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.

     Participation in the University of Kentucky Retirement Plan in groups 1, 11, and IlIl is mandatory for all
     faculty and staff members, age 30 and older, who have completed one year of service. Participation
     is voluntary to age 30 (after completion of one year of service). Participation in groups IV and V is
     voluntary. The University contributes 10% of eligible compensation to groups 1, 11 and Ill. Employees
     contribute 5% of eligible compensation to groups 1, 11 and Ill.

     The University has authorized three retirement plan carriers, effective July 1, 1988, as follows:

                Teachers Insurance and Annuity Association/College
                   Retirement Equities Fund (TIAAICREF)
                Fidelity Institutional Services Company
                American Century Investments

     Under the fully funded University of Kentucky Retirement Plan, the University and plan participants
     make contributions to provide fully vested retirement benefits to employees. The University's
     contributions and costs for 2000 were approximately $37,544,000 and the employees contributed
     approximately $18,663,000. The University's total payroll costs were approximately $581,300,000. The
     payroll for employees covered by the retirement plan was approximately $375,437,000.

     In addition to retirement benefits provided from the group retirement plan, the University provides
     supplemental retirement income benefits to certain eligible employees in each of the retirement groups
     (see Note 11).

11. Minimum Annual Retirement Benefits and Supplemental Retirement Income

     Employees in retirement groups 1, 11 and Ill, referred to in Note 10, who were age 40 or older prior to the
     date of establishment of each group plan, and who were employed by the University prior to that date,
     qualify for the minimum annual retirement benefit provisions of the retirement plan. Benefits for these
     eligible employees are based upon a percentage, determined through years of service, of the
     participant's annual salary in the last year of employment prior to retirement. Retirement benefits as
     determined are funded by each individual retiree's accumulation in the group retirement plan, with the
     balance, if necessary, provided by the University as supplemental retirement income.

     The Legislature of the Commonwealth of Kentucky has appropriated funds to the University for the
     payment of supplemental retirement income benefits since adoption of the group retirement plans, and
     is expected to continue this practice. However the Constitution of the Commonwealth of Kentucky
     prohibits the commitment of future revenues beyond the end of the current biennium. Accordingly, the
     University does not recognize the liability for supplemental retirement income benefits during the service
     life of covered employees, but recognizes its costs when funds are appropriated by the Legislature and
     payments are made. The University intends to continue paying supplemental retirement income
     benefits contingent upon the Legislature continuing to appropriate funds required to make these
     payments. Supplemental retirement benefit payments were approximately $4,130,000 for 2000.



13