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revenue producing activities, it is now estimated that product development royalties, principally from Fieldcrest, less related expenses, will produce $350,000. Results from our Museum Shops bear out our predictions of lower income this year because of (1) closing of the A&I Building, (2) expense of amortizing new Museum Shop costs and (3) expected loss on our initial sales catalogue program.

This year's higher $3,115,000 projected surplus before transfers would be after sharing about $460,000 with bureaus in the form of interest payments on their restricted fund balances and partial allocations of revenues from the Museum Shops, Product Development and concessions. This surplus should permit the approved additional $1,500,000 for West Court construction and another $600,000 for Cooper-Hewitt renovation and Chesapeake Bay Center mortgage payments. In addition, it should permit the transfer of $1,000,000 to our Endowment Funds.

In view of this possibility of transferring $1.0 million from current funds into endowment, an analysis was made of the Smithsonian's cash flow situation as well as its working capital requirements. The transfer of these funds, or a portion of them, would impose no cash shortage on the operating funds, and the recommendation was therefore sought from the Investment Policy Committee as to the timing of any such transfer to endowment funds. Contained in their report which follows is the Investment Policy Committee's recommendation that $500,000 be made available for transfer into endowment at this time with the balance (depending on operating results) at the end of the year. Approval of the further transfer will be sought from the Regents at the May meeting based on projections at that time.