Endowment Fund

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Endowment Fund June 30, 2008
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Table of Contents

• Introduction........1
• Endowment History.....................
  ...3
• Endowment Growth..........................
  ..............4
• Increases by Component.............5
• Endowment Performance..7
• NACUBO Comparisons.......8
• Size Endowment per FTE Student.........
  9
• Investment Performance.....12
• Asset Allocation.16
• Gift Flow Rate.....17
• Endowment Spending Rate.......20

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Introduction
An endowment fund for an educational institution
provides long-term continuous support for various
programs and services. Lehigh University
recognizes the importance of providing enduring
financial support through endowment and desires
to enhance its endowment position through the
procurement of new endowment contributions and
the prudent management of its invested
funds. Trustee Responsibilities The University
By-Laws provide that one of the general powers of
the Board of Trustees is to oversee the
management of the University's endowment and
investments. The Board has delegated endowment
management responsibility to its Finance
Committee, which has specific responsibility for
endowment and similar funds as defined in the
By-Laws as follows 1. Establish and monitor
investment policies and guidelines. 2. Manage
investments through the appointment of managers
and/or internal management. 3. Review at
least annually the investment performance. 4.
Establish a policy regarding disbursement of
income. Because sound endowment management
policy suggests a clear separation between
certain functions such as asset allocation
decisions and the determination of endowment
spending policy, the Finance Committee has
established an Investment Subcommittee that has
particular responsibilities for the endowment
fund.
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Introduction

• Committee Membership
• Trustee Finance Committee
• F. J. Ingrassia, Chair
• R. L. Brown, III M. K.
  Chrin W. W. Crouse, III
• J. H. Glanville A. K. Harkness
  T. J. Healy, Jr.
  W. F. Hecht M. L. Paley J. R. Perella
• D. E. Singleton, III E. J. Sussman R. C.
  Tschampion, III
• M. D. Zisman Lehigh Liasion Margaret
  Plympton
• Investment Subcommittee
• R. C. Tschampion, III, Chair (b)
• M. K. Chrin (a) K. L. Clayton (b) A. J.
  Greenwood
• M. F. Hoben (b) J. B. McGowan (b) M. L. Paley
• K. R. Parke S. Sethi Lehigh Liasions
  Peter Gilbert, Mark Siddoway Jennifer Sassani
• (a) Chair effective 1-1-2009 (b) Term
  expired 12-31-2008
• Annual Reporting
• The Trustee Finance Committee desires to report
  annually to the Board of Trustees upon the status
  of the University's endowment fund. These
  reports will present the general progress and
  stewardship of endowment at Lehigh. This report
  will give specific attention to

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5
Endowment History
The University's Endowment Fund has experienced
rapid growth in market value over the past ten
years from approximately 611 million at June 30,
1998, to 1,127 million at June 30, 2008. Since
our June 30 fiscal year-end through March 2009,
our investment portfolio declined by 23.6 which
was better than the broad market equity indices
and also our composite benchmark which declined
27.6, but we take little comfort in that. Other
colleges and universities are reporting similar
losses. As a perpetual entity, we have the
benefit of a long-term time horizon and remain
focused on our strategic asset allocation At
March 31, 2009 the market value was 850 million.
The market value increase over the past 10
years can be broken down into the following
components Gifts Realized and Unrealized
Gains Reinvested Earnings The following three
pages highlight the market growth and the
components of that growth over the past 10 years.
Lehigh Endowment Funds 25-year performance
history is provided on page 7. The endowment
fund has returned an average total annual return
of 11.5 over the 25-year period, which compares
favorably to the composite index of 10.2.
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6
Lehigh University Endowment FundGrowth History
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7
Endowment Increase by ComponentsJune 30, 1998
through June 30, 2008
Gifts and Bequests 203,388,000
39 Investment Performance
643,696,000 Endowment Spending
(331,640,000) Net Appreciation
312,056,000 61 Increase
515,444,000 100

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8
Lehigh University Endowment FundIncrease by
Component June 30, 1998 to June 30, 2008
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Lehigh University Endowment Fund25 Year
Performance History
June 30

Total Return 1984
-1.4 1985 28.9
1986 24.3 1987
20.8 1988 3.3
1989 18.6 1990 8.3
1991 6.1 1992 13.6
1993 15.4 1994 2.1
1995 18.6
1996 16.9 1997 21.4
1998 21.8
1999 12.4
2000 19.3 2001 -4.6
2002 -5.7 2003
7.2 2004 16.1 2005 9.5 2006 12.0 2007
15.7 2008 -2.7 Avg. Annual
Return
11.5 Composite Index (65
Equities/35 Bonds) 10.2
Note Returns for 1986 after are net of
manager fees
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NACUBO Comparisons
The NACUBO Endowment Study (NES) is an annual
report prepared by TIAA/CREF under the direction
of the National Association of College and
University Business Officers (NACUBO). The
report is a useful tool for colleges and
universities to help evaluate the effectiveness
of their endowment policies and investment
performance. Lehigh has participated in the NES
for over three decades. The 2008 Study reports
on 791 participating institutions of higher
education. The following pages compare various
aspects of Lehigh's endowment fund with one or
more of a) the universe of all participating
colleges and universities b) participating
independent schools and c) participating
institutions of similar endowment size (greater
than 1 billion). The latter, when available, is
the most useful standard of comparison for Lehigh.
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NACUBO Comparisons
Endowment Size and Endowment per FTE
Student Page 10 indicates the growth of Lehigh's
endowment fund from 1998 to 2008. As of June 30,
2008, the University ranks 65th in endowment size
among 791 participating institutions. Lehigh's
184,805 endowment per FTE student compares
favorably to the 147,760 for independent
institutions over 500 million to 1 billion and
147,770 for all independent institutions.
Although we have improved our position compared
to these endowment classifications, Lehigh
continues to rank in the lower half of the list
among institutions with which we compete for
students (see page 11). The endowment per FTE
student for independent institutions with
endowments greater than 1 billion is 434,537.
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NACUBO Comparisons
Endowment Size 6/30/98
6/30/08 Lehigh
611,498,000
1,126,942,000 Rank 62 of 508 65
of 791 Institutions Institutions Endowment
per FTE Student 6/30/98
6/30/08 Lehigh 108,422
184,805 Rank (Independent Institutions) 101
of 343 89 of 522
Average - All Schools 90,780
55,580 Independent
Institutions Over 500 million to 1 billion
195,908 147,760 Over 1 billion n/a
434,537 All 126,310
147,770
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Endowment per FTE StudentLehigh vs. Aspirational
PeersJune 30, 2008


Market Value FTE
Endowment Institution
in 000s
Students per Student Rice University
4,610,164
5,064 910,380 University of Notre Dame
6,225,688 11,657 534,073 Northwestern
University 7,243,948 16,856 429,755 Emory
University 5,472,528 12,755 429,050
Brown College
2,746,832 7,878 348,671 Vanderbilt
University 3,524,338 11,847 297,488 University of
Pennsylvania 6,233,281 21,204 293,967 L
afayette College 682,673 2,349 290,623
Cornell University 5,385,482 19,800 271,994 Univ
ersity of Rochester 1,730,772 8,274 209,182 LEHIGH
UNIVERSITY 1,126,942 6,098
184,805 Tufts University 1,445,662 9,355 154,
534 Carnegie Mellon University 1,067,728 9,
625 110,933 Georgetown University
1,059,075 13,587 77,948 George Washington
University 1,256,433 20,108 62,484
Lafayette College is included for
informational purposes only.
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NACUBO Comparisons
Investment Performance Lehigh's endowment
returns for the one, three and five year periods
ending June 30, 2008 ranked in the top half.
Return for the ten year period ending June 30,
2008 ranked in the top quarter performance vs.
all endowment funds. Performance information can
be found on the following two pages.
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Average Annual ReturnEnding June 30, 2008 for
Each Period

10 Yrs
5 Yrs 3 Yrs 1
Year Lehigh University 7.6 9.9
8.0 -2.7 All Endowment Funds
6.5 9.7 8.0 -3.0 LU Rank
120/494 304/652 323/699
317/728 Greater than 1 billion
9.5 13.3 12.0 0.6 LU
Rank 49/74 72/78 71/78 61/78 500 million
- 1 billion 7.6 11.4
9.6 -1.9 Independent Institutions
6.8 9.9
8.2 -2.8 LU Equity N/A 12.1
8.7 -5.8 MSCI World (net) N/A 12.0
8.9 -10.7 LU Bonds N/A
2.8 2.2 1.0 LB Govt Intermed
N/A 3.6 4.8 9.2 LU Composite Benchmark
5.7 9.5 7.0 -6.1 Added Value over
Benchmark 1.9 0.4 1.0 3.4
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LU Investment Performance vs. All Participating
Institutions June 30, 2008
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NACUBO Comparisons
Asset Allocation The asset allocation of
Lehigh's endowment fund at June 30, 2008 tends to
reflect the average of all participating
institutions with exception of under weightings
in domestic equities, fixed income and real
estate and over weightings in non-U.S. equities,
private equity/venture capital and cash. The
following page indicates asset allocation data as
of June 30, 1998 and 2008.
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Asset AllocationJune 30, 2008
6/30/98
6/30/08 LU
Average LU Average Equity
U.S. 48.2 52.4 27.0 34.9 Equity
Global/Foreign 10.6 11.0 21.8
17.0 Fixed Income 31.0 24.9 12.6
19.2 Cash 4.1 4.1 9.7
3.8 Private Equity/Venture Capital 2.1
1.9 7.4 4.3 Hedge Funds 0.2 2.2
10.0 12.8 Natural Resources - -
7.2 2.3 Real Estate 0.3 2.2
1.4 4.2 Other 3.5 1.3 2.9
1.5 TOTAL
100.0
100.0 100.0 100.0
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NACUBO Comparisons
Endowment Gift Flow Rate The endowment gift
flow rate measures the percent of the market
value increase at June 30 related to gifts
received during the year. The percentage can
fluctuate significantly depending on the gift
activity, such as endowment campaign gifts and
large bequests received, in a particular year.
The year by year gift flow rate is charted on the
following page. Fiscal year 1998
Fiscal year 2008 Lehigh University
1.7 5.4 Average - All Institutions
4.7 3.1 Over 1 billion 2.6 2.7 Over
500 million to 1 billion 3.9 2.9
Independent Institutions 3.6 2.4
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Gift Flow RateFiscal Year 1998-2008

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NACUBO Comparisons
Endowment Growth and Gifts Year to year
endowment growth is influenced by gifts and
investment performance. The university has
experienced a period of strong investment
performance over the past 10 years with the
exception of the recent market decline. If we
are to meet the challenge of endowment growth
relative to our peers, gifts to endowment will
be the key. A significant portion (60) of Shine
Forever The Campaign for Lehigh, our current
comprehensive campaign, is focused on endowment,
particularly for endowed scholarships and endowed
chairs. While Lehigh maintains a strong planned
giving program to encourage testamentary gifts to
endowment, the campaign provides an opportunity
to emphasize current gifts to endowment from
alumni and friends. These gifts will be the
cornerstone to future growth of the endowment
fund.
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NACUBO Comparisons
Endowment Spending Rate Below are details of
Lehigh's spending as a percentage of the current
years average market value. Lehighs spending
rate in 2008 was below the NACUBO average for all
endowments, the average for endowments over 1
billion, and the independent institution average.
Further information regarding Lehighs spending
policy and historic spending rates can be found
on following two pages.

FISCAL YEAR 1998
2008 Lehigh University 3.8 4.5
Average - All Institutions 4.0 4.6 Over
1 billion N/A 4.3 Over 500 million to 1
billion 4.0 4.4 Independent Institutions
4.0 4.6
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Endowment Spending Rate1998 - 2008
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NACUBO Comparisons
Endowment Fund Spending Policy The Endowment
will transfer to the University's Operating Fund
annually 5 of the three year moving average
market value of the Endowment. On a per unit
basis, the transfer will result in a minimum
increase of 0 and a maximum increase of 10 over
the prior year's payout. For fiscal year 2010 the
spending amount per share will be reduced by 5
of computed amount.
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