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Mr. Johnston pointed out that the Freer Fund, which can be analyzed easily since there are neither additions nor withdrawals of capital, has shown an annual rate of total return (dividends plus market appreciation) for the past ten years of 8.8%.  For the last two years the rate was 10.6%, and for the last year ended June 30, 1968, it was 10.8%.  This performance was achieved despite a decline in the bond portion of the portfolio.

Figures on the four principal funds of the Institution are tabulated in the following statement.

[[underline]] Relationship of Market Value to Book Value [[/underline]]

[[six column table]]

    | MARKET VALUE 12/29/67 | MARKET VALUE 9/30/68 | MARKET VALUE 11/29/68 | Adjusted Book Value 12/29/67 | Gain or (Loss) from Book

Freer | $18,781,445 | $19,746,784 | $19,986,987 | $12,767,591 | $7,219,396

Consolidated | 9,775,410 | 11,767,239 | 12,251,367 | 10,248,570 | 2,002,797

[[all number values in this row are underlined]] 
General | 1,180,200 | 993,529 | 990,609 | 996,786 | (6,177)
Special Endow. | 1,341,529 | 1,472,703 | 1,694,501 | 1,659,183 | 35, 318

[[all number values in this row are double underlined]] 
Totals | $31,078,584 | $33,980,255 | $34,923,464 | $25,672,130 | $9,251,334

[[end table]]

Note: A net amount of approximately $1,192,705 was added to the Funds during the period 1/1/68 through 11/29/68.

In commenting more specifically about the investment performance of the Smithsonian funds to November 29, 1968, Mr. Johnston noted that the market value of the Freer Fund had increased since 1945 from $6.2 million to nearly $20.0 million, a new all-time high. Annual income had increased from $213,000 to $619,000 in Fiscal Year 1968, a 10.0% return on initial capital value, and 3.3% on average market value during the past year. 

In the Consolidated Fund the "adjusted capital value" has increased since 1945 from $1.5 million to $8.3 million, with substantial capital amounts added in recent years. Over the same period, market value increased from $1.5 million to $12.3 million. Annual income has risen from $50,000 to $417,000, a rate of 5.9% on the adjusted capital value and 4.1% on average market value during the past year. Average yields have been lowered by the recent additions of new capital as well as by pursuit of a policy of seeking growth equities. 

As of November 1968, the combined Freer and Consolidated Funds were invested 70% in common stocks and 30% in bonds and preferred stocks, based upon market value, compared with 68% in common stocks on September 30, 1967. The Special Endowment Fund is currently invested about 55% in common stocks versus 44% a year ago. It is anticipated that the portion of equities will be further increased to approximate eventually the 70% ratio existing in the other funds.

With respect to the bond holdings of the Freer and Consolidated Endowment Funds, there has previously been a heavy concentration in long-term maturities which has resulted in substantial price deterioration with 

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