Under Section 2-603 of the State's Finance and Procurement Article, the State lends U.S. Government securities held by the
Lottery to broker-dealers and other entities (borrowers). The State Treasurer's Office controls the program and authorizes all
transactions. The State's custodial bank manages the securities lending program by contracting with a lending agent who receives
cash as collateral. The lending agent may use or invest cash collateral in accordance with the reinvestment guidelines approved by
the State Treasurer's Office. The collateral will be returned for the same securities in the future. The collateral cannot be pledged or
sold by the State unless the borrower defaults. Cash collateral is initially pledged at greater than the market value of the securities
lent and additional cash collateral has to be provided by the next business day if the aggregate value of the collateral falls to less than
100 percent of the market value of the securities lent. Either the State or the borrower may terminate the lending agreements on
demand. Lending agreements are usually short in duration. Therefore, the duration of lending agreements does not generally
match the maturities of the investments made with cash collateral.

The bank is obligated to indemnify the State against liability for any suits, actions, or claims of any character arising from or
relating to the performance of the bank under the contract, except for liability caused by acts or omissions of the State.

The State did not experience any losses on their securities lending transactions for the year ended June 30,2000. Furthermore,
as of June 30,2000, the State had no credit risk exposure to borrowers because the fair value of collateral for the securities loaned was
at least 100% of the fair value of the related securities, as follows (amounts expressed in thousands).

	Fair	Value
	Loaned	Collateral Percent
	Securities	Received Collateralized
Securities - US Treasury obligations ............................................................................................	$154,234	$154,386 100.1%

D. Investments-Fiduciary Funds:

The Maryland Local Government Investment Pool may invest in any instrument in which the State Treasurer may invest.
Permissible instruments are established under the State Finance and Procurement Article of the Annotated Code of Maryland,
Title 6, Subtitle 2. Investments of the plan are stated at fair value.

The Pension Trust Funds (Funds), in accordance with State Personnel and Pensions Article Section 21-123 of the Annotated
Code of Maryland, are permitted to make investments subject to the terms, conditions, limitations, and restrictions imposed by the
Board of Trustees of the State Retirement and Pension Systems of Maryland. The law further provides that no more than 25% of
the assets that are invested in common stocks may be invested in non-dividend paying common stocks. In addition, no investment
in any one organization may constitute more than 5% of the net plan assets available for pension benefits. Investments of the Funds
are stated at fair value.

State employees are offered participation in a deferred compensation plan (Plan) created in accordance with the Internal
Revenue Code, Sections 401(a), 401(k), 403(b) and 457. The Board of Trustees of the State's Supplemental Retirement
Systems is responsible for the implementation, maintenance and administration of the Plan. The Board has appointed a private
company as the Plan administrator. Assets of the Plan are held in trusts for the exclusive benefit of participating employees and
their beneficiaries. Investments of the Plan are stated at fair value.

The investments as of June 30,2000, for the fiduciary funds of the Primary Government are as follows (amounts expressed in thousands).

		Category
	1	2	3	Fair Value
U.S. Treasury and agency obligations ...................................................	$ 1,922,059			$ 1,922,059
Repurchase agreements. .......................... ..............................................	135,753			135,753
Bonds....................................................................................................	2,487,777			2,487,777
Corporate equity securities ...................................................................	16,481,852			16,481,852
Commercial paper ................................................................................	21,493			21,493
Bankers acceptances. ....... ......................................................................	156,486			156,486
Mortgage related securities ...................................................................	2,322,529			2,322,529
	$23,527,949			23,527,949
Items not subject to classification:
Annuities and guaranteed investment contracts ...................................				521,968
Mutual funds ........................................................................................				6,936,538
Real estate.............................................................................................				661,143
Investments held by borrowers under
securities loans with cash collateral:
U.S. Treasury and agency obligations ................................................				789,934
Bonds.................................................................................................				42,146
Corporate equity securities ................................................................				1,294,274
Total................................................................................................				$33,773,952

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