Trust account assets and a total liability for defeased bonds of $59,630,000 at June 30, 1997 are not
     included in the financial statements.

7.  Capital Lease Obligations
     The University has utilized capital leases to acquire the following: Woodford County farm,
     $11,500,000; football stadium, $11,699,545; life safety improvements to buildings, $24,621,000; and
     various items of equipment, $8,909,797.

     The minimum future lease payments on the capital lease obligations, which are principally with the
     Commonwealth of Kentucky, are as follows:
                                                                       (in thousands)
                  1998                                                  $ 6,905
                  1999                                                     6,682
                  2000                                                     4,668
                  2001                                                     4,617
                  2002                                                     3,833
                  2003-2016                                               30,765
                  Total                                                 57,470
                  Less: Amount representing interest                     (18,922)
                  Present value of net minimum lease payment    $ 38.548

8.  Funds Held in Trust by Others

     The University is the income beneficiary of various trusts which are held and controlled by
     independent trustees. For the year ended June 30, 1997, the University received income from these
     trusts amounting to $1,244,339. The University has no equity interest in the principal of the trusts
     which, accordingly, is recorded at a nominal value of $1 each. The 1997 income received from these
     trusts is recorded as endowment income in the current unrestricted fund ($466,379) and in the
     current restricted fund ($777,960).

9.  Pension Plans

     Regular full-time employees, including faculty, are participants in the University of Kentucky
     Retirement Plan, a defined contribution plan. The University of Kentucky Retirement Plan consists
     of five groups as follows:

           Group I     Established July 1, 1964, for faculty and
                           certain administrative officials.
           Group II    Established July 1, 1971, for staff members
                           in the clerical, technical and service categories.
           Group IlIl  Established July 1, 1972, for staff members
                            in the managerial, professional and scientific categories.
           Group IV    Established January 1, 1973, for staff members
                           having U.S. Civil Service Retirement entitlement.
           Group V     Established July 1, 1987, for staff members covered
                           under the Federal Employees Retirement System
                           that replaced Civil Service (those whose employment
                           began during the period from January 1, 1984 to
                           March 31, 1987). Staff members whose employment began
                           after March 31, 1987 are under one of the above University
                           of Kentucky Retirement Plans.



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