ML100070108

Request and Application, Self Guarantee, Decommissioning Expenses - License No. SNM-986, License No. R-37

ML100070108
Person / Time
Site:	07000938, MIT Nuclear Research Reactor
Issue date:	10/27/2009
From:	Dugan R Massachusetts Institute of Technology (MIT)
To:	Simpson J Office of Nuclear Material Safety and Safeguards
References
Download: ML100070108 (53)

Text

Massachusetts Institute of Technology

/1 I

Regina Dugan Associate Counsel/Insurance Manager Office of the General Counsel Building 12-090 77 Massachusetts Avenue Cambridge, Massachusetts 02139-4307 Phone 617-253-2823 Fax 617-258-0267 Email dugan@mit.edu VIA FEDERAL EXPRESS October 27, 2009 Ms. Jo Ann Simpson U.S. Nuclear Regulatory Commission Office of Nuclear Material Safety and Safeguards O-12D3 Washington, DC 20055-0001 Re:

Request and Application, Self Guarantee, Decommissioning Expenses - License No. SNM-986, License No. R-37 IlI~r

Dear Ms. Simpson:

MIT was recently made aware of the option for qualified licensees to self-guarantee the estimated decommissioning expenses associated with the above-referenced licensing activities. MIT presently holds securities in an escrow account with U.S. Bank, as reasonable assurance to the Nuclear Regulatory Commission, for funding such decommissioning expenses.

MIT requests the NRC's approval to self guarantee the required decommissioning assurance. The following documents are enclosed to complete MIT's application as guarantor of financial assurance for its estimated decommissioning expenses of the NRC licenses:

1. Letter from MIT's Chief Financial Officer in Support of Self Guarantee.

2. Report of MIT's Auditor, PricewaterhouseCoopers.

3. Schedule Reconciling Chief Financial Officer's Letter.

4. Executed Self Guarantee Agreement.

5. MIT's Bond Rating information.

6. MIT's most recent audited financials, Report of the Treasurer for the year ended June 30, 2009.

Please contact me should any additional information be required to complete this process. Thank you for your assistance with this request.

V truly yours, Reg4nDtugan 49 Enclosures

• Office of the Vice President for Finance i'lir Massachusetts Institute of Technology 77 Massachusetts Avenue, Building NE49-3000 Cambridge, Massachusetts 02139-4307 October 15, 2009 U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 I am the Chief Financial Officer of the Massachusetts Institute of Technology ("MIT"), a nonprofit university. This letter is in support of MIT's use of the self-guarantee financial test to demonstrate financial assurance, as specified in 10 CFR Part 30. MIT has no parent company holding majority control of its voting stock.

MIT guarantees, through the self-guarantee submitted to demonstrate compliance under 10 CFR Part 30, the decommissioning of the following facilities owned or operated by MIT. The current cost estimates or certified amounts for decommissioning, so guaranteed, are shown for each facility:

Certified Amounts or Current Cost Estimates Name of Facility License Number MIT Research Reactor SNM-986 MIT Research Reactor R-37 Location of Facility 77 Massachusetts Av Cambridge, MA 02139 138 Albany St.

Cambridge, MA 02139

$1,125,000.00

$30,000,000.00 I hereby certifythat MIT is currently a going concern and that it possesses positive tangible net worth in the amount of $12,949.6 million*.

This fiscal year of this firm ends on June 30. The figures for the above item marked with an asterisk are derived from MIT's independently audited, year-end financial statements and footnotes for the latest completed fiscal year, ended June 30, 2009.

MIT is not required to file a Form 10-K with the U.S. Securities and Exchange Commission for the latest fiscal year.

This firm satisfies the following self-guarantee test:

1. Current bond rating of most recent uninsured, uncollateralized, and unencumbered issuance of this institution:

Rating: Aaa Name of rating service: Moody's Investors Service

2.

Date of issuance of bonds:

January 8, 2009

3.

Description & date of maturity of bonds:

Amount Interest rate Maturity Date Description

$10,000,000 4.00%

July 1, 2016 MHEFA Series 0 57586ECG4

$78,000,000 5.00%

July 1, 2016 MHEFA Series 0 57586ECH2

$23,485,000 5.00%

July 1, 2026 MHEFA Series 0 57586ECJ8

$47,975,000 5.75%

July 1, 2026 MHEFA Series 0 57586ECK5

$42,000,000 5.50%

July 1, 2036 MHEFA Series 0 57586ECL3

$65,000,000 6.00%

July 1, 2036 MHEFA Series 0 57586ECM1

4.

Is the rating specified on line 1 "A" or better?

Yes I hereby certify that the content of this letter is true and correct to the best of my knowledge.

Signature

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Name:

Terry Stone

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44 c0

.57OA/l

Title:

Chief Financial Officer Date:

Qr9)6r

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PRECEWATERHOUsEC(4PERS 9 PricewaterhouseCoopers LLP 125 High St.

Boston MA, 02110 www.pwc.com Report of Independent Accountants To the Board of Trustees of Massachusetts Institute of Technology:

We have performed the procedures enumerated below, which were agreed to by Massachusetts Institute of Technology ("the Institute"), NRC MIT licenses SNM-986 and R-37, solely to assist you in complying with the Nuclear Regulatory Commission's financial assurance regulations, 10 CFR Part 30.

Management is responsible for the Institute's compliance with those regulations. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

The procedures and associated findings are as follows:

1. Confirmed that the net worth in the "Per Financial Statements" column of the accompanying schedule agrees with total net assets contained in the Institute's financial statements for the year ended June 30, 2009, which we have audited in accordance with auditing standards generally accepted in the United States of America and have issued our report thereon dated September 16, 2009;

2.

Confirmed that the tangible net worth in the "Per CFO's Letter" column of the accompanying schedule agrees with tangible net worth in the CFO's letter dated October 15, 2009;

3.

Inquired of management as to the existence of any reconciling items between the CFO's Letter and the audited financial statements noting that there are none; and

4. Mathematically check the totals in the accompanying schedule, including the current cost estimates of decommissioning for each facility listed per the CFO's letter.

No exceptions were noted.

We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on compliance with the regulations. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

This report is intended solely for the information and use of management and the Board of Trustees of Massachusetts Institute of Technology and the Nuclear Regulatory Commission, and is not intended to be and should not be used by anyone other than these specified parties.

October 16, 2009

prCEWVATERHOUSECO4PERS U Schedule Reconciling Amounts Contained in Chief Executive Officer's or Chief Financial Officer's Letter with Amounts in, Financial Statements MIT YEAR ENDED JUNE 30, 2009 (000.000)

Per Financial Reconciling CFO's Letter Statements Items Net worth

$12,949.6 0

$12,949.6 Less: Cost in excess of value of tangible assets 0

0 0

acquired Net worth after cost in excess of value of tangible

$12,949.6 0

$12,949.6 assets acquired Accrued decommissioning costs included in current 0

0 0

liabilities Tangible net worth (plus

$12,949.6 0

$12,949.6 decommissioning costs)

$12,94.6_0_$2,949.

(2)

SELF-GUARANTEE Guarantee made this 5

day of October,

2009, by Massachusetts Institute of Technology ("MIT"), a "non-profit university," organized under the laws of the Commonwealth of Massachusetts, herein referred to as "guarantor," to the U.S. Nuclear Regulatory Commission (NRC), beneficiary, on behalf of itself as licensee.

Recitals

1.

The guarantor has full authority and capacity to enter into this self-guarantee under its bylaws, articles of incorporation, and the laws of the Commonwealth of Massachusetts.

2.

This self-guarantee is being issued to comply with regulations issued by the NRC, an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 70, and Title 10, Chapter I of the Code of Federal Regulations, Part 72, which require that a holder of, or an applicant for, a materials license issued pursuant to 10 CFR Part 50 and 10 CFR Part 70, provide assurance that funds will be available when needed for required decommissioning activities.

3.

The self-guarantee is issued to provide financial assurance for decommissioning activities for the MIT Research Reactor, 138 Albany Street, Cambridge. Massachusetts 02139, NRC License Number R-37, and MIT, 77 Massachusetts Avenue, Cambridge, Massachusetts, 02139, NRC License Number SNM-986 and required by 10 CFR Part 50 and 10 CFR Part 70 and Appendix E to 10 CFR Part 30.

4.

The guarantor meets or exceeds the following financial test criteria, as a nonprofit university that issues bonds, and agrees to comply with all notification requirements as specified in 10 CFR Part 50 and 10 CFR Part 70 and Appendix E to 10 CFR Part 30.

The guarantor meets the following self-guarantee test:

(a) A current rating for its most recent uninsured, uncollateralized, and unencumbered bond issuance of AAA, AA, or A as issued by Standard & Poor's, or Aaa, Aa, or A as issued by Moody's.

5.

The guarantor does not have a parent company holding majority control of its voting stock.

6.

Decommissioning activities as used below refer to the activities required by 10 CFR Part 50 and 10 CFR Part 70, for decommissioning of the facilities identified above.

7.

Pursuant to the guarantor's authority to enter into this guarantee, the guarantor guarantees to NRC that the guarantor shall:

(a) carry out the required decommissioning activities, as required by License No. SNM-986 and License No. R-37 or (b) set up a trust fund in favor of the above identified beneficiary in the amount of the current cost estimates for these activities.

8.

The guarantor agrees to submit revised financial statements, financial test data, evidence of MIT's bond rating, and reconciling schedule annually within 90 days of the close of its fiscal year.

9.

The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee financial test criteria, it shall send within 90 days of the end of the fiscal year, by certified mail, notice to NRC that it intends to provide alternative financial assurance as specified in 10 CFR Part 50 and 10 CFR Part

70. Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance.

10. The guarantor also agrees to notify the beneficiary promptly if the ownership of the licensed activity is transferred, and to maintain this guarantee until the new licensee provides alternative financial assurance acceptable to the beneficiary.

2

11.

The guarantor agrees that if it determines, at any time other than as described in Recital 9, that it no longer meets the self-guarantee financial test criteria or it is disallowed from continuing as a self-guarantor, it shall establish alternative financial assurance as specified in 10 CFR Part 50 and 10 CFR Part 70, as applicable, within 30 days.

12. The guarantor, as well as its successors and assigns, agrees to remain bound jointly and severally under this guarantee notwithstanding any or all of the following:

amendment or modification of the license or NRC-approved decommissioning funding plan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licensee pursuant to 10 CFR Part 50 and 10 CFR Part 70.

13. The guarantor agrees that it shall be liable for all reasonable litigation costs incurred by the beneficiary, NRC, in any successful effort to enforce the agreement against the guarantor.

14. The guarantor agrees to remain bound under this self-guarantee for as long as it, as licensee, must comply with the applicable financial assurance requirements of 10 CFR Part 50 and 10 CFR Part 70, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to NRC, such cancellation to become effective not before an alternative financial assurance mechanism has been put in place by the guarantor.

15. The guarantor agrees that if it, as licensee, fails to provide alternative financial assurance as specified in 10 CFR Part 50 and 10 CFR Part 70, as applicable, and obtain written approval of such assurance from NRC within 90 days after a notice of cancellation by the guarantor is received by NRC from the guarantor, the guarantor shall make full payment under the self-guarantee. Such payment shall be held in escrow, by NRC, for the estimated decommissioning activities for the previously listed facilities, and shall satisfy guarantor's financial assurance required under 10 CFR Part 50 and 10 CFR Part 70, as may be subject to adjustment to keep such estimate current, until guarantor 3

furnishes evidence of alternative financial assurance in compliance with 10 CFR Part 50 and 10 CFR Part 70). Upon the approval by NRC of such alternative financial assurance, NRC shall return the payment made by guarantor in full.

16. The guarantor waives notice of acceptance of this self-guarantee by NRC. The guarantor expressly waives notice of amendments or modifications of the decommissioning requirements.

17. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its independent auditor and to NRC during each year in which this self-guarantee is in effect.

18. The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceases to be rated in the category of "A" or above by either Standard & Poor's or Moody's, it shall provide notice in writing of such fact to NRC within 20 days after publication of the change by the rating service.

I hereby certify that this self-guarantee is true and correct to the best of my knowledge.

Effective date: ()1 Lr-.** _

SELF-GUARANTOR:

Massachusetts Institute of Technology:

By:

/

Theresa M. Stone Executive Vice President and Treasurer Signature of witness or notary:

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.NON PINKSTEN i~Q~j~

Notay Public~

C6UMONWEALTH OF MYJouin Dtom~

4

Global Credit Research New Issue Moo' a s 9 DEC 2008 New Issue: Massachusetts Health & Educational Facilities Authority MOODY'S ASSIGNS Aaa RATING TO MASSACHUSETTS INSTITUTE OF TECHNOLOGY'S $275 MILLION SERIES 0 BONDS; OUTLOOK IS STABLE RATINGS AFFIRMED ON $1.5 BILLION OF RATED DEBT, INCLUDING CURRENT OFFERING Massachusetts Health & Educational Facilities Authority Higher Education MA Moody's Rating ISSUE RATING Revenue Bonds, Series 0 Aaa Sale Amount

$275,000,000 Expected Sale Date 12/09/08 Rating Description Private University Revenue A-Moody's Outlook Stable Opinion NEW YORK, Dec 9, 2008 -- Moody's Investors Service has assigned a rating of Aaa to Massachusetts Institute of Technology's (MIT's or Institute's) $275 million Series 0 bonds to be issued through the Massachusetts Health and Educational Facilities Authority. The rating outlook is stable. Moody's has also affirmed our Aaa and Aaa/VMIG1 ratings on MIT's previously issued bonds as detailed at the end of this report. The Series 0 bonds will be issued in the fixed rate mode. Including the current offering, MIT will have a total of $1.7 billion of outstanding direct debt of which 75% is fixed rate and 25% is variable rate. A total of

$250 million of the variable rate debt has a put feature that is supported by the Institute's self-liquidity.

USE OF PROCEEDS: Series 0 proceeds will be used to fund a variety of capital projects on the Institute's campus, including a new graduate student residence, a new building for the School of Architecture +

Planning and the Media Laboratory, a new facility for the Sloan School of Management; a new underground parking garage, and a new facility for the Koch Institute for Integrative Cancer Research; to pay capitalized interest; and to pay costs of issuance.

LEGAL SECURITY: Unsecured general obligation of the Institute INTEREST RATE DERIVATIVES: MIT has two interest rate swap agreements related to its Series J variable rate bonds, each with a notional amount of $125 million. Swap payments are unsecured general obligations of the Institute. One of the swaps is with Merrill Lynch Capital Services and guaranteed by Merrill Lynch &

Co., Inc. (rated A2/P-1 under review for possible upgrade). Under this swap, which expires in 2011, MIT pays a fixed rate and receives a variable rate based on SIFMA. There are no automatic termination events, and the swap can be terminated by either party if the other party's senior unsecured credit rating is below A3. The market value of the swap was negative $7.5 million to MIT as of 11/28/2008. The second swap was originally with Lehman Brothers Commercial Bank, a subsidiary of Lehman Brothers Holdings, Inc. Earlier this month, MIT terminated that swap and entered into a new agreement for the same notional amount with Deutsche Bank AG (rated Aal/P-1). An upfront payment from the new counterparty offset MIT's payments associated with termination of the Lehman swap. Under the new swap, which expires in 2031, MIT pays a fixed rate and receives a variable rate based on SIFMA. This swap also has no automatic termination events, and the swap can be terminated by either party if the other party's credit senior unsecured credit rating is below A3. MIT has the right to terminate the agreement anytime, but the counterparty does not. The Institute must post collateral if its rating is A3 or below and if its rating is A2 and the market value of the swap is negative to MIT by at least $10 million.

STRENGTHS

• Exceptional balance sheet position with $12.0 billion of total financial resources at the end of FY 2008,

providing very.strong coverage of outstanding debt (6.9 times total financial resources to pro-forma direct debt), which will continue to provide a substantial financial cushion despite market declines in FY 2009;

• Premier student market position and research reputation (12% selectivity, 66% matriculation for fall 2008);

• Consistently healthy operating performance (13.7% operating cash flow margin in FY2008);

• Large portfolio of liquid assets and management team depth supporting highest short-term rating.

CHALLENGES

• Sustaining a long track-record of superior investment performance, which in the past has helped support expense growth;

• Managing growing commitments for expenses such as financial aid and debt service in the face of near-term budgetary pressures.

• High reliance (50% of operating revenues) on research grants and contracts, a revenue stream that has exhibited volatility in recent years, with an increase in FY 2008 following a decline in FY2007.

MARKET POSITION/COMPETITIVE STRATEGY: PREMIER ACADEMIC REPUTATION LEADS TO HIGHEST LEVELS OF STUDENT DEMAND AND ATTRACTION OF RESEARCH AWARDS Moody's anticipates that MIT's extraordinarily strong academic reputation will be sustained in the near future and will continue to lead to excellent student demand and an ability to attract top research faculty and grant awards. MIT's selectivity and matriculation rates have continued to improve from already strong levels, with selectivity of 11.9% and yield of 66.0% in fall 2008. MIT has an enrollment base that is more heavily oriented toward graduate educatiorn, with 41% of full-time equivalent enrollment in undergraduate programs. Over time, this share has increased as MIT embarked on a deliberate plan to shift the balance of undergraduates and graduates slightly.

Along with many of its peer institutions, MIT announced changes to its financial aid policies earlier this year, including covering full tuition from MIT and other grants for students with family income below $75,000 and eliminating loans for this population of students. In addition, MIT will no longer consider home equity as a source of payment for those families earning less than $100,000. The combined changes in the program will increase MIT's financial aid budget to $74 million, or approximately 10% from the prior year.

MIT's research profile remains extremely strong, with total grant and contract revenue of $1.2 billion in FY2008, including $620 million of grants at the Lincoln Laboratory. Research conducted at MIT's Cambridge campus rebounded by 5.8% to $622 million in FY 2008 after decreasing by 3.5% to $571 million in FY2007.

Growth of research revenue in FY 2008 was due in particular to increased non-federal sources, which improved by 18% on the strength of non-profit foundation funding. Although the environment for research funding remains very competitive and continues to face weak government funding, we expect MIT to remain well positioned to sustain research revenue over the medium and long-term. MIT has consistently worked with industry as a research partner and increasingly has developed relationships overseas to provide research and development expertise, including the Singapore-MIT Alliance for Research and Technology, which is projected to be a $350 million program over five years. Separate incorporation of the Broad Institute, an MIT research center located on campus and operated in collaboration with Harvard University and its affiliated hospitals and the Whitehead Institute for Biomedical Research that accounted for $142 million of research funding in FY 2008, is not expected to have a material impact on the Institute.

OPERATING PERFORMANCE: HIGHLY CONSISTENT AND FAVORABLE OPERATING PERFORMANCE EXPECTED TO CONTINUE DESPITE SHORT-TERM PRESSURE

,Moody's expects MIT to continue to generate favorable operating performance as diligent operating

.management has resulted in highly consistent performance over time. MIT's operating cash flow margin was 13.7% in FY2008 and has averaged 10.7% for the last three years. These annual cash flow margins produced a strong debt service coverage averaging 4.1 times from FY 2006 through FY 2008. This margin will decline with the additional debt MIT has issued this year (Series N of $325 million in August 2008 in addition to the current Series 0), with an estimated 2.0 times average coverage of maximum annual debt service. Operating revenues are heavily reliant on grant and contract income, with 50% of revenue from grants in FY2008. Excluding the Lincoln Laboratory contract, approximately 34% of revenues were from grants and contracts. MIT's other primary revenue sources include tuition and fees (13%),.investment income (19%) and gifts (7%). These diverse sources of revenue have remained relatively proportionate over time, with slightly less reliance on grant revenue and slightly more reliance on investment income in the past two years.

The Institute's budget planning is based on a financial framework that produced a balanced budget without use of restricted endowment funds for the first time in FY 2009. Given current investment losses, MIT is

projecting reduced revenues beginning in FY 2010 and has begun efforts to reducethe budget for that year by $50 million, which represents about 2% of total annual expenses. Potential target areas are new construction 5nd the pace of new faculty recruitment. MIT intends to maintain its commitment to financial aid, which increased $24 million, or 14%, between FY 2004 and FY 2008. With conservative endowment spending policies, highly predictable revenues and expenses, and strong financial management, we expect MIT to continue to generate healthy, although potentially reduced, cash flow.

Fundraising has been a growing strength of MIT, with average gift revenue climbing to nearly $320 million in recent years. Cash receipts for the current fiscal year to date are above the prior year at this time, and MIT reports it has received most of the gifts targeted for several current major capital projects.

BALANCE SHEET POSITION: EXCEPTIONAL BALANCE SHEET STRENGTH PROVIDES STRONG OPERATING AND DEBT CUSHION BUT WILL DECLINE WITH EXPECTED LOSSES.

MIT built balance sheet strength in recent years with high investment returns and growing gift revenue. Total financial resources were slightly above $12 billion in FY2008, compared to $1.7 billion of pro-forma direct debt and $2.3 billion of total expenses. The ratio of expendable financial resources to pro-forma direct debt is 5.4 times compared to 5.3 times in FY2004. Moody's has reclassified $791 million of unrestricted net assets representing the overfunded defined benefit plan to permanently restricted net assets. Although these funds represent a long-term strength since MIT is likely to need to make fewer contributions to the plan compared to other organizations with an underfunded pension, the funds cannot be used for any other purpose and therefore are more akin to permanently restricted endowment funds.

MIT's investment returns have remained among the best in the industry, with an average 20.2% annual return from FY 2004 through FY 2007. In FY 2008, the investment return.was 3.2%. The Institute's asset allocation is highly diversified. As of October 31, 2008, allocations were 28% to publicly traded equity (both domestic and international/emerging), 5% to fixed income, 27% to marketable alternatives, 20% to private equity, and 10% each to real estate and real assets. Although the valuation of nonmarketable assets is not precise, MIT roughly estimates that as of October 31, 2008, the decline in the market value of investments has been in the range of 20% to 25% from its June 30, 2008 value. As described above, MIT is taking action to reduce spending in FY 2010. Despite the reduction in investment value, however, the Institute retains a healthy balance sheet. With a pro-forma 30% decline in expendable financial resources, MIT's ratio of expendable financial resources to pro-forma direct debt would decline to 3.8 times, and expendable financial resources to operations would fall to 2.8 times. Moody's expects these investment results would be in line with MIT's Aaa-rated peers.

Previously, MIT was a relatively infrequent borrower given its size and balance sheet strength, utilizing gifts and cash flow to support capital investments. With the current Series 0 issue and the recent Series N borrowing (both in FY 2009 and totaling $610 million), the Institute is completing a number of large projects.

MIT plans to slow future capital spending plans in response to the current economic and financial environment. Within the next year, MIT will explore the establishment of a new line of credit and/or taxable commercial paper program of up to $500 million to provide additional liquidity capacity for operating needs.

SHORT TERM RATING RATIONALE:

The VMIGI rating on MIT's $250 million of weekly reset Series J-1 and J-2 bonds is supported by MIT's own strong interral liquidity. Daily liquidity includes $88 million of funds in a 2a-7 money market fund and $268 million of U.S. Treasury securities as of October 31, 2008. These figures exclude $48 million that remains locked up in the Commonfund Short-Term Fund. Another $667 million in weekly liquidity is available from exchange-traded equities and other funds and investments. MIT has extensive treasury experience in managing its investment and debt portfolio, ensuring timely draws on available liquidity to pay any failed remarketings of the bonds.

Outlook The outlook for MIT's credit position remains stable. Losses of investment market value and tighter operating performance can likely be sustained without pressuring the rating.

What could change the rating - UP Not applicable.

What could change the rating - DOWN Further substantial declines in endowment market value or operating performance; significant additional borrowing without strengthening balance sheet resources.

KEY DATA AND RATIOS (Fiscal year 2008 financial data; fall 2008 enrollment data)

'Figures in parentheses included a pro-forma 30% reduction to financial resources Total Enrollment: 10,173 full-time equivalent students Total Pro-forma Direct Debt (including current offering): $1.74 billion Expendable Resources to Debt: 5.4x (3.8x) (Moody's has removed $791 million from unrestricted net assets representing overfunded pensions and classified as permanently restricted)

Expendable Resources to Operations: 4.1x (2.8x) (Moody's has removed $791 million from unrestricted net assets representing overfunded pensions and classified as permanently restricted)

Total Financial Resources per Student: $1.2 million ($827,754)

Three-Year Average Operating Margin: 3.6%

RATED DEBT Series I, K, L, M, N, 0: Aaa Series J-1 and J-2: Aaa/VMIG1 (self-liquidity)

CONTACTS Massachusetts Institute of Technology: Israel Ruiz at 617-253-4495 or Allen Marcum at 617-324-7207 Underwriter: Barclays Capital, Jim Costello at 212-526-5730 or John Augustine at 212-526-5436 METHODOLOGY The principal methodology used in rating Massachusetts Institute of Technology was "Moody's Rating Approach for Private Colleges and Universities," which can be found at www.moodys.com in the Credit Policy

& Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy &

Methodologies directory.

The last rating action was on July 21, 2008 when the ratings of Massachusetts Institute of Technology were affirmed.

Analysts Laura C. Sander Analyst Public Finance Group Moody's Investors Service Roger Goodman Backup Analyst Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653

© Copyright 2008, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.

(together, "MOODY'S"). All rights reserved.

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CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPIINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any.user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling.

MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered, by it fees ranging from $1,500 to approximately $2,400,000. Moody's Corporation (MCO) and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."

NEW ISSUE - BOOK EN Y ONLY In the opinion. of Edwards Angell Palmer &;Dodge LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other-matters,, compliance with certain, covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986. Interest on theBonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes,,

altoug sch ntres isinludd n ajuted currn qernns when calculating corporate alternative minimum:

incme Unter exstiicuein qu yrt-a'I.

taxable: income. Under existing law, interest on the Bonds and any profit on the

.sale of the Bonds are exempt from Massachusetts personal income taxes and the Bonds are exempt from Massachusetts personal property taxds. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual-or receipt:of interest on, theBonds., See "TAX EXEMPTION' herein.

$266,460,000 MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY REVENUE BONDS, MASSACHUSETS INSTITUTErOF TECHNOLOGY ISSUE, SERIES 0 (2008)

Dated:, Date of delivery Due: July 1, asý shown below The Series 0 Bonds.(the "Bonds") will be issued only as fully registered bonds withOut coupons, and, when issued, Wilf be registered in the name of Cede & Co., as Bondo-ner and nominee for The Depository Trust Company ("DTC"), New York, New York DTC willact as securities depository for the Bonds. Ptirchases of the Bonds will be madem bookentry forim Purchasers will not receive certificates representing their interests in.the Bonds purchased. So0long as Cede & Co. is the Bondowner, as, nominee ofDTC, references herein to the Bondowners or registered owners shallmean Cede & Co., as aforesaid, and shall not mean the'beneficial owners of the Bonds. See "THE BONDS -Book-Entry Only System"n hereinr.

Prncipal of and interest on the Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., New York, New York, as Trustee. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner,.,as more fully described herein.: Interest on the Bonds-will be payable:on July 1, 2009,. and semiannually thereafter on January 1 and July 1 of each year to the Bondowners of record aslof the close ofbusiness on the fifteenth day of the month preceding such interest payment date.

The-Bonds are subjectto redemption prior to maturity as more fully described herein.

The Bonds shall be special obligations of the Massachusetts Health and Educational-Facilities Authority (the "Authority..")

payable solely from theRevenues (as hereinafter defined) of the Authority, includingpayments to The Bank of New York Mellon Trust Company, N.A., New:.York, New:York, asTrustee, for the account of the Authority by the Massachusetts Institute of Technology (the "Institute") in accordance with the proviions ofthe Agreement (as defined herein). Such payments pursuant to the Agreement are a general obligation of the Institute, Reference is made to this Official Statement for pertinent security provisions of the Bonds.

THE BONDS( SHALL NOT BE DEEMED TO*CONSTITUTE A DEBT OR LIABILITY OF*THE COMMONWEALTH OF'MASSACHUSETrS ORANY POL.ITICA SUBDIVISION THEREOF, OR A PLEDGE OF THE FAITH AND CREDIT

'OF THE COMMONWEALTH:OF MASSACHuSE'rs OR ANYPOLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES PROVIDED UNDER :THE AGREEMENT. NEITHER.THE FAITH AND C.

CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH ORANY POLITICAL SUBDIMSION THEREOF IS PLEDGED TO THERPAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE ACT DOES NOT IN ANY WAY CREATE A SO-CALLED MORAL OBLIGATION OF THE COMMONWEALTH TO PAY DEBT SERVICE [IN THE EVENT OF DEFAULT BY THE INSTITUTE. THE AUTHORITY DOES NOT HAVE TAXING POWER.

$10,000,000 4.00%Bonds due July 1, 2016 -

Yield 3.60% CUSIP No. 57586ECG4 778,0y000i000 5.00% Bonds due July 1, 2016 - Yield 3.60% CUSIP No. 57586ECH2

$23,485,000 5.00% Bonds due July 1,2026 -

Yield 5.28% CUSI9 No. 57586ECJ8 847,975,000 5.75% Bonds due July 1, 2026.- Yield 5.28*% CUSIP No. 57586ECK5

$42,000,000 5.50%' Bonds due July 1, 2036-Yield 5.70% CUSIP No. 57556ECL3

$65,000,000 6.00% Bonds due July 1, 2036 -

Yield 5.70*% CUSIP No. 57586ECM1 The Bonds are offered when, as and if issued and received by the Underwriters, subject to prior sale, to withdrawal or modifycationof the offer without notice, and to the approval of ter legality and certain other matters by Edwards Angell Palmer & Dodge Iii, Boston, Massachusetts, Bond Counsel to the Authority. Certain legal matters will be passed upon.

for the Institute by itscounsel, Mintz, Levin, Cohn, Ferris, Govsky and Popeo, P.C.I Boston, Massachusetts. Certain legal Is d

sed uponfor.thOeUnderwriters by, their iounsel, Orrick, Herrington & Sutcliffe LLP, New York, New York.

is ected tht onds in definitive form'will be available for delivery to DTC in New York, New York, on or' about CJanuary 8,.2009..

CAPITAL Morgan Stanley Dated" December 10, 2008

• Yield to the July 1, 2018 optional redemption date.

CONTINUING DISCLOSURE The Authority has determined that. no financial or operating data concerning the Authority is material to.

an evaluationof the offering.of the-Bonds or to any decision to purchase, hold or sell the. Bonds'and the.Authority will not provide any such-,information.

The Institute has undertaken all responsibilitiesfior-any cont!nuing.

disclosure to owners of the Bonds as described below*, and the Authority shall have 'no liability-to the owners of the Bonds orf ahyb other. person with -espect to Securities and.Exchange Commission Rule 15c2-12.

The Institute has.covenanted for the benefit of holders and beneficial owners of the Bonds to provide certain financial information relating to the Institute (the "Annual Report") by not later than. 180 days afterthe end.

ofeachfiscal year, commencing with the report for the 2009 fiscal year, and to provide notices of the occurrence of ceriain enumerated events,-'if material. The Annual Report and the notices of material' events will be filed by the. Institute or. a dissemination agentz with each Nationally Recognized Municipal Securities Information Repository and with the State Repository, if any. These covenants have been. made, in order to" assist the Underwriters in complying with Securities and Exchange Commission Rule. 15c2-12(b)(5) (the "Rule").

On the date of delivery of the offered Bonds, 'the Institute'and the Trustee-will enter into the Continuing Disclosure Agreement substantially in the.form attached hereto as Appendix E -. "FORM OF CONTINUING DISCLOSURE AGREEMENT."

The Institute has never failed to comply in all material respects-with any previous undertakings with regard to the Rule to provide annual reports or notices of material events*, except that'the filing with respect to A

fiscal year 2006 was not made 'in a timely manner.

COMMONWEALTHNOTLIABLE ON THE BONDS:

The Bonds shall-not be deemed to constitute a debt or liability of the Commonwealth or any political subdivision thereof, or a pledge, of the faith and credit_.of the Commonwealth or any such political subdivision, but shall be payable solely from the Revenues derived by the Authority Under the Agreement Neither the faith and credit nor the taxing power 'of the Commonwealth or of any political subdivision thereof is pledged to the' payment of the principal 'ofor interest: on the :Bonds. The Act does not in any, way create' a so-called moral obligation of the Commonwealth or of any political subdivision thereof to pay debt service in the event.of default by the Institute. The Authority does not.have taxing power.

Moody's Investors Service, Inc. and St n Division of the McGraw-Hill Companies, Inc.

have assighedratiigs of"Aaa"'and '"AA'A" respectively,. to the'Bonds., Such ratings reflect only the views of such Organizations and any desired explanation of the significance of such ratings should'be obtained from the-rating agency furnishing the same, at the 'following addresses: Moody's Investors Service, Inc., 7 World Trade Center, 250 Greenwich Street_. NewYork, New York 10007; and Standard & Poor's,.55 Water Street, New York,. New York 10041. 'Generally, a. rating'agency'bases its rating on the information and materials-furnished to it, and. on investigations, studies' and assumptions of its own.

The above ratings are not. recommendations to buy, sell or own the Bonds, and. such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any or all.ratings may have an adverse effect on the market price of the Bonds..

UNDERWRITING The Bonds are being purchased for reoffering by Barclays Capital Inc., as. representative of the Underwriters. The Underwriters have agreed to purchase the Bonds.at an aggregate 'discount of $1,218,273.77.

from the public offering prices or yields'set forth on the cover page hereof and will be rcinmbursed for certain Report of the Treasurer for the year ended June 30, 2009 PIT Massachusetts Institute of Technology

Report of the Treasurer for the year ended June 30, 2009 Massachusetts Institute of Technology

The Corporation 2008-2009 as ofJune 30, 2009 Chairman: Dana G. Mead*

President: Susan Hockfield*

Executive Vice President and Treasurer: Theresa M. Stone*

Vice President for Institute Affairs and Secretary: Kirk D. Kolenbrander*

Life Members John S. Reed; Shirley A. Jackson; Raymond S. Stata*; David H. Koch; PatrickJ. McGovern; Robert A. Muh; Denis A. Bovin*; James A. Champy*; Judy C. Lewent; A. Neil Pappalardo*; Arthur Gelb; Edie N. Goldenberg; Robert M. Metcalfe; Kenan E. Sahin; John K. Castle; Susan E. Whitehead; Charles M. Vest; Brian G. R. Hughes; Norman E. Gaut; L. RobertJohnson; ArthurJ. Samberg*.

Members Barrie R. Zesiger*; Gordon M. Binder; Gururaj Deshpande; Linda C. Sharpe; John A. Thain; Thomas P. Gerrity; Mark P. Gorenberg; Scott P. Marks, Jr.; Marjorie M.T Yang; James H. Simons; Alan G. Spoon; Lawrence K. Fish; David D. Ho; Abigail P. Johnson; Robert B. Millard*; Carly S. Fiorina; Anita K. Jones*; Paula J. Olsiewski; Sanjay K. Rao; Milton H. Roye, Jr.; Martin Y. Tang; Robert L. Blumberg; R. Erich Caulfield; Raymond C. Kurzweil; Kenneth Wang; David A. Berry; James A. Lash; Paul E Levy; Megan J. Smith; Henri A. Termeer; Chiquita V White*; 0. Reid Ashe, Jr.;

John W. Jarve; Frederick A. Middleton, Jr.; Barun Singh; Diana C. Walsh; Ursula M. Burns; Diane B. Greene; Helen Greiner; Harbo P. Jensen; Marta M. Luczynska; Victor J. Menezes; Peter L. Slavin; Laura D. Tyson; Tony Keng Yam Tan.

President of the Association of Alumni and Alumnae Antonia D. Schuman Representatives of the Commonwealth Governor: Deval L. Patrick Chief Justice of the Supreme Judicial Court: Margaret H. Marshall Secretary of Education: S. Paul Reville Life Members Emeriti Irdnde duPont, Jr.; John C. Haas; Norman B. Leventhal; George P. Gardner; Mitchell W Spellman; D. Reid Weedon, Jr.;

Colby H. Chandler; Carl M. Mueller; Joseph G. Gavin, Jr.; Louis W. Cabot; Christian J. Matthew; Howard W. Johnson; Paul M. Cook; William S. Edgerly; Frank Press; Edward E. David, Jr.; Emily V. Wade; Angus N. MacDonald; Kenneth H. Olsen; George N. Hatsopoulos; Charles H. Spaulding; Mary Frances Wagley; Michael M. Koerner; Morris Tanenbaum; Breene M. Kerr; W Gerald Austen; Richard P Simmons; Morris Chang; Paul E. Gray; Alexander W. Dreyfoos, Jr.; Ronald A. Kurtz; DuWayne J. Peterson, Jr.

Members' names are listed in.chronological order of election to each category.

• member of the Executive Committee

Table of Contents

" Report of theTreasurer...............................................

5-8

" Financial Statements The financial statements summarize the finances of MIT for the fiscal years 2008 and 2009 Statem ents of Financial Position..............................................

9 Statem ents of Activities.................................................

10-11 Statem ents of C ash Flows...................................................

12 N otes to Financial Statem ents............................................

13-32 Report of Independent Auditors.............................................

33

• Additional Information Five-Year Trend Analysis................................................

34-36

Report of the Treasurer To Members of the Corporation General Fiscal 2009 was a notable year for MIT from a financial perspective. Guided by the comprehensive financial planning work conducted in 2008, we entered 2009 with a balanced budget for the first time in many years.

As the worldwide economic crisis unfolded in the fall, we recognized likely effects on our future support from endowment, as well as possible pressures on gifts and grants to MIT, net tuition (after needed financial aid), and research funding. By carefully managing liquidity and expenses, MIT concluded 2009 with the general Institute budget and consolidated operating results in line with our plan.

MIT was also able to secure $610.0 million of tax-exempt financing despite market turbulence and, as a result, will complete construction of three major new buildings, the Koch Institute for Integrative Cancer Research, the Sloan School of Management, and the Media Lab and School of Architecture and Planning, over the next eighteen months.

Starting in the fall and through early spring, administrative units and academic departments, labs, and centers focused on strategies to operate with reduced budgets. Projections were developed that indicated a potential need to reduce expenditures by ten to fifteen percent within two to three years. Initial savings have been achieved in 2009.

With additional 2010 budgeted savings of at least five percent, about half of the needed reductions will have been achieved. The majority of units are planning to reach ultimate required reductions in the 2011 budget cycle.

In addition to these unit-based efforts, the Institute-wide Planning Task Force, through nine separate working groups, developed recommendations for improvements to MIT's academic, research, and administrative activities aimed at strengthening our ability to fulfill MIT's mission while reducing required funding. The work of this task force, which included close to 200 faculty, staff, and students working in cross-organizational groups, has been an impressive demonstration of MIT's culture of tackling problems and of our community's commitment to the Institute's mission.

As we plan for future years, the level of endowment support is an important factor.- Our endowment investment returns for 2009 were down 17.1 percent. When adjusted for planned support to MIT during 2009, endowment funds before pledges at June 30, 2009 were $7,982.0 million, down 20.7 percent from June 30, 2008 levels of $10,068.8 million. Consolidated net assets at year end were $9,946.4 million as ofJune 30, 2009, down $2,823.6 million from net assets of $12,770.0 million in 2008. The decrease in net assets reflects the effect of the economy's impact on investment performance across all invested assets including endowment, working capital, and retirement assets.

We are appreciative of the MIT community - our alumni, donors, board members, research partners, faculty and staff, colleagues, and students - for their financial support, advice, and collaboration that were most generously offered as we navigated this challenging year for MIT We are optimistic that, with their continued involvement, MIT will emerge from this global economic contraction stronger, more flexible, and better equipped to fulfill the Institute's mission for the nation and the world.

Following are additional details on MIT's financial position, operating activities, gifts and pledges, investments, endowments, fixed assets, and borrowings.

Financial Position Net assets are presented in three categories to recognize the significant ways in which universities are different from profit-making organizations. These categories reflect the nature of the restrictions placed on gifts by donors.

Permanently restricted net assets represent those gifts for which the original principal is to be preserved. This category includes gifts and pledges to true endowment together with assets held in trust, such as life income funds, which, when received or matured, will be added to the endowment. The increase in permanently restricted net assets of $67.0 million, or 3.5 percent, to a total of $1,985.4 million, primarily reflects new gifts and pledges made to restricted endowment funds.

Temporarily restricted net assets represent those gifts that ultimately can be used to fund operating or capital expenditures. They require an event or lapse of time to occur before they are available for spending. Over 90 percent of the assets in this category are accumulated market gains on permanently restricted endowment funds.

This category also includes pledges not permanently restricted, gifts for construction projects that have not been completed and put into use, and life income funds, which, upon maturity, will be available for spending. The decrease in temporarily restricted net assets of $1,364.3 million, or 23.7 percent, to a total of $4,401.0 million, primarily results from the decrease in the market value of assets held in permanently restricted funds. The Commonwealth of Massachusetts requires that all universities located within the Commonwealth report accumulated market gains on both permanently and temporarily restricted net assets as temporarily restricted net assets until appropriated for use.

SUMMARY

5

Unrestricted net assets comprise all the remaining economic resources available to MIT. This category includes MIT's working capital and those assets designated by MIT as "funds functioning as endowment," to be invested over the long term to generate support for MIT's operations and capital projects. Also included in this category are current funds received from donors for restricted purposes that, under the accounting rules, are categorized as unrestricted if MIT spends an equivalent amount of unrestricted funds for the same purpose. Unrestricted net assets decreased

$1,526.3million, or 30.0 percent, to a total of $3,559.9 million. The decrease in unrestricted net assets is due to two major factors: first, the decrease in endowment value and second, the net decrease in the overfunded status of retirement plan assets resulting from decreased fair value of plan assets and increased benefit obligations. During 2009 and 2008, unrestricted net assets were reduced by $24.0 million and $0.3 million respectively, to offset investment losses on permanently restricted net assets where market value dropped below book value. This amount will be restored to unrestricted net assets in-line with subsequent market value increases.

Operations MIT's operations include tuition, research revenues, unrestricted gifts and bequests for current use, fees and services, other programs, investment income, the portion of net investment gains distributed to funds under MIT's spending policy, auxiliary revenues, payments on pledges for unrestricted gifts, and operating expenditures. The Statements of Activities, on pages 10 and 11, show that operating revenues exceeded operating expenses by $182.7 million in 2009, due primarily to unspent distributions from the endowment. In 2008, operating revenues exceeded operating expenses by $114.2 million.

Operating revenues increased $235.5 million, or 9.8 percent, to $2,644.0 million due primarily to increases in distributed net gains on investments and research revenues and offset by a decrease in investment income. Operating expenses increased $167.0 million, or 7.3 percent, to a total of $2,461.3 million driven primarily by increases in salaries and wages and supplies and services.

Net tuition revenue decreased $11.7 million, or 5.1 percent, to $217.4 million. Reflecting MIT's commitment to increasing the affordability of.undergraduate education, financial support for undergraduate students from MIT sources grew 12.5 percent.

In 2009, MIT experienced a 10.4 percent increase in research revenues, from $1,245.2 million to $1,375.1 million. On-campus research programs are carried out at departments, labs, and centers where research revenue totaled $690.8 million in 2009, an 11.1 percent increase over 2008. Included in the campus figure are Broad Institute research revenues of $166.3 million, which grew 17.0 percent over 2008. At Lincoln Laboratory, research revenue totaled $669.8 million in 2009, an increase of 8.1 percent. Research at the Lincoln Laboratory is funded primarily under a contract with the Department of Defense (Air Force). At the Singapore-MIT Alliance for Research and Technology (SMART), $14.5 million of research revenue was generated during 2009, its second year of operation, for research activities taking place in Singapore.

On MIT's campus, the Department of Health and Human Services (primarily through the National Institutes of Health) was the largest research sponsor, growing $29.6 million, or 13.1 percent over 2008, and providing 37.0 percent of MIT's campus research revenue in 2009. Overall, federal sponsorship of campus research grew 8.0 percent.

Federal sponsorship from the Department of Defense grew by $10.2 million, or 11.6 percent. National Aeronautics and Space Administration revenue increased $1.9 million, or 7.4 percent, while revenue from the National Science Foundation decreased $3.6 million, or 5.5 percent, over last year. Revenue from Department of Energy and other federal agencies remained close to 2008 levels. Nonfederal funding for campus research increased by $38.5 million, or 25.9 percent, in 2009 with the greatest increases coming from nonprofit foundations and foreign governments.

Research revenues include reimbursement from sponsors for both direct and indirect (facilities and administration) costs. MIT's modified total direct research expenditures (MTDC or "base"), that form the basis for recovery of indirect costs, increased by $57.8 million, or 8.6 percent.

Of this increase, $24.5 million is campus research; $33.3 million is Lincoln Laboratory and SMART research.

Revenue from fees and services decreased $5.9 million, or 3.6 percent, to $157.1 million. This was due primarily to decreased revenues from technology licensing, for which 2008 revenue included amounts related to a non-recurring legal settlement. Investment income, defined as dividends, interest, and rents, decreased $83.5 million, or 45.3 percent, to $100.6 million, due primarily to declining interest rates and economic conditions. Net asset reclassifications to operations of $57.8 million primarily reflect payments on unrestricted pledges received and released to operations in 2009.

Operating expenses increased $167.0 million, or 7.3 percent, to a total of $2,461.3 million in 2009. The largest component of the increase was sponsored research expense, which grew $112.6 million, or 10.7 percent. A significant contributor to this expense growth was The Broad Institute, where direct spending for sponsored research grew $23.0 milliorf to a total of $121.3 million. Instruction and unsponsored research increased $39.6 million, or 6.2 6

MIT REPORT OF THE TREASURER 2009

percent. General and administrative expenses increased

$10.6 million, or 2.2 percent. Employee benefits expenses increased $3.4 million, or 2.0 percent, due primarily to an increase in costs for employee and retiree medical benefits, employment tax, and disability benefits, offset by pension credits resulting from the overfunded status of MIT's defined benefit plan in prior years.

Gifts and Pledges With the successful public launch of the Campaign for Students on October 3, 2008, the Campaign now stands at a total of $351.3 million, with 70.3 percent of the $500 million goal raised. Gifts support scholarships, fellowships, educational programming, and student life activities. The MIT Energy Initiative (MITEI) now has 1,154 donors, and has raised $54.1 million as ofJune 2009.

Gifts and pledges for 2009 totaled $303.9 million, a decrease of 21.3 percent from the 2008 total of $386.0 million. Gifts from individuals represented 35.6 percent of new gifts and pledges, down from 50.9 percent in the previous year. Gifts from foundations represented 40.9 percent of new gifts and pledges in 2009, up from 35.2 percent in the previous year. Gifts from corporations and other sources represented 23.5 percent, up from 13.9 percent in 2008. New gifts and payments on pledges for unrestricted purposes were 7.7 percent of the total, compared with 3.9 percent in 2008. The largest category of gifts for 2009 was Research and Education, which accounted for 62.0 percent of the total.

Investments Investments at fair value were $9,519.4 million, a decrease of $1,789.0 million, or 15.8 percent, from the $11,308.4 million of the previous year. Over the past five years, total invested assets have increased from $7,250.5 million to

$9,519.4 million while distributions for expenditures have totaled $2,063.4 million. More specific information is included in Note B to the Financial Statements.

The financial statements include both realized and unrealized gains and losses on investments. Realized and unrealized gains and losses, including those related to the disposition of fixed assets, decreased from a gain of $154.8 million in 2008 to a loss of $1,854.4 million in 2009.

The asset allocation among fixed income, equity, marketable alternatives, and real estate investments remained similiar to 2008 during 2009. Equity, marketable alternatives, and real estate investments at market value were 84.5 percent of the investments as of June 30, 2009, as compared to 88.5 percent atJune 30, 2008.

The Board of Directors of the MIT Investment Management Company (MITIMCo) held four regularly scheduled meetings during the fiscal year. During 2009, MITIMCo, in conjunction with MIT's senior administration, acted defensively to manage liquidity in the turbulent markets while still capturing investment opportunities in the equity and marketable alternative arenas consistent with its investment policies and asset allocation targets. Equities include investments in venture capital and private equity. Marketable alternatives include investments in event arbitrage, distressed debt and hedge funds. The alternative investments are managed by more than one hundred independent organizations primarily through pooled investment partnerships.

Endowment and Similar Funds The market value of investments in the endowment and similar funds totaled $7,982.0 million as of June 30, 2009.

The endowment assets are managed to maximize total investment return relative to appropriate risk. Investment income and a portion of gains are distributed for spending in a manner that, over the long term, retains for reinvest-ment an amount at least equal to the anticipated rate of inflation. Endowment funds invested in Pool A, MIT's primary investment pool, receive distributions based on the number of units held. Units are valued monthly and new gifts or other funds transferred to Pool A are credited with Pool A units based on the previous month's market value of the units in Pool A.

Land, Buildings, and Equipment Fixed assets had a net book value of $2,120.6 million as of June 30, 2009, an increase of 9.4 percent from $1,938.9 million as of June 30, 2008. The most significant area of increase this past fiscal year was in the area of educational buildings.

Major ongoing construction projects include a new 163,000-square-foot building for the Media Lab and School of Architecture and Planning to be completed in October 2009, a new 217,000-square-foot building for the Sloan School of Management with a three-level, 430-car garage located directly under the new building and scheduled for occupancy in 2010, a new 367,000-square-foot laboratory research building for the Koch Institute for Integrative Cancer Research to be completed by December 2010, significant improvements to Vassar Street west of Massachusetts Avenue, various utility and infrastructure improvements, and exterior rehabilitation of the undergraduate dormitory at 305 Memorial Drive.

More extensive renovations related to 305 Memorial Drive have been deferred as part of a portfolio of measures

SUMMARY

7

designed to preserve financial flexibility. These projects are part of a new construction initiative that adds state-of-the-art facilities for emerging areas of research, increases educational infrastructure that supports residential and community life, and revitalizes the physical campus. The major project completed during 2009 was the new 540-bed graduate residence at 235 Albany Street.

Borrowings Total borrowings outstanding increased from $1,335.4 million as of June 30, 2008, to $1,735.8 million as ofJune 30, 2009, primarily due to the issuance of $610.0 million in new, tax-exempt debt to finance major construction projects currently underway and to replace $203.0 million in line of credit financing. MIT's publicly held debt continues to be rated AAA by both Moody's and Standard & Poor's. More specific information is included in Note G to the Financial Statements.

Summary MIT's full financial statements and footnotes follow, more fully describing our financial position and activities through June 30, 2009. In closing, we again thank the MIT community for its generous financial support, advice, and collaboration throughout the year and reaffirm our optimism for the future.

Respectfully submitted, Theresa M. Stone Executive Vice President and Treasurer September 16, 2009 8

MIT REPORT OF THE TREASURER 2009

Massachusetts Institute of Technology Statements of Financial Position at June 30, 2009 and 2008 (in thousands of dollars) 2009 2008 2009 2008 Assets C ash......................................................................

A ccounts receivable, net........

Pledges receivable, net, at fair value.............................................

Contracts in progress, principally U.S. Government...............................

Deferred charges, inventories and other assets....................................

Student notes receivable, net..................................................

Investm ents, at fair value......................................................

Collateral for securities lending and minority interest..............................

Retirem ent plan asset-overfunded status.........................................

Land, buildings & equipment, (at cost $2,994,190 forJune 2009; $2,728,805 forJune 2008),

net of accum ulated depreciation................................................

T o tal assets..............................................................

Liabilities and Net Assets Liabilities:

Accounts payable, accruals and other liabilities................................

Liabilities due under life income fund agreements.................................

Collateral for securities lending and minority interest..............................

D eferred revenue and other credits.............................................

A dvance paym ents...........................................................

B orrow in gs.................................................................

Government advances for student loans..........................................

Accrued benefit liabilities.....................................................

T otal liabilities...........................................................

Net Assets:

U nrestricted................................................................

Tem porarily restricted........................................................

Perm anently restricted.......................................................

T otal n et assets..........................................................

Total liabilities and net assets...............................................

77,387 241,024 464,736 85,821 57,457 48,953 9,519,413 168,306 165,842 2,120,613

$ 12,949,552 299,565 72,606 168,306 175,070 343,296 1,735,843 33,341 175,137 3,003,164 3,559,925 4,401,015 1,985,448 9,946,388

$ 12,949,552 81,106 223,790 443,303 67,938 62,316 47,327 11,308,429 363,516 922,338 1,938,919

$15,458,982 267,837 78,372 363,516 164,470 315,202 1,335,393 33,057 131,161 2,689,008 5,086,270 5,765,302 1,918,402 12,769,974

$15,458,982 The accompanying notes are an integral part of the financial statements.

FINANCIAL STATEMENTS 9

Massachusetts Institute of Technology Statements of Activities for the years ended June 30, 2009 and 2008 (in thousands of dollars)

Unrestricted --

i-Temporarily Restricted --

2009 2008 2009 2008 Operating Activities Operating Revenues:

Tuition and similar revenues, net of discount of

$214,383 in 2009 and $192,131 in 2008............

Research revenues:

D irect........................................

In direct......................................

Total research revenues..........................

Gifts and bequests for current use....................

Fees and services..................................

O ther program s...................................

Investm ent incom e................................

Net gains on investments, distributed.................

Auxiliary enterprises...............................

Net asset reclassification and transfers.................

Total operating revenue............................

Operating Expenses:

Salaries and w ages.................................

Em ployee benefits.................................

Supplies and services...............................

Subrecipient agreem ents............................

U tilities, rent, and repairs...........................

D epreciation.....................................

Interest expense...................................

Total operating expenses............................

Results of operations...............................

Non-Operating Revenues, Gains and Losses P ledges..........................................

G ifts and bequests.................................

Investm ent Incom e.................................

Net (loss) gain on investments and other assets..........

Distribution of accumulated investment gains...........

Net change in life income funds......................

Pension-related charges other than net periodic pension (cost)..........................

Net asset reclassifications and transfers..............

Total non-operating activities........................

(Decrease) Increase in net assets......................

Net assets at the beginning of the year................

Net assets at the end of the year......................

The accompanying notes are an integral part of the financial statements.

217,389 1,153,620 221,452 1,375,072 100,072 157,110 86,133 100,624 455,680 94,041 57,837 2,643,958 967,383 173,616 872,725 85,550 181,264 125,018 55,730 2,461,286 182,672 229,099 1,038,998 206,172 1,245,170 122,091 162,994 93,268 184,119 228,403 91,190 52,094 2,408,428 896,145 170,266 822,953 68,944 177,308 111,611 47,020 2,294,247 114,181 (686,881)

(151,590) 1,775 (825,440)

(46,881)

(1,709,017)

(1,526,345) 5,086,270

$ 3,559,925 65,515 (78,579)

(1,053)

(188,325)

(42,313)

(244,755)

(130,574) 5,216,844

$ 5,086,270 92,836 2,730 5,084 (1,143,063)

(304,090)

(4,669)

(13,115)

(1,364,287)

(1,364,287) 5,765,302

$ 4,401,015 146,116 9,967 6,384 81,041 (151,306) 396 (11,302) 81,296 81,296 5,684,006

$ 5,765,302 10 MIT REPORT OF THE TREASURER 2009

Massachusetts Institute of Technofogy Statements of Activities for the years ended June 30, 2009 and 2008 (in thousands of dollars) rF-Permanently Restricted Fr-Total 1

2009 2008 2009 2008 217,389 229,099 1,153,620 221,452 1,375,072 100,072 157,110 86,133 100,624 455,680 94,041 57,837 2,643,958 967,383 173,616 872,725 85,550 181,264 125,018 55,730 2,461,286 182,672 1,038,998 206,172 1,245,170 122,091 162,994 93,268 184,119 228,403 91,190 52,094 2,408,428 896,145 170,266 822,953 68,944 177,308 111,611 47,020 2,294,247 114,181 205,972 57,889 9,935 154,765 (228,403) 750 (188,325)

(52,094)

(39,511) 74,670 12,695,304

$ 12,769,974 Operating Activities Operating Revenues:

Tuition and similar revenues, net of discount of

$214,383 in 2009 and $192,131 in 2008 Research revenues:

Direct Indirect Total research revenues Gifts and bequests for current use Fees and services Other programs Investment income Net gains on investments, distributed Auxiliary enterprises Net asset reclassifications and transfers Total operating revenues Operating Expenses:

Salaries and wages Employee benefits Supplies and services Subrecipient agreements Utilities, rent, and repairs Depreciation Interest expense Total operating expenses Results of operations Non-Operating Revenues, Gains and Losses Pledges Gifts and bequests Investment income Net (loss) gain on investments and other assets Distribution of accumulated investment gains Net change in life income funds Pension-related charges other than net periodic pension income (cost)

Net asset reclassifications and transfers Total non-operating activities (Decrease) Increase in net assets Net assets at the beginning of the year Net assets at the end of the year 35,028 73,224 4,046 (24,436)

(22,975) 2,159 67,046 67,046 1,918,402 S

1,985,448 59,856 47,922 3,551 8,209 1,482 1,407 1,521 123,948 123,948 1,794,454

$ 1,918,402 127,864 75,954 9,130 (1,854,380)

(455,680)

(25,869)

(825,440)

(57,837)

(3,006,258)

(2,823,586) 12,769,974

$ 9,946,388 The accompanying notes are an integral part of the financial statements.

FINANCIAL STATEMENTS I1

Massachusetts Institute of Technology Statements of Cash Flows for the years ended June 30, 2009 and 2008 (in thousands of dollars) 2009 2008 Cash Flow from Operating Activities:

(Decrease) increase in net assets.

$ (2,823,586)

Adjustments to reconcile change in net assets to net cash provided by operating activities:

N et loss (gain) on investm ents..............................................

Change in retirement plan asset, net of change in accrued benefit liability...........

D epreciation............................................................

G ifts of securities........................................................

N et loss on life incom e funds...............................................

Amortization of bond premiums and discounts and other adjustments..............

Change in operating assets and liabilities:........................................

Pledges receivable........................................................

A ccounts receivable.......................................................

C ontracts in progress.....................................................

Deferred charges, inventories and other assets.................................

Accounts payable, accruals and other liabilities, excluding building and equipm ent accruals....................................................

Liabilities due under life income fund agreements..............................

D eferred revenue and other credits..........................................

A dvance paym ents........................................................

Reclassify investm ent incom e..................................................

Reclassify contributed securities received as payment on pledges.....................

Reclassify contributions restricted for long-term investment.........................

Net cash (used in) provided by operating activities...........................

Cash Flow from Investing Activities:

Purchase of land, buildings and equipment.......................................

Purchases of investm ents.....................................................

Proceeds from sale of investments, including contributed securities...................

Student notes issued.........................................................

Collections from student notes.................................................

N et cash used in investing activities.......................................

Cash Flow from Financing Activities:

Proceeds from contributions restricted for:

Investm ent in endowm ent.................................................

Investm ent in plant and other..............................................

Less: contributed securities, gifts for endowment, plant and other.................

Total proceeds from contributions.........................................

Increase in investment income for restricted purposes..............................

Proceeds from borrowings and re-marketing of swap related to borrowings............

Repaym ent of borrowings.....................................................

Increase in government advances for student loans.................................

Net cash provided by financing activities...................................

N et decrease in cash.........................................................

Cash at the beginning of the year...............................................

C ash at the end of the year....................................................

1,854,380 800,472 125,018 (1,894) 38,230 (2,838)

(21,433)

(17,234)

(17,883) 4,859 22,928 (5,766) 10,600 28,094 (9,130)

(22,479)

(75,954)

(113,616)

(299,049)

(21,221,423) 21,105,189 (16,016) 14,019 (417,280) 73,224 2,730 (2,145) 73,809 9,130 649,150 (205,196) 284 527,177 (3,719) 81,106 77,387

$ 74,670 (154,765) 179,589 111,611 (5,554) 12,174 (2,039)

(111,860)

(16,455)

(14,793)

(1,536)

(830) 3,711 2,050 36,452 (9,935)

(34,535)

(57,889) 10,066 (285,877)

(65,738,595) 65,687,444 (15,673) 17,599 (335,102) 47,922 9,967 (13,457) 44,432 9,935 261,815 (2,085) 301 314,398 (10,638) 91,744 81,106 The accompanying notes are an integral part of the financial statements.

12 1MIT REPORT OF THE TREASURER 2009

Notes to Financial Statements A. Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America. The financial statements include MIT and its wholly owned subsidiaries.

Net assets, revenues, expenses, gains and losses are classi-fied into three categories based on the existence or absence of donor-imposed restrictions. The categories are perma-nendy restricted, temporarily restricted and unrestricted net assets. Unconditional promises to give (pledges) are recorded as receivables and revenues within the appropriate net asset category.

Permanently restricted net assets include gifts, pledges, trusts and remainder interests, and income and gains that are required by donors to be permanently retained.

Pledges, trusts and remainder interests are reported at their estimated fair values.

Temporarily restricted net assets include gifts, pledges, trusts and remainder interests, and income and gains that can be expended but for which restrictions have not yet been met. Such restrictions include purpose restrictions where donors have specified the purpose for which the net assets are to be spent, or time restrictions imposed by donors or implied by the nature of the gift (capital projects, pledges to be paid in the future, life income funds) or by interpretations of law (net gains on permanently restricted gifts, which have not been appropriated for spending). Net unrealized losses on permanently restricted endowment funds for which the book value exceeds market value are recorded as a reduction to unrestricted net assets.

Unrestricted net assets are all the remaining net assets of MIT. Donor-restricted gifts and unexpended restricted endowment income that are received and either spent, or the restriction is otherwise met within the same year, are reported as unrestricted revenue. Gifts of long-lived assets are reported as unrestricted revenue. Gifts specified for the acquisition or construction of long-lived assets are reported as temporarily restricted net assets until the monies are expended and the buildings are put into use, at which point they are reclassified to unrestricted net assets.

Net asset reclassifications and transfers consist primarily of payments on unrestricted pledges and use of building funds in accordance with donor restrictions. Expirations of temporary restrictions on net assets and the release of per-manent restrictions by a donor are also reported as reclas-sifications of net assets from temporarily or permanently restricted net assets to unrestricted net assets.

MIT administers its various funds, including endowments, funds functioning as endowments, school or departmental funds and related accumulated gains in accordance with the principles of "Fund Accounting." Gifts are recorded in fund accounts and investment income is distributed to funds annually. Income distributed to funds may be a combination of capital appreciation and yield pursuant to MIT's total return investment and spending policies. Each year, the Executive Committee of the Corporation approves the rates of distribution of investment return to the funds from MIT's investment pools. See Note K for further information on income distributed to funds.

MIT's operations include tuition, research revenues, unrestricted gifts and bequests for current use, fees and services, other programs, investment income, the portion of net investment gains distributed to funds under MIT's spending policy, auxiliary revenues, payments on pledges for unrestricted gifts, and operating expenditures. Results of operations are displayed in the Statements of Activities.

MIT is a nonprofit organization that is tax exempt under Section 501(c)(3) of the Internal Revenue Code, originally recognized in October 1926, with the most recent affirma-tion letter dated July 2001.

Cash Current banking arrangements do not require outstand-ing checks and wires to be funded until actually presented for payment. Outstanding checks and wires in the amount:

of $22.6 million and $21.4 million in 2009 and 2008, respectively, are recorded in accounts payable until they are presented to our banks for payment. Certain cash balances, totaling $42.1 million and $41.0 million in 2009 and 2008, respectively, are restricted for use in connection with gov-ernment research.

Sponsored Research Revenue associated with contracts and grants is recognized as related costs are incurred. The capital costs of buildings and equipment are depreciated over their estimated life cycle and the sponsored research recovery allowance for depreciation is treated as indirect research revenue. MIT has recorded reimbursement of indirect costs relating to sponsored research at negotiated fixed billing rates. The income generated by the negotiated rates is adjusted each fiscal year to reflect any variance between the negotiated fixed rates and rates based on actual cost. The actual cost rate is audited by the Defense Contract Audit Agency (DCAA) and a final fixed-rate agreement is signed by the NOTES TO FINANCIAL STATEMENTS 13

A. Accounting Policies (continued)

U.S. Government and MIT. The variance between the negotiated fixed rate and the final audited rate results in a carry-forward (over or under recovery). The carry-forward will be included in the calculation of negotiated fixed billing rates in future years. Any adjustment in the rate is charged or credited to unrestricted net assets.

Land, Buildings and Equipment Land, buildings and equipment are shown at cost or fair value as of the date of a gift, net of accumulated deprecia-tion. When expended, costs associated with the construc-tion of new facilities are shown as construction in progress until such projects are completed. Depreciation is com-puted on a straight-line basis over the estimated useful lives of 25 to 50 years for buildings, 3 to 25 years for equipment, and 4 to 6 years for software. Fully depreciated assets were removed from the financial statements in the amount of

$42.5 million and $52.3 million during 2009 and 2008, respectively. Land, buildings and equipment at June 30, 2009 are shown in Table 1 below.

Depreciation expense was $125.0 million in 2009 and

$111.6 million in 2008. Net interest expense of $10.5 million and $4.8 million was capitalized during 2009 and 2008, respectively, in relation to MIT's construction projects.

Tuition and Financial Aid Tuition and similar revenues, shown in Table 2 below, include tuition and fees in degree programs as well as tuition and fees for executive and continuing education programs at MIT Table 2. Tuition and Similar Revenues (in thousands of dollars) 2009 2008 Tuition revenue........

409,195 387,803 Executive and continuing education revenues.....

22,577 33,427 Total................

431,772 421,230 Less: tuition discount...

(214,383)

(192,131)

Net tuition...........

217,389 229,099 Tuition support is awarded to undergraduate students by MIT based on need. Graduate students are provided with tuition support in connection with research assistance, teaching assistance and fellowship appointments. Total financial aid granted to students was $376.1 million and

$349.5 million in 2009 and 2008, respectively. Of that amount, $118.7 million in 2009 and $117.6 million in 2008, was aid from sponsors. Tuition support from MIT sources is displayed as tuition discount. Components of financial aid are detailed in Table 3.

Table 1. Land, Buildings and Equipment (in thousands of dollars) 2009 2008 L and.................

Educational buildings...

Equipment............

Software..............

Total................

Less: accumulated depreciation...........

Construction in progress..............

Software projects in progress..............

Land, buildings and equipment...........

51,944 2,372,275 220,709 33,084 2,678,012 51,944 2,181,649 187,670 43,27.3 2,464,536 (873,577)

(789,886) 309,468 6,710

$2,120,613 260,991 3,278

$1,938,919 Table 3. Financial Aid (in thousands of dollars) 2009 I

r 2008 Institute External Total Institute External Total Sources Sponsors Financial Aid Sources Sponsors Financial Aid Tuition support............

$ 214,383 51,883 266,266

$ 192,131 52,873 245,004 Stipends.................

15,566 11,943 27,509 13,418 12,229 25,647 Student salaries...........

27,374 54,913 82,287 26,421 52,471 78,892 Total..................

$257,323

$ 118,739 376,062

$ 231,970

$ 117,573

$ 349,543 14 MIT REPORT OF THE TREASURER 2009

A. Accounting Policies (continued)

Gifts and Pledges Gifts and pledges are recognized when received. Gifts of securities are recorded at their fair value at the date of con-tribution. Gifts of equipment received from manufacturers and other donors during 2009 and 2008 were put into use and recorded by MIT at fair value. Gifts of equipment totaled $2.0 million and $0.6 million in 2009 and 2008, respectively. Pledges in the amount of $464.7 million and

$443.3 million are recorded as receivables with the revenue assigned to the appropriate classification of restriction for 2009 and 2008, respectively. Pledges consist of unconditional written promises to contribute to MIT in the future and are recorded after discounting the future cash flows to the present value.

MIT records items of collections as a gift at nominal value.

They are received for educational purposes and generally displayed throughout MIT. They are not disposed of for financial gain or otherwise encumbered in any manner.

Advance Payments Amounts received by MIT from the U.S. Government, cor-porations, industrial sources, foundations and other non-MIT sponsors under the terms of agreements that generally require the exchange of assets, rights, or privileges between MIT and the sponsor are recorded as advance payments.

Revenue is recognized when MIT fulfills the terms of the agreement.

Life Income Funds MIT's life income fund agreements with donors consist primarily of irrevocable charitable gift annuities, pooled income funds, and charitable remainder trusts for which MIT serves as trustee. Assets are invested and payments are made to donors and other beneficiaries in accordance with the respective agreements. MIT records the assets that are associated with each life income fund at fair value and records as liabilities the present value of the estimated future payments at current interest rates to be made to the donors and beneficiaries under these agreements. Life income fund liabilities are classified as Level 3 under the valuation hierarchy disclosed in Note B.

Recently Adopted Accounting Pronouncements SFAS No. 157 MIT adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157), as of July 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No.

157 applies to fair value measurements that are already required or permitted by other accounting standards and does not require any new fair value measurements. The statement defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

MIT adopted FASB Staff Position 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is NotActive (FSP 157-3), as of July 1, 2008. FSP 157-3 amends SFAS No. 157 to clarify the application of fair value in inactive markets and allows for the use of management's internal assumptions about future cash flows with appropriately risk-adjusted discount rates when relevant observable market data does not exist. The objective of SFAS No. 15 7 has not changed and continues to be the determination of the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date. The adoption of FSP 157-3 did not have a material effect on MIT's results of operations, financial position or liquidity.

MIT adopted the provisions of FASB Staff Position 157-4, Determining Fair Value When the Volume and Level ofActivity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4),

as of July 1, 2008, and applied them prospectively in 2009.

FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased and re-emphasizes that regardless of market conditions the fair value measurement is an exit price concept as defined in SFAS No. 157. The scope of this FSP does not include assets and liabilities measured under Level 1 inputs (quoted prices in active markets for identical assets).

SFAS No. 159 In conjunction with SFAS No. 157, FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for FinancialAssets and Financial Liabilities - including an Amendment of FASB Statement No. 115 (SFAS No. 159).

SFAS No. 159 allows an entity the irrevocable option to elect fair value to measure certain financial assets and liabilities under an instrument-by-instrument election, and establishes additional disclosure requirements. MIT elected the fair value option under the provisions of SFAS No.

159 in accounting for pledges receivable and life income fund liabilities as of July 1, 2008. The adoption of SFAS No. 159 did not have a material impact on MIT's financial statements.

NOTES TO FINANCIAL STATEMENTS 15

A. Accounting Policies (continued)

UPMIFA and FSP 117-1 SFAS No. 165 In July 2009, the Commonwealth of Massachusetts enacted a version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), which replaced Chapter 180A, Massachusetts Attorney General's June 1995 statement of position, the Uniform, Management Institutional Funds Act (UMIFA). The new law, which has an effective date of June 30, 2009, eliminates the historical dollar threshold and establishes prudent spending guidelines that consider both the duration and preservation of the fund. As a result of this enactment, subject to the donor's intent as expressed in a gift agreement or similar document, a Massachusetts charitable organization may now spend the amount of the principal and income of an endowment fund, even from an underwater fund, after considering the factors listed in the Act.

MIT adopted FASB Staff Position 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds (FSP 117-1), as of July 1, 2008. FSP 117-1 provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of UPMIFA. The adoption of FSP 117-1 had no impact on the way that MIT classifies donor-restricted endowment funds, but does require additional financial statement disclosures about MIT's endowment funds. The additional disclosures are included in Note K.

MIT adopted FASB Statement of Financial Accounting Standards No. 165, Subsequent Events (SEAS No. 165), as of June 30, 2009. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of SFAS No.165 did not have a material impact on MIT's financial statements. MIT has evaluated subsequent events through September 16, 2009, the date of financial statement issuance.

Non-Cash Items Non-cash transactions excluded from the Statements of Cash Flows include the (decrease) increase in collateral for securities lending and minority interest of ($195.2) million and $35.5 million, as well as $30.3 million and $21.5 million of accrued liabilities related to plant and equipment purchases, for 2009 and 2008, respectively.

Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclo'sure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications Certain June 3 0, 2008 balances previously reported have been reclassified to conform to the June 30, 2009 presentation.

B. Investments Investment transactions are accounted for on the trade date.

Realized gains and losses are recorded by MIT using the average cost basis. Premiums and discounts on securities purchased and securities sold short are amortized using the effective yield method over the life of the respective security when cash collection is expected and included in interest income (long investments) or interest expense (short investments). Dividend income is recorded on the ex-dividend date.

Cash equivalents include money market funds, commercial paper, banker acceptances and negotiable certificates of deposit.

MIT may utilize various derivative instruments, such as forwards, futures, interest rate, total return or currency swaps or forward contracts to increase or decrease its exposure to changes in the level of interest rates, underlying asset values or to partially offset exchange rate movements.

Derivative instruments are recorded at fair value. As of June 30, 2009, MIT had entered into several interest rate swap contracts. Certain of the contracts were executed to manage the interest rate risk associated with its Massachusetts Health and Educational Facilities Authority (MHEFA) variable rate debt portfolios; others were to manage overall interest rate risk of the portfolio. The interest-rate swap agreements were recorded at an estimated market value 16 MIT REPORT OF THE TREASURER 2009

B. Investments (continued) of ($9.8) million and ($25.0) million at June 30, 2009 and 2008, respectively, and the change in market value of ($6.9) million and ($10.6) million for 2009 and 2008 was included in non-operating net gain or loss on investments and other assets. Pending spot and forward currency contracts totaled

$0.6 million at June 30, 2009 and $1.8 million at June 30, 2008.

As discussed in Note A, as of July 1, 2008, MIT adopted SFAS No. 157 and has valued its investments in accordance with the principles of this standard.

SFAS No. 157 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity's own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS No. 157 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by MIT for financial instruments measured at fair value on a recurring basis. The three levels of inputs are as follows:

• Level I - Quoted prices in active markets for identical assets or liabilities. Market price data is generally obtained from relevant exchange or dealer markets.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities. Inputs are obtained from various sources including market participants, dealers, and brokers.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Table 4 below presents MIT's investments at fair value as ofJune 30, 2009, grouped by the SFAS No. 157 valuation hierarchy as defined above.

Table 4. Investments Quoted prices in active markets (Level 1) 2009 Significant other observable inputs (Level 2) 2008 Significant un-observable inputs (Level 3)

(in thousands of dollars)

Total fair value Total fair value Cash equivalents............

Fixed income...............

E quities...................

Marketable Alternatives......

Real estate.................

Perpetual trusts.............

Interest rate swaps..........

741,008 13,954 607,585 10,915 602,656 3

65,524 4,445,655 2,203,965 790,348 47,618

$ 7,553,110 751,923 682,134 5,053,243 2,203,965 790,348 47,618 (9,818)

$ 9,519,413 433,989 828,555 6,305,729 2,898,174 800,054 66,912 (24,984)

$ 11,308,429 Total investments........... $ 1,362,547 (9,818)

$ 603,756 NOTES TO FINANCIAL STATEMENTS 17

B. Investments (continued)

Investments included in Level 3 primarily consist of MIT's ownership in alternative investments (principally limited partnership interests in hedge, private equity, real estate, and other similar funds). Securities held by limited partnerships that do not have readily determinable fair values are determined by the general partner and are based on appraisals, or other estimates that require varying degrees of judgment. If no public market exists for the investment securities, the fair value is determined by the general partner taking into consideration, among other things, the cost of the securities, prices of recent significant placements of securities of the same issuer, and subsequent developments concerning the companies to which the securities relate. MIT has performed due diligence around its alternative investments to ensure they are recorded at fair value as of June 30, 2009 and 2008.

Interest rate swaps are valued using observable inputs, such as quotations received from the counterparty, dealers or brokers, whenever available and considered reliable.

In instances where models are used, the value of the interest rate swap depends upon the contractual terms of, and specific risks inherent in, the instrument as well as the availability and reliability of observable inputs. Such inputs include market prices for reference securities, yield curves, credit curves, measures of volatility, prepayment rates, and correlations of such inputs. The interest rate swap arrangements have inputs which can generally be corroborated by market data and therefore are generally classified within Level 2.

Perpetual trusts held by third parties are valued at the present value of the future distributions expected to be received over the term of the agreement.

The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while MIT believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Table 5 below is a rollforward of the investments classified by MIT within Level 3 of the fair value hierarchy defined on page 17.

Table 5. Rollforward of Level 3 Investments Marketable Perpetual Total (in thousands of dollars)

Fixed income Equities alternatives Real estate trusts investments Fair value, July 1, 2008....

$ 57,679

$ 4,915,258

$ -2,898,174

$ 800,055

$ 66,912

$ 8,738,078 Realized gains (losses).....

(62,307)

(45,793) 91 (108,009)

Unrealized losses........

(972,258)

(522,800)

(184,807)

(19,850)

(1,699,715)

Net purchases, sales, and settlements...........

7,845 564,962 (125,616) 175,009 556 622,756 FairValue, June 30, 2009... $ 65,524

$4,445,655

$2,203,965

$ 790,348

$ 47,618

$7,553,110 All net realized and unrealized gains and losses relating to financial instruments held by MIT shown in Table 5 are reflected in the Statements of Activities. Unrealized gains related to Level 3 investments totaled $582.6 million at June 30, 2009 and

$2,262.5 million at June 30, 2008.

18 1MIT REPORT OF THE TREASURER 2009

C. Collateral for Securities Lending and Other Assets MIT has an agreement with a major financial institution to lend its securities in exchange for a fixed annual fee less a contractual rebate on the cash collateral received. All securities are returnable on demand and are collateralized by daily cash deposits based on the market value of the securities loaned. MIT manages the investment process for all cash collateral received and is indemnified against borrower default by the financial institution. MIT did not have any investment securities on loan as of June 30, 2009 and had $162.9 million on loan at June 30, 2008.

Cash collateral under management related to the securities lending program was $164.9 million at June 30, 2008. As of June 30, 2009 and 2008, MIT also recorded $168.3 million and $198.6 million, respectively, of minority interest in privately held investments. The cash collateral received under the securities lending program and minority interest are shown as assets and liabilities in the Statements of Financial Position.

D. Pledges Receivable Table 6 below shows the time periods in which pledges receivable atJune 30, 2009 are expected to be realized.

Table 6. Pledges Receivable (in thousands of dollars) 2009 2008 In one year or less......

Between one year and five years............

More than five years....

Less: allowance for unfulfilled pledges......

Pledges receivable, net.................

152,686 195,033 168,897 (51,880)

$ 464,736 117,979 200,849 173,175 (48,700) 443,303 As discussed in Note A, MIT adopted SFAS No. 159 in accounting for pledges receivable. Pledges receivable are classified as Level 3 under the valuation hierarchy as defined by SFAS No. 157 and disclosed in Note B. Table 7 below is a rollforward of the pledges receivable for 2009.

Table 7. Rollforward of Pledges Receivable (in thousands of dollars)

Pledges receivable, June 30, 2008.........

$ 443,303 N ew pledges...........................

125,502.

Pledge payments received................

(106,431)

Decrease in pledge discount..............

5,542 Increase in reserve for unfulfilled pledges....

(3,180)

Pledges receivable, June 30, 2009....

$ 464,736 A review of pledges is periodically made with regard to collectability. As a result, the allowance for pledges that may not be fulfilled is adjusted, and some pledges have been canceled and are no longer recorded in the financial state-ments. In addition, pledges are discounted in the amount of

$89.5 million and $95.0 million in 2009 and 2008, respec-tively. MIT has gross conditional pledges, not recorded, for the promotion of education and research in the amount of

$114.0 million and $150.2 million as of June 30, 2009 and 2008, respectively.

NOTES TO FINANCIAL STATEMENTS 19

E. Student Notes Receivable Table 8 below details the components of student notes

$33.3 million and $33.1 million at June 30, 2009 and receivable atJune 30, 2009 and 2008.

2008, respectively, are ultimately refundable to the U.S.

Perkins student notes receivable are funded by the U.

Government and are classified as liabilities. Due to the Government and by MIT to the extent required by the nature and terms of the student loans, which are subject to Perkins National Direct Student Loan Program. Funds significant restrictions, it is not feasible to determine the fair value of such loans.

advanced by the U.S. Government for this program, Table 8. Student Notes Receivable (in thousands of dollars) 2009 2008 Institute-funded student notes receivable.....................................

18,188 19,974 Perkins student notes receivable............................................

33,765 30,353 Total student notes receivable........................................

51,953 50,327 Less: allowance for doubtful accounts.......................................

(3,000)

(3,000)

Student notes receivable, net.........................................

48,953 47,327 F Accounts Payable, Accruals and Other Liabilities MIT's accounts payable, accruals and other liabilities at June 30, 2009 are shown in Table 9 below.

Table 9. Accounts Payable, Accruals and Other Liabilities (in thousands of dollars) 2009 2008 Accounts payable and accruals.............................................

249,445 220,107 Accrued vacation........................................................

50,120 47,730 Total.............................................................

$ 299,565 267,837 20 MIT REPORT OF THE TREASURER 2009

G. Borrowings Table 10. Borrowings (in thousands of dollars / due dates are calendar based) 2009 EDUCATIONAL PLANT Massachusetts Health and Educational Facilities Authority (MHEFA)

Series I, 4.75%-5.20%, due 2028, par value $59,200..........................

Series J-1, variable rate, due 2031.........................................

Series J-2, variable rate, due 2031.........................................

Series K, 5.25%-5.50%, due 2012-2032, par value $230,000...................

Series L, 3.0%-5.25%, due 2004-2033, par value $184,860.....................

Series M, 5.25%, due 2014-2030, par value $131,110.........................

Series N, 3.5%-5.0%, due 2014-2038, par value $325,195.....................

Series 0, 4.0%-6.0%, due 2016-2036, par value $266,460.....................

Total MHEFA...................................................

Medium Term Notes Series A, 7.125%, due 2026............................

Medium Term Notes Series A, 7.25%, due 2096.............................

Notes payable to bank, variable rate, due 2011...............................

Total educational plant.............................................

STUDENT LOANS Notes payable to bank, variable rate, due 2011...............................

OTHER Notes payable to bank, variable rate, due 2011...............................

2008 59,663 125,000 125,000 243,804 188,616 145,998 333,991 274,475 1,496,547 17,347 45,440 48,033 1,607,367 59,688 125,000 125,000 244,624 191,804 146,981 893,097 17,343 45,438 251,039 1,206,917 5,000 5,000 123,476 123,476 Total Borrowings...............................

S 1,735,843

$ 1,335,393 The aggregate amount of debt payments and sinking fund requirements for each of the next five fiscal years is shown in Table 11 below.

Table 11. Debt Obligations (in thousands of dollars) 2010..................

2,260 2011..................

178,879 2012..................

2,490 2013..................

26,500 2014..................

26,000 Cash paid for interest on long-term debt in 2009 and 2008 was $47.4 million and $46.7 million, respectively.

In 2009, fair value of the outstanding debt is approximately 3 percent greater than the carrying value. In 2008, the carrying value of the outstanding debt approximates fair value. Carrying value is based on estimates using current interest rates available for similarly rated debt of the same remaining maturities. MIT maintains a line of credit with a major financial institution for an aggregate commitment of $500.0 million. As ofJune 30, 2009, $323.5 million was available under this line of credit. The line of credit expires on March 28, 2011.

Variable interest rates at June 30, 2009 are shown in Table 12 below.

Table 12. Variable Interest Rates (in thousands of dollars)

Amount Rate MHEFA Series J-1.......

$ 125,000 0.17%

MHEFA Series J-2.......

125,000 0.10%

Notes payable to bank.....

176,509 0.370/o In the event that MIT receives notice of any optional tender on its Series J-1 and Series J-2 variable-rate bonds, or if these bonds become subject to mandatory tender, the purchase price of the bonds will be paid from the remarketing of such bonds. However, if the remarketing proceeds are insufficient, MIT will be obligated to purchase the bonds tendered.

NOTES TO FINANCIAL STATEMENTS 21

H. Commitments and Contingencies Federal Government Funding MIT receives funding or reimbursement from Federal Government agencies for sponsored research under Government grants and contracts. These grants and con-tracts provide for reimbursement of indirect costs based on rates negotiated with the Office of Naval Research (ONR),

MIT's cognizant Federal agency. MIT's indirect cost reimbursements have been based on fixed rates with carry-forward of under or over recoveries, except in 2008, during which fixed rates were negotiated without carry-forward for most on and off-campus research activity. At June 30, 2008, MIT recorded a net under-recovery of $5.8 million resulting primarily from activity in its specialized service facility, where carry-forward arrangements were still in place. At June 30, 2009, MIT recorded a net over-recovery of $2.4 million.

The DCAA is responsible for auditing both direct and indirect charges to grants and contracts in support of ONR's negotiating responsibility. MIT has final audited rates through 2007. MIT's 2009 research revenues of

$1,375.1 million include reimbursement of indirect costs of $221.5 million, which includes the adjustment for the variance between the indirect cost income determined by the fixed rates and actual costs for 2009. In 2008, research revenues were $1,245.2 million, which included reimbursement of indirect costs of $206.2 million.

Leases At June 30, 2009, there were no capital lease obligations.

MIT is committed under certain operating (rental) leases.

Rent expense incurred under operating lease obligations was $65.5 million and $62.3 million in 2009 and 2008, respectively. Some of the leases expiring in 2010 are subject to renewal. Future minimum payments under operating leases are shown in Table 13 below.

Table 13. Lease Obligations (in thousands of dollars) 2010..................

$ 54,747 2011..................

49,467 2012..................

44,171 2013..................

40,959 2014..................

33,900 Investments As of June 30, 2009, MIT is committed to invest approximately $2,342.6 million with equity managers and with private partnerships for hedge funds, private equity and other alternative investments. This compares to

$3,352.5 million as of June 30, 2008. As ofJune 30, 2009,

$42.6 million of investments were pledged as collateral to various supplier and government agencies, the largest being to the Nuclear Regulatory Commission and for self-insured workers' compensation insurance.

Future Construction MIT has contracted for educational plant in the amount of $214.1 million atJune 30, 2009. It is expected that the resources to satisfy these commitments will be provided from unexpended plant funds, anticipated gifts, unrestricted funds and future borrowings. MIT will be committing additional resources to planned major construction projects and improvements to the current infrastructure over the next several years.

Related Entities MIT has entered into agreements, including collaborations with third-party not-for-profit and for-profit entities for education, research and technology transfers. Some of these agreements involve funding from foreign governments.

These agreements subject MIT to greater financial risk than do its normal operations. In the opinion of management, the likelihood of realization of increased financial risks by MIT under these agreements is remote.

General MIT is subject to certain other legal proceedings and claims that arise in the normal course of operations. In the opinion of management, the ultimate outcome of these actions will not have a material effect on MIT's financial position.

22 MIT REPORT OF THE TREASURER 2009

I. Functional Expense Classification MIT's expenditures on a functional basis are shown in Table 14 below.

Table 14. Expenditures by Functional Classification (in thousands of dollars) 2009 2008 G eneral and adm inistrative................................................

497,043 Instruction and unsponsored research.......................................

680,848 Sponsored research......................................................

A uxiliary enterprises.....................................................

O peration of alum ni association............................................

Total operating expense.............................................

1,167,036 104,443 11,916

$2,461,286 486,444 641,241 1,054,474 100,545 11,543

$2,294,247 J. Retirement Benefits MIT offers a defined benefit plan and a defined con-tribution plan to its employees. The plans cover substan-tially all of MIT's employees.

MIT also provides retiree welfare benefits (certain health care and life insurance benefits) for retired employees.

Substantially all of MIT's employees may become eligible for those benefits if they reach a qualifying retirement age while working for MIT Retiree health plans are paid for in part by retirees and covered retirees, their covered dependents and beneficiaries. Benefits are provided through various insurance companies whose charges are based either on the benefits and administrative expenses paid during the year or annual insured premiums. Retiree life insurance plans are non-contributory and cover the retiree only. MIT maintains a trust to pay for retiree welfare benefits.

MIT contributes to the defined benefit plan amounts that are actuarially determined to provide the retirement plan with sufficient assets to meet future benefit requirements.

There were no contributions to the defined benefit plan in 2009 or 2008.

For purposes of calculating net periodic pension cost for the defined benefit plan, plan amendments are amortized on a straight line basis over the average future service to expected retirement of active participants at the date of the amendment. Cumulative gains and losses (including changes in assumptions) in excess of 10 percent of the greater of the projected benefit obligation and the market related value of assets are amortized over the average future service of active participants. The annual amortization shall not be less than the total amount of unrecognized gains and losses up to $1 million.

During 2008, MIT amended its defined benefit plan to provide participants with immediate vesting of their accrued benefits. The Pension Protection Act required a change from five-year vesting to three-year vesting for MIT's defined benefit plan; this change has been treated as mandatory and the impact has been reflected as an actu-arial loss. The change from three-year vesting to immediate vesting was reflected as a plan amendment.

The amount contributed and expenses recognized during 2009 and 2008 related to the defined contribution plan were

$40.3 million and $37.8 million, respectively.

For purposes of calculating net periodic postretirement benefit cost, a portion of the current obligation, related to the transition to SEAS No. 106, is being amortized on a straight line basis over 20 years from the date of adoption of that statement in 1994. Plan amendments are amortized on a straight line basis over the average future service to full eligibility of active participants at the date of amendment.

Cumulative gains and losses (including changes in assump-tions) in excess of 10 percent of the greater of the plan's obligation and the market related value of assets are amor-tized over the average future service of active participants.

The annual amortization shall not be less than the total amount of unrecognized gains and losses up to $1 million.

NOTES TO FINANCIAL STATEMENTS 23

J. Retirement Benefits (continued)

Components of Net Periodic Benefit (Income) Cost and Other Amounts Recognized in Unrestricted Net Assets Table 15 summarizes the components of net periodic benefit (income) cost recognized in the Statement of Activities and other amounts recognized in unrestricted net assets for the years ended June 30, 2009 and 2008.

Table 15. Components of Net Periodic Benefit (Income) Cost and Other Amounts Recognized in Unrestricted Net Assets (in thousands of dollars)

Pension Benefits --

I Other Benefits 2009 2008 2009 2008 Components of net periodic benefit (income) cost Service cost...................................

Interest cost...................................

Expected return on plan assets....................

Amortization of transition amount.................

Amortization of net actuarial (gain) loss.............

Amortization of prior service cost.................

One-time specific termination benefits (FAS 88)......

Net periodic benefit (income) cost..............

Other amounts recognized in unrestricted net assets Current year actuarial loss.......................

Amortization of actuarial gain (loss)................

Current year prior service cost....................

Amortization of prior service cost.................

Amortization of transition obligation...............

Total recognized in unrestricted net assets.......

Total recognized in net periodic benefit (income) cost and unrestricted net assets................

54,344 134,080 (215,752)

(31,172) 2,180 1,143 (55,177) 728,482 31,172 (2,180) 757,474 47,122 127,332 (201,487)

(7,802) 2,103 (32,732) 120,884 7,802 3,598 (2,103) 15,009 25,137 (20,647) 4,776 2,380 3,555 13,335 21,084 (19,756) 4,775 1,000 3,557 30,210 78,677 (2,380)

(3,555) 23,995 67,476 (1,000)

(3,557)

(4,775) 58,144 (4,776) 130,181 67,966

$ 702,297 97,449 98,176 82,139 The estimated net actuarial gain and prior service cost for the defined benefit plan that will be amortized from unre-stricted net assets into net periodic benefit income during the next fiscal year are $29.5 million and $2.2 million, respectively. The estimated net actuarial loss, prior service cost and transition obligation for the other postretirement plans that will be amortized from unrestricted net assets into net periodic benefit cost during the next fiscal year are

$4.4 million, $3.6 million and $4.8 million, respectively.

24 MIT REPORT OF THE TREASURER 2009

J. Retirement Benefits (continued)

Benefit Obligations and Fair Value of Assets Table 16 summarizes the funded status, benefit obligations, amounts recognized in the Statements of Financial Position, and amounts recognized in unrestricted net assets for the MIT's benefit plans. MIT uses a June 30 measurement date for its pension and postretirement benefit plans.

Table 16. Benefit Obligations and Fair Value of Assets (in thousands of dollars)

Pension Benefits

-- -1 m Other Benefits 2009 2008 2009 2008 Change in benefit obligation Benefit obligation at beginning of year.............

Service cost...................................

Interest cost...................................

Retiree contributions............................

Plan am endm ent...............................

Net benefit payments and transfers................

Assumption changes and actuarial net loss (gain).....

Special termination benefits......................

Benefit obligation at end of year...............

Change in plan assets Fair value of plan assets at beginning of year.........

Actual return on plan assets......................

Employer contributions.........................

Retiree contributions............................

Net benefit payments and transfers................

Fair value of plan assets at end of year...........

Funded (unfunded) status at end of year.........

Amounts recognized in the statements of financial position consist of:

Benefit assets..................................

Benefit liability................................

T otal......................................

Amounts recognized in unrestricted net assets consist of:

N et actuarial loss (gain)..........................

Prior service cost...............................

Transition liability..............................

T otal......................................

$ 2,066,978 54,344 134,080 (111,972)

(25,596) 1,143 2,118,977 2,989,316 (538,325)

(54,200)

(111,972) 2,284,819

$ 165,842

$ 2,042,729 47,122 127,332 3,598 (107,757)

(46,046) 382,845 15,009 25,137 3,105 (22,043) 5,685 334,436 13,335 21,084 2,914 (23,544) 34,620 2,066,978 409,738 382,845 3,062,516 251,684 34,557 (52,345) 54,200 3,105 (107,757)

(22,043) 2,989,316 234,601 922,338

$ (175,137) 285,414 (13,100) 2,914 (23,544) 251,684

$ (131,161)

(131,161)

$ (131,161) 165,842 922,338

$ 165,842 (20,371) 11,182 (9,189)

(175,137)

$ 922,338

$ (175,137)

$ (780,024) 148,942 72,645 13,362 7,113 10,668 19,103 23,879

$ (766,662)

$ 175,158

$ 107,192 NOTES TO FINANCIAL STATEMENTS 25

J. Retirement Benefits (continued)

The accumulated benefit obligation for MIT's defined benefit pension plan was $2,011.3 million and $1,966.5 million atJune 30, 2009 and 2008, respectively.

Defined benefit plan funding rules are set forth under the Pension Protection Act of 2006 (PPA). On a PPA basis, the funded position of a plan is measured by comparing the actuarial value of assets with the funding target. The actuarial value of assets is an average, of the fair market value over a three-year period adjusted for cash flow and expected earnings, but not greater than 110 percent of the fair market value. The funding target is the present value of benefits accrued or earned as of the valuation date (January 1). As of January 1, 2009 (the plan's valuation date), the MIT defined benefit pension plan was 129.7 percent funded on a PPA basis. This is based on a funding target of $1,957.2 million and an actuarial value of assets of $2,538.5 million.

Under accounting rules set forth in Statement of Financial Accounting Standards No. 87 Employers'Accounting for Pension (SFAS No. 87), the funded position of the plan is measured by comparing the fair value of assets with the accumulated benefit obligation (ABO) or the projected benefit obligation (PBO). The ABO equals the present value of benefits as of the end of the fiscal year (June 30).

The PBO equals the ABO adjusted for the effect of future expected pay increases. As of June 30, 2009, the MIT defined benefit pension plan was 113.6 percent funded on an ABO basis. This is based on an ABO of $2,011.3 million and the fair value of assets of $2,284.8 million.

The ABO and PPA funded percentages differ primarily due to the difference in plan assets and economic conditions (and therefore plan valuation assumptions) between January 1, 2009 and June 30, 2009.

MIT has recognized the effect of the expected Medicare subsidy by reducing its accumulated postretirement benefit obligation by $67.8 million and $64.0 million as of June 30, 2009 and 2008, respectively. This initial reduction was recognized as an actuarial gain. Additionally, the service and interest cost components of postretirement benefits cost were reduced in 2009 and future periods.

Table 17. Assumptions and Health Care Cost Trend Rates Pension Benefits -

I F-Other Benefits--,

2009 2008 2009 2008 Assumptions used to determine benefit obligation as of June 30:

Discount rate..................................

6.25%

6.50%

6.25%

6.50%

Rate of compensation increase....................

4.00%'

4.00%

Assumptions used to determine net periodic benefit (income) cost for year ended June 30:

Discount rate..................................

6.50%

6.25%

6.50%

6.25%

Expected long-term return on plan assets...........

8.00%

8.25%

7.00%

7.50%

Rate of compensation increase....................

4.00%

4.00%

Assumed health care cost trend rates:

Health care cost trend rate assumed for next year.....

8.00%

8.50%

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate).........................

5.00%

5.00%

Year that the rate reaches the ultimate trend rate.....

2015 2015 The average rate of salamy increase is assumed to be 2% for 2010 and 2011, 3% for 2012, and 4% thereafter.

The expected long-term rate of return assumption represents the expected average rate of earnings on the funds invested or to be invested to provide for the benefits included in the benefit obligation. The long-term rate of return assumption is determined based on a number of factors, including historical market index returns, the anticipated long-term asset allocation of the plans, histori-cal plan return data, plan expenses and the potential to outperform market index returns.

26 MIT REPORT OF THE TREASURER 2009

J. Retirement Benefits (continued)

As an indicator of sensitivity, a one percentage point change in the assumed health care cost trend rate would effect 2009 as shown in Table 18 below.

Table 18. Health Care Cost Trend Rate Sensitivity (in thousands of dollars) 1% point increase 1% point decrease Effect on 2009 post-retirement service and interest cost...................

$ 5,963

$ (4,941)

Effect on post-retirement benefit obligation as of June 30, 2009..............

$ 46,870

$ (39,674)

Plan Assets Target allocations and weighted-average asset allocations of the investment portfolio for the MIT defined benefit plan and other postretirement benefit plans at June 30, 2009 and 2008 are shown in Table 19 below.

Table 19. Plan Assets Pension Benefits Other Benefits Plan Assets as of June 30 Plan Assets as of June 301 Target Target Allocation 2009 2008 Allocation 2009 2008 Cash.......................

4%

2%

Equity securities.............

73%

71%

79%

75%

77%

75%

Fixed income securities........

8%

8%

13%

20%

18%

24%

Real estate..................

19%

17%

8%

5%

3%

1%

Total.....................

100%

100%

100%

100%

100%

100%

The investment objectives for the assets of the plans are to minimize expected funding contributions and to meet or exceed the rate of return assumed for plan funding pur-poses over the long term. The nature and duration of ben-efit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appropriate asset allocation to achieve the investment objectives.

Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives within prudent risk parameters. Risk management practices include the use of external investment managers and the maintenance of a portfolio diversified by asset class, invest-ment approach and security holdings, and the maintenance of sufficient liquidity to meet benefit obligations as they come due. In 2008, the defined benefit plan participated in securities lending programs in order to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. The defined benefit plan.had no outstanding securities lending arrangements at June 30, 2009.

Contributions MIT does not expect to contribute to its defined benefit pension plan, and expects to contribute approximately $36.8 million to its other postretirement benefit plan in 2010.

These contributions have been estimated based on the same assumptions used to measure MIT's benefit obligation at June 30, 2009.

In 2009, under provision of Section 420 of the Internal Revenue Code, the MIT defined benefit plan transferred

$54.2 million of excess pension assets to the postretirement welfare benefit plan. The Internal Revenue Code permits transfers annually of an amount not to exceed actual expenditures on retiree health care benefits. The transfer resulted in a negative contribution of $54.2 million for the defined benefit plan and a positive contribution of $54.2 million to the postretirement welfare benefit plan.

NOTES TO FINANCIAL STATEMENTS 27

J. Retirement Benefits (continued)

Expected Future Benefit Payments Table 20 reflects total expected benefit payments for the defined benefit and other postretirement benefit plans, as well as expected receipt of the federal subsidy. These payments have been estimated based on the same assumptions used to measure MIT's benefit obligation at year end.

Table 20. Expected Future Benefit Payments Pension Other Federal (in thousands of dollars)

Benefits Benefits' Subsidy2 2010...........................................

117,270 28,759 2,893 2011...........................................

125,361 31,154 3,176 2012............................................

128,446 33,044 3,498 2013...........................................

131,426 34,870 3,814 2014...........................................

134,532 36,595 4,122 2015-2019......................................

729,805 208,258 24,886 1Other benefits reflect the total net benefits expected to be paid from the plans and exclude the participants' share of the cost, which is funded by participant contributions to the plans, and does not reflect any subsidy expected to be received from the government for MITM retiree prescription drug coverage.

2 Federal subsidy reflects the amount MIT is expected to receive from the government and reflects MITM expected drugs claims experience.

28 MIT REPORT OF THE TREASURER 2009

K. Components of Net Assets and Endowment Table 2 1 below presents the three categories of net assets by purpose as of June 3 0, 2 009. The amounts listed in the unrestricted column labeled Endowment Funds Principal are those gifts received over the years that MIT designated as funds functioning as endowment and invested with the endowment funds. A large component of temporarily restricted net assets is pledges, the majority of which will be reclassified to unrestricted net assets when cash is received.

Table 2 1. Fund Category I

Temporarily Unrestricted Restricted 20091 (in thousands of dollars)

Restricted Total 2008 TotalI Endowment funds principal General purpose...................

Departments and research............

Library...........................

Salaries and wages..................

Graduate general...................

Graduate departments...............

Undergraduate.....................

Prizes............................

Miscellaneous......................

Investment income held for distribution.'

Endowment funds before pledges....

Pledges...........................

Total endowment funds.............

Other invested funds Student loan funds..................

Building funds.....................

Designated purposes:................

- Departments and research...........

- Other purposes...................

Reserve funds......................

Real estate gifts held for sale..........

Life income funds..................

Pledges...........................

Other funds available for current expenses Funds expended for educational plant...

Total other funds..................

Total net assets at fair value...........

594,998 325,179 7,883 285,788 47,580 55,309 142,731 4,780 668,552 246,190 2,378,990 2,378,990 19,889 58,258 258,747 51,440 98,316 7,908 6,179 254,780 425,418 1,180,935

$3,559,925 707,929 562,495 12,781 1,559,674 72,129 171,312 629,330 15,278 127,935 3,858,863 3,858,863

$ 214,524 383,533 7,799 571,340 69,981 159,681 286,449 17,167 33,694 1,744,168 169,784 1,913,952

$1,517,451 1,271,207 28,463 2,416,802 189, 690 386,302 1,058,510 37,225 830,181 246,190 7,982,021 169,784 8,151,805

$ 1,929,726 1,597,782 36,031 3,062,843 210,750 478,012 1,333,218 47,583 1,056,514 316,328 10,068,787 165,713 10,234,500 36,900 185,771 246,194 47,038 3,777 7,653 122,457 277,590 1,154,847 453,247 2,535,474

$12,769,974 17,536 37,425 205,881 147,623 39,273 294,953 60,303 542,152

$4,401,015 53,960 71,496 S 1,985,448 258,747 51,440 98,316 7,908 99,412 294,953 315,083 425,418 1,794,583

$9,946,388 NOTES TO FINANCIAL STATEMENTS 29

K. Components of Net Assets and Endowment (continued)

MIT's endowment consists of approximately 3,000 individual funds established for a variety of purposes and includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor imposed restrictions.

The Board of Trustees of MIT has interpreted the Massachusetts enacted version of Uniform Prudent Management of Institutional Funds Act (UPMIFA) as allowing MIT to appropriate for expenditure or accumulate so much of an endowment fund as MIT determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established, subject to the intent of the donor as expressed in the gift instrument.

Unless stated otherwise in the gift instrument, the assets in an endowment fund shall be donor-restricted assets until appropriated for expenditure by the Board of Trustees. As a result of this interpretation, MIT has not changed the way permanently restricted net assets are classified. See note A for further information on net asset classification.

The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Board of Trustees considers the following factors in making a determination to appropriate or accumulate endowment funds:

i.

the duration and preservation of the fund ii.

the purposes of MIT and the endowment fund iii.

general economic conditions iv.

the possible effect of inflation and deflation

v.

the expected total return from income and the appreciation of investments vi.

other resources of MIT vii.

the investment policies of MIT Fiscal Year 2009 Table 22. Endowment Net Asset Composition by Type of Fund as of June 30, 2009 Temporarily Permanently (in thousands of dollars)

Unrestricted Restricted Restricted Total Donor-restricted endowment funds................

$ 3,858,863

$ 1,913,952

$ 5,772,815 Board-designated endowment funds...............

2,378,990 2,378,990 Total endowment funds......................

$ 2,378,990

$ 3,858,863

$ 1,913,952

$ 8,151,805 Table 23. Changes in Endowment Net Assets for the Fiscal Year ended June 30, 2009 Temporarily Permanently (in thousands of dollars)

Unrestricted Restricted Restricted Total Endowment net assets, June 30, 2008...............

$ 3,091,110

$5,320,317

$1,823,073

$10,234,500 Investment return:

Investment income...........................

21,970 48,094 4,046 74,110 Net depreciation (realized and unrealized)........

(618,016)

(1,143,356)

(24,337)

(1,785,709)

Total investment return..........................

(596,046)

(1,095,262)

(20,291)

(1,711,599)

Contributions.................................

4,650 108,155 112,805 Appropriation of endowment assets for expenditure...

(153,545)

(364,402)

(517,947)

Other changes:

Underwater gain adjustment and funds held for reinvestment.........................

(23,984) 23,984 4,587 4,587 Net asset reclassifications and transfers to create board-designated endowment funds..............

56,805 (25,774)

(1,572) 29,459 Endowment net assets, June 30, 2009...........

$ 2,378,990

$ 3,858,863

$ 1,913,952

$ 8,151,805 30 MIT REPORT OF THE TREASURER 2009

K. Components of Net Assets and Endowment (continued)

Fiscal Year 2008 Table 24. Endowment Net Asset Composition by Type of Fund as of June 30, 2008 Temporarily Permanently (in thousands of dollars)

Unrestricted Restricted Restricted TotalI Donor-restricted endowment funds.................

$ 5,320,317

$ 1,823,073

$ 7,143,390 Board-designated endowment funds..................

3,091,110 3,091,110 Total endowment funds........................

3,091,110

$ 5,320,317

$ 1,823,073

$10,234,500 Table 25. Changes in Endowment Net Assets for the Fiscal Year ended June 30, 2008 Temporarily Permanently (in thousands of dollars)

Unrestricted Restricted Restricted TotalI Endowment net assets, June 3 0, 200 7................

3,147,258

$5,273,222

$1,695,909

$10,116,389 Investment return:

Investment income..............................

46,960 107,261 3,551 157,772 Net depreciation (realized and unrealized).....

86,065 131,332 8,209 225,606 Total investment return.............................

133,025 238,593 11,760 383,378 Contributions....................................

15,242 106,129 121,371 Appropriation of endowment assets for expenditure...

(116,874)

(275,788)

(392,662)

Other changes:

Underwater gain adjustment and funds held for reinvestment.............................

(329) 329 1,482 1,482 Net asset reclassifications and transfers to create board-designated endowment funds.................

(87,212) 83,961 7,793 4,542 Endowment net assets, June 30, 2008.............

$ 3,091,110

$ 5,320,317

$ 1,823,073

$10,234,500 Underwater Endowment Funds From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the value of the initial and subsequent donor gift amounts (underwater). When underwater endowment funds exist, they are classified as a reduction of unrestricted net assets. Total under-water endowment funds reported in unrestricted net assets were $24.3 million and $0.3 million as of June 30, 2009 and 2008, respectively. The underwater status of these funds resulted from unfavorable market fluctuations.

Investment and Spending Policies MIT maintains its investments primarily in two investment pools: Pool A, principally for endowment and funds functioning as endowment, and Pool C, principally for investmrent of current funds of MIT's schools and departments and MIT's operating funds. Pool A operates as a mutual fund with units purchased and redeemed based on the previous month's unit market value of Pool A. The total market value of Pool A was $8,143.7 million at June 30, 2009 and $10,292.5 million in 2008. The total value of Pool A includes Pool C investments of $3 23.7 million at June 30, 2009 and $416.0 million in 2008. Certain assets are also maintained in separately invested funds. Separately invested funds totaled $162.1 million as of June 30 2009 and $192.3 million in 2008.

NOTES TO FINANCIAL STATEMENTS 331

K. Components of Net Assets and Endowment (continued)

MIT has adopted endowment investment and spending policies designed to provide a predictable stream of funding to programs supported by its endowment while maintaining the purchasing power of endowment assets. Under this policy, the return objective for the endowment assets is to attain an average, annual, real total return of at least 6 percent over the long term. Real total return is the sum of capital appreciation (or depreciation) and current income adjusted for inflation by the Higher Education Price Index (HEPI). An additional investment goal is to maximize return relative to appropriate risk such that performance exceeds appropriate benchmark returns at the total pool, asset class and individual manager levels.

To achieve its long-term rate of return objectives, MIT relies on a total return strategy in which investment returns are realized through both capital appreciation (realized and unrealized gains) and current yield (interest and dividends).

MIT targets a diversified asset allocation that places greater emphasis on equity-based investments to achieve its long-term objectives within prudent risk constraints.

The Executive Committee of the Corporation votes to distribute funds for operational support from general investments. In accordance with MIT's spending policy, these distributions are funded from both investment income and market appreciation. In 2009, the distribution rate was $69.21 per Pool A unit, up 30.6 percent from $53.00 in 2008. The increase in the distribution per unit from 2008 to 2009 is the result of a planned increase consistent with the comprehensive financial framework developed in 2008. The financial framework addressed a long term structural imbalance in the funding of operations, bringing MIT's operating revenues into alignment with planned operating expenses in 2009, including adjusting the annual endowment spending.

In 2009, the amount distributed for spending from Pool A and Pool C totaled $582.8 million, compared to

$443.5 million distributed in the prior year. In 2009, the distribution included $455.7 million from investment gains, or 78.2 percent of the total distributed to funds. In 2008, the comparable amount distributed included $244.8 million, or 54.9 percent, from investment gains. During 2009, distributions from separately invested funds were

$3.3 million, compared to $3.9 million in 2008. The income earned in Pool C, or currently invested funds, was fully distributed. In addition to the aforementioned distributions, there was also a special distribution of $24.0 million from gains in Pool C in 2009 and $5.0 million in 2008.

L. Subsequent Events The Broad Institute On July 1, 2009, The Broad Institute, previously a unit of MIT, became a separately incorporated entity. The Broad Institute is a research center located adjacent to the MIT campus. Before July 1, 2009, MIT administered The Broad Institute as a collaboration among MIT, Harvard University and its affiliated hospitals, and The Whitehead Institute for Biomedical Research. Following the separation, The Broad Institute is a self-administered collaboration of MIT, Harvard University, and affiliated hospitals.

The separation was enabled by a $400 million gift pledged by Los Angeles philanthropists Eli and Edythe Broad to The Broad Institute. The gift serves to create an endowment to transform The Broad Institute from a 10-year experiment, as it was conceived when founded in 2004 with a $100 million gift of operating funds to MIT, into a permanent entity.

The Broad Institute's assets and liabilities reflected in MIT's Statements of Financial Position as ofJune 30, 2009 were

$199.5 million and $106.2 million, respectively. Assets consist primarily of equipment, leasehold improvements, accounts receivable, grants and contracts in progress, cash, investments, and inventory. Liabilities include sponsor advances, agency funds held, and deferred landlord financed leasehold improvements. At separation on July 1, 2009, MIT transferred these assets and liabilities to the separately incorporated Broad Institute. The Broad Institute's revenues as reflected in MIT's Statement of Activities in 2009 totaled $206.0 million; expenses were $215.4 million.

32 MIT REPORT OF THE TREASURER 2009

PfC4WATERHOUSE-CoPER, I

PricewaterhouseCoopers LLP 125 High Street Boston MA 02110 Telephone (617) 530 5000 Facsimile (617) 530 5001 Report of Independent Auditors To the Audit Committee of the Massachusetts Institute of Technology In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of activities and cash flows present fairly, in all material respects, the financial position of the Massachusetts Institute of Technology (the "Institute")at June 30, 2009 and 2008, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Institute's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note A to the accompanying consolidated financial statements, as of July 1, 2008, the Institute adopted Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements.

September 16, 2009 REPORT OF INDEPENDENT AUDITORS 33

Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (Dollars in thousands) 2009 2008 2007 2006 2005 Financial Position:

Investments, at fair value..............

Land, buildings, and equipment, at cost less accumulated depreciation..

Borrowings.........................

Total assets.........................

Total liabilities......................

Unrestricted net assets, at market.......

Temporarily restricted net assets, at market Permanently restricted net assets, at market Total net assets......................

Market value of endowment funds.......

Principal Sources of Revenue:

Tuition and other income.............

Research revenues:

Campus direct................

Campus indirect.................

-Lincoln Laboratory direct..........

Lincoln Laboratory indirect.........

SMART direct...................

SMAIRT indirect.................

Gifts, bequests and pledges............

Net (losses) gains on investments and other assets Investment distribution...............

Principal Purposes of Expenditures:

Total operating expenditures...........

General and administrative............

Instruction and unsponsored research..

Direct cost of sponsored research -

current dollars...................

Direct cost of sponsored research -

constant dollars (2005 = 100)........

Scholarships and fellowships...........

$ 9,519,413 2,120,613 1,735,843 12,949,552 3,003,164 3,559,925 4,401,015 1,985,448 9,946,388 7,982,021 431,772 497,493 193,289 642,101 27,667 14,026 496 303,890 (1,854,380) 603,907

$ 2,461,286 497,043 680,848

$11,308,429 1,938,919 1,335,393 15,458,982 2,689,008 5,086,270 5,765,302 1,918,402 12,769,974 10,068,787

$ 11,061,142 1,743,203 1,078,234 14,946,369 2,251,065 5,216,844 5,684,006 1,794,454 12,695,304 9,980,409 421,230 394,652

$ 9,500,178 1,687,835 1,278,489 12,362,451 2,302,676 3,732,539 4,699,881 1,627,355 10,059,775 8,368,066

$ 373,309 419,144 163,340 602,426 33,968 232,472 1,432,552 329,375

$ 2,175,913 485,306 548,256 448,065 173,455 587,076 32,611 3,857 106 385,952 154,765 456,154 407,650 163,148 573,696 32,234 332,874 1,673,275 355,848

$ 8,022,655 1,608,719 1,249,591 10,856,158 2,230,588 3,277,741 3,792,029 1,555,800 8,625,570 6,712,436 362,299 400,345 159,359 579,915 31,210 177,305 885,605 318,067

$2,032,517 424,770 503,901 996,943 996,943 165,458

$2,294,247 486,444 641,241

$2,201,696 482,527 608,423 1,167,036 1,054,474 1,001,144 1,035,417 1,042,176 214,383 954,803 192,131 940,104 185,399 997,433 174,140 34 34 MIT REPORT OF THE TREASURER 2009

Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (continued)

(Dollars in thousands) 2009 2008 2007 2006 2005 Research Revenues:(A)

Campus:

Federal government sponsored:

Health and Human Services............

Department of Defense................

Department of Energy................

National Science Foundation...........

National Aeronautics and Space Administration..............

O ther federal........................

Total federal.........................

Non-federal sponsored:

State/local/foreign governments.........

N on-profits.........................

Industry............................

Total non-federal.....................

Total federal & non-federal.............

F&A and other adjustments............

Total cam pus........................

Lincoln Laboratory:

Federal government sponsored..........

Non-federal sponsored................

F&A and other adjustments............

Total Lincoln Laboratory..............

SMART.(B)

Non-federal sponsored................

Total SM ART.......................

Total Research Revenues............

255,896 97,528 65,773 61,386 27,358 14,559 522,500 27,145 60,538 99,219 186,902 709;402 (18,620) 690,782 675,329 2,989 (8,550) 669,768 14,522 14,522 226,307 87,370 65,611 64,973 25,479 14,169 483,909 18,549 47,695 82,194 148,438 632,347 (10,827) 621,520 606,850 3,602 9,235 619,687 3,963 3,963 201,557 90,571 64,899 65,057 27,889 14,431 464,404 13,055 32,200 79,725 124,980 589,384 (18,586) 570,798 607,270 4,602 (5,942) 605,930 195,573 89,552 67,265 65,163 31,228 15,570 464,351 15,137 24,833 72,743 112,713 577,064 5,420 582,484 631,292 5,102 636,394 180,682 86,096 69,927 66,768 32,170 11,954 447,597 17,912 19,744 65,108 102,764 550,361 9,343 559,704 606,441 4,684 611,125

$ 1,375,072

$ 1,245,170

$ 1,176,728

$ 1,218,878

$ 1,170,829 (4) The amounts in this table reflect revenues from the original source offunds.

(B) The amounts represent research that has taken place in Singapore.

ADDITIONAL INFORMATION 35

Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (continued) 2009 2008 2007 2006 2005 Students:

Undergraduate Full-tim e........................

Part-tim e........................

Undergraduate Applications A pplicants.......................

A ccepted........................

Acceptance rate...................

E nrolled.........................

Y ield............................

Freshmen ranking in the top 10%

of their class...................

Average SAT scores (math and verbal)...............

Graduate Full-tim e........................

Part-tim e........................

Graduate applications A pplicants.......................

Accepted......................

Acceptance rate...................

E nrolled.........................

Y ield............................

Student Financial Aid:

(in thousands of dollars)

Undergraduate tuition support..........

Graduate tuition support..............

Fellowship stipends...................

Student loans........................

Student employment..................

Total financial assistance.............

Tuition (in dollars):

Tuition and fees......................

Average room and board...............

Faculty and staff:

F aculty.............................

Staff...............................

4,118 35 13,396 1,589 12%

1,048 66%

97%

1,453 5,991 155 17,325 3,215 19%

1,955 61%

4,119 53 12,445 1,553 13%

1,067 69%

97%

1,458 5,837 211 16,208 3,058 19%

1,825 60%

4,068 59 11,374 1,514 13%

1,002 66%

97%

1,460 5,924 202 15,968 3,002 19%

1,857 62%

4,014 52 10,440 1,494 14%

996 67%

97%

i,461 5,865 275 14,958 3,115 21%

1,876 60%

4,078 58 10,466 1,665 16%

1,077 65%

97%

1,471 5,907 277 15,015 3,159 21%

1,782 56%

78,534 187,732 27,509 9,641 82,287 385,703 36,390 10,860 1,009 13,320 70,157 174,847 25,647 8,766 78,892 358,309 65,529 172,021 25,020 8,962 77,732 349,264 57,963 167,297 32,440 9,542 78,503 345,745 54,649 161,384 31,717 11,052 75,917 334,719 34,986 10,400 1,008 12,832 33,600 9,950 998 12,453 32,300 9,500 992 11,970 30,800 9,100 983 11,490 36 MIT REPORT OF THE TREASURER 2009

Report of the Treasurer for the year ended June 30, 2009

• flflE Massachusetts IILI nstitute of Technology