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been reduced in duration, as have holdings in mortgage-backed instruments. From September 30 to November 10, MAS's holdings only lost 9.31% in value versus 26.85% for the DOW.

MAS does not necessarily look for a recession in 1988; it anticipates the decline in the dollar will counter the trade deficit. Many stocks of good value are now available, with strong earnings potentials. MAS looks to increase holdings in Cyclicals and Technology while trimming holdings in Financials and low P/E stocks, unless they are exceptionally good buys.

Mr. Sherrerd pointed out, in response to the Chairman's question, that he agreed that a recession in 1988 was unlikely and that the coming income tax decrease should help to forestall such an occurrence. He also discussed the present dominant influences on asset allocation. Stock values are attractive relative to short term governments and fully priced relative to fixed incomes; equities are also more reasonable on a price/book value and yield basis. Finally, sentiment appears moderately positive.

MAS has begun a Select Value Mutual Fund consisting of low P/E South Africa-free holdings. They asked permission of the Committee to move a portion of monies under their management into this new fund. The Chairman thanked the MAS representatives for their presentation and advised that the Committee would discuss their proposal.

Mr. Bruce Everitt then reported to the Committee on Nova Advisors. He explained that Gordon Rollert had left the firm to start his own company. Mr. Orie Dudley of Fort Hill Investments, Nova's new parent company, is now working closely with Mr. Everitt on the Smithsonian portfolio.

Mr. Everitt pointed out that the portfolio was impacted more heavily during the recent market drop due to significant holdings in smaller capitalization companies. The portfolio lost 33.39% of its value between September 30 and November 10; for the year ending September 30, Nova had outperformed all the Institution's other managers with a year-to-year gain of 48.34%. Mr. Everitt sees a positive shift in 1988 in the components of GNP, shifting from growth in the service sector to more growth in the capital equipment sector. This favors technology issues, including capital equipment, followed by semiconductor, instruments, and most technology areas which have been depressed since 1983. Also, the declining dollar favors technology as many in this area have 40% or more in foreign sales.

The Chairman asked what strategy would Nova espouse should a recession commence. Mr. Everitt stated that a heavier weighting in growth issues as well as an increase in Nova's cash position would likely occur. Mr. McHenry thanked Mr. Everitt.

Mr. James R. Ullman of Batterymarch explained that the Smithsonian portfolio is virtually unchanged. Although Batterymarch initially did not suffer as greatly as many others at the beginning of the recent decline, they have since lagged behind the indices due to substantial holdings in small growth stocks. As of September 30, Batterymarch was ahead for the twelve months by 43.21%; however, the portfolio under management declined 28.83% between September 30 and November 10.