B. Enterprise, Nonexpendable and Pension Trust Funds:

The bank deposits of the enterprise, nonexpendable and pension trust funds as of June 30,1988 were entirely
insured or collateralized with securities held by the fund or its agent in the fund's name.

Investments of the enterprise funds are stated at cost, adjusted for amortization of premiums and accretion
of discounts. The investment policies for all enterprise funds, with the exception of the Community Development
Administration, are the same as those of the State Treasurer. The Community Development Administration, an
agency of the Department of Housing and Community Development, is authorized to invest in obligations of the
U. S. Treasury, U. S. Government agencies and corporations, political subdivisions of the U. S., bankers
acceptances, repurchase agreements, corporate debt securities and certificates of deposit with foreign or
domestic banks. Repurchase agreements aggregating $552,866,000 (market value of collateral of $553,710,000)
and certificates of deposit aggregating $17,494,000 at June 30, 1988 are reported as cash and short-term
investments in enterprise funds. The certificates of deposit and collateral for the repurchase agreements are held
by the fund's agent in the fund's name.

The State Accident Fund (Fund), in accordance with Article 101, Section 80 of the Annotated Code of
Maryland, is permitted to invest in those investments which are legal for insurance companies as authorized in
Article 48A, Sections 97 through 107 of the Code. All investment purchases are authorized by the Fund's
commissioners. Money market investments with an aggregate cost of $81,348,000 (which approximates market)
at June 30,1988, are reported as cash and short-term investments. The Fund had significant investments in
repurchase agreements during fiscal year 1988, however, due to fluctuations in cash flow, the Fund did not have
any repurchase agreements at June 30,1988. Other investments of the Fund, which include U. S. Treasury notes,
and corporate bonds and stocks, are stated at their market value of $283,112,000 (amortized cost - $279,022,000)
at June 30, 1988. Realized gains and losses from the sale of investments are credited or charged to income.
Changes in unrealized market appreciation or depreciation are credited or charged to fund equity. Unrealized
market appreciation or depreciation is reflected as a reservation of fund equity.

The Pension Trust Fund, in accordance with Article 73 B, Section 161 of the Annotated Code of Maryland,
is permitted to make investments subject to the terms, conditions, limitations, and restrictions imposed by the
Board of Trustees of the Maryland State Retirement and Pension Systems. The law further provides that not
more than 15% of the assets that are invested in common stocks may be invested in non-dividend paying common
stocks. The pension trust fund's investments are commingled in three combined investment funds. Two
investment funds consist principally of bonds and other fixed income investments while the other investment
fund consists principally of common stocks. Investments of the pension trust fund are stated at cost, adjusted
for amortization of premiums and accretion of discounts.

The investments at June 30,1988 for the enterprise, nonexpendable and pension trust funds are as follows
(amounts expressed in thousands):

C. Higher Education Fund:

The bank deposits of the Higher Education Fund (Fund) as of June 30, 1988 were entirely insured or
collateralized with securities held by the fund or its agent in the fund's name with the exception of approximately
$1,841,000.

Investment funds established by higher education institutions relate principally to endowment and trust
accounts required by debt instruments. In general, endowment funds can be invested in debt and equity
securities and trust accounts can be invested only in debt securities. These investments include U. S. Treasury
and agency obligations, certificates of deposit, commercial paper, repurchase agreements, bankers acceptances
and money market funds.

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