During the quarter covered by this report, the design of the Lincoln Training System-3 (LTS-3) Terminal System was completed and construction of a prototype unit begun. Four major hardware developments occurred: 1) An Image Systems, Incorporated Model 201 CARD Reader was converted into the LTS-3 audio-visual student terminal; 2) the first of five LTS-3 terminal interface links with the PDP-8/I computer was completed; 3) the author's audio-recording facility, permitting random access, recording, and playback, was developed; 4) a special step-and-retreat camera for the production of microfiche masters was procured. A simulator for the Lincoln Terminal Language was written on the IBM 360/67 computer and used to check out programs for the field tests at Keesler Air Force Base. Approximately 75% of the lesson material for these operations was completed; this material will be used for the initial field trial of the LTS concept. It covers one week each in the areas of electronics and air traffic control and consists of 2000 frames. Initial estimates suggest even slow students will complete the material quickly, thuse saving time at no loss of training quality. (Author/LB)