On September 17, 1987, the Board of the Maryland State Retirement and Pension Systems approved a
major change in its asset allocation investment policy. The Board directed that investments in equity
securities be reduced from approximately 60% of the total portfolio to approximately 30% of the total
portfolio. The Board further directed that a dedicated bond portfolio be developed, which would provide
scheduled payments of principal and interest that match the actuarially projected benefit payments to
members of all of the Systems who had retired prior to July 1, 1987. As a result, approximately
$2,300,000,000 in equity securities were sold prior to mid-October 1987, and approximately $4,000,000,000 in
fixed income securities were purchased or transferred to the dedicated bond portfolio. That portfolio has an
average yield of approximately 10%. As a result of these transactions, the total unfunded actuarial liability of
the Systems was reduced by approximately $1,300,000,000. The effect of this reduction will be to reduce State
contributions to the Systems in future years.

16. Commitments:

The State leases office space under various agreements that are accounted for as operating leases. Many
of the agreements contain rent escalation clauses and renewal options. Future lease expense commitments
under these agreements at June 30, 1987 are as follows (amounts expressed in thousands):

At June 30, 1987, the Department of Transportation and Maryland Transportation Authority had
commitments of approximately $604,232,000 and $139,000,000, respectively, for construction of highway and
mass transit facilities. Approximately 55% of future expenditures related to the Department of
Transportation commitments are expected to be reimbursed from proceeds of approved federal grants when
the actual costs are incurred. The remaining portion will be funded by other financial resources of the
Department.

The Department of Transportation, as lessor, leases terminal space at various marine terminals, airport
facilities and office space pursuant to various operating leases. Minimum future rental revenues (amounts
expressed in thousands) are as follows:

Total minimum future rental revenues do not include contingent rentals that may be received under certain
concession leases on the basis of a percentage of the concessionaire's gross revenue in excess of stipulated
minimums. Rent revenue was approximately $48,349,000 for the year ended June 30, 1987, including
contingent rentals of approximately $17,533,000. Assets of the Department of Transportation subject to such
operating lease agreements are included in the general fixed assets account group. The cost of these assets
was approximately $247,998,000 at June 30, 1987.

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