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SMITHSONIAN INSTITUTION Marwick, Mitchell & Company, a nationally known firm of auditors, has completed the annual audit of the Institution's accounts. This report is incorporated in the 1963 report of the Secretary that has been in your hands for some days. Copies of the typed and signed audit are also on the table for examination. It may not be inappropriate at this time to review in general terms, as I have done in the past, the procedures by means of which the invested funds of the Smithsonian Institution are managed. During the present year, as in former years, recommendations for changes in the portfolio of the Smithsonian Institution come to me as Chairman of the Executive Committee of the Smithsonian Institution. The recommendations concerning changes ordinarily originate with the investment counselors Scudder, Stevens & Clark. Copies of their proposals come from their office to me and copies are also sent to the Secretary of the Institution. Each such recommendation receives my personal consideration and my approval or disapproval. I also ask my associates in the Trust Department of the Riggs National Bank to check these proposals on the basis of the detailed sources of information that are at their disposal. A final decision is then made as to the correct action to be taken in regard to every recommendation. The action is then submitted in writing for approval or for reconsideration to the members of the Committee. Quarterly statements of all the Smithsonian's investments come to me from Scudder, Stevens & Clark. Typical copies of these reports are before the Board on the table. These statements summarize the investment holdings of the Smithsonian Institution as organized in major funds. It may be noted that the Freer Fund, when established in 1919, had a value of less than $2 million. On January 1, 1964 the book value of this fund is $10,720,150 and its market value is $16,338,604. It may be emphasized that this increase is entirely a result of the growth in the value of the investments of the Fund because no additions in the form of gifts or in the form of the addition of accumulated income have been added to this fund. Through the years the income from this fund has been used for the purposes of the Freer Gallery of Art of the Smithsonian Institution as directed by the donor. Any income not used annually is segregated in an accumulated income account to be used later according to the specifications of the donor. I repeat as I said last year that it has been said by authorities on the history of investment portfolios in universities and other nonprofit organizations that the Freer Fund of the Smithsonian Institution has had one of the most successful investment histories of any such fund in the Nation. It will be of interest to the members of the Board of Regents to learn the present state of the holdings of the Freer Fund and of the Consolidated Fund as of December 31, 1963. These figures are as follows: CONSOLIDATED FUND [[3 column table]] Book Value of Investments July 1, 1923 | | $ 177,965.28 Additions to Investments 1923-1963 - Gifts and Bequests | $ 3,529,637.19 | - Reinvestment of Income | 643,125,72 | - Gains from Sales of Securities | 1,752,184.73 | 5,924,947.64 Total Book Value December 31, 1963 | | 6,102,912.92
