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[[underlined]] Report of the Investment Policy Committee  [[/underlined]]

Mr. Wheeler reported for Mr. Burden, Chairman of the Investment Policy Committee, that the Investment Policy Committee held its regular semi-annual meeting in New York City on Monday, November 20, 1978, to review the performance of our four investment managers.  The summary table of information for the quarter ended September 30, 1978, which was provided to the Committee is attached as Schedule A.  The performance for this quarter, which was the first full quarter for three of the four  managers, was as follows, compared to market averages (total return basis):

Batterymarch                              +8.52%
Fiduciary Trust (Davis, Palmer & Biggs)   +8.08% 
Torray & Clark                            +6.49%
BEA                                       +5.23%
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Standard & Poor's 500                      +8.66%
Dow Jones Industrial                       +7.12%

The Committee was provided with current lists of portfolio holdings and was briefed on economic and stock market forecasts by the four managers.  Subsequent data added by the managers indicated that the gains to September 30th, shown above, were about offset by October's sharp market decline, but the managers remained generally positive on the outlook for equities.

The Committee then considered, and recommended that the Regents approve, certain changes in both the total return income payout policy for Smithsonian endowment funds and the investment guidelines for the managers.

In brief, the Committee recommends that the income payout amount per endowment fund unit be determined each year, not solely by the present "4-1/2% times the five-year market value average" formula tied directly to stock market levels, but rather should be determined after taking into