Notes to Financial Statements

As of June 30, 1998

NOTE 11: Pledges

Outstanding pledges to the University amounted to $60.8 million and $62.1 million as of June 30, 1998 and 1997, respectively. Included in these totals are $4.0 million and $6.7 million respectively, of pledges relating to plant construction. It is not practicable to estimate the net realizable value of such pledges and, therefore, they are not refiected in the accompanying financial statements.

NOTE 12: Commitments and Contingencies

Contractual commitments
As of June 30, 1998, the University was a party to construction contracts and commitments totaling approximately $67.1 million of which $45.1 million had been incurred. The University's commitments for equipment, leases, and services are as follows:


1998-99

$ 8,050,000

1999-00

4,413,000

2000-01

3,212,000

2001-02

1,681,000

2002-03

911,000

2003-04

176,000


The total rental expense for all property and equipment was approximately $9.4 million and $7.9 million for the years ended June 30, 1998 and 1997, respectively.

Prior bond defeasance
In prior years, certain outstanding bonds have been defeased by placing assets in irrevocable trusts with escrow agents. Accordingly, these assets and the liability for the defeased bonds are not refiected in the accompanying financial statements. As of June 30, 1998, $25.3 million of the defeased bonds remain outstanding. 

Litigation
The University is a defendant in a number of legal actions. While the final outcome cannot be determined at this time, management is of the opinion that the liability, if any, for these legal actions will not have a material effect on the University's financial position.

NOTE 13: Direct Lending

The University began participating in the Federal Direct Lending Program in July, 1995. For the year ended June 30, 1998, the Current Restricted Fund additions for federal grants and contracts of $170.1 million and the Current Restricted Fund expenditures for scholarships and fellowships of $98.3 million include $54.5 million for direct lending, respectively. For the year ended June 30, 1997, the Current Restricted Fund additions for federal grants and contracts of $158.5 million and the Current Restricted Fund expenditures for scholarships and fellowships of $96.3 million include $54.0 million for direct lending, respectively.

NOTE 14: Subsequent Event

Subsequent to June 30, 1998, stock markets have experienced significant declines. University management estimates the market value of investments held by the University's Pooled Endowment Fund declined approximately 6 percent as of September 30, 1998. The amount of assets and reserves required to meet future obligations are based, in part, on long-term investment returns. Management does not expect the recent decline in market value to have a significant effect on future funding requirements.

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Financial Report

Finance Staff