University of California Strategic Investment Program (UCSIP) Cross-Campus Collaboration (C3) July 11, 2013

1 U N I V E R S I T Y O F C A L I F O R N I A CFO Division Organizational Chart EVP Chief Financial Officer Peter J. Taylor Strategic Initiatives Financial Services & Controls Financial Accounting Risk Services Procurement UC PATH Capital Markets Finance Working Smarter Investments

U N I V E R S I T Y O F C A L I F O R N I A I. Capital Markets Finance

3 U N I V E R S I T Y O F C A L I F O R N I A Organizational Chart Sandra Kim Executive Director Caroline Brossard Senior Finance Officer Pikka Sodhi Finance Officer Allen Yin Finance Officer Rafif Ismail Finance Officer Tim Loving Administrative Assistant Location 1111 Franklin St., Oakland 10 th Floor, West Side, Between Accounting and Banking & Treasury Services

4 U N I V E R S I T Y O F C A L I F O R N I A Capital Markets Finance: Office of the President We support capital-raising activities system wide through: Financing systemwide capital needs through short term and long term funding programs Managing the University's debt & loan portfolio Providing financial advisory services for campuses and medical centers Maintaining strong relationships with investors, rating agencies and other external parties The staff of Capital Markets Finance is dedicated to providing efficient service with the highest standards of excellence

5 U N I V E R S I T Y O F C A L I F O R N I A University of California Revenue Debt Par Outstanding By Credit Type (in millions) ** The University of California is currently rated by Moody’s, Standard & Poor’s and Fitch* – General Revenue Bonds – Aa1/AA/AA+ The University’s primary borrowing vehicles for financing of projects critical to the University’s mission of education and research – Limited Project Revenue Bonds – Aa2/AA-/AA Financing vehicle for auxiliary projects such as housing and parking – Medical Center Pooled Revenue Bonds – Aa2/AA- Financing vehicle for the University’s academic medical center projects – State Public Works Board – Aa2/AA-/AA- Bonds issued (lease/leaseback) for the University by the State *Negative Outlook (Moody’s), Stable Outlook (S&P, Fitch) **The University also currently has $77.73 million of Hospital Revenue Bonds outstanding

6 U N I V E R S I T Y O F C A L I F O R N I A University of California Debt Profile Notes: Does not include UC Irvine third party housing debt service Does not include GRB Series AD principal due in 2112 Variable rate bonds with swaps assume interest based on associated swap rates GRB Series Y, Z and AH assumes principal is amortized 2037 – 2041 (Series Y-1 & Y-2 have a mandatory tender on 7/1/2014, AH matures on 7/1/2019) and variable rate Series Z pays interest at 2%

7 U N I V E R S I T Y O F C A L I F O R N I A UC Bondholder Relations Website A new investor relations website provides UC’s bond holders up-to-date information on UC debt: information/index.htmlhttp:// information/index.html Available information: – Types of UC credit – UC ratings – Annual financial reports – Official statements – Outstanding par by credit – Debt profile

U N I V E R S I T Y O F C A L I F O R N I A II. UC Strategic Investment Program

9 U N I V E R S I T Y O F C A L I F O R N I A In 2010, the CFO Division established UCSIP as a suite of internal-loan financing programs that leverage UC’s high credit rating to make low borrowing costs available for purposes other than capital construction UCSIP facilitates capital equipment acquisition, implementation of administrative efficiency projects and faculty recruitment/retention through the following funding programs UC Strategic Investment Program (UCSIP) Utilized for equipment acquisition in lieu of 3 rd party leasing Amortizing loans funded by CP Loan interest rate – 1.99% Term – 3-7 years Campuses submit authorization requests to Regents annually (May). On average $150MM - $200MM auth. per year Utilized for regional centers of excellence, systemwide efficiency initiatives Amortizing loans funded by CP Loan interest rate – 0% Term – 3-7 years Campuses competitively apply throughout year Approx. $20-50MM auth. per year. Utilized for lab renovations and/or equipment specific to a single faculty recruit Amortizing loans funded by CP Loan interest rate – 0% Term –up to 7 yrs (equip), up to 15 yrs (renovations) Campuses competitively apply throughout year Approx. $30MM auth. per year. * Strategic Teaching Acquisition and Retention: New program – Official launch date – FY Cap Equip C3 STARS*

10 U N I V E R S I T Y O F C A L I F O R N I A Cross-Campus Collaborations (C3) Cross-Campus Collaborations (C3) is an internal loan program whereby 0% loans are made to campuses, medical centres or labs for the implementation of administrative efficiency projects C3 program encourages collaboration between campuses in this effort, including systemwide efficiency initiatives C3

11 U N I V E R S I T Y O F C A L I F O R N I A C3 Program Requirements – How to Participate Application Complete a C3 application* at least 60 days prior to the desired funding, It should include: Desired total loan amount in $1,000 increments Description of proposed C3 project Potential risks and drawbacks Expected fund source for repayment Review Capital Markets Finance responds within 30 days Funding Loans are funded at the end of each quarter only. Participants may expend local funds anytime after C3 funding approval Expenditures can be accumulated across multiple quarters before requesting reimbursement * Signed by the Chancellor or Lab Director

12 U N I V E R S I T Y O F C A L I F O R N I A C3 Loan Characteristics and Reimbursements Must be at least $100,000, in increments of $1,000 Each loan will have its own uniform amortization schedule with principal due every May 15 th Participants must execute a Promissory Note* Loan Characteristics Submitted via EIAOnline before the end of each quarter Includes brief expenditure description, amortization term (3-7 years) and repayment source Each reimbursement is an individual loan, one project could have multiple loans Reimbursement Requests Approval is subject to debt financing feasibility metrics Final approved C3 amount is the maximum funding authorization** Maximum funding authorization is counted against participant’s debt capacity until actual utilization is known Approval * Delineates loan terms and debt service schedule ** Unused C3 authorization amounts remaining after three years after approval date will automatically lapse

13 U N I V E R S I T Y O F C A L I F O R N I A C3 Reimbursement Request Form* * Participants complete the top half of this form and submit it to UCOP. UCOP then completes the bottom half and returns it to Participant for signature. After receiving Participant signature, UCOP will execute the loan and transfer funds to Participant on the designated transfer date.

14 U N I V E R S I T Y O F C A L I F O R N I A C3 Utilization Across UC Total C3 authorization $106.6 million New Financial System Upgrades Procurement Initiatives Operational Excellence Implementations Other Initiatives* * Includes Online Education and Promise Platform Campus Participants:

15 U N I V E R S I T Y O F C A L I F O R N I A Goal Support the University’s core mission and maintain academic excellence by directing more resources away from administrative expenses and toward teaching and research Campus- wide Initiative (1) Manage administrative costs aggressively Create a reliable administrative infrastructure for all departments Streamline operations Financing Draw on C3 funds to finance the property’s total acquisition cost of $29,250,000 Benefits Savings of $3,500,000 (2) Reduction of cost and compliance risk created by redundant work and paper- based systems Simplification and standardization of administrative tasks and processes (1) Started in 2010; project was completed in April 2013 (2) Under lease, the NPV cost of the University’s occupancy (at a 5% discount rate) over the next 10 years is $19.9 million. The NPV cost of a purchase (at a 5% discount rate, assuming financing at 4.6%, interest only for 5 years and then fully amortized for 5 years) over 10 years is $16.44 million, a savings of $3.5 million Case Study: UC Berkeley’s Transition to Campus Shared Services (CSS)