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For the entire 33-month period from July 1, 1971 to March 31, 1974, the Freer Fund has declined 12.9%, about twice that of the major averages but only 40% the decline of the Value Line Index.  This below average performance continued in the last quarter.

The Consolidated Fund and Endowment Fund #3 have, however, both performed better than the major market averages, with a 10.8% increase in the Endowment Fund #3 over the 33-month period due in part to the superior market performance of Johnson & Johnson stock, which now, however, constitutes only 8% of the Fund's holdings.

The "Special Endowment Fund" (really a part of current funds) shows a decline of 7.0% since July 1, 1971, slightly below the Standard & Poor's 500, but substantially ahead of the 23% drop in the Value Line Index, which measures the performance of a much broader and unweighted group of listed stocks.

The total Smithsonian Endowment investment portfolios (not including the Special Endowment Fund) had a market value as of March 31, 1974 of $39,866,000 compared to $42,540,000 on July 1, 1971.  They are currently invested 79% in common stocks and 21% in cash and bonds.

The three managers discussed their views on present economic conditions and they generally felt that inflation would continue at least through 1974 at 9-10% on an annual rate.  While they agreed that current stock prices are very cheap and that for the long term equities provide the best type of long-term investment, there was little feeling of an immediate upturn in the stock market.

The Investment Policy Committee is generally satisfied to retain the present investment managers at this time, but will continue to monitor closely their activities and performance.