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SMITHSONIAN INSTITUTION   1584

I am especially happy at this time to express my appreciation to the other members of the Executive Committee for working with me so effectively on the problems of the Smithsonian Institution. The members of the Committee have considered with me the detailed actions that must be taken in connection with the management of the investments of the Smithsonian. I have also been in constant touch with the Secretary in regard to details of the management of the investment portfolio of the Institution. The management of these funds is not a simple task. Sometimes in a single week a number of letters and telephone conversations are required to transact this work promptly for the benefit of the Institution. This official correspondence is supplemented by conferences with the Secretary in regard to the problems and the business of the Smithsonian.

A formal meeting of the Executive Committee was held on December 12, 1962. At the invitation of the Chancellor this meeting was conducted in the Chambers of the Chief Justice. Mr. George S. Johnston, a partner in the firm of Scudder, Stevens & Clark, the investment counselors of the Smithsonian Institution, was present during the first part of this meeting. Mr. Johnston presented a report dealing with the portfolio of investments of the Institution. He first discussed in some detail the long-term performance of the Freer and Consolidated Funds from 1945 to September 30, 1962. He pointed out that during the years indicated the value of the Freer Fund has increased from $6.2 million to $13.5 million, and the annual income has risen from a rate of $213,000 to $470,000. The terminal date used for these statements was September 28, 1962. It was noted that during this period there have been no additions of new capital from the outside or withdrawals of capital from the Freer Fund. He also discussed the Consolidated Fund for the same period of time. The adjusted capital value of this fund has risen during these same years from $1.5 million to $2.8 million. Concurrently the market value has increased from $1.5 million to $4.8 million. Income has risen from a $50,000 annual rate to $207,000 per annum. The growth of these two funds was illustrated by graphs prepared by Scudder, Stevens & Clark.

Mr. Johnston also discussed in some detail the long-term performance of the securities in both the major funds previously mentioned. He analyzed the distribution of common stocks by industry groups as of September, 1962 and in the five previous years. He pointed out that petroleum and business equipment are still the largest industry groups, but are less substantial than in 1957 because of sales from these categories. There has been an increase in emphasis upon investments in electric utilities, automobiles, banks and drugs with de-emphasis over the same period in mining and chemical shares.

Following a consideration of the investments in the Freer and Consolidated Funds Mr. Johnston presented an analysis of the economic status of the country. In very general terms it was agreed that it is likely that the economic trend of the country during the next year would be at essentially the present level with a tendency for an upward trend. There are factors that suggest an upward trend may be continued in 1964. It was agreed by all present that many factors, impossible to assess at this time, may change these predictions.

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