munication products based on Academies studies and projects.

As of December 31, 2003, with one year remaining in the very successful Campaign for the National Academies, cumulative Campaign contributions and pledges to the National Academies exceeded $293 million, just shy of the overall $300 million target. Development efforts in 2004 – during which we expect to significantly exceed our $300 million Campaign goal – will focus particularly on the need for continuing support for programs that advance the science enterprise, and for building the unrestricted endowment that underwrites our long-term independence and flexibility.

Endowment and Trust Investment Pool

With the assistance of the Finance Committee, I am responsible for the prudent management of the endowment and trust fund portfolio. The goal of the endowment is to provide stable support for the NAS General Fund, NAS Trust and Award activities, and the Presidents’ initiatives within the NRC program. To achieve this goal, the NAS Council, acting on the recommendation of the Finance Committee, has adopted a spending limitation designed to maintain the purchasing power of the endowment over time by reinvesting a portion of the annual total investment return. The spending limitation caps annual spending at 5 percent of the three-year average market value of the participating funds in the investment pool.

Each year, the investment performance of the NAS portfolio is compared to a composite market benchmark portfolio for the year. The benchmark portfolio is a composite index consisting of the Standard and Poor’s 500 Index (35 percent), the Russell 2000 Index (15 percent), the EAFE Index (15 percent), the Emerging Markets Index (5 percent), the Lehman Aggregate (25 percent), and the Non U.S. dollar Fixed Income Index (5 percent), and was developed to reflect the asset allocation within the NAS portfolio.

Market values of the Endowment and Trust Investment Pool, after withdrawals, for the years ended December 31, 2003 and 2002, are displayed in the following chart:


($ in thousands)




Cash and Fixed-Income Securities

$ 36,627

$ 51,467

Equity Securities






During 2003, the NAS portfolio grew from $219.4 million to $267.8 million, which represents a 22.1% increase in the asset balance. Taking into account annual withdrawals, the Academy’s portfolio produced an investment return of 25.8% for the year. By capturing most of the upside performance in the good years, and generating comparatively smaller losses in the down years, the portfolio has been able to outperform the market benchmark by 0.5% for both the last 5 years and the last 10 years. The NAS return for the last five and ten years, respectively, is 4.1% and 8.9%, compared with the market composite benchmark of 3.6% and 8.4% respectively.

The next chart presents the investment structure adopted by the NAS Finance Committee in 1995 for its asset allocation strategy and compares this target to the portfolio allocation at December 31, 2003.

Overview of Current Investment Structure



Percent of Target



U.S. Fixed



U.S. High Yield



Non-U.S. Fixed



Mortgages (at cost)




U.S. Large Cap Funds



U.S. Small-Mid Cap Funds



Non-U.S.Stocks – Developed



Non-U.S. Stocks – Emerging



Hedge Funds



Private Commitments



Cash Equivalents






  • See schedule 2-A for details of investments by asset class.

  • Included in the $267.8 million total market value of the Endowment and Trust Investment Pool as of December 31, 2003, are the amounts of $45.4 million, $19.9 million, and $6.3 million for the IOM, TNAC, and Woods Hole Endowment Funds, respectively. TNAC denotes The National Academies’ Corporation (Beckman Center), which is equally owned by the National Academy of Sciences and the National Academy of Engineering Fund (see note 1 to the Financial Statements).

  • Withdrawals of $8.4 million were made to fund the President’s Committee, NAS General Fund’s activity, and prizes and awards for the current period. Additional withdrawals of $3.7 million were made to fund IOM, Woods Hole, and TNAC activity.

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