of philanthropy by applying his experience in two top-25 universities to the development programs of the NAS and the other Academies. New programs and dedicated staff will focus on improving stewardship of all gifts; increasing annual unrestricted support; developing more planned gifts, such as charitable gift annuities, charitable remainder trusts, and bequests; and acquiring new endowment gifts and capital gifts to support the planned restoration of the NAS Building

With the assistance of the Finance Committee, I am responsible for the prudent management of the endowment, trust, and other long-term investments (the “Pool”). The goal of the Pool is to provide stable support for the NAS General Fund; NAS programs, prizes and awards; 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 Pool over time by reinvesting a portion of the annual total investment return. The spending limitation caps annual spending at 5% of the three-year average market value of the participating funds in the Pool.

The Pool saw its’ market value decline from $438.0 million on 1/1/08 to $288.0 million on 12/31/08. The Pool returned −31.4% for the year, in line with the relevant market benchmarks and peer group endowments. Despite the broad diversification of the Pool’s investments, the markets in 2008 were characterized by indiscriminate selling that commenced with the September fall of Lehman Brothers and spread globally to the world’s stock and bond markets. Alternative investments in private equity and hedge funds fared only slightly better than the publicly traded markets but in the final analysis only cash and Treasury securities escaped the market sell off. The Pool’s holdings at year-end are more defensive than would be permitted by the long term policy guidelines but still include investments in equities of approximately 51%.

Market values of the Pool, after withdrawals, for the years ended December 31, 2008 and 2007, are displayed in the following chart:

At the beginning of 2008, the Pool consisted of $438.0 million in assets. During the year, the Pool received contributions of $7.5 million, withdrew funds for programs of $18.0 million, and suffered investment losses of $139.5 million, resulting in an ending asset balance of $288.0 million. For the year, the Pool portfolio returned −31.4%, compared with a benchmark return of −31.5%. In 2007, the portfolio returned 11.2% versus 10.6% for the benchmark.

The Pool has consistently outperformed the market benchmarks over a long period. For the five years ending December 31, 2008, the Pool return is 2.6% compared to the market composite benchmark of 1.1% and, for the ten years ending December 31, 2008, the Pool return is 3.3% compared with the market composite benchmark of 2.3%.

In 2007, the NAS Finance Committee adopted the following investment structure for its asset allocation strategy. The comparison of these guidelines to the actual portfolio allocation at December 31, 2008, is as follows:

• See Schedule 2-A on page 21 for details of investments by asset class.

• The Finance Committee has opted to make only minor changes in the disposition of its investments