· new issue book-entry only ratings: see “bond ratings” herein. in the opinion of gilmore...

NEW ISSUE BOOK-ENTRY ONLY RATINGS: See “BOND RATINGS” herein.

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), (1) the interest on the Series 2012E-1 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, (2) the interest on the Series 2012E-2 Bonds is included in gross income for federal income tax purposes in accordance with the owner’s normal method of accounting, (3) the interest on the Series 2012E Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes (provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108), and (4) the Series 2012E-1 Bonds have not been designated as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. See the caption “TAX MATTERS” herein.

$14,075,000 KANSAS DEVELOPMENT FINANCE AUTHORITY

Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project)

Series 2012E-1


Taxable Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project)

Series 2012E-2 Dated: Date of Delivery Due: February 1, as shown herein

The Series 2012E-1 Bonds and the Series 2012E-2 Bonds (collectively, the “Series 2012E Bonds”) will be issued by the Kansas Development Finance Authority (the “Authority”) pursuant to a Trust Indenture dated as of February 1, 2005, as supplemented, including by the Second Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Authority and UMB Bank, N.A., Kansas City, Missouri, as trustee (the “Trustee”). The Series 2012E Bonds will consist of fully registered bonds without coupons in denominations of $5,000 or integral multiples thereof. The Depository Trust Company, New York, New York (“DTC”) will act as securities depository for the Series 2012E Bonds. Purchases of beneficial ownership interests in the Series 2012E Bonds will be made in book-entry form. See the caption “THE SERIES 2012E BONDS—Book-Entry Only System” herein. The Series 2012E Bonds shall be dated as of the date of delivery and shall become due on February 1, as set forth on the inside cover page hereof. Principal and premium, if any, shall be payable upon the presentation and surrender of the Series 2012E Bonds at the principal corporate trust office of the Trustee. Interest on the Series 2012E Bonds will be payable each February 1 and August 1, commencing August 1, 2012, as more fully described herein.

MATURITY SCHEDULE—SEE INSIDE COVER PAGE

The Series 2012E Bonds are payable from loan payments to be made under a Loan Agreement dated as of February 1, 2005 (the “Original Loan Agreement”), as supplemented, including by the Second Supplemental Loan Agreement dated as of March 1, 2012 (collectively, the “Loan Agreement”), between the Authority and the University of Kansas Center for Research, Inc. (the “Corporation”), which are pledged and assigned by the Authority to the Trustee for payment of the Series 2012E Bonds in accordance with the Indenture. Pursuant to the Agreement, and as security for the obligations of the Corporation, the Corporation has pledged and assigned to the Authority its unrestricted gross revenues and certain funds held by the Trustee under the Indenture, as more fully described herein. The Series 2012E Bonds will be equally and ratably secured by the Trust Estate under the Indenture on a parity with the Authority’s outstanding Series 2006G Bonds (defined herein). Under the Indenture, Additional Bonds may be issued by the Authority on a parity with the Series 2006G Bonds and the Series 2012E Bonds (such Additional Bonds, together with the Series 2006G Bonds and the Series 2012E Bonds are collectively referred to as the “Bonds” herein). The University of Kansas (the “University”) has covenanted, pursuant to the University Agreement (defined herein), to make available unrestricted revenues of the University for the payment of debt service in connection with the Series 2012E Bonds if the revenues of the Corporation are not sufficient to make such payments.

The Series 2012E Bonds are being issued to provide funds to refund and redeem the Authority’s outstanding Series 2005B Bonds (defined herein), as described herein.

THE SERIES 2012E BONDS AND THE INTEREST THEREON SHALL BE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY OUT OF THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE SERIES 2012E BONDS AND INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE FUNDS PROVIDED FOR IN THE LOAN AGREEMENT AND IN THE INDENTURE. THE ISSUANCE OF THE SERIES 2012E BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OF KANSAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE STATE OF KANSAS SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012E BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE CORPORATION OR THE AUTHORITY. NO BREACH BY THE CORPORATION OR THE AUTHORITY OF ANY SUCH PLEDGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE STATE OF KANSAS OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER.

The Series 2012E Bonds are subject to redemption prior to maturity and to certain redemption risks as described under the caption “THE SERIES 2012E BONDS” herein.

The Series 2012E Bonds are being offered when as and if issued by the Authority subject to the receipt of the approving legal opinion of Gilmore & Bell, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its counsel and disclosure counsel, Kutak Rock LLP, for the Corporation by Barber Emerson, L.C. and for the University by its general counsel, James Pottorff, Esq. It is expected that the Bonds will be available for delivery to DTC in New York, New York on or about March 15, 2012.

The date of this Official Statement is March 1, 2012

MATURITY SCHEDULE

$14,075,000 SERIES 2012E-1 BONDS

Maturity Date

(February 1)

Principal Amount

Interest

Rate

Yield

Price

CUSIP(1)

2019 $ 455,000 5.000% 1.620% 121.912% 485429 NV2 2020 2,475,000 5.000 1.890 122.661 485429 NW0 2021 2,600,000 5.000 2.130(2) 120.710 485429 NX8 2022 2,730,000 5.000 2.300(2) 119.350 485429 NY6 2023 2,865,000 3.000 2.750(2) 101.758 485429 NZ3 2024 2,950,000 4.000 2.600(2) 109.912 485429 PA6

$15,600,000 SERIES 2012E-2 BONDS

Maturity Date

(February 1)

Principal Amount

Interest

Rate

Yield

Price

CUSIP(1)

2013 $2,255,000 2.000% 0.400% 101.400% 485429 PB4 2014 2,190,000 2.000 0.650 102.515 485429 PC2 2015 2,230,000 2.000 0.800 103.406 485429 PD0 2016 2,275,000 2.000 1.100 103.406 485429 PE8 2017 2,320,000 2.000 1.400 102.818 485429 PF5 2018 2,370,000 2.000 1.700 101.670 485429 PG3 2019 1,960,000 2.000 2.000 100.000 485429 PH1

(1)The Authority shall not be responsible for the use of the CUSIP numbers, nor is any representation made as to their

correctness. They are included solely for the convenience of readers of this Official Statement. (2)The Series 2012E-1 Bonds maturing in 2021 through 2024 are priced at a premium and the yield is calculated to the first

optional redemption date of February 1, 2020.

KANSAS DEVELOPMENT FINANCE AUTHORITY

Donald Linville, Chair Audrey H. Langworthy, Vice Chair

Suresh Kumar, Member Patti Petersen-Klein, Member

Suchitra Padmanabhan, Member Timothy M. Shallenburger, President

Rebecca E. Floyd, Executive Vice President and General Counsel Jim MacMurray, Vice President of Finance

Linda Clark, Chief Fiscal Officer

BOARD OF REGENTS OF THE STATE OF KANSAS

Ed McKechnie, Chair Tim Emert, Vice Chair

Fred Logan Dan Lykins Christine Downey-Schmidt Janie Perkins

Mildred Edwards Robba Moran Kenneth Wilk

UNIVERSITY OF KANSAS ADMINISTRATION

Dr. Bernadette Gray-Little, Chancellor Dr. Jeffrey S. Vitter, Executive Vice Chancellor/Provost, Lawrence Campus

Dr. Barbara Atkinson, Executive Vice Chancellor, Medical Center and Executive Dean of the School of Medicine

Theresa Gordzica, Chief Business & Financial Planning Officer

UNIVERSITY OF KANSAS CENTER FOR RESEARCH, INC.

Dr. Bernadette Gray-Little, Chair Dr. Jeffrey S. Vitter, Vice Chair

Steven Warren, President/Chief Operating Officer Diane Goddard, Secretary/Treasurer

ADVISORS AND CONSULTANTS

Financial Advisor, Columbia Capital Management, LLC Bond Counsel, Gilmore & Bell, P.C.

Disclosure Counsel, Kutak Rock LLP

No dealer, broker, salesman or other person has been authorized by the Authority, the Corporation, the University or the Board to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such information and representations must not be relied upon as having been authorized by the Authority, the Corporation, the University or the Board. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, nor will there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made thereafter shall, under any circumstances, create any implication that there has been no change in the affairs of the Corporation, the University, the Board or the Authority since the date hereof.

FORWARD-LOOKING STATEMENTS

This Official Statement, including under the caption “INVESTMENT CONSIDERATIONS” and in Appendix A (including under the caption “DEBT SERVICE COVERAGE” in Appendix A), Appendix C and Appendix D hereto, contains forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continues,” or the negative of these terms or other comparable terminology. Although the Authority and the Corporation believe the expectations reflected in the forward-looking statements to be reasonable, neither the Authority nor the Corporation can guarantee future results, levels of activity, performance or achievements. The Authority and the Corporation do not plan to issue any updates of revisions to those forward-looking statements if or when the expectations on which such statements are based occur or fail to occur. Certain risks and other factors with respect to such events include those listed under the caption “INVESTMENT CONSIDERATIONS” and contained in Appendix A (including under the caption “DEBT SERVICE COVERAGE” in Appendix A), Appendix C and Appendix D hereto and elsewhere in this Official Statement.

THE SERIES 2012E BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS ANY DOCUMENT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE TERMS OF THE OFFERING. THE SERIES 2012E BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THE OFFERING OF THE SERIES 2012E BONDS, THE ORIGINAL PURCHASERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH SERIES 2012E BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

TABLE OF CONTENTS

Page Page

INTRODUCTION.......................................................... 1 PLAN OF FINANCE ..................................................... 3

The Series 2005B Bonds ......................................... 3 The Series 2006G Bonds ......................................... 3 The Series 2012E Bonds ......................................... 4

ESTIMATED SOURCES AND USES .......................... 4 THE AUTHORITY ........................................................ 4 THE CORPORATION................................................... 5 THE KANSAS BOARD OF REGENTS........................ 6 THE UNIVERSITY OF KANSAS ................................ 7 THE SERIES 2012E BONDS ........................................ 7

General .................................................................... 7 Book-Entry Only System ........................................ 7 Interchangeability and Transfer............................... 7 Optional Redemption............................................... 8 Extraordinary Optional Redemption........................ 8 Selection of Bonds to be Redeemed ........................ 9 Notice and Effect of Redemption ............................ 9 Acceleration............................................................. 9 Mutilated, Lost, Stolen or Destroyed

Bonds................................................................ 9 SECURITY FOR THE BONDS................................... 10

General .................................................................. 10 The Loan Agreement............................................. 10 The University Agreement .................................... 11 Debt Service Reserve Fund ................................... 11 Additional Bonds and Additional

Obligations ..................................................... 12 ANNUAL DEBT SERVICE

REQUIREMENTS ................................................ 12 DEBT SERVICE COVERAGE ................................... 12 INVESTMENT CONSIDERATIONS ......................... 12

Revenues of the Corporation ................................. 13 No Security for University Obligations................. 13 University Revenues May be Pledged or

Restricted........................................................ 13 No Security in Real or Personal

Property of the Corporation............................ 14 Tax-Exempt Status of the Corporation

and the Series 2012E-1 Bonds........................ 14 Matters Relating to Security for the

Bonds.............................................................. 15 Enforceability of Pledge of the

Revenues; Effect of Bankruptcy..................... 15 Market for the Bonds............................................. 16 Tax Legislation and Other Matters ........................ 16 Legal Matters......................................................... 16 Suitability of Investment ....................................... 16

LITIGATION ............................................................... 17 The Authority ........................................................ 17 The Corporation .................................................... 17 The University....................................................... 17

BOND RATINGS......................................................... 17 TAX MATTERS .......................................................... 17

Opinion of Bond Counsel Regarding the Series 2012E-1 Bonds .............................. 18

Other Federal Income Tax Consequences to Owners of the Series 2012E-1 Bonds .................................... 18

Federal Income Tax Consequences to Owners of the Series 2012E-2 Bonds.............................................................. 19

Opinion of Bond Counsel Regarding the Series 2012E-2 Bonds .............................. 19

Other Federal Income Tax Consequences Applicable to Owners of the Series 2012E-2 Bonds.............................................................. 20

Other Federal Income Tax Consequences Applicable to Owners of the Series 2012E Bonds ................ 20

LEGAL MATTERS ..................................................... 21 FINANCIAL ADVISOR.............................................. 21 UNDERWRITING ....................................................... 21 FINANCIAL STATEMENTS...................................... 21

The Corporation .................................................... 21 The University....................................................... 21

CONTINUING DISCLOSURE.................................... 22 MISCELLANEOUS..................................................... 22

APPENDIX A — THE UNIVERSITY OF KANSAS CENTER FOR RESEARCH, INC.

APPENDIX B — AUDITED FINANCIAL STATEMENTS OF THE CORPORATION FOR THE YEARS ENDED JUNE 30, 2011 AND JUNE 30, 2010

APPENDIX C — THE UNIVERSITY OF KANSAS APPENDIX D — THE UNIVERSITY OF KANSAS

ANNUAL FINANCIAL REPORT (JUNE 30, 2011) (UNAUDITED)

APPENDIX E — UNIVERSITY DEBT SERVICE REQUIREMENTS

APPENDIX F — DEFINITIONS AND SUMMARIES OF THE INDENTURE, THE LOAN AGREEMENT AND THE UNIVERSITY AGREEMENT

APPENDIX G — FORM OF CONTINUING DISCLOSURE AGREEMENT

APPENDIX H — FORM OF OPINION OF BOND COUNSEL

APPENDIX I — BOOK-ENTRY ONLY SYSTEM

(THIS PAGE LEFT BLANK INTENTIONALLY)

OFFICIAL STATEMENT


Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project)

Series 2012E-1


Taxable Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project)

Series 2012E-2

INTRODUCTION

This Official Statement, including the cover page and the Appendices, is furnished in connection with the issuance by the Kansas Development Finance Authority (the “Authority”) and the offering of its $14,075,000 principal amount Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2012E-1 (the “Series 2012E-1 Bonds”) and its $15,600,000 principal amount Taxable Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2012E-2 (the “Series 2012E-2 Bonds” and together with the Series 2012E-1 Bonds, the “Series 2012E Bonds”) of the Kansas Development Finance Authority (the “Authority”). Capitalized terms used in this Official Statement and not otherwise defined herein are defined in Appendix F to this Official Statement.

The Authority is a public body, politic and corporate, and an independent instrumentality of the State of Kansas (the “State”), exercising essential public functions, created in 1987 by K.S.A. 74-8901 et seq., as amended, authorized to issue the Series 2012E Bonds. The Series 2012E Bonds will be issued pursuant to a Trust Indenture dated as of February 1, 2005, as supplemented, including by the Second Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Authority and UMB Bank, N.A., Kansas City, Missouri, as trustee (the “Trustee”).

The principal of, redemption premium, if any, and interest on the Series 2012E Bonds are special limited obligations of the Authority and are payable by the Authority solely from the funds provided in the Indenture and the Loan Agreement, which includes payments to be made by the University of Kansas Center for Research, Inc. (the “Corporation”) pursuant to a Loan Agreement dated as of February 1, 2005, as supplemented, including by the Second Supplemental Loan Agreement dated as of March 1, 2012 (collectively, the “Loan Agreement”), between the Authority and the Corporation. In addition, the University of Kansas (the “University”) has covenanted, pursuant to the Affiliation Agreement dated as of December 21, 2004, as supplemented and amended by the First Amendment to Affiliation Agreement, dated as of March 1, 2012 (collectively, the “University Agreement”) between the University and the Corporation, to make available unrestricted revenues of the University for the payment of debt service in connection with the Series 2012E Bonds if the revenues of the Corporation are not sufficient to make such payments. See the caption “SECURITY FOR THE BONDS—The University Agreement” herein and the summary of the University Agreement in Appendix F hereto.

The Series 2012E Bonds are equally and ratably secured by the Trust Estate under the Indenture, on a parity with the Series 2006G Bonds (defined herein) and any Additional Bonds, upon the terms and conditions set forth in the Indenture. For a description of the Series 2006G Bonds and the plan to use the proceeds of the Series 2012E Bonds to pay and redeem the Series 2005B Bonds (defined herein) on the day following the issuance for the Series 2012E Bonds, see the caption “PLAN OF FINANCE” herein. The Authority may issue Additional Bonds and the Corporation may issue or incur Additional Notes and Additional Obligations that would be equally and ratably secured with the Series 2006G Bonds and the Series 2012E Bonds by the pledge of Revenues of the Corporation pursuant to the Loan Agreement. See the captions “Summary of the Indenture—Authorization of Additional Bonds,” “Summary of the Loan Agreement—Additional Bonds and Additional Notes” and “Summary of the Loan Agreement—

2

Additional Obligations” in Appendix F to this Official Statement. The Series 2006G Bonds, the Series 2012E Bonds, and any Additional Bonds that may be issued under the Indenture, are collectively referred to herein as the “Bonds.” The obligation of the University pursuant to the University Agreement to make available unrestricted revenues of the University for the payment of debt service in connection with the Series 2012E Bonds relates to the payment of debt service on the Series 2012E Bonds only, and does not extend to the payment of debt service on the Series 2006G Bonds or any Additional Bonds.

The Authority will loan the proceeds of the Series 2012E Bonds to the Corporation to (i) deposit moneys into the Redemption Fund under the Indenture to refund the Series 2005B Bonds and (ii) pay certain expenses incurred in connection with the issuance of the Series 2012E Bonds. See the caption “PLAN OF FINANCE” herein.

The obligation of the Corporation to make payments under the Loan Agreement is an unconditional general obligation of the Corporation, secured under the Loan Agreement by a pledge by the Corporation to the Authority of the Corporation’s Revenues.

The Series 2012E Bonds will not be secured by the Debt Service Reserve Fund. Although a Debt Service Reserve Fund has been established under the Indenture, and an account for the Series 2006G Bonds has been funded, no deposit will be made to the Debt Service Reserve Fund with respect to the Series 2012E Bonds. See the caption “SECURITY FOR THE BONDS—Debt Service Reserve Fund” herein.

The Series 2012E Bonds are subject to redemption in whole or in part prior to maturity as described under the caption “THE SERIES 2012E BONDS” herein.

THE SERIES 2012E BONDS AND THE INTEREST THEREON SHALL BE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY OUT OF THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE SERIES 2012E BONDS AND INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE FUNDS PROVIDED FOR IN THE LOAN AGREEMENT AND IN THE INDENTURE. THE ISSUANCE OF THE SERIES 2012E BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OF KANSAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE STATE OF KANSAS SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012E BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE CORPORATION OR THE AUTHORITY. NO BREACH BY THE CORPORATION OR THE AUTHORITY OF ANY SUCH PLEDGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE STATE OF KANSAS OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER. NEITHER THE CORPORATION NOR THE AUTHORITY HAS ANY POWER TO TAX.

The Series 2012E Bonds are also subject to certain risk factors. See the caption “INVESTMENT CONSIDERATIONS” herein.

3

Definitions of certain terms used in this Official Statement are set forth in Appendix F to this Official Statement. This Official Statement contains brief descriptions of, among other things, the Authority, the Corporation, the Series 2012E Bonds, the Indenture, the Loan Agreement, the University Agreement and the Continuing Disclosure Agreement (as hereinafter defined). Such descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to documents are qualified in their entirety by reference to such documents, and references to the Series 2012E Bonds are qualified in their entirety by reference to the form of the Series 2012E Bonds included in the Indenture. Until the issuance and delivery of the Series 2012E Bonds, copies of the Indenture, the Loan Agreement, the University Agreement, the Continuing Disclosure Agreement and other documents described in this Official Statement may be obtained at the office of the Authority, Suite 202, 555 S. Kansas Avenue, Topeka, Kansas 66603. Copies of these documents may also be obtained from the Authority after delivery of the Series 2012E Bonds.

THE STATEMENTS HEREIN REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE SERIES 2012E BONDS.

Prospective purchasers of the Series 2012E Bonds should analyze carefully the information contained in this Official Statement and additional information in the form of the complete documents summarized herein, copies of which are available from the Authority.

PLAN OF FINANCE

The Series 2005B Bonds

On February 1, 2005, the Authority issued its $45,625,000 original aggregate principal amount Taxable Revenue Bonds (University of Kansas Center for Research, Inc. Project), Series 2005B (the “Series 2005B Bonds” or the “Refunded Bonds”) for the purpose of financing the costs of certain research facilities of the Corporation, including an approximately 106,000-square-foot Multidisciplinary Research Building on the West Campus of the University of Kansas in Lawrence, Kansas.

The Series 2005B Bonds are currently outstanding in the principal amount of $35,255,000. Proceeds of the Series 2012E Bonds are to be applied by the Trustee to the pay and redeem the Series 2005B Bonds on the business day following the delivery of the Series 2012E Bonds, as described at the caption “PLAN OF FINANCE—The Series 2012E Bonds” below.

The Series 2006G Bonds

On October 12, 2006, the Authority issued its $15,830,000 original aggregate principal amount of Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2006G-1 (the “Series 2006G-1 Bonds”) and $1,255,000 original aggregate principal amount of Taxable Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2006G-2 (the “Series 2006G-2 Bonds,” and together with the Series 2006G-1 Bonds, the “Series 2006G Bonds”) for the purpose of financing the costs of certain research facilities of the Corporation, including an approximately 35,000-gross-square-foot addition to the existing Structural Biology Center research building on the West Campus of the University in Lawrence, Kansas.

The Series 2006G Bonds are currently outstanding in the principal amount of $14,485,000 and will remain outstanding and will be equally and ratably secured under the Indenture on a parity with the Series 2012E Bonds.

4

The Series 2012E Bonds

The proceeds of the Series 2012E Bonds will be used by the Corporation to (i) deposit moneys into the Redemption Fund under the Indenture to refund the Series 2005B Bonds and (ii) pay certain expenses incurred in connection with the issuance of the Series 2012E Bonds. See the caption “ESTIMATED SOURCES AND USES” below. The Series 2005B Bonds are being refunded to achieve economic savings for the Corporation.

Moneys deposited in the Redemption Fund under the Indenture shall be applied by the Trustee to pay and redeem the Series 2005B Bonds on March 16, 2012, the business day following the delivery of the Series 2012E Bonds. Following such payment on March 16, 2012, the Series 2005B Bonds will no longer be outstanding under the Indenture.

ESTIMATED SOURCES AND USES

The estimated sources and uses of funds relating to the issuance of the Series 2012E Bonds are as follows:

Series 2012E-1 Bonds

Series 2012E-2 Bonds

Total

Sources of Funds Principal Amount of the Bonds $14,075,000.00 $15,600,000.00 $29,675,000.00 Original Issue Premium 2,070,045.05 345,045.40 2,415,090.45 Transfer from Debt Service Reserve

Account for Series 2005B Bonds 1,805,635.54 2,001,272.78 3,806,908.32 Total Sources of Funds $17,950,680.59 $17,946,318.18 $35,896,998.77

Uses of Funds

Deposit to Redemption Fund $17,737,775.94 $17,742,807.50 $35,480,583.44 Underwriting Discount 74,354.77 40,440.74 114,795.51 Costs of Issuance 138,549.88 163,069.94 301,619.82

Total Uses of Funds $17,950,680.59 $17,946,318.18 $35,896,998.77

THE AUTHORITY

The Authority is a public body, politic and corporate, and an independent instrumentality of the State, exercising essential public functions, created in 1987 by K.S.A. 74-8901 et seq., as amended (the “Act”). The Authority was created for the primary purposes of enhancing the ability of the State to finance capital improvements and improving access to long-term financing for State agencies, political subdivisions, public and private organizations and businesses.

The powers of the Authority are vested in the Board of Directors, consisting of five public members appointed by the Governor subject to confirmation by the State Senate. The Governor also appoints a President who serves at the pleasure of the Governor. The President is an ex-officio, non-voting member of the Board of Directors. Not less than three members of the Board of Directors must be representative of the general public and not more than three members may be members of the same political party.

The names, offices, principal occupations and places of business of the members of the Authority’s Board of Directors and their terms are as follows:

5

NAME OFFICE TERM PRINCIPAL OCCUPATION AND PLACE OF BUSINESS

Donald Linville Chair Member

9/06/11 to 1/15/15 5/02/11 to 1/15/15

CPA, Lewis, Hooper & Dick, LLC (Retired) Garden City, Kansas

Audrey H. Langworthy Vice Chair Member

6/11/10 to 1/15/13 1/29/04 to 1/15/13

Community Volunteer Prairie Village, Kansas

Suresh Kumar Member 1/17/12 to 1/15/15 CPA, MBA, Kumar Consulting, PA Overland Park, Kansas

Patti Petersen-Klein Member 3/17/11 to 1/15/13 Executive Director, Kansas Corporation Commission Topeka, Kansas

Suchitra Padmanabhan Member 2/2/10 to 1/15/13 Partner, BC Capital Topeka, Kansas

Tim Shallenburger Ex-officio Member

1/10/11 to present President Kansas Development Finance AuthorityTopeka, Kansas

Members of the Board of Directors serve until their successors are appointed by the Governor and

confirmed by the State Senate. The Authority’s General Counsel serves as Executive Vice President and Secretary to the Authority.

The Authority has the rights, powers and privileges and is subject to the duties provided by the Act creating it, including the acquisition and disposal of real and personal property for its corporate purposes; the borrowing of money and issuance of notes, bonds and other obligations; the making of secured or unsecured loans for any of the purposes for which it may issue bonds (except making loans directly to individuals to finance housing developments); the provision of technical assistance and advice to the State or political subdivisions of the State; and entering into contracts with the State or political subdivisions thereof to provide such services.

The Bonds issued pursuant to the Indenture, including the Series 2012E Bonds offered hereby, are separately secured from all other bonds and notes issued by the Authority. No recourse shall be had for the payment of the principal of or premium or interest on any of the Series 2012E Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture or any other Authority document contained, against any past, present or future officer, director, member, trustee, employee or agent of the Authority, or any officer, director, member, trustee, employee or agent of any successor corporation or body politic, as such, either directly or through the Authority or any successor corporation or body politic, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, trustees, members, employees or agents, as such, is hereby expressly waived and released as a condition of and consideration for the execution of the Indenture and the issuance of any of the Series 2012E Bonds.

THE CORPORATION

The University of Kansas Center for Research, Inc. (the “Corporation”) is a non-profit corporation designed to promote, manage, serve, and expand the research enterprise at the Lawrence,

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Kansas campus of the University. The goals of the Corporation are to enlarge the University’s role as a national/international leader in research and to increase the number of research areas in which it is prominent. The Corporation supports eight designated research centers, two state surveys, one museum, and a large number of smaller research centers, institutes, laboratories, and programs.

The operations of the Corporation are governed by a board of trustees as well as elected officers. All of the Corporation’s officers are University administrators or faculty members. An executive committee, in the absence of the trustees, has charge of both the business and general operation of the Corporation and conducts any business that it deems to be in the best interests of the Corporation.

Pursuant to the University Agreement, the Corporation submits, and negotiates on behalf of the Lawrence campus of the University, all proposals for external support of research, instructional, and service projects. The Corporation helps research investigators prepare proposals and negotiate contracts; crafts institutional policy; informs the campus about national policy; conducts training programs; and provides information on funding sources. The Corporation facilitates technology transfer and communicates information about research to the public. In addition, the Corporation conducts the full business processes involved in research administration, such as purchasing, accounts payable/receivable, and auditing.

For certain information regarding the Corporation, see Appendix A to this Official Statement; for financial statements of the Corporation, see Appendix B to this Official Statement (see the caption “FINANCIAL STATEMENTS—The Corporation” herein); and for a summary of certain terms of the University Agreement, see the caption “Summary of the University Agreement” in Appendix F to this Official Statement.

THE KANSAS BOARD OF REGENTS

As used in this Official Statement the term “Board” means the Board of Regents of the State of Kansas, as provided for in Article 6 of the Constitution and in the statutes of the State, including, prior to May 20, 1999, the state board of regents established pursuant to K.S.A. 74-3201 et seq. and, on and after May 20, 1999, the State Board of Regents established pursuant to Senate Bill No. 345, 1999 Kansas Legislature, as successor to the state board of regents established pursuant to K.S.A. 74-3201a et seq., and its successors.

The Board consists of nine regents appointed by the Governor and confirmed by the State Senate. The term of office for each regent is four years, with appointments staggered. Not more than five regents may be of the same political party. The Board is a constitutionally established board, responsible for formulating policy under which the State universities operate and for recommending to the State Legislature the amount of State funds to be made available to each institution. With respect to State universities, the Board has the power to make and execute contracts; acquire property; pledge or assign revenues; issue revenue bonds; construct, acquire or improve properties; fix, charge and collect rents, tuition and other fees; contract for services; and execute all acts necessary to the performance of its duties.

The Board controls and supervises the University of Kansas, with its main campus at Lawrence, the Edwards Campus in Overland Park and the Medical Center with campuses at Kansas City, Salina and Wichita; Kansas State University, with its campuses in Manhattan and Salina; Wichita State University; Emporia State University; Fort Hays State University; and Pittsburg State University.

Revenue bonds for State universities under the control of the Board have been issued for various purposes. All outstanding revenue bonds are secured by either a pledge of a specific source of revenues, such as rentals, student fees, housing system or other revenues for various projects at the respective institutions, or by a pledge of all available revenues of an institution. Shown below are the principal

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balances of revenue bonds outstanding at December 31, 2011, for institutions under the jurisdiction of the Board. These balances are exclusive of revenue bonds previously issued which have been refunded or defeased prior to their maturities.

Kansas Board of Regents Revenue Bonds Outstanding

December 31, 2011

Outstanding Principal Amount

Emporia State University $ 23,725,000

Fort Hays State University 6,900,000

Kansas State University 205,160,000

Pittsburg State University 36,970,000

University of Kansas 269,330,000

Wichita State University 19,345,000

Total $561,430,000

THE UNIVERSITY OF KANSAS

Information regarding the University is set forth in Appendix C. The unaudited Annual Financial Report of the University for the year ended June 30, 2011 is set forth in Appendix D. See the caption “FINANCIAL STATEMENTS—The University” herein.

THE SERIES 2012E BONDS

General

The Series 2012E Bonds will be issued as fully registered bonds in the denominations of $5,000 or any integral multiple thereof. The Series 2012E Bonds will be dated the date of issuance and shall mature, subject to prior redemption, on February 1 in the years and principal amounts set forth on the inside cover page to this Official Statement. The Series 2011E Bonds will bear interest (computed on the basis of a 360-day year of twelve 30-day months) from the date of issuance payable semiannually on each February 1 and August 1, commencing on August 1, 2012, at the rates set forth on the inside cover page of this Official Statement.

The Trustee is registrar and paying agent for the Series 2012E Bonds.

Book-Entry Only System

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository (the “Securities Depository”) for the Series 2012E Bonds. Information with respect to DTC and the book-entry only system is contained in Appendix I attached hereto.

Interchangeability and Transfer

The Bonds, upon surrender thereof to the Trustee, as bond registrar, with a written instrument of transfer satisfactory to the Trustee, duly executed by the registered owner or his or her duly authorized

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attorney, may, at the option of the registered owner thereof, be exchanged for an equal aggregate principal amount of Bonds in registered form of the same series, maturity and of any other authorized denomination.

In all cases in which the privilege of exchanging or transferring the Bonds is exercised, the Authority shall execute and the Trustee shall deliver the Bonds in accordance with the Indenture. For every such exchange or transfer of Bonds, the Trustee shall require the payment by the registered owner requesting such transfer or exchange of any tax or other governmental charges payable with respect thereto and may charge a sum not exceeding the actual cost for each new Bond.

No exchange or transfer of any Bond shall be required to be made during the 15 days next preceding an interest payment date for the Bonds, nor during the 45 days next preceding the date fixed for the redemption of such Bond.

Optional Redemption

The Series 2012E-1 Bonds maturing on or after February 1, 2021 are subject to redemption and payment prior to maturity, at the option of the Authority, which shall be exercised upon written direction of the Corporation, on or after February 1, 2020, in whole or in part on any date at a redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the redemption date.

The Series 2012E-2 Bonds shall not be subject to optional redemption prior to maturity.

Extraordinary Optional Redemption

The Series 2012E Bonds are subject to redemption and payment prior to the stated maturity thereof, at the option of the Authority, which shall be exercised upon written direction from the Corporation, in whole or in part at any time, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date, without premium, upon the occurrence of any of the following events:

(a) all or a substantial portion of the facilities financed or refinanced with the proceeds of the Series 2012E Bonds are damaged or destroyed by fire or other casualty, or title to, or the temporary use of, all or a substantial portion of such facilities are condemned or taken for any public or quasi-public use (other than use as presently contemplated by the Corporation and the University as Research Facilities) by any authority exercising the power of eminent domain or title thereto is found to be deficient;

(b) as a result of any changes in the Constitution of the State of Kansas or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final direction, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Corporation in good faith, the Indenture, the Loan Agreement, or the Series 2012E Note (as herein defined) or the University Agreement becomes void or unenforceable or impossible of performance; or

(c) the Corporation is required or ordered, by legislative, judicial or administrative action of the United States or of the State of Kansas, or any agency, department or subdivision thereof, to operate the facilities financed or refinanced with the proceeds of the Series 2012E Bonds in a manner inconsistent with the stated goals, purposes and policies of the Corporation, including, without limitation, its goals, purposes and policies with respect to its primary operations, and such legislative, judicial or administrative action is applicable to the Corporation because the Corporation is a party to the Loan Agreement or the Series 2012E Note.

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Selection of Bonds to be Redeemed

Series 2012E Bonds shall be redeemed only in the principal amount of $5,000 or any integral multiple thereof. If less than all of the Outstanding Series 2012E Bonds are to be redeemed and paid prior to maturity, such Series 2012E Bonds shall be redeemed from the maturity or maturities selected by the Corporation. If less than all Series 2012E Bonds of any maturity are to be redeemed, the particular Series 2012E Bonds to be redeemed shall be selected by the Trustee from the Series 2012E Bonds of such maturity which have not previously been called for redemption, by lot or by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions equal to $5,000 of the principal amount of Series 2012E Bonds of a denomination larger than $5,000.

Notice and Effect of Redemption

Notice of the call for any redemption identifying the Series 2012E Bonds, or portions thereof, to be redeemed shall be given by mailing a copy of the redemption notice by registered or certified mail not more than 60 days and not less than 30 days prior to the date fixed for redemption to the registered owner of each Series 2012E Bond to be redeemed at the address shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceedings for the redemption of any such Series 2012E Bonds.

On and after the redemption date specified in a notice of redemption, such Series 2012E Bonds, or portions thereof, thus called shall not bear interest, shall no longer be protected by the Indenture and shall not be deemed to be Outstanding under the provisions of the Indenture, and the holders thereof shall have the right only to receive the redemption price thereof plus accrued interest thereon to the date fixed for redemption.

Acceleration

Upon the happening of any Event of Default specified in the Indenture and the continuance of the same for the period, if any, specified in the Indenture for that Event of Default, the Trustee may, without any action on the part of the Bondholders, and shall upon the written request of the registered owners of not less than 25% in principal amount of the Bonds then Outstanding thereunder, and upon being indemnified to its satisfaction, by notice in writing delivered to the Authority, declare the entire principal amount of the Bonds then Outstanding under the Indenture and the interest accrued thereon, immediately due and payable, and the said entire principal and interest shall thereupon become and be immediately due and payable; subject, however, to the right of the registered owners of the majority in principal amount of the Bonds then Outstanding, by written notice to the Trustee and to the Authority, to annul such declaration and destroy its effect as provided in the Indenture. See the caption “SUMMARY OF THE INDENTURE—Acceleration of Maturity; Rescission and Annulment” in Appendix F hereto.

Mutilated, Lost, Stolen or Destroyed Bonds

In the event any Bond is mutilated, lost, stolen or destroyed, the Authority may execute and the Trustee may authenticate a new Bond of like date, series, maturity and denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and, in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence of such loss, theft or destruction satisfactory to the Trustee, together with indemnity satisfactory to it. In the event any such Bond shall have matured, instead of issuing a duplicate bond, the Trustee (as paying agent) may pay the same without surrender thereof. Upon the issuance of a new Bond, the Trustee or the Authority may require the payment of a sum sufficient to cover any tax or governmental charge and any other expenses connected with the issuance of such new Bond. Any Series 2012E Bond issued pursuant to this provision of the Indenture shall be deemed part of

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the original series of Bonds in respect of which it was issued and an original contractual obligation of the Authority.

SECURITY FOR THE BONDS

General

The Series 2012E Bonds are special, limited obligations of the Authority. The Series 2012E Bonds shall not constitute a debt or liability of the State or of any political subdivision thereof within the meaning of any State constitutional provision or statutory limitation and shall not constitute a pledge of the faith and credit of the State or of any political subdivision thereof. The issuance of the Series 2012E Bonds shall not directly or indirectly obligate the Authority, its officers, directors or employees, the State or any political subdivision thereof to provide any funds for their payment. The issuance of the Series 2012E Bonds shall not, directly, indirectly or contingently, obligate the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The Authority has no taxing power.

The principal of, redemption premium, if any, and interest payable on the Bonds are payable (except to the extent paid out of moneys attributable to the Bond proceeds or the income from the temporary investment thereof and under certain circumstances, proceeds from insurance and certain condemnation awards) solely from payments (the Loan Payments”) derived by the Authority from the Corporation under the Loan Agreement and a related promissory note for each series of Bonds and, for the 2012E Bonds only, from payments by the University pursuant to the University Agreement.

The Series 2012E Bonds are equally and ratably secured by the pledge of the Revenues of the Corporation pursuant to the Loan Agreement on a parity with all the Bonds previously or hereafter issued under the Indenture, including the Series 2006G Bonds and any Additional Bonds, and with any Additional Obligations issued pursuant to the Loan Agreement. See the caption “Additional Bonds and Additional Obligations” below. However, the payment obligations of the University under the University Agreement relate to the debt service on the Series 2012E Bonds only, and do not extend to the outstanding Series 2006G Bonds or any Additional Bonds or Additional Obligations.

The Trust Estate pledged by the Authority under the Indenture includes all rights, title and interest of the Authority in, to and under (a) the Loan Agreement, including all Loan Payments and other payments paid by the Corporation (excluding the Authority’s rights to payment of its fees and expenses and to indemnification), (b) the Notes, (c) the University Agreement, (d) any Qualified Swap Agreement, and (e) all financing statements or other instruments securing or otherwise relating to the loan of the proceeds of the Bonds. The Trust Estate also includes all moneys and securities held by the Trustee under the terms of the Indenture (excluding funds held in the Rebate Fund).

The Loan Agreement

Pursuant to the Loan Agreement and the related promissory notes of the Corporation, including the promissory note with respect to its obligations on the Series 2012E Bonds (the “Series 2012E Note”), the Corporation agrees to make payments to the Authority in such amounts and at such times so as to provide sufficient funds with which to make full and timely payments on the Bonds.

The obligations of the Corporation under the Loan Agreement are general obligations of the Corporation, payable by the Corporation using any and all legally available resources of the Corporation.

The Corporation has pledged all of the Revenues of the Corporation to secure the payment of amounts due, and the performance by the Corporation of its other obligations, under the Loan Agreement.

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“Revenues,” as defined in the Indenture, means for any period of time for which calculated, the total of all operating and nonoperating unrestricted gross revenues, gains and net assets released from restrictions derived by the Corporation during such period, determined in accordance with generally accepted accounting principles as reflected in the Corporation’s audited financial statements.

As additional security for its obligations under the Loan Agreement with respect to the Series 2012E Bonds, the Corporation has pledged all of its right, title and interest in the University Agreement. In addition, the Corporation has agreed that in the event the revenues of the Corporation are not sufficient to pay all of the Debt Service Requirements on the Series 2012E Bonds, the Corporation will enforce the obligation of the University to pay the debt service requirements on the Series 2012E Bonds from unrestricted revenues of the University as provided in the University Agreement.

The University Agreement

Pursuant to the University Agreement, the University has covenanted with the Corporation to make available unrestricted revenues of the University for (i) the full, prompt and timely payment of debt service payments with respect to the Series 2012E Bonds in the event that the revenues of the Corporation are not sufficient to make such payments and (ii) the reimbursement to Series 2012E Bonds holders of debt service payments on the Series 2012E Bonds required to be disgorged or repaid by holders of such Series 2012E Bonds due to bankruptcy, insolvency or similar proceedings with respect to the Corporation. For a summary of certain terms of the University Agreement, see the caption “SUMMARY OF THE UNIVERSITY AGREEMENT” in Appendix F hereto.

The payment obligations of the University under the University Agreement are general obligations of the University, payable by the University using any unrestricted revenues of the University that are legally available for such purpose. The obligations of the University are not secured by a pledge of a security interest in any revenues, unrestricted revenues or any other assets.

The payment obligations of the University under the University Agreement relate to the debt service on the Series 2012E Bonds only, and do not extend to the outstanding Series 2006G Bonds or any Additional Bonds or Additional Obligations.

Debt Service Reserve Fund

No moneys will be deposited in the Debt Service Reserve Fund under the Indenture to secure the Series 2012E Bonds. Moneys deposited the account of the Debt Service Reserve Fund for the Series 2006G Bonds or hereafter deposited in account of the Debt Service Reserve Fund for any Additional Bonds are not available to pay debt service on the Series 2012E Bonds. The Debt Service Reserve Requirement applicable to the Series 2012E Bonds is $0.

Concurrently with the issuance and delivery of the Series 2006G Bonds, the Corporation caused to be deposited into a separate account of the Debt Service Reserve Fund proceeds of the Series 2006G Bonds in an amount equal to the Debt Service Reserve Requirement for the Series 2006G Bonds. Such amount does not secure the Series 2012E Bonds or any Additional Bonds.

Upon the issuance of a series of Additional Bonds, there shall be deposited from either the proceeds of such series of Bonds or other legally available funds of the Corporation in the Debt Service Reserve Fund for such series of Bonds an amount equal to the Debt Service Reserve Requirement for such series of Bonds. The Authority may issue Additional Bonds that are not entitled to the benefit and security of the Debt Service Reserve Fund or any comparable reserve fund.

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The Debt Service Reserve Fund shall be maintained in an amount equal to the sum of the Debt Service Reserve Requirement for each series of Bonds, through the deposit of moneys or the deposit of a surety bond, an insurance policy, a letter of credit or other credit facility payable to the Trustee in such amounts as will together satisfy the Debt Service Reserve Requirement. Funds on deposit in the separate account of the Debt Service Reserve Fund for the Series 2006G Bonds shall be used to make up any deficiencies in the Debt Service Fund with respect to debt service on the Series 2006G Bonds, and not the Series 2012E Bonds or any Additional Bonds. If the moneys on deposit in any account in the Debt Service Reserve Fund are at any time less than the Debt Service Reserve Fund Requirement as a result of the withdrawal of moneys therefrom, the amount of such shortfall shall be payable by the Corporation within one year in substantially equal monthly installments.

For a summary of the provisions of the Indenture regarding the Debt Service Reserve Fund, see the caption “SUMMARY OF THE INDENTURE—Debt Service Reserve Fund” in Appendix F hereto.

Additional Bonds and Additional Obligations

Additional Bonds or Additional Obligations may be issued by the Authority which would be payable and secured on a parity with the Series 2006G Bonds and the Series 2012E Bonds in accordance with the provisions of the Indenture, and the Corporation may incur indebtedness which would be payable and secured on a parity with the Bonds in accordance with the provisions of the Loan Agreement. See the captions “Summary of the Indenture—Authorization of Additional Bonds,” “Summary of the Loan Agreement—Additional Bonds and Additional Notes” and “SUMMARY OF THE LOAN AGREEMENT—Additional Obligations” in Appendix F to this Official Statement.

ANNUAL DEBT SERVICE REQUIREMENTS

For a table of the Annual Debt Service on the Series 2006G Bonds and the Series 2012E Bonds, see the caption “ANNUAL DEBT SERVICE REQUIREMENTS” in Appendix A hereto.

DEBT SERVICE COVERAGE

For a table of the Corporation’s coverage of Annual Debt Service on the Series 2005B Bonds and the Series 2006G Bonds for the fiscal years ended June 30, 2010 and 2011 and the Corporation’s projection of the coverage of Annual Debt Service on the Series 2006G Bonds and the Series 2012E Bonds by anticipated Net Revenues Available for Debt Service for the years ending June 30, 2012 through 2016, see the caption “DEBT SERVICE COVERAGE” in Appendix A hereto.

INVESTMENT CONSIDERATIONS

The ability of the Authority to pay the principal, redemption premium, if any, and interest on the Series 2012E Bonds depends upon the ability of the Corporation to generate sufficient revenues in excess of its operating expenses to make the required payments under the Loan Agreement or the University to make available unrestricted revenues pursuant to the University Agreement. A number of risks which could prevent the Corporation or University from generating such revenues are outlined below. The future financial condition of the Corporation and the ability of the Corporation to generate sufficient Revenues to make debt service payments could be affected adversely by, among other things, the ability of University faculty to compete for research grants. There can be no assurance given that Revenues generated from the use of the Corporation’s research facilities and the University’s unrestricted revenues will not decrease. NO REPRESENTATION OR ASSURANCE CAN BE MADE OR GIVEN THAT REVENUES WILL BE REALIZED BY THE CORPORATION OR THE UNIVERSITY IN AMOUNTS SUFFICIENT TO PAY THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2012E BONDS.

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Revenues of the Corporation

The Corporation derives its Revenues primarily from research grants and contracts from agencies of the Federal government and from private sources. The portfolio of sponsoring agencies is diverse but primarily dependent on the Federal government, with Federal funding concentrated with the National Institutes of Health and the Department of Health and Human Services (approximately 35% in fiscal year 2011), the Department of Education (approximately 21% in fiscal year 2011) and the National Science Foundation (approximately 15% in fiscal year 2011). Revenues are largely dependent on the success of University faculty in competing for federally and privately funded research grants. The Corporation’s Revenue has shown positive growth in recent years (see the caption “FINANCIAL INFORMATION” in Appendix A hereto), but is projected to decline from the fiscal year 2011 level as described at the caption “DEBT SERVICE COVERAGE” in Appendix A hereto.

The overall trend in research budgets of federal agencies and federal funding of research grants has in recent years seen a flattening of the rate of increase in funding during prior years. Such funding may increase at lower rates, remain at current levels or decrease in future years. To the extent that overall federal funding of research grants remains flat or decreases, the competition for such funds may be expected to increase. In such circumstances, or for any other reason, should the success of the University faculty in receiving research grants fall short of the Corporation’s expectations, the ability of the Corporation to generate sufficient Revenues to pay the costs of operating its research facilities and to pay the principal of and interest on the Bonds could be adversely affected.

No Security for University Obligations

Pursuant to the University Agreement, the University has covenanted with the Corporation to make unrestricted revenues of the University available for payment of debt service on the Series 2012E Bonds in the event the Corporation is unable to make such payments, and to reimburse certain amounts in connection with a bankruptcy, insolvency or similar proceeding with respect to the Corporation. See the caption “SECURITY FOR THE BONDS—The University Agreement” herein and the caption “SUMMARY OF THE UNIVERSITY AGREEMENT” in Appendix F hereto. There is no pledge of a security interest in any revenues, unrestricted revenues or other assets of the University to secure such obligations.

University Revenues May be Pledged or Restricted

While there is not specific pledge of revenues of the University under the University Agreement, the revenues of the University that are generally available to pay debt service requirements on the Series 2012E Bonds pursuant to the University’s obligation under the University Agreement consist of all unrestricted revenues of the University (the “Unrestricted Revenues”). The amount of Unrestricted Revenues for the University’s year ended June 30, 2011 and certain other periods are described at the caption “FINANCIAL INFORMATION OF THE UNIVERSITY—Unrestricted Revenues” in Appendix C hereto.

Unrestricted Revenues of the University have been specifically pledged to other indebtedness of the University, including the Series 2010A Bonds, the Series 2010B Bonds, the Series 2010K Bonds, the Series 2011C Bonds and the Series 2012D Bonds described at that caption “FINANCIAL INFORMATION OF THE UNIVERSITY—University Debt Obligations—Obligations Payable from Unrestricted Revenues” in Appendix C hereto. Unrestricted Revenues may be pledged by the University to the payment of any other future indebtedness of the Board or the University. For a description of certain additional indebtedness expected to be incurred by the University, and to which the Unrestricted Revenues may be pledged, see the caption “FINANCIAL INFORMATION OF THE UNIVERSITY—Capital Projects and Planned Additional Debt Obligations” in Appendix C hereto. There is no covenant

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or other restriction on the amount of additional debt to which Unrestricted Revenues may in the future be pledged by the Board or the University.

The amount of Unrestricted Revenues may be reduced in the future by any increase in the amount of restricted revenues. Restricted revenues of the University include (i) fees, funds and revenues restricted to a use other than payment of debt service by enactment of the Kansas Legislature, (ii) fees, funds and revenues specifically pledged to secure the payment of revenue obligations of the Board or the University that are not available for payment of debt service on the Series 2012E Bonds or certain other bonds and (iii) gifts, fees and other revenues restricted to a use other than payment of debt service on the Series 2012E Bonds or certain other bonds by the donor, the Board or the University. The amount of restricted revenues can be increased by an act of the Kansas Legislature restricting the use of State appropriations for the benefit of the University or any other moneys to a purpose other than the payment of debt service on the Series 2012E Bonds or certain other bonds. The amount of Restricted Revenues can also be increased by a pledge by the Board or the University of any specific portion of current or future funds or revenues to revenue obligations of the Board or the University or by any other action of the Board or the University restricting any amount of existing or future fees or other revenues to a use other than the payment of debt service on the Series 2012E Bonds or certain other bonds. In addition, donors may restrict the use of gifts to the University to purposes other than payment of debt service on the Series 2012E Bonds or certain other bonds. There is no statute, law or contractual obligation of the State with respect to any amount of future State appropriations that would prevent the Kansas Legislature from restricting future appropriations. Neither the Board or the University is obligated to maintain any amount of Unrestricted Revenues free of restrictions that would cause revenues or receipts of the University to be included in restricted revenues and thereby excluded from the amount of Unrestricted Revenues available for the payment of debt service on the Series 2012E Bonds or certain other bonds.

No Security in Real or Personal Property of the Corporation

Bondholders do not have a lien on any of real or personal property owned by the Corporation or any other party, including the projects financed or refinanced by the Bonds and the Corporation’s other research facilities.

Tax-Exempt Status of the Corporation and the Series 2012E-1 Bonds

The Internal Revenue Service (“IRS”) has determined that the Corporation is an organization described in Section 501(c)(3) of the Code and therefore is exempt from federal income taxation. As a charitable organization, the Corporation is subject to a number of requirements affecting its operations, including prohibitions on business arrangements with private parties or transactions that may result in prohibited private inurement or private benefit. Management of the Corporation believes that any arrangements into which the Corporation has entered are in compliance with the tax laws. There can be no assurance, however, that the IRS will not pursue an action against the Corporation on account of any such arrangements or transactions.

The failure of the Corporation to remain qualified as a tax-exempt organization could affect the amount of funds available to pay debt service on the Bonds. Such failure, as well as failure to comply with certain legal requirements (see the caption “TAX MATTERS” herein), could cause the inclusion of interest on the Series 2012E-1 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2012E-1 Bonds. Such event could constitute an event of default under the Indenture (see the captions “SUMMARY OF THE INDENTURE—Events of Default” and “SUMMARY OF THE LOAN AGREEMENT—Tax Covenants” in Appendix F hereto). The Indenture does not provide for the payment of any additional interest or penalty in the event of the taxability of the interest on the Series 2012E-1 Bonds.

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The possible modification or repeal of certain existing federal income tax laws or other loss by the Corporation of the present advantages of State or federal tax laws, or any legislation imposing additional conditions on tax-exempt organizations, could adversely affect the financial position of the Corporation.

Matters Relating to Security for the Bonds

The Corporation, pursuant to the Loan Agreement, pledges and assigns and, to the extent permitted by law, grants a security interest to the Authority in its Revenues and all of its right, title and interest in the University Agreement. The Authority, pursuant to the Indenture, pledges and assigns any such security interest, to the extent permitted by law, together with a security interest in payments and certain funds held by the Trustee under the Indenture, to the Trustee. However, no assurance can be given that such security interest can or will be perfected by the Authority or the Trustee. Bond Counsel and counsel to the Corporation and the Authority are unable to render an opinion that the security interest from the Corporation to the Authority under the Loan Agreement or from the Authority to the Trustee under the Indenture can be or will be perfected under the provisions of the Kansas Uniform Commercial Code.

The remedies available to the Trustee or the registered owners of the Series 2012E Bonds upon an Event of Default under the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay. Based upon existing constitutional and statutory law and judicial decisions, including specifically the federal bankruptcy code, the remedies provided in the Indenture upon a default may not be readily available or may be limited in application. The various legal opinions to be delivered concurrently with the delivery of the Series 2012E Bonds and the delivery of the Loan Agreement and the Indenture will be qualified as to the enforceability of the various legal instruments by limitations imposed by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

Enforceability of Pledge of the Revenues; Effect of Bankruptcy

The obligation of the Corporation to make Loan Payments to be used to pay debt service on the Series 2012E Bonds is secured by a lien granted pursuant to the Loan Agreement and the Indenture on the Revenues generated by the Corporation’s operation of research facilities. The effectiveness of the security interest in the Revenues may be limited by a number of factors, including (a) commingling of proceeds of Revenues with other moneys of the Corporation not subject to the security interest in Revenues; (b) statutory liens; (c) rights arising in favor of the United States of America or any agency thereof, (d) constructive trusts, equitable or other rights impressed or conferred by a federal or state court in the exercise of its equitable jurisdiction; (e) rights of third parties in Revenues converted to cash and not in the possession of the Trustee; and (f) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Kansas Uniform Commercial Code, as from time to time in effect.

In addition, in the event of the bankruptcy of the Corporation pursuant to the United States Bankruptcy Code, any receivables coming into existence and any Revenues received on or after the date which is 90 days (or, in some circumstances, one year) prior to the commencement of the case in bankruptcy court might not be subject to the lien of the pledge of Revenues, and, under certain circumstances, a court of equity may have power to direct the use of Revenues to meet expenses of the bankrupt entity before providing for the Loan Payments to pay debt service on the Series 2012E Bonds. With respect to Revenues not subject to such lien, the Trustee would occupy the position of an unsecured creditor.

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Market for the Bonds

There is no established secondary market for the Series 2012E Bonds, and there is no assurance that a secondary market will develop for the purchase and sale of the Series 2012E Bonds. Prices of Series 2012E Bonds traded in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and changes in the operations and financial results of the Corporation and the University. From time to time it may be necessary to suspend indefinitely secondary market trading in the Series 2012E Bonds as a result of the financial condition or market position of broker-dealers, prevailing market conditions, lack of adequate current financial information regarding the Series 2012E Bonds, whether or not the Series 2012E Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices.

The Corporation has covenanted to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. In the event that the Corporation and the University fail to provide the necessary information to comply with said rule, it could adversely impact an Owner’s ability to sell the Series 2012E Bonds in the secondary market.

Tax Legislation and Other Matters

Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Series 2012E Bonds under federal or state law or otherwise prevent beneficial owners of the Series 2012E Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Series 2012E Bonds.

Legal Matters

Various State and Federal laws, regulations and constitutional provisions apply to the operations of the Corporation and the Authority. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Corporation or the Authority.

Suitability of Investment

An investment in the Series 2012E Bonds involves a certain degree of risk. The interest rate borne by the Series 2012E Bonds (as compared to prevailing interest rates on more secure tax exempt bonds, such as those which constitute general obligations of fiscally sound municipalities) is intended to compensate the investor for assuming this element of risk. Furthermore, the exclusion of interest on the Series 2012E-1 Bonds from certain taxes described under the caption “TAX MATTERS” is more valuable to high income tax bracket investors than to investors who are in low income tax brackets, and so the value of the interest compensation to any particular investor will vary with income tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Series 2012E Bonds are an appropriate investment.

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LITIGATION

The Authority

There is not now pending against the Authority any litigation restraining or enjoining the issuance or delivery of the Series 2012E Bonds or questioning or affecting the validity of the Series 2012E Bonds or any proceedings or authority under which the Series 2012E Bonds are to be issued.

The Corporation

No litigation, proceedings or investigations are pending or, to the knowledge of the Corporation, threatened against the Corporation, except litigation involving claims which, if adversely determined, will not, in the opinion of the counsel to the Corporation, materially and adversely affect the financial condition of, the operations of, or revenues generated by, the Corporation’s operation of its research facilities.

The University

No litigation, proceedings or investigations are pending or, to the knowledge of the University, threatened against the University, except litigation involving claims which, if adversely determined, will not, in the opinion of the counsel to the University, materially and adversely affect the financial condition of, the operations of, or revenues generated by, the University’s operation of its facilities.

BOND RATINGS

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”), has assigned a rating of “AA” to the Series 2012E Bonds and Moody’s Investors Service (“Moody’s”) has assigned a rating of “Aa1” to the Series 2012E Bonds. Generally, rating agencies base their ratings on such information and materials and investigations, studies and assumptions furnished to and obtained and made by the rating agency. An explanation of the significance of such rating may be obtained only from such rating agencies. The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. There is no assurance that the above rating will remain in effect for any given period of time or that they may not be lowered, suspended or withdrawn entirely by any rating agency if it deems circumstances are appropriate. Any downward change in, suspension or withdrawal of a rating may have an adverse effect on the market price of the Series 2012E Bonds.

TAX MATTERS

The following is a summary of the material federal and State of Kansas income tax consequences of holding and disposing of the Series 2012E Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2012E Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for certain tax laws of the State of Kansas, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2012E Bonds in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Series 2012E Bonds.

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Opinion of Bond Counsel Regarding the Series 2012E-1 Bonds

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2012E-1 Bonds:

Federal Tax Exemption. The interest on the Series 2012E-1 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes.

Alternative Minimum Tax. Interest on the Series 2012E-1 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations.

Kansas Tax Exemption. The stated interest on the Series 2012E-1 Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108.

Bank Qualification. The Series 2012E-1 Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b) of the Code.

Form of Opinion of Bond Counsel. The proposed form of the opinion of Bond Counsel is attached as Appendix H hereto.

Bond Counsel’s opinions are provided as of the date of the original issue of the Series 2012E-1 Bonds, subject to the condition that the Authority, the Board and the University comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the Series 2012E-1 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority, the Board and the University have covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2012E-1 Bonds in gross income for federal and Kansas income tax purposes retroactive to the date of issuance of the Series 2012E-1 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012E-1 Bonds, but has reviewed the discussion under the heading “TAX MATTERS—Other Tax Consequences.”

Other Federal Income Tax Consequences to Owners of the Series 2012E-1 Bonds

Series 2012E-1 Bonds Purchased at a Premium. If a Series 2012E-1 Bond is purchased at a price that exceeds the stated redemption price at maturity of the bond, the excess of the purchase price over the stated redemption price at maturity constitutes “premium” on the Series 2012E-1 Bond, and the bond is referred to in this discussion as a “Tax-Exempt Premium Bond.” Under Section 171 of the Code, the purchaser of a Tax-Exempt Premium Bond must amortize the premium over the term of the bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Tax-Exempt Premium Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Tax-Exempt Premium Bond prior to its maturity. Even though the owner’s basis is

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reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Series 2012E-1 Bonds Purchased with Original Issue Discount. For federal income tax purposes, original issue discount (“OID”) is the excess of the stated redemption price at maturity of a Series 2012E-1 Bond over its issue price. The issue price of a Series 2012E-1 Bond is the first price at which a substantial amount of the Series 2012E-1 Bonds of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Section 1288 of the Code, OID on tax-exempt bonds accrues on a compound basis. The amount of OID that accrues to an owner of a Series 2012E-1 Bond during any accrual period generally equals (1) the issue price of that Series 2012E-1 Bond, plus the amount of OID accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Series 2012E-1 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Series 2012E-1 Bond during that accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner’s tax basis in that Series 2012E-1 Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OID.

Federal Income Tax Consequences to Owners of the Series 2012E-2 Bonds

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, OWNERS OF THE SERIES 2012E-2 BONDS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS OFFICIAL STATEMENT RELATING TO THE SERIES 2012E-2 BONDS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY OWNERS OF THE SERIES 2012E-2 BONDS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THOSE OWNERS UNDER THE CODE; (B) THE DISCUSSION OF FEDERAL TAX ISSUES IN THIS OFFICIAL STATEMENT RELATING TO THE SERIES 2012E-2 BONDS WAS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THOSE SERIES 2012E-2 BONDS; AND (C) OWNERS OF THE SERIES 2012E-2 BONDS SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR BASED ON THEIR PARTICULAR CIRCUMSTANCES.

Opinion of Bond Counsel Regarding the Series 2012E-2 Bonds

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2012E-2 Bonds:

Kansas Tax Exemption. The stated interest on the Series 2012E-2 Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108.

No Other Opinions. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012E-2 Bonds. Purchasers of the Series 2012E-2 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2012E-2 Bonds, including the possible application of state, local, foreign and other tax laws.

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Other Federal Income Tax Consequences Applicable to Owners of the Series 2012E-2 Bonds

Series 2012E-2 Bonds Purchased at a Premium. If a Series 2012E-2 Bond is purchased at a price that exceeds the stated redemption price of the bond at maturity, the excess of the purchase price over the stated redemption price at maturity constitutes premium on the bond, and the bond is referred to in this discussion as a “Taxable Premium Bond.” Under Section 171 of the Code, the purchaser of a Taxable Premium Bond may elect to amortize the premium over the term of the Taxable Premium Bond using constant yield principles, based on the purchaser’s yield to maturity. An owner of a Taxable Premium Bond amortizes bond premium by offsetting the qualified stated interest allocable to an accrual period with the bond premium allocable to that accrual period. This offset occurs when the owner takes the qualified stated interest into income under the owner’s regular method of accounting. If the premium allocable to an accrual period exceeds the qualified stated interest for that period, the excess is treated by the owner as a deduction under Section 171(a)(1) of the Code. As premium is amortized, the owner’s basis in the Taxable Premium Bond will be reduced by the amount of amortizable premium properly allocable to the owner. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Other Federal Income Tax Consequences Applicable to Owners of the Series 2012E Bonds

Sale or Exchange. Upon the sale, exchange or retirement (including redemption) of a Series 2012E Bond, an owner of the Series 2012E Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2012E Bond (other than in respect of accrued and unpaid interest) and the owner’s adjusted tax basis in the Series 2012E Bond. To the extent the Series 2012E Bonds are held as a capital asset, the gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2012E Bond has been held for more than 12 months at the time of sale, exchange or retirement.

Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2012E Bonds, and to the proceeds paid on the sale of Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to these payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability.

Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2012E Bonds should be aware that ownership of the Series 2012E Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2012E Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2012E Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2012E Bonds, including the possible application of state, local, foreign and other tax laws.

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LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale of the Series 2012E Bonds are subject to the approving opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel. The form of the opinion of Bond Counsel is attached as Appendix H hereto. Certain legal matters will be passed upon for the Authority by its counsel and disclosure counsel, Kutak Rock LLP, for the Corporation by Barber Emerson, L.C. and for the University by its general counsel, James Pottorff, Esq.

FINANCIAL ADVISOR

Columbia Capital Management, LLC, Mission, Kansas, has served as Financial Advisor to the Authority. The Financial Advisor has assisted in various matters relating to the planning, structuring and issuance of the Series 2012E Bonds, including advice in the preparation of this Official Statement. The Financial Advisor has not passed on the accuracy or completeness of the factual information contained in this Official Statement. The Financial Advisor has not participated in any underwriting syndicate that will purchase or sell any of the Series 2012E Bonds.

UNDERWRITING

On March 1, 2012 the Authority received seven bids for the Series 2012E-1 Bonds. The Series 2012E-1 Bonds have been sold at public sale by the Authority to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Series 2012E-1 Original Purchaser”) on the basis of lowest true interest cost. The Series 2012E-1 Original Purchaser has agreed, subject to certain conditions, to purchase the Series 2012E-1 Bonds at a purchase price equal to the initial offering prices shown on the inside cover page hereof, less an underwriting discount of $74,354.77.

On March 1, 2012 the Authority received seven bids for the Series 2012E-2 Bonds. The Series 2012E-2 Bonds have been sold at public sale by the Authority to Morgan Keegan & Co., Inc. (the “Series 2012E-2 Original Purchaser”) on the basis of lowest true interest cost. The Series 2012E-2 Original Purchaser has agreed, subject to certain conditions, to purchase the Series 2012E-2 Bonds at a purchase price equal to the initial offering prices shown on the inside cover page hereof, less an underwriting discount of $40,440.74.

FINANCIAL STATEMENTS

The Corporation

The financial statements of the Corporation for the years ended June 30, 2011 and June 30, 2010 and the Independent Auditors’ Report prepared by Cochran Head Vick & Co., P.A., Kansas City, Kansas, are contained in Appendix B hereto. Cochran Head Vick & Co., P.A. has not participated in the preparation of any other portion of this Official Statement.

The University

The Annual Financial Report of the University for the fiscal year ended June 30, 2011, which was prepared by the University and has not been audited, is set forth as Appendix D hereto. Information from the Annual Financial Report of the University is included in certain audited financial statements of the State of Kansas which are a part of the State of Kansas’s Comprehensive Annual Financial Report (the “State CAFR”). However, the State CAFR does not separately state financial information for the University. No separate audited financial statements have been prepared by the University in the past and none are anticipated to be available in the future.

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Certain summary financial information of the University for the six months ended December 31, 2011 is included in Appendix C hereto. Such information should be read in connection with the Annual Financial Report of the University for the year ended June 30, 2011 set forth in Appendix D hereto.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority are material to an evaluation of the offering of the Series 2012E Bonds or to any decision to purchase, hold or sell the Series 2012E Bonds and the Authority will not provide any such information. The Corporation has undertaken all responsibilities for any continuing disclosure to Bondholders as described below, and the Authority shall have no liability to the holders of the Series 2012E Bonds or any other Person with respect to Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “SEC Rule”).

Pursuant to the Continuing Disclosure Agreement, the Corporation has covenanted for the benefit of holders and Beneficial Owners of the Series 2012E Bonds to provide certain financial information and operating data by not later than 180 days following the end of the Corporation’s fiscal year (currently June 30) (the “Annual Report”), commencing with the report for the fiscal year ending June 30, 2012, and to provide notices of the occurrence of certain enumerated events, if material. As provided in the Continuing Disclosure Agreement, the Trustee on behalf of the Corporation will file the Annual Report, together with notice of the occurrence of material events relating to the Series 2012E Bonds as provided in the Continuing Disclosure Agreement, in an electronic format as prescribed by the Municipal Securities Rulemaking Board (the “MSRB”). The MSRB has designated its Electronic Municipal Market Access system, found at http://emma.msrb.org, as the repository for such information. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the form of the Continuing Disclosure Agreement attached as Appendix G to this Official Statement. These covenants have been made in order to assist the original purchasers or underwriters in complying with the SEC Rule.

The Corporation has not failed in any material way to comply with any previous undertakings pursuant to the SEC Rule.

MISCELLANEOUS

The Corporation has furnished all information in this Official Statement relating to its research facilities and operations. The Corporation has furnished all information in this Official Statement relating to its operations. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact.

Except for information concerning the Authority under the captions “THE AUTHORITY” and “LITIGATION—The Authority” herein, none of the information in this Official Statement has been supplied or verified by the Authority and the Authority makes no representation or warranty, express or implied, as to the accuracy or completeness of such information.

The summaries or descriptions of provisions of the Series 2012E Bonds, the Loan Agreement, the Indenture, the University Agreement and the Continuing Disclosure Agreement, and all references to other materials not purporting to be quoted in full, are only brief outlines of provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is hereby made to such instruments, documents and other materials for the complete provisions thereof.

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Any requests for additional information with respect to the Corporation and the Bonds may be addressed to the University of Kansas, Office of the Comptroller, 1246 West Campus Road, Room 224, Lawrence, KS 66045, Attention: Comptroller.

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The execution and delivery of this Official Statement has been duly authorized by the Corporation.


By /s/ Steven F. Warren President

APPENDIX A

THE UNIVERSITY OF KANSAS CENTER FOR RESEARCH, INC.

APPENDIX A

TABLE OF CONTENTS

Page

GENERAL INFORMATION...................................................................................................................A-1

GOVERNANCE OF THE CORPORATION...........................................................................................A-1

MANAGEMENT OF THE CORPORATION .........................................................................................A-2

RELATED PARTIES ...............................................................................................................................A-4 University Payments for the Benefit of the Corporation..............................................................A-4 University Agreement ..................................................................................................................A-5

SPONSORED RESEARCH AT THE UNIVERSITY OF KANSAS, LAWRENCE CAMPUS.............A-5 Overview......................................................................................................................................A-5 Research Strengths.......................................................................................................................A-6

FINANCIAL INFORMATION ................................................................................................................A-7 General and Administrative Overhead (i.e., Indirect Costs) ........................................................A-7 Summary of Fiscal Years 2011 and 2010 ....................................................................................A-8 Statement of Financial Position ...................................................................................................A-9 Statement of Activities...............................................................................................................A-11

CAPITAL PROGRAMS AND ADDITIONAL FINANCING ..............................................................A-12

INSURANCE..........................................................................................................................................A-12

ANNUAL DEBT SERVICE REQUIREMENTS...................................................................................A-12

DEBT SERVICE COVERAGE..............................................................................................................A-13

APPENDIX A

THE UNIVERSITY OF KANSAS CENTER FOR RESEARCH, INC.

GENERAL INFORMATION

The University of Kansas Center for Research, Inc. (the “Corporation”) is a Kansas non-profit corporation designed to promote, manage, serve, and expand the research enterprise at the University of Kansas at Lawrence campus. The goals of the Corporation are to enlarge the university’s role as a national/international leader in research and to increase the number of research areas in which it is prominent. Operating through the office of the University of Kansas Research and Graduate Studies, the Corporation supports nine University research centers and institutes, two state surveys, three affiliated centers, two core service labs, and a large number of smaller research centers, institutes, laboratories, and programs. The Corporation is an organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code of 1986.

The operations of the Corporation are governed by a board of trustees as well as elected officers. All of the Corporation’s officers are University administrators or faculty members. An executive committee, in the absence of the trustees, has charge of both the business and general operation of the Corporation and conducts any business that it deems to be in the best interests of the Corporation.

The Corporation submits, and negotiates on behalf of the Lawrence Campus of the University of Kansas (the “University” or “KU”), all proposals for external support of research, instructional, and service projects. The Corporation helps research investigators prepare proposals and negotiate contracts; crafts institutional policy; informs the campus about national policy; conducts training programs; and provides information on funding sources. The Corporation facilitates technology transfer and communicates information about research to the public. In addition, the Corporation conducts the full business processes involved in research administration, such as purchasing, accounts payable/receivable, and auditing.

GOVERNANCE OF THE CORPORATION

The property, business, and affairs of the Corporation are under the care and supervision of the Executive Committee, a subset of the Board of Trustees. The Corporation is governed by a thirty-six (36) member board, excluding seven (7) ex officio members, with an approximately equal number of University and non-University members. The trustees serve four-year terms. From the membership of the trustees, an Executive Committee is elected annually to provide fiduciary oversight, including budget and investment approvals. The Executive Committee has all the powers of the trustees except to fill vacancies on the board. The Executive Committee acts as the policy approval body for the Corporation. The Executive Committee has the authority to purchase or contract for or to authorize any officer, agent, or employee to purchase or contract for any property or for the performance of any labor or service that it deems expedient, and has the authority to borrow money for the Corporation.

The members of the Executive Committee include the chair, vice chair, president/COO, vice presidents, and secretary-treasurer, and at least five other members selected from the membership of the trustees, at least two of whom are faculty members of the University of Kansas. The six officers of the Corporation are designated for their offices by virtue of their University titles, as described below.

A-2

Office

Name

Position at University of Kansas

Chair Dr. Bernadette Gray-Little Chancellor

Vice Chair Dr. Jeffrey S. Vitter Provost & Executive Vice Chancellor, Lawrence campus

President/Chief Operating Officer

Dr. Steven F. Warren Vice Chancellor for Research & Graduate Studies, Lawrence campus

Vice President Dr. Joshua L. Rosenbloom Associate Vice Chancellor for Research & Graduate Studies, Lawrence campus

Vice President Dr. Joseph A. Heppert Associate Vice Chancellor for Research & Graduate Studies, Lawrence campus

Secretary/Treasurer Diane Goddard Vice Provost for Administration & Finance, Lawrence campus

MANAGEMENT OF THE CORPORATION

The Corporation operates as a division of the University, following the same guidelines as followed by other divisions of the University, except for those practices and procedures unique to its corporate structure.

Biographical information of the officers of the Board of the Corporation follows.

Dr. Bernadette Gray-Little, Chair. Dr. Bernadette Gray-Little began her tenure as the 17th chancellor of the University of Kansas on August 15, 2009. As KU chancellor, Gray-Little is the chief executive officer of the university, overseeing campuses in Lawrence, Kansas City, Overland Park, Salina and Wichita, as well as research and educational centers in Garden City, Hays, Hutchinson, Parsons, Pittsburg, Topeka and Yoder.

Chancellor Gray-Little previously was executive vice chancellor and provost from 2006 to 2009 at the University of North Carolina at Chapel Hill. A professor of psychology, she rose to the post of UNC’s chief academic officer after successive administrative appointments, including dean of the College of Arts and Sciences. While at UNC, she earned a reputation as a champion for the highest quality educational experience for students and a strong advocate for faculty and for research.

A native of eastern North Carolina, Gray-Little received her bachelor's degree from Marywood College in Scranton, Pennsylvania, and her master’s and doctoral degrees in psychology from Saint Louis University. She earned a Fulbright Fellowship to study in Denmark. She also served as a Social Science Research Council Fellow and received a Ford Foundation Senior Scholar Fellowship through the National Research Council.

A-3

Dr. Jeffrey S. Vitter, Vice Chair. Jeff Vitter assumed the role of Provost and Executive Vice Chancellor at the University of Kansas effective July 1, 2010. Dr. Vitter is the Roy A. Roberts Distinguished Professor with an academic home in the Department of Electrical Engineering and Computer Science and is also a member of the Information and Telecommunication Technology Center. Previously, Dr. Vitter was on the faculty in the Department of Computer Science and Engineering at Texas A&M University and from 2008-2009, he served as provost and executive vice president at Texas A&M where he led development of the institution’s academic master plan.

Prior to Texas A&M, Vitter was the Frederick L. Hovde Dean of the College of Science at Purdue University from 2002 to 2008, leading collaborative development of two strategic plans and launching numerous academic initiatives. At Duke from 1993 to 2002, Vitter held a distinguished professorship and chaired the Department of Computer Science for eight and a half years. From 1980 to 1993, he progressed through the faculty ranks and served in administrative roles at Brown University.

A native of New Orleans, Vitter has more than 280 book, journal, conference and patent publications, primarily on the algorithmic aspects of processing massive amounts of information. He is a Guggenheim Fellow and a fellow of the American Association for the Advancement of Science, the Association for Computing Machinery and the Institute of Electrical and Electronics Engineers. He was named a National Science Foundation Presidential Young Investigator and won a Fulbright scholarship. Vitter earned a bachelor’s degree with highest honors in mathematics from the University of Notre Dame in 1977, a doctorate in computer science from Stanford University in 1980 and a master’s of business administration from Duke in 2002.

Dr. Steven F. Warren, President and Chief Operating Officer. Steven F. Warren serves as Vice Chancellor for Research & Graduate Studies for the University of Kansas, Lawrence campus. Dr. Warren was named University of Kansas, Lawrence Campus Vice Provost for Research & Graduate Studies and President of the Corporation in January 2008, after serving for five months as interim vice provost. Previously, Dr. Warren was director of KU’s Schiefelbusch Institute for Life Span Studies. He holds faculty rank as a professor of applied behavioral science, and serves as director of the Kansas Intellectual and Developmental Disabilities Research Center.

Prior to coming to KU in 2000, Dr. Warren was at Vanderbilt University for 18 years. He was a professor of special education and psychology and deputy director of Vanderbilt’s John F. Kennedy Center for Human Development. His academic background includes three degrees from KU, including a Ph.D. in child and developmental psychology at KU in 1977. Warren is internationally recognized for his contributions to understanding language development in children and leadership in the field of developmental disabilities. He has conducted extensive research on early communication and language intervention approaches and has published more than 130 papers, chapters, and books on these and related topics, and has been recipient of a number of major honors.

Dr. Joshua L. Rosenbloom, Vice President. Joshua Rosenbloom, professor of economics and director of the Center for Economic and Business Analysis in KU’s Institute for Policy & Social Research, was named Lawrence Campus Associate Vice Provost (now Associate Vice Chancellor) for Research and Vice President of the Corporation in October 2006.

Dr. Rosenbloom came to KU in 1988. He was promoted to full professor in 2000 and became director of the Center for Economic and Business Analysis a year later. He is a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. Dr. Rosenbloom has a B.A. degree from Oberlin College and a Ph.D. degree from Stanford University.

A-4

Dr. Rosenbloom participates in the oversight of KU’s research centers and has primary responsibility for the research integrity unit, the research training coordinator, the management of the General Research Fund (GRF) and Major Project Planning Grant (MPPG) funds, and relationships with foundations in support of KU research.

Dr. Joseph A. Heppert, Vice President. Joseph Heppert, professor and chair of the Department of Chemistry was named Lawrence Campus Associate Vice Provost (now Associate Vice Chancellor) for Research and Graduate Studies, and Vice President of the Corporation in August 2009.

Dr. Heppert joined the KU faculty in 1985 in chemistry and became a full professor in 2000, then chair of the department in 2005. He earned a bachelor’s in chemistry from San Jose State University and a doctorate in inorganic chemistry from the University of Wisconsin-Madison. Dr. Heppert has been particularly active at the national level in the work of the American Chemical Society and as a member of its Presidential Task Force on the Future of Science Education.

Prior to coming to KU, Dr. Heppert was a post-doctoral fellow at Indiana University. He shares oversight of research administration, strategic planning, of centers and institutes on the Lawrence campus and other research activities, and has primary responsibility for issues related to research space and infrastructure.

Diane H. Goddard, Secretary-Treasurer. Diane Goddard serves as the Vice Provost for Administration & Finance at the Lawrence campus of the University of Kansas, and is responsible for managing the budget and other fiscal affairs of the Lawrence Campus. She received her B.A. in Economics from Southern Connecticut State University and her M.B.A. from the University of Kansas.

Ms. Goddard assumed the role of Vice Provost for Administration & Finance in November 2008 having served as Associate Vice Provost/Comptroller for the Lawrence Campus of the University of Kansas since 2002. She had served as Comptroller since 1998, with her principal responsibility maintaining institutional fiscal integrity and accountability. She also served as Acting Budget Director, the Director of Purchasing. Ms. Goddard joined the KU staff in 1984, serving at the Kansas Geological Survey until 1991 as Assistant then Associate Director for Administration.

Prior to coming to the University of Kansas, Ms. Goddard was the Chief Accountant/Controller at Yale University Health Services, New Haven, Connecticut. She also served as Business Manager for the Yale University Art Gallery in the early 1980’s.

RELATED PARTIES

University Payments for the Benefit of the Corporation

The University has reported certain utility, maintenance, and custodial expenses paid by the University for the benefit of the Corporation (see Note 7 in the Audited Financial Statements of the Corporation). The following amounts were paid by the University for the years ended June 30, 2011 and 2010:

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2011 2010

Utilities $ 59,737 $ 56,761 Maintenance 27,319 19,498 Custodial 27,747 34,595 Total $114,803 $110,854

During the years ended June 30, 2011 and 2010, amounts paid by the University (and reimbursed

by the Corporation) for salaries, benefits, scholarships, fellowships, tuition and other operating expenses amounted to approximately $91,685,000 and $86,117,000, respectively. Of these amounts, approximately $4,400,000 and $4,100,000 are included in accounts payable and accrued expenses at June 30, 2011 and 2010, respectively.

Additionally, during the years ended June 30, 2011 and 2010, the University provided support to the Corporation amounting to $3,398,046 and $2,903,960 to fund general and administrative salaries and benefits and provided support of other investments amounting to $1,005,429 and $901,629, respectively.

University Agreement

The University Agreement provides that the Corporation will manage and administer all sponsored grants and contracts, including federally sponsored research grants, for the Lawrence and Edwards campuses and collect the revenues from such sponsored grants and contracts. The University Agreement also provides for the management of facilities owned or leased by the Corporation consistent with the mission of the University, the management of intellectual property and technology transfers by the Corporation. Certain provisions of the University Agreement are described at the caption “SECURITY FOR THE BONDS—The University Agreement” in the Official Statement and are summarized at the caption “SUMMARY OF THE UNIVERSITY AGREEMENT” in Appendix F to the Official Statement.

SPONSORED RESEARCH AT THE UNIVERSITY OF KANSAS, LAWRENCE CAMPUS

Overview

The University of Kansas is the leading research university in the state of Kansas in terms of sponsored project funding and, in particular, in indirect cost (sponsored research overhead) recoveries.

On July 1, 1997, dramatic changes in research administration and research focus were implemented on the University’s Lawrence campus with the restructuring of the Corporation. Until that time, the non-profit corporation primarily served the University’s School of Engineering faculty with research administration. The change expanded the Corporation’s mission to include all research, training and scholarly activity on the Lawrence and Edwards campuses.

The extraordinary growth in sponsored activities and the accompanying growth in indirect costs recovery are directly related to the change in the research administration structure. The Corporation provides a full range of research support, including proposal preparation, budget calculations, compliance certifications, contract negotiations, expenditure auditing and approval in accordance with sponsors’ regulations, asset management, appointment and compensation management, purchasing, and sponsor billings and accounts receivable.

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In the fiscal year ended June 30, 1998, sponsored project expenditures at KU Lawrence were $64.1 million. Thirteen years later, in fiscal year 2011, sponsored expenditures totaled $156.2 million (see Note 5 in the Audited Financial Statements of the Corporation). The following table details the growth in sponsored expenditures from fiscal year 1998 through fiscal year 2011. Note that in FY2011 and FY2010, ARRA funding accounted for $16.3 million and $7.1 million in sponsored expenditures, respectively. While FY2011 included a significant amount of ARRA funding in sponsored expenditures, that program will taper off in FY2012 and FY2013, so the forecasted numbers shown in this Appendix A take into account this “bubble” of ARRA funding.

University of Kansas – Lawrence & Edwards Campus Sponsored Project Expenditures

Fourteen Year History: 1998-2011

Fiscal Year Ending June 30

Sponsored Project Expenditures(1)

1998 $ 64,082,121 1999 69,886,220 2000 81,047,055 2001 84,876,946 2002 91,323,734 2003 101,210,249 2004 116,182,131 2005 120,710,654 2006 129,566,429 2007 122,017,526 2008 124,004,309 2009 126,399,073 2010 141,685,709 2011 156,223,266

(1) Combined expenditures of the University and the Corporation.

Research Strengths

Built on the traditional strengths of a multidisciplinary faculty research base, productive collaborations that foster innovation are promoted at KU through research focused on common themes. The institutional culture at KU regards the creation, dissemination, and application of knowledge as principal features of a major research university. One goal on the Lawrence campus is to significantly increase the impact and volume of KU’s externally funded research in key bioscience areas, such as drug delivery/discovery, cancer, and neuroscience. The critical importance of this research is expressed through campus strategic planning initiatives that encourage the collaborative pursuit of translational research opportunities to foster economic development throughout the State of Kansas.

KU is a member of the prestigious Association of American Universities, and ranks among the nation’s top 50 public universities in terms of its federally funded science and engineering research. Just since 2004, a complex of new research, teaching, and technology commercialization facilities has been built on the West Campus “Research Circle” in Lawrence. These include the Multidisciplinary Research Building, the four phases of the Shankel Structural Biology Center, the School of Pharmacy, and the main facility of the Bioscience & Technology Business Center. The Shankel building, for example, boasts a strong collection of shared core service lab resources for bioscience research, including an 800 MHz

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nuclear magnetic resonance spectrometer, a high-throughput screening laboratory, a chemical methodologies and library development center, a specialized chemistry center, and equipment for the close analysis of protein structure. Across campus, KU has a long history of interdisciplinary research collaboration among its faculty, grounded in a strong and coherent group of university research centers and institutes, state surveys, and affiliated centers. All these strengths in infrastructure and faculty, combined with those at the KU Medical Center in Kansas City, make KU a significant research and economic development asset for the state, the region, and the nation.

FINANCIAL INFORMATION

Income to the Corporation includes research income, general and administrative overhead, investment income and other miscellaneous income. Because income received from research activities is recognized as the Corporation performs the contracted service or incurs outlays eligible for reimbursement under the grant agreements, research income is always equal to research expenses.

General and Administrative Overhead (i.e., Indirect Costs)

Most sponsored agreements include funding for direct and indirect costs. Direct costs can be identified specifically and with a high degree of accuracy to a particular activity or project. Indirect costs are those facilities and administrative (F&A) costs that provide general support to all sponsored projects but cannot be specifically identified with a particular project. Facilities costs include building and equipment depreciation, interest on debt associated with certain buildings, operations and maintenance, and library expenses. Administrative costs include general, departmental, sponsored project, and student administration and services. These costs are reimbursed by sponsoring agencies at a rate negotiated with the federal government or at a mutually agreeable percentage of costs directly charged to the sponsored agreement.

The methodology for calculating the indirect cost rate is prescribed by the federal government in the Office of Management and Budget Circular A-21. This circular standardizes the rate elements and definitions used by all educational institutions in the calculation and expenditure of indirect costs.

The indirect cost income, along with investment income and other miscellaneous income, is used to finance the operational costs of the Corporation, including start-up investments in new faculty and facilities renovations. In Fiscal Year 1998, the KU Lawrence and Edwards campuses collected $9.3 million in indirect cost income. In Fiscal Years 2011 and 2010, indirect cost income was $24.3 and $22.8 million, respectively (see Note 5 in the Audited Financial Statements of the Corporation). Indirect cost revenues collected by the University and the Corporation are combined in the following table to show growth in total indirect cost revenues over the past nine years. In fiscal year 1998, 76% of the indirect cost income was collected by the University. As expected with the reorganization of the Corporation, in fiscal year 2011, more than 99% was collected by the Corporation.

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University of Kansas Indirect Cost Revenues 1998—2011

(Dollars)

Fiscal Year Ending June 30

Indirect Costs

1998 $ 9,271,039 1999 10,177,554 2000 10,846,727 2001 12,137,783 2002 14,225,188 2003 15,103,660 2004 17,189,673 2005 18,707,410 2006 21,474,418 2007 19,730,193 2008 19,225,843 2009 20,232,713 2010 22,769,831 2011 24,305,987

Note that the FY2011 and FY2010 Indirect Cost Revenues include $1.9 million and $1.2 million of ARRA funding, respectively.

Summary of Fiscal Years 2011 and 2010

The Corporation’s audited financial statements and notes related thereto for the fiscal years ended June 30, 2011 and 2010 are presented in Appendix B to the Official Statement and should be reviewed in conjunction with the following data.

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Statement of Financial Position

The Statement of Financial Position of the Corporation includes only those equipment and improvement purchases that remain Corporation property and accordingly, the historical cost of building assets which are University property is reflected in the University’s financial statements. Please note that the financial statements for FY2011 reflect a change in methodology relative to the recognition of equipment acquired with direct research resources (see Note 13 of the Audited Financial Statements); the change was applied retrospectively to the fiscal year ended June 30, 2010. Excerpts of the Corporation’s audited financial statements, which are included in Appendix B to the Official Statement, are set forth below:

Statements of Financial Position for the Years Ended June 30, 2011 and 2010

Assets 2011 2010

Cash and cash equivalents $ 11,595,561 $ 9,531,570 Investments 27,225,095 26,474,857 Interest receivable 188,735 206,462 Accounts receivable – sponsored research:

Federal 20,809,753 20,901,161 State 1,454,659 892,889 Private 3,975,757 1,695,310

Total accounts receivable 26,240,169 23,489,360

Note receivable – current 42,215 33,090 Prepaid expenses 5,100 -

Total current assets 65,296,875 59,735,339 Property and equipment, net 26,371,008 24,704,813 Buildings & equipment in progress 8,750,476 50,356

Total property and equipment 35,121,484 24,755,169 Cash and investments required for debt service 5,731,333 5,811,587 Other assets:

Bond issuance costs and other 905,845 969,918 Note receivable 1,024,694 966,910

1,930,539 1,936,828 Total assets $108,080,231 $92,238,923


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Liabilities and Net Assets 2011 2010

Liabilities Accounts payable and accrued expenses $ 18,664,529 $14,941,198 Current portion of long-term debt 2,481,818 2,381,818 Deferred revenues – sponsored research

Federal 5,208,651 6,116,738 State 2,196,370 2,331,762 Private 3,655,109 4,935,353

Total deferred revenues 11,060,130 13,383,853

Bonds payable, net 49,871,618 52,353,437

Total liabilities 82,078,095 83,060,306

Unrestricted net assets 26,002,136 9,178,617

Total liabilities and net assets $108,080,231 $92,238,923

Source: Audited Financial Statements of the Corporation


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Statement of Activities

The following excerpts summarize unrestricted revenues and expenses from the Corporation’s statements of activities for the last two fiscal years.

Statements of Activities, Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets

for the Years Ended June 30, 2011 and 2010

2011 2010 Revenues, Gains and Other Support

Direct Research Income $129,114,191 $116,073,641 Facilities & Administrative (F&A) reimbursement:

Corporation F&A reimbursement 20,518,111 19,096,722 Research unit/school F&A reimbursement 3,604,231 3,585,549

Total F&A reimbursement 24,122,342 22,682,271 Service centers 4,510,721 3,253,525 Technology transfer 269,018 221,369 Custodial funds - 107,480 Donation of equipment – non project funds 40,935 145,129 Investment return 1,026,994 1,483,450 Other income 1,712,399 1,505,681

Total Other Income 7,560,067 6,716,634

Total revenues, gains and other support 160,796,600 145,472,546 Expenses

Direct research expenses 129,114,191 116,073,641 Capitalized expenses for property and equipment (8,706,728) (9,441,353) 120,407,463 106,632,288 Corporation F&A expenses:

Construction & renovations - 3,856 University support 229,962 266,448 Research admin., unit support, startup 11,509,024 10,366,957 Matching costs 476,752 442,676 Interest expense – bonds 2,682,648 2,782,170

Research unit/school F&A expenses 1,495,976 2,714,539 Service centers 1,579,061 2,658,164 Technology transfer 114,488 109,084 Depreciation and amortization 5,739,737 4,651,393 Loss on disposal of assets 83,725 296,424

Total expenses 144,318,836 130,923,999

Change in Net Assets before Transfer 16,477,764 14,548,547 Transfers to University (see Note 3 of the Audited Financial

Statements) (743,276) (1,404,286) Settlement (net) (see Note 11 of the Audited Financial Statements) 1,089,031 - Change in Net Assets after Transfer 16,823,519 13,144,261 Net Assets, Beginning of Year 9,178,617 (3,965,644) Net Assets, End of Year $ 26,002,136 $ 9,178,617 Source: Audited Financial Statements of the Corporation

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CAPITAL PROGRAMS AND ADDITIONAL FINANCING

At this time, the Corporation has no plans to incur additional debt to finance capital projects. However, from time to time, the Corporation may finance additional capital expenditures from a variety of sources such as operating income and operating reserves.

INSURANCE

The Corporation (through the University) maintains comprehensive insurance on its assets, including owned buildings, on a replacement cost basis, 90% co-insurance, with $5,000 deductible. Business interruption and extra expense insurance is carried to protect the Corporation against loss of income resulting from covered losses. The Corporation also maintains insurance coverage for automobile liability, comprehensive general liability, directors and officers liability, crime, boiler and machinery, and certain other risks of the type and in the amounts as are customary for organizations of similar size and scope of activities.

ANNUAL DEBT SERVICE REQUIREMENTS

The following table sets forth the amounts required in each year for the payment of the principal of and interest on the Series 2006G Bonds and the Series 2012E Bonds.

Series 2012E Bonds Fiscal Year Ending

June 30

Series 2006G

Bonds

Principal

Interest

Annual Debt

Service

2012 $ 1,239,668.76 - - $ 1,239,668.76

2013 1,242,068.76 $ 2,255,000.00 $ 815,411.67 4,312,480.43

2014 1,243,468.76 2,190,000.00 883,850.00 4,317,318.76

2015 1,243,868.76 2,230,000.00 840,050.00 4,313,918.76

2016 1,243,268.76 2,275,000.00 795,450.00 4,313,718.76

2017 1,246,668.76 2,320,000.00 749,950.00 4,316,618.76

2018 1,243,868.76 2,370,000.00 703,550.00 4,317,418.76

2019 1,240,068.76 2,415,000.00 656,150.00 4,311,218.76

2020 1,245,268.76 2,475,000.00 594,200.00 4,314,468.76

2021 1,244,068.76 2,600,000.00 470,450.00 4,314,518.76

2022 1,246,668.76 2,730,000.00 340,450.00 4,317,118.76

2023 1,241,812.50 2,865,000.00 203,950.00 4,310,762.50

2024 1,248,062.50 2,950,000.00 118,000.00 4,316,062.50

2025 1,241,812.50 - - 1,241,812.50

2026 4,843,562.50 - - 4,843,562.50

TOTAL $22,254,206.36 $29,675,000.00 $7,171,461.67 $59,100,668.03

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The Series 2005B Bonds will be paid and redeemed using proceeds of the Series 2012E Bonds on the day following the delivery of the Series 2012E Bonds and are not included in the table of debt service requirements above. See the caption “PLAN OF FINANCE” in the Official Statement.

DEBT SERVICE COVERAGE

Set forth in the table below are the amounts of the Corporation’s historical Revenues and Net Revenues Available for Debt Service for the years ended June 30, 2010 and 2011 and the Corporation’s projection of the coverage of Annual Debt Service on the Bonds by the Corporation’s projected Revenues and Net Revenues Available for Debt Service for the years ending June 30, 2012 through 2016.

Projected revenues for the fiscal years ending June 30, 2012 and 2013 incorporate the declining impact of the ARRA stimulus “bubble” in federally sponsored expenditures, which had very positive impact in the fiscal years ended June 30, 2010 and 2011. The revenue projections for fiscal year 2013 forward are constructed around a return to a more normalized basis, and reflect a more conservative outlook for federal research spending. Research revenues and expenses are projected to increase an average of 1% per year during fiscal years 2014 through 2016. These projections are based on an assessment by the Corporation of the pipeline of proposals, awards and expenditures; investments by the University in recent years in net new research space and new faculty; assessment of the federal environment for sponsored expenditures; and evaluation of the ARRA stimulus projects already awarded to the University. See also footnote (2) to the table below.

For a description of the general obligation of the Corporation to pay debt service on the Bonds and the pledge of the Revenues of the Corporation, see the caption “SECURITY FOR THE BONDS” in the Official Statement. See also the caption “INVESTMENT CONSIDERATIONS—Revenues of the Corporation” in the Official Statement.

The projections in the table below should be read in conjunction with the audited financial statements of the Corporation set forth in Appendix B to the Official Statement.


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University of Kansas Center for Research, Inc. Historical and Projected Net Revenues Available for Debt Service and Projected Debt Service Coverage

Historical(1) Projected Projected Projected Projected Projected

FY 2010 FY 2011 FY 2012(2) FY 2013 FY 2014 FY 2015 FY 2016

Revenues(3) $145,472,546 $160,796,600 $150,126,302 $139,288,521 $135,354,846 $136,727,392 $138,114,162

Expenses (excluding depr) (3) 123,490,436 135,896,451 131,865,245 126,824,720 125,264,036 126,520,014 127,789,187

Net operating revenues available for debt service $21,982,110 $24,900,149 $18,261,058 $12,463,801 $10,090,809 $10,207,378 $10,324,975

Non-operating expense, (income) ($1,089,031)

Net Revenues Available for Debt Service $21,982,110 $25,989,180 $18,261,058 $12,463,801 $10,090,809 $10,207,378 $10,324,975 Maximum Annual Debt Service (“MADS”) for the Bonds(4) $5,040,822 $5,042,646 $4,317,419 $4,317,419 $4,317,419 $4,317,419 $4,317,419

Projected Debt Service Coverage (Net Revenues Available for Debt Service divided by MADS) 4.36x 5.15x 4.23x 2.89x 2.34x 2.36x 2.39x

Projected gross debt service coverage (Revenues divided by MADS) 28.86x 31.89x 34.77x 32.26x 31.35x 31.67x 31.99x

(1) See the audited financial statements of the Corporation in Appendix B to the Official Statement. (2) For fiscal year 2012 research direct and indirect revenues are projected to decrease from fiscal year 2011 incorporating the declining impact of the ARRA stimulus “bubble” reflected in the fiscal years ended June 30, 2010 and 2011, which forecast is based upon on an assessment by the Corporation of the pipeline of proposals, awards and expenditures and investments in recent years in net new research space and net new faculty. For fiscal year 2013, activity is expected to return to a more normal level of activity, while in fiscal years 2014 through 2016, research revenues and research expenses are estimated to increase at 1% per year. (3) Research income derived from grants is recognized and included in Revenues at the time the related expenses included in Expenses (other than indirect costs) are reimbursed pursuant to the applicable grant. (4) Maximum annual debt service is calculated for the combined debt service on the Series 2006G Bonds and the Series 2012E Bonds, offset by the expected release of moneys in the Debt Service Reserve Fund upon the final maturity of the Series 2006G Bonds.

APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE CORPORATION

FOR THE YEARS ENDED JUNE 30, 2011 AND JUNE 30, 2010

APPENDIX C


General Information

Original Section 7 of Article 6 of the Constitution of the State of Kansas states that “provision shall be made by law for the establishment, at some eligible and central point, of a state university, for the promotion of literature and the arts and sciences, including normal and agricultural department.” Acting under this constitutional authority, in 1864 the State Legislature organized the University of Kansas at Lawrence. A major comprehensive research and teaching university, the University is the only one of the Kansas Board of Regents Universities to hold membership in the prestigious Association of American Universities, a select group of 62 public and private research universities that represent excellence in graduate and professional educational and the highest achievements in research internationally. Dr. Bernadette Gray-Little began her appointment as Chancellor of the University on August 15, 2009. She is assisted by Dr. Jeffrey S. Vitter, Executive Vice Chancellor/Provost for the Lawrence campus and Dr. Barbara Atkinson, Executive Vice Chancellor for the Medical Center and Executive Dean of the School of Medicine.

The University’s main campus occupies approximately 1,000 acres with over 100 major buildings on and around Mount Oread, in Lawrence. The Edwards Campus, formerly called the Regents Center, sits on 36 acres of land in Overland Park, Kansas. The Medical Center is the health care campus of the University. The Medical Center consists of the School of Medicine, with campuses in Kansas City, Salina and Wichita, the Schools of Nursing and Allied Health, Graduate Schools and various support units for the entire academic health care enterprise.

The University confers bachelor, master, doctorate and professional degrees. Students can select from nearly 100 major courses of study offered in 14 academic divisions: the College of Liberal Arts and Sciences; the Schools of Allied Health, Architecture and Urban Design, Business, Education, Engineering, Fine Arts, Journalism, Law, Medicine, Nursing, Pharmacy, and Social Welfare; and the Graduate School. In 2010-11, the University conferred 30.4% of the bachelor’s degrees, 31.9% of the master’s degrees, 62.5% of the doctorate-research/scholarship degrees and 77.9% of the doctorate-professional practice degrees (i.e., pharmacy, audiology, physical therapy, law, and medicine) granted by the universities under the jurisdiction of the Kansas Board of Regents.

The distinguished faculty has received national awards from such prestigious professional and research organizations as the American Academy in Rome, the National Aeronautics and Space Administration, the National Institutes of Health, the National Endowment for the Arts, the National Endowment for the Humanities and the National Science Foundation. Research expenditures in the fiscal year ended June 30, 2011 exceeded $244 million.

Enrollment at the University for the fall semester of 2011 exceeded 28,700, and the University employed over 9,400 full-time equivalent faculty and staff.

The operating budget of the University is funded primarily through a combination of State appropriations (State tax dollars), tuition and fees and other restricted fees and grants. In fiscal year 2012, the operating budget of the University is estimated at $1.18 billion, 21.1% of which is funded from State appropriations and 23.8% from tuition and fees.

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In 1905, three proprietary medical schools in Kansas City combined under the control of the University. Today the University’s Medical Center, with campuses at Kansas City and Wichita serving 3,270 students, is the region’s foremost institution for the training of health care professionals. On October 1, 1998, the University’s Medical Center divided into a separate Medical Center, whose mission is the education of health care professionals, research, service, and patient care, and an independent Hospital Authority, which is an instrumentality of the State of Kansas and whose mission is to support the education, research, and public service activities of the University Medical Center, to provide patient care and specialized services, and to provide care for medically indigent citizens of the state of Kansas. The combined Medical Center and Hospital Authority is the seventh largest employer in Kansas City, with approximately 7,300 employees. The Hospital Authority at the Medical Center operates 555 staffed beds and serves as the State’s premier tertiary care center.

Governing Board

The Board of Regents (the “Board”) consists of nine regents appointed by the Governor and confirmed by the State Senate. The term of office for each regent is four years, with appointments staggered. Not more than five regents may be of the same political party. The Board is a constitutionally established board, responsible for formulating policy under which the State universities operate and for recommending to the State Legislature the amount of State funds to be made available to each institution. With respect to State universities, the Board has the power to make and execute contracts; acquire property; pledge or assign revenues; issue revenue bonds; construct, acquire or improve properties; fix, charge and collect rents, tuition and other fees; contract for services; and execute all acts necessary to the performance of its duties.

Current members of the Board are set forth on the inside cover page of the Official Statement.

University Administration

Dr. Bernadette Gray-Little, Chancellor. Dr. Bernadette Gray-Little, is the 17th chancellor of the University of Kansas, a post she assumed August 15, 2009. Prior to coming to KU, she was at the University of North Carolina-Chapel Hill, where she served as a professor of psychology before being named to several top administrative posts, including executive vice chancellor and provost. Gray-Little earned a Ph.D. and M.S. in Psychology from St. Louis University (Missouri) and an A.B. from Marywood College (Pennsylvania). Gray-Little has received numerous honors and awards including the Distinguished Service Award from the UNC General Alumni Association, the National Research Council- Ford Foundation Senior Fellow, and a Fulbright Fellowship to the University of Copenhagen. Gray-Little has identified enhancing undergraduate education, raising KU’s already high scholarly profile, and securing the resources needed for students and the university to succeed as three of her initial goals for KU.

Dr. Jeffrey S. Vitter, Executive Vice Chancellor/Provost. Dr. Jeffrey S. Vitter, became the Executive Vice Chancellor and Provost of the University of Kansas on July 1, 2010. Dr. Vitter served as provost and executive vice president for academic affairs and as a professor in the Department of Computer Science and Engineering at Texas A&M University. Dr. Vitter was responsible, as the chief academic officer of Texas A&M University, for 2,700 faculty, 5,500 staff, 48,000 students and an annual budget of $1.2 billion. He also oversaw the academic mission of Texas A&M University in Doha, Qatar. Prior to joining Texas A&M, Dr. Vitter served as the Frederick L. Hovde Dean of the College of Science at Purdue University, and at Duke University, he held a distinguished professorship as the Gilbert, Louis, and Edward Lehrman Professor of Computer Science and was department chair of the Department of Computer Science as well as co-director and a founding member of Duke’s Center for Geometric and Biological Computing. His educational degrees include a B.S. with highest honors in mathematics from

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the University of Notre Dame in Indiana, a Ph.D. in computer science from Stanford University in California and an MBA from Duke University in North Carolina. Dr. Vitter has been named a Guggenheim Fellow, an ACM Fellow, an IEEE Fellow, an AAAS Fellow, an NSF Presidential Young Investigator and a Fulbright Scholar.

Dr. Barbara Atkinson, Executive Vice Chancellor of the University of Kansas Medical Center

and Executive Dean, School of Medicine. Dr. Atkinson leads the University of Kansas Medical Center's efforts to enhance human health by championing leading-edge biomedical research, providing students with excellent educational opportunities and patients with access to the latest advances in medicine. Among her teaching honors, she received the Leonard Berwick Award for Distinguished Teaching at the University of Pennsylvania, the Lindback Award for Distinguished Teaching in Clinical Sciences at Medical College of Pennsylvania (MCP), the Golden Apple Teaching Award for Excellent Science Teaching for Integrated Learning Programs from the MCP and the Helmuth Sprintz Award for teaching at the University of Kansas. Dr. Atkinson is also a respected pathologist. She is a Life Trustee and a past president of the American Board of Pathology (ABP), and she holds the distinction of being the first woman and the first cytopathologist to be elected as a trustee. She was elected to membership in the prestigious Institute of Medicine of the National Academy of Sciences in 1997.

Theresa Gordzica, Chief Business and Financial Planning Officer. Reporting to the

Chancellor of the University, Ms. Gordzica, is responsible for University wide management of Business and Fiscal Affairs at all University of Kansas campuses. Ms. Gordzica has been in administration at KU since 1982. Her career began as a student assistant and has progressed to increasingly responsible positions within the office. Ms. Gordzica is a Certified Public Accountant and has a Masters of Business Administration and Bachelor of Science in Business and Accounting from the University of Kansas. Ms. Gordzica has also been active in the Central Association of College and University Business Officers as well as a number of community service organizations.

Faculty

The following tables present some historical information concerning the faculty at the University for the Fall semesters 2007 through 2011.

University of Kansas – Lawrence Campus Faculty Information

Academic Years Ending 2007 – 2011 2007 2008 2009 2010 2011 Number Full-Time Faculty 1,169 1,191 1,185 1,179 1,199 Number Part-Time Faculty 365 388 385 385 379 Number Tenured Faculty 849 868 865 877 895 Average Age of Faculty NA NA NA NA NA Percent of Tenured Faculty 55% 55% 55% 56% 57% Full-Time Percent with Terminal Degree(1) 96% 96% 96% 95% 95% Student-Faculty Ratio(1) 19.2 19.0 20.0 20.0 *

(1) The University is using the US News definition for terminal degree and student/faculty ratio. * This information is not available as of February 2012.

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University of Kansas – Medical Center Faculty Information

Academic Years Ending 2007 – 2011 2007 2008 2009 2010 2011(2) Number Full-Time Faculty 668 710 786(4) 848(4) 933(4) Number Part-Time Faculty 159 169 168 187 184 Number Tenured Faculty 242 236 239 249 252 Average Age of Faculty 49 48 48 48 49 Percent of Tenured Faculty(1) 75% 71% 73% 73% 72% Percent Holding Terminal Degrees 90% 89% 92% 92% 92% Student-Faculty Ratio(3) NA NA NA NA NA (1) Percent of tenured faculty reflects percent of tenure eligible faculty who have attained tenure - does not include clinical and other non tenure eligible faculty.

(2) These are preliminary numbers. (3) FTE for students is not calculated for the University of Kansas Medical Center. (4) In these years, full-time faculty counts include Internal Medicine Cardiologists and Emergency Medical Service faculty.

Student Body and Enrollment

The University has a coeducational student body with approximately 67% of students having resident status and 33% having nonresident status, based on Fall 2011 semester headcount. The following tables reflect headcount information, full-time equivalent (“FTE”) student information and applications and admissions information for the fall semesters of the years indicated.

The following tables show historical student headcount for the fall semesters at the University as a whole and each of the two main campuses.

University of Kansas Student Headcount

Fall Semesters, 2007 – 2011

Fall Semester

Total Students Residents

Non-Residents Undergraduate Graduate

First Professional(3) Other(2)

2007 29,260 20,296 8,964 20,828 6,237 1,504 691 2008 30,102 20,999 9,103 21,332 6,508 1,525 737 2009 30,004 20,765 9,239 21,066 6,414(1) 1,759(1) 765 2010 29,462 20,164 9,298 20,330 7,300 1,063 769 2011 28,718 19,344 9,374 19,673 7,161 1,100 784

(1) Federal IPEDS definitions redefined first professional to doctorate-professional practice. This includes degrees - AuD, DPT, JD, MD, PharmD. This shifted some graduate students to the first professional column. (2) Includes medical residents and fellows. (3) Includes visiting trainees.

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University of Kansas – Lawrence Campus Student Headcount


Fall Semester


Non-Residents Undergraduate

Graduate/First Professional

2007 26,342 18,291 8,051 20,298 6,044 2008 26,999 18,890 8,109 20,811 6,188 2009 26,826 18,706 8,120 20,550 6,276 2010 26,266 18,147 8,119 19,852 6,414 2011 25,448 17,364 8,084 19,222 6,226

University of Kansas – Medical Center Student Headcount


Fall Semester


Non-Residents Undergraduate Graduate

First Professional(3) Other(2)

2007 2,918 2,005 913 530 916 781 691 2008 3,103 2,109 994 521 1,045 800 737 2009 3,178 2,059 1,119 516 869(1) 1,028(1) 765 2010 3,196 2,017 1,179 478 866 1,063 769 2011 3,270 1,980 1,290 451 935 1,100 784

(1) Federal IPEDS definitions redefined first professional to doctorate-professional practice. This includes degrees - AuD, DPT, JD, MD, OTD, PharmD. This shifted some graduate students to the first professional column. (2) Other includes medical residents and fellows. (3) Includes visiting trainees. Projected Student Headcount

For the next few years, the Kansas high school graduating classes are expected to decline based on Western Interstate Commission on Higher Education’s (WICHE) projections. As set forth below, the University projects a stable enrollment for the near future. However, the number of high school graduates is declining throughout the Midwest, so the University’s ability to attract non-resident students is increasingly important.

University of Kansas Projected Student Headcount Fall Semesters, 2011 – 2015

Fall Semester Actual* / Estimated

Headcount 2011 28,718* 2012 28,800 2013 28,800 2014 28,800 2015 28,800

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University of Kansas – Lawrence Campus Projected Student Headcount Fall Semesters, 2011 – 2015


Headcount 2011 25,448* 2012 25,500 2013 25,500 2014 25,500 2015 25,500

University of Kansas – Medical Center Projected Student Headcount Fall Semesters, 2011 – 2015


Headcount 2011 3,270* 2012 3,300 2013 3,300 2014 3,300 2015 3,300

Full Time Equivalent Student Enrollment

The following table is a history of full time equivalent (FTE) students for the Fall semesters 2007 through 2011 for the University of Kansas – Lawrence and Edwards Campuses. FTE information is not calculated for the University of Kansas Medical Center.

University of Kansas – Lawrence Campus & Edwards Campus Full Time Equivalent Student Enrollment


Fall Semester Total FTE Students FTE

Undergraduate FTE Graduates/First

Professional 2007 23,831 18,471 5,360 2008 24,503 18,990 5,513 2009 24,340 18,731 5,609 2010 23,988 18,136 5,852 2011 23,290 17,632 5,658

Student Admissions

For the Fall 2011 semester, 93% of first time freshmen applications were accepted and 38% of those applicants enrolled. The one-year retention rate for the Fall 2010 full-time, first-time degree-seeking freshmen is 78%.

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First Time Freshmen Applications, Acceptances and Enrollments Fall Semesters, 2006 – 2011

Fall Fall Fall Fall Fall Fall 2006 2007 2008 2009 2010 2011 Applications Received 10,240 10,367 10,902 10,653 10,157 10,035 Applications Accepted 9,472 9,554 10,003 9,740 9,397 9,306 % Accepted 93% 92% 92% 91% 92% 93% Students Enrolled 4,153 4,084 4,483 3,942 3,702 3,580 % of Acceptances Enrolled 44% 43% 45% 40% 39% 38%

Indicated below are the average ACT scores and grade point averages of freshmen entering in the

fall semesters.

Enrolled First Time Freshmen Fall Semesters, 2006 – 2011

Fall Fall Fall Fall Fall Fall 2006 2007 2008 2009 2010 2011 Average ACT Score* 24.6 24.6 24.8 24.7 24.9 24.9 Average High School GPA 3.4 3.4 3.4 3.4 3.5 ** *SAT converted to ACT equivalent ** This information is not available as of February 2012.


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Room and Board

The following table summarizes the annual room and board fees for an academic year for the University of Kansas Lawrence campus. Approximately 3,071 students will reside in residence halls for the 2011-2012 academic year. There are no student housing facilities at the University of Kansas Medical Center campus.

University of Kansas – Lawrence Campus Annual Room and Meals Fees Academic years, 2007 – 2012

2007 2008 2009 2010 2011 2012 Room (standard) $2,997 $3,224 $3,386 $3,554 $3,642 3,700Meals 2,750 2,920 3,088 3,248 3,340 3,380Total $5,747 $6,144 $6,474 $6,802 $6,982 $7,080

Geographic Representation of Students

For the Fall 2011 semester, the majority of the University’s students were Kansas residents. All of 105 Kansas counties, all 50 states, D.C., and 2 U.S. Territories, and 105 different countries were represented in the student population.

University of Kansas Geographic Representation

Fall Semester 2011

Total Students: 28,718Kansas 18,930Other States 7,471International 2,317

Undergraduates: Kansas 14,451Other States & International 5,222

Graduates & Professionals: Kansas 4,893Other States & International 4,152


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Degrees Awarded

In the past five years, the University has awarded the following undergraduate, graduate and professional degrees.

University of Kansas Degrees Awarded

Academic years, 2007 – 2011

2007 2008 2009 2010 2011 Undergraduate Certificates* - - - - 9 Bachelor’s 3,927 3,997 4,097 4,156 4,047 Post-baccalaureate Certificates* - - - - 11 Master’s 1,351 1,429 1,481 1,484 1,583 Specialist 11 6 10 6 10 PhD’s 327 308 263 298 335 Law (JD) 159 166 159 162 172 Pharmacy (PharmD) 161 160 131 132 114 Medicine (MD) 142 147 157 169 166 Audiology (AuD) - - 9 8 6 Nursing (DNP) - - - 5 11 Occupational Therapy - - - - 2 Physical Therapy (DPT) - - 47 45 50 Total 6,078 6,213 6,354 6,465 6,516

*Certificates listed are Title IV eligible.

Tuition and Fees

The University of Kansas, Lawrence campus uses the AAU-16 Comparison group as the peer group for tuition and fees comparisons. The AAU-16 Comparison group includes: the University of Colorado; the University of Illinois; Indiana University; the University of Iowa; Iowa State University; University of Michigan; Michigan State University; the University of Minnesota; the University of Missouri; the University of Nebraska; The Ohio State University; Purdue University; the University of Texas; Texas A&M University; and the University of Wisconsin. The University of Kansas, Medical Center campus uses the cost study peers (the University of Colorado; the University of Iowa; the University of North Carolina; the University of Oklahoma; and the University of Oregon) as their comparison group.

The following tables show a history of the changes in tuition and fees of full-time students

enrolled at the University of Kansas and a comparison to the peer groups for those years. Between the Fiscal Years 2008 and 2012, tuition and fees at the University of Kansas have

increased 23% for resident undergraduates, 21% for resident graduates, 25% for nonresident undergraduates and 19% for nonresident graduates. A comparison of the past fiscal year’s standard rate tuition and fees of the University of Kansas to the average tuition and fees for the peer group for both residents and non-residents is shown in the following tables.

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Schedule of Tuition and Fees and Comparison to Cost Study Peer Institutions

University of Kansas – Lawrence Campus Schedule of Tuition and Fees

and Comparison to AAU-16 Institutions Academic Years 2008 – 2012

Resident Undergraduates Non-Resident Undergraduates

Academic Year

University of Kansas

AAU-16 Average w/out

KU

KU as % of AAU-16 Average


AAU-16 Average

w/out KU


2008 $6,600 $8,085 81.6% $16,107 $21,747 74.1% 2009 $7,042 $8,600 81.9% $17,119 $22,936 74.6% 2010 $7,414 $9,048 81.9% $18,097 $24,058 75.2% 2011 $8,025 $9,529 84.2% $19,008 $25,225 75.4% 2012 $8,469 $10,072 84.1% $20,358 $26,477 76.9%

Resident Graduates Non-Resident Graduates

Academic Year



KU



AAU-16 Average

w/out KU


2008 $6,531 $8,927 73.2% $14,557 $20,589 70.7% 2009 $6,969 $9,573 72.8% $15,476 $21,674 71.4% 2010 $7,339 $10,071 72.9% $16,357 $22,480 72.8% 2011 $7,950 $10,597 75.0% $17,448 $23,334 74.8% 2012 $8,389 $11,138 75.3% $18,476 $24,429 75.6%

Resident Law Students Non-Resident Law Students

Academic Year*



KU



AAU-16 Average

w/out KU


2008 $12,595 $19,507 64.6% $22,627 $32,392 69.9% 2009 $14,148 $22,033 64.2% $24,781 $34,988 70.8% 2010 $14,948 $24,747 60.4% $26,221 $37,317 70.3% 2011 $16,068 $26,489 60.7% $27,940 $39,266 71.2% 2012 $16,998 $28,472 59.7% $29,607 $41,517 71.3%

*Based on 30 hours.


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University of Kansas – Medical Center Schedule of Tuition and Fees

and Comparison to Cost Study Peer Institutions Academic Years 2008 – 2012

Resident Undergraduates Non-Resident Undergraduates

Academic Year

Medical Center

Peer Average

w/out KUMC

KUMC as % of Peer Average Medical Center

Peer Average w/out KUMC

KUMC as % of Peer Average

2008 $6,600 $7,081 93.2% $16,107 $18,521 87.0% 2009 $6,554 $7,913 82.8% $16,631 $20,463 81.3% 2010 $6,936 $8,514 81.5% $17,619 $21,575 81.7% 2011 $7,413 $8,512 87.1% $18,845 $22,020 85.6% 2012 $7,774 $9,084 85.6% $19,777 $23,517 84.1%

Resident Graduates Non-Resident Graduates

Academic Year

Medical Center

Peer Average

w/out KUMC




2008 $6,531 $ 9,570 68.2% $14,551 $18,998 76.6% 2009 $6,481 $10,106 64.1% $14,988 $20,031 74.8% 2010 $6,861 $10,939 62.7% $15,879 $20,904 76.0% 2011 $7,334 $10,749 68.2% $16,983 $21,370 79.5% 2012* $5,867 $10,215 57.4% $13,467 $20,301 66.3%

Resident First-Year Medical Students Non-Resident First-Year Medical Students

Academic Year

Medical Center

Peer Average

w/out KUMC




2008 $22,950 $22,295 102.9% $40,341 $47,655 84.7% 2009 $24,200 $22,640 106.9% $42,547 $48,748 87.3% 2010 $25,636 $25,759 99.5% $45,084 $46,155 97.7% 2011 $26,917 $25,076 107.3% $47,337 $51,098 92.6% 2012 $28,249 $27,568 102.5% $49,692 $54,477 91.2%

Note: KUMC’s tuition based on 30 hours for undergraduate and 24 for graduate, but beginning in 2012, tuition for gradate students is based on 18 credit hours rather than 24 credit hours. Peer average without KUMC for undergraduate and graduate does not include University of Colorado. Integrated Postsecondary Education Data System tuition (n/a until after 10/14/09). University of Colorado non-resident medical school tuition decreased by over a third from AY09 to AY10.

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In the normal course of the University’s budget process, it proposes tuition increases to the Board on an annual basis and plans to do so this year. Historical tuition information can be found on pages A-10 and A-11 under the caption “Tuition and Fees—Schedule of Tuition and Comparison to Cost Study Peer Institutions.”

Financial Aid Assistance

The following table provides information about the recipients and amounts, by category, of financial aid assistance to students for the academic years ended June 30, 2009, 2010 and 2011 as well as estimates of the numbers of recipients and dollar amount of financial aid assistance for the academic year ending June 30, 2012. Most students who receive Federal financial assistance receive multiple types of Federal financial assistance. The total number of students receiving unduplicated financial aid assistance is shown below.

University of Kansas Schedule of Financial Aid Assistance to Students

Academic Years Ending June 30, 2009 – 2012

2009 Actual 2010 Actual 2011 Actual 2012 EstimatedTotal Students Enrolled (Headcount) 30,102 30,004 29,468 28,718

Number of students receiving financial aid

assistance, by category: Federal assistance recipients 13,712 14,603 14,601 15,000 State assistance recipients 2,128 2,576 2,352 2,416 Institutional scholarship recipients 11,482 12,089 12,446 12,787 Other scholarship recipients 4,851 4,189 3,840 3,944

Total students receiving financial aid assistance (excluding Federal assistance) 12,736 12,959 12,910 13,266

Total (unduplicated) number of students receiving financial aid assistance 18,721 18,944 18,850 19,366

Amount of assistance by category: Federal assistance $167,104,107 $194,418,949 $198,154,051 $205,277,607 State assistance 7,622,021 7,827,133 7,937,681 8,424,671 Institutional scholarships 62,152,931 63,651,335 67,645,770 69,068,933 Other scholarships and assistance 25,847,093 23,148,240 16,565,389 17,785,492 Total amount of assistance to students $262,726,152 $289,045,657 $290,302,891 $300,556,703


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University of Kansas – Lawrence Campus Schedule of Financial Aid Assistance to Students


2009 Actual 2010 Actual 2011 Actual 2012 Estimated Total Students Enrolled (Headcount) 26,999 26,826 26,266 25,448

Number of students receiving financial aid

assistance, by category: Federal assistance recipients 12,388 13,240 13,283 13,648 State assistance recipients 1,934 2,389 2,198 2,258 Institutional scholarship recipients 10,233 10,976 11,332 11,644 Other scholarship recipients 4,428 3,682 3,215 3,303

Total students receiving financial aid assistance (excluding Federal assistance) 12,484 12,722 12,681 13,030

Total (unduplicated) number of students receiving financial aid assistance 17,004 17,200 17,127 17,598

Amount of assistance by category: Federal assistance $136,343,024 $161,012,247 $164,533,174 $169,057,836 State assistance 2,341,736 2,438,792 2,542,032 2,611,938 Institutional scholarships 57,625,625 58,899,463 62,548,839 64,268,933 Other scholarships and assistance 21,382,922 19,095,352 13,188,015 13,550,685 Total amount of assistance to students $217,693,307 $241,445,854 $242,812,060 $249,489,392


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University of Kansas – Medical Center Schedule of Financial Aid Assistance to Students


2009 Actual 2010 Actual 2011 Actual 2012 EstimatedTotal Students Enrolled (Headcount) 3,103 3,178 3,196 3,270

Number of students receiving financial aid assistance, by category:

Federal assistance recipients 1,324 1,363 1,318 1,352 State assistance recipients 194 187 154 158 Institutional scholarship recipients 1,249 1,113 1,114 1,143 Other scholarship recipients 423 507 625 641

Total students receiving financial aid assistance(excluding Federal assistance) 252 237 229 236

Total (unduplicated) number of students receivingfinancial aid assistance 1,717 1,744 1,723 1,768

Amount of assistance by category: Federal assistance $30,761,083 $33,406,702 $33,620,877 $36,219,771 State assistance 5,280,285 5,388,341 5,395,649 5,812,733 Institutional scholarships 4,527,306 4,751,872 5,096,931 4,800,000 Other scholarships and assistance 4,464,171 4,052,888 3,377,374 4,234,807 Total amount of assistance to students $45,032,845 $47,599,803 $47,490,831 $$51,067,311

State Appropriations and the Budget Process

The State of Kansas operates on a fiscal year basis, beginning on July 1 and ending the following June 30, and numbered for the calendar year in which it ends. The Legislature meets annually in early January and typically adjourns in May. The budget process is designed to provide the Legislature with accurate and detailed revenue projections, along with professionally prepared expenditure budgets for each State agency for the current and succeeding fiscal years.

The Higher Education Coordination Act provides that the Kansas Board of Regents shall “serve as the representative of the public postsecondary educational system before the Governor and the Kansas Legislature.” K.S.A. 74-3202c(b)(2). This provision provides the foundation for an approach to state funding that reflects the recurring theme of maintaining a unified state budget request for new resources and a system wide focus on requesting and advocating for increases in State General Fund appropriations for public postsecondary education.

In September of each year, the Kansas Board of Regents submits the unified budget request to the Department of Administration, Division of Budget, that reflects increases (or decreases) to the budget for operating grants and enhancements for each of the six universities governed by the Board of Regents. In September, the state universities also submit a budget request document for their base budget to the

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Department of Administration, Division of the Budget, for the succeeding fiscal year. Professional staff at the Division of the Budget analyze and review the budget requests of the universities and other State agencies and presents the budgets to the Governor for preliminary gubernatorial approval. The Governor then presents a complete State budget, with funding recommendations, to the Legislature in January, during the first week of the legislative session.

During the legislative session, both the Senate Ways and Means Committee and the House Appropriations Committee review individual agency budgets, including the state universities, making final recommendations for legislative approval. Staff support for the Legislature also includes professional budget analysts who again scrutinize the proposed budgets.

Once the complete, proposed State budget is approved by the Legislature, it is again presented to the Governor for passage into law. The Governor has line-item veto power. The Governor’s veto can only be overridden by a two-thirds majority vote of both the House and Senate. This portion of the budget process is completed prior to the beginning of the succeeding fiscal year.

The Kansas Constitution mandates that budgeted expenditures are limited to available funds from current revenue, or a combination of current revenue and available reserves. Once the budget is approved by the Legislature and Governor, State agencies, including the universities, have flexibility within their particular budgets to change line item amounts appropriately to compensate for necessary modifications due to internal or external reasons. This flexibility allows State agencies to react appropriately to either revenue variances or changing operational needs.

During the fiscal year for which the budget has been prepared, the Governor and Legislature review the budget in progress and have the ability to make necessary adjustments. Continuous expenditure review is performed by each university and other State agencies, as well as by the Department of Administration. Also, current state general fund revenues are monitored by the Department of Administration, Division of the Budget; Department of Revenue; the Legislative Research Department; the Governor; and three economists from the State’s three largest Board of Regents’ universities to insure fiscal responsibility. An executive branch allotment system is applicable to reduce expenditures under certain circumstances for any fiscal year in which the resources of the state general fund or any special revenue fund appear likely to be insufficient to cover appropriations. Pursuant to this allotment system, State appropriations to the University were reduced for the fiscal year ending June 30, 2010 to the amount reported in the table below.

The following table sets forth a comparison of State appropriations to tuition and fees and other revenues for the five most recent fiscal years for the University.


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Comparison of State Appropriations to Tuition and Fees and Other Revenue Sources

FY 2007 – FY 2012

Revenue in Dollars As a % of Total Revenue Fiscal Year

Ended June 30

State Appropriations

Tuition & Fees

All Other Sources

Total Revenues

State Appropriations

Tuition & Fees

All

Other Sources

2007 $267,007,441 $196,503,152 $586,288,466 $1,049,799,059 25.43% 18.72% 55.85% 2008(1) 280,091,879 214,417,817 496,546,963 991,056,659 28.26% 21.64% 50.10% 2009 280,890,240 229,175,773 497,619,561 1,007,685,574 27.87% 22.74% 49.38% 2010 260,624,941 235,231,646 581,580,101 1,077,436,688 24.19% 21.83% 53.98% 2011 264,155,468 236,846,895 622,291,932 1,123,294,295 23.52% 21.09% 55.40% 2012(2) 248,960,000 280,810,000 649,570,000 1,179,340,000 21.11% 23.81% 55.08%

Source: University Comptroller’s Office (1) Due to changes in organizational structure in FY2008, Kansas University Physicians, Inc. is no longer considered a related component unit to the University and was therefore excluded from the University’s financial statements. (2) 2012 amounts are budgeted amounts.

FINANCIAL INFORMATION OF THE UNIVERSITY

The fiscal operations of the University constitute an extensive business operation. State appropriations for University operations from the State General Fund for Fiscal Year 2012 total $242 million and the University estimates that tuition revenues will be $281 million. These are the two main sources of funds for general University operations. The total operating budget for the University, for the fiscal year ending June 30, 2011 is $1.18 billion. The total revenues for the University, including Federal grants and contracts, auxiliary enterprises, and capital improvements for the fiscal year ending June 30, 2011 was over $1.12 billion.

State appropriations for Fiscal Year 2012 are down approximately 6% from Fiscal Year 2011 appropriations due to the shift of a $5 million appropriation for the Cancer Initiative from the Medical Center to the Kansas Department of Commerce and the completion of several rehabilitation and repair projects in Fiscal Year 2011 which resulted in the expenditure of balances. The shift of the Cancer Initiative funds to the Department of Commerce is consistent with how funding for other programs was appropriated. When the funds are transferred from the Department of Commerce, they will be recorded in “All Other Sources.”

Actual expenditure information for the consolidated financial statements as of December 31, 2011is not available at this time, but expenses are anticipated to be at or below actual revenues generated, as expenses are managed to match revenues at the department and fund levels.

The University of Kansas is one of six universities operated under the direction of the Kansas Board of Regents. An independent single audit of the State of Kansas includes the operations of the Regents institutions. The most currently available University of Kansas Annual Financial Report (for the fiscal year ended June 30, 2011) is attached as Appendix D to the Official Statement. This Annual Financial Report is prepared by the Comptroller of the University for delivery to the Chief Business and Financial Planning Officer and the University Chancellor, who transmits it to the Chairperson of the Kansas Board of Regents.

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The University of Kansas Annual Financial Report attached as Appendix D to the Official Statement has not been audited and is not expected to be audited.

This financial information is provided for background information only. Not all revenues of the University are unrestricted revenues that would be available if necessary for the payment of debt service on the Series 2012E Bonds pursuant to the University Agreement.

Unrestricted Revenues

The financial information for the years ended June 30, 2011 and June 20, 2010 which follows is excerpted from the University of Kansas Annual Financial Report for the fiscal year ended June 30, 2011 in Appendix D to the Official Statement.

The unrestricted revenues of the University (the “Unrestricted Revenues”) that would be available if necessary for the payment of debt service on the Series 2012E Bonds pursuant to the University Agreement include the amounts identified in the “Unrestricted Revenues” column of the table below. Amounts in the “Restricted” column are restricted to uses incompatible with any potential payment of debt service on the Series 2012E Bonds pursuant to the University Agreement. See the captions “SECURITY FOR THE BONDS—The University Agreement” and “INVESTMENT CONSIDERATIONS—University Revenues May be Pledged or Restricted” in the Official Statement.

University of Kansas (including affiliated corporations)

Revenues Pledged and Restricted Revenues Year Ended June 30, 2012 Budget

Total Revenues

Restricted Revenues(2)

UnrestrictedRevenues(3)

Tuition and Fees $280,804,000 $11,907,080 $268,896,920 State Appropriations(4) 248,959,761 19,596,003 229,363,758 Auxiliaries:

Housing(5) 21,609,000 19,281,929 2,327,071 Parking(5) 9,267,107 7,882,719 1,384,388

All Other Sources 618,693,640 453,846,401 164,847,239 Total $1,179,333,508 $512,514,132 $666,819,376

Six Months Ended December 31, 2011

Total Revenues



Tuition and Fees $141,634,988 $ 5,313,072 $136,321,916 State Appropriations(4) 248,959,761 19,596,003 229,363,758 Auxiliaries:

Housing(5) 11,829,653 10,666,117 1,163,536 Parking(5) 5,896,379 5,204,185 692,194

All Other Sources 333,575,485 246,620,651 86,954,834 Total $741,896,266 $287,400,028 $454,496,238

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Year Ended June 30, 2011

Total Revenues(1)



Tuition and Fees $236,846,895 $10,770,905 $226,075,990 State Appropriations(4) 264,155,468 27,308,163 236,847,305 Sales and Services 59,639,673 13,744,262 45,895,411 Other Operating Revenues 35,135,176 26,589,594 8,545,582 Gifts 33,145,943 8,131,541 25,014,402 Grants and Contracts (Federal, State & Nongovernmental) 294,546,048 294,546,048 -Auxiliaries

Housing(5) 19,755,806 17,425,774 2,330,032 Parking(5) 11,898,761 10,991,111 907,650 All Other Auxiliaries 116,484,382 116,484,382 -

Other Non-Operating Revenues 51,686,143 51,686,143 - Total $1,123,294,295 $577,677,923 $545,616,372

Year Ended June 30, 2010 (Restated)

Total Revenues(1)



Tuition and Fees $ 233,763,429 $ 10,478,023 $223,285,406 State Appropriations(4) 260,624,941 24,148,811 236,476,130 Sales and Services 60,538,784 15,352,434 45,186,350 Other Operating Revenues 26,326,167 25,373,953 952,214 Gifts 39,183,506 9,170,801 30,012,705 Grants and Contracts (Federal, State & Nongovernmental) 248,552,826 248,552,826 - Auxiliaries:

Housing(5) 20,866,588 17,966,588 2,900,000 Parking(5) 11,225,387 10,667,962 557,425 All Other Auxiliaries 112,948,069 112,948,069 -

Other Non-Operating Revenues 53,446,509 53,446,509 - Total $1,067,476,206 $528,105,976 $539,370,230

(1) Total revenues of the University from the Statement of Revenues, Expenses and Changes in Net Assets on page 13 of the University of Kansas Annual Financial Report for the fiscal year ended June 30, 2011 in Appendix D to the Official Statement.

(2) The University has determined that these amounts are restricted to purposes incompatible with any potential use to pay debt service on the Series 2012E Bonds.

(3) These amounts are the Unrestricted Revenues that may be available for payment of debt service if necessary pursuant to the University Agreement.

(4) Includes capital appropriations. (5) To the extent University revenues pledged to specific bonds (such as housing and parking revenues) are transferred to a

surplus fund that permits use of moneys for any lawful purpose, such excess portion of the revenues transferred to the surplus fund are presented as Unrestricted Revenues.

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University Debt Obligations

General Description of University Debt Obligations. Information regarding outstanding long-term debt obligations of the University is set forth in the University of Kansas Annual Financial Report for the fiscal year ended June 30, 2011 in Appendix D to the Official Statement.

Subsequent to June 30, 2011, the University has not incurred any additional long-term obligations, other than the Series 2012D Bonds described below.

Obligations Payable from Unrestricted Revenues. In addition to the Series 2012E Bonds, obligations payable from the Unrestricted Revenues of the University, include the following:

Series 2009O Bonds. The $55,250,000 original principal amount of Kansas Development Finance Authority Lease Revenue Bonds Series 2009O (University of Kansas Hospital Authority Medical Office Building Project – University of Kansas, Tenant) (the “Series 2009O Bonds”) were issued on December 16, 2009. Debt service on the Series 2009O Bonds is payable from revenues of the University of Kansas Hospital Authority from lease payments made by the University from Unrestricted Revenues.

Series 2010A Bonds. The $23,700,000 original principal amount of Kansas Development Finance Authority Revenue Bonds Series 2010A (Kansas Board of Regents - University of Kansas – Housing System Project) (the “Series 2010A Bonds”) were issued on January 28, 2010. Debt service on the Series 2010A Bonds is payable from Unrestricted Revenues pledged by the University. The Series 2010A Bonds are also secured by a pledge of gross revenues of the housing system.

Series 2010B Bonds. The $21,650,000 original principal amount of Kansas Development Finance Authority Revenue Bonds Series 2010B (University of Kansas Energy Conservation Program) (the “Series 2010B Bonds”) were issued on January 28, 2010. Debt service on the Series 2010B Bonds is payable from Unrestricted Revenues pledged by the University.

Series 2010K Bonds. The $7,860,000 original principal amount of Kansas Development Finance Authority Revenue Bonds Series 2010K-1 (University of Kansas Projects) (the “Series 2010K-1 Bonds”) and $7,190,000 original principal amount of Kansas Development Finance Authority Revenue Bonds Series 2010K-2 (University of Kansas Projects) (Build America Bonds – Direct Payment to Issuer) (the “Series 2010K-2 Bonds” and, together with the Series 2010K-1 Bonds, the “Series 2010K Bonds”) were issued on May 12, 2010. Debt service on the Series 2010K Bonds is payable from Unrestricted Revenues pledged by the University.

Series 2010N Bonds. The $30,160,000 original principal amount of Kansas Development Finance Authority Revenue Bonds (University of Kansas Medical Center Research Institute, Inc. Project) Series 2010N (the “Series 2010N Bonds”) were issued on October 14, 2010. Debt service on the Series 2010N Bonds is payable from revenues of the University of Kansas Medical Center Research Institute, Inc. (“KUMCRI”). The University covenanted to make available Unrestricted Revenues of the University to pay debt service on the Series 2010N Bonds if revenues of the Corporation are not sufficient to pay such debt service. However, the expected source of payment of the Series 2010N Bonds is revenues of KUMCRI.

Series 2011C Bonds. The $13,450,000 original principal amount of Kansas Development Finance Authority Revenue Bonds, Series 2011C (University of Kansas Housing System Project)

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(the “Series 2010N Bonds”) were issued on May 18, 2011. Debt service on the Series 2011C Bonds is payable from Unrestricted Revenues pledged by the University.

Series 2012D Bonds. The $49,200,000 original principal amount of Kansas Development Finance Authority Refunding Revenue Bonds, Series 2012D (University of Kansas Projects) (the “Series 2012D Bonds”) are expected to be issued on March 7, 2012. Debt service on the Series 2012D Bonds is payable from Unrestricted Revenues pledged by the University.

For a schedule of the annual debt service payable on the Series 2009O Bonds, the Series 2010A Bonds, the Series 2010B Bonds, the Series 2010K Bonds, the Series 2010N Bonds, the Series 2011C Bonds, the Series 2012D Bonds described above and the Series 2012E Bonds, see Appendix E to the Official Statement.

Capital Projects and Planned Additional Debt Obligations

The University currently has several capital improvement projects in various stages of planning and construction. For a recent description of the certain of those projects, see the caption “CAPITAL ASSETS” in the Management’s Discussion and Analysis contained at the beginning of the University’s Annual Financial Report set forth in Appendix D to the Official Statement.

The Series 2012D Bonds described above are expected to be issued on March 7, 2012 for the purpose of refinancing the outstanding indebtedness of the University to achieve economic savings.

The 2011 Legislature authorized bonding authority for a $65 million engineering facilities expansion project by the University. The architect is being selected for the project at this time. The project will be constructed in phases with the foundation package being bid in January 2013. Construction of the project is expected to be bid in spring 2013 with construction completion approximately two years later. It is currently anticipated that bonds may be issued to finance this project in or about spring 2013.

The University is currently pursuing a market study of its student housing needs, including a potential renovation of the McCollum Residence Hall.

Pension Obligations

Certain University employees participate in the Kansas Public Employees Retirement System (“KPERS”), a defined benefit plan which is funded through contributions by employers and the individual employees. The employer rate of contributions is determined under State law and the University, as a participating employer, pays the statutorily mandated contribution amount. The KPERS Comprehensive Annual Financial Report for its fiscal year ended June 30, 2011 indicates that as of December 31, 2010, the date of the most recent actuarial valuation described in the report, KPERS’s funded ratio was 62% compared with a funded ratio of 64% for the prior year, and that the unfunded actuarial liability had increased from $7.7 billion at December 31, 2009 to $8.3 billion at December 31, 2010. The Comprehensive Annual Financial Reports of KPERS are available by contacting KPERS at 611 S. Kansas Avenue, Suite 100, Topeka, Kansas 66603.

Kansas law places a cap on employer contributions to the KPERS plans, which has resulted in a statutory contribution rate for employers that has been below the actuarial required contribution rate for many years. In an effort to address the unfunded actuarial liability of the KPERS plans, the Kansas legislature approved legislation in 2011 that, following consideration of additional reforms identified by a study commission created by such legislation, may become effective to increase employer contributions at

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a rate greater than the 0.6% of covered compensation rate of increase in recent years. The University made contributions to the KPERS plan of $5.3 million and $4.7 million for fiscal years ended June 30, 2011 and 2010.

Litigation

As a result of the wide variety of the University’s activities, the University is a party to a number of legal proceedings and there can be expected to exist a variety of circumstances that have resulted in threatened legal proceedings or may result in additional claims and legal proceedings. However, no litigation, proceedings or investigations are pending or, to the knowledge of the University, threatened against the University, except litigation involving claims which, if adversely determined, will not, in the opinion of the counsel to the University, materially and adversely affect the financial condition of, the operations of, or revenues generated by, the University.

The Kansas Tort Claims Act, K.S.A. 75-6101 et seq., limits the liability of the State of Kansas, its

boards, commissions, departments, agencies, bureaus and institutions for damages caused by the negligent or wrongful act or omission of any of their employees while acting within the scope of their employment. Subject to certain exceptions contained within the Kansas Tort Claims Act, liability for claims within the scope of the Kansas Tort Claims Act cannot exceed $500,000 for any number of claims arising out of a single occurrence or event.

Website Information

The University maintains public websites on which it periodically posts certain financial and other information, including annual financial reports of the University (available at http://www.comptroller.ku.edu/financial_reporting_services/) and information regarding the University’s strategic planning process (available at http://boldaspirations.ku.edu/). None of the information included on these pages, or on the University’s websites generally, is incorporated by reference into the Official Statement.


APPENDIX D

UNIVERSITY OF KANSAS ANNUAL FINANCIAL REPORT (JUNE 30, 2011) (UNAUDITED)

July 1, 2010-June 30, 2011

2011 ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS

Kansas Board of Regents and Officers 1

Management’s Discussion and Analysis 2

Statement of Net Assets 12

Statement of Revenues, Expenses, and Changes in Net Assets 13

Statement of Cash Flows 14

Notes to Financial Statements 16

KANSAS BOARD

OF REGENTS Mildred Edwards Tim Emert Fred Logan Dan LykinsEd McKechnie Robba MoranJanie Perkins Kenny Wilk Christine Downey-Schmidt

EXECUTIVE OFFICERS Bernadette Gray-Little Chancellor Theresa Gordzica Chief Business and Financial Planning Officer

Lawrence Campus

Jeffrey S. Vitter Executive Vice Chancellor / Provost Diane H. Goddard Vice Provost for Administration & Finance

Medical Center Campus

Dr. Barbara Atkinson, M.D. Executive Vice Chancellor Steffani Webb Vice Chancellor for Administration R. Michael Keeble Associate Vice Chancellor of Finance

Financial Officers

Katrina Yoakum Comptroller, Lawrence Campus Robert W. Weseloh Controller, Medical Center

1


MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion and analysis provides an overview of the financial performance of the University of Kansas based on currently known facts, decisions, and conditions and is designed to assist readers in understanding the accompanying financial statements. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) principles, with the exception of GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units. The University has made the decision not to include the Kansas University Endowment Association (KUEA) within the University’s unaudited financial statements. This discussion – along with the financial statements and related footnote disclosures – has been prepared by management and should be read in conjunction with the statements and footnotes. The financial statements, footnotes, and this discussion are the responsibility of management. STATEMENT OF NET ASSETS

The Statement of Net Assets presents the assets, liabilities, and net assets of the University at a point in time (at the end of the fiscal year). Its purpose is to present a financial snapshot of the University. The Statement of Net Assets includes all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector institutions. Under the accrual basis of accounting all of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid.

Within the Statement of Net Assets, assets and liabilities are further classified as current or non-current. Current classification distinguishes those assets that are highly liquid and available for immediate and unrestricted use by the University, and those liabilities likely to be settled in the next 12 months.

Net assets are divided into three categories:

1. Invested in capital assets, net of related debt, indicates the university’s equity in property, plant, and equipment owned by the University.

2. Restricted net assets are further divided into two subcategories, non-expendable and expendable. The corpus of non-expendable restricted resources is available only for investment purposes. Expendable restricted net assets are available for expenditure by the University but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets.

3. Unrestricted net assets are available to the University for any lawful purpose of the institution. Total assets at June 30, 2011 were $1,627.5 million, an increase of $116.0 million (8%). Capital net assets comprised 62%, or $1,000.5 million of the assets. Total liabilities were $605.7 million at June 30, 2011, an increase of $49.5 million (9%) compared to $556.2 million at June 30, 2010. Long-term liabilities comprised 73%, or $440.9 million of the liabilities. Total net assets at June 30, 2011 were $1,021.8 million, a $66.4 million increase over the prior year, or a 7% increase in net assets. The breakout of net assets is shown below:

Capital Assets, net of related debt ………………. 629,952,407$ Restricted net assets ……………………………… 178,987,739Unrestricted net assets …………………………… 212,862,604 Total net assets 1,021,802,750$

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The composition of current and non-current assets and liabilities and net assets is displayed below for both the 2011 and 2010 fiscal year-ends (in thousands):

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Total CurrentAssets

Total Non-CurrentAssets

Total CurrentLiabilities

Total Non-Current

Liabilities

Total NetAssets

2011

2010

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses, and Changes in Net Assets presents the total revenues earned and expenses incurred by the University for operating, non-operating and other related activities during a period of time. Its purpose is to assess the University’s operating results. Revenues Total revenues increased by $55.8 million, from $1,067.5 million to $1,123.3 million, an overall increase of 5%. Operating revenues at the University as of June 30, 2011 increased by 8% over the previous fiscal year from $714.2 million to $774.3 million. Overall operating revenues are very consistent with prior year as student enrollment remains relatively static in comparison to prior year and there were moderate tuition and fees increases. The following is a brief summary of the significant changes:

Federal grants and contracts increased by $38.9 million from $169.5 million in 2010 to $208.4 million in 2011. The majority of the increase is related to grants received under the American Recovery and Reinvestment Act (ARRA) funds. The Lawrence campus and the University of Kansas Center for Research (KUCR) received $23.3 million in 2011 versus $8.6 million in 2010, an increase of $14.7 million. The Medical Center received $6.9 in 2011 and $6.1 million in 2010, an increase of $0.8 million; resulting in a total increase in ARRA funds of $15.5 million.

Non-governmental grants and contracts increased by $8.7 million (18%) from $48.4 million to $57.1 million. $3.7 million of the increase is additional funding received in 2011 by the KU Medical Center Research Institute Inc. (KUMCRI) for funding received from The Kansas Bioscience Authority for start-up funds to support new faculty for the KU Cancer Center and $2.5 million of the increase consists of increased private grants from several sources received by The University of Kansas Center for Research Inc. (KUCR).

Other operating revenue increased $8.8 million (33%) from $26.3 million to $35.1 million. The increase is primarily due to the Medical Center receiving $5 million in other operating revenues because of a renegotiated contract with the KU Hospital Authority (KUHA) in which the Medical Center received more support for resident salaries.

Total non-operating revenues decreased 3%, from $332.1 million to $321.6 million in 2011. The following is a brief summary of the significant changes:

Gifts decreased $6.1 million from $39.2 million to $33.1 million, or 15%. Gifts received consists primarily of

funds held by the Kansas University Endowment Association (KUEA) and transferred to the university at the request of the spending unit. The level of support from KUEA varies from year to year. See also Endowment Expenses Paid on Behalf of the University.

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Other non-operating revenue (expenses) decreased $8.5 million from $6.3 million in 2010 to $(2.2) million in 2011. During FY 2010 the Medical Center recorded $6.1 million of land that had previously not been recorded as additional non-operating revenue, a similar transaction did not occur in 2011, thereby attributing to $6.1 million of the decrease. In FY 2011 the Lawrence Campus also transferred ownership of approximately $5.0 million in investments to the KU Endowment Association (KUEA). Prior to the transfer, these investments were held by KUEA on behalf of the University in agency accounts. The transfer was authorized by new legislation that allows the University to transfer property given in name to the University of Kansas to KUEA. The result of the transfer should be less duplication and more efficient management of the donated property. Over the coming year, additional agency accounts will be reviewed and transferred to KUEA.

Other revenues included the following:

Capital appropriations and capital gifts increased $7.0 million from $20.4 to $27.4 million (34%). The level of capital appropriations and capital gifts varies from year to year based upon the source of funding used for capital projects. The majority of this increase ($4.6 million) was in capital grants and gifts.

The composition of these revenues is displayed in the following graph:

State appropriations22%

Grants and contracts26%

Tuition and fees, net of scholarship allowances

21%

Auxiliary enterprises13%

Sales and services of educational departments

5%

Non-Federal Grants and Contracts2%

Gifts3%

Capital grants and gifts3%

Other revenue5%

Expenses Operating expenses were $1,040.0 million for the 2011 Fiscal Year, an increase from the prior year of $45.2 million (5%). Overall operating expenses were very consistent with prior year. The following is a brief summary of the significant changes:

Research increased $20.3 million (9%) from $224.0 million to $244.3. The increase in research expenses is directly related to the increase in federal and non-federal grants and contracts (noted above) of $38.9 million and $8.7 million, respectively.

Public service increased $4.9 million (16%) from $31.4 million to $36.3 million in 2011. Public service expenses include funds expended for activities beneficial to individuals and groups external to the University. Activities include public service grants administered by the KU Center for Research (KUCR), programs provided through the University’s Continuing Education division, various public lecture series, and Kansas Public Radio programs. The increase in expenses can be primarily attributed to an increase in public service grants administered by KUCR during 2011.

Institutional support increased $6.6 million (12%) from $55.3 million to $61.9 million in 2011. $3.6 million of the increase is for the reimplementation of the Human Resource / Payroll System. The reimplementation is

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expected to be completed in July 2012 and will result in one instance of PeopleSoft version 9.1 for all University campuses. The Lawrence Campus is currently using PeopleSoft version 7.6 and the Medical Center is using PeopleSoft version 8.0.

Operations and maintenance of plant decreased $6.9 million (10%) from $69.8 million to $62.9 million in 2011. $4.0 million of the decrease is related to the Medical Center’s operations and maintenance expense decreasing from $28.1 to $24.1 million. During FY 2010, The Medical Center completed several interior-remodeling projects, all under the University’s capitalization policy amount. As such, a great number of projects were expensed to operation & maintenance of plant expense in FY 2010. The Lawrence campus also experienced a decrease in operation and maintenance expense of $2.6 million as the result of tighter departmental budgets resulting in less renovation and remodeling.

Scholarships and fellowships increased $5.2 million (17%) from $29.7 million to $34.9 million in 2011. The increase is due primarily to increases in Federal Pell grant expenses of $2.2 million (14%). The University’s Federal Pell grant funding for all campuses increased 8% in 2011 and expenditures increased accordingly. The level of activity of Federal Pell grants varies from year to year based upon federal budgets.

Non-operating expenses (interest expense) decreased 9% from $18.7 million to $17.0 million in 2011. The composition of total expenses, including operating and non-operating, is displayed below:

Instruction28%

Research23% Public service

3%

Academic support8%

Student services3%

Institutional support6%

Operations and maintenance of plant6%

Depreciation6%

Scholarships and fellowships3%

Auxiliary enterprises13%

Capitalized expenses for property and equipment

-1%

Other 2%

Extraordinary Items The University did not have any special and/or extraordinary items in 2011 or 2010. Endowment Expenses Paid On Behalf of University The Kansas University Endowment Association (KUEA), an independent, not-for-profit organization whose primary mission is to raise funds for the University, provides direct and indirect support to the University that is not entirely reflected in the University’s Statement of Revenues, Expenses, and Changes in Net Assets. Expense items paid on behalf of the University by KUEA include expenses such as scholarships and fellowships, salaries, construction, equipment, library acquisitions, works of art, and travel. Total University support provided by KUEA equaled approximately $108.6 million and $112.9 million in 2011 and 2010, respectively.

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The following support items totaling $37.7 million are reflected in the University’s statements for 2011.

Capital Projects. KUEA sponsored many capital projects throughout the year with a combined approximate value of $7.2 million. The major capital projects that benefited from KUEA’s fundraising efforts included an addition to the Lied Center ($1.7 million), construction of the new Pharmacy building ($0.6 million), renovation of departmental space at the Medical Center ($0.5 million), and accessibility improvements at the Outlook ($0.2 million). KUEA also donated to the University land at the Wichita campus valued at $2.1 million and artwork valued at $0.5 million.

Salaries and other operating expenses. KUEA reimbursed the University approximately $30.5 million for various faculty and staff member salaries, including the University’s distinguished professors, and other minor operating expenses. The salary expense is reflected in the University’s statements as it represents a more accurate reflection of the University’s operating expenses. KUEA’s reimbursement is reflected as a gift to the University within non-operating revenues.

Net Assets Net assets increased by $66.4 million (7%) over the previous fiscal year. This significant increase can primarily be attributed to the continued support of the University via capital and non-capital gifts during 2011 as well as increased research revenue.

STATEMENT OF CASH FLOWS The Statement of Cash Flows presents cash receipts and payments of the University during a period of time. Its purpose is to assess the University’s ability to generate future net cash flows and meet its obligations as they come due. The following is a condensed statement of cash flows for the years ended June 30, 2011 and 2010: CASH FLOWS FOR THE PERIOD (In thousands of dollars)

June 30, 2011 June 30, 2010Net cash provided (used) by: Operating activities (221,844)$ (225,076)$ Non-capital financing activities 312,655 322,701 Capital and related financing activities (51,544) (51,684) Investing activities (3,322) 26,902 Net increase in cash 35,945 72,842

Beginning cash and cash equivalent balances 274,862 202,020

Ending cash and cash equivalent balances 310,807$ 274,862$

Cash flows from operating activities will always be negative because GASB requires state appropriations to be reported as cash flows from non-capital financing activities. Cash flows from capital financing activities include all plant funds and purchase investments and all increases in cash and cash equivalents from the sale of investments, and the earnings on cash and investments. Cash used by operating activities decreased $3.2 million (1%). This decrease in the use of cash is the result of the University’s operating revenues (tuition and fees, grants and contracts, auxiliary income) increasing slightly more than operating expenses. Cash flows provided by non-capital financing activities decreased by $10.0 million (3%) due primarily to a decrease in gifts of $4.7 (9%) million in 2011.

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Cash flows from investing activities decreased $35.2 million (131%). The decrease in cash provided by investment activity is a result of increased investment purchase, reduction in investment income and less proceeds received on sales of investments.

CAPITAL ASSETS The University made significant investments in capital during the 2011 fiscal year. Detailed information regarding capital asset additions, retirements, and depreciation is available in Note 8 to the financial statements. The following is a brief summary of the construction projects that were completed during the current fiscal year:

In response to Board of Regent’s University deferred maintenance studies, the Lawrence Campus began a major overhaul of its utility tunnel system during fiscal year 2008. While various maintenance projects related to the tunnels occur routinely each year, the University staged the critical overhaul of the utility tunnel system into multiple phases. Phase III, in the amount of $1.1 million, was completed in FY 2011. Phases II & III were a part of the $180 million in critical deferred maintenance identified by the Board of Regent’s studies. The tunnel improvements were necessary to maintain the various university-owned utility systems routed through more than 16,000 feet of utility tunnels. The tunnel system is used to route steam and condensate piping from the central plant, portions of the campus electrical distribution system, communication cabling and other vital utility systems to approximately 50 buildings on the main campus. The project was funded by the State’s Infrastructure Maintenance Fund as well as University Interest funds.

In 2008, KU proposed an expansion of its School of Pharmacy in response to a growing shortage of pharmacists

in the Kansas health care system. The expansion included construction of a new building on the Lawrence campus and an additional floor on the Women’s Research Institute Center for Primary Care building at the Wichita campus. The Phase One Teaching and Administration project provided 110,000 gross square feet of new space, including a model pharmacy, integrated instructional labs, library and computer commons, student study spaces, lecture halls, and teaching labs. The project accommodated the entire instructional mission, including the relocation of the Pharmacy Practice program and faculty, and all the required instructional space for the departments of Pharmaceutical Chemistry, Medicinal Chemistry, and Pharmacology and Toxicology in a new location adjacent to the current Simons Bioscience buildings on KU's West Campus. Final cost for both projects was $47.4 million and was financed by state bonds. The State General Fund is responsible for the annual debt service on the revenue bonds. Construction was completed in August 2010.

The University of Kansas Transit Facility is a new facility that was constructed to house the coordinated transit

systems of KU on Wheels and the City of Lawrence Transit System. The 13 acre site is located in a nearby industrial area. The 18,000 square foot one-story building provides offices for administration, dispatch, training functions, and maintenance facilities to include 6 maintenance bays, parts and fluids storage, an automated bus wash and a fueling station. Parking on site supports 6 staff vehicles and 100 buses. The project final cost was $4.0 million. The project was funded by parking and transit auxiliary revenues and rental income from the Lawrence transit system. The University of Kansas Transit Facility was purchased in December of 2010.

The Malott Hall project was completed April 2011. The project replaced four 30-year old air-handling units and related controls. It also replaced approximately 50 exhaust hoods of similar vintage in order to better control chemical fume concentrations in classrooms, laboratories, and office spaces. The total cost for this project was $1.8 million and was funded from the State’s Infrastructure Maintenance Fund, as well as University Interest funds.

Additionally, the University was involved in several construction projects that were under construction or in planning and design phases at year-end:

The Haworth Hall project replaces ten air handling units, controls, and chilled water piping in the original

building, 1971 and 1985 additions, and Stewart Wing, and replaces the cooling tower in the original building. This project also replaces exhaust hoods and controls in the original building and additions, and updates the fire

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alarm system. Total projected cost is $4.5 million and is funded from the State’s Infrastructure Maintenance Fund and University Interest funds. The project will be completed Fall 2011.

The Murphy Hall project replaces HVAC components including the air handling units, building chiller, cooling

tower, and chilled water piping. It also replaces the electrical distribution system to branch panel boards. It includes an emergency generator for life safety systems; and also repairs or replaces deficient elevator equipment. The project is estimated to cost $3.4 million and is funded from the State’s Infrastructure Maintenance and University Interest funds. The project will be completed Fall 2011.

The Edwards Campus Business, Engineering, Science and Technology (BEST) building project includes the

construction and equipping of the fourth building on the 36-acre Edwards Campus in Overland Park, Kansas. The building will add 75,000 gross square feet to the approximately 160,000 square feet in three buildings currently at the Edwards Campus. The space will include media-equipped classrooms, space for information technology staff, computer equipment, and faculty and administrative support spaces. Space used primarily for evenings and weekends for additional academic programs will be available during the day for business and community programs. The classrooms and computer labs are intended to serve the teaching and research needs for expansion of the curriculum in several different disciplines including business, engineering, science and technology. Bonds were sold for this project in May 2010. The debt service, as well as the operating costs of the facility, is being funded with the Johnson County Education Research Triangle (JCERT) sales tax revenues. The $22.9 million project will be completed Spring 2012.

During 2010, the University entered into a contract to increase energy efficiency improvement to maximize the

amount of facility upgrades that can be obtained from available budgeted funds. The end result is to leverage the substantial annual energy savings achieved through implementing campus-wide lighting retrofits, water conservation, energy management controls, steam system improvements and campus energy awareness and behavioral changes. The holistic solutions developed in the affected buildings includes replacement of air-handling units that were past their useful life, retro-commissioning of air-distribution systems, upgrade of exhaust hood systems that will reduce energy waste and greatly enhance occupant safety, and conversion from constant volume air-flow to variable volume airflow which both saves energy and improves comfort. This project is estimated to cost $21.6 million and is being funded by bond proceeds secured by unrestricted university revenues and will be completed Fall 2011.

The Gertrude Sellards Pearson Hall (GSP) project will include the renovation of all student rooms and public

spaces in the residence hall, excluding the recently renovated main lobby. The dining center and kitchen will also be renovated in the lower level. The building will be made accessible and brought into compliance with current codes. The design process and resulting project will also address energy conservation and sustainability issues. Following the renovation, the building will be co-ed rather than the current single sex (female) residence hall. The $14.7 million project is funded by housing bonds and will be completed Summer 2012.

During 2009 the Medical Center began working on a renovation of the Applegate Energy Center. The project replaced chillers, control panels and other vital parts to make the Energy Center operate more efficiently. The project was funded from the State’s Infrastructure Maintenance Fund, as well as University Interest funds. Total project cost is $6.8 million and will be completed in August 2011.

During 2010 the Medical Center began construction of a new parking garage with a total cost of approximately

$7.9 million. The project is funded by revenue bonds secured with a pledge of university unrestricted revenues and will open in July 2011.

The Hall Family Foundation purchased and donated to the University an office building in Fairway, Kansas to

house the Medical Center’s clinical and translational research programs. In addition to housing the Heartland Institute for Clinical & Translational Research (HICTR), this facility will accommodate clinical trials for cancer, as part of a University effort to achieve designation as a National Cancer Institute comprehensive cancer center. This project is estimated to cost $19.4 million and is funded by bonds sold in October 2010. The debt service, as well as the operating costs of the facility, is funded with the JCERT sales tax revenues. The project will be completed late Fall 2011.

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During 2009 the University of Kansas Medical Center Research Institute, Inc. (KUMCRI) began a $34.0 million project to renovate the Wahl/Hixon Research Complex for Basic and Translational Cancer Research. The project is funded with a portion of the $26.4 million grant from the Kansas Bioscience Authority and by the issuance of bonds which were sold in October 2010. The funds from years 4 through 10 of the KBA grant will be used to pay debt service on the bonds, after which the debt service will be funded from unrestricted revenues of the KUMCRI. The project will be completed during fiscal year 2013.

During 2011 the KU Center for Research Inc. (KUCR) began a $24 million project to construct a new building on the Lawrence campus for the School of Engineering. The Measurement, Materials and Sustainable Environment Center building project will be an interdisciplinary-focused research building that will provide the School of Engineering a facility that will permit extensive research activities in energy/transportation, global change, composite materials/technology, and sustainable building practices. The project is funded by a combination of KUEA funds, federal ARRA grant funds and departmental funds. The project will be completed during the fiscal year 2013.

DEBT ADMINISTRATION At June 30, 2011, the University had $403.8 million in revenue bond debt outstanding. In Fiscal Year 2011, the University issued new debt in the amount of $59.6 million for the following projects:

$13.5 million to finance renovations to Gertrude Sellards Pearson Hall (GSP). $15.9 million to finance renovations to University of Kansas Medical Center Clinical Research Center. $30.2 million to finance renovations to Wahl/Hixon Research Complex for Basic and Translational Cancer

Research. At June 30, 2010, the University had $365.8 million in revenue bond debt outstanding. In Fiscal Year 2010, the University issued new debt in the amount of $106.4 million for the following projects:

$31.6 million to finance the School of Pharmacy Expansion Project which includes the construction of a new 111,700 gross-square-foot building on the Lawrence campus.

$21.7 million to finance an energy performance contract at the Lawrence campus. $23.7 million to finance renovations to Jayhawker Towers as well as the refinancing KDFA series 2002A-1 and

1998D bonds and KDFA 2008-4 bond anticipation note. $21.0 million to finance construction of the BEST building on the Edwards Campus. $8.4 million to finance construction of a new parking garage for the Medical Center.

In Fiscal Year 2011, the University paid $24.3 million in principal and interest payments related to all outstanding revenue bonds. Moody’s Investor Service currently rates the University “Aa2”. More detailed information about the University’s revenue bonds is available in Notes 10 and 11 to the financial statements. ECONOMIC OUTLOOK The State of Kansas economy is expected to continue a slow recovery. Revenue collections were close to the estimates prepared by the Consensus Revenue Estimating Group near the end of fiscal year 2011. The University’s appropriations were held essentially flat for fiscal year 2012. In November 2009, the governor proposed further reductions that would reduce Higher Education funding to 2006 levels, the maximum reduction allowed for the State to qualify for State Fiscal Stabilization Funds from the American Recovery and Reinvestment Act of 2009 (ARRA) without applying for a waiver from the US Department of Education. Beyond the University’s state appropriation reductions, the financial position of the University continues to be relatively strong. During the Fall 2011 semester, 28,718 students enrolled at KU. While enrollment was down by 744 students when compared to Fall 2010, this decrease was anticipated and fiscal year 2012 budgets were revised in anticipation of the

9


decrease. The University has also seen a shift in the mix of students (resident versus non-resident) which resulted in an increase of higher revenue producing international and non-resident students. Based on Western Interstate Commission on Higher Education’s (WICHE) projections Kansas high school graduation rates are expected to continue to decline for the next several years; therefore, the ability to attract non-resident students is increasingly important. Because Enrollment and Retention is one of University’s top priorities, the University hired an enrollment manager during fiscal year 2011 to oversee recruitment and enrollment. The assessments and collections of tuition are monitored on an ongoing basis to assure that the current year budget reflects a realistic estimate of tuition revenue. The University has also focused on the growing number of research opportunities that have been created by the American Recovery and Reinvestment Act. As of June 2011, the KU Center for Research, Inc. has been awarded 54 projects with a total award budget of $53.7 million. The KU Medical Center Research Institute has been awarded 59 projects with a total award budget of $16.8 million. The University was very successful in obtaining several large construction awards including a $12.3 million award from the National Institute of Standards and Technology Construction Grant Program (NIST) for the construction of an innovative “green technologies” research facility for the School of Engineering. Construction was initiated in fiscal year 2011 and as noted above will be completed during the fiscal year 2013. Finally there has been continued strong state and regional support for life sciences and cancer initiatives that will position the University for future growth. One of the top priorities of the University continues to be achieving National Cancer Institute (NCI) designation as a comprehensive cancer center. In September 2011, the University of Kansas Cancer Center submitted its application to the NCI. Peer reviewers from NCI will visit in February 2012 to determine whether University of Kansas Cancer Center will be awarded the NCI designation. The University is not aware of any additional currently known facts, decisions, or conditions that are expected to have significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations.

10

Financial

Statements

11


STATEMENT OF NET ASSETS

AS OF JUNE 30, 2011 AND 2010

Restated2011 2010

ASSETSCurrent assets: Cash and cash equivalents 285,790,910$ 268,018,802$ Investments 104,442,417 87,132,344 Accounts receivable, net 68,734,363 62,920,583 Pledges receivable, net 5,646,244 6,392,119 Loans to students, net 5,241,634 3,572,349 Inventories 7,632,694 7,872,064 Prepaid expenses and other assets 5,871,709 5,089,338

Total current assets 483,359,971 440,997,599

Non-current assets: Restricted cash and cash equivalents 25,015,862 6,843,523 Accounts receivable, net 1,024,694 966,910 Pledges receivable, net 9,792,443 12,871,183 Endowment investments 71,683,275 67,223,600 Other investments 10,148,133 11,871,270 Loans to students, net 20,201,578 20,835,532 Prepaid expenses and other assets 5,827,472 5,839,685 Capital assets, net 1,000,466,332 944,113,993

Total non-current assets 1,144,159,789 1,070,565,696 Total assets 1,627,519,760 1,511,563,295

LIABILITIESCurrent liabilities: Accounts payable and accrued expenses 62,292,225 55,534,008 Deferred revenue 45,357,509 49,571,817 Deposits held in custody for others 1,510,962 1,571,214 Accrued compensated absences – current portion 35,365,001 32,591,657 Capital leases payable - current portion 1,641,414 3,256,224 Notes payable – current portion 740,157 311,040 Revenue bonds payable - current portion 17,510,000 14,745,000 Other liabilities 376,933 286,621

Total current liabilities 164,794,201 157,867,581

Non-current liabilities: Accrued compensated absences 7,061,722 6,018,497 Accrued other post-employment benefits 18,620,107 13,475,098 Capital leases payable 15,587,737 15,785,028 Notes payable 7,830,666 8,537,973 Revenue bonds payable 386,295,000 351,095,000 Other long-term liabilities 5,527,577 3,393,783

Total non-current liabilities 440,922,809 398,305,379 Total liabilities 605,717,010 556,172,960

NET ASSETSInvested in capital assets, net of related debt 629,952,407 603,614,928 Restricted for: Nonexpendable 62,662,438 49,630,727 Expendable:

Scholarships, research, instruction and other 42,219,400 30,157,688 Loans 25,324,266 24,438,402 Capital projects 32,439,604 25,439,528 Debt service 16,342,031 17,957,507

Unrestricted 212,862,604 204,151,555 Total net assets 1,021,802,750$ 955,390,335$

See accompanying notes to financial statements.

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STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 Restated

2011 2010OPERATING REVENUESTuition and fees (net of scholarship allowances of $25,567,176 in 2011 and $23,148,193 in 2010) 236,846,895$ 233,763,429$ Federal grants and contracts 208,413,106 169,475,639 State and local grants and contracts 28,993,897 30,653,362 Nongovernmental grants and contracts 57,139,045 48,423,825 Sales and services of educational departments 59,639,673 60,538,784 Auxiliary enterprises: - Housing 19,755,806 20,866,588 Athletics 69,183,542 65,170,775 Parking and transit 11,898,761 11,225,387 Student unions 33,086,173 33,504,028 University health services 8,637,339 8,704,468 Other auxiliary enterprises 5,577,328 5,568,798 Other operating revenues 35,135,176 26,326,167 Total operating revenues 774,306,741 714,221,250

OPERATING EXPENSESInstruction 298,651,084 295,113,062 Research 244,329,473 223,985,161 Public service 36,265,728 31,391,674 Academic support 81,616,357 78,852,775 Student services 30,611,378 28,845,290 Institutional support 61,945,201 55,323,293 Operations and maintenance of plant 62,900,396 69,829,429 Depreciation 63,068,566 58,502,987 Scholarships and fellowships 34,866,585 29,726,377 Auxiliary enterprises: Housing 14,383,060 15,183,580 Athletics 68,197,849 65,339,463 Parking and transit 6,715,708 6,786,787 Student unions 30,966,028 30,300,361 University health services 7,684,247 7,201,852 Other auxiliary enterprises 4,499,480 4,214,742 Capitalized expneses for property and equipment (8,706,728) (9,441,353) Other operating expenses 1,936,662 3,608,797 Total operating expenses 1,039,931,074 994,764,277

Operating income (loss) (265,624,333) (280,543,027)

NO N-O PERATING REVENUES (EXPENSES)State appropriations 251,227,889 250,156,442 Gifts 33,145,943 39,183,506 Investment income 21,580,563 20,028,588 Interest expense (16,950,806) (18,650,996) Federal grants and contracts 17,804,625 16,443,869 Other non-operating revenues (expenses) (2,201,255) 6,314,884 Net non-operating revenues (expenses) 304,606,959 313,476,293

Income before other revenues, expenses, gains, or losses 38,982,626 32,933,266

Capital appropriations 12,927,579 10,468,499 Capital grants and gifts (expense) 14,452,580 9,890,521 Additions to permanent endowments 49,630 768,647 Increase (decrease) in net assets 66,412,415 54,060,933

NET ASSETSNet assets - beginning of year 955,390,335 901,329,402 Net assets - end of year 1,021,802,750$ 955,390,335$ See accompanying notes to financial statements

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STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 Restated

2011 2010CASH FLOWS FROM OPERATING ACTIVITIESTuition and fees 259,151,031$ 233,057,256$ Sales and services of educational activities 59,094,287 59,844,466 Auxiliary enterprises: Housing 4,205,415 5,513,155 Athletics 3,792,367 6,573,558 Parking and transit 3,758,706 4,336,153 Student unions (2,597,256) 1,670,304 University health services 1,547,208 1,602,959 Other auxiliary enterprises 844,229 1,463,714 Grants and contracts 274,970,010 248,904,425 Payments to suppliers (174,164,014) (168,448,579) Payments to utilities (23,199,684) (22,743,940) Compensation and benefits (601,962,596) (581,560,320) Payments for scholarships and fellowships (58,870,216) (30,117,556) Loans issued to students and employees (5,350,534) (5,190,004) Collection of loans to students and employees 4,784,378 4,067,207 Other receipts (payments) 32,152,943 15,950,784 Net cash provided (used) by operating activities (221,843,726) (225,076,418)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESState appropriations 251,227,889 250,156,442 Gifts 45,898,388 50,602,121 Agency transactions (60,252) (81,560) Federal education loan receipts 140,693,524 145,622,250 Federal education loan disbursements (141,993,708) (144,593,811) Non-operating grants and contracts 17,354,278 15,908,617 Other (465,000) 5,086,476 Net cash provided by noncapital financing activities 312,655,119 322,700,535

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIESProceeds from capital debt 62,292,796 116,224,281 Capital appropriations 12,927,579 10,468,499 Purchases of capital assets (95,260,674) (112,613,992) Proceeds from sale of capital assets 4,781,406 109,138 Principal paid on capital debt and leases (25,579,246) (43,922,661) Interest paid on capital debt and leases (16,713,793) (18,047,349) Contributions restricted for research facilities renovations 6,909,869 - Other (902,357) (3,901,873) Net cash used by capital financing activities (51,544,420) (51,683,957)

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sales and maturities of investments 74,824,788 95,948,802 Interest on investments 6,994,777 9,280,184 Purchase of investments (85,142,091) (78,326,796) Net cash provided by investing activities (3,322,526) 26,902,190

Net increase (decrease) in cash 35,944,447 72,842,350

Cash - beginning of the year 274,862,325 202,019,975 Cash - end of year 310,806,772$ 274,862,325$

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STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 (CONTINUED) RECONCILIATION OF NET OPERATING REVENUES (EXPENSES) RestatedTO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: 2011 2010Operating income (265,624,333)$ (286,043,611)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 63,068,566 58,502,987 Other non-cash expenses 449,192 146,222 Changes in assets and liabilities: Accounts receivables, net (2,643,826) 2,390,404 Pledges receivable, net 3,824,615 9,162,448 Loans to students, net (1,035,331) (963,759) Inventories 239,370 (86,191) Prepaid expenses and other assets (424,816) (441,550) Accounts payable and accrued liabilities (25,800,411) (16,210,346) Deferred revenue (2,858,330) 2,189,456 Accrued compensated absences 3,816,569 1,651,216 Accrued other post-employment benefits 5,145,009 4,626,306 Net cash provided (used) by operating activities: (221,843,726)$ (225,076,418)$

Non-cash Investing, Capital and Financing ActivitiesGifts-In-Kind 14,126,255$ 9,513,373$ Net Change in Unrealized Gains and Losses 13,197,266 (9,742,048)

See accompanying notes to financial statements

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NOTES TO THE FINANCIAL STATEMENTS

For the Years Ended June 30, 2011 and 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the exception of GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units. The University has made the decision not to include the Kansas University Endowment Association (KUEA) within the University’s financial statements. These financial statements have not been audited. In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Organization. The University of Kansas (the “University”) is a comprehensive institution providing undergraduate, graduate, and professional education in a variety of academic programs. The University is a Public Doctoral/Research University - Extensive and is accredited by the North Central Association of Colleges and Schools. The University is governed by the Kansas Board of Regents and is an agency of the State of Kansas. As an agency of the State of Kansas, the University is included in the audited financial report of the State of Kansas. The University conducts education, research, public service, and related activities at: the campus in Lawrence, Kansas, the Edwards Campus in Overland Park, Kansas, and the medical center campuses in Kansas City, Kansas, Salina, Kansas, and Wichita, Kansas. For fall 2010, the Lawrence and Edwards’s campuses had an undergraduate enrollment of 19,852 and a graduate/first professional enrollment of 6,414. The Medical Center had an undergraduate enrollment of 478 and a graduate/first professional (including medical residents, fellows and trainees) enrollment of 2,718. Enrollment at all campuses was 29,462 students. Financial Reporting Entity. As required by accounting principles generally accepted in the United States of America, these financial statements present the combined financial position and financial activities of all of the University’s campuses and the following blended component units for which the University is financially accountable: the University of Kansas Center for Research, Inc. (KUCR), Kansas Athletics, Inc. (Athletics), the University of Kansas Memorial Corporation (KU Unions), the University of Kansas Medical Center Research Institute Inc. (KUMCRI), the Student Union Corporation of the University of Kansas Medical Center, and Kansas University Health Partners, Inc. The financial activity and balances of the Kansas University Endowment Association (KUEA), the Kansas University Alumni Association, Kansas University Physicians, Inc. (KUPI) and the University of Kansas Hospital Authority are not included in the financial statements of the University as they are legally separate entities and the University does not appoint a voting majority of their governing bodies. In preparing the financial statements, all significant transactions and balances between campuses and blended component units have been eliminated to avoid overstatement of 1) revenues and expenses on the Statement of Revenues, Expenses, and Changes in Net Assets, and 2) balances on the Statement of Net Assets. Basis of Accounting. For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.

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Cash Equivalents. For purposes of the Statement of Cash Flows, the University considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At certain times, some of the University’s component units maintain cash balances in excess of FDIC limits. Management has evaluated the financial stability of these financial institutions and feels the risk to the component units is minimal. Investments. The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. Accounts Receivable. Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty, and staff. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories. Inventories are carried at cost. Prepaid Expenses. Prepaid expenses consist primarily of deferred charges related to revenue bond issuances as well as deferred summer school expenses. Capital Assets. Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University’s capitalization policy includes all items with a unit cost $5,000 or more, and an estimated useful life greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized if the related project cost exceeds $100,000. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, 25 years for land improvements, 8 years for equipment, and 5 years for vehicles. Depreciation for buildings and infrastructure is computed using a componentized building and infrastructure depreciation study. Note – The estimated useful lives used by the blended component units for equipment, building improvements and buildings, ranging from 5 to 40 years, vary slightly from the University’s policy. The financial impact of the variation is considered to be immaterial to the financials statements as a whole. Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until placed in service. The University did not capitalize any interest in 2011 or 2010. Deferred Revenues. Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include summer school tuition not earned during the current year and amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences. Employee unused vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued compensated absences in the Statement of Net Assets, and as an expense in the Statement of Revenues, Expenses, and Changes in Net Assets. Deposits Held In Custody For Others. Deposits held in custody for others consist primarily of student organizations’ moneys administered by the University. Non-current Liabilities. Non-current liabilities include principal amounts of notes and revenue bonds payable, capital lease obligations with contractual maturities greater than one year, and estimated amounts for accrued compensated absences and accrued other postemployment benefits that will not be paid within the next fiscal year.

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Net Assets. The University’s net assets are classified as follows:

Invested in capital assets, net of related debt: This represents the University’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of “invested in capital assets, net of related debt.”

Restricted net assets – non-expendable: Restricted non-expendable net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal.

Restricted net assets – expendable: Restricted expendable net assets include resources for which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for any purpose. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty, and staff.

Tax Status. As a state institution of higher education, the income of the University is generally exempt from federal and state income taxes under Section 115(a) of the Internal Revenue Code; however, income generated from activities unrelated to the University’s exempt purpose is subject to income taxes under Internal Revenue Code Section 511(a)(2)(B). Classification of Revenues. The University has classified its revenues as either operating or non-operating revenues according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as 1) student tuition and fees, net of scholarship discounts and allowances, 2) sales and services of auxiliary enterprises, 3) most federal, state, and local grants and contracts, and 4) interest on institutional student loans.

Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenues by GASB Statement No. 9, Reporting Cash Flows of Proprietary and Non-expendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB Statement No. 34, such as state appropriations and investment income.

Scholarship Discounts and Allowances. Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other federal, state, or non-governmental programs, are recorded as either operating or non-operating revenues in the University’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded a scholarship discount and allowance. Contributions. Unconditional promises to give cash and other assets are accrued at estimated fair value at the date each promise is received. Reclassifications. Certain reclassifications have been made to the 2010 financial statements to conform to the 2011 financial statement presentation. These reclassifications had no effect on the change in net assets.

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NOTE 2 – DEPOSITS SUMMARY OF CARRYING VALUES The carrying values of deposits and investments shown below are included in the Statement of Net Assets as follows:

2011 2010Carrying value: Deposits 295,958,445$ 261,006,923$ Investments 201,122,152 180,082,616

497,080,597$ 441,089,539$

Included in the following Statement of Net Assets line items: Cash and cash equivalents 285,790,910$ 268,018,802$ Investments 104,442,417 87,132,344 Restricted cash and cash equivalents (non-current) 25,015,862 6,843,523 Endowment investments (non-current) 71,683,275 67,223,600 Other investments (non-current) 10,148,133 11,871,270

497,080,597$ 441,089,539$

At June 30, 2011 the University carried deposits as shown below:

2011Investment Type Fair ValueCash deposits with State Treasury 233,251,181$ Cash deposits with financial institutions 51,290,859$ Certificates of deposit 8,052,393$ Money market funds 3,364,012$

295,958,445$

The deposits reflected above were held by the following entities as of June 30:

2011 2010KU Lawrence and Edwards Campuses 182,130,956$ 185,032,842$ Kansas Athletics, Inc. 3,428,729 2,813,380 KU Center for Research, Inc. * 1,225,878 (265,847) KU Memorial Corporation 2,143,075 2,731,853 KU Medical Center 82,932,160 53,502,188 KU Medical Center Research Institute 22,529,857 15,764,408 Student Union Corporation of KUMC 1,286,530 1,223,100 Kansas University Health Partners, Inc. 281,260 204,999

295,958,445$ 261,006,923$

* The University of Kansas Center for Research, Inc. utilizes an overnight repurchase agreement for its bank

deposits to maximize investment return. At June 30, 2011 and 2010, the overnight repurchase agreement amounted to $12,679,419 and $10,894,268, respectively, and its carrying value is included in the investments above. The repurchase agreement balance is included in “cash and cash equivalents” on the Statement of Net Assets at year-end. The negative deposit book balance noted above is primarily the result of outstanding checks.

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State law requires the University (Lawrence Campus, Edwards Campus, and the Medical Center campuses - in Kansas City, Salina and Wichita) to deposit the majority of its cash balances with the state treasurer, who holds and invests the funds. The exceptions to this law are any funds maintained in the University’s imprest fund, organizational safekeeping, revenue bond project and reserve funds, and any funds held by external entities on behalf of the University. Cash balances maintained by the state treasurer are pooled and are held in a general checking account and other special purpose bank accounts. The available cash balances beyond immediate need are pooled for short-term investment purposes by the Pooled Money Investment Board (PMIB) and are reported at fair value, based on quoted market prices. The majority of University deposit balances not maintained by the state treasurer are covered by FDIC or collateralized. The University does not have a formal deposit policy regarding custodial credit risk. However, management has evaluated the financial stability of the financial institutions involved and feels the custodial credit risk is minimal. NOTE 3 - INVESTMENTS At June 30, 2011, the University carried investments as shown below:

2011Investment Type Fair ValueUS Treasury obligations 6,427,067$ US Agency obligations 45,778,258 Corporate bonds 2,444,874 Fixed mutual funds 2,012,210 Domestic stock 4,739,390 Foreign stock 379,503 Preferred stock 245,256 Equity mutual funds 5,999,684 Limited liability companies 531,269 Other 4,377,418 Repurchase agreements 13,072,669 Guaranteed investment contracts 10,231,744 Pooled Money Investment Board (PMIB) 1,231,639 External investment pools KUEA Short-term Investment Program 16,944,431 KUEA Long-term Investment Program 86,706,740

201,122,152$

The investments reflected above were held by the following entities as of June 30:

2011 2010University of Kansas Lawrence and Edwards Campuses 74,618,027$ 68,804,647$ Kansas Athletics, Inc. 45,523,044 43,343,583 KU Center for Research, Inc. 43,326,111 42,083,861 KU Memorial Corporation 64,060 54,612 KU Medical Center 17,809,993 12,714,866 KU Medical Center Research Institute 19,780,917 13,081,047

201,122,152$ 180,082,616$

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INVESTMENT POLICY State statutes govern the University’s investment policies. For investments related to the University’s revenue bonds, state statutes authorize cash balances to be invested as permitted by bond documents and bond covenants. The Kansas Development Finance Authority (KDFA) manages the University’s revenue bond investments. Allowable investments include:

U.S. Government obligations Obligations of government-sponsored agencies Federal funds, unsecured certificates of deposit, time deposits, and banker’s acceptances Deposits – fully insured by FDIC Certain State or municipal debt obligations Certain pre-refunded municipal obligations Commercial paper Investments in money market funds Repurchase agreements Stripped securities Investments in the Municipal Investment Pool Fund Investment agreements Guaranteed investment contracts

State statutes also govern the investment policies of the PMIB. The primary objectives are to attain safety, liquidity, and yield. Allowable investments for State pooled moneys not held in Kansas financial institutions are as follows:

Direct obligations of, or obligations that are insured as to principal and interest by, the U.S. Government or any direct agency thereof, with maturities up to four years

Obligations and securities of United States sponsored enterprises that under federal law may be accepted as security for public funds. Moneys available for investments shall not be invested in mortgage-backed securities of such enterprises, which include the Government National Mortgage Association

Repurchase agreements with Kansas banks or with primary government securities dealers Interfund loans to various State agencies as mandated by the Kansas Legislature limited to not more than the

lesser of 10 percent or $80,000,000 of total investments Certain Kansas agency and IMPACT Act projects and bonds Linked deposit loans for agricultural production not to exceed $55,000,000 High grade commercial paper

The Finance Committee of the Kansas University Endowment Association (KUEA) Board of Trustees oversees investments in KUEA’s investment programs. The Finance Committee develops guidelines and procedures for investment programs, in accordance with the policies established by the Executive Committee. The KUEA Short-term Investment Program is designed for short-term, highly liquid investing needs. KUEA invests the idle cash balances in individual fund accounts by pooling them into a short-term investment program to produce a net investment yield. The total investment yield, less distributions of earnings to certain accounts, is retained by KUEA and is allocated to the unrestricted net asset classification to defray administrative costs. The KUEA Long-term Investment Program is designed for investing endowed funds and other types of funds with similar long-term objectives. These funds are collectively invested in a diversified long-term portfolio that is professionally managed by firms chosen by KUEA for their expertise in specialized portfolio management. Funds participating in the long-term investment portfolio receive regular distributions that are available for immediate spending in accordance with KUEA’s established spending policy.

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The Executive Committee as well as the Finance and Audit Committee of KUCR oversee KUCR investments. Per KUCR investment policy, investments are limited to money market funds, U.S. Treasury obligations (Bills, Notes, Bonds), U.S. Government Agency obligations, corporate obligations rated ‘A-‘ or better, stocks sold on major international exchanges such as NYSE, ASE, and NASDAQ, and fully collateralized repurchase agreements. Asset allocation targets are reviewed quarterly by the Finance and Audit Committee. Athletics investment policy limits investments to money market accounts, certificates of deposit, U.S. Treasury obligations (Bills, Notes, Bonds), and investments with KUEA. KU Unions does not have a formal investment policy. Operational reserves are invested in short-term certificates of deposit or government securities as directed by the Executive Board. The Board of Directors and Finance Committee of KUMC Research Institute Inc. (KUMCRI) oversee the KUMCRI's investment policy. Per KUMCRI investment policy investments in fixed income investments are through direct ownership of the financial investments held by the KUMCRI in a laddered portfolio, and for equities within a mutual fund. Investments will be made by the Treasurer within the guidelines of the investment policy. The Finance Committee reviews the portfolio quarterly. KUMCRI investment policy limits fixed income investments to Certificates of Deposit, U.S. Treasury or Agency obligations and no more than 10% of portfolio in equities. Certificates of Deposit may not exceed the FDIC limit for any one bank.

INTEREST RATE RISK Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The University does not have a formal investment policy that leverages investment maturities as a means of managing its exposure to fair value losses arising from changing interest rates. The University has historically held its fixed income securities until maturity, thus limiting the University’s interest rate risk exposure. For revenue bond investments managed by KDFA, because of the tax-exempt status of the bonds, it is generally the practice of KDFA and University management to match reserve fund interest rates to the arbitrage yield on the bonds, and the term of the investments to the maturity of the bonds. For invested loan funds, KDFA generally invests to maximize the interest rate and sets a term of investment based on estimated expenditures, which is generally 3 – 5 years.

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The University had the following investments and maturities at June 30, 2011:

Investment Type Fair Value Less than 1 1-5 6-10 More than 10Investments with Maturity Date: US Treasury obligations 6,427,067$ 2,114,403$ 4,312,664$ -$ 0$ US Agency obligations 45,778,258 11,278,884 30,650,061 3,199,150 650,164 Corporate bonds 2,444,874 17,137 1,681,663 746,074 - Repurchase agreements 13,072,669 12,679,419 - - 393,250 Guaranteed investment contracts 10,231,744 - - 2,121,479 8,110,265 Pooled Money Investment Board (PMIB) 1,231,639 - 191,112 - 1,040,527 External investment pools KUEA Short-term Investment Program 16,944,431 16,944,431 - - -

96,130,682$ 43,034,274$ 36,835,499$ 6,066,703$ 10,194,206$ Investments not subject ot maturity dates:Fixed mutual funds 2,012,210 Domestic stock 4,739,390 Foreign stock 379,503 Preferred stock 245,256 Equity mutual funds 5,999,684 Limited liability companies 531,269 Other 4,377,418 External investment pools KUEA Long-term Investment Program** 86,706,740

104,991,470 201,122,152$

** KUEA's Long-term investment program is invested in approximately 80% equities (no maturity date).

Investment Maturities (in years)

CREDIT RISK Credit risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations. The University holds investments that may have credit risk since the underlying securities may include securities other than those that take the form of U.S. Treasuries or obligations explicitly guaranteed by the U.S. government. Certain investments have an underlying collateral agreement. As of June 30, 2011, the University held the following investments as rated by Standard and Poor’s and/or Moody’s:

Credit Quality Rating Fair Value % of Total AAA/Govt 53,913,825$ 26.8% AAA - 0.0% AA 681,978 0.3% A 4,030,002 2.0% BBB 167,384 0.1% BB - 0.0% B 1,995,007 1.0% C 23,645 0.0% D - 0.0% Not Rated 140,310,311 69.8%

201,122,152$ 100.0%

The investments in the “Not Rated” category include investments in KUEA’s Short-term and Long-term Investment Programs (external investment pools are not required to be rated), the State’s Pooled Money Investment Board (PMIB), as well as the University’s bond related guaranteed investment contracts and repurchase agreements managed by KDFA.

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CUSTODIAL CREDIT RISK The custodial credit risk for investments is the risk that, in the event of the failure of the counter party, the University will not be able to recover the value of the investments that are in the possession of an outside party. Custodial credit risk should not be confused with market risk, which is the risk that the market value of a security may decline. The University’s investment securities are exposed to custodial credit risk if the securities are uninsured and unregistered and held by the counterparty, or by its trust department or agent but not in the University’s name. The investment policies of the University and its component units do not formally address custodial credit risk. Nonetheless, the University’s custodial credit risk is estimated to be minimal due to several factors. First, investments in external investment pools and in open-end mutual funds is not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. As noted above, the majority of the University’s investments are invested within KUEA’s Short-term and Long-term Investment Programs. Second, management has evaluated the stability of the financial institutions through which other investments are made. Generally the financial institutions are members of the Depository Trust Company (DTC), the world’s largest depository and a member of the Federal Reserve System. DTC holds and provides asset servicing for securities deposited with the DTC by DTC participants. DTC facilitates settlement of transactions through electronic book-entry transfers and pledges between the DTC participants’ accounts. This eliminates the need for physical movement of securities certificates. Additionally the financial institutions hold the assets in custody or trust so that they would not be available to the institution’s creditors because they are excluded from the assets of the custodian. The KUMCRI has made minimal investments directly in limited partnerships, which would have some custodial risk. The balance of these investments as of June 30, 2011 and 2010 was $531,269 and $532,892, respectively. CONCENTRATION OF CREDIT RISK Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer that exceeds 5 percent or more of its total investments. Investments issued or explicitly guaranteed by the U.S. Government and investments in mutual funds, external investment pools, and other pooled investments are excluded from this requirement. The University does not have a formal policy regarding the concentration of credit risk. However, management has evaluated the financial stability of the financial institutions involved and feels the credit risk is minimal. Of the University of Kansas’ total investments of $201,122,152 and $180,082,616 as of June 30, 2011 and 2010, respectively; the University of Kansas Endowment Association administers $104,051,505 and $97,767,498 respectively. The Kansas Development Finance Authority invests $3,746,367 and $5,069,903 million of the total as of June 30, 2011 and 2010, respectively. These monies represent bond proceeds and reserve requirements. The University investments also include $20,068,215 and $16,074,133 of investments administered by outside trustees as of June 30, 2011 and 2010, respectively. These investments consist of three accounts: 1) the Gertrude S. Pearson Trust, 2) the Elizabeth M. Watkins Trust for Watkins and Miller Scholarship Halls, and 3) the Elizabeth M. Watkins Trust for Watkins Hospital.

The Gertrude S. Pearson Trust had a reported market value of $14,550,650 at June 30, 2011 and $11,383,358 at June 30, 2010. The trustee is Bank of America. The Elizabeth M. Watkins Trust for Watkins and Miller Scholarship Halls had a reported market value of $3,547,688 at June 30, 2011 and $3,041,802 at June 30, 2010. The trustee is Bank of America. The Elizabeth M. Watkins Trust for Watkins Hospital had a reported market value of $1,969,877 at June 30, 2011 and $1,648,973 at June 30, 2010. The trustee is Bank of America.

The remaining investments consist of $73,256,065 and $61,171,082 invested in a combination of short-term and long-term investments, primarily US Agency obligations.

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NOTE 4 – ACCOUNTS RECEIVABLE Accounts receivable net of estimated uncollectible amounts, consisted of the following at June 30:

Restated2011 2010

Tuition and Fees 8,693,163$ 8,384,905$ Auxiliary 34,919,482 32,491,499 Grants and Contracts 11,863,829 10,917,215 Other 14,282,583 12,093,874

69,759,057$ 63,887,493$

NOTE 5 – PLEDGES RECEIVABLE Pledges receivable consist of the following unconditional promises to give:

2011 2010Due in less than one year 6,415,837$ 10,758,485$ Due in one to five years 8,979,613 11,328,614 Due in more than five years 1,397,250 2,472,249

16,792,700 24,559,348 Less Unamortized discount 679,013 946,046 Allowance for uncollectible amounts 675,000 4,350,000

15,438,687$ 19,263,302$

Pledges receivable are recorded on the accompanying statements of financial position as follows:

2011 2010Pledges receivable - current 5,646,244$ 6,392,119$ Pledges receivable - non-current 9,792,443 12,871,183

15,438,687$ 19,263,302$

NOTE 6 – INVENTORIES Inventories consisted of the following at June 30:

2011 2010Bookstore 3,318,719$ 3,562,514$ Food Service 212,247 236,847 Physical Plant 2,360,487 2,250,200 Professional and Scientific Supplies 768,009 858,618 Office Supplies 339,695 368,898 Other 633,537 594,987

7,632,694$ 7,872,064$

NOTE 7 – LOANS TO STUDENTS Student loans made through the Federal Perkins Loan Program comprise substantially all of the loans to students at June 30, 2011 and 2010. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of

25



100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management’s opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2011 and 2010, the allowance for uncollectible loans was estimated to be $498,569 and $489,172, respectively. NOTE 8 – CAPITAL ASSETS Capital asset activity for the year ended June 30, 2011 was as follows: The following roll forward of capital assets is for the Lawrence, Edwards, and Medical Center Campuses only.

Beginning EndingBalance Additions Retirements Balance

Land 21,928,834 2,999,782 (10,010) 24,918,606 Land improvements 4,127,161 - - 4,127,161 Works of Art 17,266,971 746,667 (20,000) 17,993,638 Infrastructure 72,635,225 4,042,962 - 76,678,187 Buildings 1,127,779,001 84,172,947 - 1,211,951,948 Equipment 152,804,239 17,205,496 (4,251,543) 165,758,192 Vehicles 18,216,367 778,192 (501,621) 18,492,938

Total 1,414,757,798 109,946,046 (4,783,174) 1,519,920,670

Less accumulated depreciation:Infrastructure 23,537,147 2,839,918 26,377,065 Buildings 454,493,874 36,396,030 (104,515) 490,785,389 Equipment 105,589,354 12,516,298 (3,763,983) 114,341,669 Vehicles 13,335,045 1,909,950 (513,850) 14,731,145 Total accumulated depreciation 596,955,420 53,662,196 (4,382,348) 646,235,268

Capital assets, net 817,802,378$ 56,283,850$ (400,826)$

Kansas Athletics Inc. 17,244,234 KU Center for Research, Inc. 34,834,318 KU Memorial Corporation 5,849,219 KU Medical Center Research Institute 927,239 Construction in Progress 67,925,920

1,000,466,332$

The University elected not to capitalize its library book collections. These collections adhere to the University’s policy to (a) maintain them for public exhibition, education, or research; (b) protect, keep encumbered, care for, and preserve them; and (c) require proceeds from their sale to be used to acquire other collection items. Generally accepted accounting principles permit collections maintained in this manner to be charged to operations at the time of purchase rather than be capitalized.

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NOTE 9 - CHANGES IN NON-CURRENT LIABILITIES Non-current liability activity for the year ended June 30, 2011 was as follows: Beginning Ending Current

Balance Additions Reductions Balance Portion

Accrued compensated absences 38,610,154$ 43,762,045$ (39,945,476)$ 42,426,723$ 35,365,001$ Accrued other post-employment benefits 13,475,098 5,232,303 (87,294) 18,620,107 - Capital leases payable 19,041,252 2,136,180 (3,948,281) 17,229,151 1,641,414 Notes payable 8,848,313 9,090 (286,580) 8,570,823 740,157 Revenue bonds payable 365,840,000 59,540,000 (21,575,000) 403,805,000 17,510,000 Other long-term liabilities 3,681,104 2,744,406 (521,000) 5,904,510 376,933 Total non-current liabilities 449,495,921$ 113,424,024$ (66,363,631)$ 496,556,314$ 55,633,505$

NOTE 10 - REVENUE BONDS OUTSTANDING Revenue bonds payable consist of the following: Principal Outstanding

at 6/30/11

Kansas Development Finance Authority Revenue Bonds – Series 1999C (The Board of Regents – University of Kansas Child Care Facility Construction Project) $3,085,000. Due in annual installments of $100,000 to $470,000. Issued 6/1/99 with a final maturity on 5/1/19. Interest ranging from 4.00% to 5.10% payable semi-annually. A rating of A1 was assigned by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by Ambac Assurance Corporation.

1,750,000$

Kansas Development Finance Authority Revenue Bonds - Series 2002A-1 (The Board of Regents – University of Kansas Housing System Renovation Project - Ellsworth Hall) $11,230,000. Due in annual installments of $45,000 to $1,280,000. Issued 4/1/02 with final maturity on 5/1/27. Interest ranging from 3.50% to 5.00% payable semi-annually. A rating of AAA was assigned by Standard & Poor’s based upon an insurance policy issued by Ambac Assurance Corporation. The underlying revenue stream was assigned an Aa3 post sale rating by Moody’s Investor Service.

945,000

Kansas Development Finance Authority Revenue Bonds - Series 2002A-2 (The Board of Regents – University of Kansas Student Recreation and Fitness Center) $15,330,000. Due in annual installments of $735,000 to $1,350,000. Issued 4/1/02 with final maturity on 5/1/17. Interest ranging from 3.50% to 5.00% payable semi-annually. A rating of AAA was assigned by Standard & Poor’s based upon an insurance policy issued by Ambac Assurance Corporation. The underlying revenue stream was assigned an Aa3 post sale rating by Moody’s Investor Service.

7,240,000

Kansas Development Finance Authority Revenue Bonds – Series 2002K (The Board of Regents – University of Kansas Edwards Campus Project) $5,120,000. Due in annual installments of $65,000 to $540,000. Issued 11/1/02 with a final maturity on 12/1/22. The first principal payment is due 12/1/10. Interest ranging from 4.3%to 5.0% payable semi-annually. A rating of A was assigned by Moody’s Investor Service, and no insurance was purchased. Moody’s Investor Service upgraded the bonds rating to A1 as of 7/23/04.

1,775,000

Kansas Development Finance Authority Revenue Bonds - Series 2005E-1 (The Board of Regents – University of Kansas Housing System 1996E Templin Hall Refunding Project) $3,065,000. Due in annual installments of $155,000 to $270,000. Issued 5/1/05 with a final maturity on 5/1/21. Interest ranging from 3.0% to 5.0% payable semi-annually. A rating of Aa3 was assigned by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by Ambac Assurance Corporation.

2,240,000

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Principal Outstandingat 6/30/11

Kansas Development Finance Authority Revenue Bonds - Series 2005E-1 (The Board of Regents – University of Kansas Housing System Hashinger Hall Renovation) $12,965,000. Due in annual installments of $125,000 to $2,015,000. Issued 5/1/05 with a final maturity on 5/1/30. Interest ranging from 3.0% to 4.5% payable semi-annually. A rating of Aa3 was assigned by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by Ambac Assurance Corporation.

11,885,000

Kansas Development Finance Authority Revenue Bonds - Series 2006B (Kansas Board of Regents – University of Kansas Parking Facilities Project - Park & Ride) $9,790,000. Due in annual installments of $140,000 to $1,450,000. Issued 4/1/06 with a final maturity on 4/1/21. Interest ranging from 3.5% to 4.13% payable semi-annually. A rating of Aa3 was assigned by by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by XL Capital Assurance Inc.

9,365,000

Kansas Development Finance Authority Revenue Bonds - Series 2007E (Kansas Board of Regents – University of Kansas Recreation and Fitness Center Expansion Project) $6,275,000. Due in annual installments of $200,000 to $450,000. Issued 5/1/07 with final maturity on 5/1/27. Interest ranging from 3.75% to 4.30% payable semi-annually. A rating of AAA was assigned by Standard & Poor’s based upon an insurance policy issued by XL Capital Assurance.

5,385,000

Kansas Development Finance Authority Revenue Bonds - Series 2007M (Kansas Board of Regents - University of Kansas – Law Enforcement Training Center) $18,220,000. Due in annual installments of $670,000 to $1,350,000. Issued 12/6/07 with final maturity on 6/1/27. Interest ranging from 3.5 % to 4.6% payable semi-annually. A rating of A1 was assigned by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by Assured Guaranty Corporation.

16,140,000

Kansas Development Finance Authority Revenue Bonds - Series 2008L (Kansas Board of Regents - University of Kansas – School of Pharmacy Project) $21,070,000. Due in annual installments of $560,000 to $1,245,000. Issued 11/1/08 with final maturity on 11/1/28. The first principal payment is due 11/1/09. Interest ranging from 2.0 % to 5.25% payable semi-annually. A rating of Aaa was assigned by Moody’s Investor Service based upon an insurance policy issued by Financial Security Assurance, Inc.

19,615,000

Kansas Development Finance Authority Revenue Bonds - Series 2009M (State of Kansas Project - Pharmacy) $31,650,000. Due in annual installments of $1,115,000 to $2,350,000. Issued 8/13/09 with final maturity on 11/1/2029. Interest ranging from 3.0 % to 6.31% payable semi-annually. A rating of Aa2 was assigned by Moody’s Investor Service and AA by Standard & Poor's.

31,650,000

Kansas Development Finance Authority Revenue Bonds - Series 2010A (Kansas Board of Regents - University of Kansas Housing System Program) $23,700,000. Due in annual installments of $610,0000 to $2,030,000. Issued 1/28/10 with final maturity on 11/1/29. Interest ranging from 2.00% to 4.05% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

23,090,000

Kansas Development Finance Authority Revenue Bonds - Series 2010B (University of Kansas Energy Conservation Program) $21,650,000. Due in annual installments of $275,0000 to $1,815,000. Issued 1/7/10 with final maturity on 11/1/26. Interest ranging from 2.50% to 3.75% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

21,375,000

Kansas Development Finance Authority Revenue Bonds - Series 2010K-1 (University of Kansas Refund of Edwards Campus 2002K) $3,615,000. Due in annual installments of $40,000 to $530,000. Issued 5/12/10 with final maturity on 5/1/23. Interest ranging from 2.00% to 3.50% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

3,575,000

Kansas Development Finance Authority Revenue Bonds - Series 2010K-1 (University of Kansas Medical Center Parking Facilities) $1,240,000. Due in annual installments of $240,000 to $255,000. Issued 5/12/10 with final maturity on 5/1/15. Interest ranging from 2.00% to 3.00% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

990,000

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Kansas Development Finance Authority Revenue Bonds - Series 2010K-1 (University of Kansas Refund of 1999 D Parking Garage #2) $3,005,000. Due in annual installments of $455,000 to $860,000. Issued 5/12/10 with final maturity on 5/1/14. Interest ranging from 2.00% to 3.00% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

2,155,000

Kansas Development Finance Authority Revenue Bonds - Series 2010K-2 (University of Kansas Medical Center Parking Build America Bonds) $7,190,000. Due in annual installments of $265,000 to $495,000. Issued 5/12/10 with final maturity on 5/1/35. Interest ranging from 3.60% to 6.20% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

7,190,000

Kansas Development Finance Authority Revenue Bonds - Series 2010M1 & Series 2010M2 (University of Kansas Edwards Campus Building No. 4) $20,990,000. Due in annual installments of $1,175,000 to $1,700,000. Issued 5/5/10 with final maturity on 9/1/25. Interest ranging from 2.00% to 5.10% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

20,990,000

Kansas Development Finance Authority Revenue Bonds - Series 2011C (Kansas Board of Regents - University of Kansas Housing System Project) $13,450,000. Due in annual installments of $385,000 to $830,000. Issued 5/18/2011 with final maturity on 5/1/36. Interest ranging from 2.00% to 4.375% payable semi-annually. A rating of Aa1 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

13,450,000

Kansas Development Finance Authority Revenue Bonds – Series 2003C (The Board of Regents – University of Kansas Medical Center Scientific Research and Development Facilities Projects) $36,100,000. Due in annual installments ranging from $3,220,000 to $5,430,000. Issued 2/1/03 with a final maturity on 4/1/21. The first principal payment is due 10/1/16. Interest ranging from 2.13% to 5.01% payable semi-annually. The bonds were rated at AA by Standard & Poor’s at the time of issuance. A rating of AAA was assigned by Standard & Poor’s based upon an insurance policy issued by Ambac Assurance Corporation.

36,100,000

Kansas Development Finance Authority Revenue Bonds – Series 2003J-1 (The Board of Regents – University of Kansas Medical Center Energy Conservation Project) $13,080,000. Due in annual installments ranging from $350,000 to $1,060,000. Issued 8/3/03 with a final maturity of 8/1/24. Interest ranging from 2.00% to 4.75% payable semi-annually. The bonds were rated at AA by Standard & Poor’s and Aa2 by Moody’s at the time of issuance. The rating was upgraded to AAA with the purchase of insurance.

10,230,000

Kansas Development Finance Authority Revenue Bonds – Series 2005D (The Board of Regents – University of Kansas Medical Center Scientific Research and Development Facilities Projects) $27,130,000. Due in annual installments ranging from $1,170,000 to $3,935,000. Issued 4/1/05 with a final maturity on 10/1/15. Interest ranging from 3.90% to 4.80% payable semi-annually. The bonds were rated at AA by Standard & Poor’s at the time of issuance. The rating was upgraded to AAA with the purchase of insurance.

11,910,000

Kansas Development Finance Authority Revenue Bonds – Series 2005E-2 (The Board of Regents – University of Kansas Medical Center Parking Garage #3) $3,330,000. Due in annual installments ranging from $120,000 to $225,000. Issued 5/1/05 with a final maturity on 5/1/25. Interest ranging from 3.00% to 5.00% payable semi-annually. The underlying revenue stream was assigned an A1 rating by Moody’s Investor Service. The bonds were upgraded to Aaa with the addition of an insurance policy issued by Ambac Assurance Corporation.

2,690,000

Kansas Development Finance Authority Revenue Bonds – Series 2010P-1 & 2010P-2 (The Board of Regents – University of Kansas Medical Center Clinical Research Center) $15,930,000. Due in annual installments ranging from $1,345,000 to $1,730,000. Issued October 2010 with a final maturity in 2031. Interest ranging from 2.00% to 5.00% payable semi-annually. A rating of Aa2 was assigned by Moody's Investor Service and AA by Standard & Poor’s.

15,930,000

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Kansas Development Finance Authority Revenue Bonds – Series 2010N (The Board of Regents – University of Kansas Medical Center Research Institute, Inc. Project) $30,160,000. Due in annual installments ranging from $910,000 to $2,550,000. Issued 10/14/10 with a final maturity in 4/2030. Interest ranging from 3.5% to 5.00% payable semi-annually. The bonds were rated AA rating by Standards and Poor's at the time of issuance and rated Aa1 by Moody's Investor Service.

29,670,000

Kansas Development Finance Authority Revenue Bonds – Series 2004K (The Board of Regents – University of Kansas Athletic Corporation – Restructuring Project) $17,830,000. Due in annual installments of $660,000 to $1,355,000. Issued 11/16/04 with final maturity on 6/1/23. Interest ranging from 3.3% to 4.5% payable semi-annually. A rating of A was assigned by Standard & Poor’s.

12,740,000

Kansas Development Finance Authority Revenue Bonds – Series 2008C (The Board of Regents – University of Kansas Athletic Corporation Project) $32,820,000. Due in annual installments of $360,000 to $9,035,000. Issued 7/1/08 with final maturity on 6/1/33. Interest ranging from 3.0 % to 5.0 % payable semi-annually. A rating of A1 was assigned by Moody’s Investor Service.

31,515,000

Kansas Development Finance Authority Revenue Bonds – Series 2005B (The Board of Regents – University of Kansas Center for Research, Inc. Project (MRB) $45,625,000. Due in annual installments of $1,565,000 to $3,610,000. Issued 2/1/05 with a final maturity on 2/1/25. Interest ranging from 3.6% to 5.3% payable semi-annually. A rating of A1 was assigned by Moody’s. The bonds were upgraded to Aaa with the purchase of a surety bond issued by MBIA Insurance Corporation.

37,165,000

Kansas Development Finance Authority Revenue Bonds – Series 2006G (The Board of Regents – University of Kansas Center for Research, Inc. Project (SBCIII) $17,085,000. Due in annual installments of $470,000 to $4,615,000. Issued 10/1/06 with final maturity on 2/1/26. Interest ranging from 4.00% to 5.04% payable semi-annually. A rating of A was assigned by Standard & Poor’s and a rating of A1 was assigned by Moody’s Investor Services.

15,050,000

Total 403,805,000$

NOTE 11 - REVENUE BONDS MATURITY SCHEDULE Maturities of principal and interest requirements on revenue bonds payable are as follows:

Year Ending June 30: Principal Interest Total2012 19,280,000$ 16,237,710$ 35,517,710$ 2013 19,440,000 15,651,267 35,091,267 2014 19,595,000 15,033,267 34,628,267 2015 20,970,000 14,352,146 35,322,146 2016 21,830,000 13,600,695 35,430,695

2017-2021 118,135,000 54,447,352 172,582,352 2022-2026 117,900,000 28,867,923 146,767,923 2027-2031 54,810,000 9,121,277 63,931,277 2032-2035 11,845,000 1,288,755 13,133,755

403,805,000$ 168,600,392$ 572,405,392$

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The University defeased a portion of 1999 D bond series through advance refunding during fiscal year 2006, and defeased the remainder of the 1999 D bond series in 2010. The University also defeased a portion of 2002A-1 through advanced refunding, and refunded two other bond series during fiscal year 2010. During 2011, the University refunded 2 bonds series in conjunction with one bond issuance. Accordingly, the series are not reflected in the accompanying statements. The amount of bonds that have been defeased as of June 30, 2011 consists of the following:

Outstanding atSeries June 30, 20111998 D 3,100,000$ 1999 D 4,585,000 2002A-1 8,230,000 2002K 3,280,000 1999B 1,785,000 2001T-1 4,120,000

Total 25,100,000$

NOTE 12 - LEASE OBLIGATIONS The University of Kansas is obligated for the purchase of certain equipment funded through the issuance of blanket financing agreements in the amount of $17,229,151 and $19,041,252 as of June 30, 2011 and 2010, respectively. Payments to liquidate these obligations are scheduled as follows:

Year Ending June 30: Total2012 1,641,414$ 2013 2,613,320 2014 1,820,927 2015 1,429,999 2016 6,155,755

2017 and thereafter 3,567,736 17,229,151$

Included in this balance is the $18,699,700 Master Lease Purchase agreement between the University and the State for the University’s Energy Performance Contract. The University’s Energy Performance Contract consists of approximately 100 energy savings measures that were completed in fiscal year 2004 and were expected to result in annual utility and maintenance savings of $1,700,000. The projects were funded through a Master Lease Purchase Agreement between the State of Kansas and Citibank, N.A. The University is responsible for repaying the State for the 20-year term of the lease. The remaining principal balance of the master lease agreement as of June 30, 2011 is $12,532,864.

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NOTE 13 - RETIREMENT PLANS University employees participate in two separate retirement programs. University Support Staff and Classified Staff employees participate in the "Kansas Public Employees Retirement System" (KPERS). This defined benefit program is funded through contributions by the University and the individual employees. The University contributed $5,306,675 and $4,699,101 during fiscal years 2011 and 2010, respectively, and individual employees contributed $2,476,935 and $2,637,844. Unclassified employees participate in the "Board of Regents 403(b) Retirement Program". This defined contribution program is funded through contributions by the University and the individual employees. The University contributed $30,285,066 and $29,297,721 during fiscal years 2011 and 2010, respectively, and individual employees contributed $19,488,924 and $18,552,506. Employees of Kansas Athletics, Inc., the University of Kansas Memorial Corporation, and the University of Kansas Medical Center Research Institute, participate in defined contribution programs similar to the “Board of Regents Retirement Program”. The Corporations contributed $492,472 and $1,769,071 to their individual plans during fiscal years 2011 and 2010, respectively. NOTE 14 – OTHER POSTEMPLOYMENT HEALTHCARE BENEFITS (OPEB) DESCRIPTION As an agency of the State of Kansas, the University participates in the State’s health insurance benefit plan. Kansas statute provides that postemployment healthcare benefits be extended to retired employees who have met age and/or service eligibility requirements. The health insurance benefit generally provides the same coverage for retirees and their dependents as for active employees and their dependents. The health insurance benefit plan is a single employer defined benefit plan administered by Kansas Health Policy Authority. The benefit is available for selection at retirement and is extended to retirees and their dependents for life. Non-Medicare participants are subsidized by the University, thus resulting in a liability to the University. At a State level, the accounting for the health insurance for retirees is included in the State’s Self-Insurance Health fund, with the subsidy provided from the Self-Insurance Health fund. FUNDING POLICY The University provides health insurance benefits to retirees and their dependents in accordance with Kansas law (K.S.A. 75-6511). Kansas statute, which may be amended by the state legislature, established that participating retirees contribute to the employee group health fund benefits plan, including administrative costs. The University does not pay retirement benefits directly; they are paid implicitly over time through employer subsidization of active premiums that would be lower if retirees were not part of the experience group. ANNUAL OPEB COST AND NET OPEB OBLIGATION The University’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period of not to exceed thirty years.

32



The following table presents the components of the University’s annual OPEB cost for the year, the contribution to the plan, and changes in the University’s net OPEB obligation.

Total

Annual required contribution - amortized liability 2,065,613$

Interest on amortized liability 79,526

Normal cost (with interest) 3,246,215

Annual OPEB cost (expense) 5,391,354

Interest on Net OPEB Obligation 518,791

Adjustment to the ARC (765,136) (implicit rate subsidy) -

Increase in net OPEB obligation 5,145,009

Net OPEB obligation July 1, 2010 13,475,098 Net OPEB obligation June 30, 2011 18,620,107$

Schedule of Employer Contributions (for fiscal year ended)

Annual Net End of YearFiscal OPEB Employer Percentage Net OPEBYear Cost Contributions Contributed Obligation

2010 4,626,306$ -$ 0% 13,475,098$

2011 5,145,009$ -$ 0% 18,620,107$

FUNDED STATUS AND FUNDING PROGRESS As of June 30, 2011, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $42,162,937. The University’s policy is to fund the benefits on a pay-as-you-go basis that is paid implicitly through rate subsidization, resulting in an unfunded actuarial accrued liability (UAAL) of $42,162,937. The covered payroll (annual payroll of active employees covered by the plan) was $516,615,578, and the ratio of the UAAL to the covered payroll was 8%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. The valuation includes, for example, assumptions about future employment, mortality and the healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of employer are subject to continual revision as actual results are compared with the past expectations and new estimates are made about the future. The schedule of funding progress will present in time, multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing relative to the actuarial accrued liabilities for benefits.

33



Schedule of Funding Progress

Actuarial UAAL as a Actuarial Accrued Percent of

Actuarial Value of Liability Unfunded Funded Covered CoveredValuation Assets (AAL) AAL Ratio Payroll Payroll

Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)

06/30/10 -$ 37,223,586$ 37,223,586$ 0% 504,044,418$ 7%06/30/11 -$ 42,162,937$ 42,162,937$ 0% 516,615,578$ 8%

ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits for reporting purposes are based on the substantive plan and include the types of benefits provided at the time of valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and actuarial value of assets, consistent with the long-term perspective of the calculations. In the June 30, 2011 actuarial valuation, the projected unit credit method was applied. The actuarial assumptions included a 3.85% investment rate of return, which is a blended rate of the expected long-term investment returns on the State’s pooled funds and investments. The valuation assumed annual healthcare cost trend rates of 5.5% to 10% in the first ten years and an ultimate rate of 5.0% after ten years. The valuation followed generally accepted actuarial methods and included tests as considered necessary to assure the accuracy of the results. The UAAL is being amortized over a 30-year open period in level dollar amounts. NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES At June 30, 2011 and 2010, the University had outstanding commitments under construction contracts totaling $56,971,136 and $100,841,345, respectively. The University is a defendant in several lawsuits. However, University officials are of the opinion, based on advice of in-house legal counsel, that the ultimate outcome of all litigation will not have a material effect on the future operations or financial position of the University. All university buildings are insured with a $500,000 deductible and a limit of $500,000,000 per occurrence. Named equipment is covered up to the declared value with a $5,000 deductible. Most building contents and State-owned automobiles are not insured against property damages or bodily injury. The University is not aware of any significant outstanding claims as of June 30, 2011. In the normal course of operations, the University receives grants and other forms of reimbursement from various Federal and State agencies. These activities are subject to audit by agents of the funding authority, the purpose of which is to ensure compliance with conditions precedent to providing of such funds. University officials believe that the liability, if any, for any reimbursement that may arise as the result of audits, would not be material. In connection with a settlement agreement with the Kansas Athletics, Inc’s former football coach, Kansas Athletics, Inc. paid $3,000,000, in addition to health insurance premiums through March 30, 2010. This amount is included in Athletics expense on the consolidated statement of revenues, expenses and changes in net assets for the year ended June 30, 2010.

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NOTE 16 – NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The University’s operating expenses by functional and natural classification for 2011 are as follows:

Scholarships Compensation & Supplies &

Functional Classification & Benefits Fellowships Utilities Other Services Depreciation Total

Instruction 288,645,734$ -$ 239,889$ 9,765,461$ -$ 298,651,084$ Research 161,216,701 - 4,596 83,108,176 - 244,329,473 Public service 22,495,417 - 6,181 13,764,130 - 36,265,728 Academic support 60,226,995 - 1,306 21,388,056 - 81,616,357 Student services 23,510,993 - 591,543 6,508,842 - 30,611,378 Institutional support 47,323,217 - - 14,621,984 - 61,945,201 Operations and maintenance of plant 35,420,238 - 22,145,073 5,335,085 - 62,900,396 Depreciation - - - - 63,068,566 63,068,566 Scholarships and fellowships - 34,866,585 - - - 34,866,585 Auxiliary enterprises: Housing 8,726,010 - 2,572,347 3,084,703 - 14,383,060 Athletics 28,392,387 9,084,868 1,267,910 29,452,684 - 68,197,849 Parking 2,235,376 - 273,439 4,206,893 - 6,715,708 Student unions 11,946,292 - 777,961 18,241,775 - 30,966,028 University health services 5,513,335 - - 2,170,912 - 7,684,247 Other auxiliary enterprises 4,384,342 - - 115,138 - 4,499,480 Capitalized exp for property and equip - - - (8,706,728) - (8,706,728) Other 2,025,894 - 471 (89,703) - 1,936,662 Total 702,062,931$ 43,951,453$ 27,880,716$ 202,967,408$ 63,068,566$ 1,039,931,074$ NOTE 17 – SUBSEQUENT EVENTS Subsequent to June 30, 2011, the University entered into a settlement agreement with the former head football coach in the amount of $6,357,352. NOTE 18 – RESTATEMENT During FY 2011, management of the University of Kansas Center for Research, Inc. (KUCR) evaluated the Center’s transactional and recognition recording of equipment acquired with direct research resources and determined that a change in methodology was necessary to improve the financial reporting of these transactions. Under this methodology, equipment is capitalized and depreciated in the year acquired. Equipment that must be returned to the grantor at the end of the research project is expensed as incurred. Amounts capitalized in the current period are shown on the statement of activities as a reduction to direct research expenses. Under the prior methodology, equipment acquired with research resources (that was not required to be returned) was recorded as donated equipment revenues in the period that the research project ended. The change in methodology has been retroactively applied to fiscal year ended June 30, 2010. Accordingly, an adjustment to beginning net assets for the year ended June 30, 2010 was required. The impact of this adjustment was an increase to “Invested in capital assets, net of related debt” net assets of $1,677,292. Additionally in the process of preparing the consolidated annual financial report, the University discovered that investments related to the Medical Center residual facility & administrative overhead reimbursements were not accurately reflected within the consolidated balance sheet. KUMC Research Institute, Inc. (KUMCRI) manages these funds on behalf of the Medical Center and on KUMCRI's balance sheet these investments are treated as "agency funds" -- reflected within investment total with an offsetting liability "deposits held for others". During FY 2011 it was discovered that these investments were not properly recorded on the Medical Center's balance sheet for either FY 2010 or FY 2011. Accordingly an adjustment to beginning net assets for the year ended June 30, 2010 was required. The impact of this adjustment was an increase to “Unrestricted” net assets of $17,694,451.

35



Finally, during FY 2011, management of Kansas Athletics Inc. (Athletics) evaluated Athletics recognition of investment gains and losses on non-expendable funds within net assets and determined that a change in methodology was necessary to improve the financial reporting of these transactions. Under this methodology, investment gains and losses on non-expendable funds are recorded as either restricted expendable net assets or unrestricted net assets dependent upon donor restrictions. Under the prior methodology, investment gains and losses on nonexpendable funds were recorded as nonexpendable net assets. The change in methodology has been retroactively applied to fiscal year ended June 30, 2010. Accordingly, a reclassification to ending net assets for the year ended June 30, 2010 was required. The impact of this adjustment was a decrease to “Nonexpendable” net assets of $7,460,660, an increase to “Expendable” net assets of $6,389,397, and an increase to “Unrestricted” net assets of $1,066,391. The following is a summary of the restatements for the year ended June 30, 2010:

Adjustments to FY 2010 beginning of the year net assets: Unresticted net assets, beginning of the year, as originally reported, for fiscal year ended June 30, 2010 881,957,659$

Property and Equipment, net adjustment 1,677,292 Investments 17,694,451

Unresticted net assets, beginning of the year, as restated, for fiscal year ended June 30, 2010 901,329,402$

36



Adjustments to FY 2010 end of the year net assets: Invested in capital assets, net of related debt net assets, end of the year, as originally reported, for fiscal year ended June 30, 2010 599,134,863$

Property and Equipment, net adjustment 4,480,065

Restricted nonexpendable net assets, end of the year, as restated, for fiscal year ended June 30, 2010 603,614,928$

Restricted nonexpendable net assets, end of the year, as originally reported, for fiscal year ended June 30, 2010 57,091,387$

Investment gains and losses (7,460,660)

Restricted nonexpendable net assets, end of the year, as restated, for fiscal year ended June 30, 2010 49,630,727$

Restricted expendable net assets, end of the year, as originally reported, for fiscal year ended June 30, 2010 91,598,856$

Investment gains and losses 6,394,269

Restricted expendable net assets, end of the year, as restated, for fiscal year ended June 30, 2010 97,993,125$

Unrestricted net assets, end of the year, as originally reported, for fiscal year ended June 30, 2010 185,952,053$

Investment gains and losses 1,066,391 Investments 17,133,111

Unrestricted net assets, end of the year, as restated, for fiscal year ended June 30, 2010 204,151,555$

37

APPENDIX E

UNIVERSITY DEBT SERVICE REQUIREMENTS

The table below shows the principal and interest payable annually, net of capitalized interest, on the debt obligations that are or may be payable from Unrestricted Revenues of the type that are generally available for payment of the University’s obligations under the University Agreement with respect to debt service on the Series 2012E Bonds. Prior Obligations Series 2012E Bonds

Fiscal Year Ending June 30,

General Revenue Pledge(1)

Contingent Revenue

Obligations(2) Series 2012D

Bonds(3) Principal Interest

Total Debt Service

Requirements

2012 $ 5,825,374.34 $ 4,764,035.63 $ 436,767.50 - - $ 11,026,177.47 2013 5,801,612.50 6,345,046.26 3,455,350.00 $ 2,255,000.00 $ 815,411.67 18,672,420.43 2014 5,417,487.50 6,376,896.26 3,452,950.00 2,190,000.00 883,850.00 18,321,183.76 2015 5,195,487.50 6,418,096.26 3,457,950.00 2,230,000.00 840,050.00 18,141,583.76 2016 5,213,656.25 6,447,146.26 3,450,150.00 2,275,000.00 795,450.00 18,181,402.51 2017 5,611,978.75 6,484,296.26 4,014,950.00 2,320,000.00 749,950.00 19,181,175.01 2018 5,618,747.50 6,514,796.26 4,009,350.00 2,370,000.00 703,550.00 19,216,443.76 2019 5,632,185.00 4,782,896.26 4,005,150.00 2,415,000.00 656,150.00 17,491,381.26 2020 5,643,078.75 4,818,846.26 4,562,150.00 2,475,000.00 594,200.00 18,093,275.01 2021 5,243,462.50 4,856,046.26 4,567,750.00 2,600,000.00 470,450.00 17,737,708.76 2022 5,965,205.00 4,892,846.26 4,582,950.00 2,730,000.00 340,450.00 18,511,451.26 2023 5,964,912.50 4,933,446.26 4,594,550.00 2,865,000.00 203,950.00 18,561,858.76 2024 5,493,878.76 4,970,046.26 4,606,950.00 2,950,000.00 118,000.00 18,138,875.02 2025 5,501,398.76 5,006,446.26 4,622,950.00 - - 15,130,795.02 2026 5,512,390.01 5,047,758.76 3,587,150.00 - - 14,147,298.77 2027 4,446,082.51 5,086,887.52 3,586,350.00 - - 13,119,320.03 2028 2,296,342.50 5,129,493.76 3,588,250.00 - - 11,014,086.26 2029 2,293,900.00 5,168,837.50 3,587,937.50 - - 11,050,675.00 2030 2,292,946.25 5,207,837.50 - - - 7,500,783.75 2031 1,429,462.50 3,791,837.50 - - - 5,221,300.00 2032 1,420,100.00 3,833,087.50 - - - 5,253,187.50 2033 1,413,525.00 3,877,650.00 - - - 5,291,175.00 2034 1,402,465.00 3,919,850.00 - - - 5,322,315.00 2035 1,393,815.00 3,964,450.00 - - - 5,358,265.00 2036 867,350.00 4,015,975.00 - - - 4,883,325.00 2037 - 4,058,712.50 - - - 4,058,712.50 2038 - 4,106,200.00 - - - 4,106,200.00 2039 - 4,153,550.00 - - - 4,153,550.00 2040 - 4,205,250.00 - - - 4,205,250.00 2041 - 4,263,325.00 - - - 4,263,325.00 Total $102,896,844.38 $147,441,589.55 $68,169,605.00 $29,675,000.00 $7,171,461.67 $355,354,500.60

(1) The Prior Obligations included in this column (the Series 2010A Bonds, the Series 2010B Bonds, the Series 2010K Bonds and

the Series 2011C Bonds) are expected to be paid from Unrestricted Revenues pledged to such payment by the University. See the caption “FINANCIAL INFORMATION OF THE UNIVERSITY—University Debt Obligations—Obligations Payable from Unrestricted Revenues” in Appendix C to the Official Statement.

(2) The University has agreed to apply Unrestricted Revenues to pay debt service on the Prior Obligations included in this column (the Series 2009O Bonds and the Series 2010N Bonds) if needed, but such debt service is expected to be paid from other sources. See the caption “FINANCIAL INFORMATION OF THE UNIVERSITY—University Debt Obligations—Obligations Payable from Unrestricted Revenues” in Appendix C to the Official Statement.

(3)The Series 2012D Bonds are to be issued on March 7, 2012 and are expected to be paid from Unrestricted Revenues pledged to such payment by the University. See the caption “FINANCIAL INFORMATION OF THE UNIVERSITY—University Debt Obligations—Obligations Payable from Unrestricted Revenues” in Appendix C to the Official Statement.

APPENDIX F

DEFINITIONS AND SUMMARIES OF THE INDENTURE, THE LOAN AGREEMENT AND THE UNIVERSITY AGREEMENT

APPENDIX F

DEFINITIONS AND SUMMARIES OF THE INDENTURE, THE LOAN AGREEMENT AND THE UNIVERSITY AGREEMENT

The following are summaries of certain provisions of the Indenture, the Loan Agreement and the University Agreement, as well as certain defined terms used therein and in this Official Statement. The summaries do not purport to be complete, and reference is made to the full text of the Indenture, the Loan Agreement and the University Agreement, respectively, for a complete recital of their terms, as well as a complete recital of the defined terms used therein.

DEFINITIONS In addition to the words and terms defined elsewhere in this Official Statement, the following words and terms shall have the following meanings, unless some other meaning is plainly intended: "Act" means the K.S.A. 74-8901 et seq., as from time to time amended and supplemented. "Additional Bonds" means any additional parity Bonds issued by the Authority pursuant to the Indenture that stand on a parity and equality under the Indenture with the Series 2006G Bonds and the Series 2012E Bonds. "Additional Notes" means any additional parity Notes issued by the Corporation to the Authority, pursuant to the Loan Agreement, in connection with the issuance of Additional Bonds under the Indenture. "Additional Obligations" means any Indebtedness of the Corporation, other than the Notes, issued or incurred by the Corporation in accordance with the Loan Agreement and secured on a parity with the Notes, which obligations may be issued to any Person including Persons other than the Authority. "Affiliate" means any Person (whether for-profit or nonprofit), which "controls," or is "controlled" by, or is under common "control" with, the Corporation. "Authority Representative" means the Chairman, Vice Chairman or President of the Authority, and any other duly authorized officer of the Authority whose authority to execute any particular instrument or take a particular action under the Indenture or the Loan Agreement shall be evidenced to the satisfaction of the Trustee. "Balloon Indebtedness" means Long-Term Indebtedness, 25% or more of the original principal of which becomes due and payable (either by maturity or mandatory redemption), or may become due and payable or may be required to be purchased or redeemed upon demand of the holder, during the same fiscal year, if such principal becoming due and payable is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such fiscal year. "Bond" or "Bonds" means the Series 2006G Bonds, the Series 2012E Bonds and any Additional Bonds issued pursuant to the Indenture. "Bond Insurance Policy" means (a) with respect to the Series 2006G Bonds, the financial guaranty insurance policy issued by the Bond Insurer with respect to the Series 2006G Bonds insuring the payment when due of the principal amount of the Series 2006G Bonds, and (b) with respect to any Additional Bonds, the municipal bond insurance policy, if any, issued by the Bond Insurer on the date of delivery of any Series of Bonds insuring the payment when due of the principal and interest on such Bonds as provided therein.

F-2

"Bond Insurer" means (a) with respect to the Series 2006G Bonds, XL Capital Assurance Inc., a New York stock insurance company, and (b) with respect to any Additional Bonds, the entity set forth in the Supplemental Indenture authorizing such Additional Bonds, if any. "Bond Purchase Agreement" means, with respect to each of the Series 2012E-1 Bonds and Series 2012E-2 Bonds, the document between the Authority and the original purchaser of such series of Series 2012E Bonds that sets forth the terms and details of the purchase of such series of Series 2012E Bonds. "Book Value" means, when used with respect to Property of the Corporation, the value of such Property, net of accumulated depreciation and amortization, as it is carried on the books of account of the Corporation as reflected in the most recent financial statements of the Corporation. "Business Day" means a day on which the Trustee or any Paying Agent shall be scheduled in the normal course of its operations to be open to the public for conduct of its banking operations. "Capitalized Lease" means a lease of real or personal property that is capitalized on the balance sheet of the lessee under generally accepted accounting principles. "Commitment Indebtedness" means the obligation of the Corporation to repay amounts disbursed pursuant to a binding commitment from a financial institution (including a line of credit, letter of credit, standby bond purchase agreement, reimbursement agreement or similar credit or liquidity facility or arrangement established in connection with the issuance or incurrence of any Indebtedness of the Corporation) to refinance, pay, purchase or redeem when due, tendered or required to be paid, purchased or redeemed, other Indebtedness of the Corporation which was incurred or issued in accordance with the provisions of the Loan Agreement, and the obligation of the Corporation to pay interest payable on amounts disbursed for such purposes, plus any fees payable to such financial institution for such commitment. "Completion Indebtedness" means Long-Term Indebtedness of the Corporation incurred for the purpose of financing, without materially changing the scope thereof, (a) the completion of facilities for which Long-Term Indebtedness was previously incurred under the provisions of the Loan Agreement, or (b) the improvement, replacement or substitutions for, or additions to, facilities for which Long-Term Indebtedness was previously incurred, necessitated by faulty design, damage to or destruction of such facilities, or required by enactment of legislation or the promulgation of any ruling affecting the operation of the Corporation by a government agency. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of March 1, 2012 between the Corporation and UMB Bank, N.A., as dissemination agent. "Corporation" means the University of Kansas Center for Research, Inc., a Kansas not-for-profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation as provided in the Loan Agreement. "Corporation Representative" means the Chairperson of the governing board of the Corporation or any Vice-Chairperson of the Corporation and any other duly authorized officer of the Corporation whose authority to execute any particular instrument or take a particular action under the Indenture or the Loan Agreement shall be evidenced to the Trustee by a certificate, bearing such authorized officer's signature and signed by the President or the Chairman. "Costs of Issuance" means issuance costs with respect to the Bonds (as described in Section 147(g) of the Internal Revenue Code, and any regulations thereunder in the case of Bonds which are not Taxable Bonds), as described in the Indenture. "Costs of Issuance Fund" means the fund by that name created by the Indenture.

F-3

"Costs of the Project" means costs permitted under the Act to be paid out of proceeds of Bonds with respect to the Project, including the total of all reasonable or necessary expenses incidental to the acquisition, construction, reconstruction, repair, alteration, improvement and extension of the Project, including without limitation: the expenses of studies and surveys, land title and mortgage title policies, architectural and engineering services and the cost of legal, organization or marketing services; financial and underwriting fees and expenses; the cost of acquiring or demolishing existing structures, developing the site of and constructing and equipping a new building constituting a part of the Project; rehabilitating, reconstructing, repairing or remodeling existing buildings constituting a part of the Project; and all other necessary and incidental expenses, including interest during construction on Bonds issued to finance the Project to a date subsequent to the estimated date of completion thereof; repayment of interim indebtedness incurred to finance a portion of the Project; and any other costs permitted by the Act. "Current Value" means the fair market value of such Property, which fair market value shall be evidenced by appraisal or in such other manner satisfactory to the Trustee. "Debt Service Fund" means the fund by that name created by the Indenture. "Debt Service Requirements" means, for the period of time for which calculated, the aggregate principal payments (whether at maturity, or upon mandatory sinking fund redemption, mandatory prepayment or otherwise) and interest payments required to be made during such period on Outstanding Long-Term Indebtedness; provided that:

(a) the amount of such payments for any future period shall be calculated in accordance with the assumptions contained in the Loan Agreement; and (b) such payments shall be excluded from Debt Service Requirements to the extent that such payments were paid or are payable from Escrow Deposits or from the proceeds of Refunding Indebtedness or other Long-Term Indebtedness (e.g., accrued interest and capitalized interest).

"Debt Service Reserve Fund" means the fund by that name created by the Indenture. "Debt Service Reserve Requirement" means (a) with respect to the Series 2006G Bonds, initially, the sum of $1,708,500, and thereafter, an amount equal to the least of (1) 10% of the original principal amount of the Series 2006G Bonds, (2) the Maximum Annual Debt Service on the Series 2006G Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2006G Bonds; and (b) with respect to any Additional Bonds that are entitled to the benefit of the Debt Service Reserve Fund, an amount equal to the least of (1) 10% of the original principal amount of such Additional Bonds, (2) the Maximum Annual Debt Service on the Additional Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Additional Bonds; provided, that with respect to Additional Bonds that are designated as Tax-Exempt Bonds, the maximum amount to be deposited in the Debt Service Reserve Fund from the proceeds of such Additional Bonds shall not exceed the amount permitted by the Internal Revenue Code to be deposited in a debt service reserve fund without being subject to yield restriction under the Internal Revenue Code and without causing the interest on such Additional Bonds (Tax-Exempt Bonds) to be included in gross income for federal income tax purposes. "Defeasance Obligations" means: (a) Government Obligations which are not subject to redemption prior to maturity; or

(b) Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations).

F-4

"Escrow Deposits" means cash, including proceeds of Refunding Indebtedness or other Long-Term Indebtedness, or Defeasance Obligations (including, where appropriate, the earnings or other increment to accrue thereon) that are on deposit in an irrevocable escrow or trust account with the Trustee or a third party escrow agent and are required to be applied to pay all or a portion of the principal of and interest on, as the same shall become due, any Bonds or Indebtedness which would otherwise be considered Outstanding and such amounts so required to be applied are sufficient to pay such principal and interest. "Expenses" means, for any period of time for which calculated, the total of all operating and non-operating expenses paid from unrestricted revenues and losses incurred during such period by the Corporation, determined in accordance with generally accepted accounting principles reflected in the Corporation's Audited Financial Statements, other than (a) interest expense, (b) depreciation and amortization, and (c) extraordinary losses resulting from the early extinguishment of debt, the sale or other disposition of assets not in the ordinary course of business or any reappraisal, revaluation or write-down of assets, and any other extraordinary losses or expenses. "First Supplemental Indenture" means the First Supplemental Trust Indenture dated as of October 1, 2006 between the Authority and the Trustee. "First Supplemental Loan Agreement" means the First Supplemental Loan Agreement dated as of October 1, 2006 between the Authority and the Corporation.

"Government Obligations" means the following:

(a) bonds, notes, certificates of indebtedness, treasury bills or other securities

constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America; and

(b) evidences of direct ownership of a proportionate or individual interest in future

interest or principal payments on specified direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee.

"Indebtedness" means all indebtedness or obligations of the Corporation for the repayment of borrowed money (including capital leases, installment purchase contracts and guarantees of indebtedness) shown as liabilities on the balance sheet of the Corporation or which are properly capitalized on the balance sheet of the Corporation in accordance with generally accepted accounting principles. "Indenture" means the Trust Indenture dated as of February 1, 2005, as supplemented by the First Supplemental Trust Indenture dated as of October 1, 2006 and the Second Supplemental Trust Indenture dated as of March 1, 2012, between the Authority and the Trustee, as from time to time further amended and supplemented by Supplemental Indentures in accordance with the provisions of the Indenture. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Loan" means the loan of the proceeds of the Bonds made by the Authority to the Corporation pursuant to the Loan Agreement. "Loan Agreement" means the Loan Agreement dated as of February 1, 2005, as supplemented by the First Supplemental Loan Agreement dated as of October 1, 2006 and the Second Supplemental Loan Agreement dated as of March 1, 2012, between the Authority and the Corporation, as from time to time further amended by Supplemental Loan Agreements in accordance with the provisions of the Loan Agreement.

F-5

"Loan Payments" means the payments of principal and interest on the Loan payable pursuant to the Loan Agreement. "Long-Term Indebtedness" means (a) Indebtedness having an original stated maturity or term greater than one year, or (b) Indebtedness having an original stated maturity or term equal to or less than one year that is renewable or extendable at the option of the debtor for a period greater than one year from the date of original issuance or incurrence thereof, or with respect to which the Corporation has incurred Commitment Indebtedness that would refinance such Indebtedness for a period extending beyond one year from the date of original issuance or incurrence thereof. "Maximum Annual Debt Service" means the maximum amount of Debt Service Requirements as computed for the then current or any succeeding fiscal year. "Maximum Interest Rate" means, with respect to any particular Bonds that provide for Variable Rate Indebtedness, a numerical rate of interest, which shall be set forth in the Supplemental Indenture authorizing such Bonds, that shall be the maximum rate of interest that such Variable Rate Indebtedness Bonds may at any time bear. "Moody's" means Moody's Investors Service, a Delaware corporation and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Moody's shall be deemed to refer to any other nationally recognized securities rating service designated by the Corporation, with notice to Authority and the Trustee. "Net Proceeds," when used with respect to any damage, destruction, condemnation or loss of title, means the gross proceeds from any insurance (or self-insurance) relating to damage or destruction of any Property of the Corporation, or condemnation award with respect to condemned Property or realization of title insurance with respect to any deficiency or loss of title to any Property, remaining after the payment of all expenses (including attorneys' fees and any expenses of the Authority or the Trustee) incurred in the collection of such gross proceeds. "Net Revenues Available for Debt Service" means, for any period of calculation, Revenues minus Expenses. "Notes" means the Series 2006G Note, the Series 2012E Note and any Additional Notes. "Officer's Certificate" means a written certificate of the Corporation signed by the Corporation Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Corporation with respect to matters set forth therein, and which certificate in each instance, including the scope, form, substance and other aspects thereof, is acceptable to the Trustee. "Opinion of Bond Counsel" means a written opinion in the form described in the Indenture of any legal counsel acceptable to the Authority and the Trustee who shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exclusion from gross income for federal income tax purposes of interest on such obligations. "Opinion of Counsel" means a written opinion in the form described in the Indenture of any legal counsel acceptable to the Corporation and the Trustee and, to the extent the Authority is asked to take action in reliance thereon, the Authority, who may be an employee of or counsel to the Corporation or the Trustee. "Original Indenture" means the Trust Indenture dated as of February 1, 2005, as originally executed by the Authority and the Trustee.

F-6

"Original Loan Agreement" means the Loan Agreement dated as of February 1, 2005, as originally executed by the Authority and the Corporation. "Outstanding" means

(a) when used with respect to Bonds, as of the date of determination, all Bonds theretofore authenticated and delivered under the Indenture, except:

(1) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for

cancellation as provided in the Indenture; (2) Bonds for whose payment or redemption money or Defeasance Obligations

in the necessary amount has been deposited with the Trustee or any Paying Agent in trust for the owners of such Bonds as provided in the Indenture, provided that, if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made;

(3) Bonds in exchange for or in lieu of which other Bonds have been

authenticated and delivered under the Indenture; and (4) Bonds alleged to have been destroyed, lost or stolen which have been paid as

provided in the Indenture; and

(b) when used with respect to other Indebtedness, as of the date of determination, all other Indebtedness theretofore issued or incurred by the Corporation, except Indebtedness that has been discharged in accordance with the terms of the instrument or instruments creating or evidencing such Indebtedness.

"Paying Agent" means the Trustee and any other commercial bank or trust Corporation organized under the laws of any state of the United States of America or any national banking association designated pursuant to the Indenture or any Supplemental Indenture as paying agent for any series of Bonds at which the principal of, redemption premium, if any, and interest on such Bonds shall be payable. "Permitted Encumbrances" means, with respect to Property of the Corporation as of any particular time, the following:

(a) the lien and security interest of the Loan Agreement and any other liens or security interest in the Property that equally and ratably secure all of the Notes on a parity basis;

(b) liens for taxes, assessments, and other governmental charges not delinquent, or if

delinquent are being contested in good faith by appropriate proceedings and as to which the Corporation shall have set aside on its books adequate reserves with respect thereto;

(c) mechanic's, laborer's, materialman's, supplier's or vendor's liens not filed of record

and similar charges not delinquent, or if filed of record are being contested in good faith and have not proceeded to judgment and as to which the Corporation shall have set aside on its books adequate reserves with respect thereto;

(d) liens in respect of judgments or awards with respect to which the Corporation is in

good faith currently prosecuting an appeal or proceedings for review, and with respect to which the Corporation shall have secured a stay of execution pending such appeal or proceedings for review, provided the Corporation shall have set aside on its books adequate reserves with respect thereto;

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(e) utility, access and other easements and rights-of-way, restrictions, encumbrances and exceptions that do not materially affect the marketability of title to such Property and do not in the aggregate materially impair the use of such Property for the purposes for which it is held by the Corporation;

(f) such minor defects and irregularities of title as normally exist with respect to

property similar in character to the Property affected thereby and which do not materially affect the marketability of title to or value of such Property and do not materially impair the use of such Property for the purposes for which it is held by the Corporation;

(g) zoning laws, ordinances or regulations and similar restrictions that are not violated

by the Property affected thereby; (h) statutory liens and rights of setoff granted to banks or other financial Corporations

with respect to funds on deposit in the ordinary course of business; (i) restrictions on Property received by the Corporation through gifts, grants, bequests,

contributions or donations imposed by the donor or grantor of such Property and which consist solely of restrictions on the use of such Property or the income therefrom;

(j) liens existing on Property at the time of its acquisition by the Corporation through

purchase, lease or otherwise, or liens existing on Property of a Person on the date such Person merges into or consolidates with the Corporation that were not imposed or incurred in contemplation of such Person merging into or consolidating with the Corporation; provided, that no such lien may be increased, extended, renewed, or modified after such date to apply to any Property of the Corporation not subject to such lien on such date unless such lien as so increased, extended, renewed or modified otherwise qualifies as a Permitted Encumbrance;

(k) leases under which the Corporation is lessor entered into in accordance with the

disposition of Property provisions in the Loan Agreement; (l) purchase money mortgages, security interests, and liens securing purchase money

indebtedness, placed upon Property that does not constitute real property in order to obtain the use of such Property or to secure a portion of the purchase price thereof;

(m) liens on Property securing Subordinated Indebtedness, provided that a superior lien

on the same Property is granted to the Note; (n) liens on Property which are existing at the date of the Indenture and the Loan

Agreement; provided that no such lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of the Corporation not subject to such lien on such date unless such lien as so increased, extended, renewed or modified otherwise qualifies as a Permitted Encumbrance;

(o) the University Agreement; (p) any other lien or encumbrance created or incurred in the ordinary course of business

which does not secure, directly or indirectly, the repayment of borrowed money or the payment of installment sales contracts or capital leases and which, individually or in the aggregate, does not materially impair the value or the utility of the Property subject to such lien or encumbrance; and

(q) any other liens on Property expressly permitted by the Loan Agreement or approved

in writing by the owners of all of the Bonds.

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"Permitted Investments" means, if and to the extent the same are at the time legal for investment of funds held under the Indenture:

(a) Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations); or

(b) Government Obligations; (c) obligations of any of the following federal agencies which obligations represent full

faith and credit of the United States of America, including:

- Export-Import Bank - Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing & Urban Development (PHA's) - Federal Housing Administration;

(d) bonds, notes or other evidences of indebtedness rated "AAA" by Standard & Poor's

and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years;

(e) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances

with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1+" by Standard & Poor's and "P-1" by Moody's and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank);

(f) commercial paper which is rated at the time of purchase in the single highest

classification, "A-1+" by Standard & Poor's and "P-1" by Moody's and which matures not more than 270 days after the date of purchase;

(g) investments in a money market fund rated "AAAm" or "AAAm-G" or better by

Standard & Poor's; (h) pre-refunded Municipal Obligations defined as follows: Any bonds or other

obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Standard & Poor's and Moody's or any successors thereto; or (B)(i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate;

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(i) investment agreements with entities rated AA or better by Standard & Poor's, and

acceptable in form to the Trustee; and (j) other forms of investments approved in writing by the Bond Insurer and Standard &

Poor's.

The value of the Permitted Investments shall be determined as follows:

(a) as to Permitted Investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then The New York Times): the average of the bid and asked prices for such Permitted Investments so published on or most recently prior to such time of determination;

(b) as to Permitted Investments the bid and asked prices of which are not published on a

regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such Permitted Investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such Permitted Investments or the bid price published by a nationally recognized pricing service; and

(c) as to certificates of deposit and bankers acceptances: the face amount thereof, plus

accrued interest. "Person" means any natural person, firm, association, corporation, partnership, limited liability company, joint stock company, a joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body. "Prime Rate" means, for any date of determination, the interest rate per annum publicly announced from time to time by the Trustee as its "prime rate." "Project" means (i) the facilities described in the Indenture which constitute Research Facilities, and (ii) the improvement of existing Research Facilities or construction of new Research Facilities. "Property" means, with respect to the Corporation, any and all rights, titles and interests of the Corporation in and to all revenues from the operation of the Corporation and any and all other property, whether real or personal, tangible (including cash) or intangible, wherever situated and whether now owned or thereafter acquired. "Purchase Money Indebtedness" means Indebtedness incurred by the Corporation pursuant to a purchase money contract, conditional sale agreement, installment purchase contract, capitalized lease, or other similar debt or title retention agreement in connection with the acquisition of real or personal property and secured by a purchase money mortgage, security interest or lien with respect to the property acquired by the Corporation, where the lien of the seller or lender under such agreement is limited to such property. "Qualified Swap Agreement" means an interest rate exchange, hedge or similar agreement (including schedule and credit support annex, if any) entered into by the Authority and a Swap Provider, or the Corporation and a Swap Provider, expressly identified in a certificate of the Authority or the Corporation, as applicable, as having been entered into in order to hedge the interest rate payable on all or any portion of any Bonds or other Outstanding Indebtedness or any Bonds expected to be issued, which agreement may include, without limitation, an interest rate swap, a forward or futures contract or an option (e.g., a call, put, cap, floor or collar). "Rebate Fund" means the fund by that name created by the Indenture.

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"Record Date" means the 15th day (whether or not a Business Day) of the calendar month next preceding the month in which an interest payment on any Bond is to be made. "Redemption Fund" means the fund by that name created by the Second Supplemental Indenture. "Refunding Indebtedness" means Long-Term Indebtedness issued for the purpose of refunding other Long-Term Indebtedness (including Long-Term Indebtedness commonly referred to as current refunding indebtedness, advance refunding indebtedness or cross-over refunding indebtedness where the proceeds of such Refunding Indebtedness are deposited in an irrevocable escrow or trust account to secure the payment on the applicable payment dates of the interest and principal on such Refunding Indebtedness and/or the Indebtedness being refunded). "Research Facilities" means research facilities utilized by or owned by the Corporation located in Lawrence, Kansas, including research facilities on-campus and off-campus of the University of Kansas for use in research and development activities and related facilities, as more fully described in the Indenture, as supplemented and amended. "Revenues" means, for any period of time for which calculated, the total of all operating and non-operating unrestricted gross revenues and gains and net assets released from restrictions derived by the Corporation during such period, determined in accordance with generally accepted accounting principles reflected in the Corporation's Audited Financial Statements. "Second Supplemental Indenture" means the Second Supplemental Trust Indenture dated as of March 1, 2012 entered into between the Authority and the Trustee pursuant to the Original Indenture. "Second Supplemental Loan Agreement" means the Second Supplemental Loan Agreement dated as of March 1, 2012 entered into between the Authority and the Corporation pursuant to the Original Loan Agreement. "Series 2005B Bonds" means the series of Taxable Revenue Bonds (University of Kansas Center for Research, Inc. Project), Series 2005B, in the original principal amount of $45,625,000, issued pursuant to the Original Indenture. "Series 2006G Bonds" means, collectively, the Series 2006G-1 Bonds and the Series 2006G-2 Bonds. "Series 2006G-1 Bonds" means the series of Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2006G-1, in the initial principal amount of $15,830,000, issued pursuant to the First Supplemental Indenture, which series of bonds were designated as Tax-Exempt Bonds. "Series 2006G-2 Bonds" means the series of Taxable Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2006G-2, in the initial principal amount of $1,255,000, issued pursuant to the First Supplemental Indenture. "Series 2006G Note" means the promissory note that evidences the obligation of the Corporation to repay the loan to the Corporation of the proceeds of the Series 2006G Bonds and which is referred to in the First Supplemental Loan Agreement. "Series 2012E Bonds" means, collectively, the Series 2012E-1 Bonds and the Series 2012E-2 Bonds.

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"Series 2012E-1 Bonds" means the series of Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2012E-1, in the original principal amount of $14,075,000, issued pursuant to the Second Supplemental Indenture, which series of bonds are designated as Tax-Exempt Bonds. "Series 2012E-2 Bonds" means the series of Taxable Refunding Revenue Bonds (University of Kansas Center for Research, Inc. Project) Series 2012E-2, in the original principal amount of $15,600,000, issued pursuant to the Second Supplemental Indenture. "Series 2012E Note" means the promissory note that evidences the obligation of the Corporation to repay the loan to the Corporation of the proceeds of the Series 2012E Bonds and which is referred to in the Second Supplemental Loan Agreement. "Short-Term Indebtedness" means Indebtedness having an original maturity less than or equal to one year from the date of original incurrence thereof, and not renewable or extendible at the option of the obligor thereon for a term greater than one year beyond the date of original incurrence. "Standard & Poor's" means Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Standard & Poor's shall be deemed to refer to any other nationally recognized securities rating service designated by the Corporation, with notice to Authority and the Trustee. "Subordinated Indebtedness" means Indebtedness that by the terms thereof is specifically junior and subordinate to the Bonds, the Notes and any Additional Obligations with respect to payment of principal and interest thereon. "Supplemental Indenture" means any indenture supplemental to the Original Indenture entered into by the Authority and the Trustee pursuant to the Original Indenture, specifically including the First Supplemental Trust Indenture and the Second Supplemental Trust Indenture. "Supplemental Loan Agreement" means any agreement supplemental to the Original Loan Agreement entered into by the Authority and the Corporation pursuant to the Original Loan Agreement, specifically including the First Supplemental Loan Agreement and the Second Supplemental Loan Agreement. "Swap Provider" means any counterparty with whom the Authority or the Corporation enters into a Qualified Swap Agreement whose senior long term debt obligations, or whose obligations under a Qualified Swap Agreement are guaranteed by a party whose senior long term debt obligations, are rated (at the time of execution of the Qualified Swap Agreement) in one of the top two rating categories by Standard & Poor's or Moody's, and which is obligated to make Swap Provider Payments under a Qualified Swap Agreement. "Swap Provider Payments" means any payment (including Termination Payments) required to be made by or on behalf of a Swap Provider pursuant to a Qualified Swap Agreement.

"Taxable Bonds" means Bonds the interest on which is not excluded from gross income for federal

income tax purposes, including the Series 2006G-2 Bonds and the Series 2012E-2 Bonds.

"Tax Compliance Agreement" means the Tax Compliance Agreement dated as of March 1, 2012 among the Authority, the Corporation and the Trustee, as from time to time amended in accordance with the provisions thereof.

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"Tax-Exempt Bonds" means all Bonds (including the Series 2006G-1 Bonds and the Series 2012E-1 Bonds) except the Taxable Bonds. "Tax-Exempt Organization" means a nonprofit organization, organized under the laws of the United States of America or any state thereof, that is an organization described in Section 501(c)(3) of the Internal Revenue Code, is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code, and is not a "private foundation" within the meaning of Section 509(a) of the Internal Revenue Code, or corresponding provisions of federal income tax laws from time to time in effect. "Termination Payments" shall mean the amount payable by the Authority, the Corporation or a Swap Provider pursuant to a Qualified Swap Agreement for the early termination of the obligations, in whole or in part, of the parties to that Qualified Swap Agreement. "Transaction Documents" means the Indenture, including the Second Supplemental Indenture, the Bonds, the Loan Agreement, including the Second Supplemental Loan Agreement, the Notes, the University Agreement, the Bond Purchase Agreement, the Tax Compliance Agreement, the Official Statement relating to the Bonds and any and all other documents or instruments that evidence or are a part of the transactions referred to in the Indenture, the Loan Agreement or the Official Statement or contemplated by the Indenture, the Loan Agreement or the Official Statement; and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing; provided, however, that when the words "Transaction Documents" are used in the context of the authorization, execution, delivery, approval or performance of Transaction Documents by a particular party, the same shall mean only those Transaction Documents that provide for or contemplate authorization, execution, delivery, approval or performance by such party. "Trust Estate" means the Trust Estate described in the Granting Clauses of the Indenture, including:

(a) All rights, title and interest of the Authority (including, but not limited to, the right to enforce any of the terms thereof) in, to and under (1) the Loan Agreement, including, without limitation, all Loan Payments and other payments to be received by the Authority and paid by the Corporation under and pursuant to and subject to the provisions of the Loan Agreement (except the Authority's rights to payment of its fees and expenses and to indemnification as set forth in the Loan Agreement and as otherwise expressly set forth therein), (2) the Notes, (3) the University Agreement, (4) any Qualified Swap Agreement and (5) all financing statements or other instruments or documents evidencing, securing or otherwise relating to the loan of the proceeds of the Bonds; and

(b) All moneys and securities (except moneys and securities held in the Rebate Fund) from time to time held by the Trustee under the terms of the Indenture; and

(c) any and all other property (real, personal or mixed) of every kind and nature from

time to time, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Indenture by the Authority or by anyone in its behalf or with its written consent, to the Trustee, which is thereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms thereof.

The Trustee shall hold in trust and administer the Trust Estate, upon the terms and conditions set forth in the Indenture for the equal and pro rata benefit and security of each and every owner of Bonds, without preference, priority or distinction as to participation in the lien, benefit and protection of the Indenture of one Bond over or from the others, except as otherwise expressly provided in the Indenture. "Trustee" means UMB Bank, N.A., as trustee, and its successors and assigns. "University" means The University of Kansas.

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"University Agreement" means the Affiliation Agreement, dated as of December 21, 2004, as

amended by the First Amendment to Affiliation Agreement, dated as of March 1, 2012, each between the University and the Corporation, as further supplemented or amended from time to time, pursuant to which the University agrees to make certain payments with respect to the Series 2012E Bonds in the event that the revenues of the Corporation are not sufficient to pay the principal of, redemption premium, if any, and interest on the Series 2012E Bonds when due.

"Unrestricted Cash and Investments" means (a) the line item 'cash and cash equivalents' as set forth in the most recent audited financial statements of the Corporation, (b) the line item 'investments' as set forth in the most recent audited financial statements of the Corporation, and (c) amounts on deposit in the Debt Service Reserve Fund, if any, that are not restricted in any manner. "Value", as of any particular time of determination, means, (a) with respect to cash the face value thereof, (b) with respect to any investments, other than those in the Debt Service Reserve Fund, the lower of the cost of the investment or the market price of the investment excluding accrued interest on the date of valuation, (c) with respect to any investments in the Debt Service Reserve Fund, the market price of the investment excluding accrued interest on the date of valuation, and (d) with respect to an insurance policy, letter of credit, or surety bond guaranteeing payments into the Debt Service Reserve Fund, the face value thereof. "Variable Rate Indebtedness" means any Indebtedness which provides for interest to be payable thereon at a rate per annum that may vary from time to time over the term thereof in accordance with procedures provided in the instrument creating such Indebtedness.

SUMMARY OF THE INDENTURE The following is a summary of certain provisions of the Indenture. This summary does not purport to be complete, and reference is made to the full text of the Indenture for a complete recital of its terms, as well as a complete recital of the defined terms used therein. Authorization and Amount of Bonds. The Authority may issue Bonds in one or more series from time to time under the Indenture, but subject to the provisions of the Indenture and any Supplemental Indenture authorizing a series of Bonds. The total principal amount of Bonds, the number of Bonds and series of Bonds that may be issued under the Indenture is not limited, except with respect to the Series 2006G Bonds, the Series 2012E Bonds and with respect to Additional Bonds as provided in the Indenture and in the Supplemental Indenture providing for the issuance thereof, and except as may be limited by law. The Series 2006G Bonds are entitled to the benefit and security of the Debt Service Reserve Fund, but the Series 2012E Bonds are not entitled to the benefit and security of the Debt Service Reserve Fund. Authorization of Additional Bonds. Additional Bonds may be issued under and equally and ratably secured by the Indenture on a parity (except as otherwise provided in this Section) with the Series 2006G Bonds, the Series 2012E Bonds and any other Additional Bonds at any time and from time to time, upon compliance with the conditions set forth in the Indenture and the Loan Agreement, for any purpose authorized under the Act. Except as to any difference in the date, the maturities, the rates of interest or the provisions for redemption, such Additional Bonds shall be on a parity with and shall be entitled to the same benefit and security of the Indenture as the Series 2006G Bonds, the Series 2012E Bonds and any other Additional Bonds, and except that the Authority may issue Additional Bonds that are not entitled to the benefit and security of the Debt Service Reserve Fund or any comparable reserve fund. If such Additional Bonds are secured by the Debt Service Reserve Fund, such Fund shall be fully funded to the Debt Service Reserve Requirement at the time of

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issuance of such Additional Bonds from the proceeds of the sale of such Additional Bonds or other available moneys. . As a condition precedent to the issuance of Additional Bonds, there shall be filed with the Trustee certain opinions, documents and certificates as described in the Indenture, including (a) an Officer's Certificate (1) stating that no event of default under the Loan Agreement has occurred and is continuing and that no event has occurred and is continuing which with the lapse of time or giving of notice, or both, would constitute such an event of default, and (2) stating the purpose or purposes for which such Additional Bonds or Notes are being issued and the classification of the Indebtedness under the Loan Agreement and accompanied by the certificates, reports or opinions demonstrating compliance with the applicable tests with respect to Indebtedness set forth in the Loan Agreement, and (b) an Opinion of Bond Counsel to the effect that all requirements for the issuance of such Additional Bonds have been met. Except as provided in the Indenture and in the Loan Agreement, the Authority will not otherwise issue any obligations on a parity with the Bonds, but the Authority may issue other obligations specifically subordinate and junior to the Bonds. Redemption of Bonds Generally. The Series 2012E Bonds are subject to redemption prior to maturity in accordance with their terms and the terms and provisions set forth in this Official Statement. Additional Bonds shall be subject to redemption prior to maturity in accordance with the applicable terms and provisions contained in the Indenture and as may be specified in such Bonds and the Supplemental Indenture authorizing such Bonds. Creation and Ratification of Funds and Accounts. There are created and ordered to be established in the custody of the Trustee the following special trust funds in the name of the Authority to be designated as follows: (a) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Project Fund" (the "Project Fund"). (b) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Costs of Issuance Fund" (the "Costs of Issuance Fund"). (c) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Debt Service Fund" (the "Debt Service Fund"). (d) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Debt Service Reserve Fund" (the "Debt Service Reserve Fund"). (e) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Rebate Fund" (the "Rebate Fund"). (f) "Kansas Development Finance Authority–University of Kansas Center for Research,

Inc. Redemption Fund" (the "Redemption Fund"). The Trustee is authorized to establish separate accounts within such funds or otherwise segregate moneys within such funds, on a book-entry basis or in such other manner as the Trustee may deem necessary or convenient, or as the Trustee shall be instructed by the Authority. The Trustee shall establish other separate accounts within such funds or otherwise segregate moneys within such funds, on a book-entry basis or in such other manner as the Trustee may deem necessary or convenient, for each separate series of Bonds issued under the Indenture, including the Series 2006G and the Series 2012E Bonds; provided, that no separate accounts shall be created within the Debt Service Fund with

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respect to each series of Bonds, and provided further, that no account will be created within the Project Fund or the Debt Service Reserve Fund with respect to the Series 2012E Bonds. Debt Service Fund. The Trustee shall deposit and credit to the Debt Service Fund, as and when received, as follows:

(a) The amounts required to be deposited therein from proceeds of the sale of the Bonds, and all Loan Payments made by the Corporation pursuant to the Second Supplemental Loan Agreement.

(b) Any amount required to be transferred from the Project Fund to the Debt Service

Fund upon completion of a Project pursuant to applicable provisions of a Supplemental Indenture authorizing the issuance of Additional Bonds, and any amount required to be transferred from the Debt Service Reserve Fund;

(c) All moneys received from the University pursuant to the University Agreement for

the payment of Debt Service Requirements with respect to the Series 2012E Bonds, which amounts shall be applied solely to pay the principal of and redemption premium, if any, and interest on the Series 2012E Bonds and shall not be applied to pay the principal of and redemption premium, if any, and interest on any other series of Bonds.

(d) Any amount required to be transferred to the Debt Service Fund from the Costs of

Issuance Fund pursuant to the Second Supplemental Indenture. (e) Interest earnings and other income on Permitted Investments required to be deposited

in the Debt Service Fund pursuant to the Indenture. (f) All other moneys received by the Trustee under and pursuant to any of the provisions

of the Loan Agreement or any other Transaction Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into such account of the Debt Service Fund.

The moneys in the Debt Service Fund shall be held in trust and shall be applied in accordance with the provisions of the Indenture to pay the principal of and redemption premium, if any, and interest on the Bonds as the same becomes due and payable.

Debt Service Reserve Fund. The Series 2012E Bonds will not be secured by the Debt Service Reserve Fund. The Series 2006G Bonds are secured by the Debt Service Reserve Fund.

The Trustee shall deposit and credit to the applicable account of the Debt Service Reserve Fund, as and when received, as follows: (a) The initial deposits from proceeds of a series of Bonds in an amount equal to the Debt Service

Reserve Requirement with respect to such series of Bonds. (b) Amounts on deposit in the separate accounts in the Debt Service Reserve Fund for a series of

Bonds that are transferred for deposit in one of the other separate accounts for a series of Bonds at the time that such amounts are released under the Indenture.

(c) Any payments required to be made by the Corporation pursuant to the Loan Agreement to

make up a deficiency in an account of the Debt Service Reserve Fund.

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(d) Interest earnings and other income on Permitted Investments required to be deposited in an account of the Debt Service Reserve Fund pursuant to the Indenture.

(e) Any amounts required by a Supplemental Indenture authorizing the issuance of Additional

Bonds to be deposited in an account of the Debt Service Reserve Fund, as specified in such Supplemental Indenture.

(f) All other moneys received by the Trustee under and pursuant to any of the provisions of the

Loan Agreement or any other Transaction Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into an account of the Debt Service Reserve Fund.

Moneys in each separate account of the Debt Service Reserve Fund shall be disbursed and expended by the Trustee solely for the payment of and redemption premium, if any, and interest on the applicable series of Bonds if sufficient moneys therefor are not available in the Debt Service Fund. In the event the balance of moneys in the Debt Service Fund is insufficient to pay the principal of and redemption premium, if any, and interest on a series of Bonds when due and payable, moneys in the applicable account of the Debt Service Reserve Fund shall be transferred into the Debt Service Fund in an amount sufficient to make up such deficiency. The Trustee may use moneys in the applicable account of the Debt Service Reserve Fund for such purpose whether or not the amount in such account of the Debt Service Reserve Fund at that time equals the Debt Service Reserve Requirement. Such moneys shall be used first to make up any deficiency in the payment of interest and then principal. Moneys in each account of the Debt Service Reserve Fund shall also be used to pay the last Bonds of such series becoming due unless such Bonds and all interest thereon be otherwise paid, and thereafter any remaining balance in such account of the Debt Service Reserve Fund shall be paid to the Corporation. The Trustee shall determine the Value of cash and Permitted Investments in the Debt Service Reserve Fund each July 1 and at the time of any withdrawal from the Debt Service Reserve Fund and at such other times as the Trustee deems appropriate. If on any such valuation date, the Value of cash and Permitted Investments on deposit in the Debt Service Reserve Fund is less than the Debt Service Reserve Requirement, or at any time any amount is withdrawn from the Debt Service Reserve Fund for the purposes described above, the Trustee shall immediately notify the Corporation of such deficiency, and instruct the Corporation to make up such deficiency by making payment of such deficiency in twelve equal monthly installments directly to the Trustee for deposit in the Debt Service Reserve Fund; provided, however, that if the Trustee or the owners of not less than a majority in principal amount of Bonds then Outstanding shall approve another schedule of periodic payments, the amount of such deficiency shall be paid to the Trustee in accordance with such schedule. If at any time of valuation, the Value of cash and Permitted Investments on deposit in the Debt Service Reserve Fund is in excess of the Debt Service Reserve Requirement, the amount of such excess shall be transferred to the Debt Service Fund. The Debt Service Reserve Requirement may be satisfied by deposits in cash, Permitted Investments, or an insurance policy, letter of credit or surety bond issued by a Qualified Financial Corporation guaranteeing payments into the Debt Service Reserve Fund in the amount of the Debt Service Reserve Requirement, subject to the requirements and conditions specified in the Indenture. Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Compliance Agreement. All amounts on deposit at any time in the Rebate Fund shall be held by the Trustee in trust to the extent required to pay rebatable arbitrage to the United States of America, and neither the Corporation, the Authority nor the owner of any Bonds shall have any rights in or claim to such money.

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Redemption Fund. Moneys deposited in the Redemption Fund pursuant to the Second Supplemental Indenture shall be applied by the Trustee to the redemption of the Series 2005B Bonds on March 16, 2012. Payments Due on Saturdays, Sundays and Holidays. In any case where the date of maturity of principal of, redemption premium, if any, or interest on the Bonds or the date fixed for redemption of any Bonds shall be a day other than a Business Day, then payment of principal, redemption premium, if any, or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if funds sufficient to pay such Bond shall have been made available to the Trustee, all liability of the Authority to the owner thereof for the payment of such Bond, shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in trust in a separate trust account, without liability for interest thereon, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under the Indenture or on or with respect to said Bond. If any Bond shall not be presented for payment within six years following the date when such Bond becomes due, whether by maturity or otherwise, the Trustee shall repay to the Corporation the funds theretofore held by it for payment of such Bond without liability for interest thereon, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Corporation, and the owner thereof shall be entitled to look only to the Corporation for payment, and then only to the extent of the amount so repaid, and the Corporation shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Records and Reports of Trustee. The Trustee agrees to maintain such records with respect to any and all moneys or investments held by the Trustee pursuant to the provisions of the Indenture as are requested by the Authority. The Trustee shall furnish to the Authority and the Corporation, quarterly on the tenth Business Day after the end of each calendar quarter, a report on the status of each of the funds and accounts established under this Section which are held by the Trustee, showing the balance in each such fund or account as of the first day of the preceding month, the total of deposits to and the total of disbursements from each such fund or account, the dates of such deposits and disbursements, and the balance in each such fund or account on the last day of the preceding month. The Trustee shall render an annual accounting for each calendar year ending December 31 to the Authority, the Corporation, and any bondowner at the expense of such bondowner requesting the same, showing in reasonable detail all financial transactions relating to the Trust Estate during the accounting period, including investment earnings and the balance in any funds or accounts created by the Indenture as of the beginning and close of such accounting period.

Moneys to be Held in Trust. All moneys deposited with or paid to the Trustee for the funds and accounts held under the Indenture, and all moneys deposited with or paid to any Paying Agent under any provision of the Indenture shall be held by the Trustee or Paying Agent in trust and shall be applied only in accordance with the provisions of the Indenture and the Loan Agreement, and, until used or applied as therein provided, shall (except for moneys in the Rebate Fund) constitute part of the Trust Estate and be subject to the lien, terms and provisions thereof and shall not be commingled with any other funds of the Authority or the Corporation except as otherwise provided in the Indenture for investment purposes. Neither the Trustee nor any Paying Agent shall be under any liability for interest on any moneys received thereunder except to the extent such moneys are invested in Permitted Investments. Investment of Moneys. Moneys held in each of the funds and accounts under the Indenture shall, pursuant to written directions of the Corporation Representative, or in the absence of such direction at the discretion of the Trustee, be invested and reinvested by the Trustee in accordance with the provisions of the Indenture and the Tax Compliance Agreement in Permitted Investments which mature or are subject to

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redemption by the owner thereof prior to the date such funds are expected to be needed. The Trustee may make any investments permitted by the provisions of this Section through its own bond department or short-term investment department or that of any affiliate of the Trustee and may pool moneys for investment purposes, except moneys held in any fund or account that are required to be yield restricted in accordance with the Tax Compliance Agreement, which shall be invested separately. Any such Permitted Investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund or account in which such moneys are originally held. The interest accruing on each fund or account and any profit realized from such Permitted Investments (other than any amounts required to be deposited in the Rebate Fund) shall be credited to such fund or account, and any loss resulting from such Permitted Investments shall be charged to such fund or account; provided that interest earned on moneys on deposit in the Debt Service Reserve Fund shall be transferred to the Debt Service Fund if amounts on deposit in the Debt Service Reserve Fund equal to the Debt Service Reserve Requirement. The Trustee shall sell or present for redemption and reduce to cash a sufficient amount of such Permitted Investments whenever it shall be necessary to provide moneys in any fund or account for the purposes of such fund or account and the Trustee shall not be liable for any loss resulting from such investments.

Inspection of Books. The Authority covenants and agrees that all books and documents in its possession relating to the Bonds, the Indenture and the Loan Agreement, and the transactions relating thereto shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate. The Trustee covenants and agrees that all books and documents in its possession relating to the Bonds, the Indenture and the Loan Agreement, and the transactions relating thereto, including financial statements of the Corporation, shall be open to inspection by the Authority during business hours upon reasonable notice.

Enforcement of Rights. The Authority agrees that the Trustee, as assignee, transferee, pledgee, and owner of a security interest under the Indenture in its name or in the name of the Authority may enforce all rights of the Authority and the Trustee and all obligations of the Corporation under and pursuant to the Loan Agreement and any other Transaction Documents for and on behalf of the bondowners, whether or not the Authority is in default under the Indenture. The Loan Agreement and all other Transaction Documents shall be delivered to and held by the Trustee. Amendments to the Loan Agreement. The Loan Agreement may be supplemented or amended by Supplemental Loan Agreements executed by the Authority and the Corporation as provided in the Loan Agreement; provided that subsequent to the issuance of any Bonds and prior to their payment in full (or provision thereof having been made in accordance with the provisions of the Indenture), the Loan Agreement may not be amended, changed, modified, altered or terminated without the written consent of the Trustee. Tax Covenants. The Authority (to the extent within its power or direction) shall not use or permit the use of any proceeds of Tax-Exempt Bonds or any other funds of the Authority, directly or indirectly, in any manner, and shall not take or permit to be taken any other action or actions, which would cause the interest on any Tax-Exempt Bond to be included in gross income for federal income tax purposes. The Authority agrees that so long as any of the Tax-Exempt Bonds remain Outstanding, it will comply with the provisions of the Tax Compliance Agreement applicable to the Authority. The Trustee agrees to comply with the provisions of the Tax Compliance Agreement, and may rely upon the Tax Compliance Agreement and any Opinion of Bond Counsel which sets forth such requirements, to comply with any statute, regulation or ruling that may apply to it as Trustee thereunder and relating to reporting requirements or other requirements necessary to preserve the exclusion from federal gross income of the interest on the Tax-Exempt Bonds. The Trustee from time to time, in its sole discretion, may cause a firm of attorneys, consultants or independent accountants or an investment banking firm to supply the Trustee, on behalf of the Authority, with such information as the Trustee, on behalf of the Authority, may request in order to determine in a manner reasonably satisfactory to the Trustee, on behalf of the Authority, all matters relating

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to (a) the actuarial yields on the Tax-Exempt Bonds as the same may relate to any data or conclusions necessary to verify that the Tax-Exempt Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code, and (b) compliance with rebate requirements of Section 148(f) of the Internal Revenue Code. Payment for fees, charges, costs and expenses incurred in connection with supplying the foregoing information shall be paid by the Corporation.

Events of Default. The term "event of default," wherever used in the Indenture, means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest on any Bond when such interest becomes due and payable; or

(b) default in the payment of the principal of (or premium, if any, on) any Bond when the

same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise); or

(c) default in the performance, or breach, of any covenant or agreement of the Authority

in the Indenture (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given to the Authority and the Corporation by the Trustee or to the Authority, the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Authority shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(d) any event of default under the Loan Agreement shall occur and is continuing and has

not been waived. Acceleration of Maturity; Rescission and Annulment. If an event of default occurs and is continuing, the Trustee may, and if requested in writing by the Bond Insurer and the owners of not less than 25% in principal amount of the Bonds Outstanding shall, by written notice to the Authority and the Corporation, declare the principal of all Bonds Outstanding and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest shall become immediately due and payable. Notwithstanding any other provision of the Indenture, the Bond Insurer, acting alone, shall have the right to direct all remedies in the event of a default. The Bond Insurer shall be recognized as the registered owner of each Bond which it insures for the purpose of exercising all rights and privileges available to bondowners. With respect to each Bond which it insures, the Bond Insurer shall have the right to institute any suit, action or proceeding at law or in equity under the same terms as a bondowner in accordance with the applicable provisions of the Indenture. At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on any Bonds has been obtained by the Trustee as provided in this Section, the owners of a majority in principal amount of the Bonds Outstanding may, by written notice to the Authority, the Corporation and the Trustee, rescind and annul such declaration and its consequences if: (a) the Authority has deposited with the Trustee a sum sufficient to pay: (1) all overdue installments of interest on all Bonds,

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(2) the principal of (and premium, if any, on) any Bonds which have become

due otherwise than by such declaration of acceleration and interest thereon at the rate prescribed therefor in the Bonds,

(3) interest upon overdue installments of interest at the rate prescribed therefor

in the Bonds, and (4) all sums paid or advanced by the Trustee thereunder and the reasonable

compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and

(b) all events of default, other than the non-payment of the principal of Bonds which

have become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Indenture.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. Exercise of Remedies by the Trustee. Upon the occurrence and continuance of any event of default under the Indenture, unless the same is waived as provided in the Indenture, the Trustee shall have the following rights and remedies, in addition to any other rights and remedies provided under the Indenture or by law: (a) Right to Bring Suit, Etc. The Trustee may pursue any available remedy at law or in

equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Bonds Outstanding, including interest on overdue principal (and premium, if any) and on overdue installments of interest, and any other sums due under the Indenture, to realize on or to foreclose any of its interests or liens under the Indenture or any other Transaction Document, to enforce and compel the performance of the duties and obligations of the Authority as set forth in the Indenture and to enforce or preserve any other rights or interests of the Trustee under the Indenture with respect to any of the Trust Estate or otherwise existing at law or in equity.

(b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by

the owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and remedies conferred by the Indenture as the Trustee shall deem most expedient in the interests of the bondowners.

(c) Appointment of Receiver. Upon the filing of a suit or other commencement of

judicial proceedings to enforce the rights of the Trustee and of the bondowners under the Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer.

(d) Suits to Protect the Trust Estate. The Trustee shall have power to institute and to

maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Indenture and to protect its interests and the interests of the bondowners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under the Indenture or be prejudicial to the interests of the bondowners or the Trustee, or to intervene (subject to the approval of a court of competent

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jurisdiction) on behalf of the bondowners in any judicial proceeding to which the Authority or the Corporation is a party and which in the judgment of the Trustee has a substantial bearing on the interests of the bondowners.

(e) Enforcement Without Possession of Bonds. All rights of action under the Indenture or

any of the Bonds may be enforced and prosecuted by the Trustee without the possession of any of the Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and subject to the provisions of the Indenture, be for the equal and ratable benefit of the owners of the Bonds in respect of which such judgment has been recovered.

(f) Restoration of Positions. If the Trustee or any bondowner has instituted any

proceeding to enforce any right or remedy under the Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such bondowner, then and in every case the Authority, the Corporation, the Trustee and the bondowners shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Indenture, and thereafter all rights and remedies of the Trustee and the bondowners shall continue as though no such proceeding had been instituted.

Limitation on Suits by Bondowners. No owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to the Indenture, or for the appointment of a receiver or trustee or for any other remedy under the Indenture, unless (a) such owner has previously given written notice to the Trustee of a continuing event

of default; (b) the owners of not less than 25% in principal amount of the Bonds Outstanding shall

have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee under the Indenture;

(c) such owner or owners have offered to the Trustee indemnity as provided in the

Indenture against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity

has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee

during such 60-day period by the owners of a majority in principal amount of the Outstanding Bonds; it being understood and intended that no one or more owners of Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the lien of the Indenture or the rights of any other owners of Bonds, or to obtain or to seek to obtain priority or preference over any other owners or to enforce any right under the Indenture, except in the manner therein provided and for the equal and ratable benefit of all Outstanding Bonds. Control of Proceedings by Bondowners. The owners of a majority in principal amount of the Bonds Outstanding shall have the right, during the continuance of an event of default, provided indemnity has been provided to the Trustee in accordance with the Indenture:

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(a) to require the Trustee to proceed to enforce the Indenture, either by judicial proceedings for the enforcement of the payment of the Bonds and the foreclosure of the Indenture, or otherwise; and

(b) to direct the time, method and place of conducting any proceeding for any remedy

available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture, provided that

(1) such direction shall not be in conflict with any rule of law or the Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is

not inconsistent with such direction, and (3) the Trustee shall not determine that the action so directed would be unjustly

prejudicial to the owners not taking part in such direction. Application of Moneys Collected. Any moneys collected by the Trustee (after the deductions for payment of costs and expenses of proceedings resulting in the collection of such moneys) together with any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) First: To the payment of all undeducted amounts due the Trustee under the

Indenture; (b) Second: To the payment of the whole amount then due and unpaid upon the

Outstanding Bonds for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal (and premium, if any) and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal and interest, without any preference or priority, ratably according to the aggregate amount so due; and

(c) Third: To the payment of the remainder, if any, to the Authority or to whosoever

may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section, such moneys shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any unpaid Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Rights and Remedies Cumulative. No right or remedy therein conferred upon or reserved to the Trustee or to the bondowners is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy

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given thereunder or now or thereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy thereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any owner of any Bond to exercise any right or remedy accruing upon an event of default shall impair any such right or remedy or constitute a waiver of any such event of default or an acquiescence therein. Waiver of Past Defaults. Before any judgment or decree for payment of money due has been obtained by the Trustee as provided in this Section, the owners of a majority in principal amount of the Bonds Outstanding may, by written notice delivered to the Trustee and the Authority, on behalf of the owners of all the Bonds waive any past default thereunder and its consequences, except a default (a) in the payment of the principal of (or premium, if any) or interest on any Bond, or (b) in respect of a covenant or provision thereof which under the Indenture cannot be

modified or amended without the consent of the owner of each Outstanding Bond affected. Upon any such waiver, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been cured, for every purpose of the Indenture; but no such waiver shall extend to or affect any subsequent or other default or impair any right or remedy consequent thereon. Acceptance of Trusts; Certain Duties and Responsibilities. The Trustee accepts and agrees to execute the trusts imposed upon it by the Indenture, but only upon the terms and conditions set forth in the Indenture: (a) Except during the continuance of an event of default, (1) the Trustee undertakes to perform such duties and only such duties as are

specifically set forth in the Indenture, and no implied covenants or obligations shall be read into the Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as

to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture; but in the case of any such certificates or opinions which by any provision thereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Indenture.

(b) If an event of default has occurred and is continuing, the Trustee shall exercise such

of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of its own affairs.

(c) No provision of the Indenture shall be construed to relieve the Trustee from liability

for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1) the effect of subparagraph (a) above shall not be limited;

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(2) the Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action taken or omitted to

be taken by it in good faith in accordance with the direction of the owners of a majority in principal amount of the Outstanding Bonds relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture; and

(4) no provision of the Indenture shall require the Trustee to expend or risk its

own funds or otherwise incur any financial liability in the performance of any of its duties under the Indenture, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

Indemnification of Trustee. Notwithstanding anything in the Indenture to the contrary, the Trustee

shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture whether at the request or direction of any of the bondowners pursuant to the Indenture or otherwise, unless such bondowners or other party shall have offered to the Trustee reasonable security or indemnity against the fees, advances, costs, expenses and liabilities (except as may result from the Trustee's own negligence or willful misconduct) which might be incurred by it in connection with such rights or powers. Notice of Defaults. The Trustee shall not be required to take notice or be deemed to have notice of any default under the Indenture except failure by the Authority to cause to be made any of the payments to the Trustee required to be made by the Indenture, unless the Trustee shall be specifically notified in writing of such default by the Authority, the Corporation, or the owners of at least 10% in principal amount of all Bonds Outstanding, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no default except as aforesaid. Within 30 days after the Trustee has received notice of any default or the occurrence of any default under the Indenture of which the Trustee is deemed to have notice, the Trustee shall give written notice of such default by first class mail to all owners of Bonds as shown on the bond register maintained by the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Bond, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the bondowners. For the purpose of this paragraph, the term "default" means any event which is, or after notice or lapse of time or both would become, an event of default as defined in the Indenture. Resignation and Removal of Trustee. The Trustee may resign at any time by giving written notice thereof to the Authority, the Corporation and each owner of Bonds Outstanding as shown by the list of bondowners required by the Indenture to be kept at the office of the Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee has or shall acquire any conflicting interest, it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the Authority or the Corporation (so long as the Corporation is not in default under the Indenture) that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in the immediately preceding paragraph above. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Authority and the Trustee signed by the owners of a majority in principal amount of the

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Outstanding Bonds, or, so long as the Corporation is not in default and no condition that with the giving of notice or passage of time, or both, would constitute a default under the Loan Agreement, by the Corporation. The Authority, the Corporation or any bondowner may at any time petition any court of competent jurisdiction for the removal for cause of the Trustee. If at any time: (1) the Trustee shall fail to comply with the second paragraph above after written request

therefor by the Authority or by any bondowner, or (2) the Trustee shall cease to be eligible under the Indenture and shall fail to resign after

written request therefor by the Authority or by any such bondowner, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or

insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (A) the Authority may remove the Trustee, or (B) the Corporation or any bondowner may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. The Trustee shall give notice at the expense of the Corporation of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the registered owners of Bonds as their names and addresses appear in the bond register maintained by the Trustee. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to the Indenture shall become effective until the acceptance of appointment by the successor Trustee under the Indenture. Appointment of Successor Trustee. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Authority, with the written consent of the Corporation (which consent shall not be unreasonably withheld) (so long as no event of default under the Indenture or under the Loan Agreement has occurred and is continuing), or the owners of a majority in principal amount of Bonds Outstanding (if an event of default thereunder or under the Loan Agreement has occurred and is continuing), by an instrument or concurrent instruments in writing delivered to the Authority and the retiring Trustee, shall promptly appoint a successor Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee, by written instrument, may similarly appoint a temporary successor to fill such vacancy until a new Trustee shall be so appointed by the Authority or the bondowners. If, within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed in the manner therein provided, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the retiring Trustee and any temporary successor Trustee appointed by such receiver or trustee. If no successor Trustee shall have been so appointed and accepted appointment in the manner therein provided, any bondowner may petition any court of competent jurisdiction for the appointment of a successor Trustee, until a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. Every such successor Trustee appointed pursuant to the provisions of this Section shall be a bank or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of the Indenture.

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Merger, Consolidation and Succession to Business. Any corporation or association into which the Trustee may be merged or with which it may be consolidated, or any corporation or association resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee under the Indenture, provided such corporation or association shall be otherwise qualified and eligible under the Indenture, and shall be vested with all of the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or any further act on the part of any of the parties to the Indenture. Supplemental Indentures Without Consent of Bondowners. Without the consent of the owners of any Bonds, the Authority and the Trustee may from time to time enter into one or more Supplemental Indentures for any of the following purposes: (a) to correct or amplify the description of any property at any time subject to the lien of

the Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of the Indenture, or to subject to the lien of the Indenture additional property; or

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms

or purposes of issue, authentication and delivery of Bonds or of any series of Bonds, as therein set forth, additional conditions, limitations and restrictions thereafter to be observed; or

(c) to authorize the issuance of any series of Additional Bonds; or (d) to evidence the appointment of a separate trustee or the succession of a new trustee

under the Indenture; or (e) to add to the covenants of the Authority or to the rights, powers and remedies of the

Trustee for the benefit of the owners of all Bonds or to surrender any right or power therein conferred upon the Authority; or

(f) to cure any ambiguity, to correct or supplement any provision in the Indenture which

may be inconsistent with any other provision therein or to make any other change, with respect to matters or questions arising under the Indenture, which shall not be inconsistent with the provisions of the Indenture, provided such action shall not materially adversely affect the interests of the owners of the Bonds; or

(g) to modify, eliminate or add to the provisions of the Indenture to such extent as shall

be necessary to effect the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or under any similar federal statute thereafter enacted, or to permit the qualification of the Bonds for sale under the securities laws of the United States or any state of the United States.

Supplemental Indentures with Consent of Bondowners. With the consent of the Bond Insurer and the owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Indenture, the Authority and the Trustee may enter into one or more Supplemental Indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the owners of the Bonds under the Indenture; provided, however, that no such Supplemental Indenture shall, without the consent of the owner of each Outstanding Bond affected thereby, (a) change the stated maturity of the principal of, or any installment of interest on, any

Bond, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, any

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Bond, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date); or

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of

whose owners is required for any such Supplemental Indenture, or the consent of whose owners is required for any waiver provided for in the Indenture of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences; or

(c) modify the obligation of the Authority to make payment on or provide funds for the

payment of any Bond; or (d) modify or alter the provisions of the proviso to the definition of the term

"Outstanding"; or (e) modify any of the provisions relating to Supplemental Indentures, except to increase

any percentage provided thereby or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the owner of each Bond affected thereby; or

(f) permit the creation of any lien ranking prior to or on a parity with the lien of the

Indenture with respect to any of the Trust Estate or terminate the lien of the Indenture on any property at any time subject thereto or deprive the owner of any Bond of the security afforded by the lien of the Indenture.

Corporation's Consent to Supplemental Indentures. So long as the Corporation is not in default under the Loan Agreement, a Supplemental Indenture which affects any rights of the Corporation will not become effective unless and until the Corporation consents in writing to the execution and delivery of such Supplemental Indenture; provided that receipt by the Trustee of a Supplemental Loan Agreement executed by the Corporation in connection with the issuance of Additional Bonds shall be deemed to be the consent of the Corporation to the execution of the related Supplemental Indenture. Payment, Discharge and Defeasance of Bonds. Bonds will be deemed to be paid and discharged and no longer Outstanding under the Indenture and will cease to be entitled to any lien, benefit or security of the Indenture if the Authority shall pay or provide for the payment of such Bonds in any one or more of the following ways: (a) by paying or causing to be paid the principal of (including redemption premium, if

any) and interest on such Bonds, as and when the same become due and payable; (b) by delivering such Bonds to the Trustee for cancellation; or (c) by depositing in trust with the Trustee or other Paying Agent moneys and

Government Obligations in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity or redemption dates (including the payment of the principal of, premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof); provided that, if any such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption is given in accordance with the requirements of the Indenture or provision satisfactory to the Trustee is made for the giving of such notice.

The Bonds may be defeased in advance of their maturity or redemption dates only with cash or Defeasance Obligations pursuant to subsection (c) above, subject to receipt by the Bond Insurer and the Trustee of (1) a verification report in form and substance satisfactory to the Bond Insurer and the Trustee

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prepared by independent certified public accountants, or other verification agent, satisfactory to the Bond Insurer and the Trustee, and (2) an Opinion of Bond Counsel addressed and delivered to the Trustee in form and substance satisfactory to the Bond Insurer and the Trustee to the effect that the payment of the principal of and redemption premium, if any, and interest on all of the Bonds then Outstanding and any and all other amounts required to be paid under the provisions of the Indenture has been provided for in the manner set forth in the Indenture and to the effect that so providing for the payment of any Bonds will not cause the interest on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture. The foregoing notwithstanding, the liability of the Authority in respect of such Bonds shall continue, but the owners thereof shall thereafter be entitled to payment only out of the moneys and Defeasance Obligations deposited with the Trustee as aforesaid. Satisfaction and Discharge of Indenture. The Indenture and the lien, rights and interests created by the Indenture shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of Bonds therein provided for) if the following conditions are met:

(a) the principal of, premium, if any, and interest on all Bonds has been paid or is

deemed to be paid and discharged by meeting the conditions set forth above; (b) all other sums payable under the Indenture with respect to the Bonds are paid or

provision satisfactory to the Trustee is made for such payment; (c) the Trustee receives an Opinion of Bond Counsel (which may be based upon a ruling

or rulings of the Internal Revenue Service) to the effect that so providing for the payment of any Bonds will not cause the interest on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture; and

(d) the Trustee receives an Opinion of Counsel to the effect that all conditions precedent

in this Section to the satisfaction and discharge of the Indenture have been complied with. Thereupon, the Trustee shall execute and deliver to the Authority a termination statement and such instruments of satisfaction and discharge of the Indenture as may be necessary and shall pay, assign, transfer and deliver to the Authority, or other Persons entitled thereto, all moneys, securities and other property then held by it under the Indenture as a part of the Trust Estate, other than moneys or Defeasance Obligations held in trust by the Trustee as therein provided for the payment of the principal of, premium, if any, and interest on the Bonds.

SUMMARY OF THE LOAN AGREEMENT The following is a summary of certain provisions of the Loan Agreement. This summary does not purport to be complete, and reference is made to the full text of the Loan Agreement for a complete recital of its terms.

Use of Proceeds. The proceeds of the Series 2012E Bonds loaned to the Corporation shall be

deposited with the Trustee and shall be administered, disbursed and applied for the purposes and in the manner as provided in the Indenture and in the Loan Agreement.

Loan Payments. The Corporation shall make the following payments ("Loan Payments") in repayment of the loan of proceeds of Bonds to the Corporation and to provide for payment of the interest on and principal of, and redemption premium, if any, on the Bonds, directly to the Trustee, for the account of the Authority, for deposit in the Debt Service Fund, on the following dates, and otherwise as set out below:

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(a) Debt Service Fund -- Interest: On or before the fifteenth day preceding the next

interest payment date on the Bonds, an amount which is not less than the interest to become due on such interest payment date on the Bonds; provided, however that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

(b) Debt Service Fund -- Principal: On or before the fifteenth day preceding the next

installment of principal due on the Bonds, an amount which is not less than the principal to become due on the next principal payment date on the Bonds, whether by maturity or mandatory sinking fund redemption; provided, however, that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

(c) Debt Service Fund - Redemption: On or before the date required by the Loan

Agreement or the Indenture, the amount of any Net Proceeds or other moneys received which is intended or required to redeem Bonds then Outstanding if the Corporation exercises its right to redeem Bonds under any provision of the Indenture or if any Bonds are required to be redeemed under any provision of the Indenture.

Notwithstanding any schedule of payments upon the Loan set forth in the Loan Agreement or in the Series 2006G Note or the Series 2012E Note, the Corporation shall make payments upon the Loan and shall be liable therefor at the times and in the amounts (including interest, principal, and redemption premium, if any) equal to the amounts to be paid as interest, principal and redemption premium, if any, whether at maturity or by optional or mandatory redemption upon all Bonds from time to time Outstanding under the Indenture. Any Supplemental Loan Agreement authorizing the issuance of Additional Notes shall provide for similar deposits into the Debt Service Fund of amounts sufficient to insure the prompt payment of the principal of, premium, if any, and interest on any Additional Bonds or Additional Notes as the same become due. Credits on Loan Payments. Notwithstanding any provision contained in the Loan Agreement or in the Indenture to the contrary, in addition to any credits on the Loan resulting from the payment or prepayment of Loan Payments from other sources:

(a) any moneys deposited by the Trustee or the Corporation in the Debt Service Fund as interest (including moneys received as accrued interest from the sale of the Bonds and any initial deposit made from the proceeds of the sale of any series of the Bonds) shall be credited against the obligation of the Corporation to pay interest on the Loan as the same becomes due;

(b) any moneys deposited by the Trustee or the Corporation in the Debt Service Fund as

principal shall be credited against the obligation of the Corporation to pay the principal of the Loan as the same becomes due in the order of maturity thereof; and

(c) the amount of any moneys transferred by the Trustee from any other fund held under

the Indenture and deposited in the Debt Service Fund as interest or principal shall be credited against the obligation of the Corporation to pay interest or principal, as the case may be, as the same become due.

Additional Payments. The Corporation shall make the following additional payments to the following Persons:

(a) Authority Fees. The Corporation shall pay to the Authority upon the initial issuance of the Series 2012E Bonds or upon demand, its issuance fees.

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(b) Trustee Fees and Professional Fees. The Corporation shall pay to the Trustee and any Paying Agent, registrars, counsel, accountants, engineers and other Persons, when due, all reasonable fees, charges and expenses of such Persons for services rendered under the Indenture and under any of the Transaction Documents and expenses incurred in the performance of such services under the Indenture and any of the Transaction Documents for which such Persons are entitled to payment or reimbursement, including, without limitation, attorneys, accountants and expenses of compliance with the Tax Compliance Agreement.

(c) Advances By Trustee. The Corporation shall pay to the Trustee the amount of all

advances of funds made by the Trustee under the provisions of the Loan Agreement or the Indenture, with interest thereon at the prime rate announced from time to time by the Trustee plus 2%.

(d) Arbitrage Rebate Payments. The Corporation shall pay to the United States

Government all rebate payments required under Section 148(f) of the Internal Revenue Code. (e) Debt Service Reserve Fund. The Corporation shall pay to the Trustee for deposit in

the Debt Service Reserve Fund the amounts at the times as required by the Indenture. (f) Costs of Enforcement. In the event the Corporation defaults under any of the

provisions of the Loan Agreement and the Trustee or the Authority employ attorneys or incur other expenses for the collection of required payments or the enforcement of performance or observance of any obligation or agreement on the part of the Corporation contained in the Loan Agreement, the Corporation on demand therefor shall pay to the Trustee the reasonable fees of such attorneys and such other expenses so incurred by the Trustee or the Authority. The Corporation also shall pay, and shall indemnify the Authority and the Trustee from and against, all costs, expenses and charges, including, without limitation, reasonable counsel fees, incurred for the collection of payments due or for the enforcement or performance or observance of any covenant or agreement of the Corporation under the Loan Agreement or under the Series 2006G Note, the Series 2012E Note or the Indenture or any other Transaction Document.

(g) Taxes and Assessments. The Corporation also covenants and agrees, at its expense,

to pay all taxes and assessments of any type or character charged to the Authority or to the Trustee affecting the amount available to the Authority or the Trustee from payments to be received thereunder or in any way arising due to the transactions contemplated thereby (including property and other taxes and assessments assessed or levied by any public agency or governmental authority of whatsoever character having power to levy taxes or assessments) but excluding any taxes based upon the capital and/or income of the Trustee or any other Person other than the Corporation; provided, however, that the Corporation shall have the right to protest any such taxes or assessments and to require the Authority or the Trustee, as the case may be, at the Corporation's expense, to protest and contest any such taxes or assessments assessed or levied upon them and that the Corporation shall have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest, or contest would materially adversely affect the rights or interests of the Authority or the Trustee.

(h) Other Amounts Payable. The Corporation shall pay to the Person or Persons entitled

thereto, any other amounts which the Corporation has agreed to pay under the Loan Agreement or which the Corporation is required to pay under the Indenture.

Prepayment of the Loan. The Corporation shall have and is granted the option to prepay from time to time the amounts payable under the Loan Agreement in sums sufficient to redeem or to pay or cause to be paid all or part of the Bonds in accordance with the provisions of the Indenture.

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Obligations Absolute and Unconditional; Pledge of Revenues. The obligations of the Corporation under the Loan Agreement are general obligations of the Corporation, and the full faith and credit of the Corporation is pledged to the payment of all sums due and payable by the Corporation under the Loan Agreement. The Corporation agrees to pay all such amounts due and payable under the Loan Agreement using any and all legally available resources of the Corporation (which excludes State appropriations), as necessary. Without limiting the generality of the foregoing, the Corporation pledges, and to the extent permitted by law grants a security interest to the Trustee in, all of the Revenues of the Corporation to secure the payment of and the performance by the Corporation of its other obligations under the Loan Agreement. The Corporation also pledges, and to the extent permitted by law grants a security interest to the Trustee in, all of its right, title and interest in the University Agreement to further secure the payment of and the performance by the Corporation of its other obligations under the Loan Agreement. The Corporation shall pay all Loan Payments and other payments due under the Loan Agreement and perform its obligations, covenants and agreements under the Loan Agreement, without notice or demand, and without abatement, deduction, set-off, counterclaim, recoupment, discrimination or defense or any right of termination or cancellation arising from any circumstances whatsoever, and regardless of the invalidity of any portion of the Loan Agreement, and, to the extent permitted by law, the Corporation waives the provisions of any statute or other law now or thereafter in effect contrary to any of its obligations, covenants or agreements under the Loan Agreement or which releases or purports to release the Corporation therefrom. Nothing in the Loan Agreement shall be construed as a waiver by the Corporation of any rights or claims the Corporation may have against the Authority under the Loan Agreement or otherwise, but any recovery upon such rights or claims shall be had from the Authority separately, it being the intent of the Loan Agreement that the Corporation shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under the Loan Agreement for the benefit of the owners of the Bonds. Assignment of Authority's Rights. Under the Indenture, the Authority has pledged, assigned, transferred in trust and granted a security interest to the Trustee in all of the Authority's rights, title and interest under the Loan Agreement, the Series 2006G Note and the Series 2012E Note accruing to or vested in the Authority (except for the Authority's rights to payment of its fees and expenses and the Authority's right to indemnification in certain circumstances and as otherwise expressly set forth in the Loan Agreement) as security for the Bonds, and such rights, title and interest may be exercised, protected and enforced for or on behalf of the owners of the Bonds in conformity with the Loan Agreement and the Indenture. The Trustee is given the right to enforce, as assignee of the Authority, the performance of the obligations of the Corporation under the Loan Agreement, and the Corporation consents to the same and agrees that the Trustee may enforce such rights as provided in the Loan Agreement and in the Indenture. The Loan Agreement recognizes that the Trustee is a third party creditor-beneficiary of the Loan Agreement. Corporate Existence and Tax-Exempt Status. Except as otherwise expressly provided in the Loan Agreement, the Corporation shall (1) preserve and keep in full force and effect its corporate or other separate legal existence, (2) remain qualified to do business and conduct its affairs in each jurisdiction where ownership of its Property or the conduct of its business or affairs requires such qualification, and (3) maintain its status as a Tax-Exempt Organization. Maintenance and Use of Property. The Corporation shall cause all of its Property used or useful in the conduct of its business and operations to be maintained, preserved and kept in good repair and working order and condition and in as safe condition as its operations will permit and will make all repairs, renewals, replacements and improvements thereof necessary for the efficient and advantageous conduct of its business and operations and shall, during the term of the Bonds, operate the facilities financed by the Bonds, as research facilities and educational facilities within the meaning of the Act. Subject to the provisions of the Loan Agreement and the Act, the Corporation shall have the right to use its Property for any purpose allowed by law and contemplated by the Act. Except as provided in the Loan Agreement, the Authority reserves no power or authority with respect to the operation of the Property by the Corporation and activities incident thereto, it

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being the intention of the parties to the Loan Agreement that so long as the Corporation shall duly and faithfully observe and perform all of the terms, covenants, provisions and agreements of the Loan Agreement, the Corporation shall manage, administer and govern the Property of the Corporation in its activities and affairs on a continuing day-to-day basis. The Corporation agrees that it will not use or permit the use of any of the properties financed or refinanced, or for which it is reimbursed, in whole or in part, out of the proceeds of the Bonds in an unrelated trade or business as defined in Section 513(a) of the Internal Revenue Code, or by any person who is not an organization described in Section 501(c)(3) of the Internal Revenue Code, in either case in such manner or to any extent which could jeopardize the validity of the Bonds or result in the inclusion of interest on the Bonds in gross income for federal income tax purposes. Payment of Taxes and Other Charges. The Corporation shall pay or cause to be paid as they become due and payable all taxes, assessments and other governmental charges lawfully levied or assessed or imposed upon the Corporation or its Property or any part thereof or upon any income therefrom. Payment of Obligations. The Corporation shall promptly pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, unless the validity, amount or collectability thereof (excluding the Notes) is being contested in good faith or unless the failure to comply or contest would not materially impair its ability to pay its Indebtedness when due nor subject a material amount of the Property of the Corporation to loss or forfeiture. Liens and Encumbrances. The Corporation shall not create or incur or permit to be created or incurred or to exist any mortgage, lien, security interest, charge or encumbrance upon its real or personal property except Permitted Encumbrances, and shall promptly discharge or terminate all mortgages, liens, security interests, charges and encumbrances on its real or personal property that are not Permitted Encumbrances.

Licenses and Permits. The Corporation shall procure and maintain all licenses and permits necessary or desirable in the operation of its business and affairs; provided, however, that the Corporation shall not be required to procure or maintain in effect any right, license or accreditation that the governing board of the Corporation shall have determined in good faith, is not in the best interests of the Corporation and is no longer desirable in the conduct of its business and that lack of such compliance will not materially impair the ability of the Corporation to pay or perform its obligations under the Loan Agreement.

Insurance. The Corporation shall maintain or cause to be maintained insurance with respect to the Project and its Property covering such risks that are of an insurable nature and of the character customarily insured against by organizations operating similar properties and engaged in similar operations (including but not limited to property and casualty, and, to the extent the Corporation has employees, worker's compensation and employee dishonesty) and in such amounts as, in its judgment, are adequate to protect the Corporation, the Project and the Property.

Damage, Destruction and Condemnation. In the event of damage to or destruction of any Property

of the Corporation resulting from fire or other casualty, or in the event any Property of the Corporation is condemned or taken for any public or quasi-public use or title thereto is found to be deficient, the Net Proceeds of any insurance relating to such damage or destruction, the Net Proceeds of such condemnation or taking or the Net Proceeds of any realization on title insurance shall be paid directly to the Corporation, and the Corporation agrees to promptly notify the Authority and the Trustee of such event. The Corporation agrees that the Corporation shall, within 90 days after such Net Proceeds are received by the Corporation, elect one of the following two options:

(a) Option A -- Replacement, Repair, Reconstruction or Restoration. The Corporation may elect to use all or part of such Net Proceeds to replace, repair, reconstruct or restore the affected Property. In such event the Corporation shall proceed forthwith to replace, repair, reconstruct or restore the affected portion of the Property to substantially the same condition or utility value as

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existed prior to the event affecting the Property and will apply the Net Proceeds received by the Corporation to the payment or reimbursement of the costs of such replacement, repair, reconstruction or restoration. In the event the Corporation shall elect this Option A, the Corporation shall complete the replacement, repair, reconstruction or restoration of the Property, whether or not such Net Proceeds received by the Corporation for such purposes are sufficient to pay for the same.

(b) Option B -- Prepayment of Notes. The Corporation may elect to have all or part of

such Net Proceeds applied to the prepayment of the Notes. In such event the Corporation shall deposit such Net Proceeds or a specified portion thereof with the Trustee for credit to the Debt Service Fund to be used to pay the next successive principal payments on the Bonds as they become due or to redeem Bonds on the earliest permissible date. If only part of such Net Proceeds is applied to the prepayment of the Bonds, then the remaining part of such Net Proceeds shall be applied as provided under Option A above. Moneys deposited in the Debt Service Fund pursuant to this Option B shall be used to pay scheduled principal payments on the Bonds or to redeem Bonds on the earliest permissible date.

Financial Statements and Other Information. The Corporation shall keep proper books of record and account, in which full and correct entries shall be made of all dealings or transactions of or in relation to the properties, business and affairs of the Corporation in accordance with generally accepted accounting principles. The Corporation shall furnish to the Trustee, as soon as practicable after they are available but in no event more than 180 days after the last day of each fiscal year, the financial statements of the Corporation for such fiscal year reviewed by the Corporation's independent certified public accountants, covering the operations of the Corporation for such fiscal year and containing a statement of financial position as of the end of such fiscal year and a statement of cash flows and a statement of activities for such fiscal year, showing in each case in comparative form the financial figures for the preceding fiscal year. Sale, Lease or Other Disposition of Property. The Corporation shall not in any fiscal year, sell, lease or otherwise transfer or dispose of its Property in an amount which aggregates in excess of 10% of the total value of the Property of the Corporation (calculated on the basis of the Book Value or, if the Corporation so elects, on the basis of Current Value), except for transfers of Property as follows:

(a) The Corporation may transfer Property to any Person in the ordinary course of business.

(b) The Corporation may transfer Property to any Person for fair and adequate

consideration on terms no less favorable to the Corporation than would be obtained in a comparable arm's-length transaction.

(c) The Corporation may transfer Property to any Person, if in the reasonable judgment

of the Corporation, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete or worn out, or otherwise unsuitable, unprofitable, undesirable or unnecessary for the operation of the Corporation's primary business.

(d) The Corporation may transfer Property to any Person, if such Property consists solely

of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on Long-Term Indebtedness of the Corporation.

(e) The Corporation may transfer Property to any Person if the Property to be transferred

is not essential to the Corporation's primary business operation, and the proceeds of such transfer are used to acquire additional facilities, to repay the principal of Long-Term Indebtedness of the Corporation, or otherwise used in a productive manner to the benefit of the Corporation's operations.

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(f) The Corporation may transfer Property as part of a consolidation, merger, conveyance or transfer permitted by the Loan Agreement.

(g) The Corporation may transfer Property as a loan to any Person provided that such

loan is evidenced in writing, such loan bears interest at a reasonable interest rate, and the Trustee receives an Officer's Certificate stating that there is a reasonable expectation that such loan will be repaid in accordance with its terms. The Corporation shall not transfer, loan or otherwise dispose of cash and cash equivalents that would result in a reduction of the level of unrestricted cash and liquid investments of the Corporation below 30 day's operating expenses.

(h) The Corporation may transfer Property that does not constitute real property or cash,

cash equivalents or liquid investments to any Person, at any time without restriction. (i) The Corporation may transfer Property to the University of Kansas or the State of

Kansas.

Consolidation, Merger, Conveyance or Transfer of Property. The Corporation shall not consolidate with or merge into any other Person or convey or transfer its Property substantially as an entirety to any Person, unless the following conditions are met:

(a) such merger, consolidation, conveyance or transfer is on such terms as shall fully preserve the lien and security of the Indenture and the Loan Agreement and the rights and powers of the Trustee and the owners of the Bonds under the Indenture and the Loan Agreement;

(b) the Person formed by such consolidation or into which the Corporation is merged or

the Person which acquires by conveyance or transfer the Corporation's Property substantially as an entirety is a corporation or other legal entity organized and existing under the laws of the United States of America or any state thereof, is authorized to conduct business in the State of Kansas, is a Tax-Exempt Organization, and shall execute and deliver to the Trustee a written instrument in form satisfactory to the Trustee, containing an assumption by such successor of the due and punctual payment of the principal of (and premium, if any) and interest on the Loan and the performance and observance of every covenant and condition of the Loan Agreement to be performed or observed by the Corporation;

(c) the Trustee receives an Officer's Certificate stating that, immediately after giving

effect to such transaction, (1) no event of default thereunder shall have occurred and be continuing; (2) the successor or transferee shall possess such permits, licenses and accreditations to operate such Property as may be required if it is to operate such Property; and (3) the Unrestricted Cash and Investments of the Corporation will be equal to at least 90% of the Unrestricted Cash and Investments of the Corporation immediately prior to such transaction;

(d) the Trustee and the Authority receive an Opinion of Counsel to the effect that (1)

such consolidation, merger, conveyance or transfer complies with this Section and all conditions precedent therein provided for relating to such transaction have been complied with; (2) such transaction will not adversely affect the status of the Corporation as a Tax-Exempt Organization; (3) the Person which is the surviving entity is liable on the Loan, as if such Loan were originally made to such Person;

(e) the Trustee and the Authority receives an Opinion of Bond Counsel to the effect that,

if all amounts due or to become due on any Tax-Exempt Bonds that bear interest that is not includable in gross income under the Internal Revenue Code have not been fully paid to the owners thereof, under then existing law the consummation of such consolidation, merger, conveyance, or transfer

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would not cause the interest payable on such Tax-Exempt Bonds to become includable in gross income under the Internal Revenue Code;

(f) the Trustee and the Authority receive written confirmation from Standard & Poor's

and Moody's to the effect that such consolidation, merger, conveyance or transfer will not adversely affect the ratings assigned to the Bonds.

Continuing Disclosure. The Corporation will enter into the Continuing Disclosure Agreement and take such other actions as are necessary to comply with Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Tax Covenants. The Corporation covenants and agrees that it will not take any action or permit any action to be taken that would adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Tax-Exempt Bonds and will take whatever action, or refrain from whatever action, necessary to comply with the requirements of the Internal Revenue Code to maintain the exclusion from gross income for federal income tax purposes of the interest on the Tax-Exempt Bonds, and the Corporation shall comply with the Tax Compliance Agreement and will pay or provide for payment to the United States Government or the Trustee, all rebate payments required under Section 148(f) of the Internal Revenue Code and the Tax Compliance Agreement, to the extent such amounts are not available to the Trustee in the Rebate Fund held under the Indenture. This covenant shall survive payment in full or defeasance of the Tax-Exempt Bonds. Enforcement of University Agreement. In the event the revenues of the Corporation are not sufficient to pay all of the Debt Service Requirements on the Series 2012E Bonds, the Corporation covenants and agrees that it shall enforce the obligation of the University to pay the debt service requirements on the Series 2012E Bonds from unrestricted revenues of the University.

Budget Covenant. The Corporation shall establish a budget which produces Revenues during each Fiscal Year sufficient to (i) make all payments due under the Loan Agreement and the Notes and all other Indebtedness of the Corporation and (ii) pay the Expenses of the Corporation. Additional Bonds and Additional Notes. The Authority from time to time may, in its sole discretion, at the written request of the Corporation, authorize the issuance of Additional Bonds for the purposes and upon the terms and conditions provided in the Indenture; provided that (1) the terms of such Additional Bonds, the purchase price to be paid therefor and the manner in which the proceeds thereof are to be disbursed shall have been approved by resolutions adopted by the Authority and the Corporation; (2) the Authority and the Corporation shall have entered into a Supplemental Loan Agreement to acknowledge that Loan Payments are revised to the extent necessary to provide for the payment of the principal of, redemption premium, if any, and interest on the Additional Bonds and to extend the term of the Loan Agreement if the maturity of any of the Additional Bonds would otherwise occur after the expiration of the term of the Loan Agreement; and (3) the Authority and the Corporation shall have otherwise complied with the provisions of the Loan Agreement and the Indenture with respect to the issuance of such Additional Bonds. Simultaneously with the issuance of any Additional Bonds under the Indenture, the Corporation will issue and deliver to the Authority (but only to the Authority) one or more Additional Notes pursuant to the Loan Agreement, in order to evidence the loan from the Authority to the Corporation of the proceeds of any such Additional Bonds. The principal amount of any Additional Notes shall be equal to the principal amount of the corresponding series of Additional Bonds being issued concurrently with such Additional Notes. The Corporation agrees that the net proceeds from the loan evidenced by such Additional Notes shall be deposited with the Trustee as provided in the Indenture and in the Supplemental Indenture executed in connection with the issuance of such Additional Bonds. Any such Additional Notes may bear interest at any rate lawful at the time of issuance thereof and may mature over any period of time not exceeding the maximum maturity permitted by law, and as may be agreed upon by the Corporation and the Authority. Upon the issuance of any

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Additional Notes and sale thereof, the same shall together with any other Notes then outstanding, be equally and ratably secured under the Loan Agreement. Additional Obligations. The Corporation may issue or incur Additional Obligations for any proper corporate purpose if prior to the issuance and delivery of any Additional Obligations, and as a condition precedent thereto, the following documents and showings shall be executed and delivered to the Trustee: (a) A loan agreement or other debt instrument, executed by the Corporation and the

lender, specifying, among other things, the principal amount, rate of interest, maturity, terms of optional prepayment, if any, and form of any Additional Obligations.

(b) An Officer's Certificate (1) stating that no event of default under the Loan Agreement

has occurred and is continuing and that no event has occurred and is continuing which with the lapse of time or giving of notice, or both, would constitute such an event of default, and (2) stating the purpose or purposes for which such Additional Obligations are being issued and the classification of the Indebtedness under the Loan Agreement and accompanied by the certificates, reports or opinions demonstrating compliance with the applicable tests set forth in the Loan Agreement, including the tests described in the following Section captioned "Permitted Indebtedness".

(c) Such other certificates, title insurance policies, endorsements or reports, financing

statements, financial statements and opinions as the Trustee may reasonably request. Such Additional Obligations shall have standing on a parity with the security interest granted to the Authority by the Loan Agreement. The owners of such Additional Obligations shall not have a security interest in or other rights to or be entitled to share on a parity with the owners of the Bonds in the Debt Service Fund or the Debt Service Reserve Fund. Such Additional Obligations may be further secured in any manner not inconsistent with the provisions and intent of the Indenture or the Loan Agreement. In the event that the Corporation shall propose to secure any such Additional Obligation by a pledge, lien, mortgage or other security interest as described above, the Authority, the Trustee and the Corporation shall take, or shall cause to be taken, such actions (including entering into a Supplemental Loan Agreement or Supplemental Indenture and execute, deliver, file and record such instruments of security as their respective counsel agree to be necessary or appropriate to grant to and/or otherwise secure for the owner or owners of the Additional Obligation, equivalent to that of the Trustee, and the Corporation shall as a condition of securing such Additional Obligation execute, deliver, file and record, and cause to be executed, delivered, filed and recorded by such owner or owners, such documents as counsel for the Trustee and the Corporation agree to be necessary or appropriate to grant to and/or otherwise secure for the Trustee a pledge of and a security interest in any security granted to the owner or owners of the Additional Obligation and not theretofore granted to the Trustee equivalent to the interest granted to such owner or owners of such Additional Obligation, to the end that all such outstanding secured Additional Obligations and all outstanding Notes shall be of equal rank and be entitled to share pari passu in such security. Any default under any instrument or agreement providing for repayment of any Additional Obligation secured on a parity with the Notes as provided in this Section shall be a default under the Loan Agreement and there shall be included in any instrument or agreement providing for repayment of such Additional Obligation a provision that any default under the Loan Agreement shall be a default under such instrument or agreement. Any action which cures a default under any such instrument or agreement shall also cure such default under the Loan Agreement. Unless otherwise agreed to by the Trustee, the Trustee shall act as trustee under any instrument securing any such Additional Obligation. Any instrument or agreement providing for repayment of such Additional Obligation shall include a provision that, prior to exercising any remedies upon a default by the Corporation under such instrument or agreement, the Trustee (or the owners thereof, if the Trustee otherwise consents) shall consider the interests of the owners of the Additional Obligations and the Bonds and

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shall proceed such that the interests of such owner or owners of the Additional Obligations and the bondowners shall be equally protected. Permitted Indebtedness. The Corporation shall not incur any Indebtedness (whether or not incurred or evidenced through the issuance of Notes under the Loan Agreement) other than the following Indebtedness:

(a) Long-Term Indebtedness. The Corporation may incur Long-Term Indebtedness if prior to incurrence thereof or, if such Long-Term Indebtedness was incurred in accordance with another subsection of this Section and the Corporation desires to have such Indebtedness reclassified as having been issued under this subsection (a), prior to such reclassification, there is delivered to the Trustee an Officer's Certificate stating that, after giving effect to the incurrence of such Long-Term Indebtedness, (1) the Net Revenues Available for Debt Service shall be equal to or greater than 125% of Maximum Annual Debt Service for the then current or any succeeding fiscal year or (2) Unrestricted Cash and Investments are equal to or greater than 50% of the Long-Term Indebtedness then Outstanding and Long-Term Indebtedness proposed to be issued.

(b) Commitment Indebtedness. The Corporation may incur Commitment Indebtedness

without limit, if the Indebtedness supported by such Commitment Indebtedness was incurred in accordance with one of the provisions of this Section.

(c) Completion Indebtedness. The Corporation may incur Completion Indebtedness in a

principal amount not in excess of 10% of the principal amount of the original Long-Term Indebtedness incurred for such facilities, if prior to the incurrence thereof there is delivered to the Trustee an Officer's Certificate stating: (1) that at the time the original Long-Term Indebtedness for the facilities to be completed was incurred, the Corporation had reason to believe that the proceeds of such Indebtedness together with other moneys then expected to be available would provide sufficient moneys for the completion of such facilities; (2) the amount estimated to be needed to so complete the facilities; and (3) that the proceeds of such Completion Indebtedness to be applied to the completion of the facilities, together with a reasonable estimate of investment income to be earned on such proceeds and available to pay such costs, the amount of moneys, if any, committed to such completion from available cash or marketable securities and reasonably estimated earnings thereon, enumerated bank loans (including letters or lines of credit) and any other moneys reasonably expected to be available, will be in an amount not less than the estimated amount needed to complete the facilities set forth in such Officer's Certificate.

(d) Purchase Money Indebtedness. The Corporation may incur Purchase Money

Indebtedness if, immediately after entering into such Purchase Money Indebtedness, the aggregate principal amount due on all Purchase Money Indebtedness then Outstanding will not be greater than 15% of the Unrestricted Cash and Investments of the Corporation as shown on the audited financial statements of the Corporation for the most recent fiscal year for which audited financial statements are available.

(e) Refunding Indebtedness. The Corporation may incur Refunding Indebtedness for the

purpose of refunding (whether in advance of maturity or otherwise) any Outstanding Long-Term Indebtedness, if the Corporation determines that such refunding is in the best interest of the Corporation.

(f) Short-Term Indebtedness. The Corporation may incur Short-Term Indebtedness if,

immediately after the incurrence of such Short-Term Indebtedness, the total principal amount of Outstanding Short-Term Indebtedness of the Corporation incurred under this subsection does not exceed 25% of the Unrestricted Cash and Investments of the Corporation as shown on the audited financial statements of the Corporation for the most recent fiscal year for which audited financial statements are available; provided, however, that for a period of at least 30 consecutive calendar days

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in each fiscal year the total amount of such Short-Term Indebtedness of the Corporation Outstanding under this subsection shall be not more than 5% of the Unrestricted Cash and Investments of the Corporation for the preceding fiscal year, plus such additional amount as the Corporation certifies in an Officer's Certificate is (1) attributable to Short-Term Indebtedness incurred to offset a temporary delay in the receipt of funds due from third party payors and (2) in the minimum amount reasonably practicable taking into account such delay.

(g) Subordinated Indebtedness. The Corporation may incur Subordinated Indebtedness

without limit as to principal amount, provided such Indebtedness is evidenced by an instrument containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instrument evidencing such Indebtedness) to the Bonds, the Notes and any Additional Obligations with respect to payment out of the Trust Estate, so that if at any time the Corporation shall be in default in paying either interest on or principal of the Bonds, the Notes and Additional Obligations or if the Corporation shall be in default in making any payments required to be made under the provisions of the Loan Agreement, the Corporation shall make no payments of either principal of or interest on said Subordinated Indebtedness until said default or defaults be cured.

Calculation of Debt Service Requirements. For purposes of the various calculations under the Loan Agreement, the amount of Long-Term Indebtedness of the Corporation, the amortization schedule of such Indebtedness and the Debt Service Requirements with respect to such Indebtedness shall be calculated in accordance with the actual amortization schedule for such Indebtedness, except as follows:

(a) Balloon Indebtedness. The Debt Service Requirements on Balloon Indebtedness may be deemed to be payable as follows:

(1) If the Corporation has incurred and there is in effect at the time any

such Indebtedness is incurred Commitment Indebtedness to provide refinancing sufficient to pay the principal amount of any such Balloon Indebtedness becoming due in each fiscal year in which 25% or more of the original principal amount of such Balloon Indebtedness comes due, such Indebtedness may be deemed to be payable in accordance with the terms of such Commitment Indebtedness; or

(2) If the Corporation delivers an Officer's Certificate to the Trustee

that establishes an amortization schedule for any such Indebtedness, which provides for payments of principal and interest for each fiscal year that are sufficient to make any actual payments required to be made in such fiscal year by the terms of such Indebtedness; and the Corporation agrees in such Officer's Certificate that the Corporation will deposit for each fiscal year with a bank or trust company (pursuant to an agreement between the Corporation and such bank or trust company, which agreement shall be satisfactory in form and substance to the Trustee) the amount of principal shown on such amortization schedule net of any amount of principal actually paid on such Indebtedness during such fiscal year (other than from amounts on deposit with such bank or trust company), which deposit shall be made prior to any such required actual payment during such fiscal year if the amounts so on deposit are intended to be the source of such actual payments, then such Indebtedness may be deemed to be payable in accordance with the terms of such amortization schedule and agreement; or

(3) Such Indebtedness, in a principal amount not in excess of 15% of

Revenues of the Corporation, may be deemed to be Long-Term Indebtedness payable on a level annual debt service basis over 30% years from the date of issuance or incurrence of such Indebtedness, bearing interest on the unpaid principal balance at

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the rate equal to the rate set forth in the 30-year Bond Buyer Revenue Bond Index most recently published in The Bond Buyer.

(b) Capital Appreciation Indebtedness. The principal amount of Indebtedness that

constitutes "capital appreciation indebtedness" (defined below) shall be deemed to be the "accreted value" (defined below) thereof as of the relevant date. "Capital appreciation indebtedness" means any Long-Term Indebtedness for which interest is payable only at the maturity of such Indebtedness, upon the redemption of such Indebtedness before maturity, or upon the conversion of such Indebtedness to Indebtedness with interest payable periodically in installments prior to maturity or prior to redemption before maturity. "Accreted value" means with respect to any capital appreciation indebtedness (a) as of any "valuation date" (defined below), the amount set forth in the Supplemental Loan Agreement authorizing such Indebtedness or in the related Supplemental Bond Indenture as the value of such Indebtedness on such valuation date and (b) as of any date other than a valuation date the sum of (i) the accreted value on the next preceding valuation date and (ii) the product of (A) a fraction, the numerator of which is the number of days having elapsed from the preceding valuation date and the denominator of which is the number of days from such preceding valuation date to the next succeeding valuation date and (B) the difference between the accreted values for such valuation dates. "Valuation date" means with respect to any capital appreciation indebtedness the date or dates set forth in the Supplemental Loan Agreement relating to such Indebtedness or the related Supplemental Bond Indenture on which specific accreted values are assigned to the capital appreciation indebtedness.

(c) Capital Leases. The principal amount of Indebtedness in the form of a "capital

lease" (defined below) shall be deemed to be the amount, as of the date of determination, at which the aggregate "net rentals" (defined below) due and to become due under such capital lease would be reflected as a liability on the balance sheet of the lessee, and the Debt Service Requirements on a capital lease for the period of time for which calculated shall be deemed to be the aggregate amount of net rentals to be payable under such Capitalized Lease during such period. "Capital lease" means any lease of real or personal property that is capitalized on the balance sheet of the lessee under generally accepted accounting principles. "Net rentals" means all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the Property other than upon termination of the lease for a default thereunder) payable under such lease excluding any amounts required to be paid by the lessee (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Net rentals for any future period under any so-called "percentage lease" shall be computed on the basis of the amount reasonably estimated to be payable thereunder for such period, but in any event not less than the amount paid or payable thereunder during the immediately preceding period of the same duration as such future period; provided that the amount estimated to be payable under any such percentage lease shall in all cases recognize any change in the applicable percentage called for by the terms of such lease.

(d) Commitment Indebtedness. No debt service shall be deemed payable with respect to

Commitment Indebtedness until such time as the obligation to make payments under the commitment actually rises (and only to the extent of advances actually made under such Commitment Indebtedness) except as provided in the Loan Agreement. From and after such funding, the amount of such debt service shall be calculated in accordance with the actual amount required to be repaid on such Commitment Indebtedness and the actual interest rate and amortization schedule applicable thereto. No Indebtedness shall be deemed to arise when any funding occurs under any such commitment if such funding is immediately repaid and such commitment is reinstated in accordance with its terms, or when any such commitment is renewed upon terms which provide for substantially the same terms of repayment of amounts disbursed pursuant to such commitment as existed prior to such renewal.

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(e) Long-Term Indebtedness Supported By Commitment Indebtedness. The Debt Service Requirements on Long-Term Indebtedness with respect to which the Corporation has incurred Commitment Indebtedness that would refinance such Indebtedness for a period extending beyond its original maturity date, may be deemed to be payable in accordance with the terms of such Commitment Indebtedness.

(f) Variable Rate Indebtedness; Qualified Swap Agreements. In determining Debt

Service Requirements on Variable Rate Indebtedness, the rate of interest on Outstanding Variable Rate Indebtedness shall be the average annual rate of interest which was payable on such Variable Rate Indebtedness during the sixty (60) months immediately preceding the date as of which the calculation is made; and the rate of interest on Variable Rate Indebtedness to be incurred (or incurred less than sixty (60) months preceding such date) shall be the average annual rate of interest which would have been payable on such Variable Rate Indebtedness had it been outstanding for a period of sixty (60) months immediately preceding the date as of which the calculation is made, all as set forth in a certificate of a Consultant, delivered to the Authority; provided, however, if the Authority or the Corporation enters into a Qualified Swap Agreement with a Swap Provider requiring the Authority or the Corporation to pay a fixed interest rate on a notional amount, and has determined that such Qualified Swap Agreement was entered into for the purpose of providing substitute interest payments for a particular maturity of Bonds or other Indebtedness in a principal amount equal to the notional amount of the Qualified Swap Agreement, then during the term of such Qualified Swap Agreement and so long as the Swap Provider under such Qualified Swap Agreement is not in default under such Qualified Swap Agreement, the interest rate on such Bonds or other Indebtedness shall be determined as if such Bonds or other Indebtedness bore interest at the interest rate payable by the Authority or the Corporation under such Qualified Swap Agreement.

Events of Default. The term "event of default," wherever used in the Loan Agreement, means any

one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest on any Note when such interest becomes due and payable and continuance of such default for a period of 15 days; or

(b) default in the payment of the principal of (or premium, if any, on) any Note when the

same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise) and continuance of such default for a period of 15 days; or

(c) default in the performance, or breach, of any covenant or agreement of the

Corporation in the Loan Agreement (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given to the Corporation by the Authority or the Trustee or to the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Corporation shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(d) any representation or warranty made by the Corporation in the Loan Agreement or in

any written statement or certificate furnished to the Authority or the Trustee or the purchaser of any Bond in connection with the sale of any Bond or furnished by the Corporation pursuant to the Loan Agreement proves untrue in any material respect as of the date of the issuance or making thereof and shall not be corrected or brought into compliance within 60 days after there has been given to the

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Corporation by the Authority or the Trustee or to the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Corporation shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(e) default in the payment of the principal of, premium, if any, or interest on any

Indebtedness other than a Note when the same becomes due and payable, and any applicable grace period shall have expired, or an event of default as defined in any mortgage, indenture or other instrument under or pursuant to which there was issued or incurred, or by which there is secured, any such Indebtedness; provided, however, that such default shall not constitute an event of default if payment of such Indebtedness has not been accelerated under the terms of payment of such Indebtedness or if within 30 days, or within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the Indebtedness, the Corporation in good faith commences proceedings, or in proceedings against it, to contest the obligation to pay or the existence or payment of such Indebtedness; and provided further, however, that none of the foregoing shall constitute an event of default unless the amount of such unpaid principal of all Indebtedness so in default exceeds $50,000; or

(f) any final judgment, writ, warrant of attachment or any similar process shall be

entered or filed against the Corporation or against any Property of the Corporation and remains unvacated, unpaid, unbonded, unstayed or uncontested in good faith for a period of 60 days; provided, however, that none of the foregoing shall constitute an event of default unless the amount of such judgment, writ, warrant of attachment or similar process, together with the amount of all other such judgments, writs, warrants or similar processes so unvacated, unpaid, unbonded, unstayed or uncontested, exceeds $50,000; or

(g) the entry of a decree or order by a court having jurisdiction in the premises for relief

in respect of the Corporation, or adjudging the Corporation a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, adjustment or composition of or in respect of the Corporation under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Corporation or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order remains unstayed and in effect for a period of 60 consecutive days; or

(h) the commencement by the Corporation of a voluntary case, or the Corporation by it

of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the Corporation of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the United States Bankruptcy Code or any other applicable federal or state law, or the consent or acquiescence by it to the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability or its failure to pay its debts generally as they become due, or the taking of corporate action by the Corporation in furtherance of any such action; or

(i) the occurrence and continuance of any "event of default" specified in the Indenture

that has not been waived.

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Promptly after any officer of the Corporation obtains knowledge of a default thereunder, the Corporation will deliver to the Trustee a written notice specifying the nature and period of existence thereof and the action the Corporation is taking and proposes to take with respect thereto. Acceleration of Maturity; Rescission and Annulment. If an event of default under the Loan Agreement occurs and is continuing, the Trustee, as assignee of the Authority, may, and if requested by the owners of not less than 25% in principal amount of the Bonds Outstanding shall, by written notice to the Corporation and the Authority, declare the principal of the Loan and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on the Loan has been obtained by the Trustee, the Trustee may, by written notice to the Corporation, rescind and annul such declaration and its consequences if (a) the Corporation has deposited with the Trustee a sum sufficient to pay

(1) all overdue installments of interest on all Notes, (2) the principal of (and premium, if any, on) any Notes which have become due

otherwise than by such declaration of acceleration and interest thereon at the rate prescribed therefor in such Notes,

(3) interest upon overdue installments of interest at the rate or rates prescribed

therefor in the Notes, and (4) all sums paid or advanced by the Trustee thereunder and the reasonable

compensation, expenses, disbursements and advances of the Trustee, its agents and counsel plus interest on any advances at the Prime Rate plus 2%; and

(b) all events of default, other than the non-payment of the principal of the Notes which

have become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Loan Agreement.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. Exercise of Remedies by the Trustee. Upon the occurrence and continuance of any event of default under the Loan Agreement, unless the same is waived as provided in the Loan Agreement, the Trustee, as assignee of the Authority, shall have the following rights and remedies, in addition to any other rights and remedies provided under the Loan Agreement or by law:

(a) Right to Bring Suit, Etc. The Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Loan, including interest on overdue principal (and premium, if any) and on overdue installments of interest, and any other sums due under the Loan Agreement, to enforce and compel the performance of the duties and obligations of the Corporation as set forth in the Loan Agreement and the Supplemental Agreements and to enforce or preserve any other rights or interests of the Trustee under the Loan Agreement and the Supplemental Agreements existing at law or in equity.

(b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by

the owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and

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remedies conferred by the Loan Agreement as the Trustee shall deem most expedient in the interests of the bondowners.

(c) Appointment of Receiver. Upon the filing of a suit or other commencement of

judicial proceedings to enforce the rights of the Trustee under the Loan Agreement, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Property subject to the lien and security interest of the Loan Agreement pending such proceedings, with such powers as the court making such appointment shall confer.

(d) Restoration of Positions. If the Trustee has instituted any proceeding to enforce any

right or remedy under the Loan Agreement by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, then and in every case the Authority, the Corporation and the Trustee shall, subject to any determination in such proceeding, be restored to their former positions and rights thereunder, and thereafter all rights and remedies of the Trustee shall continue as though no such proceeding had been instituted.

Supplemental Loan Agreements without Consent of Bondowners. Without the consent of the owners of any Bonds, the Authority and the Corporation may from time to time enter into one or more Supplemental Loan Agreements, for any of the following purposes:

(a) to correct or amplify the description of any property of the Corporation at any time subject to the Loan Agreement, or to subject to the Loan Agreement additional property or to more precisely identify any project financed or refinanced out of the proceeds of any series of Bonds, or to substitute or add additional property thereto; or

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms

or purposes of the Loan, as therein set forth, additional conditions, limitations and restrictions thereafter to be observed; or

(c) to authorize the issuance of any Additional Notes and make such other provisions as

provided in the Loan Agreement; or (d) to modify or eliminate any of the terms of the Loan Agreement; provided, however,

that

(1) such Supplemental Loan Agreement shall expressly provide that any such modifications or eliminations shall become effective only when there is no Bond Outstanding of any series created prior to the execution of such Supplemental Loan Agreement; and

(2) the Trustee may, in its discretion, decline to approve any such Supplemental

Loan Agreement which, in its opinion, may not afford adequate protection to the Trustee when the same becomes operative; or

(e) to evidence the succession of another corporation to the Corporation and the

assumption by any such successor of the covenants of the Corporation therein contained; or (f) to add to the covenants of the Corporation or to the rights, powers and remedies of

the Trustee for the benefit of the owners of all or any series of Bonds or to surrender any right or power therein conferred upon the Corporation; or

(g) to cure any ambiguity, to correct or supplement any provision therein which may be

inconsistent with any other provision therein or to make any other provisions, with respect to matters

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or questions arising under the Loan Agreement, which shall not be inconsistent with the provisions of the Loan Agreement, provided such action shall not adversely affect the interests of the owners of the Bonds.

Supplemental Loan Agreements with Consent of Bondowners. With the consent of the owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Loan Agreement, the Authority and the Corporation may enter into Supplemental Loan Agreements, in form satisfactory to the Trustee, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Loan Agreement or of modifying in any manner the rights of the Trustee and the owners of the Bonds under the Loan Agreement; provided, however, that no such Supplemental Loan Agreement shall, without the consent of the owner of each Outstanding Bond affected thereby,

(a) change the stated maturity of the principal of, or any installment of interest on, the Loan, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, the Loan, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date); or

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of

whose owners is required for any such Supplemental Loan Agreement, or the consent of whose owners is required for any waiver provided for in the Loan Agreement of compliance with certain provisions of the Loan Agreement or certain defaults thereunder and their consequences; or

(c) modify any of the provisions of this Section, except to increase any percentage

provided thereby or to provide that certain other provisions of the Loan Agreement cannot be modified or waived without the consent of the owner of each Bond affected thereby.

SUMMARY OF THE UNIVERSITY AGREEMENT

The following is a summary of certain provisions of the University Agreement. This summary does not purport to be complete, and reference is made to the full text of the University Agreement for a complete recital of its terms, as well as a complete recital of the defined terms used therein.

Sponsored Agreements. The Corporation will manage and administer all sponsored grants and

contracts, including federally sponsored research grants, for the Lawrence and Edwards campuses of the University, and will provide appropriate accounting and purchasing procedures for investigators. The Corporation shall receive, collect and enforce collection of revenue or other consideration derived from the administration of sponsored grants and contracts and shall retain sponsored research overhead reimbursement of University costs associated with sponsored projects (“Indirect Costs”) undertaken by the Corporation. Financial reports of all research efforts will be made available to University faculty and administrators designated by the Provost of the University or the Vice Provost for Research. Financial data and reports on all Corporation operations also will be made available to the Chancellor and the Provost and/or their designees.

Internal Research Funds. The Corporation will establish and manage research funds for internal

support of University faculty and staff research efforts. The Corporation will develop written policies for the operation and management of research funds for the support of University faculty and staff research. Such policies shall specify the nature of accounts held by the Corporation, including research overhead accounts, and shall indicate those individuals who, by virtue of position, have authority to approve use of such funds in support of research and research development.

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Facilities. All activities, contracts and research that are conducted in research facilities developed and/or operated by the Corporation shall be consistent with the mission of the University and shall not jeopardize the missions of the Corporation or the University. The management of facilities owned or leased by the Corporation shall be conducted such that the property or properties that are leased, developed or purchased will be acquired, built and/or maintained in such condition so as to be transferred to the University upon the completion of their intended purpose or mission or at a time the parties mutually agree to be appropriate. The Corporation shall utilize the services of the KU Design and Construction Management Office ("DCM") for all Lawrence campus building modification projects. Except for buildings leased by the Corporation, the Corporation shall also utilize DCM services for off-campus building modification projects when DCM can provide a bid for such project that meets the University's time and budget requirements. The University shall have the first right of refusal to purchase or lease the research facilities owned by the Corporation if such an occasion should arise. The Corporation will be allowed to occupy and use designated facilities of the University. In consideration of the Corporation's agreement and purpose to support the research efforts of University faculty and staff, such facilities shall be provided free of rent, overhead and maintenance charges, unless otherwise mutually agreed.

Technology Transfer. The Corporation will manage and administer all Lawrence and Edwards

Campus intellectual property in accordance with the Regents’ Intellectual Property Policy and the University of Kansas Intellectual Property Policy for the Lawrence Campus. The Corporation shall undertake all appropriate activities to accomplish the development and transfer of technology that is determined by the Corporation Executive Committee and the Vice Provost for Research to be appropriate for management by the Corporation. The Corporation shall receive, collect, manage and enforce collection of revenue or other consideration, including royalties and equity holdings, including those equities previously acquired by the University through technology transfer or derived from the development and/or disposition of University technology. The Corporation will develop written policies for its technology transfer operations and management, including implementation of Regents and University policy regarding royalties, equities and other assets acquired through technology transfer. Such policies shall address the Corporation's recovery of its costs incurred in technology transfer efforts; reimbursement to faculty and staff researchers of expenses incurred in technology development; use of revenues for future technology development, to include technology transfer staff; and allocation of technology transfer revenues, if any, that exceed actual expenses of the technology transfer program. The Corporation shall make financial reports regarding technology transfer operations available to the University Provost and Chancellor annually or upon reasonable request.

Audits. Pursuant to Regents Policy II.B.8.b(3) the books and records of the Corporation shall be

public records and shall be audited annually, using generally accepted accounting principles, by an independent certified public accountant acceptable to the Corporation Executive Committee or an independent audit committee created by the Corporation Executive Committee. Copies of the audit shall be provided to the University Chief Business and Financial Planning Officer for distribution to the Regents, and to the state agency in charge of post-auditing state expenditures (Regents Policy II.B.8.b(3)).

Open Records and Open Meetings. As a University-affiliated organization, the Corporation will

comply with and be subject to the Kansas Open Records Act and the Kansas Open Meetings Act. It is understood and agreed that many University records may be protected against disclosure pursuant to various provisions of the Kansas Open Records Act. The Corporation and the University agree to cooperate in response to any Open Record Act requests.

Insurance and Indemnification. In addition to, or as a part of its Directors and Officers insurance

coverage, the Corporation agrees to maintain liability insurance coverage for its operations in a commercially reasonable amount, and in no event in an amount less than $1 million per incident and $2 million in the aggregate per year. The Corporation agrees to be responsible for liability arising out of the negligence and errors and omissions of the Corporation's agents and its employees, excluding University faculty and staff members to the extent they are participating in or supporting sponsored research or technology transfer through the Corporation, up to and subject to the limitations contained in the provisions of the Kansas Tort Claims Act,

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K.S.A. 75-6101 et seq. The University agrees to be responsible for liability arising out of the negligence and errors and omissions of its agents and employees, subject to the limitations contained in the provisions of the Kansas Tort Claims Act, K.S.A. 75-6101 et seq.

Use Of University Services. Unless otherwise specified by state law, and/or Board of Regents or

University policy, any Corporation employees shall be eligible to use the central services provided to the University community, including, but not limited to, parking services, library access, and access to the University's local area network.

Amendment. The University Agreement may not be amended or modified except by a written

instrument duly executed by each of the parties thereto. No amendment or modification to the sections of the University Agreement relating to amendments, termination, assignment, financing arrangements, the University payment obligation and third party beneficiaries may be made without (1) the written consent of the Authority, which consent may not be unreasonably withheld, and (2) the receipt by the Authority of a written confirmation from Moody's, so long as such agency's rating is in effect with respect to the Series 2012E Bonds, to the effect that such amendment will not adversely affect the rating assigned by such rating agency to the Series 2012E Bonds. Assent or non-assent to amend shall be given within thirty (30) days after notice of the request to amend is received by the Authority. Consent of the Authority is not required after all of the Series 2012E Bonds are paid in full or legally defeased. The University shall give prompt written notice of any amendment or modification to the University Agreement to Moody's, so long as such agency's rating is in effect with respect to the Series 2012E Bonds, and to the Authority.

Term and Termination. The term of the University Agreement is indefinite. Either party may

terminate the University Agreement upon the provision of one hundred and eighty (180) days written notice prior to any proposed termination date. The University may terminate the University Agreement immediately upon any material change to the Corporation's Articles of Incorporation or Bylaws including but not limited to any change in (a) the number of Corporation Trustees, (b) Corporation ex officio Trustees, (c) the number or the composition of the Corporation's Board of Trustees Executive Committee or (d) the Officers of the Corporation. Notwithstanding the foregoing, the University Agreement may not be terminated by any party pursuant to this section unless the University shall have assumed and agreed to perform the payment obligations with respect to the Series 2012E Bonds, either by assuming the Second Supplemental Loan Agreement and related promissory note or by otherwise entering into an agreement with the Authority to the effect that, in the event that the Corporation fails to promptly pay the debt service on the Series 2012E Bonds when and as the same shall become due pursuant to the Loan Agreement, the University will promptly discharge and pay such obligations.

Non-Assignment. The University Agreement may not be assigned by any party without (1) the

written consent of the other parties thereto and the Authority, which consent may be granted or withheld in each entity's sole and absolute discretion, and (2) the receipt by the Authority of a written confirmation from Moody's, so long as such agency's rating is in effect with respect to the Series 2012E Bonds, to the effect that such assignment will not adversely affect the rating assigned to the Series 2012E Bonds. Assent or notice of non-assent to assign shall be given no later than thirty (30) days after notice of the request to assign is received by the applicable party. Consent of the Authority is not required after the Series 2012E Bonds are paid in full or legally defeased.

Survival. The use of Indirect Costs as security for a debt by the Corporation shall survive the

termination of the University Agreement until such debt is satisfied or the lender agrees to alternative security for such debt.

Financing Arrangements. The Corporation shall be the obligor on the Series 2012E Bonds and shall enter into a Second Supplemental Loan Agreement with the Authority in connection with the issuance of the Series 2012E Bonds upon such terms as are mutually acceptable to the Corporation and the Authority. To the

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extent received, the Corporation will use the proceeds of the loan for purposes of refunding the Series 2005B Bonds.

University Payment Obligation. The University, acting by and through its Chancellor, will make

available unrestricted revenues of the University in such amounts and at such times as may be reasonably necessary to provide for (a) the full, prompt and timely payment of the debt service requirements with respect to the Series 2012E Bonds when and as the same shall become due, in the event the revenues of the Corporation are not sufficient to pay the debt service requirements on the Series 2012E Bonds and (b) the reimbursement to the owners of the Series 2012E Bonds of any debt service payments made with respect to the Series 2012E Bonds that such owners are required to disgorge or otherwise repay by reason of (1) the commencement by the Corporation of a voluntary case, or the filing of a petition with a court having jurisdiction over the Corporation to commence against the Corporation an involuntary case, under the federal bankruptcy laws, as now in effect or thereafter amended, or any other applicable federal or state bankruptcy, insolvency or similar laws, (2) the Corporation admitting in writing its inability to pay its debts generally as they become due, (3) a receiver, trustee or liquidator of the Corporation being appointed in any proceeding brought against the Corporation, (4) an assignment by the Corporation for the benefit of its creditors or (5) the entry by the Corporation into an agreement of composition with its creditors. The obligations of the University under this paragraph are absolute and unconditional and shall remain in full force and effect until the entire principal of, premium, if any, and interest on the Series 2012E Bonds shall have been paid or such payment provided for, and the University shall perform such obligations without abatement, deduction, set-off, counterclaim, recoupment, discrimination or defense or any right of termination or cancellation arising from any circumstances whatsoever, whether now existing or thereafter arising, and regardless of the invalidity of any portion of the University Agreement.

Third Party Beneficiaries. The Authority is an intended third-party beneficiary of the sections of the

University Agreement relating to amendments, termination, assignment, financing arrangements and the University payment obligation, and shall have enforceable rights and remedies with respect thereto until all of the Series 2012E Bonds are paid in full or legally defeased.

APPENDIX G

FORM OF CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT, dated as of March 1, 2012 (the “Disclosure Agreement”) is executed and delivered by the UNIVERSITY OF KANSAS CENTER FOR RESEARCH, INC. (the “Corporation”) and UMB BANK, N.A. (the “Dissemination Agent”) in connection with the issuance by the Kansas Development Finance Authority (the “Authority”) of its $__________ original aggregate principal amount of Revenue Bonds (University of Kansas Center for Research, Inc. Project), Series 2012E-1 and its $__________ original aggregate principal amount of Taxable Revenue Bonds (University of Kansas Center for Research, Inc. Project), Series 2012E-2 (collectively, the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture dated as of February 1, 2005, as supplemented by the First Supplemental Trust Indenture dated as of October 1, 2006 and the Second Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Authority and UMB Bank, N.A., as trustee. The Corporation and the Dissemination Agent covenant and agree as follows:

Section 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings;

“Annual Report” means any Annual Report described in Sections 2(a) of this Disclosure Agreement.

“Beneficial Owner” means any registered owner of any Bonds and any Person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including Persons holding Bonds through nominees, depositories or other intermediaries) or (b) is treated as the Owner of any Bonds for federal income tax purposes.

“Dissemination Agent” shall mean initially UMB Bank, N.A., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Corporation and to serve as dissemination agent pursuant to this Disclosure Agreement, as set forth in Section 5.

“EMMA” means the Electronic Municipal Market Access facility for municipal securities disclosure of the MSRB (www.emma.msrb.org).

“Financial Information” means the financial information of the Corporation and the University described in Section 2(a)(i) hereof.

“Fiscal Year” mans the one-year period commencing on July 1 of any year and ending on June 30 of the following year, and numbered for the year in which it ends, or such other date or dates as may be adopted by the Corporation for its general accounting purposes.

“GAAP” means generally accepted accounting principles, as applied to governmental units as in effect at the time of the preparation of Annual Report.

“Material Events” means any of the events listed in Section 3(a) hereof.

“MSRB” means the Municipal Securities Rulemaking Board.

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“Official Statement” means the Official Statement dated March __, 2012 for the Bonds.

“Operating Data” means the operating data of the Corporation and the University described in Section 2(a)(ii) hereof.

“Rule” means Rule 15c2-12(b)(5) adopted by the SEC the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” means the securities and Exchange Commission of the United States.

“State” means the State of Kansas.

“University” means the University of Kansas.

Section 2. Provision of Annual Reports.

(a) The Corporation shall provide, or shall cause the Dissemination Agent to provide, as soon as practicable after they are available, but in no event more than 180 days after the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2012, the Financial Information and the Operating Data (jointly, the “Annual Report”) as follows:

(i) Financial Information. Financial Information shall consist of (A) the financial statements of the Corporation for the prior Fiscal Year, beginning with the Fiscal Year ending June 30, 2012, of the type and in substantially the format contained in the Corporation’s Annual Financial Report contained in Appendix B to the Official Statement and (B) the financial statements of the University for the prior Fiscal Year, beginning with the Fiscal Year ending June 30, 2012, of the type and in substantially the format contained in the University of Kansas Annual Financial Report contained in Appendix D to the Official Statement. The method of preparation and basis of accounting of the Financial Information shall be as set forth in said Appendix B and Appendix D, respectively, or otherwise in conformance with State laws or regulations. If the Financial Information in the Annual Report is not prepared in accordance with GAAP, but such Financial Information in accordance with GAAP is available, such Financial Information shall also be provided in accordance with GAAP. The Financial Information in the Annual Report may be unaudited; provided, however, that if audited Financial Information is available, such audited Financial Information shall be provided to the Dissemination Agent for inclusion in the Annual Report when available. If the basis of accounting is changed to a basis less comprehensive than contained in the Official Statement, the Dissemination Agent shall provide notice of such change in the same manner as for a Material Event under Section 3(b) hereof.

(ii) Operating Data. Operating Data with respect to the Corporation shall consist of the information and data regarding the Corporation in substantially the scope and form contained in each of the tables of information regarding the Corporation in Appendix A to the Official Statement under the captions “RELATED PARTIES,” “SPONSORED RESEARCH AT THE UNIVERSITY OF KANSAS, LAWRENCE CAMPUS,” “FINANCIAL INFORMATION,” and “DEBT SERVICE COVERAGE”. Operating Data with respect to the University shall consist of the information and data regarding the University in substantially the scope and form contained in each of the tables of information regarding the University in Appendix C to the Official Statement, each updated as of the end of the prior Fiscal Year, beginning with the Fiscal Year ending

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June 30, 2012. Such information shall include actual information for such Fiscal Year but need not include revised estimates or projections for future Fiscal Years.

(iii) Any or all of the Annual Report may be incorporated by reference from other documents, including official statements of debt issues with respect to the Corporation that have been filed with the MSRB or the SEC and, in the case of a final official statement, that is available from the MSRB. The Corporation shall clearly identify each document incorporated by reference and the source from which it is available. The Financial Information and Operating Data may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if it is not available by that date. If the Fiscal Year changes, the Dissemination Agent shall provide notice of such change in the same manner as for a Material Event under Section 3(b).

(b) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report whether there has occurred a change in the MSRB’s e-mail address or filing procedures and requirements under EMMA; and

(ii) unless the Corporation has filed the Annual Report specified by Section 2(a) hereof, file the Annual Report specified by Section 2(a) hereof, or if the Annual Report is not received from the Corporation and thus not filed within the time period specified in Section 2(a) hereof, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A to this Disclosure Agreement.

Section 3. Reporting of Material Events.

(a) The Corporation agrees that it will file, or cause the Dissemination Agent to file, pursuant to Section 3(b) below, in a timely manner not in excess of 10 business days after the occurrence of the event, notice of any of the following events with respect to the Bonds:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) unscheduled draws on credit enhancements reflecting financial difficulties;

(v) substitution of credit or liquidity providers or their failure to perform;

(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(vii) modifications to rights of Bondholders, if material;

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(viii) bond calls, if material, and tender offers;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the Bonds, if material;

(xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of the Corporation1;

(xiii) the consummation of a merger, consolidation or acquisition involving the Corporation or the sale of all or substantially all of the assets of the Corporation, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; or

(xiv) appointment of a successor additional trustee or the change of name of a trustee, if material.

(b) The Corporation shall file a notice of such occurrence in a timely manner, not in excess of 10 business days after the occurrence of the event with the MSRB, or may request that the Dissemination Agent provide such notice. If so requested by the Corporation, the Dissemination Agent will file a notice of such occurrence as set forth above. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds or defeasance of any Bonds need not be given under this Disclosure Agreement any earlier than the notice of such redemption or defeasance is given to the Owners of affected Bonds pursuant to the Indenture.

(c) The Dissemination Agent shall determine each time it is required to file information with the MSRB whether there has occurred a change in the MSRB’s e-mail address or filing procedures and requirements under EMMA.

Section 4. Filing. Submission of material event notices, Annual Reports, or any other filing required by this Disclosure Agreement shall be effected by sending the filing or notice to the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify), in such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information.

Section 5. Dissemination Agent. The Corporation may, from time to time, appoint or engage a successor Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Corporation. The appointment of a successor Dissemination Agent shall be effective 1This event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Corporation or the University in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Corporation or the University, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Corporation or the University.

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upon the delivery to the Corporation of written acceptance of such designation in substantially the form set forth in Exhibit B hereto. The Dissemination Agent may resign as dissemination agent hereunder at any time upon 30 days prior written notice to the Corporation.

Section 6. Termination of Reporting Obligation. The obligations of the Corporation and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If a party’s obligations hereunder are assumed in full by some other entity, such other entity shall be responsible for compliance with this Disclosure Agreement in the same manner as if it were the signatory hereto, and the assignor shall have no further responsibility hereunder. If such termination or assignment and assumption occurs prior to the final maturity of the Bonds, notice of such termination or assignment and assumption shall be given in the same manner as for a Material Event under Section 3(b).

Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Corporation and the Dissemination Agent, if any, may amend this Disclosure Agreement (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Corporation), and any provision of this Disclosure Agreement may be waived, provided that (a) Bond Counsel or other counsel experienced in federal securities law matters provides the parties to this Disclosure Agreement with its opinion that the undertakings contained herein, as so amended or after giving effect to such waiver, are in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to this Disclosure Agreement; (b) if the amendment or waiver relates to Section 2(a) or 3(a), it may be made only in connection with a change in circumstances that arises from a change in law or legal requirements or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or is waiver either (i) approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments of the Indenture with consent of the Owners or (ii) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Agreement, such amendment or waiver shall be described in the next Annual Report, which shall include a narrative explanation of the reason for the amendment or waiver and its impact such Annual Report. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Material Event under Section 3(b), and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Corporation from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Disclosure Agreement. If the Corporation chooses to include any information in any Annual Report or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Agreement, the Corporation shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Material Event.

Section 9. Default. In the event of a failure of the Corporation or the Dissemination Agent, if any, to comply with any provision of this Disclosure Agreement, any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Corporation or the Dissemination Agent, if any, as the case may

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be, to comply with its obligations under this Disclosure Agreement, Noncompliance with the provisions of this Disclosure Agreement shall not be deemed a Event of Default under the Indenture and the sole remedy under this Disclosure Agreement in the event of any failure of the Corporation or the Dissemination Agent, if any, to comply with this Disclosure Agreement shall be an action to compel performance.

Section 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement and the Corporation, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the Corporation under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Corporation shall pay the fees, charges and expenses of the Dissemination Agent in connection with its administration of this Disclosure Agreement.

Section 11. Notices. Any notices or communications to or among any of the parties referenced in this Disclosure Agreement may be given as follows:

(a) With respect to the Corporation: University of Kansas Center for Research, Inc. Youngberg Hall 2385 Irving Hill Road Lawrence, KS 66045 Attn: President

With a copy to: University of Kansas University General Counsel Strong Hall 1450 Jayhawk Blvd., Room 245 Lawrence, KS 66045

(b) With respect to the Authority: Kansas Development Finance Authority 555 South Kansas Avenue, Suite 202 Topeka, Kansas 66603 Attn: General Counsel

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(c) With respect to the Dissemination Agent: UMB Bank, N.A. 130 N. Market Wichita, KS 67202 Attn: Corporate Trust Department

Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent. Any such different address shall be included in the next Annual Report.

Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the parties hereto and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other Person.

Section 13. Severability. If any provision in this Disclosure Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14. Governing Law. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State and any suites and actions arising out of this Disclosure Agreement shall be instituted in a court of competent jurisdiction in the State.

Section 15. Electronic Transactions. The parties hereto agree that the transaction described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

Section 16. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.


By Name Title

UMB BANK, N.A., as Dissemination Agent

By Name Title

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Exhibit A to

Continuing Disclosure Agreement

Notice of Failure to File Annual Report

Name of Obligated Person: University of Kansas Center for Research, Inc.

Name of Bond Issue: $_______ Kansas Development Finance Authority Revenue Bonds (University of Kansas Center for Research, Inc.), Series 2012E-1 and $_______ Kansas Development Finance Authority Taxable Revenue Bonds (University of Kansas Center for Research, Inc.), Series 2012E-2

Date of Issuance: March __, 2012

NOTICE IS HEREBY GIVEN that the Obligated Person has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated as of March 1, 2012. The Obligated Person anticipates that the Annual Report will be filed by ___________.

Dated:______________

[DISSEMINATION AGENT], as Dissemination Agent

By Name Title

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Exhibit B to

Continuing Disclosure Agreement

Acceptance of Dissemination Agent

Name of Obligated Person: University of Kansas Center for Research, Inc.

Name of Bond Issue: $_______ Kansas Development Finance Authority Revenue Bonds (University of Kansas Center for Research, Inc.), Series 2012E-1 and $_______ Kansas Development Finance Authority Taxable Revenue Bonds (University of Kansas Center for Research, Inc.), Series 2012E-2

Dissemination Agent: __________________________________

Notice Address of Dissemination Agent: ___________________________________

The Dissemination Agent set forth above, having been duly appointed by the Corporation to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Agreement to which this acceptance is attached, hereby accepts such duties and responsibilities set forth therein.

Dated:______________

[DISSEMINATION AGENT]

By as Dissemination Agent

APPENDIX H

FORM OF OPINION OF BOND COUNSEL

[Closing Date] Kansas Development Finance Authority UMB Bank, N.A., Trustee Topeka, Kansas Kansas City, Missouri University of Kansas Center for Research, Inc. Lawrence, Kansas Re: Kansas Development Finance Authority Refunding Revenue Bonds (University of

Kansas Center for Research, Inc. Project), Series 2012E-1 (the “Series 2012E-1 Bonds”) Kansas Development Finance Authority Taxable Refunding Revenue Bonds (University

of Kansas Center for Research, Inc. Project), Series 2012E-2 (the “Series 2012E-2 Bonds”)

_______________________________________________________________________ Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the Kansas Development Finance Authority (the “Authority”) of the above-captioned Series 2012E-1 Bonds and Series 2012E-2 Bonds (collectively, the “Series 2012E Bonds”), pursuant to the Kansas Development Finance Authority Act, K.S.A. 74-8901, et seq., as amended, and a Trust Indenture dated as of February 1, 2005, as supplemented by a First Supplemental Trust Indenture dated as of October 1, 2006 and a Second Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Authority and UMB Bank, N.A., as trustee (the “Trustee”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. We have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied on representations of the Authority, the University of Kansas Center for Research, Inc. (the “Corporation”) and the University of Kansas (the “University”) contained in the Loan Agreement and the Tax Compliance Agreement and certified proceedings and other certifications of the Authority, the Corporation, the University and others furnished to us, without undertaking to verify the same by independent investigation. We have also relied on the legal opinion of counsel to the Corporation, dated the date of this opinion, regarding certain matters, including (a) the corporate status and due organization of the Corporation, (b) the status of the Corporation as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), (c) the corporate power of the Corporation to enter into and perform its obligations under the Loan Agreement, the Series 2012E Note and the Tax Compliance Agreement and (d) the due authorization, execution and delivery of the Loan Agreement, the Series 2012E Note and the Tax Compliance Agreement by the Corporation, and the binding effect and enforceability of those documents against the Corporation. We have further relied on the legal opinion of

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counsel to the University, dated the date of this opinion, regarding certain matters, including (a) the power of the University to enter into and perform its obligations under the Tax Compliance Agreement and (b) the due authorization, execution and delivery of the Tax Compliance Agreement by the University, and the binding effect and enforceability of such document against the University. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Series 2012E Bonds have been duly authorized, executed and delivered by the Authority and are valid and legally binding special obligations of the Authority, payable from the Loan payments made by the Corporation under the Loan Agreement, from other funds held by the Trustee and pledged under the Indenture and from payments made by the University pursuant to the University Agreement. The Series 2012E Bonds do not constitute a debt or liability of the State of Kansas or of any political subdivision thereof within the meaning of any constitutional or statutory provision or limitation and do not constitute a pledge of the full faith and credit of the State of Kansas or of any political subdivision thereof. The issuance of the Series 2012E Bonds shall not, directly, indirectly or contingently, obligate the State of Kansas or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. 2. The Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Authority and are valid and legally binding agreements of the Authority, enforceable against the Authority. The Series 2012E Note has been duly endorsed by the Authority to the Trustee and all of the Authority's right, title and interest in the Loan Agreement (except certain rights to indemnification, reimbursement and administrative fees) and the Series 2012E Note have been duly assigned by the Authority to the Trustee under the Indenture for the benefit and security of the owners of the Bonds. 3. All requirements for the issuance of the Series 2012E Bonds as Additional Bonds under the Indenture have been met. 4. The interest on the Series 2012E-1 Bonds (including any original issue discount properly allocable to an owner of a Series 2012E-1 Bond) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but the interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinions set forth in this paragraph are subject to the condition that the Authority and the Corporation comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2012E-1 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority and the Corporation have covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the interest on the Series 2012E-1 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2012E-1 Bonds. The Series 2012E-1 Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b) of the Code. 5. The interest on the Series 2012E Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108. The rights of the owners of the Series 2012E Bonds and the enforceability of the Series 2012E Bonds, the Indenture, the Loan Agreement, the Series 2012E Note and the Tax Compliance Agreement

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may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles, whether considered at law or in equity. This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours,

APPENDIX I

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2012E Bonds. The Series 2012E Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each series of the Series 2012E Bonds, each in the aggregate principal amount of such series, and will be deposited with DTC.

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Series 2012E Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2012E Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2012E Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2012E Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2012E Bonds, except in the event that use of the book-entry system for the Series 2012E Bonds is discontinued.

To facilitate subsequent transfers, all Series 2012E Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2012E Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2012E Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series

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2012E Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2012E Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2012E Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2012E Bonds may wish to ascertain that the nominee holding the Series 2012E Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2012E Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2012E Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2012E Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payment of principal or redemption price of and interest on the Series 2012E Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or Paying Agent, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, its nominee, the Paying Agent, or Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal or redemption price of and interest on the Series 2012E Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or Paying Agent. Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2012E Bonds at any time by giving reasonable notice to Authority or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2012E Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered.

THE INFORMATION IN THIS APPENDIX CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC. NEITHER THE AUTHORITY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS,

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INDIRECT PARTICIPANTS OR ANY BENEFICIAL OWNER WITH RESPECT TO: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012E BONDS; (3) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE INDENTURE; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDOWNER.
