Committee Members:

William H. Goodwin, Jr., Chair
Henry L. Valentine, II
Walter F. Walker
Timothy B. Robertson
James C. Wheat, III
Joseph E. Wolfe
John P. Ackerly, III, Ex Officio

A. Pratt Fund

• 1999-2000 Budget

B. Appointment to University of Virginia Investment Management Company Board

C. Change in Trustee and Reinvestment of Assets of the University of Virginia Pooled Income Fund

D. Amendment to Faculty Retirement Plan

II. ACTION ITEMS (Mr. Sandridge)

A. 1999-2000 Budget 10

1. Academic Division

2. The University of Virginia's College at Wise

3. Medical Center

B. Integrated Healthcare Information Management System Acquisition

C. Enrollment Projections

• Academic Division

D. Bond Issuance

• Biomedical Engineering and Medical Research Building
• Orange Medical Office Building

III. REPORTS BY THE EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Mr. Sandridge)

A. Endowment Report (Ms. Handy) 14

• Market Value and Performance as of March 31, 1999

B. Report on Actions of the Investment Management Company, April 19, 1999 (Mr. Goodwin)

C. Vice President's Remarks (Mr. Sandridge)

• Integrated Systems Project Update
• Desktop Computing Initiative
• Miscellaneous Financial Reports
  1. Capital Campaign Gift Report
  2. Disinvestment of Unrestricted Quasi-Endowment to Fund Capital Campaign Expenses
  3. Internal Loans to University Departments and Activities
  4. Quarterly Budget Report
  5. Quasi-Endowment Actions Report
  6. Write-off of Bad Debts for Non-Patient Services

IV. ATTACHMENT

• 1999-2000 Pratt Fund Allocation

V. EXECUTIVE SESSION (Mr. Sandridge)

A. Discussion or consideration of the condition, acquisition or use of real property for public purpose, as provided for in Section 2.1-344 (A)(3) of the Code of Virginia.

B. Discussion of the investing of public funds where competition and bargaining is involved, when if made public initially the financial interest of the University would be adversely affected, as provided for in Section 2.1-344 (A)(6) of the Code of Virginia.

I. A. PRATT FUND: Approval of the 1999-2000 budget of Pratt Estate funds for the School of Medicine and specific departments in the College of Arts and Sciences

In April 1976, the University received funds, designated in the will of John Lee Pratt, to be used "to supplement salaries of the professors of the Departments of Biology, Chemistry, Mathematics and Physics, to purchase equipment for these departments as suggested by the heads of the departments and approved by the President and the Board of Visitors, and to provide for scholarships in these departments for outstanding students." Mr. Pratt's will provides further that these funds could be used "to support research in the School of Medicine and to provide scholarships for medical students." The will stipulates that the Pratt endowment reverts to Washington and Lee University if the University of Virginia does not comply with the provisions of the will.

The original Pratt endowment has been split into two equal endowments, with 50 percent of the original principal assigned to the College of Arts and Sciences and the remaining 50 percent assigned to the School of Medicine. A distribution of $1.3 million from each individual endowment, for a total of $2.6 million, in 1999-2000 is recommended to support the projects outlined below. Deans in each of the schools, the Vice President and Provost, the Vice President and Provost for Health Sciences and the President support these projects. The table below shows aggregate allocations; Attachment A on page 41 describes the specific allocations.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF PRATT FUND DISTRIBUTION FOR 1999-2000:

RESOLVED that the budget for the expenditure of funds from the Estate of John Lee Pratt be approved to supplement appropriations made by the Commonwealth of Virginia for the School of Medicine and Departments of Biology, Chemistry, Mathematics and Physics in the College of Arts and Sciences. These allocations, which are not to exceed $2.6 million for 1999-2000, are suggested by the department chairs and recommended by the dean of each school, and approved by the Vice President and Provost, the Vice President and Provost for Health Sciences, the President and the Finance Committee. To the extent the annual income from the endowment is not adequate to meet the recommended distribution, the principal of the endowment will be disinvested to provide funds for the approved budgets.

1999 Pratt Fund Allocation

I. B. APPOINTMENT TO UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY BOARD -- Approves the appointment of a public member, Mr. Donald Laing III, to the University of Virginia Investment Management Company (UVIMCO) Board for a four-year term.

The initial four public members of the board had terms staggered over four years. Mr. Laing already has served a one-year term and is eligible for two additional four-year terms. He played a critical role in the search for international managers and has been an active participant at the UVIMCO meetings. Mr. Laing is a general partner in Cornerstone Partners, a fund of funds specializing in emerging markets.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF THE PUBLIC MEMBERSHIP OF THE UNIVERSITY OF VIRGINIA INVESTMENT MANAGEMENT COMPANY

WHEREAS, the Manual of the Board of Visitors authorizes the Board to appoint to the University of Virginia Investment Management Company no more than four public members, who shall be alumni of the University, to serve as non-voting members in staggered initial terms not to exceed four years;

RESOLVED that Donald Laing III of Charlottesville shall be appointed to serve as a public member of the University of Virginia Investment Management Company for a term of four years beginning July 1, 1999.

I. C. CHANGE IN TRUSTEE AND REINVESTMENT OF ASSETS OF THE UNIVERSITY OF VIRGINIA POOLED INCOME FUND:

The University of Virginia Pooled Income Fund (the "Fund"), established on May 28, 1976, is one of the first Planned Giving vehicles to fund future gifts for the University. Similar to a Charitable Remainder Trust, the Fund accepts assets from donors, pays a lifetime of income for designated beneficiaries and leaves the remainder to the University.

The Fund was established during a period of double-digit interest rates and in the past has provided better-than-average income flow to the beneficiaries. While beyond our control, the current interest rate market environment has made many income beneficiaries unhappy with their payments, discouraging additions to the Fund.

Fiduciary Trust Company International is the Trustee, and provides asset management, custodial and administrative services. The fees for these services have always been paid from the principal portion of the Fund and income beneficiaries have been receiving periodic distributions based upon the Fund's gross income. As of December 1998, Fiduciary reorganized all of its investment advisory relationships into its public fund complex. Because these public funds arrive at distributable income net of expenses (i.e., fees are charged to income), payments to beneficiaries are further reduced from earlier levels.

The University has the power to appoint itself as Successor Trustee to the Fund and to invest the Fund in the Core Equity and Bond Fund portfolios of the University's Pooled Endowment Fund. This approach is consistent with the treatment of various Charitable Remainder Trusts where the University acts as Trustee and has a remainder interest. As Trustee, the University would continue the policy of charging fees against principal and Fiduciary would continue to act as custodian and administrator. These actions were reviewed by the Investment Management Company on April 19, 1999, and recommended to the Board of Visitors for approval.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF CHANGE IN TRUSTEE AND REINVESTMENT OF ASSETS OF THE UNIVERSITY OF VIRGINIA POOLED INCOME FUND

RESOLVED by the Board of Visitors that the Executive Vice President and Chief Financial Officer is authorized to execute a Second Amendment to the Amendment and Restatement of Trust Agreement for the University of Virginia Pooled Income Fund thereby providing for the University to appoint itself as Successor Trustee to the Fund, to invest the assets of the Pooled Income Fund in the Core Equity and Bond Fund portfolios of the University's Pooled Endowment Fund and to charge fees against principal.

I. D. AMENDMENT TO THE FACULTY RETIREMENT PLAN: Approves an amendment to the faculty retirement plan to include participation of salaried part-time faculty working at least twenty hours per week.

During the 1999 Session of the General Assembly, legislation was passed (HB 1756), which mandates that part-time classified salaried employees be automatically enrolled in the Virginia Retirement System (VRS). This amendment permits salaried, part-time faculty to enroll in the Defined Contribution Plan for Faculty of the University of Virginia.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF AMENDMENT TO THE FACULTY RETIREMENT PLAN

WHEREAS, under the terms of the University's Faculty Retirement Plan, the Board of Visitors has the sole authority to amend the Plan; and

WHEREAS the Board of Visitors finds that the Plan's eligibility rules should be amended to include salaried, part-time faculty members working at least twenty hours per week with a minimum six-month appointment;

RESOLVED that the Executive Vice President and Chief Financial Officer is authorized and directed to execute and amend the Plan as described above.

AMENDMENT TO THE DEFINED CONTRIBUTION RETIREMENT PLAN
FOR THE GENERAL FACULTY OF THE UNIVERSITY OF VIRGINIA
(As Restated January 1, 1996)

AMENDMENT TO THE DEFINED CONTRIBUTION RETIREMENT PLAN FOR THE GENERAL FACULTY OF THE UNIVERSITY OF VIRGINIA (the "Plan") by the UNIVERSITY OF VIRGINIA (the "University").

WITNESSETH:

WHEREAS, The Plan was restated effective January 1, 1996, and

WHEREAS, the University desires to amend the Plan to expand the class of employees eligible to participate in the Plan, and

WHEREAS, section 7.1 of the Plan permits the University to amend the Plan,

RESOLVED, the Plan is hereby amended as follows:

Plan section 1.6 is amended to read as follows effective July 1, 1999:

D. Eligible Employee

A salaried Employee who

(a) is a member of the "General Faculty of the University," as that term is described in the Faculty Handbook of the University;

(b) is a "Senior Scientist" or "Principal Scientist" as determined by the University in its sole and absolute discretion;

(c) worked for Agency 209 of the University of Virginia Medical Center and was a Participant in this Plan as of December 31, 1998; or,

(d) effective September 1, 1998, is a member of the faculty of the University of Virginia's College at Wise.

Notwithstanding the foregoing, an Employee shall not be an Eligible Employee if he or she is one of the following:

(a) a visiting faculty member, as that designation is determined by the Employer at the commencement of employment;

(b) a faculty member regularly scheduled to work less than 20 hours per week;

(c) a faculty member with an appointment of less than six (6) months; or

(d) an Employee who participates in the Defined Contribution Retirement Plan for Employees of the University of Virginia Medical Center.

II.A. 1999-2000 Budget Approval of the 1999-2000 budget for the University of Virginia Academic Division, The University of Virginia's College at Wise and the Medical Center

BACKGROUND: During its May meeting, the Board acts on the proposed operating budgets for the Academic Division, the University of Virginia's College at Wise and the Medical Center. Since November 1997, we have presented to the Board the operating and capital budget requests submitted to the state for the period 1998-2000, the preliminary budget assumptions for the 1999-2000 operating budget and the results of the 1999 General Assembly session. At its January and March meetings, the Board approved tuition and fees and housing and dining rates for 1999-2000, which comprise a significant revenue source for the operating budget.

DISCUSSION: The 1999-2000 operating budget proposals for all divisions of the University total $1.19 billion, representing an increase of 3.0 percent compared with the revised budgets of the previous fiscal year. Of this amount, $719.3 million relates to the Academic Division, $449.8 million to the Medical Center (teaching hospital) and $17.1 million to University of Virginia's College at Wise.

Academic Division

Under the proposed budget, the Academic Division revenues will increase by 6.5 percent, or $43.8 million, to a total of $719.9 million. Tuition accounts for 21.1 percent of all Academic Division revenues; state general funds comprise 22.2 percent; and sponsored program revenues represent 25.9 percent. Auxiliary enterprise revenues, gifts, endowment income and revenues from other sources comprise the remainder of the revenue budget (30.8 percent).

Academic Division expenditures are projected to increase by $43.8 million, or 6.5 percent. Personnel costs comprise approximately 65 percent of total operating expenditures in the Academic Division. For 1999-2000, we must annualize the cost of the November 1998 salary increases, as well as budget for authorized average salary increases of 6.5 percent for full-time instructional faculty, 6.25 percent for classified staff and 4.0 percent for administrative faculty, part-time faculty and graduate teaching assistants that will take effect November 1999. Technology enhancements also are important factors in the budget for 1999-2000. The University anticipates the use of more than $12.0 million in carryforward balances to continue a project that will ultimately replace all of the University's core administrative systems with an integrated suite of systems.

The University's 1999-2000 budget has been developed to support the priorities identified in its strategic plan. The appropriations authorized by the 1999 Virginia General Assembly for the 1999-2000 fiscal period are reflected in the budget. Within the financial and staffing limitations established in the budget, vice presidents, deans and directors of major units of the University have the flexibility to allocate available resources to their highest priority program requirements.

Medical Center

The Medical Center total expenditure budget is proposed to decrease by $9.8 million, or 2.1 percent, during 1999-2000, compared with the revised budget for 1998-99. The budget reflects expectations for higher patient volumes in the outpatient areas, and renewal and expansion of the Medical Center's value improvement program focused on cost, quality and service. The budget presentation will include a proposal to increase hospital room rates and ancillary service charges by an average of 3.0 percent.

The Medical Center's operating and budget plan has been developed to provide quality and cost-effective health care services to patients, patient families, third-party payers, employers, state and federal governments, referring physicians, referring agencies and affiliated networks. With general operating expenses decreasing by $8.8 million, the budget reflects the Medical Center's continued implementation of a strategic expense reduction plan that will include restructuring and consolidation efforts, reductions in indirect operating costs, program and service reviews and financial management innovations. In addition, depreciation, interest expense and bad debt expense will decrease by $1.0 million.

University of Virginia's College at Wise

The proposed University of Virginia's College at Wise expenditure budget increases by $720,000, or 4.4 percent, in 1999-2000. Of this amount, approximately $620,000 funds expanded instructional programs and increased salaries averaging 12.5 percent for full-time instructional faculty, 6.25 percent for classified staff and 4.0 percent for administrative and part-time faculty. Auxiliaries comprise the remainder of the increase.

For a full discussion of the budget proposal as well as comparative revenue and expenditure data for the Academic Division, the College at Wise and the Medical Center, please refer to the budget summary received in preparation for the May 13, 1999, Finance Committee meeting.

ACTION REQUIRED: Approval of the Finance Committee and the Board of Visitors

APPROVAL OF THE 1999-2000 BUDGET FOR THE ACADEMIC DIVISION

RESOLVED that the 1999-2000 Budget for the Academic Division be approved, as recommended by the President and the Chief Financial Officer, and as approved by the Finance Committee.

APPROVAL OF THE 1999-2000 BUDGET FOR THE UNIVERSITY OF VIRGINIA'S COLLEGE AT WISE

RESOLVED that the 1999-2000 Budget for the College at Wise be approved, as recommended by the President and the Chief Financial Officer, and as approved by the Finance Committee.

APPROVAL OF THE 1999-2000 BUDGET FOR THE UNIVERSITY OF VIRGINIA MEDICAL CENTER

RESOLVED that the 1999-2000 Budget for the University of Virginia Medical Center, which includes a hospital room and ancillary service rate increase of 3.0 percent, be approved, as recommended by the President and the Chief Financial Officer, and as approved by the Finance Committee.

II.B. Integrated Healthcare Information Management System Acquisition

BACKGROUND: The University of Virginia Medical Center and the University of Virginia Health Services Foundation (HSF) require access to accurate and timely clinical and financial information. Over the past two decades the Medical Center and the HSF have acquired or built information systems in a piecemeal fashion. The primary emphasis for these systems has been on billing and financial accounting. The life-cycle costs of acquiring and maintaining systems developed in this way are high.

DISCUSSION: New systems are needed to integrate clinical detail and financial information. Better-integrated systems will allow more effective management of cost, facilitate the capture of accurate patient data and improve the effectiveness of billing and reimbursement processes. New systems will provide alerts or reminders to the caregivers allowing more timely decisions to be made concerning the delivery of care.

The Medical Center issued a request for information about integrated systems to 14 vendors in 1997. Based on the information returned by eleven of the vendors, nine were selected and sent a Request for Proposal. Five of these were selected to make presentations to the Medical Center during March and April 1998. Faculty and staff participated in the discussions. Four vendors were selected for more intensive evaluation. During the summer of 1998, a group of faculty and staff numbering between 15 and 20 visited the headquarters of each vendor and two sites where the vendors had installed systems. Based on the recommendations of the group that visited the sites, two vendors were selected for contract negotiations. Further negotiations led to a focus on a single vendor

The proposed implementation schedule by Phase follows:

Phase 1: Enterprise Patient Scheduling and Registration (FY 2000 - 2001)

Phase 2: Outpatient Clinical (FY 2001-2003)

Phase 3: Inpatient Clinical (FY 2003-2005)

Phase 4: Enterprise Financial and Reporting (FY 2004-2006)

Estimated capital and implementation costs for the project total $54 million over seven years. A cost benefit analysis conducted by the Medical Center and evaluated by an independent third party projects a payback period of approximately 3.5 years. The sources of funding will be Medical Center reserves, HSF reserves (approximately ten percent of core applications' costs) and departmental funds for department-specific systems.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors.

APPROVAL OF INTEGRATED HEALTHCARE INFORMATION MANAGEMENT SYSTEM ACQUISITION

WHEREAS, The University of Virginia Medical Center and the Health Services Foundation have identified the need for an integrated healthcare information management system that will provide access to essential clinical and financial data that are accurate and timely, to clinicians, management and staff across the healthcare delivery system; and

WHEREAS, negotiations are being conducted for an agreement to install enterprise-wide core systems that will form the nucleus for an Integrated Healthcare Information Management System that includes software, hardware, implementation and integration services; and

WHEREAS, the acquisition of an integrated information system from a single vendor is anticipated to provide estimated benefits over the seven-year contract period valued at approximately $94 million while related costs over that same period are expected to be approximately $54 million;

RESOLVED that the Executive Vice President and Chief Financial Officer, in consultation with the General Counsel, be authorized to approve and execute an agreement to procure these enterprise-wide core systems along with the associated implementation and integration services for the University of Virginia Medical Center.

II.C. Enrollment Projections, Academic Division

BACKGROUND: In 1990 the Board of Visitors approved a phased enrollment growth plan for the next 15 years. The planned increase of 1,486 in-state undergraduates and 550 graduate students was to begin in the fall of 1997. The total on-Grounds enrollment approved by the Board for the 2005-05 academic year was 20,170: 12,685 undergraduate students, 5,185 graduate students, 1,700 first-professional students (law and medicine) and 600 students enrolled through Continuing Education.

Since 1990, the Board has revised that plan two times. In June 1993, the State Council of Higher Education in Virginia (SCHEV) asked the University to begin an increase in enrollment in fall 1994, earlier than planned and without additional funding, to accommodate rising numbers of high school graduates. The agreement included a stipulation that the undergraduate growth be comprised of 65 percent in-state and 35 percent out-of-state students. The total projected enrollment for 2004-05 remained essentially the same.

In fall 1994, the University's restructuring report to the General Assembly and SCHEV called for a five-percent reduction in graduate Arts and Sciences enrollment in order to devote more faculty resources to undergraduate teaching. This resulted in a decrease in the long-range graduate projections.

In February 1997, to reflect a declining number of applications to graduate Arts and Sciences and graduate Engineering, as well as increased undergraduate demand, the Board approved a further revision of the enrollment projections. The undergraduate total enrollment for 2004-05 was increased by about 250 students to 12,900 and was extended to 13,000 for 2006-07. The graduate total was reduced to 4,170, or about 1,000 fewer than the original plan. This decrease resulted in a lower total projection of 19,185 on-Grounds students in 2006.

Since 1997, reflecting national trends, the University has experienced continuing reductions in graduate applications in Arts and Sciences and Engineering and Education. Total on-Grounds enrollment this academic year is 18,463, slightly less than projected.

DISCUSSION: The proposal before the Board maintains the projected increase of 560 undergraduates between 1998 and 2006 that was approved by the Board in February 1997. It incorporates a slight additional decrease in graduate enrollment: approximately 100 fewer graduate students than projected in 1997. Similarly, there is a 45-student reduction in the first-professional total.

This revision also calls for an increase of 325 students by 2006 in the on-Grounds Continuing Education component, which represents enrollment in the new Bachelor of Interdisciplinary Studies program. As a result, the total enrollment in 2006 -- 19,307 on-Grounds students -- is approximately 120 students more than the total approved by the Board in 1997, but still below the 1990 plan.

Last month, the University received SCHEV's approval for the proposed revised enrollment projections for 1998 through 2006.

ACTION REQUIRED: Approval by the Board of Visitors

APPROVAL OF REVISED ENROLLMENT PROJECTIONS FOR 1998 - 2006:

WHEREAS the University's existing enrollment plan, approved by the Board of Visitors in February 1997, must be revised to reflect projected reductions in graduate enrollment in Arts and Sciences, Engineering, Education and Law; and

WHEREAS the new Bachelor of Interdisciplinary Studies program is expected to enroll 325 undergraduate students through on-Grounds Continuing Education by 2006; and

WHEREAS the revised enrollment projections for 1998-2006 have been submitted to and approved by the State Council of Higher Education for Virginia in April 1999;

RESOLVED that, compared with the 1997 plan, the undergraduate student population stay at the same level projected for 2006; the graduate student population be decreased by 100 headcount students over the same period; the first-professional student population be decreased by 45; and on-Grounds Continuing Education students increased by 266 headcount students, resulting in a total student enrollment target of 120 more on-Grounds students than approved in 1997. The total enrollment in 2006 will be 19,307, or 1,397 more students than the 1989-90 base year.

RESOLVED FURTHER that all undergraduate growth maintain the current mix of in-state and out-of-state students.

Proposed Fall Census Headcount Enrollment Plans
Option #4

II.D. Virginia College Building Authority Pooled Bond Program

BACKGROUND: The Virginia College Building Authority's (VCBA) Pooled Bond Program was established by the General Assembly during its 1996 legislative session. The University proposes using the VCBA for the Biomedical Engineering and Medical Science Building and the Orange Medical Office Building projects in a principal amount not to exceed $32.6 million for both projects. Total cost for these two projects is $45.8 million.

The Pooled Bond Program is designed to provide the Commonwealth's institutions of higher education the opportunity to secure financing for capital projects at attractive rates. The lower rates are a result of VCBA's bond ratings and attractive market perception. In addition, administrative costs will be spread among the participants, thereby reducing the costs incurred by each institution.

DISCUSSION: The Biomedical Engineering and Medical Science Building is a laboratory research building housing Biomedical Engineering, Pathology, Cardiovascular Medicine and Vivarium space. Construction is scheduled to begin in October 1999 and to be completed by December 2001. At its May 1998 meeting, the Board of Visitors approved an intent to issue bonds for this project in an amount not to exceed $41.3 million. Bonds are being issued for the Biomedical Engineering and Medical Science Building in a principal amount not to exceed $28.1 million. The debt service on the bonds for the Biomedical Engineering and Medical Science Building will be paid from indirect cost recoveries, School of Medicine unrestricted endowment income and clinical revenues. The total project cost for this facility is $41.3 million. In addition to the bond issue, the University is providing $13.25 million in indirect cost recoveries, clinical revenues, gifts and grants to help finance the project.

The Orange Medical Office Building is a 24,000-square-foot, regional, state-of-the-art dialysis and ambulatory care facility housing ancillary services, radiology and clinical laboratory services. The facility will support the University of Virginia Health Sciences Center's mission of providing accessible primary care services throughout Central Virginia. At its October 1998 meeting, the Board of Visitors approved an intent to issue bonds for this project in an amount not to exceed $4.5 million. Bonds are being issued for the Orange Medical Office Building in an amount not to exceed $4.5 million. The debt service on the bonds for the Orange Medical Office Building will be paid from hospital operating revenue.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF BOND ISSUANCE:

WHEREAS, pursuant to Chapter 3.2, Title 23 of the Code of Virginia of 1950, as amended (the "Act"), the General Assembly of Virginia has authorized the Virginia College Building Authority (the "Authority") to develop a pooled bond program (the "Program") to purchase bonds and other debt instruments issued by public institutions of higher education in the Commonwealth of Virginia (the "Institutions") to finance or refinance the construction of projects of capital improvement specifically included in a bill passed by a majority of those elected to each house of the General Assembly of Virginia (the "Projects");

WHEREAS, the Authority intends to issue from time to time under the Program its Educational Facilities Revenue Bonds (Public Higher Education Financing Program) (the "Bonds") to finance the purchase of bonds and other debt instruments issued by the Institutions to finance or refinance the Projects, all in the furtherance of the purposes of the Act and the Program;

WHEREAS, The Rector and Visitors of the University of Virginia (the "Board") may from time to time wish to finance or refinance Projects of The Rector and Visitors of the University of Virginia (the "Institution") through the Program;

WHEREAS, if the Institution wishes to finance or refinance a Project through the Program, it will be necessary for the Institution to enter into a Loan Agreement (a "Loan Agreement") between the Authority and the Institution and to evidence the loan to be made by the Authority to the Institution pursuant to the Loan Agreement by issuing the Institution's promissory note (the "Note") pursuant to Section 23-19 of the Code of Virginia of 1950, as amended. Pursuant to the Loan Agreement, the Authority will agree to issue its Bonds and to use certain proceeds of the Bonds to purchase the Note issued by the Institution and the Institution will agree to use the proceeds received from the Authority to finance or refinance the construction of the Project and to make payments under the Loan Agreement and the Note in sums sufficient to pay, among other administrative and arbitrage rebate payments, the principal of, premium, if any, and interest due on that portion of the Bonds issued to purchase the Note;

WHEREAS, the Institution now proposes to sell to the Authority its Note (the "1999A Note") to be issued under a Loan Agreement (the "1999A Loan Agreement") to finance or refinance all or a portion of the costs of the Biomedical Engineering and Medical Sciences building project and the Medical Office Building in Orange project (together, the "1999A Project");

WHEREAS, there has been presented to the Board the proposed forms of the 1999A Note and the 1999A Loan Agreement;

WHEREAS, it is the desire of the Board to approve the execution and delivery of the 1999A Loan Agreement and the execution and issuance of the 1999A Note on terms and conditions substantially in accordance with the forms presented to the Board and, similarly, to authorize officers of the Institution to execute, deliver and issue in the name of and on behalf of the Institution, the 1999A Loan Agreement, the 1999A Note and any and all documents necessary to effectuate the financing or refinancing of all or a portion of the costs of the 1999A Project through the Program with the Authority and to facilitate the purchase of the 1999A Note by the Authority; and

WHEREAS, it is the desire of the Board to approve the further participation by the Institution in the Program and to authorize the execution, delivery and issuance of such other Loan Agreements and Notes on terms and conditions substantially similar to the 1999A Loan Agreement and 1999A Note and to similarly authorize certain officers of the Institution to execute, deliver and issue in the name of and on behalf of the Institution, all Loan Agreements, all Notes and any and all future documents necessary to effectuate the Program with the Authority and to facilitate the purchase of the Notes by the Authority.

RESOLVED THAT:

Section 1. The 1999A Loan Agreement and 1999A Note are approved in substantially the forms presented to the Board and the pledge of Pledged General Revenues to the payment of the 1999A Note, as provided in the 1999A Loan Agreement, is hereby authorized.

Section 2. The President of the Institution and the Executive Vice President and Chief Financial Officer of the Institution (the "Authorized Officers"), or either of them, are hereby delegated and invested with full power and authority to execute, deliver and issue, on behalf of the Board,

(a) the 1999A Loan Agreement in substantially the form submitted to the Board with such changes, insertions or omissions as may be approved by the Authorized Officers, whose approval shall be evidenced conclusively by the execution and delivery of the 1999A Loan Agreement,

(b) the 1999A Note in substantially the form submitted to the Board with such changes, insertions or omissions as may be approved by the Authorized Officers, whose approval shall be evidenced conclusively by the execution and issuance of the 1999A Note, and

(c) any and all other documents, instruments or certificates as may be deemed necessary to consummate the financing or refinancing of all or a portion of the costs of the 1999A Project through the Program, the construction of the 1999A Project and the Institution's participation in the Program, and to further carry out the purposes and intent of this Resolution. The Authorized Officers are directed to take such steps and deliver such certificates prior to the delivery of the 1999A Note as may be required under existing obligations of the Institution.

Section 3. The Authorized Officers, or either of them, are hereby delegated and invested with full power and authority to execute and deliver, on behalf of the Board,

(a) such future Loan Agreements in substantially the form of the 1999A Loan Agreement with such changes, insertions or omissions as may be approved by the Authorized Officers, whose approval shall be evidenced exclusively by the execution and delivery of the future Loan Agreement,

(b) such future Notes in substantially the form of the 1999A Note with such changes, insertions or omissions as may be approved by the Authorized Officers, whose approval shall be evidenced exclusively by the execution and delivery of the future Note, and

(c) any and all other documents, instruments or certificates as may be deemed necessary in the future to consummate the Program, the construction of the Projects and the Institution's participation in the Program, and to further carry out the purposes and intent of this Resolution in the future, it being the intent of the Board that no further action on behalf of the Board shall be necessary to empower the Authorized Officers, or either of them, to execute, deliver and issue such future Loan Agreements, future Notes and other documents as may be deemed necessary in order for the Institution to participate in the Program in the future.

Section 4. The authorizations given above as to the execution, delivery and issuance of the 1999A Loan Agreement and the 1999A Note are subject to the following parameters:

(a) that the principal amount to be paid under the 1999A Note shall not be greater than the aggregate amount authorized for the components of the 1999A Project by the General Assembly of Virginia, including any adjustments required or permitted by law,

(b) that the interest rate payable under the 1999A Note shall not exceed a "true" or "Canadian" interest cost more than fifty basis points higher than the interest rate for "AA" rated securities with comparable maturities, as reported by Delphis-Hanover, or another comparable service or index, taking into account original issue discount or premium, if any,

(c) that the weighted average maturity of the principal payments due under the 1999A Note shall not be in excess of twenty (20) years,

(d) that the last principal payment date under the 1999A Note shall not extend beyond the period of the reasonably expected economic life of the 1999A Project,

(e) that the financing of the 1999A Project and the terms and provisions of the 1999A Loan Agreement and the 1999A Note will comply with the Alternative Construction and Financing Guidelines issued by the Commonwealth's Secretary of Finance, and

(f) that the actual interest rates, maturities, and date of the 1999A Note shall be approved by an Authorized Officer, which approval will be evidenced by the execution of the 1999A Note. The 1999A Note shall be sold to the Authority at a price of par.

Section 5. The authorizations given above as to the execution, delivery and issuance of any future Loan Agreements and future Notes are subject to the following parameters:

(a) that the principal amount to be paid under such Notes shall not be greater than the amount authorized for the Projects by the General Assembly of Virginia, including any adjustments required or permitted by law,

(b) that the interest rate payable under such Notes shall not exceed a "true" or "Canadian" interest cost more than fifty basis points higher than the interest rate for "AA" rated securities with comparable maturities, as reported by Delphis-Hanover, or another comparable service or index, taking into account original issue discount or premium, if any,

(c) that the weighted average maturity of the principal payments due under such Notes shall not be in excess of twenty (20) years,

(d) that the last principal payment date under such Notes shall not extend beyond the period of the reasonably expected economic life of the Projects being financed, and

(e) that the financing of the Projects and the terms and provisions of such Loan Agreements and Notes will comply with the Alternative Construction and Financing Guidelines issued by the Commonwealth's Secretary of Finance.

Section 6. The Board acknowledges, on behalf of the Institution, that if the Institution fails to make any payments of debt service due under any Loan Agreement or Note, including the 1999A Loan Agreement and the 1999A Note, the Program authorizes the State Comptroller to charge against the appropriations available to the Institution all future payments of debt service on that Loan Agreement and Note when due and payable and to make such payments to the Authority or its designee, so as to ensure that no future default will occur on such Loan Agreement or Note.

Section 7. The Board agrees that if the Authority determines that the Institution is an "obligated person" under Rule 15c2-12 of the Securities and Exchange Commission with respect to any issue of Bonds, the Institution will enter into a continuing disclosure undertaking in form and substance satisfactory to the Authority and the Institution and will comply with the provisions and disclosure obligations contained therein.

Section 8. This resolution shall take effect immediately upon its adoption.

III.A. Endowment Report

ACTION REQUIRED: None

Market Value and Performance as of March 31, 1999

BACKGROUND: The Rector and Visitors of the University, particularly the University of Virginia Investment Management Company (UVIMCO), oversees the major component of the endowment that benefits the University. A report on the endowment is made at each Board of Visitors meeting.

DISCUSSION: As of March 31, 1999, the endowment under the control of the Rector and Visitors totaled $1.106 billion, up $8 million from its value on December 31, 1998 and up $19 million from its value on June 30, 1998. During the quarter, the domestic stock market continued trends established over the past three years. An increasingly small number of very large cap growth stocks continued to dominate the performance of the domestic stock index, offsetting less impressive returns on smaller company's stock. The dominance of these large-cap issues is illustrated in the difference in returns of the S&P 500 index -- the cap-weighted index is up 5.0 percent for the quarter and 14.7 percent since June; the equally weighted index is up just 1.3 percent for the quarter and 2.4 percent since June.

Several markets that were hard hit in the second half of 1998 rebounded sharply during the first quarter of 1999. For the quarter, emerging market stocks were up twelve percent; energy stocks were up 15 percent. Long-term bonds were down -2.5 percent for the quarter in the face of rising interest rates and an increasing spread between short-term and long-term rates.

The Pooled Endowment Fund, invested across a broad spectrum of asset classes, returned 1.7 percent for the quarter and 2.9 percent fiscal year-to-date. Within the domestic equity portfolio, the bias toward smaller capitalization value stocks continued to slow performance. Through mid April, we have seen a big turnaround in the market, with the very large cap growth issues underperforming the smaller cap value issues by a wide margin. The board's decision to preserve these biases for the time being is based on the expectation that extreme valuation differences between growth and value and large and small stocks will correct over time.

Within international, the emerging markets position participated fully in the rally, however will take much longer to recover fully and have a positive influence on fiscal year performance. A slightly shorter duration within the domestic bond portfolio and a commitment to high-yield bonds helped minimize the loss in the Bond Fund for the quarter, down -1.5 percent versus -2.5 percent on the Merrill-Lynch 7-10 year Government Bond Index. The Real Estate, Absolute Return, and Private Equity portfolios all turned in strong returns for the quarter. Returns on the individual components of the endowment are reported on the following Endowment Fund Highlights report.

The University of Virginia's Investment Management Company Board continues to work with staff to systematically review the asset allocation and manager structure of the endowment.

Preliminary UVA Investment Report, Page 1
Preliminary UVA Investment Report, Page 2

III.B. Report on Actions of the Investment Management Company

ACTION REQUIRED: None

BACKGROUND: The University of Virginia Investment Management Company (UVIMCO) meets regularly and reports all of its activities at the following meeting of the Finance Committee.

DISCUSSION: The UVIMCO Board met on April 19, 1999, in New York. The Board approved of investments with three managers: $35 million with Tiger Management, $25 million with Pequot Capital and $40 million with TT International Investment Management. Assets to fund the managers will come from the domestic equity portfolios of John W. Bristol and Invesco Capital Management. The GMO Foreign Fund will manage the international portfolio. The UVIMCO Board also approved guidelines for the Absolute Return and Global Opportunistic portfolios.

The UVIMCO Board, as the Oversight Committee for the Faculty and Medical Center Retirement Plans, reviewed the investment options and reporting for compliance with Employee Retirement Income Security Act (ERISA) standards. The Board requested that staff develop appropriate benchmarks for the performance of each fund.

The Board also recommended to the Finance Committee and the Board of Visitors that the University become the trustee for the Pooled Income Fund. The Board of Visitors will be asked to approve of this change as part of the May 14, 1999 Finance Committee consent agenda.

III.C. Vice President's Remarks

ACTION REQUIRED: None

Integrated Systems Project Update

BACKGROUND: In March, the Board heard a report from the Executive Vice President and Chief Financial Officer on the status of the acquisition and installation of a new integrated set of administrative applications. At that time, he indicated he would provide a report on the progress of the software vendor selection at the May meeting.

DISCUSSION: Currently, the Integrated Systems Project (ISP) is in the final stages of negotiations with both software vendor firms. There are many delicate issues involved in the software contract negotiations such as licensing fees, maintenance fees, the provision of a database on which to run the software applications and guarantees to deliver needed functionality. These negotiations should be concluded by the end of May, allowing the project to move into the next phase, a comprehensive twelve-week planning effort during which major gaps between the capabilities of the software and the University's requirements will be identified.

During this phase, the Project will depend heavily on the perspective of both field and central office personnel to ensure that the systems are ultimately designed to meet the needs of all members of the University community. The ISP staff has been working closely with the central offices, schools and auxiliary units to identify personnel who can contribute to this important effort.

In the fall, the Board will be asked to consider approval of the first phase of a multi-phase implementation effort, including the selection of the software vendor and the implementation partner for the project. A fully-developed business plan outlining the financial feasibility of the project, which will include a cost estimate of the entire project, will be presented at this time.

Desktop Computing Initiative

BACKGROUND: The University currently supports thousands of different brands and configurations of microcomputer hardware and software.

DISCUSSION: In an effort to reduce support costs, the University plans to enter into a contract with a single vendor for Windows/Intel-type personal computers and Macintosh's and to identify specific models of desktop and laptop computers from those vendors to recommend for purchase by members of the University community. The standard computers would be acquired from the factory with UVa-specific software pre-loaded. The computers would begin to be installed as early as the fall of 1999. The plan calls for a regular replacement of computers on a scheduled basis. The University will recommend the same brand and models to our students for personal purchase. Cavalier Computers will serve as the retail outlet.

III. D. Miscellaneous Financial Reports

1. Capital Campaign Gift Report
2. Disinvestment of Unrestricted Quasi-Endowment to Fund Capital Campaign Expenses
3. Internal Loans to University Departments and Activities
4. Quarterly Budget Report

   1998-99 Revenue Budget Summary, Academic Division

   1998-99 Expenditure Budget Summary, Academic Division

5. Quasi-Endowment Actions Report

   Page 1

   Page 2

   Page 3

6. Write-off of Bad Debts for Non-Patient Services