June 30, 2000 and 1999

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2) Applied Physics Laboratory (APL)

The APL is engaged in research and development work principally under an omnibus contract with the Naval Sea Systems Command of the United States Navy (NAVSEA). Revenues and expenses under the contract with NAVSEA and contracts with other agencies of the United States Government represent substantially all of the revenues and expenses of the APL. The omnibus contract and other contracts define reimbursable costs and provide for fees to the University. The omnibus contract also requires that a portion of the fees earned by the University thereunder be retained and used for various APL-related purposes.

The current contract with NAVSEA expires on September 30, 2002. University management expects that a contractual relationship with the United States Navy will continue after expiration of the current contract.

In accordance with an agreement between the United States Government and the University, the APL has been designated a national resource. Under the agreement, if the University should determine that it can no longer sponsor the APL or the Secretary of the Navy should determine that the Navy can no longer contract with the University with respect to the APL, the University will establish a charitable trust to provide for the continued availability of the APL. The trust would be administered by five trustees and the corpus would consist of the University's interest in the APL facilities, including land to the extent necessary, and the balances in the University's APL stabilization, contingency and research fund on the date the trust is established, less certain costs. Upon termination of the trust, the corpus, in whole or in part, would be returned to and held and used by the University for such educational or research purposes and in such manner as the trustees and University agree.

The APL stabilization, contingency and research fund is included in unrestricted net assets and was approximately $195,586,000 and $181,901,000 at June 30, 2000 and 1999, respectively, including net investments in property and equipment of $89,011,000 and $77,380,000, respectively. At June 30, 2000, APL purchase and subcontract commitments were approximately $44,000,000.

3) Accounts Receivable

Accounts receivable, net, are summarized as follows at June 30 (in thousands):

4) Contributions Receivable

Contributions receivable, net, are summarized as follows at June 30 (in thousands):

At June 30, 2000, approximately 30% of the gross contributions receivable were due from eleven donors. Approximately 29% and 55% of contribution revenues for 2000 and 1999, respectively, were from ten donors. At June 30, 2000, the University had also received bequest intentions of approximately $87,000,000 and certain other conditional promises to give. These intentions and conditional promises to give are not recognized as assets and, if they are received, they will generally be restricted for specific purposes stipulated by the donors, primarily endowments for faculty support, scholarships or general operating support of a particular department or division of the University.

5) Investments

Investments are summarized as follows at June 30 (in thousands):

Investments are professionally managed, primarily by outside investment organizations, subject to direction and oversight by a committee of the Board of Trustees. The Board has established investment policies and guidelines which cover asset allocation and performance objectives and impose various restrictions and limitations on the managers. These restrictions and limitations are specific to each asset classification and cover concentrations of market risk (at both the individual issuer and industry group levels), credit quality of fixed-income and short-term investments, use of derivative securities, investments in foreign securities and various other matters.

Investment income is summarized as follows for the years ended June 30 (in thousands):

At June 30, 2000 and 1999, assets of endowment and similar funds, including cash and cash equivalents and investments, amounted to $1,787,752,000 and $1,520,793,000, respectively. Substantially all assets of endowment and similar funds and certain other assets are combined in a common investment pool known as the Endowment Investment Pool (EIP). Purchases and disposals of shares in the EIP are made based on the market value per share at the end of the quarter during which the transaction takes place.

At June 30, 2000 and 1999, assets of the EIP, including cash and cash equivalents and investments, amounted to $1,803,289,000 and $1,472,752,000, respectively. At June 30, 2000 and 1999, other investments include $106,860,000 and $99,133,000, respectively, of investments held by the University under deferred compensation agreements. Such amounts approximate the UniversityÕs related liability to employees which is included in obligations under deferred compensation agreements and other long-term liabilities. At June 30, 2000, investments having a fair value of $8,565,000 were pledged as security for the payment of unemployment claims and investments having a fair value of $4,828,000 were pledged as security for certain debt. At June 30, 2000, commitments for purchases of investments were approximately $73,000,000.