Again this year, Johns Hopkins University achieved better-than-ever financial results. Revenues reached $1.8 billion, and net cash flows from operations were $129 million. With an operating surplus of $73 million, and investment returns of $128 million, the University added net assets of $257 million, bringing total net assets to $2.4 billion. Long-term debt declined, despite extensive new investment in plant and equipment. At year-end, the Johns Hopkins Initiative had topped its fund-raising goal of $1.2 billion and still had a year to run. This campaign is succeeding in every academic division of the University, with top priority now focused on raising endowment for student aid and libraries, and on funding new facilities. The University is likewise benefiting from the effective investment of these funds, along with its existing endowment and operating revenues. Investment returns for the year exceeded 8.6 percent, with controlled exposure to risk. Johns Hopkins depends on revenue from three major lines of business--sponsored research, instruction, and other services (especially patient care)--carried out in varying degrees by each of its operating divisions. Of course, these activities are interrelated. Research generates new knowledge, and knowledge becomes part of instruction and is applied in patient care. Instruction and medical treatment raise questions that generate new directions in scientific research, and the cycle repeats itself. The revenue that supports one line of business, in effect, supports the others by spreading fixed costs over a larger base, enabling faculty to carry out the full range of academic responsibilities. In dollar terms, sponsored research is the dominant line of business at Hopkins, providing over $1 billion, or 58 percent of total operating revenue. The other sources, equally critical to the University's mission, provide a diversified financial base. Instruction revenue (tuition, fees, housing, food service, etc.) represents about 12 percent of the total, with clinical services and other service activity representing 10 percent. The balance is from investment income and gifts. An emerging line of business, sale and licensing of intellectual property, has potential for considerable growth, but as yet it is not a major source of revenue. Maintaining the overall financial vigor of the University depends upon each division striking a careful balance among its lines of business, a balance that differs markedly from one division to another. Thus, the School of Medicine and the School of Public Health--both of which have preeminent programs of instruction and public service--must nonetheless protect the singular positions they occupy as recipients of sponsored research funding for schools of their kind. Similarly, the Applied Physics Laboratory carries out instructional programs in cooperation with the School of Engineering, and actively engages in public service projects in the community, but its primary focus must be on retaining its edge in research for national defense, space exploration, and civilian application of its technological capabilities. In contrast, the Peabody Institute, the School of Advanced International Studies, the School of Nursing, and the School of Professional Studies in Business and Education are more heavily weighted toward instruction, with emphasis on enrollment management, student services, revenue enhancement, and market-based pricing. The Schools of Arts and Sciences and Engineering have an even more complex task, combining as they do the need for student-oriented management of their instruction programs with the demands of their positions as centers of research excellence. In all divisions, fund-raising is an increasingly important part of financial well-being. To achieve an overall balance among its lines of business and maintain financial stability, Johns Hopkins has for a decade employed a rolling five-year financial planning process. Each year in conjunction with the development of its annual budget, the University projects detailed estimates of each revenue and expense item of each division. These estimates originate in the operating divisions, are subjected to thorough analysis by senior management, and reviewed in detail by the Trustee Finance Committee. The five-year plan is not a rigid construct. Each year it is updated and revised, as new opportunities and challenges present themselves. But the structure of the five-year plan assures that the long-term consequences of all policies, decisions, and external events are taken into account. The process has served Hopkins well. James T. McGill Senior Vice President for Administration

SCHOOL OF NURSING In January 1998, the School of Nursing moved into a new state-of-the-art education and research facility. Situated in the heart of the Johns Hopkins Medical Institutions campus, the building is the first structure at Hopkins dedicated solely to nursing education and research. It also houses the Institute for Johns Hopkins Nursing and the Center for Nursing Research. The building, named in honor of local philanthropist Anne M. Pinkard, consists of six levels and includes a 230-seat auditorium, two 110-seat lecture halls, classrooms, practice laboratories, interactive computer video labs, research space with behavioral laboratories, study rooms, a café, and a serene outdoor garden courtyard.

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