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[[underline]] REPORT OF THE INVESTMENT POLICY COMMITTEE [[/underline]]
Mr. McHenry introduced the following report of the Investment Policy Committee. He noted that the market value of the Institution's endowment funds totaled $203,432,363.20 as of the end of April. The following motion was discussed and unanimously approved by the Board:

VOTED that the Board of Regents accepts the Report of the Investment Policy Committee and approves a total income return rate for fiscal year 1989 of $9.81 per share, which will use only interest and dividends. 

It was noted that the motion is intended to make clear that the payout rate of $9.81 will use no more than earned interest and dividends, and in that sense it is entirely consistent with past practice and policy. 

*   *   *   *   *

The Spring meeting of the Investment Policy Committee convened in New York on April 5, 1988. Present were Chairman Barnabas McHenry, William R. Salomon, Jane Mack Gould, Charles H. Mott, and Donald Moriarty. Smithsonian staff present were Ann R. Leven, Treasurer, and John R. Clarke, Assistant Treasurer. Also in attendance were representatives from Cambridge Associates (James Bailey and Sandra Thorpe); Miller, Anderson, and Sherrerd, Inc. (Daniel J. Forrestal and Richard Worley); and Fiduciary Trust Company of New York (Jeremy Biggs, Anne M. Tatlock, and Charles Beck).

The Chairman convened the luncheon meeting at 12:00 noon and then introduced Mr. Bailey of Cambridge Associates and asked him to briefly summarize the reports that had been prepared for the Committee on Smithsonian endowment performance, fixed income investing, and asset allocation. 

Mr. Bailey began by comparing Smithsonian performance to two representative indices used by his firm, namely the SEI Balanced Index and the Cambridge Associates Endowment Mean. Cambridge Associates' Index is based upon performance information gathered from some 200 colleges and universities. The Smithsonian Endowment Fund has slightly underperformed these representative indices on the average, and on an appropriately weighted basis, over the most recent five year period. 

Mr. Bailey stated that there were three basic reasons for this underperformance. First, the Smithsonian portfolio does not have any significant holdings in international securities. A typical university portfolio generally is comprised of about 7% in foreign equities and 3%