1. The Regents of the University of California Financial Update January 2011

2. 1 U N I V E R S I T Y O F C A L I F O R N I A Working to serve California and the nation every year UC Davis UC Davis Medical Center UC Berkeley UCSF UCSF Medical Center UC Irvine Medical Center UCLA Medical Center UC San Diego Medical Center UC Santa Barbara UCLA UC Irvine UC Merced UC Riverside UC Santa Cruz UC San Diego EDUCATING over 220,000 students CONFERRING over 40,000 bachelor’s degrees and 3,800 PhDs CONDUCTING over $4 billion in research HANDLING 3.7 million out- patient visits, 254,000 ER visits, and 142,000 in- patient admissions GENERATING $4 billion in tax revenues CREATING 2.3 million California jobs this decade EMPLOYING over 180,000 Californians TRAINING 40% of all interns and residents statewide GRADUATING 60% of all med school grads In California

3. 2 U N I V E R S I T Y O F C A L I F O R N I A Two-year University budget picture Add’l. State Funds, 65.4 Debt Restructuring, 75.0 Add’l. State Funds, 65.4

4. 3 U N I V E R S I T Y O F C A L I F O R N I A UC management has responded swiftly to budgetary challenges presented by reductions in State funding Net reduction of more than $600 million in FY 2010 vs. FY 2008 was addressed by revenue increases & expense reductions – Student fee increases – Two sequential 15% increases for undergraduate & professional students – Curtailed freshmen enrollment by 2,300 in fall 2009 and 1,500 in fall 2010 – Reduced enrollment not funded by the State – Employee furloughs / salary reduction – Campus and systemwide layoffs, programmatic reductions – Restructuring of UC General Revenue Bonds – Targeted approximately $75 million in each of FY 2010 & FY 2011 – Executed as a current refunding of debt service due May 15 Mandatory State appropriation deferrals – Over $1 billion of mandatory deferrals in FY 2011 – Bridge financing with CP borrowing and STIP liquidity

5. 4 U N I V E R S I T Y O F C A L I F O R N I A “Working Smarter” towards administrative efficiencies Keep the pipeline full on three levels of change: Campus restructuring initiatives Regional centers of excellence Systemwide efficiency measures Vision: 10 campuses using ONE administrative framework: Common, integrated financial and payroll systems Common, integrated time & attendance/HR systems Common, integrated extramural fund accounting Common, integrated data warehousing Common, integrated asset management Common, integrated strategic investment program Common, integrated e-procurement Common, integrated energy solutions Common, integrated approach to ICR $500 million of positive fiscal impact in five years

6. 5 U N I V E R S I T Y O F C A L I F O R N I A UC Strategic Initiative Program (CAPEQUIP, C3, AND STARS) Strategic funds accumulated by the capital equipment segment would fund the interest costs of the other two segments CapEquip C3 (Cross-Campus Collaborations) STARs (Strategic Teaching Acquisition and Retention) Low fixed-rate loans for capital equipment acquisitions, in lieu of higher-rate third-party leasing) Goal: Cut costs through economies of scale inherent in UC debt program No-interest loans to fund regional centers of excellence and/or systemwide efficiency initiatives Goal: Cut duplication and increase systems commonality No-interest loans to fund lab renovations and lab equipment for star faculty recruits Goal: Maintain competitive research and academic excellence Internal-loan financing program would leverage the University’s high credit rating to make low borrowing costs available to the campuses for a broader range of purposes beyond solely capital construction Encourage strategic investments and partnerships across the system through three segments of the program:

7. 6 U N I V E R S I T Y O F C A L I F O R N I A Rating (Moody’s/S&P)Par AmountSecurity Pledge General Revenue BondsAa1/AA$5.87 BillionGeneral revenues of the Regents, excluding state appropriations and medical center revenues Limited Project Revenue BondsAa2/AA-$1.85 BillionAuxiliary project gross revenues, subordinate to General Revenues Medical Center Pooled Revenue Bonds Aa2/AA-$2.30 BillionGross academic medical center revenues Tax-Exempt & Taxable Commercial Paper P-1/A-1+$713 Million ($2 Billion authorized) Project revenues The Regents of the University of California Debt Portfolio * As of 12/1/10. Excludes State Lease Revenue Bonds and campus-originated leases. UC Credits

8. 7 U N I V E R S I T Y O F C A L I F O R N I A Debt Service in $000’s * As of 12/1/10. Excludes capitalized interest payments, campus-originated leases and State Lease Revenue Bonds. UC Debt Service Restructuring for Cash Flow Relief