The University invests directly in mortgage backed securities including collateralized mortgage obligations, interest only strips and mortgage pass-through securities.  These securities are purchased to modify exposure to certain risks, to enhance yields on investments or to effect changes in portfolios without significantly affecting liquidity.  Since these securities are based on cash flows from the underlying mortgages, they are sensitive to prepayments by mortgagees and to interest rate changes.

 Some of the University's mutual fund managers may invest in a variety of derivatives including futures, options, forward foreign currency contracts, short sales and convertible bond hedging.  Any derivative may carry credit risk, market risk and interest rate risk.  Certain of these securities are used to reduce market risk, currency exchange risk and interest rate risk.

 The University's investments are categorized to give an indication of the level of risk assumed at year end.  Category 1 includes investments that are insured or registered, or securities held by the University or its agent in the University's name.  Category 2 includes investments that are uninsured and unregistered for which the securities are held by the bank's trust department or agent in the University's name.  Category 3 includes investments that are uninsured and unregistered for which the securities are held by the bank, or its trust department or agent but not in the University's name.  The University did not have any Category 3 investments at June 30, 2000.

 Investments at fair value at June 30, 2000, in thousands of dollars, are as follows:

 The major portion of endowment fund assets is pooled for investment purposes.  Each individual fund subscribes to or disposes of units on the basis of the value per unit at fair value at the beginning of the month within which the transaction takes place.  Income is distributed on a per unit basis.  Of the total units (each having a fair value of $48,738)  2,567.6271 units were owned by endowment funds and  1,139.8478 units by quasi endowment funds at June 30, 2000 ($46,293,  2,407.1932 and 1,026.0136 respectively, at June 30, 1999).

 The table below summarizes changes in relationships between cost and fair values (dollars in thousands except per unit amounts) of the pool:

  The average net earnings per unit, exclusive of net gains, amounted to $819.61 in fiscal 00 and $1,114.02 in fiscal 99.