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financial developments.  With the increased size of the Institution and seemingly continuous inflation causing commensurate increases in administrative costs, the Institution is even more vulnerable now than in the past to any unfavorable developments which might reverse our present satisfactory income position.  The $8,400,000 unrestricted purpose endowment funds, for example, would by itself provide only about $375,000 of annual income--i.e., about 7% of our present administrative expense or about equal to the annual inflationary increase in such expense.

2.  Present favorable annual surpluses are derived primarily from the [[underline]]Smithsonian[[/underline]] Magazine.  Our ability to carry administrative costs is also heavily dependent on overhead charges levied against the Magazine, other auxiliary activities, and our current sizable volume of grants and contracts from Federal agencies and restricted-purpose gifts (See Table 2).  While there is no immediate reason to foresee diminution of such support, these are, by their very nature, subject to change in public taste, political decision, and general economy.

3.  In view of this vulnerability of the Institution's Trust Fund operations to possible adverse financial developments in the