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projection of a gain in the "Shops and Product Development" activities of $75,000 in fiscal year 1973 will prove conservative as our product development program begins to show positive financial benefits. 

As expected, the Freer Fund will show a deficit in fiscal year 1972, although somewhat less than budgeted.  Income for the Freer will be increased next year as the result of the adoption of the Total Return Concept of Income for investment purposes and this gallery should have no trouble operating within its private funds income in fiscal year 1973.

Income from gifts and other restricted funds and also the related expenditures are showing a substantial increase over fiscal year 1971.  In the contract and grant area, the recent downward trend of scientific grants to the Astrophysical Observatory has been reversed in the current year while the uptrend in these grants for the rest of the Smithsonian has continued; the total should approximate $9,700,000 in fiscal year 1972 compared with $9,317,000 in the previous year.  This increase will have the beneficial effect of reducing our overhead rate which must be applied to such grants and will make it easier to recover administrative expenses of the Institution.

As may be seen from the balance sheet figures as of March 31, 1972, we are currently in a comfortable cash position with $4,000,000 of cash and current investments compared with $3,439,000 on June 30,1971.  This increase is of a somewhat temporary nature since it reflects the large seasonal increase in magazine subscription moneys and also the receipt of the $500,000 gift for the Cooper-Hewitt reconstruction work.  For the longer run it is considered highly