kansas development finance authority revenue bonds

NEW ISSUE RATING: See "BOND RATING" herein In the opinion of Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the Series 2009K-1 Bonds is excluded 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. The stated interest on the Series 2009K-2 Bonds is included in gross income as interest for federal income tax purposes. In the opinion of Bond Counsel, under existing law, the interest on the Series 2009K Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes. See "LEGAL MATTERS – Opinion of Bond Counsel" herein.

KANSAS DEVELOPMENT FINANCE AUTHORITY REVENUE BONDS

$4,610,000

Revenue Bonds Series 2009K-1

(Kansas Board of Regents – Kansas State University

Child Care Facility Project)

$1,530,000 Taxable Revenue Bonds

Series 2009K-2 (Kansas Board of Regents –

Kansas State University Child Care Facility Project)

Dated: Date of Delivery Due: November 1, as shown on the inside cover page The Series 2009K-1 Bonds referenced above (the "Series 2009K-1 Bonds") and the Series 2009K-2 Bonds referenced above (the “Series 2009K-2 Bonds,” together with the Series 2009K-1 Bonds, the “Series 2009K Bonds”) will be issued by the Kansas Development Finance Authority (the "Authority") as fully registered bonds without coupons in denominations of $5,000 or any integral multiple thereof. The Depository Trust Company, New York, New York, will act as securities depository for the Series 2009K Bonds. Purchases of Series 2009K Bonds will be made in book-entry form. See "THE BONDS – Book-Entry Only System for Series 2009K Bonds" herein. Principal will be payable upon presentation and surrender of the Series 2009K Bonds by the Owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as bond registrar and paying agent (the "Bond Registrar" and "Paying Agent"). Interest on the Series 2009K Bonds will be payable on May 1 and November 1, beginning November 1, 2009, by check or draft of the Paying Agent mailed to the persons who are the Owners of the Series 2009K Bonds as of the close of business on the fifteenth day (whether or not a Business Day) of the calendar month preceding each interest payment date. The Owner of Series 2009K Bonds of the same series in the principal amount of $500,000 or more may request the payments of principal, redemption premium, if any, and interest on Series 2009K Bonds to be made by wire transfer upon written request of the Owner received by the Paying Agent at least fifteen business days before any Payment Date. Principal and semiannual interest on the Series 2009K Bonds will be paid directly to DTC by the Paying Agent, so long as DTC or its nominee, Cede & Co., is the Owner of the Series 2009K Bonds. The Series 2009K Bonds will be issued pursuant to Bond Resolution No. 257 adopted by the Authority on July 9, 2009 (the "Bond Resolution"). The Series 2009K Bonds will stand on a parity with any Additional Bonds issued from time to time under the Bond Resolution (collectively, and together with the Series 2009K Bonds, the "Bonds").

MATURITY SCHEDULE LISTED ON INSIDE COVER PAGE

The principal of, redemption premium, if any, and interest on the Series 2009K Bonds are payable solely and only from the Trust Estate (as defined in the Bond Resolution), which includes, but is not limited to, (i) deposits into the Revenue Fund of Gross Revenues derived by the Kansas Board of Regents (the "Board") from the ownership and operation of the child care facility located on the Manhattan campus of the University, as the same may be expanded from time to time (the “Child Care Facility”), in accordance with the Pledge of Revenues Agreement, dated as of July 1, 2009, between the Authority and the Board (the "Pledge Agreement"), (ii) all funds provided by the University pursuant to the Supplemental Security Agreement, dated as of July 1, 2009 between the Authority and the University (the "Supplemental Security Agreement") and (iii) certain investment earnings. THE BONDS SHALL NOT BE A DEBT OR GENERAL OBLIGATION OF THE AUTHORITY, THE BOARD, THE UNIVERSITY, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, AND NEITHER THE BONDS, THE INTEREST THEREON, NOR ANY JUDGMENT THEREON OR WITH RESPECT THERETO, ARE PAYABLE IN ANY MANNER FROM UNLIMITED TAX REVENUES OF ANY KIND OR CHARACTER. THE BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY, THE BOARD, THE UNIVERSITY, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. The Series 2009K Bonds are subject to redemption as described under the caption "THE SERIES 2009K BONDS – Redemption" herein.

The Series 2009K Bonds are offered when, as and if issued by the Authority, subject to the approval of legality by Gilmore & Bell, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its general counsel, Rebecca Floyd, Esq. and for the Board by its general counsel, Julene L. Miller, Esq. It is expected that the Series 2009K Bonds will be available for delivery in New York, New York through the facilities of DTC on or about July 29, 2009.

The date of this Official Statement is July 15, 2009.

PIPER JAFFRAY & CO.

http://sports.espn.go.com/ncf/clubhouse?teamId=2306�

$4,610,000 KANSAS DEVELOPMENT FINANCE AUTHORITY

REVENUE BONDS, SERIES 2009K-1 (KANSAS BOARD OF REGENTS – KANSAS STATE UNIVERSITY

CHILD CARE FACILITY PROJECT)

SERIAL BONDS

Maturity November 1

Principal Amount

Interest Rate

Yield

Price

CUSIP

2023 $185,000 4.000% 4.030% 99.672% 48542K C98 2024 195,000 4.000 4.130 98.534 48542K D22 2025 200,000 4.125 4.230 98.769 48542K D30 2026 210,000 4.200 4.320 98.545 48542K D48 2027 220,000 4.300 4.410 98.624 48542K D55 2028 230,000 4.375 4.500 98.395 48542K D63 2029 240,000 4.500 4.590 98.814 48542K D71

TERM BONDS

$1,705,000 4.80% Term Bonds Due November 1, 2035 (Yield: 4.920%; Price: 98.234%) (CUSIP: 48542K D89) $1,425,000 5.00% Term Bonds Due November 1, 2039 (Yield: 5.010%; Price: 99.837%) (CUSIP: 48542K D97)

$1,530,000 KANSAS DEVELOPMENT FINANCE AUTHORITY

TAXABLE REVENUE BONDS, SERIES 2009K-2 (KANSAS BOARD OF REGENTS – KANSAS STATE UNIVERSITY

CHILD CARE FACILITY PROJECT)

SERIAL BONDS

Maturity November 1

Principal Amount

Interest Rate

Yield

Price

CUSIP

2012 $110,000 2.625% 2.790% 99.487% 48542K B65 2013 115,000 3.250 3.380 99.485 48542K B73 2014 120,000 3.750 3.930 99.148 48542K B81 2015 125,000 4.375 4.550 99.050 48542K B99 2016 130,000 4.750 4.850 99.387 48542K C23 2017 135,000 4.750 4.930 98.784 48542K C31 2018 145,000 5.000 5.130 99.043 48542K C49 2019 150,000 5.100 5.230 98.969 48542K C56 2020 160,000 5.300 5.430 98.906 48542K C64 2021 170,000 5.500 5.580 99.287 48542K C72 2022 170,000 5.625 5.730 99.024 48542K C80

KANSAS DEVELOPMENT FINANCE AUTHORITY

Brett A. Reber, Chair Daniel L. Watkins, Vice Chair John G. Montgomery, Member

Audrey H. Langworthy, Member Timothy C. Schaller, Member

Stephen R. Weatherford, President Rebecca E. Floyd, Executive Vice President and General Counsel

Jim MacMurray, Vice President of Finance Nick Lehman, Vice President of Finance

Linda Clark, Chief Fiscal Officer

BOARD OF REGENTS OF THE STATE OF KANSAS

Jill Docking, Chair Gary Sherrer, Vice Chair

Jarold Boettcher Janie Perkins Christine Downey-Schmidt Donna Shank

Richard Hedges William Thornton Dan Lykins

BOARD OF REGENTS STAFF

Reginald L. Robinson, President and CEO Diane Duffy, Vice President for Finance and Administration

Julene L. Miller, General Counsel

KANSAS STATE UNIVERSITY ADMINISTRATION

Dr. Kirk H. Schulz, President (effective July 1, 2009) Bruce Shubert, Vice President for Administration and Finance

Fran Willbrant, Controller Bernard Pitts, Assistant Vice President, Student Life

PROFESSIONAL SERVICES

Bond Counsel ........................... Gilmore & Bell, P.C. Bond Registrar and Paying Agent ..... Treasurer of the State of Kansas

Financial Advisor .............. Columbia Capital Management, LLC

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No dealer, broker, salesman or other person has been authorized by the Authority 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 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 State of Kansas, the Board, the University or the Authority since the date hereof. Piper Jaffray & Co. ("Piper") has entered into an agreement (the "Distribution Agreement") with Advisors Asset Management, Inc. ("AAM") for the distribution of certain municipal securities offerings allocated to Piper at the original offering prices. Under the Distribution Agreement, if applicable to the Series 2009K Bonds, Piper will share with AAM a portion of the fee or commission, exclusive of management fees, paid to Piper. TABLE OF CONTENTS Page INTRODUCTION........................................................................................................................................................1 ESTIMATED SOURCES AND USES OF FUNDS...................................................................................................2 THE SERIES 2009K BONDS .....................................................................................................................................2 General............................................................................................................................................................2 Book-Entry Only System ...............................................................................................................................3 Security for the Bonds....................................................................................................................................3 Authorization of Additional Bonds and Parity Obligations ..........................................................................4 Redemption.....................................................................................................................................................5 Selection of Bonds to be Redeemed ..............................................................................................................6 Paying Agent's and Bond Registrar's Duties to Redeem Bonds ...................................................................6 Notice of Redemption ....................................................................................................................................6 Effect of Call for Redemption........................................................................................................................6 INVESTMENT CONSIDERATIONS ........................................................................................................................6 No Pledge of Real or Personal Property ........................................................................................................7 Limitation of Liability ....................................................................................................................................7 Special Obligations.........................................................................................................................................7 Projection of Gross Revenues ........................................................................................................................7 Bond Reserve Account...................................................................................................................................7 Taxation of Interest on the Bonds ..................................................................................................................8 Market for the Series 2009K Bonds...............................................................................................................8 Legal Matters..................................................................................................................................................9 Limitations on Remedies Available to Owners of the Bonds .......................................................................9 Premium on Series 2009K Bonds ..................................................................................................................9 Suitability of Investment ................................................................................................................................9 THE AUTHORITY....................................................................................................................................................10 THE KANSAS BOARD OF REGENTS ..................................................................................................................11 KANSAS STATE UNIVERSITY .............................................................................................................................12 History and Academic Development ...........................................................................................................12 External Relationships..................................................................................................................................12 State Appropriations and the Budget Process..............................................................................................13 Additional University Information...............................................................................................................14 THE CHILD CARE FACILITY................................................................................................................................14 NON-LITIGATION CERTIFICATION ...................................................................................................................14

(ii)

BOND RATING.........................................................................................................................................................15 CONTINUING DISCLOSURE.................................................................................................................................15 LEGAL MATTERS ...................................................................................................................................................15 Approval of Bonds .......................................................................................................................................15 Opinion of Bond Counsel.............................................................................................................................15 FINANCIAL ADVISOR............................................................................................................................................16 UNDERWRITING.....................................................................................................................................................17 MISCELLANEOUS...................................................................................................................................................17 AUTHORIZATION OF OFFICIAL STATEMENT ................................................................................................17 ADDITIONAL INFORMATION..............................................................................................................................18 APPENDIX A: The University ..........................................................................................................A-1 APPENDIX B: The Child Care Facility............................................................................................. B-1 APPENDIX C: Projected Debt Service Requirements and Debt Service Coverage Ratios............... C-1 APPENDIX D: Summary of Principal Financing Documents...........................................................D-1 APPENDIX E: Book-Entry Only System.......................................................................................... E-1

(THIS PAGE LEFT BLANK INTENTIONALLY)

KANSAS DEVELOPMENT FINANCE AUTHORITY REVENUE BONDS

$4,610,000

Revenue Bonds Series 2009K-1

(Kansas Board of Regents – Kansas State University

Child Care Facility Project)

$1,530,000 Taxable Revenue Bonds

Series 2009K-2 (Kansas Board of Regents –

Kansas State University Child Care Facility Project)

INTRODUCTION This Official Statement, including the cover page and appendices hereto (the "Official Statement"), is provided to furnish information with respect to the Kansas Development Finance Authority (the "Authority") and the issuance and delivery of its Revenue Bonds, Series 2009K-1 (Kansas Board of Regents – Kansas State University Child Care Facility Project) (the "Series 2009K-1 Bonds") and its Taxable Revenue Bonds, Series 2009K-2 (Kansas Board of Regents – Kansas State University Child Care Facility Project) (the "Series 2009K-2 Bonds," together with the Series 2009K-1 Bonds, the “Series 2009K Bonds”). The Series 2009K Bonds are being issued pursuant to Bond Resolution No. 257 adopted by the Authority on July 9, 2009 (the "Bond Resolution"). The Series 2009K Bonds will stand on a parity with any Additional Bonds issued from time to time under the Bond Resolution (collectively, the "Bonds"). The Series 2009K Bonds are being issued for the purpose of (i) paying a portion of the costs of construction and equipping of a child care facility (the “2009K Project”) to be located on the Manhattan campus of Kansas State University (the “University”), substantially as described in the "Architectural Program for Kansas State University – Child Development Center dated September 2006”, (ii) making a deposit to the Bond Reserve Account, (iii) paying capitalized interest and (iv) paying certain costs of issuance. As used herein, references to the “Child Care Facility” means the child care facility located on the Manhattan campus of the University, as the same may be expanded from time to time, financed from the proceeds of the Series 2009K Bonds. The Authority is an independent instrumentality of the State of Kansas pursuant to K.S.A. 74-8901 et seq., as amended and supplemented. The Authority is authorized pursuant to Kansas Law and the Bond Resolution to issue its revenue bonds to finance the construction and equipping of the 2009K Project, which is to be owned by the Kansas Board of Regents (the "Board") and operated by the University. See "THE AUTHORITY" herein. Pursuant to the Pledge of Revenues Agreement, dated as of July 1, 2009 (the "Pledge Agreement"), by and between the Authority and the Board, the Board has pledged the Gross Revenues to the Authority, and the Authority has pledged to pay the principal of, redemption premium, if any, and interest on the Bonds from the Trust Estate, which includes, but is not limited to, all right, title and interest of the Authority in, to, and under the Pledge Agreement and the Supplemental Security Agreement. Pursuant to the Bond Resolution, the Gross Revenues are deposited into the Revenue Fund established with the State Treasurer (the "Revenue Fund"). The Bonds are payable solely and only from the Trust Estate and not from any other fund or source of the Authority or the Board. Pursuant to the Bond Resolution, the Authority will pledge and assign the Trust Estate to the payment of the principal of, redemption premium, if any, and interest on the Bonds. The Board covenants in the Pledge Agreement to establish, revise, charge and collect fees and charges for child care services rendered at the Child Care Facility, in amounts such that the Debt Service Coverage Ratio will be not less than 1.75 and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution.

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In the event the Gross Revenues are not sufficient to pay the Debt Service Requirements on the Bonds and the timely payment of Current Expenses, the University, acting by and through the President of the University, agrees and covenants pursuant to the Supplemental Security Agreement dated as of July 1, 2009 (the "Supplemental Security Agreement") between the Authority and the University, to make available unrestricted funds of the University, other than State general fund appropriations, in such amounts and at such times as may be necessary to provide for the full and prompt payment of Debt Service Requirements and the Current Expenses when and as the same shall become due. Certain capitalized terms used in this Official Statement and not otherwise defined herein shall have the meanings given to such terms under the caption "DEFINITIONS" in APPENDIX D attached hereto.

ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Series 2009K Bonds and other available funds provided by the University are estimated to be applied as follows: Sources of Funds Series 2009K-1 Bond Proceeds $4,610,000.00 Series 2009K-2 Bond Proceeds 1,530,000.00 Less Original Issue Discount (64,341.95) TOTAL $6,075,658.05 Uses of Funds Deposit or Project Account $5,000,000.00 Deposit to Bond Reserve Account 399,920.00 Deposit to Principal and Interest Account 504,118.76 Costs of Issuance 133,735.49 Underwriters' Discount 37,883.80 TOTAL $6,075,658.05

THE SERIES 2009K BONDS

General The Series 2009K Bonds will be issued as fully registered Bonds in the denomination of $5,000 each or integral multiples thereof. The Series 2009K Bonds will be dated the date of initial delivery, and will mature, subject to prior redemption, in the years and amounts as shown on the inside cover page hereof and will bear interest from their dated date at the rates shown on the inside cover page. The principal of, redemption premium, if any, and interest on the Series 2009K Bonds will be payable in lawful money of the United States of America at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar") and shall be paid by (1) check or draft of the Paying Agent mailed to such Owner, or (2) at the written request addressed to the Paying Agent by any Owner of Series 2009K Bonds in the aggregate principal amount of at least $500,000 of Bonds, by wire transfer to the bank for credit to the account number filed with the Paying Agent no later than the Business Day preceding the Record Date. The principal of each Series 2009K Bond will be payable at maturity or earlier redemption upon presentation and surrender at the principal office of the Paying Agent. Interest on each Series 2009K Bond will be payable to

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the Owners of the Bonds at the address of each Owner shown on the registration records maintained by the Bond Registrar as of the fifteenth day of the calendar month next preceding each Interest Payment Date. Series 2009K Bonds will be transferable at the office of the Bond Registrar. The Authority has agreed to pay the fees, charges and expenses of the Bond Registrar, which fees, charges and expenses shall include all costs incurred in connection with the issuance, transfer, exchange, registration, redemption or payment of the Series 2009K Bonds, except (a) the reasonable fees and expenses in connection with the replacement of any Series 2009K Bond or Series 2009K Bonds mutilated, stolen, lost or destroyed, or (b) any tax or other governmental charge imposed in relation to the transfer, exchange, registration, redemption or payment of the Bonds. Such additional costs shall be paid by the Owners. Neither the Authority nor the Bond Registrar shall be required to make any such exchange or transfer of Series 2009K Bonds during the 15 days immediately preceding a Payment Date or, in the case of any proposed redemption of Bonds, during the 15 days immediately preceding the selection of Bonds for such redemption or after such Bonds or any portion thereof has been selected for redemption. Book-Entry Only System The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Series 2009K Bonds. Information with respect to the book-entry system is contained in APPENDIX E attached hereto. Security for the Bonds The Bonds and the interest thereon shall be special, limited obligations of the Authority payable solely and only from, and are secured as to the payment of principal of, redemption premium, if any, and interest by a pledge of, the Trust Estate, which consists of: (a) All right, title and interest of the Authority in, to and under the Pledge

Agreement and the Supplemental Security Agreement; provided that the pledge and assignment thereby made shall not impair or diminish the obligations of the Authority under the provisions of the Pledge Agreement and the Supplemental Security Agreement;

(b) All moneys and securities from time to time held under the terms of the

Bond Resolution (excluding funds held in or accruing to the Rebate Fund), including, without limitation, bond proceeds and income from the temporary investment thereof and proceeds from insurance and condemnation awards, and any and all other real or personal property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security for the Bonds by the Authority; and

(c) All right, title and interest of the Authority in, to and under any Qualified

Swap Agreement. The payment of the principal of, redemption premium, if any, and interest on the Bonds is further secured by the establishment of a Bond Reserve Account, which is required to be funded from proceeds received from the sale of Bonds in an amount equal to the Bond Reserve Requirement. In the event funds credited to and deposited in the Principal and Interest Account with respect to the Series 2009K Bonds are insufficient to provide for payment of the principal of, redemption premium, if any, and interest on the Series 2009K Bonds promptly when due, the Authority shall cause the State Treasurer to withdraw from the Bond Reserve Account and transfer to the Principal and Interest Account with respect to the Series 2009K Bonds such sum as shall be necessary to provide for payment of such principal of, redemption premium, if any, and

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interest on the Series 2009K Bonds, which shall be applied in accordance with the provisions of the Bond Resolution. See "SUMMARY OF BOND RESOLUTION – Bond Reserve Account" in APPENDIX D hereto. Pursuant to the Pledge Agreement, the Board has pledged to the Authority the Gross Revenues, which include (a) the “Pledged Child Care Fees" consisting of the following fees and charges collected from parents and guardians of children attending the Child Care Facility (including related subsidies received from governmental or private agencies on behalf of children attending the Child Care Facility): (1) monthly or other periodic attendance charges (i.e., “tuition”), (2) application fees, (3) registration fees, (4) late fees, (5) charges for supplies, equipment and field trips, and (6) and investment earnings amounts specified in clauses (1) through (5), and (b) investment earnings on Funds and Accounts available for Debt Service Requirements pursuant to the Bond Resolution and the Pledge Agreement. The Board covenants in the Pledge Agreement to establish and collect fees and charges for use of the Child Care Facility sufficient to pay when due the principal of, redemption premium, if any, and interest on the Bonds. The Board further covenants and agrees that it shall establish, revise, charge and collect rates, fees and charges for services rendered at the Child Care Facility in amounts sufficient to produce Gross Revenues that maintain a Debt Service Coverage Ratio of not less than 1.75, and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution. Pursuant to the Supplemental Security Agreement, in the event the Gross Revenues are not sufficient to pay the Debt Service Requirements on the Bonds and the timely payment of Current Expenses, the University, acting by and through the President of the University, agrees and covenants to make available unrestricted funds of the University, other than State general fund appropriations, in such amounts and at such times as may be necessary to provide for the full and prompt payment of Debt Service Requirements and the Current Expenses when and as the same shall become due. THE BONDS SHALL NOT BE A DEBT OR GENERAL OBLIGATION OF THE AUTHORITY, THE UNIVERSITY, THE BOARD, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, AND NEITHER THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE BONDS, NOR ANY JUDGMENT THEREON OR WITH RESPECT THERETO, ARE PAYABLE IN ANY MANNER FROM UNLIMITED TAX REVENUES OF ANY KIND OR CHARACTER. THE BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY, THE UNIVERSITY, THE BOARD, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. Authorization of Additional Bonds and Parity Obligations Additional Bonds may be issued under the Bond Resolution at any time and from time to time, for the purposes and upon compliance with the conditions set forth in the Bond Resolution and the Pledge Agreement. Such Additional Bonds shall be equally and ratably secured by the Bond Resolution with respect to the Trust Estate on a parity with the Series 2009K Bonds and any other Parity Bonds if the conditions set forth in the Bond Resolution and Pledge Agreement are met. See "SUMMARY OF THE BOND RESOLUTION – Authorization of Additional Bonds," "SUMMARY OF THE PLEDGE AGREEMENT – Additional Bonds" and "SUMMARY OF THE PLEDGE AGREEMENT–Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. The Board may issue Parity Obligations in accordance with the provisions of the Pledge Agreement that will be on a parity, with respect to the Gross Revenues, with the Parity Bonds, and may also issue Subordinated Indebtedness in accordance with the provisions of the Pledge Agreement. See "SUMMARY OF THE PLEDGE

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AGREEMENT – Additional Obligations" and "SUMMARY OF THE PLEDGE AGREEMENT – Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. Except as specifically provided in the Bond Resolution and Pledge Agreement, the Authority will not otherwise issue any obligations ratably secured and on a parity with the Parity Bonds with respect to the Trust Estate, but the Authority may issue Subordinated Indebtedness. See "SUMMARY OF THE PLEDGE AGREEMENT – Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. Redemption Optional Redemption. The Series 2009K Bonds maturing in the years 2010 to 2019, inclusive, shall become due without option of prior payment. At the option of the Authority, the Series 2009K Bonds maturing in the year 2020 and thereafter may be called for redemption and payment prior to maturity on November 1, 2019 or thereafter in whole or in part (selection of Series 2009K Bonds to be designated by the Authority in such equitable manner as it may determine) at any time, at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Extraordinary Optional Redemption. The Series 2009K Bonds shall be subject to redemption and payment prior to the stated maturity thereof, (a) in the event of a Change of Circumstances, at the option of the Authority upon instructions from the Board or (b) upon the occurrence of an Event of Default under the Pledge Agreement, at the option of the Authority with notice to the Board, on any date, at a redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption, provided all of the Series 2009K Bonds are so redeemed and paid according to their terms.

Mandatory Sinking Fund Redemption. The Series 2009K-1 Bonds maturing on November 1, 2035 shall be subject to mandatory redemption and payment prior to maturity at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption, on November 1 in each of the following years in the following principal amounts:

Year Principal Amount 2030 $250,000 2031 265,000 2032 275,000 2033 290,000 2034 305,000 2035* 320,000

* Maturity date.

The Series 2009K-1 Bonds maturing on November 1, 2039 shall be subject to mandatory redemption and payment prior to maturity at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption, on November 1 in each of the following years in the following principal amounts:

Year Principal Amount 2036 $335,000 2037 350,000 2038 365,000 2039* 375,000

* Maturity date.

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Selection of Bonds to be Redeemed Bonds shall be redeemed only in the principal amount of $5,000 or integral multiples thereof. If less than all of the Outstanding Bonds are to be redeemed and paid prior to maturity, such Bonds shall be redeemed in such equitable manner as the Authority shall determine. The Paying Agent shall thereafter select the Bonds to be redeemed in such manner as it shall determine. Paying Agent's and Bond Registrar's Duties to Redeem Bonds The Paying Agent shall call Bonds for redemption and payment and shall give notice of redemption as provided in the Bond Resolution upon receipt by the Bond Registrar at least 45 days prior to the redemption date of a written request of the Authority together with the consent or request of the Board, provided funds are on deposit with the Paying Agent and are available for such redemption on or prior to such redemption date. Such request shall specify the principal amount of and the respective maturities of the Bonds to be called for redemption, the applicable redemption price or prices and the provision or provisions of the Bond Resolution pursuant to which such Bonds are to be called for redemption. Notice of Redemption Notice of the call for any redemption identifying the Bonds or portions thereof to be redeemed shall be given by the Bond Registrar, in the name of the Authority, by mailing a copy of the redemption notice at least 30 days prior to the date fixed for redemption to the Original Purchaser, the Bond Insurer and to the Owner of each Bond to be redeemed at the address shown on the registration books maintained by the Bond Registrar; provided, however, that failure to give such notice by mailing as aforesaid, or any defect therein, shall not affect the validity of any proceedings for the redemption of the Bonds. Any notice of redemption shall state the date of redemption, the place or places at which such Bonds shall be presented for payment, the series, maturities and numbers of the Bonds or portions of Bonds to be redeemed and the principal amount thereof being redeemed, the redemption price, whether or not funds for the redemption are on deposit with the Paying Agent or the redemption is contingent upon the deposit of such funds, and shall state that interest on the Bonds described in such notice will cease to accrue from and after the redemption date if the conditions described herein under the caption "THE BONDS – Effect of Call for Redemption" are met. Effect of Call for Redemption Prior to the date fixed for redemption, funds or Defeasance Obligations shall be deposited with the Paying Agent in an amount sufficient to provide for the payment of the Bonds called for redemption, accrued interest thereon to the redemption date and the redemption premium, if any. Upon the deposit of such funds or Defeasance Obligations, and notice having been given as provided in the Bond Resolution, the Bonds or portions of Bonds thus called for redemption shall cease to bear interest on the specified redemption date and shall no longer be entitled to the protection, benefit or security of the Bond Resolution and shall not be deemed to be Outstanding under the provisions of the Bond Resolution.

INVESTMENT CONSIDERATIONS THE PURCHASE OF THE SERIES 2009K BONDS IS SUBJECT TO CERTAIN RISKS. EACH PROSPECTIVE INVESTOR IN THE SERIES 2009K BONDS IS ENCOURAGED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY, AND TO GIVE PARTICULAR ATTENTION TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE PAYMENT OF DEBT SERVICE ON THE SERIES 2009K BONDS, AND WHICH COULD ALSO

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AFFECT THE MARKET PRICE OF THE SERIES 2009K BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. THIS DISCUSSION OF RISK FACTORS IS NOT, AND IS NOT INTENDED TO BE, EXHAUSTIVE. No Pledge of Real or Personal Property The pledge of the Trust Estate does not constitute a pledge of the Child Care Facility or any real or personal property. Limitation of Liability 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 said Act cannot exceed $500,000 for any number of claims arising out of a single occurrence or event. The directors, employees and officers of the Authority are also protected from personal liability, under K.S.A. 74-8910, for any reason arising from the issuance of bonds unless such person acted with willful, wanton or fraudulent misconduct or intentionally tortuous conduct. Special Obligations The Bonds are special, limited obligations of the Authority. Neither the principal of, redemption premium, if any, nor interest on the Bonds constitutes a general obligation or indebtedness of, nor is the payment thereof guaranteed by the Authority, the Board, the University, the State or any municipal corporation or political subdivision thereof. The Bonds are not payable in any manner from unlimited tax revenues of any kind or character. The Authority has no taxing power. Projection of Gross Revenues The cash flow projections for the Gross Revenues derived from the operation and ownership of the Child Care Facility as set forth under the caption "Projected Gross Revenues " and in APPENDIX B hereto, have been prepared by the University based upon the best available information with respect to historical revenues from the Center and projected revenues from the Child Care Facility, but, due to factors beyond the control of the University, may not materialize as set forth therein. Bond Reserve Account Pursuant to the Bond Resolution, an amount necessary to cause the amount on deposit in the Bond Reserve Account to equal the Bond Reserve Requirement with respect to the Bonds will be deposited in the Bond Reserve Account from proceeds of the Series 2009K Bonds. Moneys in the Bond Reserve Account may be invested in Investment Obligations. Moneys, including such Investment Obligations, may be applied by the Authority to prevent default in the payment of the principal of, redemption premium, if any, and interest on the Series 2009K Bonds in accordance with the Bond Resolution, in the event funds in the Principal and Interest Account with respect to the Series 2009K Bonds are insufficient to provide funds for payments due on the Series 2009K Bonds on any Payment Date. In the event it is necessary to sell any Investment Obligations for such purpose, the price realized upon such sale may not equal the value of the applicable Investment Obligation(s) at the most recent date to which Investment Obligations are required to be valued. This may result in available funds in the Bond Reserve Account being less than the Bond Reserve Requirement.

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In the event of a default by the Authority under the Bond Resolution, the Bond Reserve Account may, under certain circumstances and, ordinarily under the supervision of and under order of the Courts, be applied for purposes other than payment of the Parity Bonds. Such purposes may include preservation of and security of the Trust Estate and payment of other costs for which the Board is obligated under the Pledge Agreement. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Series 2009K-1 Bonds is excluded from gross income for Federal income tax purposes under current provisions of the Code, and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Series 2009K-1 Bonds includable in gross income for Federal income tax purposes. The Authority and Board have covenanted in the Bond Resolution and the Pledge Agreement, respectively, and in other documents and certificates to be delivered in connection with the issuance of the Series 2009K-1 Bonds, to comply with the provisions of the Code, including those which require the Authority or Board to take or omit to take certain actions after the issuance of the Series 2009K-1 Bonds. Because the existence and continuation of the excludability of the interest on the Series 2009K-1 Bonds depends upon events occurring after the date of issuance of the Series 2009K-1 Bonds, the opinion of Bond Counsel described under "LEGAL MATTERS" assumes the compliance by the Authority and Board with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Series 2009K-1 Bonds in the event of noncompliance with such provisions. The failure of the Authority or Board to comply with the provisions described above may cause the interest on the Series 2009K-1 Bonds to become includable in gross income for Federal income tax purposes as of the date of issuance. Bond Counsel will render its opinion that the interest on the Series 2009K Bonds is exempt from income taxation by the State of Kansas. Market for the Series 2009K Bonds There is no established secondary market for the Series 2009K Bonds, and there is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of 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 Child Care Facility. From time to time it may be necessary to suspend indefinitely secondary market trading in selected issues of bonds as a result of the financial condition or market position of the broker dealer, prevailing market conditions, lack of adequate current financial information regarding the Bonds, whether or not the 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 Authority and the Board have covenanted to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. In the event that the Authority and the Board fail to provide the necessary information to comply with said rule, it could adversely impact an Owner's ability to sell the Series 2009K Bonds in the secondary market.

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Legal Matters Various State and Federal laws, regulations and constitutional provisions apply to the operations of the Authority, the Board and the University. 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 Authority, the Board and the University. Limitations on Remedies Available to Owners of the Bonds The enforceability of the rights and remedies of the Owners of Bonds, and the obligations incurred by the Authority in issuing the Bonds, are subject to the following: the Federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the Federal or State government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Premium on Series 2009K Bonds

Any person who purchases a Series 2009K Bond in excess of its principal amount, whether during the initial offering or in a secondary market transaction, should consider that the Series 2009K Bonds are subject to redemption at par under the various circumstances described under the caption "THE SERIES 2009K BONDS–Redemption" herein. Suitability of Investment An investment in the Series 2009K Bonds involves a certain degree of risk. The interest rate borne by the Series 2009K 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 tax exempt feature of the Series 2009K Bonds 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 2009K Bonds are an appropriate investment. NO REPRESENTATION OR ASSURANCE CAN BE MADE OR GIVEN THAT REVENUES WILL BE REALIZED BY THE AUTHORITY IN AMOUNTS SUFFICIENT TO PAY THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2009K BONDS. THE FOREGOING STATEMENTS 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 2009K BONDS.

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Prospective purchasers of the Series 2009K 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.

THE AUTHORITY The Authority is an independent instrumentality of the State exercising essential public functions, created in 1987 by K.S.A. 74-8901 et seq., as amended (the "KDFA 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:

Name Office Term Principal Occupation and Place of Business

Brett A. Reber Chair Vice-Chair & Member

12/15/06 to 1/15/11 5/02/03 to 1/15/11

Attorney McPherson, Kansas

Daniel L. Watkins Chair Vice Chair Member

5/02/03 to 12/15/06 12/15/06 to 1/15/09 5/02/03 to 1/15/09

Attorney Lawrence, Kansas

John G. Montgomery Member 5/02/01 to 1/15/09 President, Junction City Daily Union Junction City, Kansas

Audrey H. Langworthy

Member 1/29/04 to 1/15/09 Community Volunteer Prairie Village, Kansas

Timothy C. Schaller Member 3/23/04 to 1/15/11 Architect Larned, Kansas

Stephen R. Weatherford

Ex-officio Member

1/27/03 to present President Kansas Development Finance Authority Topeka, 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 Secretary to the Authority. The Authority has the rights, powers and privileges and is subject to the duties provided by the KDFA 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 Series 2009K Bonds offered hereby, together with any Additional Bonds issued under the Bond Resolution, 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, redemption premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Bond Resolution or any other

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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 Bond Resolution and the issuance of any of the Bonds. 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. 74-3201 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 Pittsburg State University, 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 and Wichita; Kansas State University, with its campuses in Manhattan and Salina, Wichita State University; Emporia State University; and Fort Hays 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 rentals, student fees and other revenues for various projects at the respective institutions. Shown below are the principal balances of revenue bonds outstanding at June 1, 2009, 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 at June 1, 2009

Outstanding Principal Amount Emporia State University $10,692,900 Fort Hays State University 12,430,000 Kansas State University 138,240,000 Pittsburg State University 12,235,000 University of Kansas 130,665,000 Wichita State University 28,515,000 Total $332,777,900

In addition, as of June 1, 2009 the Authority also has outstanding three series of its Kansas

Development Finance Authority Revenue Bonds (Kansas Board of Regents—Comprehensive Rehabilitation and Repair Project), including Series 1997G-1, Series 2001F and Series 2004F, in the aggregate principal amount of $41,827,162.50. Such bonds were issued for the purpose of paying a portion of the costs of construction, rehabilitation, repair and equipping of various facilities located on one or more institutions under

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the control and supervision of the Board. These revenue bonds are secured by annual appropriations of the State made to the Comprehensive Rehabilitation and Repair Fund of the Board from the Kansas Educational Building Fund, a special revenue fund of the State funded by a one mill property tax levy on tangible property in the State.

KANSAS STATE UNIVERSITY

History and Academic Development

Founded in 1863, Kansas State University was established under the Morrill Act, which created land grant colleges. In 1991 the Legislature merged the former Kansas College of Technology with the University to establish the Kansas State University-Salina College of Technology and Aviation. The University's full-time enrollment for the fall semester 2008 was in excess of 23,000, and the University employed in excess of 5,000 full-time equivalent faculty and staff.

Today, the University has a main campus of 664 acres, located in northern Manhattan, Kansas, which is approximately 125 miles west of Kansas City. In 1991, the Kansas Legislature established the Salina campus of the University, through a merger of the former Kansas College of Technology with the University. The University also owns 18,000 acres throughout the State in four branch locations of the Agricultural Experiment Station and 8,600 acres in the Konza Research Prairie, a natural research area leased from Nature Conservancy and the Kansas State University Foundation, dedicated to the natural ecology of the bluestem prairie.

The University currently has nine colleges, including Agriculture, Architecture and Design, Arts and Sciences, Business Administration, Education, Engineering, Human Ecology, Veterinary Medicine Salina Colleges of Technology and Aviation, and the Graduate School. The University offers associate, bachelor, master, doctorate, and professional degrees. It is the only Kansas institution offering graduate degrees in Agriculture, Human Ecology/Home Economics, and Veterinary Medicine. Annual grant expenditures in excess of $110 million for the year ended June 30, 2009 place the University among the top one hundred research universities in the nation, with a leading role in agricultural research. The KSU-Salina College of Technology and Aviation delivers programs in engineering technology, related science technology fields and aviation, offering associate and bachelor degrees.

External Relationships

The Kansas State University Foundation. The Kansas State University Foundation (the "Foundation") was organized in 1944. The Foundation is governed by a Board of Trustees representing geographic and educational constituencies.

The essential purpose of the Kansas State University Foundation is to provide funding unavailable through State appropriations or student fees to support the educational undertakings of the University. To that end, the Foundation encourages donations of and holds in trust any real or personal property contributed for the use of the University, its faculty and its students. The Foundation is charged with investing, managing, controlling and disbursing all such gifts. It currently supports the University with over $39.7 million annually expended for grants, equipment and supplies, professorships and other faculty compensation, research, travel, public relations, construction costs, special projects, student recruitment and transfers to the Department of Intercollegiate Athletics. In addition, scholarships of more than $8.6 million dollars annually are provided through the Foundation.

The Kansas State University Foundation, together with Nature Conservancy, a nonprofit organization dedicated to preservation of the natural environment and ecology, currently leases prairie land to the University for use in its experimental agriculture program.

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The Kansas State University Foundation is a separate entity from the University, and results of its financial operations are not included in the financial statements of the University. As of June 30, 2008, balance sheet assets of the Foundation were in excess of $410 million.

The Kansas State University Alumni Association. The Kansas State University Alumni Association (the "Association") was chartered in 1874. Its purpose is to provide a lifelong link between the University and its alumni and friends, through programs providing records maintenance, student recruitment, publications, programs throughout the nation, fund-raising activities, volunteer identification and honors for outstanding alumni.

At the beginning of each Fiscal Year, the Association is granted an allotment of State funds by the University through a contract which provides the funding for the maintenance of the alumni database.

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.

Each year, the Board of Regents approves a system-wide budget request for the submission to the Department of Administration, Division of the Budget by September for the succeeding Fiscal Year. Professional staff members at the Division of the Budget analyze and review the budget requests of the universities and other State agencies and present 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 those of the Regents' institutions, making final recommendations for legislative approval. Staff support for the Legislature also includes professional budget analysts who again scrutinize the proposed budgets.

Once the proposed budget is complete and approved by the Legislature, it is again presented to the Governor for passage into law. The Governor has line-item veto authority. 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 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, including the University, to ensure fiscal responsibility.

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. Examples of other revenue sources include

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revenues from auxiliary operations, sponsored research overhead, grants and contracts, and other miscellaneous sales and service activities.

Kansas State University Comparison of State Appropriations to Tuition & Fees and Other Revenue Sources

Fiscal Years Ended June 30, 2004 – 2008 (Millions of Dollars)

Revenues in Millions of Dollars As a % of Total Revenue Fiscal Year

Ended June 30,

State

Appropriations

Tuition& Fees

All OtherSources

Total

Revenues

State

Appropriations

Tuition & Fees

All Other

Sources 2004 157.7 84.1 289.9 531.7 29.7 15.8 54.8 2005 163.4 102.2 333.0 598.6 27.3 17.1 55.6 2006 171.5 110.8 395.4 677.7 25.3 16.3 58.4 2007 181.8 132.6 390.6 705.0 25.8 18.8 55.4 2008 185.2 142.7 404.0 731.9 25.3 19.5 55.2

Source: Controller's Office, Kansas State University.

Additional University Information

Additional information regarding the University is set forth in APPENDIX A attached hereto.

THE CHILD CARE FACILITY Information about the Child Care Facility is set forth in APPENDIX B. Included in APPENDIX B are projected results of operations of the Child Care Facility, including projected Gross Revenues, other non-pledged operational revenues of the Child Care Facility and contributions from the University. The application of projected Gross Revenues to anticipated debt service requirements for the Bonds is set forth in APPENDIX C. No assurance is given that the projected Gross Revenues or other revenues will be realized in the amounts set forth in such Appendices.

NON-LITIGATION CERTIFICATION Upon delivery of the Series 2009K Bonds, the Authority and the Board will furnish a certificate dated the date of delivery of the Series 2009K Bonds, to the effect that (a) to the knowledge of the signer or signers thereof there is no litigation pending or threatened against the Authority or the Board affecting the validity of the Pledge Agreement, the Bond Resolution or the Series 2009K Bonds; and (b) the execution, delivery and performance by the Authority or the Board of the Pledge Agreement or the Bond Resolution will not violate any provision of the Constitution, statutes or other laws of the State, or any other applicable judgment, order or regulation of any court or of any public or governmental agency or authority of the State and will not conflict with or result in any breach of any of the provisions of, or constitute a default under, any agreement or instrument to which the Authority or the Board is a party or by which either the Authority or the Board or any of their respective property is or may be bound, nor will such action result in any violation of the provisions of any statute, order, rule or regulation applicable to the Authority or the Board of any court or any federal, state or other regulatory authority or other governmental body.

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BOND RATING

Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), is expected to assign a rating to the Series 2009K Bonds of "AA-." Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, by said rating agency if, in its judgment, circumstances so warrant. Any such downward revisions or withdrawal of any rating may have an adverse effect on the market price of the Series 2009K Bonds.

CONTINUING DISCLOSURE

Pursuant to the Pledge Agreement and the Disclosure Undertaking, the Board has agreed to provide certain financial information of the University and the Child Care Facility, including certain operating data of the University, to the Authority within 190 days after the end of each Fiscal Year. Generally, such financial information will consist of the financial information and operating data included in this Official Statement in APPENDICES A and B attached hereto, updated annually. Such financial information may be unaudited and may be prepared in accordance with Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements-and Management's Discussion and Analysis—for Public Colleges and Universities, as amended by GASB Statements 37 and 38. Additionally, the Board has agreed to give to the Authority timely notice of the occurrence of material events relating to the Bonds as described under the caption "SUMMARY OF THE DISCLOSURE UNDERTAKING – Reporting of Material Events" in APPENDIX D attached hereto. The Authority has agreed to transmit promptly, when received from the Board, the information described herein to certain national repositories and the Municipal Securities Rulemaking Board, as applicable. The Board and the Authority have made such agreement in an effort to comply with Rule 15c2-12 of the Securities and Exchange Commission (the "SEC Rule"). Neither the Authority nor the Board has failed to comply with previous undertakings pursuant to the SEC Rule. Reference is made to the caption "SUMMARY OF THE DISCLOSURE UNDERTAKING" contained in APPENDIX D attached hereto for a summary of the agreements of the Board and the Authority under the Disclosure Undertaking. LEGAL MATTERS Approval of Bonds All matters incident to the authorization and issuance of the Series 2009K Bonds are subject to the approval of Gilmore & Bell, P.C., Bond Counsel. The factual and financial information appearing herein and in the Appendices hereto has been supplied or reviewed by certain officials of the Authority, the Board and the University, as referred to herein, and Bond Counsel expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned "THE SERIES 2009K BONDS," "LEGAL MATTERS" and APPENDIX D attached hereto. Opinion of Bond Counsel Federal Tax Exemption. In the opinion of Bond Counsel, under existing law, the interest on the Series 2009K-1 Bonds is excluded 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. It should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining

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adjusted current earnings. The opinions set forth in this paragraph are subject to the condition that the Authority and the Board 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 2009K-1 Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the Board 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 2009K-1 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Series 2009K-1 Bonds have not been designated as "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code. BOND COUNSEL IS NOT RENDERING ANY OPINION WITH RESPECT TO THE TREATMENT OF INTEREST ON THE SERIES 2009K-2 BONDS FOR PURPOSES OF FEDERAL INCOME TAXATION, AND THE INTEREST ON THE SERIES 2009K-2 BONDS IS EXPECTED TO BE INCLUDED IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. Other Federal Tax Consequences. Prospective purchasers of the Series 2009K-1 Bonds should be aware that (i) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 2009K-1 Bonds or, in the case of a financial institution, that portion of such institution's interest expense allocable to interest on the Series 2009K-1 Bonds; (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Series 2009K-1 Bonds; (iii) interest on the Series 2009K-1 Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code; (iv) passive investment income, including interest on the Bonds, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year, if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income; and (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on the Series 2009K-1 Bonds. These categories of Bondowners should consult their own tax advisors as to the applicability of these consequences. Kansas Tax Exemption. The Series 2009K Bonds and the interest paid thereon are exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes. Bond Counsel expresses no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2009K Bonds.

FINANCIAL ADVISOR Columbia Capital Management, LLC, Overland Park, Kansas has served as financial advisor ("Financial Advisor") to the Authority. The Financial Advisor has assisted in various matters relating to the planning, structuring and issuance of the Series 2009K 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 2009K Bonds.

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UNDERWRITING Piper Jaffray & Co. (the "Underwriter"), is purchasing the Series 2009K Bonds from the Authority for resale in the normal course of its business activities. The Underwriter has agreed, subject to certain conditions contained in the Bond Purchase Agreement, to purchase the Series 2009K Bonds from the Authority at a purchase price of $6,037,774.25 (representing the principal amount thereof, less an underwriting discount of $37,883.80, less original issue discount of $64,341.95). The Bond Purchase Agreement provides that the Underwriter shall purchase all the Series 2009K Bonds if any are purchased, subject to the conditions contained therein. The Series 2009K Bonds may be offered and sold to certain dealers, banks and others at prices different than the offering prices indicated on the cover page hereof, and such offering prices may be changed from time to time by the Underwriter. MISCELLANEOUS The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is made to all such documents for full and complete statements of all matters of fact relating to the Series 2009K Bonds, the security for the payment of the Series 2009K Bonds and the rights of the Owners thereof. During the period of the offering, copies of drafts of such documents may be examined at the offices of the Authority. Following delivery of the Series 2009K Bonds, copies of such documents may be examined at the office of the Authority. The information contained in this Official Statement has been compiled from official and other sources deemed to be reliable, and while not guaranteed as to completeness or accuracy, is believed to be correct as of the date thereof. Any statement made in this Official Statement including all appendices hereto, involving matters of opinion or of estimates, whether or not expressly so stated, are set forth as such and not as representation of fact, and no representation is made that any of the estimates will be realized. 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 hereunder shall, under any circumstances, create any implication that there has been no change in the information presented herein since the date hereof. This Official Statement is not to be construed as a contract or agreement between the Authority, the University, the Board, the Underwriters and the purchasers or Owners of any Series 2009K Bonds. AUTHORIZATION OF OFFICIAL STATEMENT The preparation of this Official Statement and its distribution has been authorized by the Authority as of the date on the cover page hereof.

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ADDITIONAL INFORMATION

Additional information with respect to the Authority and the Series 2009K Bonds may be obtained upon request from the Kansas Development Finance Authority, 555 South Kansas Avenue, Suite 202, Topeka, KS 66603, Attention: Stephen R. Weatherford, President. KANSAS DEVELOPMENT FINANCE AUTHORITY By: /s/ Rebecca E. Floyd Rebecca E. Floyd, Executive Vice President

APPENDIX A

THE UNIVERSITY Student Body and Enrollment

The University has a coeducational student body with approximately 76.3% of students having resident status and 23.7% having nonresident status, based on Fall 2008 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 table is a history of student headcount for the fall semesters, showing both resident vs. nonresident status and undergraduate vs. graduate status.

Kansas State University Student Headcount Fall Semesters, 1999-2008

Fall

Semester Total

Students Residents Nonresidents Undergraduate Graduate 1999 21,543 18,076 3,467 17,903 3,640 2000 21,929 18,815 3,114 18,252 3,677 2001 22,396 19,149 3,247 18,770 3,626 2002 22,762 18,942 3,820 19,048 3,714 2003 23,050 18,951 4,099 19,083 3,967 2004 23,151 18,796 4,364 19,098 4,053 2005 23,182 18,737 4,445 18,838 4,344 2006 23,141 18,428 4,713 18,761 4,380 2007 23,332 18,253 5,079 18,454 4,878 2008 23,520 17,957 5,563 18,491 5,029

Source: The Office of Planning and Analysis of Kansas State University. According to live birth-rate data, the population of graduating high school seniors in Kansas will decrease 11.2% over the next ten years, thus causing a projected reduction in student headcount in future years as reflected in the following table showing projected student headcount for the fall semesters 2009 through 2015:

Kansas State University Projected Student Headcount Fall Semesters, 2009-2015

Fall

Semester Estimated Headcount

2009 23,474 2010 23,731 2011 23,777 2012 23,811 2013 23,924 2014 24,037 2015 24,257

Source: The Office of Planning and Analysis of Kansas State University.

A-1

The following tables provide is a history of full time equivalent ("FTE") student enrollment for the fall semesters 1999 through 2008:

Kansas State University Full Time Equivalent Student Enrollment

Fall Semesters, 1999-2008

Fall Semester

Total FTE Students

FTE Undergraduates

FTE Graduates

1999 18,578 15,706 2,872 2000 19,127 16,194 2,933 2001 19,416 16,555 2,861 2002 19,603 16,703 2,900 2003 19,659 16,607 3,052 2004 19,788 16,729 3,059 2005 19,615 16,513 3,102 2006 19,750 16,538 3,212 2007 19,918 16,337 3,581 2008 19,932 16,252 3,680

Source: The Office of Planning and Analysis of Kansas State University.

The following table is a history of the freshmen undergraduate applications received by the University, the number of accepted applications and the number of new freshmen undergraduates registered at the University for the fall semesters of 2001 through 2008. Also shown are the composite American College Testing ("ACT") scores of the enrolled students.

Kansas State University Applications, Admissions and American College Testing (ACT)

Composite Scores of Freshman Undergraduate Students Fall Semesters, 2001-2008*

Fall Semester

Under- Graduate

Applications** a

Under- Graduates Accepteda

New Under- Graduates Registeredb

ACT Composite

Scorec 2001 10,631 6,817 5,294 23.5 2002 10,733 6,387 5,119 23.4 2003 10,399 6,406 5,118 23.6 2004 10,526 6,510 5,205 23.4 2005 9,937 6,510 5,032 23.5 2006 9,685 6,403 5,171 23.5 2007 10,212 6,472 5,177 23.8 2008 11,712 6,832 5,233 24.4 d

* Includes transfer students. **Includes incomplete applications. aSource: Admissions Office of Kansas State University. bSum of IPEDS first-time freshmen total and Registrar's 20th day new transfer report total. cSource: ACT Profile report. Does not include transfer students' scores. dSource: Admissions Office of Kansas State University.

A-2

Kansas State University Schedule of Faculty Data Fall Semesters 2004-2008 2004 2005* 2006 2007 2008 Number Full-Time Equivalent Faculty 1,539 1,560 1,598 1,620 1,635 Number Full-Time Faculty 1,191 1,199 1,242 1,260 1,305 Number Part-Time Faculty 240 -- 206 199 191 Number Tenured Faculty 778 730 761 759 773 Average Age of Faculty 49 49 49 49 50 Percent of Tenured Faculty 54% 61% 53% 52% 52% Percent Holding Terminal Degrees 78% 85% 71% 78% 73% Student-Faculty Ratio 12.9 12.6 12.4 12.3 12.2

*2005 data includes full-time faculty only Note: Student-Faculty ratio is derived by dividing total full-time equivalent ("FTE") students by FTE Instructional faculty. Source: Planning and Analysis of Kansas State University (IPEDS Fall Staff Report) Budget Office data cards Tuition and Fees

Kansas State University is in a peer group defined by the Board. The peer group includes the following universities: Colorado State University; Iowa State University; North Carolina State University; Oklahoma State University; and Oregon State University. The following tables show a history of the changes in tuition and fees of full-time students enrolled at Kansas State University since Fiscal Year 2001 and a comparison to the appropriate peer group for these years. Between the Fiscal Years 2001 and 2008, tuition and fees at Kansas State University increased 124.2% for resident undergraduates and 112.7% for resident graduates, and 67.2% for nonresident undergraduates and 64.3% for nonresident graduates.

Kansas State University to Peer Group Average Comparison Schedule of Annual Tuition and Fees

Undergraduate Students Fiscal Years Ending June 30, 2001-2009

Fiscal Year

KSU Resident

Peer Average Resident

KSU as % of Peer

Average Resident

KSU Nonresident

Peer Average

Nonresident

KSU as % of Peer Average Nonresident

2001 $2,781 $3,064 90.8% $9,549 10,760 88.7% 2002 2,834 3,352 84.6 9,761 11,440 85.3 2003 3,444 3,654 94.3 10,704 12,690 84.3 2004 4,059 4,210 96.4 11,949 14,117 84.6 2005 4,665 4,579 101.9 13,425 14,789 90.8 2006 5,124 4,856 105.5 14,454 15,522 93.1 2007 5,779 5,014 115.3 15,514 15,873 97.7 2008 6,235 5,620 110.9 15,970 17,239 92.6 2009 6,627 5,958 111.2 16,932 18,378 92.1

Source: The Office of Planning and Analysis of Kansas State University, as derived from the Kansas Board of Regents Statistical Abstract.

A-3

Kansas State University to Peer Group Average

Comparison Schedule of Annual Tuition and Fees Graduate Students

Fiscal Years Ending June 30, 2001-2009

Fiscal Year

KSU Resident

Peer Average Resident

KSU as % of Peer

Average Resident

KSU Nonresident

Peer Average

Nonresident

KSU as % of Peer Average Nonresident

2001 3,158 3,938 80.2% 8,920 10,581 84.3% 2002 3,223 4,245 75.9 9,088 11,191 81.2 2003 3,857 4,758 81.1 9,951 12,450 79.9 2004 4,527 5,366 84.4 11,079 14,043 78.9 2005 5,211 5,633 92.5 12,435 14,745 84.3 2006 5,724 5,946 96.3 13,380 15,523 86.2 2007 6,352 6,334 100.3 14,296 16,804 85.1 2008 6,718 6,895 97.4 14,662 16,831 87.1 2009 7,139 7,317 97.6 15,547 17,516 88.8 Source: The Office of Planning and Analysis of Kansas State University, as derived from Association of American State

Colleges and Universities/National Association of State Universities and Land Grant Colleges Surveys of Student Charges at Public Institutions.

The current academic year's tuition and fees of the six Kansas Board of Regents Institutions are shown in the following table.

Kansas Board of Regents Institutions and Their Peer Groups

Comparison Schedule of Full-time Tuition and Fees per Year Effective Fiscal Year Ending June 30, 2008

Kansas University Wichita Emporia Pittsburg Fort Hays State of State State State State University Kansas University University University University Resident Undergraduate $6,234 $6,600 $4,804 $3,926 $4,060 $3,356 Graduate 6,718 6,532 5,110 4,554 4,590 3,712 Peer Average: Undergraduate 5,726 6,190 6,458 5,738 5,738 5,738 Graduate ----------------------------------------Unavailable---------------------------------------- Nonresident Undergraduate 15,970 16,106 12,152 11,976 11,866 10,544 Graduate 14,662 14,556 13,508 12,186 11,254 9,808 Peer Average: Undergraduate 17,344 20,042 17,136 12,724 12,724 12,724 Graduate ----------------------------------------Unavailable----------------------------------------

Source: The Office of the Kansas Board of Regents – Statistical Abstract Report.

A-4

FINANCIAL INFORMATION OF THE UNIVERSITY

The fiscal operations of the University constitute an extensive business operation. The State Legislature approved appropriations from State General Use Funds for operation of the University over $185 million for Fiscal Year 2009 and over $166 million for Fiscal Year 2010. The following table outlines the total operating budget for the University, excluding capital improvements, for the following fiscal years ending June 30:

Fiscal Year Budget

2004 $531,700,000 2005 598,600,000 2006 677,700,000 2007 683,500,000 2008 705,000,000 2009 731,900,000

Kansas State University is one of six universities operated under the direction of the Kansas Board of

Regents. The Board of Regents is a constitutionally established Board of the State of Kansas, and the universities under the Board's supervision are statutorily precluded from independent audit of their financial operations. An independent single audit of the State of Kansas includes the operations of the Regents institutions. Excerpts of the most currently available Kansas State University Annual Financial Report (for the fiscal year ended June 30, 2008) are provided in this APPENDIX A..

The financial information which follows is excerpted from the Kansas State University Annual

Financial Report for the fiscal year ended June 30, 2008, prepared by the University on a modified cash basis of accounting and represents the historical format of the University's financial statements prior to GASB 34/35. In 2003 the University began conversion to the new reporting format specified in GASB 34/35 and issued a separate financial report in that format, not contained herein.

This financial information is provided for background information only. Not all revenues of the

University are pledged to the repayment of the Bonds. Only the Gross Revenues, as defined in the Bond Resolution, are pledged to the payment of the Bonds. In addition, pursuant to the Supplemental Security Agreement, the University has agreed to make certain payments with respect to the Bonds in the event that the Gross Revenues are not sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds when due.

A-5

Kansas State University

Annual Financial ReportFiscal Year Ended June 30, 2007

43162 Finance Cvr 12/18/07 9:05 AM Page 1


Annual Financial ReportFiscal Year Ended June 30, 2008

TABLE OF CONTENTS Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Statement of Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Statement of Revenues, Expenses and Changes in Net Assets . . . . . . . . . . . . . . . . . . . .11 Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2

Kansas State University Management’s Discussion and Analysis

For the Year Ended June 30, 2008 The following Management’s Discussion and Analysis (MD&A) provides an overview of the financial performance of Kansas State University (University) based on currently known facts, decisions and conditions. Readers are encouraged to consider this information in conjunction with the statements and footnotes. The financial statements, footnotes, and this discussion are the responsibility of management. USING THE FINANCIAL STATEMENTS This report consists of the three financial statements. The Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Net Assets, and the Statement of Cash Flows. These financial statements are prepared in accordance with Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements---and Management’s Discussion and Analysis---for Public Colleges and Universities, as amended by GASB Statements 37 and 38. These statements establish standards for external financial reporting for public colleges and universities and require that financial statements be presented on a consolidated basis to focus on the University as a whole. 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). 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. The 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 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 only available 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 who 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, 2008 were $603.3 million, an increase of $39.6 million (7%). Capital assets, net of depreciation, comprised 67.3%, or $406 million of the total assets. Total liabilities were $230.1 million at June 30, 2008, an increase of $24.3 million (11.8%), compared to $205.8 million at June 30, 2007. Long-term liabilities comprised 72%, or $165.7 million of the total liabilities.

3

Total net assets at June 30, 2008 were $373.2 million, a $15.3 million increase over the prior year. The breakout of net assets is shown below:

Capital assets, net of related debt………….. $240,382,812

Restricted net assets ………………………... 62,063,109

Unrestricted net assets ……………………… 70,793,101

Total net assets……………………….. $373,239,022

The composition of current and non-current assets and liabilities and net assets is displayed below for both the 2007 and 2008 fiscal year ends (in thousands):

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 Operating revenues at the University as of June 30, 2008 increased by 5.7% over the previous fiscal year. The following is a brief summary of the significant changes:

• Student fee revenues, after scholarship allowances, were $142.2 million in 2008, compared to $131.9 million in 2007. This increase is a result of a tuition increase approved by the Kansas Board of Regents for fiscal year 2008. The goal of the tuition increase, which was the result of collaboration between University Administration and University students, was to provide additional funds to the University to improve or enhance student education while State appropriations decreased significantly. The increase was used for specific expenses including faculty salary increases, instructional and technological upgrades, and additional scholarships.

4

1%

2%

6%

Revenues

State Appropriations

Federal appropriations

Tuition and fees, net of

scholarship allowances

Sales and services of educational

departments

Other revenues

Grants and contracts

Capital appropriations, grants,

gifts, & student fees

Auxiliary enterprises

Investment income

A

B

C

D

E

F

G

A

B

H

D

E2%

32%

H

C

G

F

25%

22%

4%

I6%

I

• Grants and contracts (federal, state and local, and non-governmental) increased $5.9 million from the previous fiscal year. This category of revenue includes funds received from the federal government for financial aid as well as other sponsored research revenue.

• Sales and services of educational activities increased $600 thousand from the previous fiscal year. These revenues are generated by activities that are related incidentally or exist primarily to afford hands on experience related to providing instruction, research, and public service.

• Auxiliary enterprises increased $2.5 million from the previous fiscal year. Auxiliary enterprises include Housing, Parking, University health services, and a variety of other smaller services.

Total non-operating revenues were up 4.4% from the prior year from $180.5 million to $188.5 million. The following is a brief summary of the significant changes:

• State appropriations, the largest single source of revenue at the University, increased from $177.2 million to $181.8 million.

• Investment income increased $4.2 million, due to a legislative change in which interest earnings on certain funds were returned to the university

• Student fees collected for capital projects remained constant. Other revenues included the following:

• Capital grants and gifts decreased from $26.8 million to $6.5 million. The previous fiscal year was an exceptional year for donations of land and buildings, with 2008 showing more conventional activity.

In summary, total revenues increased by $20.5 million, from $546.8 million to $567.3 million, an overall increase of 3.7%. The compositions of these revenues are displayed in the following graph:

5

Expenses Operating expenses were $544.6 million for the 2008 fiscal year. This was an increase over the prior year of $38.9 million, or 7.7%. The following is a brief summary of the significant changes:

• Expenses related to the University’s mission of instruction, research and public service increased $22.1 million in 2008. This increase is directly related to the University’s tuition increase earmarked for faculty salaries.

• Scholarships and fellowships expenses increased from $12.6 million in 2007 to $14.4 million in 2008.

Non-operating expenses are represented primarily by interest expense, which increased from $1.7 million in 2007 to $6.7 million in 2008. The composition of total expenses, including operating and non-operating are displayed below:

1%

7%

29%

12%By Program

Public Service

Other

Academic support

Student service

Institutional support

Operations & maintenance

Depreciation

Auxiliary enterprises

Instruction

Scholarships & fellowships

Research

Interest expense

A

B

C

D

E

F

G

A

D

E

F

IG

5%

C

8%

4%

5%H

I

J

K

H

J

K

6%

3%

20%

0%

B

L

L

6

Extraordinary Items The University did not have any special and extraordinary items in 2008. Net Assets Net assets increased by $15.3 million compared to the previous fiscal year, which generally indicates that the financial condition has improved over the year. There were many offsetting variances, but the increase is primarily due to an increase in capital assets, net of depreciation. 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.

3%

5%66%

12%By Natural Classification

Utilities

Contractual services

Scholarship & fellowships

Supplies & materials

Aid, dept, nonexpense

Depreciation

Interest expense

Compensations & benefits

A

B

C

D

E

F

G

A

B

D

E

FH

G1%

C3%

8%

2%H

7

SUMMARY OF THE STATEMENT OF CASH FLOWS (in thousands of dollars): June 30, 2008 June 30, 2007 Net cash provided (used) by: Operating activities $ (157,937) $ (145,860) Non-capital financing activities 182,181 177,103 Capital and related financing/appropriations (11,982) (40,542) Investing activities 24,252 16,320 Net increase in cash 36,514 7,021 Beginning cash and cash equivalent balances 100,808 93,713 Component Unit Prior Period Adjustment (25) 74 Ending cash and cash equivalent balances $ 137,297 $ 100,808

Cash provided by operating activities includes tuition and fee and grant and contract revenues. Cash used for operating activities includes payments to employees and suppliers. Cash provided by non-capital financing/appropriations includes state appropriations and the receipt and disbursement of the federal direct student loan program. Cash provided for capital and related financing activities represents proceeds from debt, the principal and interest payments towards debt, capital appropriations and grants, and the purchase and construction of capital assets. Cash provided by investing activities includes purchases and sales of investments as well as investment income earnings and losses realized. The University’s overall liquidity increased by $36.5 million during fiscal year 2008. This increase is the net result of an increase in state appropriations, tuition and fees, and interest income during the year, offset by expenditures to employees and suppliers. CAPITAL ASSETS The University made significant investments in capital during the 2007-2008 fiscal year. Detailed information regarding capital asset additions, retirements & depreciation is available in Note 3 to the financial statements. The following is a brief summary of the construction projects that were completed during the current fiscal year:

• Four buildings of the Jardine Terrace Apartments renovation were completed as well as

significant infrastructure and landscaping at a cost of $18 million in FY2008. This Department of Housing and Dining Services project has an estimated total cost of $102 million and will be funded through a 30-year series of bond agreements with future repayment of the bonds coming from Housing Operation revenues.

• Construction and renovation projects affecting a variety of buildings were completed during the year at an estimated cost of $4.9 million.

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

• Construction of a Student Life Center at the Salina campus was started the Summer 2008. The $6.4 million project will be conducted in two phases and will be located adjacent to the College Center. It will have a union atmosphere with meeting facilities, including a high technology auditorium, and a recreational facility to replace the aging south gym, student union, bookstore and cafeteria.

• Construction of a 1,400 space Parking Garage started the Summer 2007. The $17.5 million project on the south side of the Student Union is to increase availability of parking places for the entire university community as well as visitors.

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• The Board of Regents formally approved a five-year building maintenance project plan for each of the state universities effective for FY 2008, to preserve and strengthen higher education infrastructure. The first year of funding was approximately $13 million, with the second year estimated at $9.1 million. The economic climate may reduce this significantly.

• Several projects are in the planning stages, including a $6 million Child Care Center, a $10.5 million Leadership Studies building, and a $24 million Student Recreation Center Enhancement project at the Manhattan Campus.

DEBT ADMINISTRATION At June 30, 2008, the University had $163.6 million in debt outstanding, compared to $149.9 million at June 30, 2007. The increase is due to the issuance of Parking System Revenue Bonds of $17,855,000 and Salina Student Life Center Revenue Bonds of $1,600,000. The University paid $13,413,043 in principal and interest payments related to all outstanding debt. Moody’s Investors Service currently rates the University “Aa3”. More detailed information about the University’s long-term liabilities is available in Notes 7, 8, and 9 to the financial statements. ECONOMIC OUTLOOK The State of Kansas revenues slowed in FY 2008 and revenues for FY 2009 are projected to be only 1.5 percent more than actual receipts for FY 2008. The Kansas economy is expected to experience a downward trend in FY 2009, in response to the national financial crisis revolving around the housing, credit, automobile and stock markets. Historically, approximately one-third of the total resources for the University, during a fiscal year, are provided by the State. Appropriations for fiscal year 2009 are currently set at $189.6 million, which is an increase of 1.5% from fiscal year 2008. However, the State has asked the University to prepare for a 3% budget reduction for FY 2009 and an additional 4% reduction for FY 2010. The University will be looking carefully at priorities and exploring creative and innovative strategies to continue to provide high-quality teaching, research and extension education. Enrollment for the academic 2008-2009 year is expected to be relatively consistent with academic 2007-2008 year.

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2008 2007 2008 2007ASSETS

Current AssetsCash and cash equivalents 95,858,445$ 89,164,050$ 20,245,332$ 18,818,598$ Accounts receivable, net 28,742,975 23,969,042 5,371,854 7,210,274 Pledges receivable - - 95,934 62,000 Investments 2,884,646 2,706,148 4,585,948 4,154,942 Loans to students, net 4,287,933 3,573,175 487,008 - Inventories 4,386,149 4,377,402 199,390 405,260 Prepaid expenses 1,094,397 964,163 - 316,110

Total Current Assets 137,254,545 124,753,980 30,985,466 30,967,184

Noncurrent AssetsRestricted cash and cash equivalents 41,438,296 11,643,795 19,374,079 18,075,005 Pledges receivable - - 628,993 584,867 Investments 5,528,678 23,732,725 3,615,158 2,038,625 Loans to students, net 13,105,591 13,935,570 - - Other assets 2,724 - 113,683 1,556,140 Capital assets, net 406,021,252 389,726,502 7,755,234 7,893,816

Total Noncurrent Assets 466,096,541 439,038,592 31,487,147 30,148,453

TOTAL ASSETS 603,351,086 563,792,572 62,472,613 61,115,637

LIABILITIES

Current LiabilitiesAccounts payable and accrued liabilities 19,026,739 15,987,734 7,222,176 6,220,380 Deferred revenue 23,646,220 20,164,241 15,884,329 16,713,765 Revenue bonds payable 5,215,000 4,570,000 321,700 945,000 Other loan payable 255,241 1,590,467 995,000 376,700 Accrued compensated absences 13,994,565 12,642,244 786,157 696,727 Other liabilities 743,391 756,187 512,913 1,859,806 Capital lease payable 579,056 611,511 - - Deposits held in custody for others 971,076 745,134 644,145 323,409

Total Current Liabilities 64,431,288 57,067,518 26,366,420 27,135,787

Noncurrent LiabilitiesOther liabilities 2,672,886 3,416,279 - - Revenue bonds payable 155,550,000 141,310,000 12,410,889 13,405,889 Other loan payable 619,945 875,186 301,600 623,300 Accrued compensated absences 1,916,005 2,151,737 - - Net OPEB liability 3,502,749 - - - Capital lease payable 1,419,191 1,006,955 - -

Total Noncurrent Liabilities 165,680,776 148,760,157 12,712,489 14,029,189

TOTAL LIABILITIES 230,112,064 205,827,675 39,078,909 41,164,976

NET ASSETS

Invested in capital assets, net of related debt 240,382,812 236,666,335 (5,655,981) * (5,802,040) *Restricted for:

Nonexpendable 2,952,156 2,768,858 15,051,642 14,717,945 Expendable

Scholarships, research, instruction, public service, & other (7,382,387) (6,554,588) 7,822,939 3,320,590 Loans 19,625,104 19,633,793 87,472 - Capital projects 35,799,922 24,193,902 33,733 42,264 Debt service 11,068,314 10,902,136 - -

Unrestricted 70,793,101 70,354,461 6,053,899 7,671,902

TOTAL NET ASSETS 373,239,022$ 357,964,897$ 23,393,704$ 19,950,661$

*See accompanying Note 15.

Kansas State UniversityStatement of Net Assets

For the Year Ended June 30, 2008

University Funds Component Units

10

2008 2007 2008 2007

Operating Revenues:Tuition and fees, net of scholarship allowances of $16,888,658 142,158,199$ 131,851,672$ 2,392,136$ 2,309,855$ Federal appropriations 9,605,161 9,029,957 - - Federal grants and contracts 88,544,493 88,283,728 - - State and local grants and contracts 5,126,023 4,425,871 - - Nongovernmental grants and contracts 28,172,118 23,254,791 12,360,387 12,082,496 Sales and services of educational activities 33,041,870 32,369,243 25,021,833 23,616,642 Auxiliary enterprises

Housing revenues (revenues are pledged as security for bonds) 27,115,988 24,961,654 - - Parking revenues (revenues are pledged as security for bonds) 2,644,470 2,454,489 - - Student health revenues 5,951,271 5,877,933 - - Other auxiliary revenues 84,238 90,302 - -

Interest earned on loans to students 279,905 268,722 - - Other operating revenues 12,388,320 12,180,640 7,992,526 8,109,212 Contributions 145,928 - 8,705,568 8,486,759

Total Operating Revenues 355,257,984 335,049,002 56,472,450 54,604,964

Operating Expenses:Instruction 161,823,430 152,967,028 - - Research 113,129,964 106,887,529 - - Public Service 66,799,206 59,768,867 1,169,206 989,523 Academic Support 44,091,363 42,050,814 - - Student Service 21,539,154 19,568,368 37,432,097 35,376,069 Institutional Support 27,220,408 25,397,982 2,901,651 2,828,201 Operations & Maintenance of Plant 36,974,442 32,908,772 - - Depreciation 25,663,184 23,267,084 1,588,444 1,420,485 Scholarships & Fellowships 14,359,376 12,660,501 6,053,649 5,460,999 Auxiliary Enterprises 32,267,816 29,405,385 - - Other Expenses 786,996 808,512 4,072,130 3,848,171

Total Operating Expenses 544,655,339 505,690,842 53,217,177 49,923,448

Operating Income (Loss) (189,397,355) (170,641,840) 3,255,273 4,681,516

Nonoperating Revenues (Expenses)State appropriations 181,767,203 177,174,300 1,662,455 1,536,908 Gifts - 849,158 - - Investment income 5,151,896 962,925 2,632,459 2,779,836 Interest expense (6,746,780) (1,727,073) (1,376,582) (1,379,226) Gain/Loss on disposal of assets (589,842) (688,574) - - Student fees for capital projects 2,181,006 2,206,588 - -

Net Nonoperating Revenues 181,763,483 178,777,324 2,918,332 2,937,518

Income (Loss) Before Other Revenues, Expenses, Gains and Losses (7,633,872) 8,135,484 6,173,605 7,619,034

Capital appropriations 16,704,648 4,392,000 - - Capital grants and gifts 6,522,010 26,808,611 - - Additions to permanent endowment 129,092 102,830 938,622 2,133,371 Other additions/deductions, net (423,148) (806,255) (3,669,184) (5,401,809)

Increase (Decrease) in Net Assets 15,298,730 38,632,670 3,443,043 4,350,596

Net AssetsNet Assets -- Beginning of Year, as previously reported 357,964,897 319,258,487 19,950,661 15,600,065 Prior Period Restatement (24,605) 73,740 - - Net Assets, Beginning of Year, as restated 357,940,292 319,332,227 19,950,661 15,600,065

Net Assets -- End of Year 373,239,022$ 357,964,897$ 23,393,704$ 19,950,661$

Kansas State UniversityStatement of Revenues, Expenses and Changes in Net Assets


University Funds Component Units

11


2008 2007

Cash Flows from Operating ActivitiesTuition and fees 156,217,817$ 144,973,076$ Endowment income 137,496 79,560 Sales and services of educational activities 36,770,182 34,180,435 Auxiliary enterprise charges

Housing 28,229,814 24,686,239 Parking 2,629,654 2,365,072 Student Health 5,966,239 5,855,162 Other 84,361 88,087

Grants and contracts 125,738,281 117,330,062 Federal appropriations 9,605,161 9,029,957 Payments to suppliers (192,091,585) (173,925,399) Compensation & benefits (362,076,624) (338,343,248) Loans issued to students and employees (3,227,279) (4,784,344) Collections on loans issued to students and employees 3,346,540 4,204,784 Other receipts (payments) 30,733,119 28,400,727

Net Cash Flows from Operating Activities (157,936,824) (145,859,830)

Cash Flows from Noncapital Financing ActivitiesState appropriations 181,767,203 177,174,300 Direct lending receipts 93,396,101 95,004,815 Direct lending payments (93,207,893) (95,270,332) Funds held for others 225,942 (85,195) Other - 279,377

Net Cash Flows from Noncapital Financing Activities 182,181,353 177,102,965

Cash Flows from Capital and Related Financing ActivitiesProceeds from capital debt 19,455,000 27,750,000 Capital appropriations 16,704,648 4,392,000 Capital Grants and gifts 126,049 1,097,434 Student fees for capital projects 2,181,006 2,206,588 Purchases of capital assets (36,085,242) (63,734,939) Principal paid on capital debt and leases (6,160,467) (5,985,000) Interest paid on capital debt and leases (7,252,576) (5,674,941) Other (950,896) (593,341)

Net Cash Flows from Capital and Related Financing Activities (11,982,478) (40,542,199)

Cash Flows from Investing ActivitiesInvestment income 6,161,309 2,268,879 Purchase/Redemption of investments 18,090,141 14,051,370

Net Cash Flows from Investing Activities 24,251,450 16,320,249

Net change in cash and cash equivalents 36,513,501 7,021,185

Cash and cash equivalents -- beginning of year 100,807,845 93,712,920 Prior Period Restatement (24,605) 73,740 Cash and cash equivalents -- beginning of year 100,783,240 93,786,660

Cash and cash equivalents -- end of year 137,296,741$ 100,807,845$

Statement of Cash FlowsFor the Year Ended June 30, 2008

University Funds

12

2008 2007

Reconciliation

Operating income (loss)---SRECNA (189,397,355)$ (170,641,840)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation expense 25,663,487 23,267,084

Changes in assets and liabilities:Accounts receivable, net (5,149,593) (1,539,248) Loans to students, net 119,261 (579,560) Inventories (8,748) (1,154,469) Prepaid expenses (133,262) (64,935) Accounts payable and accrued liabilities 685,390 48,106 Deferred revenue 3,483,110 3,739,642 Accrued compensated absences 6,800,886 1,065,390

Net cash used in operating activities---Cash Flow (157,936,824)$ (145,859,830)$


University Funds

Kansas State UniversityStatement of Cash Flows (Continued)

13

Kansas State University Notes to Financial Statements

For the Year Ended June 30, 2008 Note 1 - Organization and Summary of Significant Accounting Policies Organization. Kansas State University (University) is a comprehensive, research, federal land grant institution governed by the Kansas Board of Regents and is an agency of the State of Kansas. Accordingly, for financial reporting purposes, the University is included in the financial report of the State of Kansas. The University is currently classified as a Doctoral/Research University – Extensive under the Carnegie Classification system and is accredited by the North Central Association of Colleges and Schools. Undergraduate, graduate and post-graduate degrees are available from nine colleges: Agriculture, Architecture, Planning & Design, Arts & Sciences, Business Administration, Education, Engineering, Human Ecology, Veterinary Medicine, and Technology & Aviation. Other major operating units of the University are the Agricultural Experiment Station and a statewide Cooperative Extension Service. The main campus covers 668 acres in the cities of Manhattan and Salina, Kansas. Additional University sites include 18,000 acres of the Agricultural Experiment Station (AES) located in research centers at Hays, Garden City, Colby, and Parsons and 8,600 acres in the Konza Prairie Research Natural Area, jointly operated by the AES and the Division of Biology. Financial Reporting Entity. As required by the accounting principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB), these financial statements present the financial position and financial activities of the University and its component units. The Kansas State University Research Foundation (KSURF), The IDEA Center, Inc., The K-State Union Corporation, the Intercollegiate Athletic Council of Kansas State University, Inc., and the Kansas State University Student Financial Assistance Foundation, Inc. have been discretely presented. K-State Olathe Innovation Campus, Inc., Kansas State University Veterinary Clinical Outreach, Inc., K-State Diagnostic and Analytical Services, Inc., Universal K-State, Inc., and K-State Comprehensive Assessment Tools, Inc. have been blended. In preparing the financial statements, all significant transactions and balances between the University and the blended component units have been eliminated. The Kansas State University Foundation is not included in the University’s financial statements. 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. Cash Equivalents. For the 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. 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 Investments 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 fee charges to students and auxiliary enterprise services provided to students, faculty, and staff. Accounts receivable also include amounts due from the Federal, 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 stated at cost.

14


Notes to Financial Statements (Continued) For the Year Ended June 30, 2008

Noncurrent Cash and Investments. Cash and investments that are externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other noncurrent assets, are classified as noncurrent in the Statement of Net Assets. 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 of $5,000 or more, and an estimated useful life of 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 is $100,000 or greater. 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 and half-year convention over the estimated useful lives of the assets, generally 40 years for buildings, 25 years for infrastructure and land improvements, 8 years for equipment, 5 years for vehicles, and 5 to 40 years for componentized buildings and building improvements. Deferred Revenue. Deferred revenues consist primarily of 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 vacation and sick pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded as accrued compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in Note 14 Operating Expenses by Natural Classification. Noncurrent Liabilities. Noncurrent liabilities include principal amounts of revenue bonds and loans payable, capital lease obligations with contractual maturities greater than one year, and other liabilities that are to be paid from funds that are classified as noncurrent assets. 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 – nonexpendable: Restricted nonexpendable 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 in which the University is legally or contractually obligated to spend resources 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).

15

Kansas State University Notes to Financial Statements (Continued)

For the Year Ended June 30, 2008 Classification of Revenues. The University has classified its revenues as either operating or nonoperating 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 or educational activities, 3) most Federal, state and local grants and contracts, and 4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entitities That Use Proprietary Fund Accounting and GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities, 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 nongovernmental programs, are recorded as either operating or nonoperating 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. Summer Session. Revenues and expenses for the summer session are reported within the fiscal year in which the summer session is predominately conducted. Accordingly, only revenues and expenses for the 2007 summer session are reported in the Statement of Revenues, Expenses, and Changes in Net Assets. For the 2008 summer session, revenues received prior to June 30, 2008 are reported as deferred revenues in the Statement of Net Assets while expenses paid prior to June 30, 2008 are reported as prepaid expenses. Kansas Board of Regents officials determined this methodology and believe the departure from generally accepted accounting principles will not have a material effect on the University’s financial position. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Note 2 – Deposits and Investments A summary of the University’s deposits and investments at June 30 is as follows: 2008 2007 Cash deposits with State Treasury $133,032,468 $ 97,933,718 Cash deposits with financial institutions 4,264,273 2,535,077 Mutual funds - 339,050 Certificates of deposits 2,884,646 2,706,148 Repurchase agreements 932,000 932,000 Guaranteed investment contracts 4,596,678 22,800,725 $145,710,065 $127,246,718 A reconciliation of deposits and investments to the Statement of Net Assets as of June 30 is as follows: 2008 2007 Cash and cash equivalents (current) $ 95,858,445 $ 89,164,050 Investments (current) 2,884,646 2,706,148 Restricted cash and cash equivalents (non-current) 41,438,296 11,643,795 Investments (non-current) 5,528,678 23,732,725 $145,710,065 $127,246,718

16



Deposits. The carrying amount of the University’s cash and cash equivalents with the State Treasurer and other financial institutions at June 30, 2008 were $137,296,741. The University’s deposits with the State Treasurer are pooled with the funds of other State Agencies and then, in accordance with statutory limitations, placed in short-term investments with the exception of the bond funds. All bond proceeds are invested in conjunction with specifications stated in the bond resolutions. State law requires the University to deposit the majority of its cash balances with the State Treasurer, who holds and invests the funds. These investments are managed by the Pooled Money Investment Board, which maintains a published Investment Policy. The exceptions to this are any funds maintained in the University’s imprest fund, organizational safekeeping, 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 investments purposes by the Pooled Money Investment Board and are reported at fair value, based on quoted market prices. The majority of 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 deposit custodial credit risk is minimal. Investments. Pooled Money Investment Board (PMIB). The investment policy of the PMIB is governed by State statutes. The primary objectives are to attain safety, liquidity, and yield. Allowable investments for State pooled moneys are as follows:

• Direct obligations of, or obligations that are insured as to principal and interest by, the United States of America, or any agency thereof

• Repurchase and reverse purchase agreements with a bank or a primary government securities dealer that reports to the Market Reports Division of the Federal Reserve Bank of New York

• Loans as mandated by the Kansas Legislature limited to not more than the lesser of 10 percent or $140,000,000 of total investments

• Certain Kansas agency and SKILL projects and bonds • Corporate bonds that have received one of the two highest credit ratings by a nationally recognized

investment-rating firm, not to exceed maturities of two years • High grade commercial paper that does not exceed 270 days to maturity

Kansas Development Finance Authority (KDFA). For investments related to the University’s revenue bonds, state statutes permit cash balances to be invested as permitted by bond documents and bond covenants. 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

17



The Kansas State University Foundation (Foundation). The Foundation is authorized by state statute to act as the investing agent for the state agricultural university fund. Allowable investments include:

• Time deposit, open accounts for periods of not less than 30 days, or certificates of deposit for periods of not less than 90 days, in commercial banks located in Kansas

• United States treasury bills or notes with maturities as the investing agent shall determine • Insured savings and loan associations to the extent of the insurance provided by the F.S.L.I.C.

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 limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. PMIB minimizes interest rate risk structuring the investment portfolio so that securities mature to meet cash requirement for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and by investing operating funds primarily in shorter-term securities. For revenue bond investments managed by KDFA, due to the tax-exempt status of the bonds, it is generally the practice of KDFA and the University 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 set a term of investment based on estimated expenditures, which is generally 3 – 5 years. The state agricultural university funds are invested in certificates of deposit at a fixed rate and are non-negotiable instruments. Therefore they are not exposed to interest rate risk. As of June 30, 2008 the University had the following investments:

Investment Type

Fair Value

Less Than 1 Year

1 - 5 Years 6 - 10 Years

More Than 10 Years

Certificates of Deposit $ 2,884,646 $2,884,646 Repurchase Agreements 932,000 $ 932,000 Guaranteed Investment Contracts 4,596,678 $ 638,500 84,500 $ 3,873,678

Total $ 8,413,324 $2,884,646 $ 638,500 $1,016,500 $ 3,873,678 Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the University. The University investments 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. The investments are unrated and certain investments have an underlying collateral agreement. Custodial Credit Risk for investments is the risk that, in the event of the failure of the counterparty, the University will not be able to recover the value of the investments that are in the possession of an outside party. The University’s investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the University’s name, and are held by either the counterparty or the counterparty’s trust department or agent. The University does not have a formal investment policy that addresses custodial credit risk. However, the University’s custodial credit risk is estimated to be minimal based on the expressed investment policies of PMIB, KDFA and the Foundation. Concentration of Credit Risk is the risk of loss attributed to the magnitude of the University’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.

18


For the Year Ended June 30, 2008 Note 3 – Capital Assets Capital asset activity for the University for the year ended June 30, 2008 is summarized as follows:

Beginning

Balance Additions Retirements Ending Balance

Capital Assets (not depreciated) Land and Improvements 8,980,331 4,527,778 - 13,508,109 Art Collections 2,246,958 5,824 - 2,252,782 Construction in Progress 9,098,660 23,074,919 22,993,328 9,180,251 Capital Assets (being depreciated) Buildings & Improvements 534,611,067 17,125,410 59,417 551,677,060 Land Improvements 19,460,563 1,485,993 5,476 20,941,080 Infrastructure 8,362,841 5,868,215 - 14,231,056 Equipment and Furnishings 142,562,320 11,415,755 5,094,322 148,883,753 Vehicles 21,717,992 2,037,211 873,644 22,881,559 Total Capital Assets 747,040,732 65,541,105 29,026,187 783,555,650 Accumulated Depreciation Buildings & Improvements 222,144,180 13,737,859 59,417 235,822,622 Land Improvements 9,257,203 725,840 1,314 9,981,729 Infrastructure 4,566,838 354,606 - 4,921,444 Equipment and Furnishings 101,948,923 9,871,064 4,539,061 107,280,926 Vehicles 19,397,086 973,815 843,224 19,527,677 Total Depreciation 357,314,230 25,663,184 5,443,016 377,534,398 Capital Assets, net 389,726,502 39,877,921 23,583,171 406,021,252 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.

19


For the Year Ended June 30, 2008 Note 4 – Accounts Receivable Accounts receivable are shown net of allowances for doubtful accounts in the accompanying Statement of Net Assets. At June 30, 2008, accounts receivable consisted of the following: June 30, 2008

Student tuition and fees $ 9,542,549 Auxiliary enterprises and other operating activities 2,725,976 Federal, state, and private grants and contracts 18,905,925 Interest 151,701 $31,326,151 Less allowance for doubtful accounts 2,583,176 Net accounts receivable $28,742,975

Note 5 – Loans Receivable Student loans made through the Federal Perkins Loan Program and the Health Profession Student Loan Program comprise substantially all of the June 30, 2008 loan balances. The Programs provide for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 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, 2008, the allowance for uncollectible loans was approximately $1,300,000. Note 6 – Deferred Revenue Deferred revenues consist primarily of summer session tuition and fees and advance collections on grants and contracts. The breakdown of deferred revenues is as follows: Tuition and fees $ 3,685,813 Grants and contracts 19,960,407 $23,646,220 Note 7 – Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 consists of the following: Beginning Ending Current Balance Additions Deductions Balance Portion Revenue bonds payable $145,880,000 $19,455,000 $ 4,570,000 $160,765,000 $5,215,000 Loans payable 2,465,653 1,590,467 875,186 255,241 Lease obligations 1,618,466 1,229,943 850,162 1,998,247 579,056 Deposits held in custody for others 745,134 5,336,334 5,110,392 971,076 971,076 Other liabilities 4,172,466 756,189 3,416,277 743,391

$154,881,719 $26,021,277 $12,877,210 $168,025,786 $7,763,764 Total Long-Term Liabilities

20


For the Year Ended June 30, 2008 Note 8 – Revenue Bonds Outstanding Revenue bonds payable consisted of the following at June 30, 2008: Principal Outstanding 6/30/08 Kansas Development Finance Authority Revenue Bonds-Series 2008D $ 1,600,000 (The Kansas Board of Regents – Kansas State University Student Life Center Project, Salina Campus) issued on June 15, 2008 in the original amount of $1,600,000. Due in one installment from the Trust Estate 5/1/38. Interest at 5.10% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2007H $17,855,000 (The Kansas Board of Regents – Kansas State University Parking System) issued on August 1, 2007 in the original amount of $17,855,000. Due in annual installments beginning 5/1/09 with final maturity on 5/1/37. Interest ranging from 3.60% to 4.50% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2007A $27,365,000 (The Kansas Board of Regents – Kansas State University Housing System, Manhattan Campus) issued on February 1, 2007 in the original amount of $27,750,000. Due in annual installments beginning 10/1/07 with final maturity on 4/1/37. Interest ranging from 3.75% to 4.39% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2005D $17,295,000 (The Kansas Board of Regents – Kansas State University Research and Development Facilities Projects) issued on May 1, 2005 in the original amount of $20,980,000. Due in annual installments beginning 4/1/07 with final maturity on 10/1/21. Interest ranging from 3.90% to 5.15% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2005A $42,830,000 (The Kansas Board of Regents – Kansas State University Housing System, Manhattan Campus) issued on February 1, 2005 in the original amount of $44,535,000. Due in annual installments beginning 10/1/06 with final maturity on 4/1/35. Interest ranging from 3.00% to 5.00% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2003J-1 $18,075,000 (The Kansas Board of Regents – Kansas State University Energy Conservation Projects) issued on August 1, 2003 in the original amount of $21,020,000. Due in annual installments beginning 8/1/05 with final maturity on 8/1/23. Interest ranging from 4.25% to 5.00% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2003C $22,485,000 (The Kansas Board of Regents – Kansas State University Research and Development Facilities Projects) issued on February 1, 2003 in the original amount of $22,485,000. Due in annual installments beginning 10/1/22 with final maturity on 10/1/32. Interest ranging from 4.75% to 5.00% payable semi-annually. Kansas Development Finance Authority Refunding Revenue Bonds- $ 480,000 Series 2001G-1 (The Kansas Board of Regents – Kansas State University Salina Housing Project) issued on June 15, 2001 in the original amount of $845,000. Due in annual installments with final maturity on 4/1/14. Interest ranging from 4.25% to 5.00% payable semi-annually. 21


For the Year Ended June 30, 2008 Revenue bonds payable consisted of the following at June 30, 2008: Principal Outstanding 6/30/08 Kansas Development Finance Authority Refunding Revenue Bonds- $ 3,430,000 Series 2001G-2 (The Kansas Board of Regents – Kansas State University Recreation Project) issued on June 15, 2001 in the original amount of $6,385,000. Due in annual installments with final maturity on 4/1/13. Interest ranging from 4.25% to 5.00% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 2000D $ 1,040,000 (The Kansas Board of Regents – Kansas State University Ackert Hall Addition Project) issued on July 15, 2000 in the original amount of $1,735,000. Due in annual installments with final maturity on 5/1/15. Interest ranging from 4.60% to 5.60% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 1998B $ 6,100,000 (The Kansas Board of Regents – Kansas State University Student Union Renovation and Expansion Project) issued on April 1, 1998 in the original amount of $9,320,000. Due in annual installments with final maturity on 4/1/18. Interest ranging from 3.90% to 5.00% payable semi-annually. Kansas Development Finance Authority Revenue Bonds-Series 1995K $ 2,210,000 (The Kansas Board of Regents – Kansas State University Farrell Library Expansion Project) issued on November 1, 1995 in the original amount of $3,835,000. Due in annual installments with final maturity on 10/1/15. Interest ranging from 3.75% to 5.40% payable semi-annually. Series 2008D Student Life Center Project, Series 2001G-2 Recreation Project, Series 1995K Farrell Library Expansion Project, and Series 1998B Student Union Renovation and Expansion Project are collateralized by a pledge of student fees. Series 2000D Ackert Hall Addition Project is collateralized by a pledge of sponsored research overhead revenues. Series 2001G-1 Salina Housing Project, Series 2005A Housing System Manhattan Campus, and Series 2007A Housing System Manhattan Campus are collateralized by a pledge of housing revenues. Series 2003C and Series 2005D Research and Development Facilities Projects are collateralized by a pledge of State appropriations and various university revenue funds. Series 2003J-1 Energy Conservation Projects are collateralized by the annual utility and maintenance savings realized by the implementation of the energy improvement projects. 2007H Parking System Project is collateralized by a pledge of parking operation revenues. Future debt service requirements for all bonds outstanding at June 30, 2008 are as follows:

Year Ending June 30: Principal Interest Total

2009 $ 5,215,000 $ 7,217,099 $ 12,432,0992010 5,435,000 7,028,409 12,463,4092011 5,680,000 6,813,580 12,493,5802012 5,205,000 6,591,734 11,796,7342013 6,090,000 6,364,186 12,454,186

2014-2018 28,025,000 28,021,998 56,046,9982019-2023 28,275,000 21,566,376 49,841,3762024-2028 26,955,000 14,980,528 41,935,5282029-2033 33,170,000 8,253,397 41,423,3972034-2038 16,715,000 1,885,730 18,600,730

Total $160,765,000 $ 108,723,037 $ 269,488,037 22


For the Year Ended June 30, 2008 Note 9 – Loan and Lease Obligations In July 2003, Kansas State University and the Pooled Money Investment Board entered into a construction loan agreement for the Biological and Industrial Value Added Program for a maximum amount of $4,000,000. The loan requires annual interest payments due August 1 of each year in which a principal balance remains outstanding, at a rate of 1.548% per annum. The entire principal balance was due August 1, 2007. As of June 30, 2008, the loan had been paid in full. In June 2000, the University and the KSU Foundation entered into a 15 year financing agreement for the purchase of the Educational and Agricultural Research Facility located in Finney Co. in the amount of $820,000. Annual payments are due June 1 with semi-annual interest payments due June 1 and December 1 at an interest rate ranging from 5.00% to 6.25%. The outstanding balance at June 30, 2008 is $500,000. In October 1997, the University and the KSU Foundation entered into a 10 year agreement for the purchase of the Harbin Residence Hall in the amount of $2,000,820. Annual payments are due December 1, with an outstanding balance at June 30, 2008 of $375,186. In December 2002, the University and the KSU Foundation entered into a 15 year capital lease agreement for the KSU Printing Services building in the amount of $825,000. In January 2008, the lease was increased by $210,974 to account for improvements made to the property. Annual lease payments of $91,547 are due July 31, with an outstanding balance at June 30, 2008 of $565,707. The University is obligated for the purchase of certain equipment funded through the State of Kansas Equipment Lease Purchase Program in the amount of $1,432,540 as of June 30, 2008. Payments to liquidate these obligations are scheduled as follows: Year Ending June 30: Total

2009 $ 487,509 2010 487,509 2011 235,851 2012 194,989 2013 26,682 $1,432,540

Note 10 – Retirement Plans The University participates in one cost-sharing multiple-employer defined benefit pension plan, one defined contribution pension plan, and one federal pension plan. Defined Benefit Plan Classified employees participate in the Kansas Public Employees Retirement System (KPERS). Benefit provisions are established by state statute and provide retirement, disability, and death benefits to benefits eligible employees. KPERS issues a publicly available annual financial report that includes its financial statements and required supplementary information and is available upon request from KPERS. For the year ended June 30, 2008, active KPERS members were required by statute to contribute 4% and the University to contribute 6.37% of the employees’ covered payroll. The Kansas Legislature establishes and may amend active plan members’ and the University’s contribution rates. The University contributed $2,963,814 during fiscal year 2008 and individual employees contributed $1,855,384. In addition, payments to KPERS for death and disability coverage for all University employees totaled $2,431,720. .

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For the Year Ended June 30, 2008 Defined Contribution Plan Eligible unclassified employees are required to participate in the Kansas Board of Regents (Regents) defined contribution retirement plan, which was authorized by K.S.A. 74-4925. The Regents have selected the following companies to provide investment options to participants: 1) Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF) and 2) ING Life Insurance and Annuity Company. Benefits under these plans depend solely on the contributed amounts and the returns earned on the investment of those contributions. All contributions are fully vested with the first contribution. For the year ended June 30, 2008 active members were required by statute to contribute 5.5% and the University to contribute 8.5% of the employees’ covered payroll. The Kansas Legislature establishes and may amend active plan members’ and the University’s contribution rates. The University contributed $15,335,676 during fiscal year 2008 and individual employees contributed $9,776,690. Federal Retirement Plan Some Extension Service employees at Kansas State University hold Federal appointments. Prior to December 31, 1986, Federal appointees were required to participate in the Federal Civil Service Retirement System (CSRS), a defined benefit plan. CSRS employees are subject to the Hospital Insurance portion of FICA, the CSRS employee deduction of 7.0%, and the employer contribution of 7.0%. The Federal Employees Retirement System (FERS), also a defined benefit plan, was created beginning January 1, 1987. Employees hired after December 31, 1983 were automatically converted to FERS. Other Federal employees not covered by FERS had a one-time option to transfer to FERS up to December 31, 1987. New FERS employees contribute 0.8% with an employer contribution rate of 11.2%. FERS employees contribute at the full FICA rate. They also participate in a Thrift Savings Plan with an automatic employer contribution of 1%. Employees may also contribute to this plan at variable rates, in which case the employer contributes at a variable rate up to 4%. CSRS employees are also eligible for participation in the Thrift Savings Plan, but without employer contributions. Acceptance of new member participation was terminated effective July 1, 1986 For the year ended June 30, 2008, the University contributed $880,259 and individual employees contributed $717,220 to these plans. Voluntary Tax-Sheltered Annuity Program Employees may also elect to participate, up to the maximum dollar amount permitted by the Internal Revenue Code, in a voluntary tax-sheltered annuity program. This voluntary plan permits employees to designate a part of their earnings into tax-sheltered investments and thus defer federal and state income taxes on their contributions and the accumulated earnings under the plan. Participation and the level of employee contributions are voluntary. The employer is not required to make contributions to the plan Note 11 – Postemployment Benefits In addition to pension benefits, the State provides post-employment health care benefits to eligible retired employees. The benefits are provided in accordance with the rules and regulations of the Kansas State Employees Health Care Commission. The Commission is responsible for the determination of the allocation of premium costs between the participants and the State. These allocations are subject to change each contract year. The University funds the benefits on a pay-as-you-go basis.

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For the Year Ended June 30, 2008 Note 12 – Other Postemployment Healthcare Benefits Description. 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 dependants 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 State, thus resulting in a liability to the State. 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 State 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 appropriates funds annually for the costs associated with this retirement benefit and provides funding for the expenditure on a pay-as-you-go basis. Annual OPEB Cost and Net OPEB Obligation. The University’s annual OPEB (Other Post Employment Benefits) 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. 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.

Normal cost (with interest) $2,013,261

Amortization of UAAL 1,434,269

Interest on amortized liability 55,219 Annual required contribution (ARC) $3,502,749

Contributions made --

Increase in net OPEB obligation $3,502,749

Net OPEB obligation July 1, 2007 -- Net OPEB obligation June 30, 2008 $3,502,749

Schedule of Employer Contributions (for fiscal year ended)

Annual Net End of Year

Fiscal OPEB Employer Percentage Net OPEB Year Cost Contributions Contributed Obligation

2008 $3,502,749 $0 0% $3,502,749

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For the Year Ended June 30, 2008 Funded Status and Funding Progress. As of June 30, 2008, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $29,255,102. The University’s policy is to fund the benefits on a pay as you go basis, resulting in an unfunded actuarial accrued liability (UAAL) of $29,255,102. The covered payroll (annual payroll of active employees covered by the plan) was $292,092,766, and the ratio of the UAAL to the covered payroll was 10 percent. 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. 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, 2008 actuarial valuation, the projected unit credit method was applied. The actuarial assumptions included a 3.85 percent 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 percent in the first ten years and an ultimate rate of 5.0 percent 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 13 – Commitments and Contingencies At June 30, 2008, the University had outstanding commitments on various construction projects and contracts for repairs and renovation of facilities of approximately $21,600,000. 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. As a result of legislation, the University, as an agency of the State of Kansas, is subject to the state of Kansas’ self-insurance program with regard to comprehensive general liability and personal injury insurance. The University is covered by the State’s umbrella insurance policies for automobile liability and property insurance. Also, the University is self-insured relative to workers’ compensation, medical, and unemployment insurance. These areas include stop-loss provisions that limit the University’s exposure. During June 2008, an EF4 tornado swept through Manhattan and the University suffered an estimated $10 million of damage to buildings, infrastructure and land improvements. High wind damage was also reported at the Salina campus. The deductible under the State’s policy is $5 million. The University has a separate building policy with a $10,000 deductible, covering the K-State Student Union and Housing buildings at both the Manhattan and Salina campuses. Project proposals have been submitted for consideration to FEMA, which (if awarded) would fund seventy-five percent of approved costs not covered by insurance. Financial support for the amounts not covered by FEMA and/or insurance will be sought from the State. In the normal course of operations, the University receives grants, contracts, and other forms of reimbursement from various federal and state agencies. These activities are subject to audit and disallowance by agents of the funding authority, the purpose of which is to ensure compliance with conditions precedent to providing such funds. University officials believe that the liability, if any, for any reimbursement that may arise as the result of audits, would not have a material effect on the University’s financial position.

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For the Year Ended June 30, 2008 Note 14 – Operating Expenses by Natural Classification

Year Ended June 30, 2008

Compensation Contractual Supplies Scholarships Aid, Debt

and Benefits Services and Materials Utilities and Fellowships and Nonexpense Depreciation Total

Instruction $ 140,064,554 $ 11,878,432 $ 7,587,558 $ 433 $ $ 2,292,453 $ $ 161,823,430

Research 77,250,780 17,163,543 15,773,716 307,385 2,634,540 113,129,964

Public Service 49,089,508 9,088,416 4,587,653 18,056 4,015,573 66,799,206

Academic Support 30,644,065 9,864,421 3,406,728 216 175,933 44,091,363

Student Service 15,509,952 3,512,648 560,190 12,452 1,943,912 21,539,154

Institutional Support 18,095,964 7,630,963 724,947 768,534 27,220,408

Operations and Maintenance of Plant 16,823,680 4,773,078 2,351,729 12,996,486 29,469 36,974,442

Scholarships & Fellowships 14,359,376 14,359,376

Auxiliary Enterprises 19,390,501 3,986,802 6,800,883 2,020,948 68,682 32,267,816

Depreciation 25,663,184 25,663,184

Other 492,812 294,184 786,996

Total Operating Expenses $ 366,869,004 $ 68,391,115 $ 42,087,588 $ 15,355,976 $ 14,359,376 $ 11,929,096 $ 25,663,184 $ 544,655,339

Note 15 – Component Units Buildings and improvements purchased by The Intercollegiate Athletic Council immediately become the property of Kansas State University. This results in a negative amount being reported for Invested in Capital Assets, Net of Related Debt on the Statement of Net Assets.

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APPENDIX B

THE CHILD CARE FACILITY Background

The present Center for Child Development (the “Existing Center”) provides family-centered childcare that meets the developmental and educational needs of children. The current facility provides on-campus childcare services for Kansas State University student, faculty, and staff parents. Approximately 70% of parents are K-State students, approximately 28% are faculty and staff and approximately 2% are from the Manhattan community. The percentage of students overlaps faculty and staff due to many parents who are both students and faculty or staff.

The Existing Center currently enrolls 173 full-time and part-time children each year. The Existing Center has one infant room, four toddler classrooms, four pre-school classrooms, one kindergarten room, and one school age room. Licensing allows 6 infants in an infant care room, 10 children in each toddler classroom, 20 in each preschool classroom, and 28 in our school-age classrooms. For K through 5th grade, the Existing Center provides both before and after-school care and full day care during in-service days, parent/teacher conference days and other days the school district does not have school. The Existing Center has 28 full-time staff members. This includes two full-time teaching staff in each classroom, an Executive Director, a Program Development Coordinator/Infant & Toddler Specialist and a Program Development Coordinator. Lead Teachers have college degrees. All Assistant Teachers become lead teacher qualified by obtaining their Child Development Associate Credential within one year of being hired. The Existing Center also employs approximately 50 students each year in a variety of part-time positions. The poor physical condition of the current facility, the arrangement of rooms and the limitations of the existing space prevent the Existing Center from completing the accreditation process. The Existing Center is ineligible for certain funding and other support that is only available to accredited centers. The Existing Center also is in need of expanding its services to more constituents to meet the growing childcare need at the University. However, the Existing Center space is at capacity and no further growth can occur. The firm of White Hutchinson Leisure and Learning Group, Inc. completed a Market Feasibility Study in March, 2006 that recommended that the Existing Center be replaced with a new building. The 2009K Project The 2009K Project is located on the main campus, just north of the east end of Jardine Drive and west of North Manhattan Avenue, within walking distance to the numerous field trip opportunities found on the main campus. An existing childcare teaching facility, the Hoeflin Stonehouse, is located to the southeast of this site, but is not a party of the Child Care Facility. The 2009K Project will be a 32,000 square foot facility and will include nineteen classrooms (including one restroom for each room) consisting of three infant rooms, six toddler rooms, three infant/toddler rooms, five pre-school rooms, one kindergarten room and one school-age room. The 2009K Project also includes a reception area and foyer, kitchen, laundry, motor/multipurpose room (indoor play area), conference meeting room, office for director, teacher resource room/parent library & resource room, storage area, maintenance equipment storage room, accountant office, car seat storage room, sick bay, teacher break room, and other offices. The 2009 Project includes approximately 19,800 square feet of outdoor play areas, including an infant/toddler area, pre-school area and Kindergarten/school age area. Fifteen parking spaces and bus drop-off area are also included.

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The capacity of the Child Care Facility will be 263 full-time equivalent children. The table below outlines the budget required for construction and acquisition of the 2009K Project.

Building & Site Development Building $2,777,793 Fixed equipment for building 134,421 Site work and utilities 526,059 Site furnishings and fences 101,724 Subtotal $3,539,997 Soft Costs: Modular furnishings allowance 140,000 Professional Fees 351,000 Contingency @ 8% of items 1-4 725,003 Miscellaneous @5% of items 1-5 244,000 Subtotal $1,460,003 Project Budget $5,000,000

The University anticipates that the initial total annual cost to operate the 2009K Project will be approximately $205,000. Construction of the 2009K Project is scheduled to be completed by late Fall, 2010.

PROJECTED GROSS REVENUES

The Bonds are secured by the Trust Estate, as described in the Official Statement under the caption "THE BONDS – Security for the Bonds," including all rights, title and interest of the Authority under the Pledge Agreement pursuant to which the Board pledges the Gross Revenues, which consist of tuition revenues (i.e., amounts paid by parents and guardians of children who attend the Child Care Facility) received from the operation of the Child Care Facility. The Bonds and all interest thereon constitute a first and prior lien on the Gross Revenues. Presented in the following table is a summary of the projected Gross Revenues and other revenues, including contributions from the University, to be derived and collected by the Board from the operation and ownership of the new Child Care Facility financed with proceeds of the Series 2009K Bonds. As shown in the table, contributions from the University are required in each year to supplement Gross Revenues and other non-pledged operational revenues to provide sufficient funds to pay Debt Service Requirements and Current Expenses. Projections for fiscal years ending June 30, 2009, and thereafter include revenue projections for that assume the completion of construction of the Child Care Facility in late Fall, 2010. No assurance is given that the projected Gross Revenues will be realized in the amounts set forth below.

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Kansas State University Child Care Projected Gross Revenues - Fiscal Years Ending June 30, 2009- 2040 Projected

Fiscal Total Debt Required Year Gross Other Available Service O & M Total University

Ending 6/30 Revenues1 Revenues2 Revenues Requirements3 Expenses Expenditures Contribution

2010 1,487,148 294,329 1,781,477 - 1,771,841 1,771,841 - 2011 2,032,015 425,740 2,457,755 - 2,333,861 2,333,861 - 2012 2,185,729 474,030 2,659,759 287,156 2,498,006 2,785,162 125,403 2013 2,185,729 474,030 2,659,759 395,713 2,498,006 2,893,719 233,960 2014 2,185,729 474,030 2,659,759 397,400 2,498,006 2,895,406 235,647 2015 2,185,729 474,030 2,659,759 398,281 2,498,006 2,896,287 236,528 2016 2,185,729 474,030 2,659,759 398,297 2,498,006 2,896,303 236,544 2017 2,185,729 474,030 2,659,759 397,475 2,498,006 2,895,481 235,722 2018 2,185,729 474,030 2,659,759 396,181 2,498,006 2,894,187 234,428 2019 2,185,729 474,030 2,659,759 399,350 2,498,006 2,897,356 237,597 2020 2,185,729 474,030 2,659,759 396,900 2,498,006 2,894,906 235,147 2021 2,185,729 474,030 2,659,759 398,835 2,498,006 2,896,841 237,082 2022 2,185,729 474,030 2,659,759 399,920 2,498,006 2,897,926 238,167 2023 2,185,729 474,030 2,659,759 390,464 2,498,006 2,888,470 228,711 2024 2,185,729 474,030 2,659,759 396,983 2,498,006 2,894,989 235,230 2025 2,185,729 474,030 2,659,759 399,383 2,498,006 2,897,389 237,630 2026 2,185,729 474,030 2,659,759 396,358 2,498,006 2,894,364 234,605 2027 2,185,729 474,030 2,659,759 397,823 2,498,006 2,895,829 236,070 2028 2,185,729 474,030 2,659,759 398,683 2,498,006 2,896,689 236,930 2029 2,185,729 474,030 2,659,759 398,921 2,498,006 2,896,927 237,168 2030 2,185,729 474,030 2,659,759 398,490 2,498,006 2,896,496 236,737 2031 2,185,729 474,030 2,659,759 397,090 2,498,006 2,895,096 235,337 2032 2,185,729 474,030 2,659,759 399,730 2,498,006 2,897,736 237,977 2033 2,185,729 474,030 2,659,759 396,770 2,498,006 2,894,776 235,017 2034 2,185,729 474,030 2,659,759 398,210 2,498,006 2,896,216 236,457 2035 2,185,729 474,030 2,659,759 398,930 2,498,006 2,896,936 237,177 2036 2,185,729 474,030 2,659,759 398,930 2,498,006 2,896,936 237,177 2037 2,185,729 474,030 2,659,759 397,875 2,498,006 2,895,881 236,122 2038 2,185,729 474,030 2,659,759 395,750 2,498,006 2,893,756 233,997 2039 2,185,729 474,030 2,659,759 392,875 2,498,006 2,890,881 231,122 2040 2,183,231 474,030 2,657,261 - 2,498,006 2,498,006 -

1. Includes estimated earnings on the Bond Reserve Account. 2. Other revenues generated by the Child Care Facility not pledged to the Bonds. 3. Adjusted for capitalized interest and the transfer of amounts in the Bond Reserve Account to payment of the Bonds maturing in Fiscal Year 2040. The application of projected Gross Revenues to Debt Service Requirements for the Bonds is set forth APPENDIX C to this Official Statement.

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APPENDIX C

PROJECTED DEBT SERVICE REQUIREMENTS AND DEBT SERVICE COVERAGE RATIOS

The projected Gross Revenues to be derived from the Child Care Facility are set forth in APPENDIX B to this Official Statement. The Board covenants in the Pledge Agreement to establish, revise, charge and collect fees and charges for use of or services rendered by the Child Care Facility in amounts such that the Debt Service Coverage Ratio will be not less than 1.75 and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution, including the payment of Current Expenses. The application of total projected Gross Revenues to debt service requirements for the Series 2009K Bonds is set forth below. No assurance is given that such projections will be realized.

Fiscal Year Gross Projected Debt Annual Ending 6/30 Revenues1 Service Requirements2 Coverage

2010 1,487,148 - NA 2011 2,032,015 - NA 2012 2,185,729 287,156 7.61 2013 2,185,729 395,713 5.52 2014 2,185,729 397,400 5.50 2015 2,185,729 398,281 5.49 2016 2,185,729 398,297 5.49 2017 2,185,729 397,475 5.50 2018 2,185,729 396,181 5.52 2019 2,185,729 399,350 5.47 2020 2,185,729 396,900 5.51 2021 2,185,729 398,835 5.48 2022 2,185,729 399,920 5.47 2023 2,185,729 390,464 5.60 2024 2,185,729 396,983 5.51 2025 2,185,729 399,383 5.47 2026 2,185,729 396,358 5.51 2027 2,185,729 397,823 5.49 2028 2,185,729 398,683 5.48 2029 2,185,729 398,921 5.48 2030 2,185,729 398,490 5.49 2031 2,185,729 397,090 5.50 2032 2,185,729 399,730 5.47 2033 2,185,729 396,770 5.51 2034 2,185,729 398,210 5.49 2035 2,185,729 398,930 5.48 2036 2,185,729 398,930 5.48 2037 2,185,729 397,875 5.49 2038 2,185,729 395,750 5.52 2039 2,185,729 392,875 5.56 2040 2,183,231 - NA

1 Includes estimated earnings on the Bond Reserve Account 2 Adjusted for capitalized interest and the release of amounts on deposit in the Bond Reserve Account to the payment of the Bonds maturing in Fiscal Year 2040.

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APPENDIX D

SUMMARY OF PRINCIPAL FINANCING DOCUMENTS

The following are summaries of certain provisions of the Bond Resolution, the Pledge Agreement, the Supplemental Security Agreement and the Disclosure Undertaking, as well as definitions of certain 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 Bond Resolution, the Pledge Agreement, the Supplemental Security Agreement and the Disclosure Undertaking, 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 as used in the Bond Resolution, the Pledge Agreement, the Supplemental Security Agreement and the Disclosure Undertaking shall have the following meanings, unless some other meaning is plainly intended:

"Act" means the Constitution and Statutes of the State of Kansas, including K.S.A. 74-8901 et seq., Section 173(j), Chapter 167 of the 2007 Kansas Session Laws, and Section 114(i) of Senate Substitute for House Bill No. 2354, 2009 Kansas Legislature, all as may be amended and supplemented. "Additional Bonds" means any Bonds issued pursuant to the Bond Resolution. "Additional Obligations" means any Indebtedness of the Board, issued or incurred by the Board pursuant to the Pledge Agreement and secured by the Gross Revenues. "Additional Project" means any acquisitions, additions or improvements to the Child Care Facility, to be financed or refinanced out of the proceeds of Additional Bonds or Additional Obligations. "Annual Budget" means the budget required by the Pledge Agreement. "Authority" means the Kansas Development Finance Authority, an instrumentality of the State organized and existing under the laws of the State. "Authority Swap Payments" means any payment required to be made by or on behalf of the Authority to a Swap Provider pursuant to a Qualified Swap Agreement, excluding Termination Payments. "Authorized Board Representative" means the Board Chairperson or Executive Officer of the Board, the President of the University, the Controller of the University or such other person at the time designated to act on behalf of the Board. "Balloon Indebtedness" means Long-Term Indebtedness, 25% or more of the original principal amount of which becomes due (either by maturity or mandatory redemption) during any consecutive twelve-month period, if such principal amount becoming due is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such twelve-month period. "Beneficial Owner" of the Bonds includes any Owner of the Bonds and any other Person who directly or indirectly has the investment power with respect to such Bonds. "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, or, if said Board shall be abolished, the board, body, commission or authority succeeding to the principal functions thereof or to whom the powers given under K.S.A. 74-3201a et seq., or K.S.A. 76-6a12 to 76-6a25, inclusive, to the Board shall be given by law.

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"Bond", "Bonds" or "Series of Bonds" means any Series 2009K Bonds and any Additional Bonds authorized and delivered under the Bond Resolution No. 257 or a Supplemental Bond Resolution. "Bond Counsel" means the firm of Gilmore & Bell, P.C. or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the Authority and the Board. "Bond Fund" means the Bond Fund for Kansas Development Finance Authority Revenue Bonds (Kansas Board of Regents - Kansas State University Child Care Facility Project) authorized and established in the Bond Resolution. "Bond Insurance Policy" means the bond insurance policy or financial guaranty insurance policy issued by the Bond Insurer on the date of delivery of and payment for any Series of Bonds insuring the scheduled payment when due of the principal of and interest on such Series of Bonds as provided therein. There is no Bond Insurance Policy with respect to the Series 2009K Bonds. "Bond Insurer" means, with respect to any Additional Bonds, the entity named, if any, in the Supplemental Bond Resolution authorizing such Additional Bonds. "Bond Registrar" means: (a) with respect to the Series 2009K Bonds, the Bond Registrar designated in the Bond Resolution; and (b) with respect to any Additional Bonds, the Bond Registrar designated in the Supplemental Bond Resolution authorizing such Additional Bonds, and any successors and assigns. "Bond Reserve Account" means the Bond Reserve Account for Kansas Development Finance Authority Parity Revenue Bonds (Kansas Board of Regents - Kansas State University Child Care Facility Project) authorized and established in the Bond Resolution. "Bond Reserve Requirement" means, as of any computation date, the lesser of (a) 10% of the original aggregate principal amount of each series of Parity Bonds, except that in the case of the issuance of Refunding Bonds the principal amount of the Bonds that will no longer be Outstanding as a result of the issuance of the Refunding Bonds shall not be considered in this calculation, (b) the Maximum Annual Debt Service becoming due on all Parity Bonds then Outstanding, (c) 125% of the average annual Debt Service Requirements on all Parity Bonds then Outstanding, or (d) if applicable, the maximum amount permitted by the Code to be deposited from the proceeds of the Parity Bonds in a debt service reserve fund therefor without being subject to yield restriction under the Code and without causing the interest on such Parity Bonds to be includable in gross income for federal income tax purposes; provided, however, that if the Authority shall receive an opinion of Bond Counsel to the effect that the Bond Reserve Requirement must be reduced in order that the amounts on deposit in the Bond Reserve Account may continue to be invested without yield restriction under the Code, the Bond Reserve Requirement shall be reduced in conformity with said opinion.

"Bond Resolution" means, jointly, Bond Resolution No. 257, as amended and supplemented, and any Supplemental Bond Resolutions adopted in accordance with the provisions of the Bond Resolution. "Business Day" means a day which is not a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which banks in the State are not authorized to be closed. "Change of Circumstances" means the occurrence of any of the following events: (a) title to, or the temporary use of, all or any part of the Child Care Facility shall be condemned by any authority exercising the power of eminent domain; (b) the Child Care Facility is damaged or destroyed by fire, theft or other casualty: (1) in whole or (2) in part, if said casualty loss exceeds the Claim Limitation; or

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(c) as a result of changes in the Constitution, or legislation adopted or imposed by the State or any political subdivision thereof, or by the United States, or by reason of any action instituted in any court, the Pledge Agreement shall become void or unenforceable, or impossible of performance without unreasonable delay, or in any other way, by reason of such changes of circumstances, unreasonable burdens or excessive liabilities are imposed upon the Board.

"Child Care Facility" means the center for child development located on the Manhattan campus of the University, financed from the proceeds of the Series 2009K Bonds, as the same may be expanded from time to time. "Code" means the Internal Revenue Code of 1986, as amended, including, when appropriate, the statutory predecessor of the Code, and all applicable regulations (whether proposed, temporary or final) under the Code and the statutory predecessor of the Code, and any successor provisions to the provisions of the Code and those regulations and any official rulings, announcements, notices, procedures and judicial determinations under the foregoing applicable to the Bonds. "Completion Indebtedness" means any Long-Term Indebtedness incurred for the purpose of financing, without materially changing the scope thereof, (a) the completion of the facilities for which Long-Term Indebtedness was previously incurred pursuant to the provisions of the Pledge Agreement, or (b) the improvement, replacement or substitutions for, or additions to, the 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 by a Governmental Agency affecting the operation of such facilities. "Consultant" means an independent individual consultant or certified public accountant or firm of consultants or certified public accountants selected by the Board and acceptable to the Authority, qualified and having a favorable reputation for skill and experience in financial affairs or the operation of the Child Care Facility, selected in accordance with State requirements. "Costs of Issuance" means any and all expenses of whatever nature incurred in connection with the issuance and sale of any Series of Bonds, including but not limited to bond and other printing expenses, costs associated with obtaining bond insurance, administrative fees, fees of the Bond Registrar and Paying Agent, legal fees and expenses of Bond Counsel and other legal counsel and any expenses incurred in connection with determining yield on any Series of Bonds, or investment of the proceeds of any Series of Bonds. "Costs of Issuance Account" means (a) with respect to the Series 2009K Bonds, the Costs of Issuance Account for Kansas Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project) authorized and established in the Bond Resolution, and (b) with respect to any Additional Bonds, any costs of issuance fund or account established in the Supplemental Bond Resolution authorizing such Additional Bonds. "Current Expenses" for any period, means the current expenses incurred by the Board or the University during such period in the operation of the Child Care Facility and the operation, repair and maintenance of the Child Care Facility, and shall include, subject to the provisions of the Act, the Bond Resolution and the Pledge Agreement, without limiting the generality of the foregoing, all ordinary and usual expenses of operation, repair and maintenance; cost of supplies, labor and materials; costs of insurance; all administrative, engineering, legal and architectural expenses relating to operation, repair and maintenance; any reasonable payments to pension, retirement, group life insurance, health, hospitalization and other employee benefit funds, including payments to reduce unfunded "other post-employment benefit" liabilities; and any other current expenses required or permitted to be paid by the Board under the provisions of applicable law, the Bond Resolution and the Pledge Agreement, but shall not include: (a) any reserves for extraordinary maintenance or repair; (b) any allowance for amortization or depreciation; or (c) Debt Service Requirements.

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"Debt Service Coverage Ratio" means, for the period of time for which calculated, the ratio determined by dividing (a) a numerator equal to the Gross Revenues by (b) a denominator equal to (i) with respect to the rate covenant requirements set forth in the Pledge Agreement and for purposes of the Supplemental Security Agreement, the Debt Service Requirements; and (ii) with respect to the coverage requirements for additional obligations set forth in the Pledge Agreement, the Maximum Annual Debt Service. "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 Indebtedness, plus, if the Authority determines that a Qualified Swap Agreement is being entered into for the purpose of providing substitute interest payments for a Series of Bonds, Authority Swap Payments, less, during any period of time that includes the maturity of a Series of Bonds, the amount, if any, projected to be transferred from the Bond Reserve Account to a Principal and Interest Account at maturity of such Series of Bonds pursuant to the Bond Resolution as determined by the Authority, less Swap Provider Payments (excluding Termination Payments made by a Swap Provider); provided that:

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

(c) (1) Debt Service Requirements required to be made pursuant to a Qualified Swap Agreement shall be based upon the actual amount required to be paid by the Authority, if any, to the Swap Provider. In determining that amount, any payments required to be made by either party pursuant to the Qualified Swap Agreement at a variable interest rate shall be computed, in determining the obligation of the Authority under the Qualified Swap Agreement, using the procedures set forth in the Pledge Agreement; and

(2) Termination Payments payable by the Authority shall be considered as part of Debt Service Requirements on the date of computation only if those Termination Payments have become due and remain unpaid at the time of computation in accordance with the terms of the applicable Qualified Swap Agreement.

"Defeasance Obligations" means:

(a) cash; or

(b) Investment Obligations described in Sections (a), (b) and (f) of the definition thereof, which are not subject to redemption in advance of their maturity, except at the option of the holder thereof; or

(c) Investment Obligations described in Sections j(1), j(2) and (j)(3) of the definition thereof, which are not subject to redemption in advance of their maturity, except at the option of the holder thereof, and which, under guidelines effective at the time of determination, are permitted to be included in an escrow that is rated in the highest rating category by any Rating Agency.

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"Disclosure Undertaking" means the Continuing Disclosure Undertaking of the Authority and the Board, as may be amended from time to time, to be delivered as of the Closing Date of any Series of Bonds, relating to certain matters within the scope of the SEC Rule, in accordance with its terms. "Discount Indebtedness" means Long-Term Indebtedness that is originally sold by the Board at a price (excluding accrued interest, but without deduction of any underwriters' discount) of less than 75% of the maturity amount including the amount of principal and interest to accrete at maturity of such Indebtedness. "DTC" means the Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors and assigns, including any successor securities depository duly appointed. "Escrowed Deposits" means Defeasance Obligations (including, where appropriate, the earnings or other increment to accrue thereon) that are irrevocably deposited in trust or in escrow with the Paying Agent or a third party escrow agent and are required to be applied to pay all or a portion of the principal of, redemption premium, if any, and interest on, as the same shall become due, any Indebtedness which would otherwise be considered Outstanding and provided that such amounts so required to be applied are sufficient to pay such principal, redemption premium, if any, and interest on such Indebtedness. "Event of Default" with respect to the Bond Resolution means one of the following events:

(a) Default by the Authority in the due and punctual payment of any interest on any Bond; (b) Default by the Authority in the due and punctual payment of the principal of or redemption premium, if any, on any Bond; (c) Default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Authority in the Bond Resolution (other than covenants with respect to continuing disclosure in order to comply with the SEC Rule) or in the Bonds contained, and the continuance thereof for a period of 30 days after written notice thereof shall have been given to the Authority by (1) the Board or (2) the Owners of not less than 25% in aggregate principal amount of Bonds then Outstanding; provided, however, if any default shall be such that it cannot be corrected within such 30-day period, it shall not constitute an Event of Default if corrective action is initiated by the Authority within such period and diligently pursued until such default is corrected;

(d) An Event of Default, as defined in the Pledge Agreement, by the Board has occurred; or

(e) An event of default by the University has occurred under the Supplemental Security

Agreement.

"Event of Default" with respect to the Pledge Agreement, means one of the following events:

(a) the transfers required into be made to the funds and accounts established in the Bond Resolution shall not be made as required; or (b) the Board shall for any reason be rendered incapable of fulfilling its obligations under the Pledge Agreement; or (c) failure of the Board to pay any installment of interest or principal, or any redemption premium, on any Indebtedness when the same shall become due and payable, whether at maturity or upon any date fixed for prepayment or by acceleration or otherwise; or

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(d) failure of the Board to observe or perform any of the other covenants, conditions or provisions of the Pledge Agreement (other than the covenants relating to continuing disclosure in order to comply with the SEC Rule) or to make any other payment required to be made under the Pledge Agreement and failure to remedy such default after written notice thereof from the Authority to the Board; provided that if such default is correctable, it shall not constitute an Event of Default if corrective action is promptly instituted by the Board and diligently pursued until the default is corrected, provided that such default is remedied in not more than 180 days, unless an extension is approved by the Authority, which approval shall not be unreasonably withheld; or (e) any representation or warranty made by the Board in the Pledge Agreement or any other Transaction Document or in any statement or certificate furnished by the Board to the Authority or the Original Purchaser of any Bonds in connection with the sale of any Bonds, or furnished by the Board pursuant to the Pledge Agreement, which proves untrue in any material respect as of the date of the issuance or making thereof and shall not be made good within 180 days after written notice thereof to the Board by the Authority; or (f) default (other than the payment of any installment of interest or principal, or any redemption premium) under any mortgage, agreement or other instrument under or pursuant to which any Indebtedness in excess of $500,000 is issued, and continuance of such default beyond the period of grace, if any, allowed with respect thereto; or (g) admission by the Board of insolvency or bankruptcy or its inability or failure to pay its debts secured by the Gross Revenues as they become due, or the Board makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the Board of the Gross Revenues; or (h) appointment by a court of competent jurisdiction of a trustee, custodian or receiver for the Board and failure to obtain discharge of such within 60 days after such appointment; or (i) institution of bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors by or against the Board relating to the Gross Revenues (other than bankruptcy proceedings instituted by the Board against third parties), and, if instituted against the Board, allowance against the Board or the Board consents to such proceedings or fails to obtain dismissal, stay or other nullification within 60 days after such institution.

"Executive Officer" shall mean the President and Chief Executive Officer of the Board or, in such person's absence, the duly appointed acting or interim President and Chief Executive Officer of the Board. "Federal Tax Certificate" means, with respect to the Series 2009K Bonds, the Federal Tax Certificate of the Authority and the Board, to be delivered on the Closing Date of the Series 2009K Bonds, relating to certain matters within the scope of Section 148 of the Code, as the same may be amended or supplemented in accordance with its terms. "Fiscal Year" means the 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. "Government Obligations" means obligations of, or obligations guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America. "Gross Revenues" means, collectively, (a) the Pledged Child Care Fees, and (b) investment earnings on Funds and Accounts available for Debt Service Requirements pursuant to the Bond Resolution and the Pledge Agreement.

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"Indebtedness" means (a) the Bonds, (b) Additional Obligations and (c) all other indebtedness or obligations payable from the Gross Revenues; provided that Indebtedness shall not include any portion of any Indebtedness that is payable from Escrowed Deposits and is deemed to be discharged or defeased in accordance with the terms of the instrument or instruments creating or evidencing such Indebtedness. "Index Rate" means the rate of interest set forth in The Bond Buyer Revenue Bond Index (or, in the event that The Bond Buyer does not compile such index or ceases publication, another comparable publication recognized in the municipal bond market) published for the week immediately preceding the date of determination. "Interest Payment Dates" means (a) with respect to the Series 2009K Bonds, May 1 and November 1 of each year, commencing November 1, 2009; and (b) with respect to any Additional Bonds, the dates specified in the Supplemental Bond Resolution authorizing such Series of Bonds. "Interim Indebtedness" means Indebtedness having a term not less than one year, and not in excess of five years, incurred or assumed in anticipation of being refinanced or refunded with Long-Term Indebtedness.

"Investment Obligations" means, (a) Government Obligations; (b) Obligations of government-sponsored agencies that are not backed by the full faith and credit

of the U.S. government including, but not limited to:

(1) Federal Home Loan Mortgage Corp. (FHLMC) Senior debt obligations (rated "Aaa" by Moody's and "AAA" by S&P) (2) Federal National Mortgage Association (FNMA) Senior debt obligations (rated "Aaa" by Moody's and "AAA" by S&P) (3) Federal Home Loan Banks (FHL Banks) Senior debt obligations (4) Resolution Funding Corp. (REFCORP) Debt obligations;

(c) Federal funds, unsecured certificates of deposit, time deposits, and banker's acceptances

(having maturities of not more than 360 days after date of Purchase) of any domestic commercial bank, the short-term obligations of which are rated "A-1+" by S&P and "P-1" by Moody's;

(d) Deposits that are fully insured by the Federal Deposit Insurance Corp. (FDIC), including

Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF) or collateralized by Government Obligations;

(e) State or municipal debt obligations rated "AAA" by S&P and "Aaa" by Moody's (excluded

are securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date);

(f) Pre-refunded municipal 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

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date specified in the notice, and which are rated based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of S&P and Moody's or any successors thereto;

(g) Commercial paper rated "A-1+" by S&P and "P-1" by Moody's, maturing in not more than

270 days after the date of purchase; (h) Investment in money market funds rated "AAAm" or "AAAm-G" by S&P; (i) Repurchase agreements:

(1) with a term of not more than 365 days with any transferor which has an unsecured, uninsured and unguaranteed short-term obligation rating not lower than "A-1+" by S&P and "P-1" by Moody's, or guaranteed by a parent corporation or holding company of the transferor with an uninsured, unsecured and unguaranteed short-term obligation rating meeting such requirements; or

(2) with a term of greater than 365 days with any transferor which has an

unsecured, uninsured and unguaranteed short-term obligation rating not lower than "AAA" by S&P and not lower than "Aaa" by Moody's, or guaranteed by a parent corporation or holding company of the transferor with an uninsured, unsecured and unguaranteed short-term obligation rating meeting such requirements; provided such ratings may be not lower than "AA" by S&P and not lower than "Aa2" by Moody's if:

(A) interest is paid at least semiannually at a fixed rate during the entire term of

the agreement;

(B) moneys invested thereunder may be withdrawn without any penalty, premium, or charge upon not more than two days' notice as provided in the agreement (provided such notice may be amended or cancelled at any time prior to the withdrawal date);

(C) the agreement is not subordinated to any other obligations of the transferor;

and (D) the Authority receives an opinion of counsel that such agreement is an

enforceable obligation of the transferor;

(j) Stripped securities:

(1) United States Treasury STRIPS, (2) REFCORP STRIPS (stripped by the Federal Reserve Bank of New York), (3) Financing Corp. (FICO) STRIPS (stripped by the Federal Reserve Bank of

New York which have CUSIP prefixes 317705, 31771J, and 31771K) and (4) Any stripped securities assessed or rated "AAA" by S&P and "Aaa" by

Moody's; (k) Investments in the Municipal Investment Pool Fund pursuant to K.S.A. 12-1677a;

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(l) Investment agreements with a financial institution or entity, government securities dealer,

insurance company, financial corporation or similar organization (jointly, a "Provider"), which has an unsecured, uninsured and unguaranteed obligation (or claims-paying ability) rated not lower than "AA" by S&P and not lower than "Aa2" by Moody's, or guaranteed by a parent corporation or holding company of the Provider with an uninsured, unsecured and unguaranteed obligation meeting such rating requirements provided:

(1) interest is paid at least semiannually at a fixed rate during the entire term of the

agreement;

(2) moneys invested thereunder may be withdrawn without any penalty, premium, or charge upon not more than two days' notice as provided in the investment agreement (provided such notice may be amended or cancelled at any time prior to the withdrawal date);

(3) in the event the rating of the Provider or guarantor falls below the requirements set

forth in this subsection (l), the Authority shall have the option to terminate the agreement without penalty on not more than 30 days written notice, unless: (A) the Provider transfers the agreement to a substitute Provider or guarantor that meets the rating requirements of this subsection (l); or (B) the Provider takes such other remedial actions as are specified in such agreement;

(4) the agreement is not subordinated to any other obligations of the Provider; and (5) the Authority receives an opinion of counsel that such agreement is an enforceable

obligation of the Provider;

(m) Any other forms of investments approved in writing by the issuer of any credit enhancements with respect to a particular Series of Bonds; and

(n) Any other investments authorized by State law that will not adversely affect the then current

ratings on the Bonds by S&P and Moody's, if any. "Long-Term Indebtedness" means Indebtedness having an original stated maturity or term greater than one year, or renewable or extendible at the option of the debtor for a period greater than one year from the date of original issuance or incurrence thereof. "Maximum Annual Debt Service" means the maximum amount of Debt Service Requirements computed for any Fiscal Year; provided that the Debt Service Requirements in the final Fiscal Year of the Bonds shall be reduced by the Value of cash and Investment Obligations on deposit in the Bond Reserve Account. "Maximum Interest Rate" shall mean the maximum amount of Debt Service Requirements computed for any Fiscal Year. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority with notice to the Board. "Net Proceeds" means, when used with respect to any insurance or condemnation award, means the gross proceeds from the insurance or condemnation award with respect to which the term is used remaining after

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the payment of all expenses (including attorneys' fees and any expenses of the Authority or the Board) incurred in the collection of such gross proceeds. "Outstanding" means: (a) when used with reference to Bonds, as of a particular date, all Bonds theretofore authenticated and delivered, except: (1) Bonds theretofore cancelled by the Paying Agent or delivered to the Paying Agent for

cancellation pursuant to the Bond Resolution; (2) Bonds for the payment or redemption of which moneys or investments have been

deposited with the Paying Agent in accordance with the provisions of the Bond Resolution; (3) Bonds in exchange for or in lieu of which other Bonds have been authenticated and

delivered pursuant to the Bond Resolution; (4) for purposes of any consent or other action to be taken by the Owners of a specified

percentage of Bonds under the Bond Resolution or the Pledge Agreement, Bonds owned or held by or for the account of the Authority, the Board or any Person controlling, controlled by or under common control with either of them;

(5) Bonds for which Defeasance Obligations have been deposited in accordance with the

Bond Resolution; and (6) Bonds, the principal and interest of which has been paid by the Bond Insurer; and (b) when used in connection with Indebtedness other than Bonds, all Indebtedness except Indebtedness with respect to which the obligation to make payments has been discharged in accordance with the terms of the instrument or instruments creating or evidencing such Indebtedness. "Owner" means the registered owner of any Bond as shown on the bond register maintained by the Bond Registrar. "Parity Bonds" means the Series 2009K Bonds and any Additional Bonds hereinafter issued that meet the requirements of the Bond Resolution and the requirements of the Pledge Agreement as described below under the caption “SUMMARY OF THE BOND RESOLUTION – Authorization of Additional Bonds,” and the requirements described below under the caption “SUMMARY OF THE PLEDGE AGREEMENT – Restrictions on Incurrence of Additional Indebtedness.”

"Parity Obligations" means any Additional Obligations that meet the requirements of the Pledge Agreement as described below under the caption “SUMMARY OF THE PLEDGE AGREEMENT – Restrictions on Incurrence of Additional Indebtedness.” "Participant" means brokers, dealers, banks and other financial institutions and other Persons for whom from time to time DTC effects book-entry transfers and pledges of securities deposited with DTC. "Paying Agent" means: (a) with respect to the Series 2009K Bonds, the State Treasurer; and (b) with respect to any Additional Bonds, the Paying Agent designated in the Supplemental Bond Resolution authorizing such Additional Bonds, and any successors and assigns. "Payment Date" means each Principal Payment Date and each Interest Payment Date.

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"Plans and Specifications" means the plans and specifications described in the Pledge Agreement, and any amendments and additions thereto and any change orders made in accordance with the Pledge Agreement. "Pledge Agreement" means the Pledge of Revenues Agreement dated as of the Document Date, and any agreement or agreements duly executed by the Board and the Authority amending or supplementing the Pledge Agreement. "Pledged Child Care Fees" means the following fees and charges collected from parents and guardians of children attending the Child Care Facility (including related subsidies received from governmental or private agencies on behalf of children attending the Child Care Facility): (a) monthly or other periodic attendance charges (i.e., “tuition”), (b) application fees, (c) registration fees, (d) late fees, (e) charges for supplies, equipment and field trips, and (f) and investment earnings amounts specified in clauses (a) through (e). "Pooled Money Investment Board" means the pooled money investment board of the State of Kansas established pursuant to K.S.A. 75-4221a. "Principal and Interest Account" means (a) with respect to the Series 2009K Bonds, the Principal and Interest Account for Kansas Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project), authorized and established in the Bond Resolution, and (b) with respect to any Additional Bonds, any principal and interest account established in the Supplemental Bond Resolution authorizing such Additional Bonds. "Principal Payment Date" means (a) with respect to the Series 2009K Bonds, November 1 of each year, including each November 1 on which principal shall have been called for mandatory sinking fund payment, commencing November 1, 2012, and (b) with respect to any Additional Bonds, the dates specified in the Supplemental Bond Resolution authorizing such Series of Bonds. "Project Account" means (a) with respect to the Series 2009K Bonds, the Project Account for Kansas Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project), authorized and established in the Bond Resolution, and (b) with respect to any Additional Bonds, any project fund or account established in the Supplemental Bond Resolution authorizing such Additional Bonds. "Project Costs" means costs permitted under the Act (and the Code, if applicable) to be paid out of proceeds of Bonds or other available funds with respect to the 2009K Project or any Additional Project, including the total of all reasonable or necessary expenses incidental to the acquisition, construction, reconstruction, repair, alteration, equipping, improvement and extension of the 2009K Project or any Additional Project, including without limitation: land acquisition, 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 and developing the site of and constructing and equipping new facilities constituting a part of the 2009K Project or any Additional Project; rehabilitating, reconstructing, repairing or remodeling existing parking facilities, including removal of any hazardous materials, constituting a part of the 2009K Project or any Additional Project; and all other necessary and incidental expenses, including interest during construction on Bonds issued to finance the 2009K Project or any Additional Project to a date not greater than six months subsequent to the estimated date of completion thereof, and any other costs permitted by the Act. "Put Indebtedness" means Long-Term Indebtedness which is (a) payable or required to be purchased or redeemed from the holder by or on behalf of the underlying obligor, at the option of the holder thereof, prior to its stated maturity date, or (b) payable or required to be purchased or redeemed from the holder by or on behalf of the underlying obligor, other than at the option of the holder, prior to its stated maturity date, other than pursuant to any mandatory sinking fund or other similar fund, or other than by reason of acceleration upon the occurrence of an Event of Default.

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"Qualified Financial Institution" means a bank, trust company, national banking association, insurance company or other financial services company or entity, whose unsecured long term debt obligations (in the case of a bank, trust company, national banking association or other financial services company or entity) or whose claims paying abilities (in the case of an insurance company) are rated in any of the two highest rating categories by one Rating Agency. "Qualified Swap Agreement" shall mean 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, expressly identified in a certificate of the Authority as having been entered into in order to hedge the interest rate payable on all or any portion of any Outstanding Bonds 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). "Qualified User” means a Tax-Exempt Organization or a State, territory, possession of the United States, the District of Columbia, or any political subdivision thereof, or any instrumentality of such entity, but it does not include the United States or any agency or instrumentality of the United States. "Rating Agency" means Moody's, S&P and any other company, agency or entity that provides ratings for the Bonds. "Rating Category" shall mean a generic securities rating category assigned by a Rating Agency, without regard, in the case of a long-term rating category, to any refinement or gradation of such long-term rating category by a numerical modifier or otherwise. "Rebate Account" means (a) with respect to the Series 2009K Bonds, the Rebate Account for Kansas Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project) authorized and established in the Bond Resolution, and (b) with respect to any Additional Bonds, any rebate fund or account established in the Supplemental Bond Resolution authorizing such Additional Bonds. "Record Dates" 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. "Refunding Indebtedness" means any Long-Term Indebtedness issued for the purpose of refunding any Outstanding Long-Term Indebtedness. "Revenue Fund" means the Revenue Fund for the Kansas State University Child Care Facility Project ratified and confirmed in the Bond Resolution. "S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, S&P shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority with notice to the Board. "SEC Rule" means Rule 15c2-12 of the Securities and Exchange Commission, an agency of the United States Government. "Series 2009K Bonds" means, collectively, the Series 2009K-1 Bonds and the Series 2009K-2 Bonds. “Series 2009K-1 Bonds” means the Kansas Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project) dated the Dated Date.

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“Series 2009K-2 Bonds” means the Kansas Development Finance Authority Taxable Revenue Bonds, Series 2009K-2 (Kansas Board of Regents - Kansas State University Child Care Facility Project) dated the Dated Date. "Series 2009K Term Bonds" means, collectively the Series 2009K-1 2035 Term Bonds and the Series 2009K-1 2039 Term Bonds. "Series 2009K-1 2035 Term Bonds" means the Series 2009K-1 Bonds scheduled to mature in the year 2035. "Series 2009K-1 2039 Term Bonds" means the Series 2009K Bonds scheduled to mature in the year 2039. "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 issuance. "State" means the State of Kansas. "State Treasurer" means the State Treasurer of the State of Kansas or, if the functions and duties of the State Treasurer under the Bond Resolution shall be given by law to any other person or entity, such person or entity. "Subordinated Indebtedness" means Indebtedness that by the terms thereof is specifically junior and subordinate to the Parity Bonds and Parity Obligations with respect to payment of principal of, redemption premium, if any, and interest thereon out of the Gross Revenues. "Supplemental Bond Resolution" means any resolution supplemental or amendatory to the Bond Resolution adopted by the Authority pursuant to the Bond Resolution. "Supplemental Pledge Agreement" means any agreement supplemental or amendatory to the Pledge Agreement executed by the Authority and the Board pursuant to the terms of the Pledge Agreement. "Supplemental Security Agreement" means the Supplemental Security Agreement dated as of the Document Date between the University and the Authority, as amended from time to time, pursuant to which the University agrees to make certain payments with respect to the Bonds in the event that the Gross Revenues are not sufficient to pay the Current Expenses and Debt Service Requirements on the Bonds when due. "Surplus Account" means the Surplus Account for the Kansas State University Child Care Facility created in the Bond Resolution. "Swap Provider" shall mean any counterparty with whom the Authority 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 a Rating Agency, and which is obligated to make Swap Provider Payments under a Qualified Swap Agreement. "Swap Provider Payments" shall mean any payment (including Termination Payments) required to be made by or on behalf of a Swap Provider pursuant to a Qualified Swap Agreement. “Tax-Exempt Organization” means a nonprofit organization, organized under the laws of the United States of America or any state, that is described in Code § 501(c)(3) and is exempt from federal income taxes under Code § 501(a).

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"Term Bonds" means any Bonds designated as Term Bonds in the Bond Resolution No. 257 or in any Supplemental Bond Resolution. "Termination Payments" shall mean the amount payable by the Authority 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. "Trust Estate" means:

(a) All right, title and interest of the Authority in, to and under the Pledge Agreement and the Supplemental Security Agreement; provided that the pledge and assignment made by the Bond Resolution shall not impair or diminish the obligations of the Authority under the provisions of the Pledge Agreement or the Supplemental Security Agreement;

(b) All moneys and securities from time to time held under the terms of the Bond Resolution

(excluding funds held in or accruing to the Rebate Account), including, without limitation, bond proceeds and income from the temporary investment thereof and proceeds from insurance and condemnation awards, any and all other real or personal property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security for the Bonds by the Authority; and

(c) All right, title and interest of the Authority in, to and under any Qualified Swap Agreement.

"2009K Project" means the construction and equipping of the Child Care Facility to be located on the Manhattan campus of the University, substantially as described in the "Architectural Program for Kansas State University –Child Development Center dated September 2006. "University" means Kansas State University. "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. The method of computing the variable interest rate with respect to a Series of Bonds shall be specified in a Supplemental Resolution relating to such Series of Bonds or the Qualified Swap Agreement, if applicable. SUMMARY OF THE BOND RESOLUTION The following is a summary of certain provisions of the Bond Resolution. This summary does not purport to be complete, and reference is made to the full text of the Bond Resolution for a complete recital of its terms, as well as a complete recital of the defined terms used therein. Security for the Bonds; Limited Nature of Obligations The principal of, redemption premium, if any, and the interest on the Bonds shall be special limited obligations of the Authority payable solely and only from, and are secured as to the payment of principal of, redemption premium, if any, and interest on the Bonds by a pledge by the Authority of the Trust Estate in favor of the Owners of the Bonds, as provided in the Bond Resolution. The Series 2009K Bonds shall stand on a parity and are equally and ratably secured with respect to the payment of principal of, redemption premium, if any, and interest from the Trust Estate and in all other respects (other than any security provided by any Bond Insurance Policy) with any other Parity Bonds. The Parity Bonds shall stand on a parity and are equally and ratably secured with respect to the payment of principal of, redemption premium, if any, and interest from the Gross Revenues with the Parity Obligations. The covenants and agreements of the Board and the Authority contained in the Bond Resolution, the Pledge Agreement and in the

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Bonds shall be for the equal benefit, protection, and security of the legal Owners of any or all of the Parity Bonds, all of which Parity Bonds shall be of equal rank and without preference or priority of one Bond over any other Bond in the application of the funds pledged in the Bond Resolution to the payment of the principal of, redemption premium, if any, and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in the Bond Resolution. The principal of, redemption premium, if any, and the interest on the Bonds shall not be a debt or general obligation of the Authority, the Board, the University, the State or any municipal corporation or political subdivision thereof, and neither the Bonds, the interest thereon, nor any judgment thereon or with respect thereto, are payable in any manner from unlimited tax revenues of any kind or character. The principal of, redemption premium, if any, and interest on the Bonds shall not constitute an indebtedness or a pledge of the faith and credit of the Authority, the Board, the University, the State or any municipal corporation or political subdivision thereof, within the meaning of any constitutional or statutory limitation or restriction. The Authority has no taxing power. No provision, covenant or agreement contained in the Bond Resolution, the Pledge Agreement or the Bonds, or any obligation therein imposed upon the Authority, or the breach thereof, shall constitute or give rise to or impose upon the Authority a pecuniary liability or a charge upon its general credit. In making the agreements, provisions and covenants set forth in the Bond Resolution, the Authority has not obligated itself except with respect to the Pledge Agreement and the application of the Gross Revenues and receipts therefrom as provided above. Neither the officers, directors, agents or employees of the Authority nor any person executing the Bonds shall be liable personally on the Bonds by reason of the issuance thereof. Pledge of Trust Estate The Authority pledges the Trust Estate for the payment of the principal of, redemption premium, if any, and interest on the Series 2009K Bonds; which pledge shall be on a parity of lien with respect to the Trust Estate with the lien of and any additional Parity Bonds to be issued by the Authority. Authorization of Additional Bonds The principal amount of any Additional Bonds issued under the Bond Resolution may include an amount sufficient to pay the costs and expenses of issuance, any required additional funding of the Bond Reserve Account and such capitalized amounts as are permitted by the Act. Additional Bonds may be issued under the Bond Resolution at any time and from time to time, upon compliance with the conditions set for under this caption "Authorization of Additional Bonds," for any of the following purposes: (1) Completion Indebtedness; (2) any Additional Project;

(3) repaying and retiring all or a portion of any Series of Bonds at the time Outstanding, if such Bonds may be prepaid;

(4) obtaining funds for the refunding of all or a portion of any Series of Bonds at the time

Outstanding, regardless of whether such Bonds may be prepaid, including the payment of redemption premium, if any, thereon and interest due at the designated redemption date; or

(5) any other purpose permitted under the Act.

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Additional Bonds shall be substantially in the form and executed in the manner set forth in the Bond Resolution and shall be deposited with the Bond Registrar for authentication, but prior to or simultaneously with the authentication and delivery of such Additional Bonds by the Bond Registrar, there shall be filed with the Authority and the Bond Registrar for such Additional Bonds the following:

(1) An original executed counterpart of the Supplemental Bond Resolution adopted by the Authority: (i) authorizing the issuance of such Additional Bonds, fixing the amount and terms thereof and describing the purpose or purposes for which such Additional Bonds are being issued or describing the Bonds to be refunded, (ii) authorizing the Authority to enter into a Supplemental Pledge Agreement with the Board to provide for a pledge by the Board of Gross Revenues at least sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds then to be Outstanding (including the Additional Bonds to be issued) as the same become due, and (iii) for such other matters as are appropriate because of the issuance of the Additional Bonds proposed to be issued which, in the judgment of the Authority, is not to the prejudice of the Authority or the Owners of the Bonds previously issued;

(2) An original executed counterpart of the amendment or supplement to the Pledge

Agreement, if required;

(3) An opinion of Bond Counsel to the effect that the issuance of the Additional Bonds is permitted by the statutes of the State and that the Additional Bonds constitute valid and legally binding special obligations of the Authority, subject to such limitations and restrictions as shall be described therein;

(4) Evidence of compliance with the provisions of the Pledge Agreement relating to the

issuance of Additional Bonds;

(5) Request by the Secretary of Administration that the Authority issue Additional Bonds;

(6) In the case of Additional Bonds being issued to refund Outstanding Bonds, such additional documents as shall be reasonably required by the Bond Registrar to establish that provision has been duly made for the payment of all of the Bonds to be refunded in accordance with the provisions of the Bond Resolution;

(7) The written consent of the Board.

(8) If a Series of Bonds to be issued provide for Variable Rate Indebtedness, the Maximum Interest Rate for such Bonds, and the provisions, if any, as to the calculation or change of interest rates; if the Supplemental Resolution authorizing such Series of Bonds authorizes a Qualified Swap Agreement, identification of the Swap Provider and a certificate that such agreement meets the requirements of the definition thereof; and

(9) Such other certificates, statements, receipts and documents as the Authority shall

reasonably require for the delivery of such Additional Bonds. In addition to the foregoing, if the following conditions are met, such Additional Bonds shall be equally and ratably secured by the Bond Resolution with respect to the Trust Estate on a parity with the Series 2009K Bonds and any other Parity Bonds:

(1) The Board shall not be in default in the making of any payments at the time required to be made by it into the respective Funds and Accounts stated in the Bond Resolution and shall not be in default in any covenants or procedures established in the Pledge Agreement;

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(2) Compliance with the provisions of the Pledge Agreement described below under

"SUMMARY OF THE PLEDGE AGREEMENT – Restrictions on Incurrence of Additional Indebtedness"; and

(3) There shall be deposited in the Bond Reserve Account such additional sums as shall be

necessary to bring the Bond Reserve Account to the Bond Reserve Requirement simultaneously with the issuance of such Additional Bonds but only to the extent that the Bond Reserve Requirement is not met by an insurance policy, letter of credit, or surety bond issued by a Qualified Financial Institution guaranteeing payments into the Bond Reserve Account.

Except as provided in the immediately preceding paragraph, the Authority will not otherwise issue any obligations ratably secured and on a parity with the Parity Bonds with respect to the Trust Estate, but the Authority may issue Subordinated Indebtedness. The Authority acknowledges that the Board may issue Parity Obligations in accordance with the provisions of the Pledge Agreement that will be on a parity, with respect to the Gross Revenues, with the Parity Bonds and may also issue Subordinated Indebtedness in accordance with the provisions of the Pledge Agreement. Funds and Accounts There have been created and ordered to be established with the State Treasurer, the following separate Funds and Accounts:

(1) Revenue Fund for Kansas Development Finance Authority Revenue Bonds (Kansas Board of Regents - Kansas State University Child Care Facility Project)

(2) Bond Fund for Kansas Development Finance Authority Revenue Bonds (Kansas Board

of Regents - Kansas State University Child Care Facility Project). (3) Within the Bond Fund, the following separate accounts:

(A) Costs of Issuance Account Kansas Development Finance Authority Revenue

Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project).

(B) Project Account for Kansas Development Finance Authority Revenue Bonds,

Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project). (C) Principal and Interest Account for Kansas Development Finance Authority

Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project).

(D) Bond Reserve Account for Kansas Development Finance Authority Parity Revenue Bonds (Kansas Board of Regents - Kansas State University Child Care Facility Project).

(E) Surplus Account for Kansas Board of Regents - Kansas State University Child Care Facility Project.

There has been created and established in the name of the Authority the Rebate Account for Kansas

Development Finance Authority Revenue Bonds, Series 2009K (Kansas Board of Regents - Kansas State University Child Care Facility Project).

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The funds and accounts established pursuant to the Bond Resolution described in (1) through (3) above shall be maintained and administered by the State in the custody of the State Treasurer on behalf of the Board and the Authority solely for the purposes and in the manner as provided in the Bond Resolution. The Rebate Account shall be maintained and administered by the Authority in accordance with the provisions of the Bond Resolution. Project Account

The moneys in the Project Account shall be disbursed for the payment of Project Costs in accordance with the provisions of the Pledge Agreement. Expenditures from the Project Account shall not exceed $6,000,000 or such other amount as may be authorized by enactment of the State Legislature. The completion of the 2009K Project and payment of all costs and expenses incident thereto shall be evidenced by the filing with the Authority by the Board of the certificate of completion required by the Pledge Agreement. As soon thereafter as practicable, any balance remaining in the Project Account (other than amounts retained by the Board referred to in said certificate and amounts required to be deposited into the Rebate Account), without further authorization, shall be deposited in the Bond Reserve Account, to the extent the Bond Reserve Account is not equal to the Bond Reserve Requirement, and thereafter deposited in the Principal and Interest Account with respect to the Series 2009K Bonds. Principal and Interest Account Except as provided in the two immediately succeeding paragraphs, moneys in each Principal and Interest Account shall be expended solely for the payment of the principal of, redemption premium, if any, and interest on the related Series of Bonds as the same mature and become due or upon the redemption thereof prior to maturity and to provide sufficient funds to pay the fees of the Bond Registrar and Paying Agent when the same become due. The Authority authorizes the withdrawal of sufficient funds from the Principal and Interest Account for the purposes set forth in this paragraph not later than the Business Day preceding the Payment Date and to make said funds so withdrawn available to the Paying Agent for such purposes. The Authority, upon written direction of the Board, shall use any moneys in a Principal and Interest Account to redeem all or part of the related Series of Bonds Outstanding, and to pay interest accrued thereon prior to such redemption, in accordance with and to the extent permitted by the Bond Resolution so long as the Board is not in default with respect to any payments under the Pledge Agreement and to the extent said moneys are in excess of the amount required for payment of such Series of Bonds theretofore matured or called for redemption and any unpaid past due interest in all cases when such Series of Bonds have not been presented for payment. The Board may cause such excess money in a Principal and Interest Account or such part thereof or other moneys of the Board, as the Board may direct, to be applied by the Authority for the purchase of the related Series of Bonds in the open market for the purpose of cancellation at prices not exceeding the principal amount thereof plus accrued interest thereon to the date of delivery for cancellation. Any amount remaining in a Principal and Interest Account after the payments on the related Series of Bonds authorized by the first paragraph above under this caption "Principal and Interest Account" shall have been paid in full or provision made therefor in accordance with the provisions of the Bond Resolution, shall be paid to the Board for deposit into the Surplus Account. Costs of Issuance Account Moneys held in a Costs of Issuance Account shall be used to pay Costs of Issuance with respect to the related Series of Bonds. Except as otherwise provided in a Supplemental Indenture, any moneys remaining in a Costs of Issuance Account thirty days prior to the initial Payment Date on the related Series of Bonds shall be transferred to the Principal and Interest Account with respect to such Series of Bonds.

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Bond Reserve Account Pursuant to the Bond Resolution, an amount necessary to cause the amount on deposit in the Bond Reserve Account to equal the Bond Reserve Requirement with respect to the Bonds will be deposited in the Bond Reserve Account from proceeds of the Series 2009K Bonds. Except as otherwise provided in the Bond Resolution, moneys in the Bond Reserve Account shall be disbursed and expended by the State Treasurer solely for the payment of the principal of and redemption premium, if any, and interest on any Parity Bonds if sufficient moneys therefore are not available in the applicable Principal and Interest Account. In the event funds credited to and deposited in a Principal and Interest Account are insufficient to provide for payment of the principal of, redemption premium, if any, and interest on the related Series of Bonds promptly when due, the Authority shall cause the State Treasurer to withdraw from the Bond Reserve Account and transfer to such Principal and Interest Account such sum as shall be necessary to provide for payment of such principal, redemption premium, if any, and interest, which shall be applied in accordance with the provisions of the Bond Resolution. Moneys in the Bond Reserve Account shall also be used to pay the last Parity Bonds becoming due unless such Parity Bonds and all interest thereon be otherwise paid, and thereafter any remaining balance in the Bond Reserve Account shall be paid to the Board. In the event the balance in the Bond Reserve Account is reduced to an amount less than the Bond Reserve Requirement as a result of withdrawals for any purpose authorized by the Bond Resolution, the Authority shall immediately notify the Board of such deficiency, and instruct the Board to make up such deficiency, subject to the provisions of the Pledge Agreement, by making monthly payments, for a period not to exceed 12 months, commencing not later than thirty (30) days from the date of any such withdrawal, until the Bond Reserve Account again aggregates the Bond Reserve Requirement. Except as otherwise provided in the Bond Resolution, the Bond Reserve Account shall at all times be maintained in an amount not less than the Bond Reserve Requirement. The Bond Reserve Requirement may be satisfied by deposits in cash, Investment Obligations, or an insurance policy, letter of credit or surety bond issued by a Qualified Financial Institution guaranteeing payments into the Bond Reserve Account in the amount of the Bond Reserve Requirement. The Authority shall determine the Value of cash and Investment Obligations in the Bond Reserve Account on an annual basis, but in no event more than 90 days after the last day of each Fiscal Year and at the time of any withdrawal from the Bond Reserve Account and at such other times as the Authority deems appropriate. If on any such valuation date the Value of cash and Investment Obligations on deposit in the Bond Reserve Account is less than 90% of the Bond Reserve Requirement, the Authority shall immediately notify the Board of such deficiency, and instruct the Board to make up such deficiency, subject to the provisions of the Pledge Agreement, within six months of such valuation date, by making payments into the Bond Reserve Account so that said account again aggregates the Bond Reserve Requirement. If at any time of valuation, the Value of cash and Investment Obligations on deposit in the Bond Reserve Account is in excess of the Bond Reserve Requirement, the amount of such excess may be transferred to the Principal and Interest Accounts in proportion to the Debt Service Requirements on the Parity Bonds for the current Fiscal Year. Rebate Account There shall be deposited in the Rebate Account such amounts as are required to be deposited therein pursuant to the Federal Tax Certificate. All money at any time deposited in the Rebate Account shall be held in trust, to the extent required to pay rebatable arbitrage to the United States. No Owner of any Bonds shall have any rights in or claim to such money. Computations of rebatable arbitrage shall be performed by or on behalf of the Authority in accordance with the Federal Tax Certificate. Pursuant to the Federal Tax Certificate, the Authority shall remit rebate installments and the final rebate payments to the United States. Any moneys remaining in the Rebate Account after redemption and payment of all of the Bonds and payment and satisfaction of any rebatable arbitrage, or provision made therefor, shall be withdrawn and credited to the Revenue Fund.

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Revenue Fund The Revenue Fund will be held and administered as provided in the Bond Resolution and in the Pledge Agreement. From and after the delivery of the Series 2009K Bonds, all Gross Revenues, funds derived pursuant to the Supplemental Security Agreement and Swap Provider Payments shall be promptly deposited in the Revenue Fund. All money in the Revenue Fund shall be held by the State Treasurer in trust and applied as provided in the Bond Resolution and in the Pledge Agreement and, pending such application, shall be subject to a prior lien and charge in favor of the Owners of the Bonds and for the further security of the Owners until paid out or withdrawn as provided therein. Payments from the Revenue Fund shall be made in accordance with the provisions of the Bond Resolution and the Pledge Agreement. Application of Moneys in Funds and Accounts The Authority covenants that from and after the delivery of the Series 2009K Bonds and continuing so long as any of the Bonds shall remain Outstanding and unpaid, it will cause the State Treasurer to administer and allocate the moneys then held in the Revenue Fund to the credit of the following Funds and Accounts, or the application of payments, at the times, in the order (other than as set forth in paragraph (c) below) and in the amounts, as follows: (a) Principal and Interest Account. The Authority shall cause the transfer to the credit of the Principal and Interest Account, no later than five (5) Business Days prior to each Interest Payment Date, such amount (or the entire sum withdrawn from the Revenue Fund, if less than the required amount) as may be required to make the amount then held for the credit of the Principal and Interest Account equal to the amount of interest to become due and payable on the Series 2009K Bonds on such Payment Date and (ii) the an amount for the payment of fees of the Bond Registrar and Paying Agent associated with such payments of interest on such Payment Date. Such deposits to a Principal and Interest Account may be reduced by any investment earnings to be credited to such account prior to such Payment Date. (b) Principal and Interest Accounts for Parity Indebtedness. The Authority shall cause the transfer to the credit of the principal and interest accounts for Parity Bonds on a proportionate and parity basis as transfers to the Principal and Interest Account in the amounts set forth in the Supplemental Bond Resolutions that authorize such Parity Bonds. The Board may request transfers from the Revenue Fund to debt service accounts for Parity Obligations on a proportionate and parity basis as transfers to the principal and interest accounts for Parity Bonds. (c) Bond Reserve Account. After all payments and credits required to be made under the provisions of paragraphs (a) and (b) above have been made, moneys in the Revenue Fund shall be transferred to Bond Reserve Account, if the amount in such account is less than the Bond Reserve Requirement, in such amounts as are required by the provisions described under the heading "Bond Reserve Account" above. (d) Principal and Interest Accounts for Subordinate Indebtedness. After all payments and credits required under the provisions of paragraphs (a), (b) and (c) above have been made, moneys remaining in the Revenue Fund shall be transferred to any principal and interest accounts for Subordinate Indebtedness in the amounts set forth in the Supplemental Bond Resolutions that authorize such Subordinated Indebtedness. (e) Payment of Current Expenses. Pursuant to the Pledge Agreement, the Board may pay Current Expenses from deposits of money in the Revenue Fund or may provide for payment of Current Expenses from other funds of the Board or the University. No moneys in the Revenue Fund may be used to pay Current Expenses unless the transfers required in paragraphs (a), (b),(c) and (d) have been made, if an Event of Default has occurred and is continuing, or the amount in the Bond Reserve Account is less than the Bond Reserve Requirement. No moneys shall be used to pay Current Expenses until such vouchers, supporting documents and other papers as shall be required by the State Director of Accounts and Reports and the State Treasurer pursuant to applicable law, regulations and procedures pertaining to the payment of such Current Expenses have been filed by the Board with the State Director of Accounts and Reports.

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(f) Surplus Account. Concurrent with each Payment Date, after all payments and credits required

under the provisions of paragraphs (a) through (e) above have been made, all moneys remaining in the Revenue Fund shall be transferred to the Surplus Account. Moneys in the Surplus Account may be expended and used for the following purposes, as determined by the Board:

(1) Paying the costs of completing the 2009K Project if there are insufficient moneys in the Project Account for such purpose;

(2) Paying the cost of the operation, maintenance and repair of the Child Care Facility to

the extent that other funds are not available for such purposes; (3) Paying the cost of any Additional Project (including long-range planning and

architectural and/or engineering costs); (4) Preventing default in, anticipating payments into or increasing the amounts in Funds

and Accounts referred to in paragraphs (a) through (d) above, or any one of them, or establishing or increasing the amount of the Bond Reserve Account or of any principal and interest account created for the payment of any Additional Bonds;

(5) Calling, redeeming and paying prior to maturity, or, purchasing in the open market at

the best price obtainable, the Parity Bonds or Parity Obligations; (6) Making transfers to a Rebate Account; (7) Making payments on other Bonds or Additional Obligations; (8) Paying the fees and expenses of the Board to the Authority (other than Debt Service

Requirements) and any fees or expenses of the Bond Registrar and Paying Agent not paid from the Principal and Interest Account;

(9) Making Termination Payments; or (10) Making any other lawful transfer.

Deficiency of Payments into Funds and Accounts If at any time the moneys in the Principal and Interest Account, the Bond Reserve Account and the Surplus Account are not sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds as and when the same become due, then moneys in the Revenue Fund shall be used by the Authority and the Board to prevent any default in the payment of the principal of, redemption premium, if any, and interest on the Bonds. Investment of Moneys Except as otherwise provided under this caption "Investment of Moneys," moneys held for the credit of the Funds and Accounts created or referred to in the Bond Resolution shall, pursuant to the written approval of the chief financial officer of the University be invested and reinvested by the Authority in Investment Obligations which shall mature, or which shall be subject to redemption by the owner thereof at the option of such owner, not later than the dates when the moneys held for the credit of said Funds or Accounts will be required for the purposes intended; provided, however, that such moneys shall not be invested in such manner as will violate the provisions of the Bond Resolution.

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Obligations so purchased as an investment of money in any such Fund or Account shall be deemed at all times to be a part of such Fund or Account. Investment earnings on all Funds and Accounts (except the Project Account, the Bond Reserve Account, the Costs of Issuance Account and amounts required to be deposited into the Rebate Account in accordance with the Federal Tax Certificate) shall be credited to such Fund or Account, except required deposits to any rebate account established pursuant to a Supplemental Bond Resolution, and any loss resulting from any such investment shall be charged to such Fund or Account. Investment earnings on investments held in the Bond Reserve Account (except required deposits to the Rebate Account) shall be retained in the Bond Reserve Account until the Bond Reserve Account shall equal the Bond Reserve Requirement, and then shall be transferred to the Principal and Interest Accounts on a pro rata basis based on the outstanding principal amount of each Series of Bonds. Investment earnings on investments held in the Costs of Issuance Account and the Project Account (except required deposits to the Rebate Account) shall be transferred to the applicable Principal and Interest Account. Whenever the cash balance in any Fund or Account is insufficient for the purposes of such Fund or Account, a sufficient amount of Investment Obligations therein shall be sold and reduced to cash. In determining the balance in any Fund or Account, other than the Bond Reserve Account, the Authority shall determine the Value of Investment Obligations in such Fund or Account as frequently as deemed necessary by the Authority or the Bond Insurer, but not less frequently than annually nor more frequently than monthly. Neither the State Treasurer, the Authority, the Board, the Pooled Money Investment Board nor any member, employee or officer thereof shall be liable or responsible for any loss resulting from any such investment. Money held for the credit of the Funds and Accounts created or referred to in the Bond Resolution may be invested in conformity with any applicable statute through the Pooled Money Investment Board or other instrumentality of the State, subject to the provisions of the Bond Resolution to the extent such provisions are not in conflict with any such statute. Tax Covenants The Authority covenants and agrees that to the extent within its power and control, (1) it will comply with all applicable provisions of the Code, including §§103 and 141 through 150, necessary to maintain the exclusion from gross income for federal income tax purposes of the interest on the Series 2009K-1 Bonds and (2) it will not use or permit the use of any proceeds of Series 2009K-1 Bonds or any other funds of the Authority nor take or permit any other action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from federal gross income of the interest on the Series 2009K-1 Bonds. The Authority will, in addition, adopt such other ordinances or resolutions and take such other actions as may be necessary to comply with the Code and with all other applicable future laws, regulations, published rulings and judicial decisions, in order to ensure that the interest on the Series 2009K-1 Bonds will remain excluded from federal gross income, to the extent any such actions can be taken by the Authority. The Authority covenants and agrees that to the extent within its power and control, (1) it will comply with all requirements of Code §148 to the extent applicable to the Series 2009K-1 Bonds, (2) it will use the proceeds of the Series 2009K-1 Bonds as soon as practicable and with all reasonable dispatch for the purposes for which the Series 2009K-1 Bonds are issued, and (3) it will not invest or directly or indirectly use or permit the use of any proceeds of the Series 2009K-1 Bonds or any other funds of the Authority in any manner, or take or omit to take any action, that would cause the Series 2009K-1 Bonds to be "arbitrage bonds" within the meaning of Code §148(a). The Authority covenants and agrees that to the extent within its power and control, it will not use any portion of the proceeds of the Series 2009K-1 Bonds, including any investment earnings on such proceeds, directly or indirectly, in a manner that would cause any Series K-1 Bond to be a "private activity bond" within the meaning of Code §141(a) of the Code, other than a "qualified 501(c)(3) bond" within the meaning of Section 145 of the Code. The Authority covenants and agrees that to the extent within its power and control, it will pay or otherwise provide for the payment from time to time of all amounts required to be rebated to the United States

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pursuant to Code §148(f) and any Treasury Regulations applicable to the Series 2009K-1 Bonds from time to time. The Authority specifically covenants to pay or cause to be paid to the United States, the required amounts of rebatable arbitrage at the times and in the amounts as determined by the Federal Tax Certificate. Notwithstanding anything to the contrary contained in the Bond Resolution, the Federal Tax Certificate may be amended or replaced if, in the opinion of Bond Counsel such amendment or replacement will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. This covenant shall survive payment in full or defeasance of the Series 2009K-1 Bonds. The Authority covenants and agrees that to the extent within its power and control, it will not permit, so long as the Series 2009K Bonds remain Outstanding, the Board or the University to enter into or renew a lease of the 2009K Project (or any part thereof) with any tenant that is not a Qualified User without first obtaining and delivering to the Authority an opinion of Bond Counsel addressed to the Board and the Authority that such lease will not adversely affect the tax-exempt status of the interest on the Series 2009K-1 Bonds. The provisions of this paragraph (e) shall not apply to the portions of the Project used by members of the general public who occupy the Project on a short-term basis in the ordinary course of the Board's business and portions used by a lessee under a short-term lease which has a term or one year or less, taking into account all options to renew and reasonably anticipated renewals. The Authority covenants and agrees that to the extent within its power and control, it will not permit, so long as the Series 2009K-1 Bonds remain Outstanding, the Board or the University to use or cause or allow any portion of the proceeds of the Series 2009K-1 Bonds to be used or applied to provide any airplane, skybox or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises, as such terms are used in Code § 147(e). The Authority covenants and agrees that to the extent within its power and control, the Child Care Facility will be owned for federal income tax purposes by a Qualified User and will not, to the extent of more than three percent (3%) thereof, be used (i) in the trade or business of any person other than a Qualified User, or (ii) in any unrelated trade or business of a Tax-Exempt Organization. The Authority covenants and agrees that to the extent within its power and control, it will not permit, more than 2% of the original proceeds of the Series 2009K-1 Bonds to be expended for Costs of Issuance, in compliance with Section 147(g) of the Code. In connection with the issuance of the Series 2009K-1 Bonds, the Authority will hold a public hearing as required under Code § 147(f) regarding the proposed issuance of the Series 2009K Bonds, after published notice, and will obtain the approval of Governor of the state of Kansas for the issuance of the Series 2009K Bonds as required by Code § 147(f). The Authority covenants and agrees that to it will submit or cause to be submitted to the Internal Revenue Service in accordance with Code § 149, a completed Internal Revenue Service Form 8038 or other similar form provided by the Internal Revenue Service with respect to the Series 2009K-1 Bonds. Enforcement of Rights Under Pledge Agreement and Supplemental Security Agreement The Authority covenants and agrees that it shall enforce all of its rights and all of the obligations of the Board (at the expense of the Board) under the Pledge Agreement to the extent necessary to protect the rights of the Owners under the Bond Resolution with respect to the pledge and assignment of the Gross Revenues and receipts coming due under the Pledge Agreement. The Authority covenants and agrees that it shall enforce all of its rights and all of the obligations of the University (at the expense of the University) under the Supplemental Security Agreement to the extent necessary to protect the rights of the Owners of the Bond Resolution with respect to the pledge and assignment of the receipts coming due under the Supplemental Security Agreement.

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Notice of Default and Acceleration of Maturity in Event of Default If an Event of Default shall have occurred and be continuing, the Authority shall request the Bond Registrar to promptly notify the Bond Insurer, if any, and the Owners of such default, and the Authority may, and shall upon the written request of the Owners of not less than 25% in aggregate principal amount of Parity Bonds then Outstanding by notice in writing delivered to the Authority and the Board, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. If, at any time after such declaration, but before the Bonds shall have matured by their terms, all overdue installments of principal and interest on the Bonds, together with the reasonable and proper expenses of the Bond Registrar and Paying Agent, and all other sums then payable by the Authority under the Bond Resolution shall either be paid or provision shall be made for such payment, then and in every such case the Authority shall, but only with the approval of the Owners of not less than 50% in aggregate principal amount of the Bonds Outstanding, rescind such declaration and annul such default in its entirety. In case of any rescission, then and in every such case the Authority, the Board and the Owners shall be restored to their former position and rights under the Bond Resolution respectively, but no such rescission shall extend to any subsequent Event of Default or impair any right consequent thereon. Remedies Upon the happening and continuance of any Event of Default, then and in every such case, any Owner may proceed, subject to the provisions of the Bond Resolution, to protect and enforce the rights of the Owners by a suit, action or special proceeding in equity, or at law, either for the specific performance of any covenant or agreement contained in the Bond Resolution, or in aid or execution of any power granted in the Bond Resolution, or for the enforcement of any proper legal or equitable remedy as such Owner shall deem most effectual to protect and enforce such rights. Anything in the Bond Resolution to the contrary notwithstanding, if at any time the moneys in the Principal and Interest Accounts shall not be sufficient to pay the principal of and interest on the Parity Bonds as the same shall become due and payable, such moneys, together with any moneys then available or thereafter becoming available for such purpose, whether through the exercise of the remedies provided for in the Bond Resolution or otherwise, shall be applied as follows: (a) If the principal of all the Bonds shall not have become due and payable, all such moneys shall be applied:

first: to the payment to the Persons entitled thereto of all installments of interest then due and payable on Parity Bonds above in the order in which such installments became due and payable, and, if the amount available shall not be sufficient to pay in full any particular installments, then to the payment, ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Parity Bonds; and

second: to the payment to the Persons entitled thereto of the unpaid principal of any of the Parity Bonds which shall have become due and payable (other than Parity Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Resolution), in the order of their due dates, with interest on the principal amount of such Parity Bonds at the respective rates specified therein from the respective dates upon which such Parity Bonds became due and payable, and, if the amount available shall not be sufficient to pay in full the principal of the Parity Bonds due and payable on any particular date, together with such interest, then to the payment first of such interest, ratably, according to the amount of such interest due on such date, and then to the payment of such

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principal, ratably, according to the amount of such principal due on such date, to the Persons entitled thereto without any discrimination or preference.

If, after application as described in the first and second paragraphs of this paragraph (a), any moneys remain, the same shall be applied:

third: to the payment to the Persons entitled thereto of all installments of interest then due and payable on Bonds constituting Subordinated Indebtedness above in the order in which such installments became due and payable, and, if the amount available shall not be sufficient to pay in full any particular installments, then to the payment, ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds constituting Subordinated Indebtedness;

fourth: to the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds constituting Subordinated Indebtedness which shall have become due and payable (other than Bonds constituting Subordinated Indebtedness called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Resolution), in the order of their due dates, with interest on the principal amount of such Bonds constituting Subordinated Indebtedness at the respective rates specified therein from the respective dates upon which such Bonds constituting Subordinated Indebtedness became due and payable, and, if the amount available shall not be sufficient to pay in full the principal of the Bonds constituting Subordinated Indebtedness due and payable on any particular date, together with such interest, then to the payment first of such interest, ratably, according to the amount of such interest due on such date, and then to the payment of such principal, ratably, according to the amount of such principal due on such date, to the Persons entitled thereto without any discrimination or preference; and

fifth: to the payment of the interest on and the principal of the Parity Bonds, to the purchase and retirement of Parity Bonds and to the redemption of Parity Bonds, then to the payment of interest on and the principal of Bonds constituting Subordinated Indebtedness, to the purchasing and retirement of Bonds constituting Subordinated Indebtedness and the redemption of Bonds constituting Subordinated Indebtedness, all in accordance with the provisions of the Bond Resolution.

(b) If the principal of all the Bonds shall have become due and payable, all such moneys shall be applied:

first: to the payment to the Persons entitled thereto of all installments of interest due and payable on or prior to maturity of Parity Bonds, if any, in the order in which such installments became due and payable and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Parity Bonds, and then to the payment of any interest due and payable after maturity on the Parity Bonds, ratably, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Parity Bonds; and

second: to the payment of the principal of the Parity Bonds, ratably, to the Persons entitled thereto, without preference or priority of any Parity Bond over any other Parity Bond.

If, after application as described in the first and second paragraphs of this paragraph (b), any moneys remain, the same shall be applied:

third: to the payment to the Persons entitled thereto of all installments of interest due and payable on or prior to maturity of Bonds constituting Subordinated Indebtedness, if any, in the order in which such installments became due and payable and, if the amount available shall not be sufficient to

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pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds constituting Subordinated Indebtedness, and then to the payment of any interest due and payable after maturity on the Bonds constituting Subordinated Indebtedness, ratably, to the Persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds constituting Subordinated Indebtedness; and

fourth: to the payment of the principal of the Bonds constituting Subordinated Indebtedness, ratably, to the Persons entitled thereto, without preference or priority of any Parity Bond over any other Parity Bond.

Whenever moneys are to be applied pursuant to the provisions of this section, such moneys shall be applied at such times, and from time to time, as the Authority in its sole discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future; the deposit of such moneys with the Paying Agent in trust for the proper purpose shall constitute proper application by the Authority; and the Authority shall incur no liability whatsoever to any Owner or to any other Persons for any delay in applying any such moneys, so long as the Authority acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of the Bond Resolution as may be applicable at the time of such application. Whenever the Authority shall exercise such discretion in applying such moneys, it shall fix the date (which shall be an Interest Payment Date unless the Authority 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 Authority shall give such notice as it may deem appropriate 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 surrendered to the Paying Agent for appropriate endorsement, or for cancellation if fully paid. In case any proceeding taken by any Owner on account of any default shall have been discontinued or abandoned for any reason, then and in every such case the Authority and the Owners shall be restored to their former positions and rights under the Bond Resolution, respectively, and all rights and remedies of the Owners shall continue as though no such proceedings had been taken. No Owner of any of the Bonds shall have any right in any manner whatever to affect, disturb or prejudice the security of the Bond Resolution or to enforce any right under the Bond Resolution, except in the manner provided in the Bond Resolution. All proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners. No remedy conferred in the Bond Resolution on the Owners is intended to be exclusive of any other remedy or remedies, and each and every remedy conferred shall be cumulative and shall be in addition to every other remedy given under the Bond Resolution and under the Act or now or hereafter existing at law or in equity or by statute. No delay or omission of any Owner to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy given by the Bond Resolution to the Owners may be exercised from time to time and as often as may be deemed expedient.

Payment of Authority Swap Payments shall be paid ratably with payment of installments of interest pursuant to paragraphs (a) and (b) above (provided there has not been an uncured payment default by the Swap Provider).

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Exercise of Remedies If an Event of Default shall have occurred and be continuing, the Authority shall pursue and exercise any available remedy at law or in equity by suit, action, mandamus or other proceeding, or exercise such one or more of the rights and powers conferred by the Bond Resolution as the Authority, being advised by counsel, shall deem most expedient in the interests of the Owners to enforce the payment of the principal of and interest on the Bonds then Outstanding. All rights of action under the Bond Resolution or under any of the Bonds may be enforced by the Bond Registrar without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the Authority shall be brought in its name without necessity of joining as plaintiffs or defendants any Owners of the Bonds, and any recovery of judgment shall be for the equal benefit of all the Owners of the Outstanding Bonds. Limitation on Exercise of Remedies by Owners No Owner of any Bond shall have any right (other than granted as described under the heading "Rights of Owners to Direct Proceedings" below) to institute any suit, action or proceeding in equity or at law for the enforcement of the Bond Resolution or for the execution of any trust under the Bond Resolultion or for the appointment of a receiver or any other remedy under the Bond Resolution, unless (a) an Event of Default shall have occurred, (b) the Owners of 25% in aggregate principal amount of Bonds then Outstanding shall have made written request to the Authority, shall have offered it reasonable opportunity either to proceed to exercise the powers granted in the Bond Resolution or to institute such action, suit or proceeding in its own name, and (c) the Authority shall thereafter fail or refuse to exercise the powers granted in the Bond Resolution or to institute such action, suit or proceeding in its own name; and such actions or events are declared in every case, at the option of the Authority, to be conditions precedent to the execution of the powers and trusts of the Bond Resolution, and to any action or cause of action for the enforcement of the Bond Resolution, or for the appointment of a receiver or for any other remedy under the Bond Resolution, it being understood and intended that no one or more Owners of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the Bond Resolution by its, his or their action or to enforce any right under the Bond Resolution except in the manner provided in the Bond Resolution, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner provided in the Bond Resolution and for the equal benefit of the Owners of all Bonds then Outstanding. Notwithstanding anything in this paragraph to the contrary, no suit, action or proceeding shall be undertaken with respect to Parity Bonds unless the Owners of 25% in aggregate principal amount of Parity Bonds then outstanding shall act as described in clause (b) above. Nothing in the Bond Resolution contained shall, however, affect or impair the right of any Owner to payment of the principal of, redemption premium, if any, and interest on any Bond at and after the maturity thereof; or the obligation of the Authority to pay the principal of, redemption premium, if any, and interest on each of the Bonds issued under the Bond Resolution to the respective Owners thereof at the time, place, from the source and in the manner expressed in the Bond Resolution and the Bonds. Right of Owners to Direct Proceedings Anything in the Bond Resolution to the contrary notwithstanding, the Owners of 50% in aggregate principal amount of Bonds then Outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Bond Registrar, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Bond Resolution, or for the appointment of a receiver or any other proceedings under the Bond Resolution; provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Bond Resolution. Control of Remedies Upon an Event of Default and Event of Insolvency Anything in the Bond Resolution to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as defined in the Bond Resolution, the Bond Insurer, if any, shall be entitled to control and

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direct the enforcement of all rights and remedies granted to the Owners, including, without limitation: (a) the right to accelerate the principal of the Bonds so insured as described in the Bond Resolution and (b) the right to annul any declaration of acceleration. The Bond Insurer, if any, shall also be entitled to approve all waivers of Events of Default. Any reorganization or liquidation plan with respect to the Authority must be acceptable to the Bond Insurer, if any. In the event of any reorganization or liquidation, the Bond Insurer, if any, shall have the right to vote on behalf of all Owners who hold the Bonds insured by such Bond Insurer, absent a default by such Bond Insurer under the applicable Bond Insurance Policy insuring such Bonds. Supplemental Bond Resolutions Not Requiring Consent of Owners The Authority may from time to time, without the consent of or notice to any of the Owners, adopt such Supplemental Bond Resolution or Supplemental Bond Resolutions as shall not be inconsistent with the terms and provisions of the Bond Resolution, for any one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in the Bond Resolution or to make any other change not prejudicial to the Owners; (b) To grant to or confer upon the Bond Registrar for the benefit of the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners; (c) To more precisely identify the 2009K Project or any Additional Project or to add additional property thereto; (d) To subject to the Bond Resolution additional revenues, properties or collateral; and (e) To issue Additional Bonds as provided in the Bond Resolution. Supplemental Bond Resolutions Requiring Consent of Owners Exclusive of Supplemental Bond Resolutions described above under the heading "Supplemental Bond Resolution Not Requiring Consent of Owner," and subject to the terms and provisions contained in the Bond Resolution, and not otherwise, the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained in the Bond Resolution to the contrary notwithstanding, to consent to and approve the adoption by the Authority of such other Supplemental Bond Resolution or Supplemental Bond Resolutions as shall be deemed necessary and desirable by the Authority for the purpose of modifying, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Bond Resolution or in any Supplemental Bond Resolution; provided, however, that nothing in this paragraph contained shall permit or be construed as permitting (1) an extension of the maturity of the principal of or the interest on any Bond issued under the Bond Resolution, or (2) a reduction in the principal amount of any Bond or the rate of interest thereon, or (3) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (4) a reduction in the aggregate principal amount of Outstanding Bonds of which the Owners of 100% of the Outstanding Bonds are required for consent to any such Supplemental Bond Resolution. Any provision of the Bond Resolution may be amended with the written consent of the Owners of 100% in aggregate principal amount of Bonds Outstanding. Board's Consent to Supplemental Bond Resolutions Anything in the Bond Resolution to the contrary notwithstanding, a Supplemental Bond Resolution which affects any rights of the Board shall not become effective unless and until the Board shall have consented in writing to the execution and delivery of such Supplemental Bond Resolution.

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Satisfaction and Discharge of the Bond Resolution When the principal of, redemption premium, if any, and interest on all the Bonds shall have been paid in accordance with their terms, or provision has been made for such payment as provided in the Bond Resolution, and provision shall also be made for paying all other sums payable under the Bond Resolution, including the fees and expenses of the Bond Registrar and Paying Agent to the date of retirement of the Bonds and any rebatable arbitrage to the United States as required by the Bond Resolution, then the right, title and interest of the Owners under the Bond Resolution shall thereupon cease, determine and be void, and thereupon the Authority shall cancel, discharge and release the covenants of the Bond Resolution and shall execute, acknowledge and deliver such instruments of satisfaction and discharge or release as shall be requisite to evidence such release and the satisfaction and discharge and shall assign and deliver to the Board any property at the time subject to the Bond Resolution which may then be in its possession, except funds or securities in which such funds are invested and held by the Authority for the payment of the principal of, redemption premium, if any, and interest on the Bonds or held in the Rebate Account for payment of rebatable arbitrage to the United States. Bonds Deemed to be Paid Bonds shall be deemed to be paid within the meaning of the Bond Resolution when payment of the principal of, redemption premium, if any, on such Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in the Bond Resolution, or otherwise), either (1) shall have been made or caused to be made in accordance with the terms of the Bond Resolution, or (2) shall have been provided for by depositing with the Paying Agent, or a bank located in the State of Kansas having full trust powers, or the State Treasurer at or prior to the maturity or redemption date of said Bonds, in trust for and irrevocably set aside exclusively for such payment, Defeasance Obligations insuring the availability of sufficient moneys without reinvestment to make such payment. At such time as a Bond shall be deemed to be paid under the Bond Resolution, as aforesaid, it shall no longer be secured by or entitled to the benefits of the Bond Resolution, except for the purposes of any such payment from such Defeasance Obligations. Notwithstanding the foregoing, in the case of Bonds which by their terms may be redeemed prior to the stated maturities thereof, no deposit under clause (2) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid until, as to all such Bonds which are to be redeemed prior to their respective stated maturities, proper notice of such redemption shall have been given in accordance with the Bond Resolution, or irrevocable instructions shall have been given to the Bond Registrar and Paying Agent to give such notice. Notwithstanding any provision of the Bond Resolution which may be contrary to the provisions of this section, all Defeasance Obligations set aside and held in trust pursuant to the provisions of this section for the payment of Bonds (including redemption premium thereon, if any) and interest thereon shall be applied to and used solely for the payment of the particular Bonds (including redemption premium thereon, if any) and interest thereon with respect to which such Defeasance Obligations have been so set aside in trust. SUMMARY OF THE PLEDGE OF REVENUES AGREEMENT The following is a summary of certain provisions of the Pledge Agreement. This summary does not purport to be complete, and reference is made to the full text of the Pledge Agreement for a complete recital of its terms, as well as a complete recital of the defined terms used therein. Pledge of Gross Revenues The Board pledges the Gross Revenues and not any other fund or source, to the Authority, as security for the payment of the Debt Service Requirements on the Bonds and certain fees, expenses and deposits of the Authority relating to the Bonds as described in the Pledge Agreement and the Bond Resolution, including, but not limited to, the obligation of the Authority to maintain the Bond Reserve Account in an amount equal to the Bond

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Reserve Requirement, specifically including the obligation of the Authority to provide reimbursement for any advances under any surety bond issued for such Bond Reserve Account. The pledge of the Gross Revenues with respect to the Series 2009K Bonds shall be on a parity with (i) the lien with respect to the Trust Estate with any Additional Bonds issued under the Bond Resolution that are Parity Bonds (ii) the lien with respect to Parity Obligations. By this pledge the Board acknowledges that the Authority intends to pledge its rights under the Pledge Agreement to the Owners of the Bonds. Application of Moneys in the Project Account Moneys in the Project Account shall be used by the Board for the sole purpose of paying the Project Costs in accordance with the provisions of the Act. The Board agrees to cause the 2009K Project to be diligently and continuously prosecuted and to be completed with reasonable dispatch, and to provide, from University funds if required, all moneys necessary to complete the 2009K Project substantially in accordance with the Plans and Specifications for the 2009K Project. In the event the moneys on deposit in the Project Account are at any time insufficient to pay for the Project Costs, are at any time insufficient to pay for the completion of the 2009K Project or any Additional Projects, the Board agrees to pay the amount of such deficiency, from University funds, subject to appropriation by the Legislature of the State. The Authority shall cause the Board and the University to disburse moneys on deposit in the Project Account from time to time to pay, or as reimbursement for payment made for, Project Costs, after receipt of documentation prepared and processed in accordance with procedures established by the State for payment of costs of State projects, for which payment is being requested. Any commitment of University funds necessary to complete the 2009K Project or any Additional Projects shall be subject to the Board attaining necessary State approval for expenditure of such funds. Rate Covenant The Board covenants and agrees that it shall establish, revise, charge and collect rates, fees and charges for services rendered at the Child Care Facility in amounts sufficient to produce Gross Revenues that maintain a Debt Service Coverage Ratio of not less than 1.75, and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution. Annual Budget The Board covenants that on or before the commencement of each Fiscal Year it shall adopt an annual budget of the Gross Revenues, together with a schedule for Debt Service Requirements and estimates of Current Expenses for such ensuing Fiscal Year, copies of which shall be filed with , the University, the State Director of the Budget and the Legislative Research Department of the State and shall be made available to the Authority. The Board may at any time adopt an amended or supplemental Annual Budget for the remainder of the then current Fiscal Year. Copies of any such amended or supplemental Annual Budget as adopted shall be filed with and furnished to the same entities as the original Annual Budget. Revenue Fund The Board covenants that all Gross Revenues shall be deposited as received to the credit of the Revenue Fund. Moneys in the Revenue Fund shall, pending disbursement, be held in the custody of the State Treasurer and shall be accounted for separate and apart from all other funds of the Board, the University and the State. Moneys in the Revenue Fund shall be expended and used only in the manner and order specified in the Pledge Agreement and in the Bond Resolution. All moneys in the Revenue Fund shall be held by the State Treasurer in trust and applied as provided in the Pledge Agreement and in the Bond Resolution, and pending such application,

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shall be subject to a prior lien and charge in favor of the Owners of the Bonds and for the further security of such Owners until paid out or withdrawn as provided in the Pledge Agreement. Deficiency of Payments into Funds and Accounts If at any time the moneys in the Principal and Interest Account and the Bond Reserve Account are not sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds as and when the same become due, then moneys in the Revenue Fund and the Surplus Account shall be used by the Board to prevent any default in the payment of the principal of, redemption premium, if any, and interest on the Bonds in accordance with the Bond Resolution. If the Value in the Bond Reserve Account is less than the Bond Reserve Requirement, then the Board covenants to comply with the replenishment requirements thereof as set forth in the Bond Resolution. Tax Covenants The Board covenants and agrees that to the extent within its power and control, (A) it will comply with all applicable provisions of the Code, including § 103 and 141 through 150, necessary to maintain the exclusion from gross income for federal income tax purposes of the interest on the Series 2009K-1 Bonds and (B) it will not use or permit the use of any proceeds of any Bonds or any other funds of the Authority nor take or permit any other action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from federal gross income of the interest on the Series 2009K-1 Bonds. In addition, the Board will take such other actions as may be necessary to comply with the Code and with all other applicable future laws, regulations, published rulings and judicial decisions, in order to ensure that the interest on the Series 2009K-1 Bonds will remain excluded from federal gross income, to the extent any such actions can be taken by the Board. The Board covenants and agrees that to the extent within its power and control, (A) it will comply with all requirements of Code § 148 to the extent applicable to the Series 2009K-1 Bonds, (B) it will use the proceeds of the Series 2009K-1 Bonds as soon as practicable and with all reasonable dispatch for the purposes for which the Series 2009K-1 Bonds are issued, and (C) it will not invest or directly or indirectly use or permit the use of any proceeds of the Bonds or any other funds of the Authority or the Board in any manner, or take or omit to take any action, that would cause the Series 2009K-1 Bonds to be "arbitrage bonds" within the meaning of Code § 148(a). The Board covenants and agrees that to the extent within its power and control, it will not use any portion of the proceeds of the Series 2009K-1 Bonds, including any investment earnings on such proceeds, directly or indirectly, in a manner that would cause any Bond to be a "private activity bond" within the meaning of Code § 141(a) of the Code, other than a "qualified 501(c)(3) bond" within the meaning of Section 145 of the Code. The Board shall cause to be paid to the Authority from time to time all amounts required to be rebated to the United States pursuant to Code § 148(f) and any temporary, proposed or final Treasury Regulations as may be applicable to the Bonds from time to time in accordance with the Federal Tax Certificate. This covenant shall survive payment in full or defeasance of the Series 2009K-1 Bonds. The Board will not use or cause or allow any portion of the proceeds of the Series 2009K-1 Bonds to be used or applied to provide any airplane, skybox or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises, as such terms are used in Code § 147(e). So long as the Series 2009K-1 Bonds remain Outstanding, the Child Care Facility will be owned for federal income tax purposes by a Qualified User and will not, to the extent of more than three percent (3%) thereof, be used (i) in the trade or business of any person other than a Qualified User, or (ii) in any unrelated trade or business of a Tax-Exempt Organization.

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The Board will not authorize or permit more than 2% of the original proceeds of any series of the Series 2009K-1 Bonds to be expended for Costs of Issuance, in compliance with Section 147(g) of the Code. Covenants as to Liens The Board covenants that it will not create or suffer to be created any lien, encumbrance or charge upon the Gross Revenues as pledged under the Pledge Agreement and the Bond Resolution except the pledge, lien and charge for the security of the Bonds and Additional Obligations, and that, from the Gross Revenues and other funds available therefor, it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies or other obligations which, if unpaid, might by law become a lien upon the Gross Revenues, provided, however, that nothing in this paragraph contained shall require the Board to pay or cause to be discharged, or make provision for, any such lien, encumbrance or charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. Contract Impairments The Board covenants that no contract or contracts will be entered into or any action taken by which the Gross Revenues shall be reduced below the amount required under the Pledge Agreement or by which the rights of the Authority under the Pledge Agreement or the rights of the Owners under the Bond Resolution or the Bonds might be impaired or diminished. The Board covenants that none of the Gross Revenues will be used for any purpose other than as provided in the Pledge Agreement and the Bond Resolution, and no contract or contracts will be entered into or any action taken by it which shall be inconsistent with the provisions of the Pledge Agreement. Payment of Taxes, Charges and Assessments The Board covenants and agrees to pay promptly all lawful taxes, governmental charges and assessments at any time levied or assessed and due upon or against it or the Child Care Facility; provided, however, that the Board shall have the right to contest in good faith by appropriate proceedings any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof, provided that the Board shall have set aside on its books adequate reserves with respect to such contest and such contest shall not materially impair the ability of the Board to meet its obligations under the Pledge Agreement. Insurance The Board covenants and agrees that it will at all times maintain or cause to be maintained at its sole cost and expense, insurance, which may include self-insurance, with respect to the Child Care Facility, the operation thereof and its business as set forth in the Pledge Agreement. Damage, Destruction and Condemnation In the event of damage to, or destruction of, the Child Care Facility or any portion thereof resulting from fire or other casualty, or in the event the Child Care Facility or any portion thereof is condemned or taken for any public or quasi-public use or title thereto is found to be deficient, and the Net Proceeds of any insurance or condemnation do not exceed the Claim Limitation, then the Board agrees that, to the extent permitted by law, it will forthwith replace, repair, reconstruct and restore the Child Care Facility to substantially the same or an improved condition or utility value as existed prior to the event causing such damage or condemnation and will, to the extent necessary, direct the application of the Net Proceeds of any insurance or condemnation received by the Board to the payment or reimbursement of the costs of such replacement, repair, reconstruction and restoration. Any remaining balance not required for said purpose shall be deposited in the Principal and Interest Accounts on a pro rata basis based on the outstanding principal amount of each Series of Bonds. Net Proceeds of any insurance or condemnation exceeding the Claim Limitation shall be paid directly to the Authority.

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In the event any damage, destruction or condemnation is estimated to exceed the Claim Limitation, the Board agrees to promptly notify the Authority of such event and the Board shall, within 90 days after such damage, destruction or condemnation, within 90 days after the date when title to the Child Care Facility or portion thereof vests in the party condemning or taking the same, or the date on which the Net Proceeds are determined, elect, subject to the written approval of the Authority, which approval shall not be unreasonably withheld, one of the following two options: (a) Option A -- Repair and Restoration. The Board may elect to use all or part of such Net Proceeds to replace, repair, reconstruct and restore the Child Care Facility. In such event the Board shall proceed forthwith to replace, repair, reconstruct and restore the damaged or condemned Child Care Facility to substantially the same condition or utility value as existed prior to the event causing such damage, destruction or condemnation and will apply the Net Proceeds received by the Board from the Authority to the payment or reimbursement of the costs of such replacement, repair, reconstruction and restoration. So long as the Board is not in default under the Pledge Agreement, any such Net Proceeds received by the Authority shall be deposited in a separate account to be established in accordance with the Bond Resolution and so long as the Board is not in default under the Pledge Agreement, the Board shall have the right to receive such Net Proceeds from the Authority from time to time upon the receipt by the Authority of a certificate from the Authorized Board Representative specifying the expenditures made or to be made or the indebtedness incurred in connection with such repair, reconstruction and restoration and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction and restoration.

It is further understood and agreed that in the event the Board shall elect this Option A or is unable to obtain the opinion required by Option B below, the Board shall complete the replacement, repair, reconstruction and restoration of the Child Care Facility, whether or not the Net Proceeds of insurance or condemnation received by the Board for such purposes are sufficient to pay for the same. Upon completion of such replacement, repair, reconstruction and restoration any excess moneys from the Net Proceeds of such insurance or condemnation over and above the costs of such replacement, repair, reconstruction and restoration shall be deposited by the Authority in the Principal and Interest Accounts on a pro rata basis based on the outstanding principal amount of each Series of Bonds. If the Board elects to use only part of such Net Proceeds for replacements, repairs, reconstruction and restoration of the Child Care Facility, then the remaining part of such Net Proceeds shall be applied to the prepayment of the Bonds and in such event the Board shall, in its notice of election to the Authority, direct the Authority to deposit such moneys when and if received in the Principal and Interest Accounts on a pro rata basis based on the outstanding principal amount of each Series of Bonds. The Board agrees to direct such Net Proceeds so received solely to the purposes specified in such notice of election. (b) Option B -- Prepayment of Bonds. The Board may elect to have all or part of such Net Proceeds applied to the prepayment of the Bonds provided that the Board supplies the Authority with a certificate stating that the property destroyed or the property condemned which resulted in the realization of Net Proceeds was not essential to the use of the Child Care Facility as a complete and operational facility and that the Gross Revenues will not be materially adversely affected by such destruction, or by such condemnation or taking; provided, however, no such opinion shall be required if all Bonds Outstanding are to be redeemed and paid. In such event the Board shall, in its notice of election to the Authority, direct the Authority to deposit such Net Proceeds or a specified portion thereof, when and as received, in the Principal and Interest Accounts on a pro rata basis based on the outstanding principal amount of each Series of Bonds. 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. Title of Site The Board covenants that the Child Care Facility is located on Property of the Board, the University or the State, free from all liens and encumbrances, other than those which in the opinion of an attorney at law will

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not materially and adversely affect the operation and maintenance of the Child Care Facility or receipt of the Gross Revenues. Continuing Disclosure The Board agrees to provide to the Authority all information of the Board or the University necessary for compliance with the provisions of the SEC Rule, as more fully set forth in the Disclosure Undertaking. The Authority, upon receipt of information from the Board, will disseminate said information in accordance with the SEC Rule and the Disclosure Undertaking. Payment of Current Expenses The Board shall pay or cause the University to pay all Current Expenses. Additional Bonds The Authority from time to time may, in its sole discretion, at the request of the Board, authorize the issuance of Additional Bonds for the purposes and upon the terms and conditions provided in the Pledge Agreement and the Bond Resolution; provided that (1) the terms of such Additional Bonds, the purchase price to be paid therefor and the manner in which the proceeds therefrom are to be disbursed shall have been approved by resolutions adopted by the Authority and the Board; (2) the Authority and the Board shall have entered into a Supplemental Pledge Agreement to acknowledge that the provisions of the Pledge Agreement 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 associated costs, fees and expenses, and to extend the term of the Pledge Agreement if the maturity of any of the Additional Bonds would otherwise occur after the expiration of the term of the Pledge Agreement; and (3) the Board shall have otherwise complied with the provisions of the Bond Resolution with respect to the issuance of such Additional Bonds. Prior to the issuance and delivery of any Additional Bonds, and as a condition precedent thereto, the following documents and showings shall be executed and delivered to the Authority: (1) A Supplemental Pledge Agreement, executed by the Board and the Authority,

and a Supplemental Bond Resolution, executed by the Authority, authorizing the Additional Bonds being issued and specifying, among other things, the terms thereof, pledging and assigning such Supplemental Pledge Agreement as security for the Additional Bonds and providing for the disposition of the proceeds thereof.

(2) A certificate of the Board stating that no Event of Default under the Pledge

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.

(3) In the event such Additional Bonds are being issued to finance an Additional

Project: (A) a certificate of an Architect setting forth the cost or estimated

cost of completing the Additional Project; and (B) a certificate from the Board showing that the proceeds of the

sale of the Additional Bonds and other funds made available, together with estimated investment earnings thereon, will be an amount not less than the estimated cost of completing the Additional Project plus any required reserves pursuant to the Supplemental Bond Resolution providing for the issuance of the corresponding Additional Bonds.

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(4) Such legislative, administrative or regulatory approvals as are required under

State law. (5) Such other certificates, endorsements or reports, financing statements,

financial statements and opinions of counsel as the Authority may reasonably request. Additional Obligations

The Board may issue or incur Additional Obligations for any proper purpose if the conditions set forth in paragraphs (2) through (5) above are met when the term "Additional Obligations" is substituted for the term "Additional Bonds." If the certificates, reports or opinions demonstrating compliance with the applicable tests set forth in below under the heading "Restrictions on Incurrence of Additional Indebtedness" are delivered, such Additional Obligations shall have a security interest in the Gross Revenues on a parity with the Parity Bonds and shall be designated as "Parity Obligations." The owners of such Parity Obligations shall not have a security interest in or other rights in or be entitled to share on a parity with the Owners of the Bonds in any Funds and Accounts established or ratified pursuant to the Bond Resolution, except the Revenue Fund. Any Additional Obligations may be further secured in any manner not inconsistent with the provisions and intent of the Bond Resolution or the Pledge Agreement. Restrictions on Incurrence of Additional Indebtedness The Board covenants and agrees that it will not incur any additional Indebtedness which is a Parity Obligation, other than the following Indebtedness, and then only if there shall not exist any Event of Default under the Bond Resolution or the Pledge Agreement (unless such Indebtedness is to be incurred to cure such Event of Default): (a) Long-Term Indebtedness; provided that: (1) there shall be delivered to the Authority a certificate of the Authorized Board

Representative setting forth the intended uses of the proceeds of such Long-Term Indebtedness and, if such intended uses include the acquisition, construction or installation of land, facilities, equipment or other capital improvements, the estimated cost thereof; and

(2) there shall be delivered to the Authority: (A) a certificate of the Authorized Board Representative stating

that the Debt Service Coverage Ratio, computed exclusive of any Outstanding Long-Term Indebtedness that is to be refunded or redeemed with proceeds of the Indebtedness proposed to be incurred, and inclusive of Long-Term Indebtedness then proposed to be incurred, is not less than 1.25 for the most recently ended Fiscal Year for which financial statements are available; and

(B) a certificate of the Authorized Board Representative stating

that the projected Debt Service Coverage Ratio for each of the Fiscal Year following the estimated completion of the acquisition, construction, renovation or replacement being paid for with the proceeds of such additional Long-Term Indebtedness, or following the incurrence of Long-Term Indebtedness for other purposes, will not be less than 2.00 after giving effect to the incurrence of such additional Long-Term Indebtedness and the application of the proceeds thereof; and

(C) evidence that the Board is in compliance with the covenants set forth in the Pledge Agreement; and

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(D) the credit rating assigned to the Long-Term Indebtedness shall not be lower than the then-current rating on the Outstanding Parity Bonds.

(b) Completion Indebtedness; provided that the amount thereof shall not exceed the lesser of: (1) the amount required to provide completed Property of the Board of substantially the same type and scope contemplated at the time Long-Term Indebtedness was originally incurred for such Property, to provide for capitalized interest during the period of construction, to provide any reserve fund relating to such Completion Indebtedness and to pay the costs and expenses of issuing or incurring such Completion Indebtedness; or (2) 20% of the principal amount of any Series of Bonds with respect to the Child Care Facility, or 15% of the principal amount of any other Long-Term Indebtedness incurred for the Property of the Board to be completed, and there shall be delivered to the Authority a certificate of the Authorized Board Representative (A) stating that at the time the original Long-Term Indebtedness for the Property to be completed was incurred, the Board 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 the Property, (B) setting forth the amount estimated to be needed to complete the Property, and (C) stating that the proceeds of such Completion Indebtedness to be applied to complete the Property, together with other moneys available therefor, will not be less than the amount set forth in the statement referred to in clause (B). (c) Refunding Indebtedness; provided that either: (1) the Maximum Annual Debt Service on all Outstanding Long-Term Indebtedness after the incurrence of such Refunding Indebtedness will not increase by more than 10%; or (2) such Refunding Indebtedness shall meet the conditions for the incurrence of Long-Term Indebtedness set forth in the Pledge Agreement. (d) Short-Term Indebtedness; provided that immediately after the incurrence of such Short-Term Indebtedness, the principal amount of all Outstanding Short-Term Indebtedness does not exceed 15% of the Gross Revenues for the most recently ended Fiscal Year for which financial statements are available. Short-Term Indebtedness may also be incurred if such Short-Term Indebtedness could be incurred under paragraph (a) above assuming it was Long-Term Indebtedness. (e) Interim Indebtedness; provided that: (1) there is delivered to the Authority a written statement of a Consultant to the effect that it is such Consultant's opinion that it is reasonable to assume that the Board will be able to refinance such Interim Indebtedness prior to its maturity date in compliance with the provisions of this section and (2) the conditions described in paragraph (a) above are met with respect to such Interim Indebtedness when it is assumed that such Interim Indebtedness is Long-Term Indebtedness maturing over 25 years (or such shorter period as such Consultant indicates is reasonable to assume in such statement) from the date of issuance of the Interim Indebtedness, bears interest on the unpaid principal balance at the Index Rate and is payable on a level annual debt service basis over a 25-year period (or such shorter period as such Consultant indicates is reasonable to assume in such statement). Notwithstanding the foregoing, the Board may incur Subordinated Indebtedness if such Indebtedness is evidenced by an instrument, or issued under any resolution, indenture or other document, containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instrument evidencing such Indebtedness) to the Parity Bonds and Parity Obligations with respect to payment out of the Gross Revenues, so that if at any time the Board shall be in default in paying either interest on or principal of the Parity Bonds and Parity Obligations or if the Board shall be in default in making any payments required to be made under the provisions of the Pledge Agreement, the Board 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 The various calculations of the amount of Indebtedness of the Board, the amortization schedule of such Indebtedness and the debt service payable with respect to such Indebtedness required under certain provisions of

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the Bond Resolution and the Pledge Agreement shall be made in a manner consistent with that set forth in the Pledge Agreement. Remedies Upon Default Upon the occurrence and during continuance of any Event of Default under the Pledge Agreement, unless the same shall have been waived as provided in the Pledge Agreement, the Authority shall have the following rights and remedies, in addition to any other remedies provided in the Pledge Agreement: (a) Acceleration of Maturity; Waiver of Event of Default and Rescission of Acceleration. The Authority may, by written notice to the Board, declare if deemed appropriate, any Additional Obligations (if not then due and payable) to be due and payable immediately, and upon any such declaration the principal of the Additional Obligations, as the case may be, shall become and be immediately due and payable as if all of the sums of money payable thereunder were originally stipulated to be paid on such accelerated payment date, anything in the Additional Obligations, as the case may be, or in the Pledge Agreement contained to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal of the Additional Obligations shall have been so declared and become due and payable, all arrears of interest and principal then due, if any, upon the Additional Obligations and the expenses of the Authority shall be paid by the Board, and every other default in the observance or performance of any covenant, condition or agreement contained in the Pledge Agreement or the Additional Obligations shall be made good, or be secured, to the satisfaction of the Authority, or provision deemed by the Authority to be adequate shall be made therefor, then and in every such case the Authority, by written notice to the Board, may waive the Event of Default by reason of which the principal of the Additional Obligations shall have been so declared and become due and payable, and may rescind and annul such declaration and its consequences; but no such waiver, rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. (b) Right to Bring Suit, Etc. The Authority, with or without entry, personally or by attorney, may in its discretion, without notice or demand: (1) proceed to protect and enforce its rights by a suit or suits in equity or at law, whether for damages or for the specific performance of any covenant or agreement contained in the Additional Obligation, or the Pledge Agreement, or in aid of the execution of any power granted in the Pledge Agreement, or for any foreclosure, or for the enforcement of any other appropriate legal or equitable remedy, as the Authority shall deem effectual to protect and enforce any of its rights or duties under the Pledge Agreement; or (2) avail itself of all other rights or remedies available to it. (c) Appointment of Receiver. The Authority shall be entitled as a matter of right if it shall so elect, (1) forthwith and without declaring the principal of the Additional Obligations to be due and payable, or (2) after declaring the same to be due and payable, or (3) upon the commencement of any other proceedings, judicial or otherwise, to enforce any right of the Authority, to institute such actions or proceedings at law or in equity for the appointment of a receiver or receivers and all the earnings, revenues, rents, issues, profits and income thereof, with such powers as the court making such appointment shall confer. Any amounts collected by the Authority pursuant to action taken under the Pledge Agreement shall be applied in accordance with the provisions of the Bond Resolution. Remedies Cumulative No remedy conferred upon or reserved to the Authority in the Pledge Agreement is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given under the Pledge Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission of the Authority to exercise any right or power accruing upon any Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and every power and remedy given by the Pledge Agreement to the Authority may be exercised from time to time and as often as may be deemed expedient by the Authority.

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Authority's Right to Perform Certain Board Covenants In the event the Board shall fail to: (a) make provision for payment of principal of, redemption premium, if any, and interest on the Bonds as the same shall become due and payable; (b) procure the insurance required by the Pledge Agreement or pay any insurance premium with respect thereto; or (c) pay any amount required to be rebated to the United States Government pursuant to the requirements of Code §148(f) when due, then and in each such case the Authority, with prior written notice to the Board, may remedy such default for the account of the Board and make advances for that purpose; provided that the Authority shall be entitled to indemnity in an amount and form deemed adequate in the discretion of the Authority prior to making any such advances. No such performance or advance shall operate to release the Board from any such default or prejudice any rights of the Authority or the Owners arising under any of the Transaction Documents in consequence of such failure. The Authority shall have the right to enter the Child Care Facility or any portion thereof in order to effectuate the purposes of this section. The Authority shall be reimbursed by the Board for any advances and costs and expenses related to making such advances, subject to and dependant upon appropriation of the State Legislature being made to the Board, which may be lawfully utilized to pay such obligation. Amendments to Pledge Agreement Except as otherwise provided in the Pledge Agreement or in the Bond Resolution, the Pledge Agreement may not be amended, changed or modified except by an agreement in writing executed by the Authority and the Board, and upon the same terms and conditions as the Bond Resolution may be amended. Prior to the execution of any such amendment, the Authority and the Board shall furnish the Original Purchaser with a copy of the amendment, change or modification proposed to be made. SUMMARY OF THE SUPPLEMENTAL SECURITY AGREEMENT The following is a summary of certain provisions of the Supplemental Security Agreement. This summary does not purport to be complete, and reference is made to the full text of the Supplemental Security Agreement for a complete recital of its terms, as well as a complete recital of the defined terms used therein. Covenants of the University In the event the Gross Revenues derived from the operation of the Child Care Facility are not sufficient to pay the Debt Service Requirements on the Bonds and the timely payment of Current Expenses, the University, acting by and through the President of the University, agrees and covenants to make available unrestricted funds of the University, other than State general fund appropriations, in such amounts and at such times as may be necessary to provide for the full and prompt payment of Debt Service Requirements on the Bonds when and as the same shall become due and the Current Expenses. Such payment of funds for Current Expenses shall be made on a monthly basis in accordance with the provisions of the Annual Budget for the Child Care Facility required by the Pledge Agreement In the event that amounts in the Principal and Interest Account five (5) days prior to each Interest Payment Date are not sufficient to meet the Debt Service Requirements due on such Interest Payment Date, the University shall cause the deficiency amount to be deposited into the Principal and Interest Account not less than three (3) business days prior to such Interest Payment Date. The obligations of the University under the Supplemental Security Agreement shall be absolute and unconditional and shall remain in full force and effect until the entire principal of, premium, if any, and interest on the Bonds shall have been paid or such payment provided for.

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Amendments, Changes and Modifications Subsequent to the issuance of the Bonds and prior to their payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Indenture), the Supplemental Security Agreement may not be effectively amended, changed, modified, altered or terminated without the prior written consent of the Authority, the University and the Board. Third-Party Beneficiaries The parties to the Supplemental Security Agreement recognize and agree that the terms of the Supplemental Security Agreement and the enforcement thereof are essential to the security of the Bonds, and are entered into for the benefit of the Owners of the Bonds. Such Owners shall accordingly have contractual rights and duties in the Supplemental Security Agreement and be entitled to enforce separately or jointly with the Authority, or to cause the Authority to enforce, the terms of the Supplemental Security Agreement. In addition, the Owners are intended to be, and shall be, third-party beneficiaries of the Supplemental Security Agreement; and shall have the right (but not the obligation) to enforce the terms of the Supplemental Security Agreement insofar as the Supplemental Security Agreement sets forth obligations of the University under the Supplemental Security Agreement. SUMMARY OF THE CONTINUING DISCLOSURE UNDERTAKING The following is a summary of certain provisions of the Continuing Disclosure Undertaking, which will be entered into between the Board and the Authority pursuant to the terms of the Pledge Agreement. Additional Definitions In addition to the definitions set forth in this APPENDIX D, which apply to any capitalized term used in the Disclosure Undertaking, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report described in the section below entitled "Provision of Annual Report." "Beneficial Owner" means any registered owner of any Series 2009K 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 Series 2009K Bonds (including Persons holding Series 2009K Bonds through nominees, depositories or other intermediaries); or (b) is treated as the Owner of any Series 2009K Bonds for federal income tax purposes. "Dissemination Agent" means any entity designated in writing by the Authority to serve as dissemination agent pursuant to the Disclosure Undertaking and which has filed with the Authority a written acceptance of such designation. "EMMA" means the Electronic Municipal Market Access system for municipal securities disclosures operated by the MSRB, which can be accessed at www.emma.msrb.org. "Financial Information" means the financial information of the University, described in the section below entitled " Provision of Annual Reports - Financial Information.". "GAAP" means generally accepted accounting principles, as applied to governmental units as in effect at the time of the preparation of the Financial Information. "Material Events" means any of the events listed below in the section below entitled "Reporting of Material Events."

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"MSRB" means the Municipal Securities Rulemaking Board, or any successor repository designated as such by the Securities and Exchange Commission in accordance with the Rule. "Official Statement" means this Official Statement. "Operating Data" means the operating data of the University described in the section below entitled "Provision of Annual Reports - Operating Data." "Participating Underwriter" means any of the original underwriters of the Series 2009K Bonds required to comply with the SEC Rule in connection with offering of the Series 2009K Bonds. "SEC" means the Securities and Exchange Commission of the United States. Provision of Annual Reports

The Board agrees to provide to the Authority as soon as practicable after they are available, but in no event more than 190 days after the end of each Fiscal Year, commencing with the Fiscal Year ended June 30, 2009, the Financial Information and the Operating Data (jointly, the "Annual Report") as follows:

(1) Financial Information. Financial Information shall consist of the financial statements of the University for the prior Fiscal Year, beginning with the Fiscal Year ending June 30, 2009, which shall be prepared on the accrual basis of accounting in the format approved by the Board pursuant to the Pledge Agreement. If such Financial Information is audited, it shall be audited in accordance with generally accepted auditing standards generally accepted in the United States of America, as such standards may be amended. If audited Financial Information is not available to meet the filing requirement set forth herein, the Board shall provide unaudited Financial Information within the prescribed time. If audited financial statements are in future years prepared for the University, such audited financial statements shall be promptly provided to the Authority and included in the Financial Information. If the basis of accounting for the Financial Information is changed to a basis less comprehensive than previously described, the Board shall provide notice of such change in the same manner as for a Material Event.

(2) Operating Data. Operating Data with respect to the University and the Parking

System shall consist of the information and data regarding the University and the Parking System in substantially the scope and form contained in (A) the table titled "Comparison of State Appropriations to Tuition and Fees and Other Revenue Sources" under the caption "KANSAS STATE UNIVERSITY— State Appropriations and the Budget Process" in the Official Statement and (B) each of the tables of information regarding the Child Care Facility and the University in Appendices A, B and C to the Official Statement, each updated as of the end of the prior Fiscal Year, beginning with the Fiscal Year ending June 30, 2009. Such information shall include actual information for such Fiscal Year but need not include revised projections for future Fiscal Years.

Any or all of the Financial Information or Operating Data may be incorporated by reference from

other documents, including official statements of debt issues with respect to which the Board is an "obligated person" (as defined by the Rule) that have been provided to the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the MSRB. If the Fiscal Year changes, the Board shall provide notice of such change in the same manner as for a Material Event.

The Authority shall file the Annual Report with the MSRB, through EMMA, as specified by the Disclosure Undertaking, or if the Annual Report is not received from the Board and thus not filed within the time period the Authority shall send a notice to the MSRB in substantially the form attached to the Disclosure Undertaking.

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Reporting of Material Events The Board agrees that it will furnish to the Authority, as promptly as practicable, notice of any of the following events with respect to the Series 2009K Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) modifications to rights of bondowners; (4) optional, contingent or unscheduled bond calls; (5) defeasances; (6) rating changes;

(7) adverse tax opinions or events affecting the tax-exempt status of the Series 2009K Bonds; (8) unscheduled draws on debt service reserves reflecting financial difficulties; (9) unscheduled draws on credit enhancements reflecting financial difficulties; (10) substitution of credit or liquidity providers, or their failure to perform; or

(11) release, substitution or sale of property securing repayment of the Series 2009K Bonds.

The Authority shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the General Counsel of the Board or his or her designee, or such other person as the Board shall designate in writing to the Authority from time to time, inform such person of the event, and request that the Board promptly notify the Authority in writing whether or not to report the event. The Board will promptly respond in writing to any such request. Whenever the Board obtains knowledge of the occurrence of a Material Event, because of a notice from the Authority or otherwise, the Board shall promptly determine if such event would be material under applicable federal securities law. If the Board has determined that knowledge of the occurrence of a Material Event would be material under applicable federal securities law, the Board shall promptly so notify the Authority in writing. Such notice shall instruct the Authority to report the occurrence. If the Board has determined that knowledge of a Material Event would not be material under federal securities law, the Board shall promptly so notify the Authority in writing. Such notice shall instruct the Authority not to report the occurrence. If the Authority has been given written instructions by the Board to report the occurrence of a Material Event, or if the Board does not respond to a request by the Authority with respect to a Material Event, the Authority shall promptly file a notice of such occurrence with the MSRB, through EMMA, with copies to the Board. Notice of Material Events regarding redemption or defeasances need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Series 2009K Bonds pursuant to the Bond Resolution. Notwithstanding the foregoing, the Authority may independently determine that an event is material, and provide notice of the same in the manner set forth in this Section. Dissemination Agent

The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. In the event that a Dissemination Agent is appointed, the Dissemination Agent shall assume the responsibilities of the Authority with respect to reporting.

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Termination of Reporting Obligation The Authority's and the Board's obligations under the Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2009K Bonds. If such termination or substitution occurs prior to the final maturity of the Series 2009K Bonds, notice of such termination or substitution shall be given in the same manner as for a Material Event. Amendment; Waiver Notwithstanding any other provision of the Disclosure Undertaking, the Board, the Authority and the Dissemination Agent, if any, may amend the Disclosure Undertaking (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Authority) and any provision of the Disclosure Undertaking may be waived, provided that: (a) Bond Counsel or other counsel experienced in federal securities law matters provides the Board, the Authority and the Dissemination Agent, if any, with its opinion that the undertakings contained in the Disclosure Undertaking, as so amended or after giving effect to such waiver, are in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to the Disclosure Undertaking; (b) if the amendment or waiver relates to filing of Annual Reports or reporting of a Material Event, it may only be made 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 Series 2009K Bonds, or the type of business conducted; and (c) the amendment or waiver is either (1) approved by the Owners of the Series 2009K Bonds in the same manner as provided in the Bond Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Series 2009K Bonds. In the event of any amendment or waiver of a provision of the Disclosure Undertaking, the same shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of Financial Information or Operating Data being presented. 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, 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. Additional Information Nothing in the Disclosure Undertaking shall be deemed to prevent the Board or the Authority from disseminating any other information, using the means of dissemination set forth in the Disclosure Undertaking 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 the Disclosure Undertaking. If the Board 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 the Disclosure Undertaking, neither the Board nor the Authority shall have any obligation under the Disclosure Undertaking to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. Noncompliance In the event of a failure of the Board, the Authority or the Dissemination Agent, if any, to comply with any provision of the Disclosure Undertaking, any Beneficial Owner of the Series 2009K Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Board, the Authority or the Dissemination Agent, if any, as the case may be, to comply with its obligations under the Disclosure Undertaking. Noncompliance with the provisions of the Disclosure Undertaking shall not be deemed an Event of Default under the Bond Resolution or the Pledge Agreement, and the sole remedy under the Disclosure Undertaking in the event of any failure of the Board, the Authority or the

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Dissemination Agent, if any, to comply with the Disclosure Undertaking shall be an action to compel performance. Beneficiaries The Disclosure Undertaking shall inure solely to the benefit of the Board, the Authority, the Dissemination Agent, if any, the Participating Underwriter and Beneficial Owners from time to time of the Series 2009K Bonds, and shall create no rights in any other person or entity.

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APPENDIX E

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Series 2009K Bonds. The Series 2009K 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 2009K 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 2.2 million issues of U.S. and non-U.S. equity issues, 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Series 2009K Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2009K Bonds on DTC's records. The ownership interest of each actual purchaser of each Security ("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 2009K 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 2009K Bonds, except in the event that use of the book-entry system for the Series 2009K Bonds is discontinued. To facilitate subsequent transfers, all Series 2009K 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 2009K 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 2009K Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2009K 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.

E-2

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 Series 2009K Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2009K Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Series 2009K Bonds may wish to ascertain that the nominee holding the Series 2009K 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 2009K 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 Series 2009K Bonds unless authorized by a Direct Participant in accordance with DTC's 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 Series 2009K Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments with respect to the Series 2009K 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 payable 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, the Paying Agent, or Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments 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 2009K Bonds at any time by giving reasonable notice to Authority or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, 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, 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 2009K BONDS; (3) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE BOND RESOLUTION; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDOWNER.