HBS entered fiscal 2010 with an aggressive plan to reduce costs in anticipation of a prolonged period of diminished revenue in the wake of the global financial crisis. But when the books closed last June, the School’s financial performance for the year turned out to be stronger than expected, according to the Annual Report 2010.

Revenue for fiscal 2010 — July 1, 2009, to June 30, 2010 — exceeded the budget by nearly 8 percent, totaling $467 million, only 1 percent lower than actual revenues for the previous year.

Two of the School’s business units — Harvard Business Publishing (HBP) and Executive Education — typically contribute more than half of the total budget. But both units are vulnerable to economic downturns, and demand for HBP products and programs offered by Executive Education were projected to suffer from a weak economy.

The downturn forced HBP to undertake restructuring and expense reduction initiatives in fiscal 2009 that better positioned the publishing operation to weather the continuing declines in advertising and circulation revenue at Harvard Business Review. However, an unexpected rebound in demand for HBP products during the second half of the 2010 fiscal year boosted total revenue, which came in $7 million above budget at $135 million. Executive Education launched an intensive effort to increase enrollment in short, focused programs, introduced several programs based on current faculty research, and scheduled extra sessions of high-demand programs. The extra effort paid off. Revenue grew by $5.6 million over the previous year to $113 million.

HBP and Executive Education helped to offset the $12 million drop in the School’s endowment distribution to $101 million. At the end of the fiscal year, the School’s endowment and current use funds totaled $2.3 billion.

Despite the weakened economy, HBS alumni and friends continued a long tradition of generosity. New gifts and pledges received during the year totaled $130 million, the second-highest annual amount in the School’s history.

In anticipation of declining revenues, the School’s expense budget for fiscal 2010 was set $18 million lower than the previous year. But the faculty and staff reined in spending more aggressively than expected, and operating expenses came in $5 million under budget at $415 million.

Spending on fellowships was a key line item protected from cuts. MBA, doctoral, and Executive Education financial aid for the year increased $2 million from the previous year, totaling $35 million.

— To read the entire Annual Report 2010, visit www.hbs.edu/about/annualreport/2010/.

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