

Computer: #5 #3

Electrical: #10 #10

Chemical: #14 #14

Civil: #14 #13

Environmental: #16 #13

Materials: #9 #11

Mechanical: #12 #13*Source: “America’s Best Colleges 2004,” US News and World Report. 8/26/05

Undergraduate Engineering Rankings

- Controversial Speakers Policy Review Committee

- Adjacent Policies: Free Speech & Assembly & Carnegie Code

- Faculty (5), Staff (3), Grads (2), Undergrads (2),

Community/Alumnus (1)

- Bill Brown to Chair

- Town Meetings & University Benchmarks

- Proposed Policy & Procedure Changes by January

- Meeting with United Jewish Federation

- University Lecture Series Advisory Council

- Focus on Diverse Perspectives & Balance

- Wrap-around Programming

Controversial Speakers

- 24 Undergraduates & 4 Graduate Students In-house

- Tulane University, plus Loyola, University of New Orleans & Xavier

- Academic Department Support

- Students, Faculty & Staff Offering Housing

- Guest Students with Tuition Waiver

- Carnegie Mellon Students/Families Impact & Support

- 33 from Area & 8 Directly Impacted

- Community Service

- Central Website

- Campus Events

- Planned Service Trips: Winter & Spring Break

Katrina Response