In a sitting room at Loeb House, decorated with oil paintings and oriental vases, Harvard's treasurer painted a picture of the University's finances last week that reflected the same wealth and stability as the historic setting.

Harvard will not hold back on its spending nor alter its fundamental strategy, despite declines in U.S. and world financial markets, said D. Ronald Daniel, treasurer of the Corporation, Harvard's highest governing board, and chair of the Harvard Management Company (HMC), which manages the University's endowment.

"That short-term reality won't get in the way of the President or the Corporation," he said.

Daniel said the Corporation will meet this month to set the net payout from the endowment for fiscal year 2000, an amount that will be unaffected by the market fluctuations in the meantime, he said.

"We don't want the spending rate, because of fluctuation in the endowment, to make it impossible for deans to plan activities," he said.

The President and the Corporation have often stated a goal of spending between 4 and 5 percent of the market value of the endowment each year, but during the last two years it is has stayed well-under that amount. The current payout is estimated at only 3.7 percent.

During this record-breaking period, the endowment grew from $9.1 billion in June 1996 to roughly $12.8 billion.

To maintain its current level of earnings, HMC has been more cautious in choosing individual investments than in the past, Daniel said.

"We had an idea the U.S. market was overextended and the emerging markets were fragile," Daniel said.

Even so, the endowment was hit hard in recent months.

"Everybody lost money in U.S. equities in August. We did too," said HMC President Jack Meyer.

HMC records show 36 percent of the endowment is invested in U.S. stocks. According to Meyer, Harvard lost more on itsdomestic investments during the summer than it didin Russia, where the currency was devalued by morethan 50 percent.

The Dow Jones Industrial Average closed at7895.66 on Friday, far below its July high of9337.97.

Roughly 24 percent of the endowment is investedin foreign stocks, which have faced severedownturns since the Japanese economy faltered morethan a year ago.

On September 2, a week after the Russiangovernment devalued the ruble by 50 percent, Meyersaid Harvard lost about 1 percent of itsendowment, or $128 million, in Russianinvestments.

Nine percent of the endowment is invested inemerging foreign markets, which faced the highesttotal losses in the recent financial upheaval.

But Meyer said Harvard is holding fast. "Doesit change our long-term strategy? The answer isno," said Meyer, who would not comment onindividual investments.

In foreign emerging markets, Harvard investedin--and lost money one--many closed-end funds.Closed-end funds are mutual funds that have alimited number of shareholders.

The closed-end funds were more profitablebefore the market crisis, Daniel said, but willbecome profitable again. Since HMC makes long-terminvestments, it will again profit from thesefunds, he predicts.

"In a lot of our emerging markets we willrecover," Daniel said