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performance is generally divergent from most other managers, and that except for one period, divergence has generally been for the better.

Miss Leven asked Mr. Ullman for Batterymarch's investment outlook. Mr. Ullman replied that Batterymarch basically does not attempt to forecast market performance. The firm believes very strongly that being fully invested and using diversification to balance risk, as opposed to trying to time the market, will over time generate significantly higher yields. Mr. Ullman personally remains bullish; he feels that the market is underpriced and that there is a lot of cash waiting to enter the market.

Mr. McHenry and Mr. Mineta quizzed Mr. Ullman as to the status of Batterymarch's international investment pursuits, specifically in Brazil, and how this activity might affect the Institution. Mr. Ullman stressed that Batterymarch has no intention of abandoning the domestic market. They do believe that international investing is on a big upswing and that the public will likely be getting much better values in the aggregate by virtue of this upswing. 

Batterymarch's Brazilian fund has increased in asset value 210% over the last two years, even while the Brazilian currency continues to plummet. Batterymarch is opening up a second fund holding assets in five South American countries. Mr. Ullman stressed that the investor in such a fund must be prepared for the long term as the risk is offset by the low cost of equities. Very few Batterymarch clients to date are participating. 

Mr. English inquired as to the holdings in Batterymarch's total firm portfolio and what percentage is in U.S. investments. Mr. Ullman replied that domestic issues constituted about 50% of the total portfolio. Japanese securities are 25% of the portfolio; Batterymarch believes that these equities are quite likely to follow the significant upward performance of Japanese real estate. He feels that Japan is seen as a "rigged market" by Americans is therefore undervalued. Mr. English added that there were few things likely to hurt the Japanese market. Mrs. Gould agreed, but stated that Japanese investments must be looked at relative to their weight in the world market.

Mr. Anderson inquired as to Batterymarch's initiatives in the real estate market. Mr. Ullman said that they had recently acquired a corporate subsidiary called Agrivest. Batterymarch feels that domestic agricultural activities represent about 20% of GNP, with low equity capitalization. A fund has been created as a way to get more private capital into agriculture in lieu of bank debt and government subsidies. Long term returns might average 5 to 6% plus appreciation.

The Chairman thanked Mr. Ullman and introduced Mr. Daniel J. Forrestal, III and Mr. James L. Kichline of Miller, Anderson & Sherrerd (MAS). Mr. Forrestal stated that Smithsonian holdings were now 55% in equities and 45% in fixed income. He requested the Committee's guidance as to whether the recently imposed guideline of a 25% minimum fixed income level for the total Smithsonian portfolio implied a maximum equity range for all managers.

Mr. Forrestal briefly described MAS's equity strategies. Large capitalization growth stocks are attractively priced, the firm believes. Earnings of