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Endowment Management

1. What categories of assets are included in your college or universitys endowment? For each
category, please indicate the amount of funds that are:
a. Unrestricted;
b. Permanently restricted by donors;
c. Temporarily restricted by donors;
d. Permanently restricted by your college or university (quasi-endowments); and
e. Temporarily restricted by your college or university.
f. For each restricted asset, please describe the uses for which the funds are restricted and
the amount of the fair market value of the endowment apportioned to each use. How
and why were the restrictions put into place?
June 30, 2015 ($ in millions)

Endowment purpose

(1.b.)
Permanent
(1.a.)
Restricted Unrestricted
Donors

(1.c.)
Temporarily
Restricted Donors

(1.d.)
Permanent
Restricted University

(1.e.)
Temporarily
Restricted University

Total

Instruction, research,and professorships


Student financial aid
General operations
Special programs
Libraries
Duke University Health System
Operation and maintenance of plant
Other designated
Interests in perpetual trusts held by others

618
717
172
61
24
11
9
115
824

1,014
735
442
139
63
13
11
92
-

147
32
238
122
13
2
235
-

266
53
632
215
10
3
269
-

2,045
1,536
1,485
537
110
24
24
710
824

Totals

2,552

2,509

789

1,447

7,297

June 30, 2014 ($ in millions)

Endowment purpose

(1.b.)
Permanent
(1.a.)
Restricted Unrestricted
Donors

(1.c.)
Temporarily
Restricted Donors

(1.d.)
Permanent
Restricted University

(1.e.)
Temporarily
Restricted University

Total

Instruction, research,and professorships


Student financial aid
General operations
Special programs
Libraries
Duke University Health System
Operation and maintenance of plant
Other designated
Interests in perpetual trusts held by others

592
673
159
61
24
11
7
94
802

1,010
749
441
141
62
13
11
91
-

146
31
233
124
13
2
93
-

276
54
628
215
10
3
268
-

2,025
1,507
1,461
541
109
24
22
546
802

Totals

2,423

2,519

642

1,452

7,037

June 30, 2013 ($ in millions)

Endowment purpose

(1.b.)
Permanent
(1.a.)
Restricted Unrestricted
Donors

(1.c.)
Temporarily
Restricted Donors

(1.d.)
Permanent
Restricted University

(1.e.)
Temporarily
Restricted University

Total

Instruction, research,and professorships


Student financial aid
General operations
Special programs
Libraries
Duke University Health System
Operation and maintenance of plant
Other designated
Interests in perpetual trusts held by others

562
631
142
61
23
11
7
84
698

800
582
363
116
51
10
8
69
-

146
30
220
126
13
2
101
-

227
44
511
170
6
2
224
-

1,736
1,288
1,235
472
94
21
19
479
698

Totals

2,220

2,000

637

1,184

6,041

For assets permanently restricted by donors, the donor and the university determine the
restrictions subject always to final approval of the university; these restrictions are codified in
a legal agreement between the donor and the university (see response to question 10, below).
Agreements creating restricted permanent endowment funds always provide for an alternative use
if the original restricted purpose no longer exists or is no longer necessary, legal or possible.
Specifically, the standard endowment agreement provides that if the stated purpose of the fund no
longer exists or is no longer necessary, legal or possible, then at the direction of the Duke University
Board of Trustees (the trustees), distributions may be used for a substantially similar purpose or for
such purposes as will further the objectives and purposes of the university, giving due consideration
to the original intent of the donor(s).
Assets which are temporarily restricted by donors are representative of the unexpended net
appreciation on assets which are permanently restricted by donors.
For quasi endowment funds, permanently restricted by your college or university, the asset
restrictions may arise from a donor designation associated with a restricted gift, not designated
for a donor-established endowment. In most instances, however, the restriction is proposed by
the administration in support of initiatives of the deans. Depending on the level of funding,
each quasi endowment proposal is reviewed either by the Executive Vice President of the
university or by the trustees. For those quasi endowments approved by the Executive Vice
President, the trustees receive a list of these approvals for their review.
It should be noted that quasi-endowment funds held by Duke University (Duke), referred to in
question 1.d. above as permanently restricted, are not permanently restricted, but are subject to
invasion (use) upon approval by the trustees. Assets which are temporarily restricted by the
university are representative of the unexpended net appreciation on those assets which are
permanently restricted by the university.

2. Does your college or university hold any investments that are not included in the
endowment?
Yes.
If so, what are they, and what are their fair market values and basis?
Duke University (the University) utilizes investment pools known as the Universitys Long
Term Pool (LTP) and the Health System Pool (HSP) to make University and Duke University
Health System, Inc. (a controlled affiliate of Duke University that operates a health system,
referred to herein as DUHS) investments in diversified portfolios of debt, equity, and other
investments. The HSP is structured to provide more liquidity for DUHS than is available within
the LTP. The investments outside of Dukes endowment consist of the following:
($ in millions)

2015

2014

2013

Long Term Pool

2,340

2,093

1,698

Health System Pool

2,201

2,337

2,051

215

368

329

4,756

4,797

4,077

Non-pooled
Non-endowment investments

How are they used to further the educational purpose of the college or university?
The Long Term Pool investments outside of the endowment consist of university reserves,
the income from which is used to provide funding for university operations, including
scholarly research, academic support, student support (need-based grants and scholarships),
and strategic initiatives.
The Health System Pool investments consist of unrestricted working capital, the income off
which is used to support health system operations as well as academic support of the
clinical missions of the universitys School of Medicine.
3. What is your endowment size, as measured by total fair market value of its assets? What
has been the net growth and net investment return on your endowment each year?
($ in millions)
Year
FY15
FY14
FY13

Ending
Market Value
7,297
7,037
6,041

Net
Growth
260
996
486

Investment
Return
4.4%
20.1%
13.5%

Given investment cycles, and to put the investment return of the last three years into context, a
longer term perspective is important; therefore, a 10 year history has been provided below:
($ in millions)
Year
FY15
FY14
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06

Ending
Market Value
7,297
7,037
6,041
5,555
5,747
4,824
4,441
6,124
5,910
4,498

Net
Investment
Growth
Return
260
4.4%
996
20.1%
486
13.5%
(192)
1.0%
924
24.5%
383
13.2%
(1,683)
-24.3%
213
6.2%
1,413
25.6%
672
20.2%

4. How much has your college or university spent each year to manage the endowment, and
how many staff and contractors are employed to manage the endowment? For any fees
paid to nonemployees for investment advice, asset management, or otherwise, please
provide detail on the amounts paid, to whom, and the fee arrangement.
The universitys and DUHS investment assets are managed by DUMAC, Inc. (DUMAC).
DUMAC is a separate, nonprofit support corporation organized and controlled by Duke
university that, in addition to managing the investment assets of the university and DUHS, also
manages the investment assets of the Employees Retirement Plan of Duke University and The
Duke Endowment (a charitable trust that provides substantial support to the university and also
has other beneficiaries). As of June 30, 2015, the investments managed by DUMAC included:
($ in billions)
Investments:
University investments, including endowment
Health System invesments
Employees' Retirement Plan
The Duke endowment
Total Investments Managed by DUMAC

9.0
2.5
1.6
3.4
16.6

The majority of the universitys endowment assets, along with an additional $2.3 billion of
reserves, are invested in the Long Term Pool (LTP).

The cost of managing the LTP over the past three years is as follows:
Year

Internal ($M)

2015
2014
2013

11
9
8

External ($M)

Total Cost ($M)

27
24
19

38
33
27

FTEs*
47.5
45.5
44.0

Contractors
80
72
67

*FTEs manage all investment noted above


5. If your endowment is required to file a Form 990 separately from your college or
universitys Form 990, please provide the endowment entity name(s) and Employment
Identification Number.
Duke Universitys endowment does not file a separate Form 990.
Endowment Spending and Use
6. How does your college or university determine what percentage of the endowment will be
paid out each year?
The spending policy (payout) is expressed in terms of dollars per unit or share of the university's
Long Term Pool. The endowment spending rate per unit is calculated as 5.5% of the average of
the Long Term Pool unit market values for the previous three calendar year ends, subject to a
10.0% maximum annual growth in per unit spending. The Board of Trustees, through the
Business and Finance Committee, reviews the spending policy annually in the spring. Any
deviation from the policy requires this committees approval.
On February 29, 2008, the universitys trustees approved a higher spending rate for permanent
and quasi endowment funds that support financial aid programs. This initiative increased the
resources from endowment funds available for financial aid while retaining the existing spending
rate for endowment funds that support non-financial aid purposes.
The financial aid endowment spending rate per unit is calculated as 5.75% of the average of the
Long Term Pool unit market values for the previous three calendar year ends, subject to a 10.0%
maximum annual growth in per unit spending. The Board of Trustees, through the Business and
Finance Committee, review the spending policy annually in the spring. Any deviation from the
policy requires this committees approval.
If any, what has been the target endowment payout as a percentage of the endowments
beginning balance each year?
The university does not target a payout percentage of the endowments beginning balance.
If that answer differs from the percentage paid out, please explain why.
Not applicable.
5

Please attach any payout policies or guidance.


Attached as Exhibit 1 Duke University Long Term Pool Spending Policy Board of Trustee
Resolution dated May 12, 2000.
Attached as Exhibit 2 Duke University Spending Policy for Endowment Funds
Supporting Financial Aid Board of Trustee Resolution dated February 29, 2008.
7. Does your college or university have policies regarding spending the endowment principal?
Duke, as a North Carolina nonprofit corporation, is subject to Chapter 36E. of the North Carolina
General Statutes, the statute that governs the management of endowment funds (excluding quasi
endowments) owned by North Carolina charitable institutions. A copy of that statute and an
executive summary is attached as Exhibit 3. That 2009 statute, entitled the Uniform Prudent
Management of Institutional Funds Act (UPMIFA), permits (but does not require) charitable
institutions to invade the principal of endowment funds under certain circumstances. When
UPMIFA became law in 2009 permitting principal invasion of endowment funds, the Board of
Trustees considered the possibility of changing its policy which had always prohibited such
invasion. The decision was made to continue the policy of prohibiting principal invasion with
the following limited exception: for undergraduate need-based scholarship endowment funds, a
minimal $1,000 per fund invasion would be made if the market value of those funds were
reduced below book value by the customary trustee-approved spending distributions.
A copy of the trustee resolution dated May 8, 2009 is attached as Exhibit 4.
Has your college or university ever spent endowment principal?
Yes
If so, under what circumstances?
In accordance with the authority of the Board of Trustees resolution attached as Exhibit 4,
Duke spent principal from certain need-based scholarship endowment funds in fiscal year
2009 by up to $1,000 per fund when the market value of those funds was reduced below
book value in order to maintain financial aid for students on endowed scholarships.

8. How much and what percentage of the endowments beginning balance has your college or
university spent each year? How much and what percentage of the endowments return on
investment has your college or university spent each year?
($ in millions)

Year
FY15
FY14
FY13

Endowment
Spending
307
285
295

% of Beg
Market Value
4.9%
5.3%
6.0%

% of Investment
Returns
115.7%
26.7%
45.3%

Dukes spending policy is designed to provide stable annual funding amounts by smoothing the
impact of short-term fluctuations in investment market values. Adding an additional seven years
to the schedule above and looking at a full ten year period shows how this has worked.
($ in millions)

Year
FY15
FY14
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06

Endowment
Spending
307
285
295
270
280
246
251
233
149
132

% of Beg
Market Value
4.9%
5.3%
6.0%
5.3%
6.6%
6.3%
4.7%
4.5%
3.9%
4.1%

% of Investment
Returns
115.7%
26.7%
45.3%
651.1%
27.3%
48.3%
-19.0%
74.4%
14.2%
14.7%

The effective spending rate shown above is a blend of the rates for financial aid endowments and
non-financial aid endowments, which have had separate payout rates since fiscal 2008, as
described in our response to question 6 above. The graph below provides the effective spending
rates for financial aid (FA) and non-financial aid (NFA) endowments. Since the market
improvement experienced in fiscal 2011, the effective spending for financial aid endowments has
been higher than the effective spending rate for non-financial aid endowments and the blended
spending rate.

Note that in fiscal 2009, the effective spending for financial aid endowments trailed the average;
many of the financial aid endowments had been recently funded as a result of the Financial Aid
Initiative, a three year campaign (2005-2008) to raise $300 million for financial aid. These new
financial aid endowments experienced market declines in 2008-2009 which negated their ability
to distribute income without invading the endowment principal.
In addition to endowment distributions, the University also derives operating support from the $2
billion of invested reserves (referenced in response to question 2 above). This related investment
income provides between $75-$100 million of annual support.
9. What percentage of your endowment does your college or university devote to financial aid
for student tuition? How much for other forms of student financial aid? Please specify the
types of non-tuition aid provided.
($ in millions)

Year
FY15
FY14
FY13

Market Value of
Market Value
% of Endowment
Endowment
of
devoted to
supporting Financial
Endowment
Financial
Aid
Aid
7,297
1,536
21.1%
7,037
1,507
21.4%
6,041
1,288
21.3%

Duke University meets full demonstrated financial need for every undergraduate student. For
U.S. citizens and permanent residents, Dukes admissions policy is need blind, which means
that applicants are accepted based on merit, regardless of their ability to pay tuition and fees.
Duke does not make the distinction between tuition and other forms of financial aid; rather,
total cost of attendance is the methodology used to award financial aid. Total cost of
attendance includes: tuition and fees, room, board, books, transportation, and personal
expenses.
8

It is important to note that endowment income is only one source of support for financial aid.
The university provides in approximately $130 million in financial aid each year, over half of
which comes from unrestricted resources. The graph below demonstrates the universitys
commitment to financial aid over the past eight years and the sources of that support.

$128

$129

$130

$120
$100
$72

$109

$86

10. Does your college or university have policies regarding whether it is allowed to accept funds
restricted to a specific purpose?
Yes. Duke will only accept restricted gifts that support the educational, research, and health
care purposes of the institution while preserving the integrity of those purposes. For example,
the educational purpose of Duke is supported by over 2,000 permanent endowment funds
restricted to student financial aid.
Has your college or university ever declined a donation because it was restricted to a
certain purpose?
Yes
If so, please describe those specific scenarios in which your school rejected a donation.
Rejected because purpose of gift not a priority for Duke. Certain gifts may propose support for
one of the core purposes of Duke; however, if the proposed gift would support a program or
effort that is not a priority for the academic leadership of Duke, then the donor would be asked
9

to change the proposed restriction to better fit Dukes academic plans. If the donor refuses,
then the proposed gift would be declined. For example, a donor may propose an endowment
gift to support a new research program that would not fit into either the current or proposed
academic structure of Duke.
Rejected because of attempted donor control. In some instances, donors propose a gift that
would normally be accepted by the university, except that the donors impose restrictions that
would give the donors control over certain aspects of the gift and its expenditure. Preservation
of the academic integrity of Duke requires that a donor retain no control over the gift and its
use once the gift is made. That is, the restrictions on the purpose of the gift are carefully
reviewed as noted above, and further, any attempted post-gift restrictions on the use of the gift
are also carefully reviewed.
For example, in one case, a multi-million dollar gift was proposed to establish an institute
including endowed professorships at Duke in a certain academic discipline, and the proposed
academic discipline was acceptable to the university. At the same time, the donor proposed
that the donor (and others to be appointed by the donor) would have a role on a committee that
would review proposed faculty members for the proposed institute. The university determined
that any role of the donor in the review of faculty members was unacceptable and the gift was
therefore declined.
In another case, a donor proposed a multi-million dollar gift to endow a scholarship fund for
students in one of Dukes schools. The purpose of the fund was acceptable; however, the
donor insisted that the committee that selected the scholarship recipients would include the
donor. This proposed control by the donor over the use of the gift by selecting scholarship
recipients was determined to be unacceptable and the gift was declined.
11. How much and what percentage of your college or universitys endowment is invested in
real property (not including REITs or other publicly-traded securities)?
Less than one-tenth of a percent (0.1%) of the universitys endowment is invested in real
property.

10

Please list and describe your college or universitys real estate holdings, including real
estate held by the college or university, the endowment, and all related parties.

Building Use
# of Buildings
Hospital / Clinical / Medical Care
57
Academic
77
Research
42
Housing / Residential
98
Administrative
56
Athletics / Fitness
23
Parking
11
Auxiliary
16
Utilities
10
Miscellaneous Support
18
Totals

408

Net SF
5,036,941
3,177,915
2,410,441
1,719,829
1,060,740
681,751
167,421
136,062
121,569
86,298

Net Book
Value
($ millions)
529
121
118
7
1,099
118
16
89
362
247

14,598,967

2,707

If the college or university has made any Payments in Lieu of Taxes, please provide the date
and amount of the payment.
The university does not make Payments in Lieu of Taxes. It does, however, provide voluntary
support to regional and local governments for a number of purposes including public
transportation and fire protection.
The table below shows the support provided to Durham County over the past three years.
FY15
Fire protection

Durham Area Transit Authority


Total

FY14

FY13

400,000 $

400,000 $

400,000

350,000

350,000

350,000

750,000 $

750,000 $

750,000

In addition, the university leases over 4 million square feet of space in various counties within
North Carolina and indirectly pays approximately $8 million in property taxes annually. This
space is used to further our missions of instruction, research, and patient care and could be
exempted from taxation; however, the university pays the taxes in support of the local
government.
Lastly, Duke contributed $7.5 million toward the construction of the Duke Performing Arts
Center (DPAC), which has further enhanced the downtown Durham economy.

11

Donations
12. Does your college or university grant naming rights to donors based on certain donation
levels? If so, please describe the naming rights program, including how much and what
percentage of any naming rights donations your college or university has used for tuition
assistance.
Duke does not have a formal naming rights program; however, there is Board of Trustee
approved policy, attached as Exhibit 5. Efforts to raise funds to support Duke and its charitable
endeavors are enhanced by donor recognition. The name of the university was changed from
Trinity College to Duke University to recognize the contributions of the Duke family to create
Duke University.
Donors to Duke are currently recognized:
as members of certain giving societies (for example, the Barrister Donor Society
recognizes annual giving at $2,500 and above to support the School of Law),
by listing in various Duke publications as giving at certain levels,
by having endowment funds named for the donors (for example, a permanent scholarship
endowment fund may be named for the donor(s) for a minimum gift of $100,000); a
permanent endowment fund for a full professor may be named for the donor(s) for a
minimum gift of $2,500,000),
by naming new buildings and spaces within buildings for donors (for example, a new
building may be named for the donor(s) if the gift is equal to one-half of the estimated
total cost of construction),
by naming renovated buildings and spaces within for donors, and
by naming a constituent part of the university for donors (for example, an institute,
laboratory, or school).
If so, please describe the naming rights program, including how much and what
percentage of any naming rights donations your college or university has used for
tuition assistance.
Donors establishing endowments select the purpose of the endowment (subject to university
approval) and may choose the endowment name, which may include the donors name
and/or the purpose of the fund. The table below shows the total gifts given to permanent
endowment funds supporting student financial aid and the percentage those gifts represent
of total endowment gifts for the fiscal years ended June 30, 2015, 2014, and 2013.
For Endowment-Related ($ in millions)
Total Endowment Gifts
Total Financial Aid Endowment Gifts
% of Endowment Gifts Directed to Financial Aid

FY15
106
43
40%

FY14
97
40
41%

FY13
76
32
42%

12

Conflicts of Interest
13. What conflict of interest policies does your college or university have in place to address
financial interest in endowment investments (including potential conflicts of interest among
and between governing boards, trustees, executives, internal employees tasked with
overseeing the endowment, and external asset managers of endowment assets?)
Duke University has adopted a conflict of interest (COI) policy for its Board of Trustees
(attached as Exhibit 6) and a COI policy for officers and employees with administrative
responsibilities (attached as Exhibit 7).
The Duke University Board of Trustees does not make investment decisions. The management
of Dukes investment assets, including the assets of permanent endowment funds, is entrusted to
DUMAC, Inc. (DUMAC), a controlled affiliate of Duke University. The COI policy of
DUMAC is attached as Exhibit 8.
How do you vet board members potential conflicts of interest?
Members of the governing board of DUMAC (the DUMAC Board of Directors) are required to
comply with the DUMAC COI policy and are required to file an Annual Statement of
Compliance with the Chief Compliance Officer (CCO) of DUMAC. The CCO of DUMAC
administers this annual disclosure process and reviews the disclosures.
What are your policies if a conflict arises with a member of the board of trustees?
The Audit Compliance and Risk Management Committee of DUMAC (chaired by a member of
the Board of Directors) reviews any potential conflicts disclosed and receives recommendations
by the CCO regarding the implementation of conflict management plans when applicable. The
COI policy of DUMAC, and a conflict management plan, requires that the subject Director
refrain from participation in, discussion of, or voting on the matter and should take no action
which would create the opportunity for private benefit until the conflict is resolved.

13

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