RATING: See "BOND RATING" herein

Transcription

1 NEW ISSUE RATING: See "BOND RATING" herein In the opinion of Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the Series 2009K-1 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The stated interest on the Series 2009K-2 Bonds is included in gross income as interest for federal income tax purposes. In the opinion of Bond Counsel, under existing law, the interest on the Series 2009K Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes. See "LEGAL MATTERS Opinion of Bond Counsel" herein. KANSAS DEVELOPMENT FINANCE AUTHORITY REVENUE BONDS $4,610,000 Revenue Bonds Series 2009K-1 (Kansas Board of Regents Kansas State University Child Care Facility Project) Dated: Date of Delivery $1,530,000 Taxable Revenue Bonds Series 2009K-2 (Kansas Board of Regents Kansas State University Child Care Facility Project) Due: November 1, as shown on the inside cover page The Series 2009K-1 Bonds referenced above (the "Series 2009K-1 Bonds") and the Series 2009K-2 Bonds referenced above (the Series 2009K-2 Bonds, together with the Series 2009K-1 Bonds, the Series 2009K Bonds ) will be issued by the Kansas Development Finance Authority (the "Authority") as fully registered bonds without coupons in denominations of $5,000 or any integral multiple thereof. The Depository Trust Company, New York, New York, will act as securities depository for the Series 2009K Bonds. Purchases of Series 2009K Bonds will be made in book-entry form. See "THE BONDS Book-Entry Only System for Series 2009K Bonds" herein. Principal will be payable upon presentation and surrender of the Series 2009K Bonds by the Owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as bond registrar and paying agent (the "Bond Registrar" and "Paying Agent"). Interest on the Series 2009K Bonds will be payable on May 1 and November 1, beginning November 1, 2009, by check or draft of the Paying Agent mailed to the persons who are the Owners of the Series 2009K Bonds as of the close of business on the fifteenth day (whether or not a Business Day) of the calendar month preceding each interest payment date. The Owner of Series 2009K Bonds of the same series in the principal amount of $500,000 or more may request the payments of principal, redemption premium, if any, and interest on Series 2009K Bonds to be made by wire transfer upon written request of the Owner received by the Paying Agent at least fifteen business days before any Payment Date. Principal and semiannual interest on the Series 2009K Bonds will be paid directly to DTC by the Paying Agent, so long as DTC or its nominee, Cede & Co., is the Owner of the Series 2009K Bonds. The Series 2009K Bonds will be issued pursuant to Bond Resolution No. 257 adopted by the Authority on July 9, 2009 (the "Bond Resolution"). The Series 2009K Bonds will stand on a parity with any Additional Bonds issued from time to time under the Bond Resolution (collectively, and together with the Series 2009K Bonds, the "Bonds"). MATURITY SCHEDULE LISTED ON INSIDE COVER PAGE The principal of, redemption premium, if any, and interest on the Series 2009K Bonds are payable solely and only from the Trust Estate (as defined in the Bond Resolution), which includes, but is not limited to, (i) deposits into the Revenue Fund of Gross Revenues derived by the Kansas Board of Regents (the "Board") from the ownership and operation of the child care facility located on the Manhattan campus of the University, as the same may be expanded from time to time (the Child Care Facility ), in accordance with the Pledge of Revenues Agreement, dated as of July 1, 2009, between the Authority and the Board (the "Pledge Agreement"), (ii) all funds provided by the University pursuant to the Supplemental Security Agreement, dated as of July 1, 2009 between the Authority and the University (the "Supplemental Security Agreement") and (iii) certain investment earnings. THE BONDS SHALL NOT BE A DEBT OR GENERAL OBLIGATION OF THE AUTHORITY, THE BOARD, THE UNIVERSITY, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, AND NEITHER THE BONDS, THE INTEREST THEREON, NOR ANY JUDGMENT THEREON OR WITH RESPECT THERETO, ARE PAYABLE IN ANY MANNER FROM UNLIMITED TAX REVENUES OF ANY KIND OR CHARACTER. THE BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY, THE BOARD, THE UNIVERSITY, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. herein. The Series 2009K Bonds are subject to redemption as described under the caption "THE SERIES 2009K BONDS Redemption" The Series 2009K Bonds are offered when, as and if issued by the Authority, subject to the approval of legality by Gilmore & Bell, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its general counsel, Rebecca Floyd, Esq. and for the Board by its general counsel, Julene L. Miller, Esq. It is expected that the Series 2009K Bonds will be available for delivery in New York, New York through the facilities of DTC on or about July 29, The date of this Official Statement is July 15, PIPER JAFFRAY & CO.

2 $4,610,000 KANSAS DEVELOPMENT FINANCE AUTHORITY REVENUE BONDS, SERIES 2009K-1 (KANSAS BOARD OF REGENTS KANSAS STATE UNIVERSITY CHILD CARE FACILITY PROJECT) SERIAL BONDS Maturity November 1 Principal Amount Interest Rate Yield Price CUSIP 2023 $185, % 4.030% % 48542K C , K D , K D , K D , K D , K D , K D71 TERM BONDS $1,705, % Term Bonds Due November 1, 2035 (Yield: 4.920%; Price: %) (CUSIP: 48542K D89) $1,425, % Term Bonds Due November 1, 2039 (Yield: 5.010%; Price: %) (CUSIP: 48542K D97) $1,530,000 KANSAS DEVELOPMENT FINANCE AUTHORITY TAXABLE REVENUE BONDS, SERIES 2009K-2 (KANSAS BOARD OF REGENTS KANSAS STATE UNIVERSITY CHILD CARE FACILITY PROJECT) SERIAL BONDS Maturity November 1 Principal Amount Interest Rate Yield Price CUSIP 2012 $110, % 2.790% % 48542K B , K B , K B , K B , K C , K C , K C , K C , K C , K C , K C80

3 KANSAS DEVELOPMENT FINANCE AUTHORITY Brett A. Reber, Chair Daniel L. Watkins, Vice Chair John G. Montgomery, Member Audrey H. Langworthy, Member Timothy C. Schaller, Member Stephen R. Weatherford, President Rebecca E. Floyd, Executive Vice President and General Counsel Jim MacMurray, Vice President of Finance Nick Lehman, Vice President of Finance Linda Clark, Chief Fiscal Officer BOARD OF REGENTS OF THE STATE OF KANSAS Jill Docking, Chair Gary Sherrer, Vice Chair Jarold Boettcher Janie Perkins Christine Downey-Schmidt Donna Shank Richard Hedges William Thornton Dan Lykins BOARD OF REGENTS STAFF Reginald L. Robinson, President and CEO Diane Duffy, Vice President for Finance and Administration Julene L. Miller, General Counsel KANSAS STATE UNIVERSITY ADMINISTRATION Dr. Kirk H. Schulz, President (effective July 1, 2009) Bruce Shubert, Vice President for Administration and Finance Fran Willbrant, Controller Bernard Pitts, Assistant Vice President, Student Life PROFESSIONAL SERVICES Bond Counsel... Gilmore & Bell, P.C. Bond Registrar and Paying Agent... Treasurer of the State of Kansas Financial Advisor... Columbia Capital Management, LLC

4 No dealer, broker, salesman or other person has been authorized by the Authority or the Board to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such information and representations must not be relied upon as having been authorized by the Authority or the Board. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, nor will there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made thereafter shall, under any circumstances, create any implication that there has been no change in the affairs of the State of Kansas, the Board, the University or the Authority since the date hereof. Piper Jaffray & Co. ("Piper") has entered into an agreement (the "Distribution Agreement") with Advisors Asset Management, Inc. ("AAM") for the distribution of certain municipal securities offerings allocated to Piper at the original offering prices. Under the Distribution Agreement, if applicable to the Series 2009K Bonds, Piper will share with AAM a portion of the fee or commission, exclusive of management fees, paid to Piper. TABLE OF CONTENTS Page INTRODUCTION...1 ESTIMATED SOURCES AND USES OF FUNDS...2 THE SERIES 2009K BONDS...2 General...2 Book-Entry Only System...3 Security for the Bonds...3 Authorization of Additional Bonds and Parity Obligations...4 Redemption...5 Selection of Bonds to be Redeemed...6 Paying Agent's and Bond Registrar's Duties to Redeem Bonds...6 Notice of Redemption...6 Effect of Call for Redemption...6 INVESTMENT CONSIDERATIONS...6 No Pledge of Real or Personal Property...7 Limitation of Liability...7 Special Obligations...7 Projection of Gross Revenues...7 Bond Reserve Account...7 Taxation of Interest on the Bonds...8 Market for the Series 2009K Bonds...8 Legal Matters...9 Limitations on Remedies Available to Owners of the Bonds...9 Premium on Series 2009K Bonds...9 Suitability of Investment...9 THE AUTHORITY...10 THE KANSAS BOARD OF REGENTS...11 KANSAS STATE UNIVERSITY...12 History and Academic Development...12 External Relationships...12 State Appropriations and the Budget Process...13 Additional University Information...14 THE CHILD CARE FACILITY...14 NON-LITIGATION CERTIFICATION...14 (i)

5 BOND RATING...15 CONTINUING DISCLOSURE...15 LEGAL MATTERS...15 Approval of Bonds...15 Opinion of Bond Counsel...15 FINANCIAL ADVISOR...16 UNDERWRITING...17 MISCELLANEOUS...17 AUTHORIZATION OF OFFICIAL STATEMENT...17 ADDITIONAL INFORMATION...18 APPENDIX A: The University...A-1 APPENDIX B: The Child Care Facility... B-1 APPENDIX C: Projected Debt Service Requirements and Debt Service Coverage Ratios... C-1 APPENDIX D: Summary of Principal Financing Documents...D-1 APPENDIX E: Book-Entry Only System... E-1 (ii)

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7 KANSAS DEVELOPMENT FINANCE AUTHORITY REVENUE BONDS $4,610,000 Revenue Bonds Series 2009K-1 (Kansas Board of Regents Kansas State University Child Care Facility Project) $1,530,000 Taxable Revenue Bonds Series 2009K-2 (Kansas Board of Regents Kansas State University Child Care Facility Project) INTRODUCTION This Official Statement, including the cover page and appendices hereto (the "Official Statement"), is provided to furnish information with respect to the Kansas Development Finance Authority (the "Authority") and the issuance and delivery of its Revenue Bonds, Series 2009K-1 (Kansas Board of Regents Kansas State University Child Care Facility Project) (the "Series 2009K-1 Bonds") and its Taxable Revenue Bonds, Series 2009K-2 (Kansas Board of Regents Kansas State University Child Care Facility Project) (the "Series 2009K- 2 Bonds," together with the Series 2009K-1 Bonds, the Series 2009K Bonds ). The Series 2009K Bonds are being issued pursuant to Bond Resolution No. 257 adopted by the Authority on July 9, 2009 (the "Bond Resolution"). The Series 2009K Bonds will stand on a parity with any Additional Bonds issued from time to time under the Bond Resolution (collectively, the "Bonds"). The Series 2009K Bonds are being issued for the purpose of (i) paying a portion of the costs of construction and equipping of a child care facility (the 2009K Project ) to be located on the Manhattan campus of Kansas State University (the University ), substantially as described in the "Architectural Program for Kansas State University Child Development Center dated September 2006, (ii) making a deposit to the Bond Reserve Account, (iii) paying capitalized interest and (iv) paying certain costs of issuance. As used herein, references to the Child Care Facility means the child care facility located on the Manhattan campus of the University, as the same may be expanded from time to time, financed from the proceeds of the Series 2009K Bonds. The Authority is an independent instrumentality of the State of Kansas pursuant to K.S.A et seq., as amended and supplemented. The Authority is authorized pursuant to Kansas Law and the Bond Resolution to issue its revenue bonds to finance the construction and equipping of the 2009K Project, which is to be owned by the Kansas Board of Regents (the "Board") and operated by the University. See "THE AUTHORITY" herein. Pursuant to the Pledge of Revenues Agreement, dated as of July 1, 2009 (the "Pledge Agreement"), by and between the Authority and the Board, the Board has pledged the Gross Revenues to the Authority, and the Authority has pledged to pay the principal of, redemption premium, if any, and interest on the Bonds from the Trust Estate, which includes, but is not limited to, all right, title and interest of the Authority in, to, and under the Pledge Agreement and the Supplemental Security Agreement. Pursuant to the Bond Resolution, the Gross Revenues are deposited into the Revenue Fund established with the State Treasurer (the "Revenue Fund"). The Bonds are payable solely and only from the Trust Estate and not from any other fund or source of the Authority or the Board. Pursuant to the Bond Resolution, the Authority will pledge and assign the Trust Estate to the payment of the principal of, redemption premium, if any, and interest on the Bonds. The Board covenants in the Pledge Agreement to establish, revise, charge and collect fees and charges for child care services rendered at the Child Care Facility, in amounts such that the Debt Service Coverage Ratio will be not less than 1.75 and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution.

8 In the event the Gross Revenues are not sufficient to pay the Debt Service Requirements on the Bonds and the timely payment of Current Expenses, the University, acting by and through the President of the University, agrees and covenants pursuant to the Supplemental Security Agreement dated as of July 1, 2009 (the "Supplemental Security Agreement") between the Authority and the University, to make available unrestricted funds of the University, other than State general fund appropriations, in such amounts and at such times as may be necessary to provide for the full and prompt payment of Debt Service Requirements and the Current Expenses when and as the same shall become due. Certain capitalized terms used in this Official Statement and not otherwise defined herein shall have the meanings given to such terms under the caption "DEFINITIONS" in APPENDIX D attached hereto. ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Series 2009K Bonds and other available funds provided by the University are estimated to be applied as follows: Sources of Funds Series 2009K-1 Bond Proceeds $4,610, Series 2009K-2 Bond Proceeds 1,530, Less Original Issue Discount (64,341.95) TOTAL $6,075, Uses of Funds Deposit or Project Account $5,000, Deposit to Bond Reserve Account 399, Deposit to Principal and Interest Account 504, Costs of Issuance 133, Underwriters' Discount 37, TOTAL $6,075, General THE SERIES 2009K BONDS The Series 2009K Bonds will be issued as fully registered Bonds in the denomination of $5,000 each or integral multiples thereof. The Series 2009K Bonds will be dated the date of initial delivery, and will mature, subject to prior redemption, in the years and amounts as shown on the inside cover page hereof and will bear interest from their dated date at the rates shown on the inside cover page. The principal of, redemption premium, if any, and interest on the Series 2009K Bonds will be payable in lawful money of the United States of America at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar") and shall be paid by (1) check or draft of the Paying Agent mailed to such Owner, or (2) at the written request addressed to the Paying Agent by any Owner of Series 2009K Bonds in the aggregate principal amount of at least $500,000 of Bonds, by wire transfer to the bank for credit to the account number filed with the Paying Agent no later than the Business Day preceding the Record Date. The principal of each Series 2009K Bond will be payable at maturity or earlier redemption upon presentation and surrender at the principal office of the Paying Agent. Interest on each Series 2009K Bond will be payable to -2-

9 the Owners of the Bonds at the address of each Owner shown on the registration records maintained by the Bond Registrar as of the fifteenth day of the calendar month next preceding each Interest Payment Date. Series 2009K Bonds will be transferable at the office of the Bond Registrar. The Authority has agreed to pay the fees, charges and expenses of the Bond Registrar, which fees, charges and expenses shall include all costs incurred in connection with the issuance, transfer, exchange, registration, redemption or payment of the Series 2009K Bonds, except (a) the reasonable fees and expenses in connection with the replacement of any Series 2009K Bond or Series 2009K Bonds mutilated, stolen, lost or destroyed, or (b) any tax or other governmental charge imposed in relation to the transfer, exchange, registration, redemption or payment of the Bonds. Such additional costs shall be paid by the Owners. Neither the Authority nor the Bond Registrar shall be required to make any such exchange or transfer of Series 2009K Bonds during the 15 days immediately preceding a Payment Date or, in the case of any proposed redemption of Bonds, during the 15 days immediately preceding the selection of Bonds for such redemption or after such Bonds or any portion thereof has been selected for redemption. Book-Entry Only System The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Series 2009K Bonds. Information with respect to the book-entry system is contained in APPENDIX E attached hereto. Security for the Bonds The Bonds and the interest thereon shall be special, limited obligations of the Authority payable solely and only from, and are secured as to the payment of principal of, redemption premium, if any, and interest by a pledge of, the Trust Estate, which consists of: (a) All right, title and interest of the Authority in, to and under the Pledge Agreement and the Supplemental Security Agreement; provided that the pledge and assignment thereby made shall not impair or diminish the obligations of the Authority under the provisions of the Pledge Agreement and the Supplemental Security Agreement; (b) All moneys and securities from time to time held under the terms of the Bond Resolution (excluding funds held in or accruing to the Rebate Fund), including, without limitation, bond proceeds and income from the temporary investment thereof and proceeds from insurance and condemnation awards, and any and all other real or personal property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security for the Bonds by the Authority; and (c) All right, title and interest of the Authority in, to and under any Qualified Swap Agreement. The payment of the principal of, redemption premium, if any, and interest on the Bonds is further secured by the establishment of a Bond Reserve Account, which is required to be funded from proceeds received from the sale of Bonds in an amount equal to the Bond Reserve Requirement. In the event funds credited to and deposited in the Principal and Interest Account with respect to the Series 2009K Bonds are insufficient to provide for payment of the principal of, redemption premium, if any, and interest on the Series 2009K Bonds promptly when due, the Authority shall cause the State Treasurer to withdraw from the Bond Reserve Account and transfer to the Principal and Interest Account with respect to the Series 2009K Bonds such sum as shall be necessary to provide for payment of such principal of, redemption premium, if any, and -3-

10 interest on the Series 2009K Bonds, which shall be applied in accordance with the provisions of the Bond Resolution. See "SUMMARY OF BOND RESOLUTION Bond Reserve Account" in APPENDIX D hereto. Pursuant to the Pledge Agreement, the Board has pledged to the Authority the Gross Revenues, which include (a) the Pledged Child Care Fees" consisting of the following fees and charges collected from parents and guardians of children attending the Child Care Facility (including related subsidies received from governmental or private agencies on behalf of children attending the Child Care Facility): (1) monthly or other periodic attendance charges (i.e., tuition ), (2) application fees, (3) registration fees, (4) late fees, (5) charges for supplies, equipment and field trips, and (6) and investment earnings amounts specified in clauses (1) through (5), and (b) investment earnings on Funds and Accounts available for Debt Service Requirements pursuant to the Bond Resolution and the Pledge Agreement. The Board covenants in the Pledge Agreement to establish and collect fees and charges for use of the Child Care Facility sufficient to pay when due the principal of, redemption premium, if any, and interest on the Bonds. The Board further covenants and agrees that it shall establish, revise, charge and collect rates, fees and charges for services rendered at the Child Care Facility in amounts sufficient to produce Gross Revenues that maintain a Debt Service Coverage Ratio of not less than 1.75, and shall also provide for required transfers to the other Funds and Accounts as provided by the Bond Resolution. Pursuant to the Supplemental Security Agreement, in the event the Gross Revenues are not sufficient to pay the Debt Service Requirements on the Bonds and the timely payment of Current Expenses, the University, acting by and through the President of the University, agrees and covenants to make available unrestricted funds of the University, other than State general fund appropriations, in such amounts and at such times as may be necessary to provide for the full and prompt payment of Debt Service Requirements and the Current Expenses when and as the same shall become due. THE BONDS SHALL NOT BE A DEBT OR GENERAL OBLIGATION OF THE AUTHORITY, THE UNIVERSITY, THE BOARD, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, AND NEITHER THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE BONDS, NOR ANY JUDGMENT THEREON OR WITH RESPECT THERETO, ARE PAYABLE IN ANY MANNER FROM UNLIMITED TAX REVENUES OF ANY KIND OR CHARACTER. THE BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY, THE UNIVERSITY, THE BOARD, THE STATE OR ANY MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. Authorization of Additional Bonds and Parity Obligations Additional Bonds may be issued under the Bond Resolution at any time and from time to time, for the purposes and upon compliance with the conditions set forth in the Bond Resolution and the Pledge Agreement. Such Additional Bonds shall be equally and ratably secured by the Bond Resolution with respect to the Trust Estate on a parity with the Series 2009K Bonds and any other Parity Bonds if the conditions set forth in the Bond Resolution and Pledge Agreement are met. See "SUMMARY OF THE BOND RESOLUTION Authorization of Additional Bonds," "SUMMARY OF THE PLEDGE AGREEMENT Additional Bonds" and "SUMMARY OF THE PLEDGE AGREEMENT Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. The Board may issue Parity Obligations in accordance with the provisions of the Pledge Agreement that will be on a parity, with respect to the Gross Revenues, with the Parity Bonds, and may also issue Subordinated Indebtedness in accordance with the provisions of the Pledge Agreement. See "SUMMARY OF THE PLEDGE -4-

11 AGREEMENT Additional Obligations" and "SUMMARY OF THE PLEDGE AGREEMENT Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. Except as specifically provided in the Bond Resolution and Pledge Agreement, the Authority will not otherwise issue any obligations ratably secured and on a parity with the Parity Bonds with respect to the Trust Estate, but the Authority may issue Subordinated Indebtedness. See "SUMMARY OF THE PLEDGE AGREEMENT Restrictions on Incurrence of Additional Indebtedness" in APPENDIX D attached hereto. Redemption Optional Redemption. The Series 2009K Bonds maturing in the years 2010 to 2019, inclusive, shall become due without option of prior payment. At the option of the Authority, the Series 2009K Bonds maturing in the year 2020 and thereafter may be called for redemption and payment prior to maturity on November 1, 2019 or thereafter in whole or in part (selection of Series 2009K Bonds to be designated by the Authority in such equitable manner as it may determine) at any time, at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Extraordinary Optional Redemption. The Series 2009K Bonds shall be subject to redemption and payment prior to the stated maturity thereof, (a) in the event of a Change of Circumstances, at the option of the Authority upon instructions from the Board or (b) upon the occurrence of an Event of Default under the Pledge Agreement, at the option of the Authority with notice to the Board, on any date, at a redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption, provided all of the Series 2009K Bonds are so redeemed and paid according to their terms. Mandatory Sinking Fund Redemption. The Series 2009K-1 Bonds maturing on November 1, 2035 shall be subject to mandatory redemption and payment prior to maturity at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption, on November 1 in each of the following years in the following principal amounts: * Maturity date. Year Principal Amount 2030 $250, , , , , * 320,000 The Series 2009K-1 Bonds maturing on November 1, 2039 shall be subject to mandatory redemption and payment prior to maturity at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption, on November 1 in each of the following years in the following principal amounts: * Maturity date. Year Principal Amount 2036 $335, , , * 375,000-5-

12 Selection of Bonds to be Redeemed Bonds shall be redeemed only in the principal amount of $5,000 or integral multiples thereof. If less than all of the Outstanding Bonds are to be redeemed and paid prior to maturity, such Bonds shall be redeemed in such equitable manner as the Authority shall determine. The Paying Agent shall thereafter select the Bonds to be redeemed in such manner as it shall determine. Paying Agent's and Bond Registrar's Duties to Redeem Bonds The Paying Agent shall call Bonds for redemption and payment and shall give notice of redemption as provided in the Bond Resolution upon receipt by the Bond Registrar at least 45 days prior to the redemption date of a written request of the Authority together with the consent or request of the Board, provided funds are on deposit with the Paying Agent and are available for such redemption on or prior to such redemption date. Such request shall specify the principal amount of and the respective maturities of the Bonds to be called for redemption, the applicable redemption price or prices and the provision or provisions of the Bond Resolution pursuant to which such Bonds are to be called for redemption. Notice of Redemption Notice of the call for any redemption identifying the Bonds or portions thereof to be redeemed shall be given by the Bond Registrar, in the name of the Authority, by mailing a copy of the redemption notice at least 30 days prior to the date fixed for redemption to the Original Purchaser, the Bond Insurer and to the Owner of each Bond to be redeemed at the address shown on the registration books maintained by the Bond Registrar; provided, however, that failure to give such notice by mailing as aforesaid, or any defect therein, shall not affect the validity of any proceedings for the redemption of the Bonds. Any notice of redemption shall state the date of redemption, the place or places at which such Bonds shall be presented for payment, the series, maturities and numbers of the Bonds or portions of Bonds to be redeemed and the principal amount thereof being redeemed, the redemption price, whether or not funds for the redemption are on deposit with the Paying Agent or the redemption is contingent upon the deposit of such funds, and shall state that interest on the Bonds described in such notice will cease to accrue from and after the redemption date if the conditions described herein under the caption "THE BONDS Effect of Call for Redemption" are met. Effect of Call for Redemption Prior to the date fixed for redemption, funds or Defeasance Obligations shall be deposited with the Paying Agent in an amount sufficient to provide for the payment of the Bonds called for redemption, accrued interest thereon to the redemption date and the redemption premium, if any. Upon the deposit of such funds or Defeasance Obligations, and notice having been given as provided in the Bond Resolution, the Bonds or portions of Bonds thus called for redemption shall cease to bear interest on the specified redemption date and shall no longer be entitled to the protection, benefit or security of the Bond Resolution and shall not be deemed to be Outstanding under the provisions of the Bond Resolution. INVESTMENT CONSIDERATIONS THE PURCHASE OF THE SERIES 2009K BONDS IS SUBJECT TO CERTAIN RISKS. EACH PROSPECTIVE INVESTOR IN THE SERIES 2009K BONDS IS ENCOURAGED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY, AND TO GIVE PARTICULAR ATTENTION TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE PAYMENT OF DEBT SERVICE ON THE SERIES 2009K BONDS, AND WHICH COULD ALSO -6-

13 AFFECT THE MARKET PRICE OF THE SERIES 2009K BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. THIS DISCUSSION OF RISK FACTORS IS NOT, AND IS NOT INTENDED TO BE, EXHAUSTIVE. No Pledge of Real or Personal Property The pledge of the Trust Estate does not constitute a pledge of the Child Care Facility or any real or personal property. Limitation of Liability The Kansas Tort claims Act (K.S.A et seq.), limits the liability of the State of Kansas, its boards, commissions, departments, agencies, bureaus and institutions for damages caused by the negligent or wrongful act or omission of any of their employees while acting within the scope of their employment. Subject to certain exceptions contained within the Kansas Tort Claims Act, liability for claims within the scope of said Act cannot exceed $500,000 for any number of claims arising out of a single occurrence or event. The directors, employees and officers of the Authority are also protected from personal liability, under K.S.A , for any reason arising from the issuance of bonds unless such person acted with willful, wanton or fraudulent misconduct or intentionally tortuous conduct. Special Obligations The Bonds are special, limited obligations of the Authority. Neither the principal of, redemption premium, if any, nor interest on the Bonds constitutes a general obligation or indebtedness of, nor is the payment thereof guaranteed by the Authority, the Board, the University, the State or any municipal corporation or political subdivision thereof. The Bonds are not payable in any manner from unlimited tax revenues of any kind or character. The Authority has no taxing power. Projection of Gross Revenues The cash flow projections for the Gross Revenues derived from the operation and ownership of the Child Care Facility as set forth under the caption "Projected Gross Revenues " and in APPENDIX B hereto, have been prepared by the University based upon the best available information with respect to historical revenues from the Center and projected revenues from the Child Care Facility, but, due to factors beyond the control of the University, may not materialize as set forth therein. Bond Reserve Account Pursuant to the Bond Resolution, an amount necessary to cause the amount on deposit in the Bond Reserve Account to equal the Bond Reserve Requirement with respect to the Bonds will be deposited in the Bond Reserve Account from proceeds of the Series 2009K Bonds. Moneys in the Bond Reserve Account may be invested in Investment Obligations. Moneys, including such Investment Obligations, may be applied by the Authority to prevent default in the payment of the principal of, redemption premium, if any, and interest on the Series 2009K Bonds in accordance with the Bond Resolution, in the event funds in the Principal and Interest Account with respect to the Series 2009K Bonds are insufficient to provide funds for payments due on the Series 2009K Bonds on any Payment Date. In the event it is necessary to sell any Investment Obligations for such purpose, the price realized upon such sale may not equal the value of the applicable Investment Obligation(s) at the most recent date to which Investment Obligations are required to be valued. This may result in available funds in the Bond Reserve Account being less than the Bond Reserve Requirement. -7-

14 In the event of a default by the Authority under the Bond Resolution, the Bond Reserve Account may, under certain circumstances and, ordinarily under the supervision of and under order of the Courts, be applied for purposes other than payment of the Parity Bonds. Such purposes may include preservation of and security of the Trust Estate and payment of other costs for which the Board is obligated under the Pledge Agreement. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Series 2009K-1 Bonds is excluded from gross income for Federal income tax purposes under current provisions of the Code, and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Series 2009K-1 Bonds includable in gross income for Federal income tax purposes. The Authority and Board have covenanted in the Bond Resolution and the Pledge Agreement, respectively, and in other documents and certificates to be delivered in connection with the issuance of the Series 2009K-1 Bonds, to comply with the provisions of the Code, including those which require the Authority or Board to take or omit to take certain actions after the issuance of the Series 2009K-1 Bonds. Because the existence and continuation of the excludability of the interest on the Series 2009K-1 Bonds depends upon events occurring after the date of issuance of the Series 2009K-1 Bonds, the opinion of Bond Counsel described under "LEGAL MATTERS" assumes the compliance by the Authority and Board with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Series 2009K-1 Bonds in the event of noncompliance with such provisions. The failure of the Authority or Board to comply with the provisions described above may cause the interest on the Series 2009K-1 Bonds to become includable in gross income for Federal income tax purposes as of the date of issuance. Bond Counsel will render its opinion that the interest on the Series 2009K Bonds is exempt from income taxation by the State of Kansas. Market for the Series 2009K Bonds There is no established secondary market for the Series 2009K Bonds, and there is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of bonds traded in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and changes in the operations and financial results of the Child Care Facility. From time to time it may be necessary to suspend indefinitely secondary market trading in selected issues of bonds as a result of the financial condition or market position of the broker dealer, prevailing market conditions, lack of adequate current financial information regarding the Bonds, whether or not the Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. The Authority and the Board have covenanted to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. In the event that the Authority and the Board fail to provide the necessary information to comply with said rule, it could adversely impact an Owner's ability to sell the Series 2009K Bonds in the secondary market. -8-

15 Legal Matters Various State and Federal laws, regulations and constitutional provisions apply to the operations of the Authority, the Board and the University. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Authority, the Board and the University. Limitations on Remedies Available to Owners of the Bonds The enforceability of the rights and remedies of the Owners of Bonds, and the obligations incurred by the Authority in issuing the Bonds, are subject to the following: the Federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the Federal or State government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Premium on Series 2009K Bonds Any person who purchases a Series 2009K Bond in excess of its principal amount, whether during the initial offering or in a secondary market transaction, should consider that the Series 2009K Bonds are subject to redemption at par under the various circumstances described under the caption "THE SERIES 2009K BONDS Redemption" herein. Suitability of Investment An investment in the Series 2009K Bonds involves a certain degree of risk. The interest rate borne by the Series 2009K Bonds (as compared to prevailing interest rates on more secure tax exempt bonds, such as those which constitute general obligations of fiscally sound municipalities) is intended to compensate the investor for assuming this element of risk. Furthermore, the tax exempt feature of the Series 2009K Bonds is more valuable to high income tax bracket investors than to investors who are in low income tax brackets, and so the value of the interest compensation to any particular investor will vary with income tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Series 2009K Bonds are an appropriate investment. NO REPRESENTATION OR ASSURANCE CAN BE MADE OR GIVEN THAT REVENUES WILL BE REALIZED BY THE AUTHORITY IN AMOUNTS SUFFICIENT TO PAY THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2009K BONDS. THE FOREGOING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE SERIES 2009K BONDS. -9-

16 Prospective purchasers of the Series 2009K Bonds should analyze carefully the information contained in this Official Statement and additional information in the form of the complete documents summarized herein, copies of which are available from the Authority. THE AUTHORITY The Authority is an independent instrumentality of the State exercising essential public functions, created in 1987 by K.S.A et seq., as amended (the "KDFA Act"). The Authority was created for the primary purposes of enhancing the ability of the State to finance capital improvements and improving access to long-term financing for State agencies, political subdivisions, public and private organizations and businesses. The powers of the Authority are vested in the Board of Directors, consisting of five public members appointed by the Governor subject to confirmation by the State Senate. The Governor also appoints a President who serves at the pleasure of the Governor. The President is an ex-officio, non-voting member of the Board of Directors. Not less than three members of the Board of Directors must be representative of the general public and not more than three members may be members of the same political party. The names, offices, principal occupations and places of business of the members of the Authority's Board of Directors and their terms are as follows: Name Office Term Brett A. Reber Chair Vice-Chair & Member Daniel L. Watkins Chair Vice Chair Member 12/15/06 to 1/15/11 5/02/03 to 1/15/11 5/02/03 to 12/15/06 12/15/06 to 1/15/09 5/02/03 to 1/15/ Principal Occupation and Place of Business Attorney McPherson, Kansas Attorney Lawrence, Kansas John G. Montgomery Member 5/02/01 to 1/15/09 President, Junction City Daily Union Junction City, Kansas Audrey H. Langworthy Member 1/29/04 to 1/15/09 Community Volunteer Prairie Village, Kansas Timothy C. Schaller Member 3/23/04 to 1/15/11 Architect Larned, Kansas Stephen R. Weatherford Ex-officio Member 1/27/03 to present President Kansas Development Finance Authority Topeka, Kansas Members of the Board of Directors serve until their successors are appointed by the Governor and confirmed by the State Senate. The Authority's General Counsel serves as Secretary to the Authority. The Authority has the rights, powers and privileges and is subject to the duties provided by the KDFA Act creating it, including the acquisition and disposal of real and personal property for its corporate purposes; the borrowing of money and issuance of notes, bonds and other obligations; the making of secured or unsecured loans for any of the purposes for which it may issue bonds (except making loans directly to individuals to finance housing developments); the provision of technical assistance and advice to the State or political subdivisions of the State; and entering into contracts with the State or political subdivisions thereof to provide such services. The Series 2009K Bonds offered hereby, together with any Additional Bonds issued under the Bond Resolution, are separately secured from all other bonds and notes issued by the Authority. No recourse shall be had for the payment of the principal of, redemption premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Bond Resolution or any other

17 Authority document contained, against any past, present or future officer, director, member, trustee, employee or agent of the Authority, or any officer, director, member, trustee, employee or agent of any successor corporation or body politic, as such, either directly or through the Authority or any successor corporation or body politic, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, trustees, members, employees or agents, as such, is hereby expressly waived and released as a condition of and consideration for the execution of the Bond Resolution and the issuance of any of the Bonds. THE KANSAS BOARD OF REGENTS As used in this Official Statement the term "Board" means the Board of Regents of the State of Kansas, as provided for in Article 6 of the Constitution and in the statutes of the State, including, prior to May 20, 1999, the state board of regents established pursuant to K.S.A et seq. and, on and after May 20, 1999, the State Board of Regents established pursuant to Senate Bill No. 345, 1999 Kansas Legislature, as successor to the state board of regents established pursuant to K.S.A et seq., and its successors. The Board consists of nine regents appointed by the Governor and confirmed by the State Senate. The term of office for each regent is four years, with appointments staggered. Not more than five regents may be of the same political party. The Board is a constitutionally established board, responsible for formulating policy under which the State universities operate and for recommending to the State Legislature the amount of State funds to be made available to each institution. With respect to State universities, the Board has the power to make and execute contracts; acquire property; pledge or assign revenues; issue revenue bonds; construct, acquire or improve properties; fix, charge and collect rents, tuition and other fees; contract for services; and execute all acts necessary to the performance of its duties. The Board controls and supervises Pittsburg State University, the University of Kansas, with its main campus at Lawrence, the Edwards Campus in Overland Park and the Medical Center with campuses at Kansas City and Wichita; Kansas State University, with its campuses in Manhattan and Salina, Wichita State University; Emporia State University; and Fort Hays State University. Revenue bonds for State universities under the control of the Board have been issued for various purposes. All outstanding revenue bonds are secured by rentals, student fees and other revenues for various projects at the respective institutions. Shown below are the principal balances of revenue bonds outstanding at June 1, 2009, for institutions under the jurisdiction of the Board. These balances are exclusive of revenue bonds previously issued which have been refunded or defeased prior to their maturities. Kansas Board of Regents Revenue Bonds Outstanding at June 1, 2009 Outstanding Principal Amount Emporia State University $10,692,900 Fort Hays State University 12,430,000 Kansas State University 138,240,000 Pittsburg State University 12,235,000 University of Kansas 130,665,000 Wichita State University 28,515,000 Total $332,777,900 In addition, as of June 1, 2009 the Authority also has outstanding three series of its Kansas Development Finance Authority Revenue Bonds (Kansas Board of Regents Comprehensive Rehabilitation and Repair Project), including Series 1997G-1, Series 2001F and Series 2004F, in the aggregate principal amount of $41,827, Such bonds were issued for the purpose of paying a portion of the costs of construction, rehabilitation, repair and equipping of various facilities located on one or more institutions under -11-

18 the control and supervision of the Board. These revenue bonds are secured by annual appropriations of the State made to the Comprehensive Rehabilitation and Repair Fund of the Board from the Kansas Educational Building Fund, a special revenue fund of the State funded by a one mill property tax levy on tangible property in the State. History and Academic Development KANSAS STATE UNIVERSITY Founded in 1863, Kansas State University was established under the Morrill Act, which created land grant colleges. In 1991 the Legislature merged the former Kansas College of Technology with the University to establish the Kansas State University-Salina College of Technology and Aviation. The University's full-time enrollment for the fall semester 2008 was in excess of 23,000, and the University employed in excess of 5,000 full-time equivalent faculty and staff. Today, the University has a main campus of 664 acres, located in northern Manhattan, Kansas, which is approximately 125 miles west of Kansas City. In 1991, the Kansas Legislature established the Salina campus of the University, through a merger of the former Kansas College of Technology with the University. The University also owns 18,000 acres throughout the State in four branch locations of the Agricultural Experiment Station and 8,600 acres in the Konza Research Prairie, a natural research area leased from Nature Conservancy and the Kansas State University Foundation, dedicated to the natural ecology of the bluestem prairie. The University currently has nine colleges, including Agriculture, Architecture and Design, Arts and Sciences, Business Administration, Education, Engineering, Human Ecology, Veterinary Medicine Salina Colleges of Technology and Aviation, and the Graduate School. The University offers associate, bachelor, master, doctorate, and professional degrees. It is the only Kansas institution offering graduate degrees in Agriculture, Human Ecology/Home Economics, and Veterinary Medicine. Annual grant expenditures in excess of $110 million for the year ended June 30, 2009 place the University among the top one hundred research universities in the nation, with a leading role in agricultural research. The KSU-Salina College of Technology and Aviation delivers programs in engineering technology, related science technology fields and aviation, offering associate and bachelor degrees. External Relationships The Kansas State University Foundation. The Kansas State University Foundation (the "Foundation") was organized in The Foundation is governed by a Board of Trustees representing geographic and educational constituencies. The essential purpose of the Kansas State University Foundation is to provide funding unavailable through State appropriations or student fees to support the educational undertakings of the University. To that end, the Foundation encourages donations of and holds in trust any real or personal property contributed for the use of the University, its faculty and its students. The Foundation is charged with investing, managing, controlling and disbursing all such gifts. It currently supports the University with over $39.7 million annually expended for grants, equipment and supplies, professorships and other faculty compensation, research, travel, public relations, construction costs, special projects, student recruitment and transfers to the Department of Intercollegiate Athletics. In addition, scholarships of more than $8.6 million dollars annually are provided through the Foundation. The Kansas State University Foundation, together with Nature Conservancy, a nonprofit organization dedicated to preservation of the natural environment and ecology, currently leases prairie land to the University for use in its experimental agriculture program. -12-

19 The Kansas State University Foundation is a separate entity from the University, and results of its financial operations are not included in the financial statements of the University. As of June 30, 2008, balance sheet assets of the Foundation were in excess of $410 million. The Kansas State University Alumni Association. The Kansas State University Alumni Association (the "Association") was chartered in Its purpose is to provide a lifelong link between the University and its alumni and friends, through programs providing records maintenance, student recruitment, publications, programs throughout the nation, fund-raising activities, volunteer identification and honors for outstanding alumni. At the beginning of each Fiscal Year, the Association is granted an allotment of State funds by the University through a contract which provides the funding for the maintenance of the alumni database. State Appropriations and the Budget Process The State of Kansas operates on a fiscal year basis, beginning on July 1 and ending the following June 30, and numbered for the calendar year in which it ends. The Legislature meets annually in early January and typically adjourns in May. The budget process is designed to provide the Legislature with accurate and detailed revenue projections, along with professionally prepared expenditure budgets for each State agency for the current and succeeding Fiscal Years. Each year, the Board of Regents approves a system-wide budget request for the submission to the Department of Administration, Division of the Budget by September for the succeeding Fiscal Year. Professional staff members at the Division of the Budget analyze and review the budget requests of the universities and other State agencies and present the budgets to the Governor for preliminary gubernatorial approval. The Governor then presents a complete State budget, with funding recommendations, to the Legislature in January, during the first week of the legislative session. During the legislative session, both the Senate Ways and Means Committee and the House Appropriations Committee review individual agency budgets, including those of the Regents' institutions, making final recommendations for legislative approval. Staff support for the Legislature also includes professional budget analysts who again scrutinize the proposed budgets. Once the proposed budget is complete and approved by the Legislature, it is again presented to the Governor for passage into law. The Governor has line-item veto authority. The Governor's veto can only be overridden by a two-thirds majority vote of both the House and Senate. This portion of the budget process is completed prior to the beginning of the succeeding Fiscal Year. The Kansas Constitution mandates that budgeted expenditures are limited to available funds from current revenue, or a combination of current revenue and available reserves. Once the budget is approved by the Legislature and Governor, State agencies, including the universities, have flexibility within their particular budgets to change line item amounts appropriately to compensate for necessary modifications due to internal or external reasons. This flexibility allows State agencies to react appropriately to either revenue variances or changing operational needs. During the Fiscal Year for which the budget has been prepared, the Governor and Legislature review the budget in progress and have the ability to make necessary adjustments. Continuous expenditure review is performed by each university and other State agencies, as well as by the Department of Administration. Also, current revenues are monitored by the Department of Administration Division of the Budget, Department of Revenue, the Legislative Research Department, the Governor, and three economists from the State's three largest Board of Regents' universities, including the University, to ensure fiscal responsibility. The following table sets forth a comparison of State appropriations to tuition and fees and other revenues for the five most recent Fiscal Years for the University. Examples of other revenue sources include -13-

20 revenues from auxiliary operations, sponsored research overhead, grants and contracts, and other miscellaneous sales and service activities. Fiscal Year Ended June 30, Kansas State University Comparison of State Appropriations to Tuition & Fees and Other Revenue Sources Fiscal Years Ended June 30, (Millions of Dollars) Revenues in Millions of Dollars As a % of Total Revenue All Other Sources State Appropriations Tuition & Fees All Other Sources Total Revenues State Appropriations Tuition & Fees Source: Controller's Office, Kansas State University. Additional University Information Additional information regarding the University is set forth in APPENDIX A attached hereto. THE CHILD CARE FACILITY Information about the Child Care Facility is set forth in APPENDIX B. Included in APPENDIX B are projected results of operations of the Child Care Facility, including projected Gross Revenues, other non-pledged operational revenues of the Child Care Facility and contributions from the University. The application of projected Gross Revenues to anticipated debt service requirements for the Bonds is set forth in APPENDIX C. No assurance is given that the projected Gross Revenues or other revenues will be realized in the amounts set forth in such Appendices. NON-LITIGATION CERTIFICATION Upon delivery of the Series 2009K Bonds, the Authority and the Board will furnish a certificate dated the date of delivery of the Series 2009K Bonds, to the effect that (a) to the knowledge of the signer or signers thereof there is no litigation pending or threatened against the Authority or the Board affecting the validity of the Pledge Agreement, the Bond Resolution or the Series 2009K Bonds; and (b) the execution, delivery and performance by the Authority or the Board of the Pledge Agreement or the Bond Resolution will not violate any provision of the Constitution, statutes or other laws of the State, or any other applicable judgment, order or regulation of any court or of any public or governmental agency or authority of the State and will not conflict with or result in any breach of any of the provisions of, or constitute a default under, any agreement or instrument to which the Authority or the Board is a party or by which either the Authority or the Board or any of their respective property is or may be bound, nor will such action result in any violation of the provisions of any statute, order, rule or regulation applicable to the Authority or the Board of any court or any federal, state or other regulatory authority or other governmental body. -14-

21 BOND RATING Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), is expected to assign a rating to the Series 2009K Bonds of "AA-." Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, by said rating agency if, in its judgment, circumstances so warrant. Any such downward revisions or withdrawal of any rating may have an adverse effect on the market price of the Series 2009K Bonds. CONTINUING DISCLOSURE Pursuant to the Pledge Agreement and the Disclosure Undertaking, the Board has agreed to provide certain financial information of the University and the Child Care Facility, including certain operating data of the University, to the Authority within 190 days after the end of each Fiscal Year. Generally, such financial information will consist of the financial information and operating data included in this Official Statement in APPENDICES A and B attached hereto, updated annually. Such financial information may be unaudited and may be prepared in accordance with Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements-and Management's Discussion and Analysis for Public Colleges and Universities, as amended by GASB Statements 37 and 38. Additionally, the Board has agreed to give to the Authority timely notice of the occurrence of material events relating to the Bonds as described under the caption "SUMMARY OF THE DISCLOSURE UNDERTAKING Reporting of Material Events" in APPENDIX D attached hereto. The Authority has agreed to transmit promptly, when received from the Board, the information described herein to certain national repositories and the Municipal Securities Rulemaking Board, as applicable. The Board and the Authority have made such agreement in an effort to comply with Rule 15c2-12 of the Securities and Exchange Commission (the "SEC Rule"). Neither the Authority nor the Board has failed to comply with previous undertakings pursuant to the SEC Rule. Reference is made to the caption "SUMMARY OF THE DISCLOSURE UNDERTAKING" contained in APPENDIX D attached hereto for a summary of the agreements of the Board and the Authority under the Disclosure Undertaking. Approval of Bonds LEGAL MATTERS All matters incident to the authorization and issuance of the Series 2009K Bonds are subject to the approval of Gilmore & Bell, P.C., Bond Counsel. The factual and financial information appearing herein and in the Appendices hereto has been supplied or reviewed by certain officials of the Authority, the Board and the University, as referred to herein, and Bond Counsel expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned "THE SERIES 2009K BONDS," "LEGAL MATTERS" and APPENDIX D attached hereto. Opinion of Bond Counsel Federal Tax Exemption. In the opinion of Bond Counsel, under existing law, the interest on the Series 2009K-1 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. It should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining -15-

22 adjusted current earnings. The opinions set forth in this paragraph are subject to the condition that the Authority and the Board comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the Series 2009K-1 Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the Board have covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2009K-1 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Series 2009K-1 Bonds have not been designated as "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code. BOND COUNSEL IS NOT RENDERING ANY OPINION WITH RESPECT TO THE TREATMENT OF INTEREST ON THE SERIES 2009K-2 BONDS FOR PURPOSES OF FEDERAL INCOME TAXATION, AND THE INTEREST ON THE SERIES 2009K-2 BONDS IS EXPECTED TO BE INCLUDED IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. Other Federal Tax Consequences. Prospective purchasers of the Series 2009K-1 Bonds should be aware that (i) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 2009K-1 Bonds or, in the case of a financial institution, that portion of such institution's interest expense allocable to interest on the Series 2009K-1 Bonds; (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Series 2009K-1 Bonds; (iii) interest on the Series 2009K-1 Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code; (iv) passive investment income, including interest on the Bonds, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year, if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income; and (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on the Series 2009K-1 Bonds. These categories of Bondowners should consult their own tax advisors as to the applicability of these consequences. Kansas Tax Exemption. The Series 2009K Bonds and the interest paid thereon are exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes. Bond Counsel expresses no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2009K Bonds. FINANCIAL ADVISOR Columbia Capital Management, LLC, Overland Park, Kansas has served as financial advisor ("Financial Advisor") to the Authority. The Financial Advisor has assisted in various matters relating to the planning, structuring and issuance of the Series 2009K Bonds, including advice in the preparation of this Official Statement. The Financial Advisor has not passed on the accuracy or completeness of the factual information contained in this Official Statement. The Financial Advisor has not participated in any underwriting syndicate that will purchase or sell any of the Series 2009K Bonds. -16-

23 UNDERWRITING Piper Jaffray & Co. (the "Underwriter"), is purchasing the Series 2009K Bonds from the Authority for resale in the normal course of its business activities. The Underwriter has agreed, subject to certain conditions contained in the Bond Purchase Agreement, to purchase the Series 2009K Bonds from the Authority at a purchase price of $6,037, (representing the principal amount thereof, less an underwriting discount of $37,883.80, less original issue discount of $64,341.95). The Bond Purchase Agreement provides that the Underwriter shall purchase all the Series 2009K Bonds if any are purchased, subject to the conditions contained therein. The Series 2009K Bonds may be offered and sold to certain dealers, banks and others at prices different than the offering prices indicated on the cover page hereof, and such offering prices may be changed from time to time by the Underwriter. MISCELLANEOUS The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is made to all such documents for full and complete statements of all matters of fact relating to the Series 2009K Bonds, the security for the payment of the Series 2009K Bonds and the rights of the Owners thereof. During the period of the offering, copies of drafts of such documents may be examined at the offices of the Authority. Following delivery of the Series 2009K Bonds, copies of such documents may be examined at the office of the Authority. The information contained in this Official Statement has been compiled from official and other sources deemed to be reliable, and while not guaranteed as to completeness or accuracy, is believed to be correct as of the date thereof. Any statement made in this Official Statement including all appendices hereto, involving matters of opinion or of estimates, whether or not expressly so stated, are set forth as such and not as representation of fact, and no representation is made that any of the estimates will be realized. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information presented herein since the date hereof. This Official Statement is not to be construed as a contract or agreement between the Authority, the University, the Board, the Underwriters and the purchasers or Owners of any Series 2009K Bonds. AUTHORIZATION OF OFFICIAL STATEMENT The preparation of this Official Statement and its distribution has been authorized by the Authority as of the date on the cover page hereof. -17-

24 ADDITIONAL INFORMATION Additional information with respect to the Authority and the Series 2009K Bonds may be obtained upon request from the Kansas Development Finance Authority, 555 South Kansas Avenue, Suite 202, Topeka, KS 66603, Attention: Stephen R. Weatherford, President. KANSAS DEVELOPMENT FINANCE AUTHORITY By: /s/ Rebecca E. Floyd Rebecca E. Floyd, Executive Vice President -18-

25 APPENDIX A THE UNIVERSITY Student Body and Enrollment The University has a coeducational student body with approximately 76.3% of students having resident status and 23.7% having nonresident status, based on Fall 2008 semester headcount. The following tables reflect headcount information, full-time equivalent ("FTE") student information and applications and admissions information for the fall semesters of the years indicated. The following table is a history of student headcount for the fall semesters, showing both resident vs. nonresident status and undergraduate vs. graduate status. Fall Semester Kansas State University Student Headcount Fall Semesters, Total Students Residents Nonresidents Undergraduate Graduate ,543 18,076 3,467 17,903 3, ,929 18,815 3,114 18,252 3, ,396 19,149 3,247 18,770 3, ,762 18,942 3,820 19,048 3, ,050 18,951 4,099 19,083 3, ,151 18,796 4,364 19,098 4, ,182 18,737 4,445 18,838 4, ,141 18,428 4,713 18,761 4, ,332 18,253 5,079 18,454 4, ,520 17,957 5,563 18,491 5,029 Source: The Office of Planning and Analysis of Kansas State University. According to live birth-rate data, the population of graduating high school seniors in Kansas will decrease 11.2% over the next ten years, thus causing a projected reduction in student headcount in future years as reflected in the following table showing projected student headcount for the fall semesters 2009 through 2015: Kansas State University Projected Student Headcount Fall Semesters, Fall Semester Estimated Headcount , , , , , , ,257 Source: The Office of Planning and Analysis of Kansas State University. A-1

26 The following tables provide is a history of full time equivalent ("FTE") student enrollment for the fall semesters 1999 through 2008: Fall Semester Kansas State University Full Time Equivalent Student Enrollment Fall Semesters, Total FTE Students FTE Undergraduates ,578 15,706 2, ,127 16,194 2, ,416 16,555 2, ,603 16,703 2, ,659 16,607 3, ,788 16,729 3, ,615 16,513 3, ,750 16,538 3, ,918 16,337 3, ,932 16,252 3,680 Source: The Office of Planning and Analysis of Kansas State University. FTE Graduates The following table is a history of the freshmen undergraduate applications received by the University, the number of accepted applications and the number of new freshmen undergraduates registered at the University for the fall semesters of 2001 through Also shown are the composite American College Testing ("ACT") scores of the enrolled students. Kansas State University Applications, Admissions and American College Testing (ACT) Composite Scores of Freshman Undergraduate Students Fall Semesters, * Under- Graduate Applications** a Under- Graduates Accepted a New Under- Graduates Registered b ACT Composite Score c Fall Semester ,631 6,817 5, ,733 6,387 5, ,399 6,406 5, ,526 6,510 5, ,937 6,510 5, ,685 6,403 5, ,212 6,472 5, ,712 6,832 5, d * Includes transfer students. **Includes incomplete applications. a Source: Admissions Office of Kansas State University. b Sum of IPEDS first-time freshmen total and Registrar's 20th day new transfer report total. c Source: ACT Profile report. Does not include transfer students' scores. d Source: Admissions Office of Kansas State University. A-2

27 Kansas State University Schedule of Faculty Data Fall Semesters * Number Full-Time Equivalent Faculty 1,539 1,560 1,598 1,620 1,635 Number Full-Time Faculty 1,191 1,199 1,242 1,260 1,305 Number Part-Time Faculty Number Tenured Faculty Average Age of Faculty Percent of Tenured Faculty 54% 61% 53% 52% 52% Percent Holding Terminal Degrees 78% 85% 71% 78% 73% Student-Faculty Ratio *2005 data includes full-time faculty only Note: Student-Faculty ratio is derived by dividing total full-time equivalent ("FTE") students by FTE Instructional faculty. Source: Planning and Analysis of Kansas State University (IPEDS Fall Staff Report) Budget Office data cards Tuition and Fees Kansas State University is in a peer group defined by the Board. The peer group includes the following universities: Colorado State University; Iowa State University; North Carolina State University; Oklahoma State University; and Oregon State University. The following tables show a history of the changes in tuition and fees of full-time students enrolled at Kansas State University since Fiscal Year 2001 and a comparison to the appropriate peer group for these years. Between the Fiscal Years 2001 and 2008, tuition and fees at Kansas State University increased 124.2% for resident undergraduates and 112.7% for resident graduates, and 67.2% for nonresident undergraduates and 64.3% for nonresident graduates. Kansas State University to Peer Group Average Comparison Schedule of Annual Tuition and Fees Undergraduate Students Fiscal Years Ending June 30, Peer Average Resident KSU as % of Peer Average Resident Peer Average Nonresident KSU as % of Peer Average Nonresident Fiscal Year KSU Resident KSU Nonresident 2001 $2,781 $3, % $9,549 10, % ,834 3, ,761 11, ,444 3, ,704 12, ,059 4, ,949 14, ,665 4, ,425 14, ,124 4, ,454 15, ,779 5, ,514 15, ,235 5, ,970 17, ,627 5, ,932 18, Source: The Office of Planning and Analysis of Kansas State University, as derived from the Kansas Board of Regents Statistical Abstract. A-3

28 Kansas State University to Peer Group Average Comparison Schedule of Annual Tuition and Fees Graduate Students Fiscal Years Ending June 30, Peer Average Resident KSU as % of Peer Average Resident Peer Average Nonresident KSU as % of Peer Average Nonresident Fiscal Year KSU Resident KSU Nonresident ,158 3, % 8,920 10, % ,223 4, ,088 11, ,857 4, ,951 12, ,527 5, ,079 14, ,211 5, ,435 14, ,724 5, ,380 15, ,352 6, ,296 16, ,718 6, ,662 16, ,139 7, ,547 17, Source: The Office of Planning and Analysis of Kansas State University, as derived from Association of American State Colleges and Universities/National Association of State Universities and Land Grant Colleges Surveys of Student Charges at Public Institutions. The current academic year's tuition and fees of the six Kansas Board of Regents Institutions are shown in the following table. Kansas Board of Regents Institutions and Their Peer Groups Comparison Schedule of Full-time Tuition and Fees per Year Effective Fiscal Year Ending June 30, 2008 Kansas University Wichita Emporia Pittsburg Fort Hays State of State State State State University Kansas University University University University Resident Undergraduate $6,234 $6,600 $4,804 $3,926 $4,060 $3,356 Graduate 6,718 6,532 5,110 4,554 4,590 3,712 Peer Average: Undergraduate 5,726 6,190 6,458 5,738 5,738 5,738 Graduate Unavailable Nonresident Undergraduate 15,970 16,106 12,152 11,976 11,866 10,544 Graduate 14,662 14,556 13,508 12,186 11,254 9,808 Peer Average: Undergraduate 17,344 20,042 17,136 12,724 12,724 12,724 Graduate Unavailable Source: The Office of the Kansas Board of Regents Statistical Abstract Report. A-4

29 FINANCIAL INFORMATION OF THE UNIVERSITY The fiscal operations of the University constitute an extensive business operation. The State Legislature approved appropriations from State General Use Funds for operation of the University over $185 million for Fiscal Year 2009 and over $166 million for Fiscal Year The following table outlines the total operating budget for the University, excluding capital improvements, for the following fiscal years ending June 30: Fiscal Year Budget 2004 $531,700, ,600, ,700, ,500, ,000, ,900,000 Kansas State University is one of six universities operated under the direction of the Kansas Board of Regents. The Board of Regents is a constitutionally established Board of the State of Kansas, and the universities under the Board's supervision are statutorily precluded from independent audit of their financial operations. An independent single audit of the State of Kansas includes the operations of the Regents institutions. Excerpts of the most currently available Kansas State University Annual Financial Report (for the fiscal year ended June 30, 2008) are provided in this APPENDIX A.. The financial information which follows is excerpted from the Kansas State University Annual Financial Report for the fiscal year ended June 30, 2008, prepared by the University on a modified cash basis of accounting and represents the historical format of the University's financial statements prior to GASB 34/35. In 2003 the University began conversion to the new reporting format specified in GASB 34/35 and issued a separate financial report in that format, not contained herein. This financial information is provided for background information only. Not all revenues of the University are pledged to the repayment of the Bonds. Only the Gross Revenues, as defined in the Bond Resolution, are pledged to the payment of the Bonds. In addition, pursuant to the Supplemental Security Agreement, the University has agreed to make certain payments with respect to the Bonds in the event that the Gross Revenues are not sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds when due. A-5

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31 Kansas State University Kansas State University Annual Financial Report Annual Financial Report Fiscal Year Ended June 30, 2008 Fiscal Year Ended June 30, 2007

32 TABLE OF CONTENTS Management s Discussion and Analysis Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows Notes to Financial Statements

33 Kansas State University Management s Discussion and Analysis For the Year Ended June 30, 2008 The following Management s Discussion and Analysis (MD&A) provides an overview of the financial performance of Kansas State University (University) based on currently known facts, decisions and conditions. Readers are encouraged to consider this information in conjunction with the statements and footnotes. The financial statements, footnotes, and this discussion are the responsibility of management. USING THE FINANCIAL STATEMENTS This report consists of the three financial statements. The Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Net Assets, and the Statement of Cash Flows. These financial statements are prepared in accordance with Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements---and Management s Discussion and Analysis---for Public Colleges and Universities, as amended by GASB Statements 37 and 38. These statements establish standards for external financial reporting for public colleges and universities and require that financial statements be presented on a consolidated basis to focus on the University as a whole. STATEMENT OF NET ASSETS The Statement of Net Assets presents the assets, liabilities, and net assets of the University at a point in time (at the end of the fiscal year). The Statement of Net Assets includes all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector institutions. Under the accrual basis of accounting all of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. Within the Statement of Net Assets, assets and liabilities are further classified as current or non-current. The current classification distinguishes those assets that are highly liquid and available for immediate and unrestricted use by the University, and those liabilities likely to be settled in the next 12 months. Net assets are divided into three categories: 1. Invested in capital assets, net of debt, indicates the university s equity in property, plant, and equipment owned by the University. 2. Restricted net assets are further divided into two subcategories, non-expendable and expendable. The corpus of non-expendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the University but must be spent for purposes as determined by donors and/or external entities who have placed time or purpose restrictions on the use of the assets. 3. Unrestricted net assets are available to the University for any lawful purpose of the institution. Total assets at June 30, 2008 were $603.3 million, an increase of $39.6 million (7%). Capital assets, net of depreciation, comprised 67.3%, or $406 million of the total assets. Total liabilities were $230.1 million at June 30, 2008, an increase of $24.3 million (11.8%), compared to $205.8 million at June 30, Long-term liabilities comprised 72%, or $165.7 million of the total liabilities. 3

34 Total net assets at June 30, 2008 were $373.2 million, a $15.3 million increase over the prior year. The breakout of net assets is shown below: Capital assets, net of related debt.. $240,382,812 Restricted net assets... 62,063,109 Unrestricted net assets 70,793,101 Total net assets.. $373,239,022 The composition of current and non-current assets and liabilities and net assets is displayed below for both the 2007 and 2008 fiscal year ends (in thousands): STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses and Changes in Net Assets presents the total revenues earned and expenses incurred by the University for operating, non-operating and other related activities during a period of time. Its purpose is to assess the University s operating results. Revenues Operating revenues at the University as of June 30, 2008 increased by 5.7% over the previous fiscal year. The following is a brief summary of the significant changes: Student fee revenues, after scholarship allowances, were $142.2 million in 2008, compared to $131.9 million in This increase is a result of a tuition increase approved by the Kansas Board of Regents for fiscal year The goal of the tuition increase, which was the result of collaboration between University Administration and University students, was to provide additional funds to the University to improve or enhance student education while State appropriations decreased significantly. The increase was used for specific expenses including faculty salary increases, instructional and technological upgrades, and additional scholarships. 4