$18,000,000* Hastings College of the Law Refunding Bonds, Series 2017

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1 This Preliminary Official Statement and the information contained herein are subject to completion and amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED DECEMBER 6, 2017 NEW ISSUE FULL BOOK-ENTRY RATING: See "RATINGS" herein In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the College, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ) and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. As discussed further below, legislation has been introduced which, if enacted, would repeal the alternative minimum tax for tax years beginning after December 31, Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2017 Bonds. See TAX MATTERS. Dated: December, * Preliminary, subject to change. $18,000,000* Hastings College of the Law Refunding Bonds, Series 2017 Dated: Date of Delivery Due: April 1, as shown on inside cover The Hastings College of the Law Refunding Bonds, Series 2017 (the Series 2017 Bonds ) are being issued in fully registered form in denominations of $5,000 or any integral multiple thereof, and when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). Interest on the Series 2017 Bonds will be payable on April 1 and October 1 of each year, commencing April 1, DTC will act as securities depository for the Series 2017 Bonds. Individual purchases of the Series 2017 Bonds will be made in bookentry form, all as described herein. Payments of principal, premium, if any, and interest on the Series 2017 Bonds will be paid by Wells Fargo Bank, National Association, as trustee (the "Trustee"), to DTC which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Series 2017 Bonds. See "APPENDIX D BOOK-ENTRY SYSTEM" herein. The Series 2017 Bonds are subject to redemption prior to their respective maturity dates, as more fully described herein. See "THE SERIES 2017 BONDS" herein. The Series 2017 Bonds are being issued by Hastings College of the Law (the College ) pursuant to Article 1 of Chapter 3 of Part 57 of Division 9 of Title 1 (commencing with Section 92200) of the California Education Code (the "Act") and a Trust Agreement, dated as of April 1, 2003, as supplemented by a First Supplemental Trust Agreement, dated as of February 1, 2008, and as further supplemented by a Second Supplemental Trust Agreement, dated as of December 1, 2017 (the "Trust Agreement"), by and between the College and Wells Fargo Bank, National Association, for the purpose of refunding all of the Hastings College of the Law Bonds, Series 2008 (the "Refunded Bonds"), and to pay certain costs related to the issuance of the Series 2017 Bonds and the refunding of the Refunded Bonds. See "PLAN OF FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS. The Series 2017 Bonds are payable from Available Funds (as defined herein) of the College. See "PLAN OF FINANCE" and "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS" herein. As more fully described under the captions INTRODUCTION Evaluation of Bond Insurance and BOND INSURANCE herein, the College is evaluating whether to purchase a bond insurance policy with respect to one or more maturities of the Series 2017 Bonds. If the College decides to purchase such a policy, the scheduled payment of principal of and interest on the Series 2017 Bonds of one or more maturities when due will be guaranteed under such insurance policy to be issued concurrently with the delivery of the Series 2017 Bonds by ASSURED GUARANTY MUNICIPAL CORP. THE SERIES 2017 BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE COLLEGE FOR WHICH THE COLLEGE IS OBLIGATED OR PERMITTED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE COLLEGE HAS LEVIED OR PLEDGED OR WILL LEVY OR PLEDGE ANY OTHER FORM OF TAXATION. WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION, NEITHER THE SERIES 2017 BONDS NOR THE OBLIGATION OF THE COLLEGE TO MAKE PAYMENTS ON THE SERIES 2017 BONDS CONSTITUTES AN INDEBTEDNESS OF THE COLLEGE, THE UNIVERSITY OF CALIFORNIA OR ITS REGENTS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS. Maturity Schedule (See the Inside Cover hereof) This cover page contains information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page not otherwise defined shall have the meanings set forth herein. The Series 2017 Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval as to their legality by Bond Counsel to the College and certain other conditions. PFM Financial Advisors LLC, San Francisco, California, is serving as Municipal Advisor to the College in connection with the issuance of the Series 2017 Bonds. Orrick, Herrington & Sutcliffe LLP, San Francisco, California, is serving as Disclosure Counsel to the College. Certain matters will be passed upon for the College by its General Counsel, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California. It is anticipated that the Series 2017 Bonds will be available for delivery through the DTC book-entry system in New York, New York, on or about December 21, *

2 AMOUNTS, MATURITIES, INTEREST RATES AND YIELDS MATURITY SCHEDULE $18,000,000 * Serial Bonds CUSIP 1 Base: Maturity (April 1) Principal Amount Interest Rate Yield CUSIP 1 Suffix Maturity (April 1) Principal Amount Interest Rate Yield CUSIP 1 Suffix $ * % Term Bond due April 1, 20 Yield % * Preliminary, subject to change. 1 CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright 2017 CUSIP Global Services. All rights reserved. CUSIP data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP numbers are provided for convenience of reference only. Neither the College nor the Underwriter take any responsibility for the accuracy of such CUSIP numbers.

3 HASTINGS COLLEGE OF THE LAW BOARD OF DIRECTORS Thomas Gede, Chair Simona Agnolucci Donald Bradley Tina Combs Marci Dragun Claes H. Lewenhaupt Mary Noel Pepys Courtney Power Carl W. Robertson COLLEGE OFFICERS David Faigman, Chancellor and Dean Morris Ratner, Academic Dean David Seward, Chief Financial Officer Elise K. Traynum, General Counsel BOND AND DISCLOSURE COUNSEL Orrick, Herrington & Sutcliffe LLP San Francisco, California MUNICIPAL ADVISOR PFM Financial Advisors LLC San Francisco, California TRUSTEE Wells Fargo Bank, National Association San Francisco, California VERIFICATION AGENT Causey Demgen & Moore P.C. Denver, Colorado

4 No dealer, broker, salesperson or other person has been authorized by the College to give any information or to make any representations other than those contained herein, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2017 Bonds by any person in any jurisdiction which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Series 2017 Bonds. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information and expressions of opinion herein are subject to change without notice, and neither 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 or opinions set forth herein or in the affairs of the College since the date hereof. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more repositories. The information in this Official Statement has been provided by the College and sources the College considers reliable. The Municipal Advisor makes no representation as to the accuracy or sufficiency of the information contained in this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2017 BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements". Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar words. Such forward-looking statements may include, but are not limited to, certain statements contained in the information under the captions "DEBT SERVICE SCHEDULE," "RISK FACTORS," "HASTINGS COLLEGE OF THE LAW" and "BOOK- ENTRY SYSTEM" in APPENDIX D of this Official Statement. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COLLEGE DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR. 2

5 Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Series 2017 Bonds or the advisability of investing in the Series 2017 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE and Appendix G - Specimen Municipal Bond Insurance Policy. 3

6 TABLE OF CONTENTS Page INTRODUCTION... 1 General... 1 Evaluation of Bond Insurance... 1 PLAN OF FINANCE... 2 ESTIMATED SOURCES AND USES OF FUNDS... 3 THE SERIES 2017 BONDS... 3 General... 3 Redemption... 5 Selection of Bonds for Redemption... 5 Notice of Redemption... 6 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS... 6 General... 6 Bond Fund... 8 Additional Indebtedness... 9 BOND INSURANCE Bond Insurance Policy Assured Guaranty Municipal Corp COVENANTS OF THE COLLEGE Accreditation No Liens on Available Funds Tax Covenants DEBT SERVICE SCHEDULE Coverage POTENTIAL FOR BOND INSURANCE The Insurance Policy RISK FACTORS Limitation of Remedies Litigation Revenue Sources to Pay the Series 2017 Bonds Enrollment Levels State of California Budget Seismic Risks Bankruptcy and Equitable Limitations Future Legislation i

7 TABLE OF CONTENTS (continued) Page Initiative and Referendum HASTINGS COLLEGE OF THE LAW General Information Financial Statement Summary TAX MATTERS CERTAIN LEGAL MATTERS CONTINUING DISCLOSURE LITIGATION AND OTHER MATTERS RATINGS PROFESSIONALS INVOLVED IN THE OFFERING UNDERWRITING VERIFICATION ADDITIONAL INFORMATION EXECUTION AND DELIVERY APPENDIX A - GENERAL INFORMATION CONCERNING HASTINGS COLLEGE OF THE LAW... A-1 APPENDIX B - AUDITED FINANCIAL STATEMENTS OF HASTINGS COLLEGE OF THE LAW FOR THE FISCAL YEARS ENDED JUNE 30, 2017 AND JUNE 30, B-1 APPENDIX C - SUMMARY OF THE TRUST AGREEMENT... C-1 APPENDIX D - BOOK-ENTRY SYSTEM... D-1 APPENDIX E - PROPOSED FORM OF OPINION OF BOND COUNSEL... E-1 APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT... F-1 APPENDIX G - SPECIMEN MUNICIPAL BOND INSURANCE POLICY... G-1 ii

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9 $18,000,000 * HASTINGS COLLEGE OF THE LAW REFUNDING BONDS SERIES 2017 INTRODUCTION This Introduction is subject in all respects to the more complete information contained elsewhere in this Official Statement, and the offering of the Series 2017 Bonds to potential investors is made only by means of the entire Official Statement. Terms used in this Introduction and not otherwise defined shall have the respective meanings assigned to them elsewhere in this Official Statement. General The purpose of this Official Statement, which includes the cover page and appendices hereto, is to set forth certain information concerning the issuance and sale by Hastings College of the Law (the "College") of its Refunding Bonds, Series 2017 (the "Series 2017 Bonds") in the aggregate initial principal amount of $18,000,000*. The Series 2017 Bonds are being issued pursuant to Article 1 of Chapter 3 of Part 57 of Division 9 of Title 1 (commencing with Section 92200) of the California Education Code (the "Act") and a Trust Agreement, dated as of April 1, 2003, as supplemented by a First Supplemental Trust Agreement, dated as of February 1, 2008, and as further supplemented by a Second Supplemental Trust Agreement, dated as of December 1, 2017 (the "Trust Agreement"), by and between the College and Wells Fargo Bank, National Association, as trustee thereunder (the "Trustee"). The Trust Agreement provides that the College may from time to time issue additional series of bonds ("Additional Indebtedness" and collectively with the Series 2017 Bonds, the "Bonds") payable from the same source of funds as the Series 2017 Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Additional Indebtedness" herein. Evaluation of Bond Insurance As more fully described under the caption BOND INSURANCE herein, the College is evaluating whether to purchase a bond insurance policy with respect to one or more maturities of the Series 2017 Bonds. If the College decides to purchase such a policy, the scheduled payment of principal of and interest on the Series 2017 Bonds of one or more maturities (the Insured Series 2017 Bonds ) when due will be guaranteed under such insurance policy (the Policy ) to be issued concurrently with the delivery of the Series 2017 Bonds by Assured Guaranty Municipal Corp. ( AGM ). In addition, the Trust Agreement will be modified to conform to the requirements of the issuance of such policy by AGM, including, but not limited to: (i) providing that AGM be deemed to be the sole Holder of the Insured Series 2017 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Holders of the Insured Series 2017 Bonds are entitled to take pursuant to the Trust Agreement pertaining to (1) defaults and remedies and (2) the duties and obligations of the Trustee; (ii) providing that any maturity of Insured Series 2017 Bonds shall not be accelerated without the consent of AGM and in the event the maturity of any maturity or maturities of the Insured Series 2017 Bonds is accelerated, AGM may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the College) and the Trustee shall be required to accept such amounts, (iii) providing that AGM be deemed to be a third party beneficiary under the Trust Agreement with respect to the Insured Series 2017 Bonds, (iv) providing that any amendment, supplement, modification to, or waiver of, the Trust Agreement that * Preliminary, subject to change. 1

10 requires the consent of Holders or adversely affects the rights and interests of AGM shall be subject to the prior written consent of AGM; and (v) providing that AGM shall, to the extent it makes any payment of principal of or interest on the Insured Series 2017 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of such policy (which subrogation rights shall also include the rights of any such recipients in connection with any Insolvency Proceeding). PLAN OF FINANCE The Series 2017 Bonds are being issued to advance refund all of the remaining outstanding Hastings College of the Law Bonds, Series 2008 (the "Refunded Bonds") and pay certain costs of issuance associated with the issuance of the Series 2017 Bonds. The Refunded Bonds were issued for the purpose of financing a portion of the construction, improvement, equipping, remodeling and renovation of facilities owned by the College, specifically a 395-stall, multi-level parking garage, with 9,900 square feet of ground-level retail space and approximately 2,700 square feet of below-grade storage space, that was constructed on parcels located at the southeast corner of Golden Gate Avenue and Larkin Street in San Francisco, California. A portion of the proceeds of the Series 2017 Bonds will be deposited into an escrow fund (the Escrow Fund ) established with respect to the Refunded Bonds under an Escrow Agreement (the Escrow Agreement ) dated as of December 1, 2017, by and between the College and Wells Fargo Bank, National Association, the trustee for the Refunded Bonds, as escrow agent (the Escrow Agent ). A portion of the proceeds of the Series 2017 Bonds deposited into the Escrow Fund will be invested in certain Permitted Investments, as defined in the Trust Agreement pursuant to which the Refunded Bonds were issued. Such Permitted Investments, along with proceeds in the Escrow Fund held uninvested as cash, will be in an amount sufficient to redeem the Refunded Bonds on April 1, 2018, at a redemption price equal to 100% of the principal amount to be redeemed, together with interest accrued thereon to such date. The mathematical computations used to determine the sufficiency of the escrow deposit will be verified by the Verification Agent (defined herein). See VERIFICATION herein. 2

11 ESTIMATED SOURCES AND USES OF FUNDS below: The estimated sources and uses of funds with respect to the Series 2017 Bonds are set forth Sources: Bond Proceeds: Par Amount Net Premium Uses of Funds: Escrow Fund Cost of Issuance Fund (1) [Bond Insurance Premium] Underwriter's Discount (1) Includes bond counsel fees and expenses, disclosure counsel fees and expenses, fees of the municipal advisor, Trustee, verification agent, rating agency fees, printing costs, and certain miscellaneous expenses. General THE SERIES 2017 BONDS The Series 2017 Bonds shall be designated "Hastings College of the Law Refunding Bonds, Series 2017" and shall be in the aggregate principal amount of $18,000,000 *. The Series 2017 Bonds shall be dated as of the date of delivery thereof, shall be issued only in fully registered form in denominations of five thousand dollars ($5,000) or any integral multiple of five thousand dollars ($5,000) (not exceeding the principal amount of Series 2017 Bonds maturing at any one time), and shall mature on the dates and in the principal amounts and bear interest at the rates as set forth in the following schedule: Maturity Date (April 1) Principal Amount Interest Rate * Preliminary, subject to change. 3

12 Maturity Date (April 1) Principal Amount Interest Rate The Series 2017 Bonds shall bear interest at the rates (based on a 360-day year of twelve 30-day months) set forth above, payable on April 1, 2018, and semiannually thereafter on April 1, and October 1 in each year. The Series 2017 Bonds shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is an Interest Payment Date or during the period from the first day of the month in which an Interest Payment Date occurs to such Interest Payment Date, in which event they shall bear interest from such Interest Payment Date, or unless such date of authentication is prior to the first Record Date, in which event they shall bear interest from the date of delivery thereof; provided, however, that if at the time of authentication of any Series 2017 Bond interest is then in default on the Outstanding Series 2017 Bonds, such Series 2017 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the Outstanding Series 2017 Bonds. Record Date means, with respect to an Interest Payment Date, the fifteenth day of the month proceeding such Interest Payment Date. Payment of interest on the Series 2017 Bonds due on or before the maturity or prior redemption thereof shall be made to the person whose name appears in the Series 2017 Bonds registration books kept by the Trustee pursuant to the Trust Agreement as the registered owner thereof as of the close of business on the Record Date for an Interest Payment Date, whether or not such day is a Business Day, such interest to be paid by check mailed on the Interest Payment Date by first-class mail to such registered owner at the address as it appears in such books; provided that upon the written request of a Holder of $1,000,000 or more in aggregate principal amount of Bonds received by the Trustee prior to the applicable Record Date, interest shall be paid by wire transfer in immediately available funds. Any such written request shall remain in effect until rescinded in writing by the Holder. The principal of the Series 2017 Bonds shall be payable in lawful money of the United States of America at the Corporate Trust Office of the Trustee. Payment of the principal of the Series 2017 Bonds shall be made upon the surrender thereof at maturity or on redemption prior to maturity at the Corporate Trust Office of the Trustee. The obligations of the College under the Series 2017 Bonds, including the obligation to make all payments of interest and principal when due, are absolute and unconditional, without any right of set-off or counterclaim and are payable from Available Funds of the College. "Available Funds" means all funds of the College lawfully available to pay Annual Debt Service, including but not limited to all income, rentals, fees, tuition, rates, charges, insurance proceeds, condemnation proceeds and other moneys derived from the ownership or operation of the College, but excluding any refundable deposits, fines or forfeitures, less (a) restricted gifts to the College, (b) amounts appropriated by the State for the support of the College, and (c) resident student fees, except to the extent such amounts or fees referred to in clauses (b) and (c), or any other moneys are from time to time designated by the College's Board of Directors for the payment of Annual Debt Service. The Series 2017 Bonds do not constitute an obligation of the College for which the College is obligated to levy or pledge any form of taxation; the College has no taxing power. Within the meaning of any constitutional or statutory debt limitation or restriction, neither the Series 2017 Bonds nor the obligation of the College to make payments on the Series 2017 Bonds constitute an indebtedness of the College, the University of California or its Regents, the State of California, or any of its political subdivisions. The Series 2017 Bonds will be issued in fully registered form, and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New 4

13 York ("DTC"). DTC will act as securities depository of the Series 2017 Bonds. Ownership interests in the Series 2017 Bonds may be purchased in book-entry form only. Purchasers will not receive securities certificates representing their interests in the Series 2017 Bonds purchased. Payments of principal of and interest on the Series 2017 Bonds will be paid by the Trustee to DTC which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Series 2017 Bonds. See "APPENDIX D BOOK-ENTRY SYSTEM" herein. Redemption * Optional Redemption. The Series 2017 Bonds maturing on or before April 1, 20 are not subject to optional redemption prior to their respective stated maturity dates. The Series 2017 Bonds maturing on or after April 1, 20 are subject to optional redemption prior to their respective stated maturity dates, at the option of the College, from the proceeds of Additional Indebtedness or any source of Available Funds (other than mandatory sinking fund payments), as a whole or in part on any date (and by lot within a maturity if less than all of the Series 2017 Bonds of a series of such maturity are then called for redemption) on or after April 1, 20, at a redemption price equal to the principal amount of the Series 2017 Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium. Mandatory Redemption. (i) The Series 2017 Bonds maturing on April 1, 20, upon notice as hereinafter provided, shall be subject to mandatory sinking fund redemption prior to maturity, in part on April 1 of each year on and after April 1, 20, by lot, from mandatory sinking account payments in the amounts set forth below at a redemption price equal to the sum of the principal amount thereof, without premium, plus accrued interest thereon to the redemption date. Mandatory Sinking Account Payment Date (April 1) Mandatory Sinking Account Payment Principal Amount *Final maturity. Selection of Bonds for Redemption If less than all Outstanding Bonds maturing by their terms on any one date are to be redeemed at any one time, the Trustee shall select the Series 2017 Bonds of such maturity date to be redeemed in any manner that it deems appropriate and fair and shall promptly notify the College in writing of the certificate numbers of the Series 2017 Bonds so selected for redemption. For purposes of such selection, Bonds shall be deemed to be composed of $5,000 multiples and any such multiple may be separately redeemed. * Preliminary, subject to change. 5

14 Notice of Redemption Notice of redemption shall be mailed by first-class mail by the Trustee, not less than thirty (30) nor more than sixty (60) days prior to the redemption date to (i) the respective Holders of the Series 2017 Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, (ii) the Securities Depositories and (iii) one or more Information Services. Notice of redemption to the Securities Depositories and the Information Services shall be given by first-class mail or facsimile transmission. Each notice of redemption shall state the date of such notice, the redemption price, if any, (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Series 2017 Bonds of such maturity, to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the redemption price, if any, thereof and in the case of a Bond to be redeemed in part only, the specified portion of the principal amount thereof to be redeemed, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. Failure to receive such notice or any defect therein shall not invalidate any of the proceedings taken in connection with such redemption. If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the Series 2017 Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds shall cease to accrue, and the Holders of such Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed pursuant to the provisions of this section shall be cancelled by the Trustee and shall be destroyed with a certificate of destruction furnished to the College and shall not be reissued. The College agrees to reimburse the Trustee for costs incurred in connection with the microfilming or other permanent record relating thereto. The College may direct that a conditional notice of redemption be delivered in connection with any optional redemption of bonds which shall state the conditions to the effectiveness of the redemption and shall provide that if such conditions are not met on or prior to the redemption date, such notice of redemption shall be deemed rescinded and of no force or effect. General SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS In order to provide sufficient funds for repayment of principal and interest when due on the Series 2017 Bonds, the Board of Directors of the College is empowered and obligated to use all Available Funds of the College. "Available Funds" means all funds of the College lawfully available to pay Annual Debt Service, including but not limited to all income, rentals, fees, tuition, charges, insurance proceeds, condemnation proceeds and other moneys derived from the ownership or operation of the College, but excluding any refundable deposits, fines or forfeitures, less (a) restricted gifts to the College, (b) amounts appropriated by the State for the support of the College, and (c) resident student fees, except to the extent such amounts or fees referred to in clauses (b) and (c) or any other moneys are from time to time designated by the College's Board of Directors for the payment of Annual Debt Service. 6

15 Under the Trust Agreement, the term "Revenues Available for Debt Service" means Available Funds less Net Expenses. "Available Funds" means all funds of the College lawfully available to pay Annual Debt Service, including but not limited to all income, rentals, fees, tuition, rates, charges, insurance proceeds, condemnation proceeds and other moneys derived from the ownership or operation of the College, but excluding any refundable deposits, fines or forfeitures, less (a) restricted gifts to the College, (b) amounts appropriated by the State for the support of the College, and (c) resident student fees, except to the extent such amounts or fees referred to in clauses (b) and (c), or any other moneys are from time to time designated by the College's Board of Directors for the payment of Annual Debt Service. "Net Expenses" means all operating and other expenses of the College less an amount of such expenses paid from moneys excluded from Available Funds by clauses (a), (b) and (c) of the definition of Available Funds. Annual Debt Service is not included in Net Expenses. The table below presents the historical Total Operating Revenues, Available Funds, Net Expenses and Revenues Available for Debt Service received in the fiscal years ending June 30, 2013 through June 30, See also APPENDIX A under "FINANCIAL OPERATIONS Available Funds, Net Expenses and Revenues Available for Debt Service" for historical and projected figures. Historical Total Operating Revenues, Available Funds, Net Expenses and Revenues Available for Debt Service Fiscal Year Ending June 30, Total Operating Revenues Available Funds Net Expenses Revenues Available for Debt Service Debt Service (1) Coverage Ratio (2) 2013 $44,000,203 $12,008,956 $5,823,113 $6,185,842 $2,121, x ,934,614 13,457, ,457,136 1,592, ,680,048 14,455,506 3,644,835 10,810,671 1,593, ,629,414 14,246,278 3,658,838 10,587,440 1,593, ,567,457 18,524, ,524,784 1,596, Source: Hastings College of the Law. (1) Includes debt service payable on the Refunded Bonds and a prior series of bonds which were redeemed in April For a description of the College's existing liabilities, see APPENDIX A under "FINANCIAL OPERATIONS Liabilities". (2) In calculating the Coverage Ratio, the College determines how much, if any, of the Available Funds are Available for Debt Service. To determine this amount, the following calculation is made: In calculating Net Expenses, Annual Debt Service is not included in Net Expenses and total operating expenses are adjusted to: remove depreciation expense remove those expenses funded by restricted private gifts and grants remove those expenses funded by state appropriations remove those expenses funded by resident student fees This calculation may result in zero or negative total Net Expenses indicating that no Available Funds are needed to support the College's operating expenses. In other words, the College's operating expenses, as adjusted for depreciation expense, are fully supported by restricted private gifts and grants, state appropriations and resident student fees. As such, all other revenues of the College are Available for Debt Service. 7

16 Although the definition of Available Funds in the Trust Agreement excludes resident student fees, this revenue can be made available for debt service for the Series 2017 bonds at the election of the Board of Directors, subject to any limitations that may be imposed in the future by the State Legislature. There are no currently imposed legal restrictions which would preclude the use of resident student fees to pay debt service. Bond Fund At least 15 days prior to each Interest Payment Date, the College will, from Available Funds of the College, transfer to the Trustee for deposit in the Series 2017 Bond Fund established and maintained by the Trustee under the Trust Agreement, an amount equal to the principal, if any, and interest due on the Series 2017 Bonds on each such Interest Payment Date. The Trustee will transfer from the Series 2017 Bond Fund, in immediately available funds, for deposit into the following respective accounts, the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of funds sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any deposit is made to any account subsequent in priority: (a) (b) Interest Account, and Principal Account All money in each of such accounts will be held in trust by the Trustee and will be applied, used and withdrawn only for the purposes described below. Interest Account. On or before each Interest Payment Date, the Trustee will set aside from the Series 2017 Bond Fund and deposit in the Interest Account that amount of money which, together with the amount then on deposit in the Interest Account, is equal to the amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need be made in the Interest Account if the amount contained therein is at least equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. All money in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Series 2017 Bonds as it will become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). Principal Account. On each Principal Payment Date, the Trustee will set aside from the Series 2017 Bond Fund and deposit in the Principal Account an amount of money which, together with any amounts then on deposit in the Principal Account, is equal to the amount of all sinking fund payments required to be made on such Principal Payment Date into the respective sinking fund accounts for all Outstanding Term Bonds and the principal amount of all Outstanding Serial Bonds maturing on such Principal Payment Date. No deposit need be made in the Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal of all Outstanding Serial Bonds maturing by their terms on such Principal Payment Date plus the aggregate amount of all sinking fund payments required to be made on such Principal Payment Date for all Outstanding Term Bonds. The Trustee will establish and maintain within the Principal Account a separate subaccount for the Term Bonds of each series and maturity (the "Sinking Account"). With respect to each Sinking Account, on each mandatory sinking account payment date established for such Sinking Account, the 8

17 Trustee will apply the mandatory sinking account payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the series and maturity for which such Sinking Account was established, upon the notice and in the manner described under the caption "THE SERIES 2017 BONDS Redemption"; provided that, at any time prior to giving such notice of such redemption, the Trustee may upon the Written Request of the College, apply moneys in such Sinking Account to the purchase for cancellation of Term Bonds of such series and maturity at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account), as may be directed by the College, except that the purchase price (excluding accrued interest) will not exceed the redemption price that would be payable for such Bonds upon redemption by application of such Mandatory Sinking Account Payment. If, during the twelve-month period immediately preceding said mandatory sinking account payment date, the Trustee has purchased Term Bonds of such series and maturity with moneys in such Sinking Account, such Bonds so purchased will be applied, to the extent of the full principal amount thereof to reduce said mandatory sinking account payment. All money in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Series 2017 Bonds as they will become due and payable, whether at maturity or redemption, except that any money in any sinking fund account will be used and withdrawn by the Trustee only to purchase or to redeem or to pay Term Bonds for which such sinking fund account was created. The Trustee will establish and maintain within the Principal Account a separate account for the Term Bond maturing on April 1, 20, designated as the Series 2017 Sinking Account. Subject to the terms and conditions set forth in the Trust Agreement, the Term Bond maturing on April 1, 20, will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the amounts and upon the dates established in the Trust Agreement and set forth under the heading "THE SERIES 2017 BONDS Redemption Mandatory Redemption" herein. Following the payments from the Principal Account and the Interest Account on each April 1, described above, any moneys remaining in the Bond Fund will be transferred by the Trustee to the College. Additional Indebtedness The College may from time to time issue additional evidences of indebtedness for borrowed money, including but not limited to bonds, notes, bond anticipation notes, commercial paper, lease or installment purchase agreements or certificates of participation therein, payable from the same source of funds as the Series 2017 Bonds ("Additional Indebtedness" and collectively with the Series 2017 Bonds, the "Bonds"), but only subject to the provisions of the Trust Agreement, in order to (i) finance facilities or other costs determined by the College s Board of Directors to be necessary or convenient for the functioning of the College, and for payment of all costs incidental to or connected with the issuance of Additional Indebtedness for such purpose, and/or (ii) refund any Bonds then Outstanding, including payment of all costs incidental to or connected with such refunding. Among other conditions, the Trust Agreement requires that prior to the issuance of any Additional Indebtedness, the Trustee shall have received a Certificate of the College to the effect that, for the Fiscal Year immediately preceding the Fiscal Year in which such Additional Indebtedness is being issued, Revenues Available for Debt Service were at least equal to 1.05 times Maximum Annual Debt Service including all Outstanding Bonds and such Additional Indebtedness. For the purpose of Additional Indebtedness, Annual Debt Service on outstanding Bonds is not included in Net Expenses. 9

18 The calculation of Revenues Available for Debt Service described above may include any Revenues Available for Debt Service projected to be produced by any new or increased fees, charges or tuition that were approved by the College's Board of Directors but not yet implemented in the Fiscal Year immediately preceding the Fiscal Year in which such Additional Indebtedness is being issued. If such Additional Indebtedness is being issued to finance a facility that will produce revenues which will constitute Available Funds, the calculation of Revenues Available for Debt Service described above may include the Revenues Available for Debt Service projected to be produced by the facility if the Trustee shall have received a certificate of the College confirming the projection of Revenues Available for Debt Service to be produced by the facility. For a definition of "Maximum Annual Debt Service" and "Indebtedness," see APPENDIX C under "SUMMARY OF THE TRUST AGREEMENT - Definitions." BOND INSURANCE The College is evaluating whether to purchase a bond insurance policy with respect to one or more maturities of the Series 2017 Bonds. The decision of whether to purchase a bond insurance policy will be made prior to the time the College enters into a contract with the Underwriter regarding the purchase of the Series 2017 Bonds by the Underwriter. If the College determines to purchase a bond insurance policy, such policy will be issued by Assured Guaranty Municipal Corp. and will insure the principal of and interest on the Series 2017 Bonds with respect to the maturities of the Series 2017 Bonds that are insured. THE FOLLOWING DESCRIPTION OF THE BOND INSURANCE POLICY AND THE INSURER IS APPLICABLE ONLY IN THE EVENT THAT THE COLLEGE DETERMINES TO PURCHASE THE BOND INSURANCE POLICY AND THE BOND INSURANCE POLICY IS ISSUED BY THE BOND INSURER. Bond Insurance Policy Concurrently with the issuance of the Series 2017 Bonds maturing April 1, 20 through April 1, 20 (the Insured Series 2017 Bonds ), Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Insured Series 2017 Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Insured Series 2017 Bonds when due as set forth in the form of the Policy included as Appendix G to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above 10

19 ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On June 26, 2017, S&P issued a research update report in which it affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM s insurance financial strength rating of AA+ (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. On August 8, 2016, Moody s published a credit opinion affirming its existing insurance financial strength rating of A2 (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody s may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM At September 30, 2017: The policyholders surplus of AGM was approximately $2,322 million. The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. ( MAC ) (as described below) were approximately $1,371 million. Such amount includes 100% of AGM s contingency reserve and 60.7% of MAC s contingency reserve. The net unearned premium reserves of AGM and its subsidiaries (as described below) were approximately $1,681 million. Such amount includes (i) 100% of the net unearned premium reserves of AGM and AGM s wholly owned subsidiaries Assured Guaranty (Europe) plc, Assured Guaranty (UK) plc, CIFG Europe S.A. and Assured Guaranty (London) plc (together, the AGM European Subsidiaries ) and (ii) 60.7% of the net unearned premium reserve of MAC. The policyholders surplus of AGM and the contingency reserves and net unearned premium reserves of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves of the AGM European Subsidiaries were determined in accordance with accounting principles generally accepted in the United States of America. 11

20 Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (filed by AGL with the SEC on February 24, 2017); (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 (filed by AGL with the SEC on May 5, 2017); (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 (filed by AGL with the SEC on August 3, 2017); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (filed by AGL with the SEC on November 3, 2017). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Insured Series 2017 Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM makes no representation regarding the Insured Series 2017 Bonds or the advisability of investing in the Insured Series 2017 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. 12

21 COVENANTS OF THE COLLEGE Accreditation In the Trust Agreement, the College has covenanted that it will maintain its accreditation by (1) the American Bar Association, and (2) the Committee of Bar Examiners of the State, so long as the College operates a program accredited thereby (the "Accrediting Bodies"), or their respective successors as bodies that accredit schools like the College, or, if none, another nationally recognized body or bodies that accredit such schools. The College has covenanted to provide to the Trustee, within thirty (30) days of receipt thereof, copies of any action letter sent to the College by each such Accrediting Body following its review of the report of each team which visited the College's facilities, which apprises the College that such Accrediting Body is issuing a warning to the College or placing the College on probation. No Liens on Available Funds In the Trust Agreement, the College has covenanted and agreed that it will not create, or permit the creation of, any pledge of, lien on, security interest in or encumbrance upon Available Funds. The College also covenanted and agreed that it will not incur any Indebtedness payable from Available Funds other than the Series 2017 Bonds except as provided for in the Trust Agreement. Tax Covenants In the Trust Agreement, the College has covenanted and agreed that it will not use or permit the use of any proceeds of the Series 2017 Bonds or any other funds of the College, directly or indirectly, to acquire any securities or obligations, and will not take or permit to be taken any other action or actions, which would cause any Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code, or which would otherwise affect the exclusion of interest on the Series 2017 Bonds from gross income of the recipients thereof for federal income tax purposes. The College will at all times do and perform all acts and things permitted by law and necessary or desirable in order to assure that interest paid by the College on the Series 2017 Bonds will, for federal income tax purposes, be excluded from the gross income of the recipients thereof. For a description of other covenants of the College, see APPENDIX C under "SUMMARY OF THE TRUST AGREEMENT Covenants of the College." 13

22 DEBT SERVICE SCHEDULE The following table presents the Annual Debt Service on the Series 2017 Bonds. HASTINGS COLLEGE OF THE LAW REFUNDING BONDS, SERIES 2017 Debt Service Debt Service Year Ending April 1 Principal Interest Total TOTAL: 14

23 Coverage The Revenues Available for Debt Service presented under "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS - Historical Unrestricted Current Fund Revenues, Available Funds, Net Expenses and Revenues Available for Debt Service" above for fiscal year ending June 30, 2017 would provide coverage for the Maximum Annual Debt Service on the Series 2017 Bonds of approximately 12x. The Insurance Policy POTENTIAL FOR BOND INSURANCE The College has applied for municipal bond insurance to guarantee the scheduled payment of principal of and interest on one or more maturities of the Series 2017 Bonds and, if a commitment is issued to insure the Series 2017 Bonds, will determine prior to the sale of the Series 2017 Bonds whether to obtain such insurance for one or more maturities. RISK FACTORS The following section describes certain risk factors affecting the payment of and security for the Series 2017 Bonds. The following information should be considered by prospective investors in evaluating the Series 2017 Bonds. However, it does not purport to be an exhaustive list of risks or other considerations which may be relevant to an investment in the Series 2017 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. There can be no assurance that other risk factors will not become material in the future. Future economic and other conditions, including changes in the demand for legal education, economic trends and events, technological developments and demographic shifts may influence the ability of the College to meet debt service requirements. Many factors such as the confidence of the public in the College, federal and state policies affecting funding for higher education, changes in government regulations, capability of College management, competition and litigation as well as increased costs may adversely affect the future financial condition of the College and, consequently, its ability to make payments of principal, premium, if any, and interest on the Series 2017 Bonds. There can be no assurance given that the financial condition of the College and/or the utilization of the facilities of the College will not be materially and adversely affected by future economic and other conditions. With respect to the financial position of the College as of June 30, 2017, see the audited financial statements attached hereto as APPENDIX B. Limitation of Remedies The rights of the owners of the Series 2017 Bonds are subject to the limitations on legal remedies against public agencies of the State of California, including applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the enforcement of such remedies against public entities, such as the College, and to the application of general principles of equity. Bankruptcy proceedings, if initiated, could subject the owners of the Series 2017 Bonds to judicial discretion and interpretation of their rights in bankruptcy proceedings or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. See "RISK FACTORS Bankruptcy and Equitable Limitations" herein. Preliminary, subject to change. 15

24 Litigation In September 2017, the California Supreme Court granted a petition for review to decide whether the City and County of San Francisco can compel public universities, including the College, that operate parking facilities within the City and County of San Francisco to collect city taxes from parking users and remit them to San Francisco. The San Francisco Superior Court and the Court of Appeal ruled in favor of the College, finding that the universities are exempt from otherwise-valid local regulation when engaged in governmental activities, and that parking operations are governmental activities. Should the California Supreme Court find in favor of the City and County of San Francisco, the College s future revenues derived from parking fees would be negatively impacted. In the event that the College receives an adverse ruling, the effect on future revenues (collection of back taxes is not being sought) would be approximately $400,000 annually based on budgeted parking revenues. The City and County of San Francisco is not seeking collection of back taxes. See "LITIGATION AND OTHER MATTERS" herein. Revenue Sources to Pay the Series 2017 Bonds The College receives a significant portion of its funding from subventions by the State. As a result, decreases in the revenues received by the State can affect subventions made by the State to the College and other public entities in the State. For a discussion of the potential impact of State budget actions for fiscal year on the College in particular, see APPENDIX A under "FINANCIAL OPERATIONS State Budget for Fiscal Year " Amounts appropriated by the State for the support of the College are not Available Funds, except to the extent such amounts are from time to time designated by the College's Board of Directors for the payment of Annual Debt Service. Enrollment Levels Law school applications have declined in recent years. To attract and retain students, the College has awarded larger merit-based scholarships. The College s revenues and financial strength will depend in part upon maintaining certain enrollment levels while balancing tuition discounts. A reduction in enrollment will have a direct result of reducing tuition payments and fee revenues. Tuition discounting could also have a negative impact on reserves and fee revenues. See APPENDIX A under "ENROLLMENT." State of California Budget The State contributes directly and indirectly to a number of the College's activities. The fiscal year budget enacted by the Governor of the State provides $ million of on-going State general funds, an increase of 9.2% ($1.1 million) from the $ million State appropriation provided for the College in The budget also includes a technical adjustment that removed $2,000,000 in one-time funding provided in the budget for deferred maintenance projects. As a result of this technical adjustment, general fund support declined by 6.8% ($933,000) from the level. Seismic Risks The College is located in a seismically active region and could sustain extensive damage to its facilities in a major earthquake, both from ground motion and possible liquefaction of underlying soils. Damage could include breaks in utility, gas, drainage and sewage lines, loss of water supply from the 16

25 City's Hetch Hetchy system, and displacement or collapse of one or more of the College's four buildings which could, in the worst case, necessitate the closing of one or more buildings for an extended period of time. In October 1989, an earthquake measuring 7.1 on the Richter scale and with an epicenter approximately 50 miles south of the College struck the San Francisco Bay Area. There was no material structural damage to any of the College's three buildings. The College's contingency plans for such emergencies were implemented immediately. As a result, the College was closed and classroom instruction was postponed for three days. The College paid $256,000 for repairs from funds on hand and was reimbursed for the majority of these costs by the Federal Emergency Management Agency. Since that time, seismic upgrades of the College's facilities at Snodgrass Hall (198 McAllister Street) and Kane Hall (200 McAllister Street) were completed in 1999 and 2007, respectively. The parking garage (376 Larkin Street) built in 2009 fully attains seismic performance standards as required by the California Building Code. The College s facility at 100 McAllister was constructed in 1929 and does not currently meet today s seismic standards. The LRCP calls for the upgrade and renovation of the structure, which is planned to begin in Bankruptcy and Equitable Limitations In addition to the limitation on remedies contained in the Trust Agreement, the rights and remedies provided in the Trust Agreement may be limited by and are subject to the provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect the enforcement of creditors' rights. The various legal opinions to be delivered concurrently with the delivery of the Series 2017 Bonds (including Bond Counsel's approving legal opinion) may be qualified, as to the enforceability of the Series 2017 Bonds, the Trust Agreement and other related documents, by bankruptcy, reorganization, moratorium, insolvency, fraudulent conveyance or other similar laws relating to or affecting the enforcement of creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitation on legal remedies against public agencies in the State. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code) which governs the bankruptcy proceedings for public agencies such as the College, there are no involuntary petitions in bankruptcy. If the College were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners and the Trustee could be prohibited from taking any steps to enforce their rights under the Trust Agreement, and from taking any steps to collect amounts due from the College under the Trust Agreement. Future Legislation The College may be subject to various laws, rules and regulations adopted by State and federal governments and their agencies. The College is unable to predict the adoption or amendment of any such laws, rules or regulations, or their effect on the operations or financial condition of the College. Initiative and Referendum The ability of the College to comply with its covenants under the Trust Agreement and to generate revenues sufficient to pay the principal of and interest on the Series 2017 Bonds may be adversely affected by actions and events outside the control of the College, including without limitation by actions taken (or not taken) by voters of the State. 17

26 Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of initiative and referendum, respectively. It is possible that future initiatives could be approved by the voters from time to time, including without limitation initiatives that revise or restrict the powers of the College over revenues and expenditures. The College is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the College. General Information HASTINGS COLLEGE OF THE LAW Hastings College of the Law was founded in 1878 as the "law department" of the University of California. The College is the oldest law school in the Western United States, and is also one of the largest public law schools in the Western United States. The College was founded by Chief Justice Serranus Clinton Hastings and was established by the California Legislature with its own Board of Directors, who govern the College independently of the Board of Regents of the University of California since the founding of the College. The Board of Regents of the University of California possesses degree-granting authority, but all other aspects of the College are under the control of the College s Board of Directors. The College is the only stand-alone, public law school in the nation. Certain economic and demographic information concerning the College is set forth in APPENDIX A hereto under "GENERAL INFORMATION CONCERNING HASTINGS COLLEGE OF THE LAW" and "ENROLLMENT AND STUDENT SERVICES." Financial Statement Summary For the College's general purpose financial statements at June 30, 2017, and for the fiscal year then ended, and at June 30, 2016, and the fiscal year then ended, see "APPENDIX B AUDITED FINANCIAL STATEMENTS OF HASTINGS COLLEGE OF THE LAW FOR THE FISCAL YEAR ENDED JUNE 30, 2017 AND AUDITED FINANCIAL STATEMENTS OF HASTINGS COLLEGE OF THE LAW FOR THE FISCAL YEAR ENDED JUNE 30, 2016." Moss Adams, LLP, Certified Public Accountants, serve as independent auditors to the College and a copy of their report is attached hereto as Exhibit B. Moss Adams, LLP has not reviewed or approved any portion of this Official Statement. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the College ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel relating to the Series 2017 Bonds is set forth in Appendix E hereto. To the extent the issue price of any maturity of the Series 2017 Bonds is less than the amount to be paid at maturity of such Series 2017 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2017 Bonds), the difference constitutes original issue 18

27 discount, the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2017 Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2017 Bonds is the first price at which a substantial amount of such maturity of the Series 2017 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2017 Bonds accrues daily over the term to maturity of such Series 2017 Bonds on the basis of a constant interest rate compounded semiannually (with straightline interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series 2017 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2017 Bonds. Beneficial Owners of the Series 2017 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2017 Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2017 Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2017 Bonds is sold to the public. The Series 2017 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Bonds ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2017 Bonds. The College has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2017 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2017 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2017 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel s attention after the date of issuance of the Series 2017 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2017 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2017 Bonds may otherwise affect a Beneficial Owner s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2017 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise 19

28 prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. Legislation has been introduced in Congress which, if enacted, would significantly change the income tax rates for individuals and corporations and would repeal the alternative minimum tax for tax years beginning after December 31, The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel s judgment as to the proper treatment of the Series 2017 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ( IRS ) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the College, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The College has covenanted, however, to comply with the requirements of the Code. Bond Counsel s engagement with respect to the Series 2017 Bonds ends with the issuance of the Series 2017 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the College or the Beneficial Owners regarding the tax-exempt status of the Series 2017 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the College and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the College legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2017 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2017 Bonds, and may cause the College or the Beneficial Owners to incur significant expense. CERTAIN LEGAL MATTERS The validity of the Series 2017 Bonds and certain other legal matters are subject to the approval of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the College. A complete copy of the proposed form of Bond Counsel opinion is contained in APPENDIX E hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Orrick, Herrington & Sutcliffe LLP, San Francisco, California, is serving as Disclosure Counsel to the College. Certain matters will be passed upon for the College by its General Counsel and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California. CONTINUING DISCLOSURE The College has covenanted for the benefit of Bondholders to provide certain financial information and operating data relating to the College by not later than nine (9) months after the end of each fiscal year (which currently is June 30), commencing with the report for the fiscal year (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events (the Listed Events ). The Annual Reports and notices of Listed Events will be filed with the Municipal Securities Rulemaking Board ( MSRB ). The specific nature of the information to be contained in the Annual Report or the notices of Listed Events is set forth in "APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the underwriters in complying with S.E.C. Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the "Rule"). 20

29 In connection with the issuance of certain obligations of the College, the College has covenanted to submit an annual report to the MSRB containing the College s audited financial statements and certain other financial information and operating data relating to the College. The College did not file in a timely manner (i) its audited financial statements for the fiscal years ending June 30, 2013 and June 30, 2014 (without notice of late filing), (ii) certain operating data for fiscal years ending June 30, 2012 through June 30, 2014 and (iii) notice of rating changes. The College has made corrective filings as appropriate and has taken steps to provide for future compliance. LITIGATION AND OTHER MATTERS There is no action, suit or proceeding pending or, to the best knowledge of the College, threatened restraining or enjoining the execution or delivery of the Series 2017 Bonds or the Trust Agreement or any other document relating to the Series 2017 Bonds, or in any way contesting or affecting the validity of the foregoing. In 2011, the City and County of San Francisco directed the College, among other universities operating parking facilities within San Francisco, to collect and remit city parking taxes. After the universities refused, San Francisco petitioned for a writ of mandate to force compliance. (City and County of San Francisco v. Regents of the University of California et al. San Francisco City & County Superior Court Action Number CPF ) The Superior Court for the City and County of San Francisco denied the petition and the Court of Appeal affirmed. In September 2017, the California Supreme Court granted a petition for review and has not yet issued an opinion. The College believes that a ruling adverse to the College would not affect its operations except for future revenues derived from parking fees. See "RISK FACTORS Litigation." RATINGS If the Policy is issued, then S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ), is expected to assign its rating of AA to the Insured Series 2017 Bonds based upon the issuance of the Policy by AGM at the time of delivery of the Insured Series 2017 Bonds. If the Policy is not issued, S&P will not otherwise be providing any rating with respect to the Series 2017 Bonds. Moody's Investors Service ("Moody's") has assigned the Series 2017 Bonds the rating of "A2." Such rating or ratings express only the views of S&P and Moody s, respectively, and are not a recommendation to buy, sell or hold the Series 2017 Bonds. There is no assurance that such rating or ratings will continue for any given period or that they will not be revised downward or withdrawn entirely by S&P or Moody s if, in their respective judgments, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2017 Bonds. PROFESSIONALS INVOLVED IN THE OFFERING The College has retained PFM Financial Advisors LLC to serve as Municipal Advisor with respect to the Series 2017 Bonds. The Municipal Advisor and Bond and Disclosure Counsel will receive compensation with respect to the Series 2017 Bonds which is contingent upon the sale and delivery of the Series 2017 Bonds. Certain matters will be passed on for the Underwriter by its counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, which will receive compensation contingent upon sale and delivery of the Series 2017 Bonds. 21

30 UNDERWRITING The Series 2017 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the Underwriter ), pursuant to the terms of a bond purchase contract between the College and the Underwriter, dated December, The Underwriter has agreed to purchase the Series 2017 Bonds at a price equal to $ representing the principal amount of the Series 2017 Bonds, less a net original issue discount of $, less an underwriting discount of $. The Underwriter will purchase all of the Series 2017 Bonds if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in the purchase contract related to the Series 2017 Bonds. VERIFICATION Upon delivery of the Series 2017 Bonds the arithmetical accuracy of certain computations College relating to the: (i) adequacy of forecasted receipts of principal and interest on the Federal Securities (as defined in the Escrow Agreement) and cash held in the escrow funds relating to the Refunded Bonds; (ii) forecasted payments of principal and interest with respect to the Refunded Bonds on and prior to their projected maturity and/or redemption dates; and (iii) yields on the Refunded Bonds and on obligations and other securities to be deposited pursuant to the escrow funds relating to the Refunded Bonds upon delivery of the Series 2017 Bonds, will be verified by Causey Demgen & Moore P.C. (the Verification Agent ). The Verification Agent has not made a study or evaluation of the information and assumptions on which such computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions or the achievability of the forecasted outcome. ADDITIONAL INFORMATION Brief descriptions of the Series 2017 Bonds, the College and the Trust Agreement are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Series 2017 Bonds and the Trust Agreement are qualified in their entirety by reference to the actual documents, or with respect to the Series 2017 Bonds, the forms thereof included in the Trust Agreement, copies of all of which are available for inspection at the offices of the Trustee and will be available upon request and payment of duplication costs from the Trustee. Additional information regarding the College may be obtained from: Hastings College of the Law 200 McAllister Street San Francisco, California Attention: Elise K. Traynum, General Counsel (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 22

31 EXECUTION AND DELIVERY The execution and delivery of this Official Statement has been duly authorized by the Board of Directors of the College. HASTINGS COLLEGE OF THE LAW By: David Faigman Chancellor and Dean 23

32 [THIS PAGE INTENTIONALLY LEFT BLANK]

33 Background and History APPENDIX A GENERAL INFORMATION CONCERNING HASTINGS COLLEGE OF THE LAW Hastings College of the Law ( Hastings or the College ) was established in 1878 as the law department of the University of California ( UC ). Hastings is the oldest law school in California (the State ) and one of the largest public law schools in the United States. Founded by California s first chief justice, Serranus Clinton Hastings, the College was established by the California Legislature in legislation that provided the institution with its own Board of Directors that has governed the College independently of the Board of Regents of the University of California ( UC Board of Regents or Regents ) since its inception. The Board of Regents possesses degree-granting authority, but all other aspects of the College are under the control of the Hastings Board of Directors. The College is the only stand-alone, public law school in the nation. Hastings is accredited by the American Bar Association and the Western Association of Schools and Colleges; Hastings is also a charter member of the American Association of Law Schools. Hastings is a highly selective law school, typically receiving over 3,000 applications for a target incoming class size of approximately 320 students. For the academic year, Hastings enrollment is approximately 930 full-time J.D. students and 30 LL.M. and MSL students. Actual enrollment varies from targeted levels on a year-to-year basis due to fluctuations in the size of the entering class, student attrition, and transfers. As a stand-alone law school, Hastings provides all student services and support normally afforded to law schools by a centralized campus in a university setting. These services include a student health center, human resources, and general counsel among others. Hastings also benefits from its formal affiliation with UC receiving, on a fee for service basis, reprographic and business center functions, security provided by the UCSF Police Department, payroll processing and investment management. Hastings career employees are members of the University of California Retirement System and UC-managed health and welfare plans (medical, dental, vision, life and disability insurance). Hastings access to centralized UC services provides financial and operational benefits. With recent hires, Hastings has 62.5 tenured or tenured track faculty members; approximately 180 academic adjunct faculty; 40 Legal Writing & Research instructors; and 175 support staff. A-1

34 Board of Directors The College is governed by an eleven-member Board of Directors (the Board ). With the exception of one Board member who, by statute, must be an heir or representative of Serranus Clinton Hastings, the members of the Board are appointed by the Governor of the State of California, confirmed by the State Senate and serve for a term of 12 years. The current members of the Board and their current terms are as follows: Name Position Beginning of Term End of Term Thomas Gede Chair September 2008 September 2020 Simona Agnolucci Director March 2016 March 2028 Donald Bradley Director May 2007 May 2019 Tina Combs Director May 2007 May 2019 Marci Dragun Director May 2007 May 2019 Claes H. Lewenhaupt Director lifetime member lifetime member Mary Noel Pepys Director December 2012 December 2024 Courtney Power Director December 2015 December 2027 Carl W. Robertson Vice-Chair February 2011 February 2023 Brief biographical information about the members of the Board follows below. Thomas Gede (Current Chair of the Board), of Davis, California, was appointed to the Board in September Since 2006, he has been a principal with Morgan Lewis (which merged with Bingham Consulting Group) and of counsel at Morgan, Lewis & Bockius LLP. From 2000 to 2006, he was the executive director of the Conference of Western Attorneys General, and from 1987 to 2000, he served in the California Office of the Attorney General as a special assistant attorney general and deputy attorney general in the criminal division and the government law section. Prior to that service, Mr. Gede was a judicial attorney for Associate Justices Edwin Regan and Keith Sparks at the California Court of Appeal, Third Appellate District. Mr. Gede earned his Juris Doctor degree from the University of California Hastings College of the Law, and a Bachelor of Arts degree from Stanford University. His term expires in Simona Agnolucci, of San Francisco, California, was appointed to the Board in March She is a partner at Keker Van Nest & Peters, where she specializes in complex litigation, including class actions, white collar criminal defense, intellectual property matters and A-2

35 commercial disputes. Ms. Agnolucci graduated magna cum laude from Hastings in 2006 and obtained her Bachelor of Arts, with honors, from Stanford University. Prior to entering private practice, she was law clerk to the Honorable William C. Canby, Jr. of the Ninth Circuit Court of Appeals. While at Hastings, she was an extern to the Honorable John T. Noonan, Jr. of the Ninth Circuit Court of Appeals and the Honorable J. Anthony Kline of the California Court of Appeal. Her term expires in Donald Bradley, of Pleasanton, California, was appointed to the Board in May He has been a member at Wilson Sonsini Goodrich & Rosati, Professional Corporation since 1984 and currently serves as the Chief Legal Officer of the firm. Mr. Bradley also serves as the Chief Executive Officer and chairman of the Board of Directors of Attorneys Insurance Mutual Risk Retention Group. Previously, he served as associate and then partner with the law firm Pillsbury, Madison & Sutro, now Pillsbury Winthrop Shaw Pittman LLP, from 1972 to Mr. Bradley served in the U.S. Army from 1969 to He earned a Juris Doctor degree from Hastings in 1968, a Master of Laws degree from New York University School of Law, and a Bachelor of Arts degree from Dartmouth College. His term expires in Tina Combs, of Oakland, California, was appointed to the Board in May She recently retired as Deputy General Counsel for the University of California as part of senior management group heading the business and land use division serving since Prior to joining the University of California, Ms. Combs was a 15-year veteran attorney at Wells Fargo, where she served as senior counsel, vice president and managing counsel and senior company counsel. She began her career at Morrison & Foerster, where she practiced law as a senior associate in the business department. Ms. Combs has held director and leadership positions on numerous boards, professional, civic and non-profit organizations during her career. She received her Juris Doctor degree from Hastings in 1988 and Bachelor of Arts degree from the University of California, Berkeley. Her term expires in Marci Dragun, of Belmont, California, is a Legislative Aide with San Mateo County Supervisor Warren Slocum. She previously served as Executive Director of the Lincoln Club of Northern California. Ms. Dragun was in-house Political Analyst for Fisher Investments and an associate for the law firm of Coddington, Hicks and Danforth. She has over 30 years of political experience working on federal, state and local campaigns. Ms. Dragun earned a B.A. degree from Mills College and a JD from Hastings College of the Law in Her term expires in Colonel Claes H. Lewenhaupt, class of 1989, descendant of S.C. Hastings, is a lifetime member of the Board. He earned a Juris Doctor degree from University of California Hastings College of the Law in He is the Senior Government Ethics Counsel in the Office of the General Counsel with the Defense Logistics Agency in Virginia. COL Lewenhaupt retired in September 2017 from the U.S. Army Judge Advocate General's (JAG) Corps after 27 years. He spent the first half of his Army career litigating as a prosecutor, a criminal defense attorney and four years defending the Army in federal court specializing in medical malpractice and civilian employment law. He spent the latter half of his career focused on national security law, serving at the U.S. Central Command, the Defense Intelligence Agency, the Office of the Director of National Intelligence and the U.S. Army Intelligence and Security Command. A-3

36 Mary Noel Pepys, of San Francisco, California, was appointed to the Board in Since 1993, she has worked as an international rule of law attorney assisting emerging democracies develop justice systems that ensure the basic principles of the protection of the citizens human rights, equal treatment of all individuals before the law, and a predictable legal structure with fair, transparent and effective government institutions. Ms. Pepys has worked in over 40 countries, lived in former communist countries, and more recently worked in Afghanistan where she served as the Justice Advisor at the U.S. Embassy. From 1984 to 1993, she worked at Heller, Ehrman, White and McAuliffe and later at her own law firm as a land use attorney. From 1982 to 1984, she served in Rome, Italy as a legal officer for the Multinational Force and Observers, the international peacekeeping force in the Sinai, which oversees the security arrangements of the 1978 Camp David Peace Accords. Prior to that, Ms. Pepys worked in Washington, D.C. as the Special Assistant to Ambassador Daniel J. Terra at the Department of State from 1981 to 1982, and for Congressman Henry S. Reuss, Chairman of the Committee on Banking, Finance, and Urban Affairs from 1980 to She served as a law clerk to Justice Thomas A. Caldecott, Presiding Justice of the California Court of Appeal, from 1978 to She received a Juris Doctor degree from Hastings in 1978 and a Bachelor of Arts degree from San Jose State University. Her term expires in Courtney Power, class of 2001, was appointed to the Board in December Ms. Power is currently General Counsel at Niantic, Inc., the San Francisco-based augmented reality innovator and publisher of the mobile gaming app Pokémon GO. Prior to Niantic, Ms. Power spent more than a decade as in-house counsel for Google, including as Legal Director in the Products and Agreements Group. She managed teams of attorneys performing product counsel and transaction work for business units including Geo, Virtual Reality and Waze. From 2001 to 2005, Ms. Power was an associate at Gibson Dunn & Crutcher in Palo Alto, where she advised clients on Internet commerce law and represented clients in regulatory investigations and civil litigation in state and federal court. Ms. Power began her career in the technology industry, serving as assistant product manager at Broderbund Software, a firm developing award-winning educational and entertainment software, and as senior analyst for Fillmore Consulting Group specializing in business process redesign and workflow systems. Ms. Power graduated magna cum laude from Harvard University in 1991 and received her Juris Doctor degree from Hastings in She was awarded a Rotary International Foundation Scholarship for postgraduate study at the University of Sydney. Her term expires in Carl W. "Chip" Robertson (Current Vice-Chair of the Board), of Los Angeles, California, was appointed as a member of the Board in February Mr. Robertson has been Co- Managing Director at Warland Investments since 2010, and a member of the Management Committee at Dax LLC. Since 2006, he served as a Trustee of the UC Hastings Foundation. In addition, Mr. Robertson serves as a Trustee of Westmark School in Encino, CA, and is a member of the Board of Advisors at the UCLA Lab School. At Hastings, he endowed the Chip W. Robertson Faculty Research Fund. Mr. Robertson received his Juris Doctor degree from Hastings in 1996, a Bachelor of Arts degree from the University of California, Berkeley, a Master's in Business Administration degree from the University of California, Los Angeles, Anderson School of Management, and a DBS from the London School of Economics. His term expires in A-4

37 Management The following table sets forth the names of the principal executive officers and senior management of the College, along with their positions and tenure at the College. A brief statement of the duties and background of certain of the officers follows the table. Name Position In Current Position Since David L. Faigman* Chancellor and Dean January 2016 David Seward* Chief Financial Officer August 1994 Elise K. Traynum* General Counsel/Secretary to the Board September 2001 Morris Ratner Academic Dean August 2017 Leslie Lundberg Executive Director of Human Resources January 2018 Camilla Tubbs June Sakamoto Associate Dean for Library and Technology Senior Assistant Dean for Enrollment Management June 2016 October 2015 Alex Shapiro Director of External Relations August 2012 Eric Dumbleton Chief Development Officer August 2015 * Executive Officers of the College. David Faigman has served as Chancellor and Dean of the College since January The Dean s administrative focus is on external matters alumni affairs, appearing before the legislature on budget matters, working directly with the Board, and representing the College on various State Bar and other national committees and events. Dean Faigman received both his Master of Arts degree in Psychology and his Juris Doctorate from University of Virginia. He is the John F. Digardi Distinguished Professor of Law at the University of California, Hastings College of the Law and holds an appointment as Professor in the School of Medicine (Department of Psychiatry) at the University of California, San Francisco. Morris Ratner was appointed Academic Dean in July The Academic Dean is responsible for overseeing the College s academic programs, including scheduling and content of classes, the operation of student service functions (e.g., admissions, financial aid, records, career services, health services, etc.), the eight student law journals, along with the Moot Court and academic support programs. He received his Bachelor of Arts degree from Stanford University and his Juris Doctorate from Harvard Law School. A-5

38 David Seward serves as the Chief Financial Officer (CFO) of the College and since 1994 has been responsible for financial and business management, long-range capital planning and projects, as well as risk, investment and real estate management. Mr. Seward s responsibilities include oversight of the College s auxiliary enterprises, including student housing, bookstore and parking operations. He earned a Bachelor of Arts degree from the University of Michigan and a Master of Business Administration degree from the University of San Francisco. Elise K. Traynum serves as General Counsel for the College and Secretary to the Board. She is an experienced municipal law attorney with special emphasis on redevelopment law, zoning and land use, economic development and financing public facilities. Additionally, she has considerable experience in employment law and representing public agencies in employment-related administrative hearings. Ms. Traynum received her Juris Doctorate from the University of California Hastings College of the Law in She served as City Attorney for the City of Perris from 1994 to She also served as general counsel to the Perris Redevelopment Agency and Assistant City Attorney for the City of Palm Springs. Faculty The following table presents the number of full-time and part-time faculty for the current academic year and each of the last past five academic years. There are no unions representing members of the faculty. Faculty Summary Full-Time Full-Time Fall Tenured Non-Tenured Part-Time Semester Faculty Faculty Faculty* Total * Includes Legal Writing and Research Instructors Source: Department of Education, IPEDS A-6

39 Staff In addition to senior management and faculty, the College has a full-time work force of 160 employees, as of June 30, The College maintains three non-faculty employee classification programs which include: The Management Program The Administrative and Professional Program The Staff Program The Management Program encompasses high-level department managers and directors and some senior management (e.g., Assistant Dean of Student Services, Registrar, Controller, Senior Assistant Dean for Enrollment Management, Assistant Dean for Career and Professional Development, Director of Admissions and Director of Financial Aid). The Administrative and Professional Program comprises high-level support and professional personnel (e.g., librarians, accountants, counselors). The Staff Program includes support and clerical staff (e.g., faculty secretary, accounting technicians and records technicians). Certain represented staff fall under collective bargaining agreements with the American Federation of State County and Municipal Employees (the AFSCME ) and the American Federation of Teachers (the AFT ). The AFSCME bargaining unit represents clerical, technical and some professional staff totaling approximately 80 positions; their collective bargaining agreement expired in June 2017 and negotiations are currently ongoing. The AFT bargaining unit consists of seven librarians. Their collective bargaining agreement expired in January 2016 and negotiations are currently ongoing. All individual teaching contracts, along with most provisions of the collective bargaining agreement, continue to be in effect due to status quo provisions in the agreement. Current Facilities Hastings campus is located on McAllister Street and Golden Gate Avenue in downtown San Francisco, bridging the Civic Center, Mid-Market, and Tenderloin neighborhoods and near the federal, state and local courthouses in the Civic Center area. Hastings s campus includes academic and administrative functions, student services, library, residential, food service and a variety of study settings. The College owns and operates three buildings and a parking structure within a campus spanning nearly two city blocks, as described below. Snodgrass Hall (198 McAllister Building). At the center of Hastings is Snodgrass Hall, the College s 136,000 square foot instructional facility that also houses administrative, business and some faculty functions. Snodgrass Hall features 14 classrooms, ranging from large, tiered lecture halls to smaller seminar rooms, and special dedicated trial and appellate advocacy classrooms, including the Cotchett Trial Advocacy Center and Marvin and Jane Baxter Appellate Law Center. Snodgrass Hall s fourth floor is designated for four co-curricular academic support activities that are central to the life of the College: Legal Writing, Research and Moot Court; the Legal Education Opportunity Program (LEOP); and the Disability Resource Program (DRP). In addition, the building includes the Gold Reading Room, a two-level 10,400 square-foot reading room. The A-7

40 main building was constructed in 1953 with an Annex located at 50 Hyde Street added in Kane Hall (200 McAllister Building). Constructed in 1980, the 185,000 square foot Kane Hall houses Hastings s 90,000 square foot library, as well as faculty and administrative offices. Students study in the Dobbs Atrium and dine either in the Law Cafe or on the adjoining patio. The building also contains student service functions and the Alumni Reception Center. A comprehensive seismic and code-compliance upgrade, along with a complete renovation of the law library, completed in 2007, was financed by $23.5 million appropriated by the State of California from the Higher Education Facilities Bond Act of 2002, along with $4 million in donations raised during a capital campaign. McAllister Tower (100 McAllister Building). In 1978, McAllister Tower was acquired from the federal government and converted to student residences and other College uses. McAllister Tower consists of 280,000 square feet and contains 252 efficiency, studio, one-bedroom, and two-bedroom apartments on 17 floors, housing approximately 280 Hastings students and their families. A gymnasium and fully-equipped fitness center are located in the building. McAllister Tower is home to the O Brien Center for Scholarly Publications, where student editorial staffs publish Hastings s eight scholarly journals. Also within The Tower is the Civil Justice Clinic, where students gain hands-on experience and confront professional, ethical and societal issues. The building also has a student lounge on the 24th floor. In 2004, a building-wide fire/life-safety upgrade was completed, financed by the sale of Hastings Series 2003 Bonds. Larkin Street Parking Structure. The College owns and operates a multi-level structure containing 395 parking stalls, and 9,900 square feet of ground-level retail space. The parking garage was completed Long Range Campus Plan Hastings is actively engaged in implementing a Long Range Campus Plan ( LRCP ) to advance its long-term objectives and execute its mission. As part of its LRCP, Hastings is currently working on the development of multiple parcels, including construction of a new academic facility at 333 Golden Gate Avenue and development of a graduate student academic village, as described below. New Academic Building (333 Golden Gate Avenue) The State of California s Department of General Services awarded a contract in August 2017 to the design build team of Clark Construction/SOM to develop a new academic building to replace that portion of Snodgrass Hall (198 McAllister) constructed in 1953 with an approximately 57,000 gross square feet energy efficient academic facility on the vacant surface lot located at 333 Golden Gate, which Hastings currently owns and controls. The project is funded with $3.1 million from private donations and $55.6 million in State appropriations from the proceeds of lease revenue bonds which were issued by the State Public Works Board (the SPWB ). The College will lease the site to the SPWB, and the SPWB, through the Department of General Services, will lease the completed facility back to the A-8

41 College, until the lease revenue bonds are paid in full. Lease payments to serve the lease revenue bonds will be made by the College from specifically earmarked, new annual appropriations from the State general fund. Academic Village The College and the University of California San Francisco (UCSF) have signed a letter of intent to collaborate on the development and renovation of student housing to alleviate the student housing shortfall and help establish a cohesive living-and-learning campus environment. Once replaced by the new structure at 333 Golden Gate Avenue, both Snodgrass Hall and the 50 Hyde Street Annex will be torn down to make way for development of up to 590 units of new student and trainee accommodations at the 198 McAllister site. This first phase is expected to be completed by Additionally, the College plans to renovate the historic 27-story McAllister Tower and Great Hall at 100 McAllister to modernize the 252 existing residential units and increase the total number of residential units there. Overall, these projects would provide nearly 1,000 of campus housing by Of this amount, UCSF is planning to master lease 49% of the housing stock. The College intends to pursue a public-private partnership to deliver and finance these projects. In January 2018, a Request for Qualifications will be disseminated followed by a Request for Proposals seeking qualified development teams. Both projects are fully entitled. Hastings does not anticipate issuing additional debt to finance these real estate developments. The Library The library is located on the fourth and fifth floors of Kane Hall (200 McAllister building), occupying approximately 60,000 square feet and housing over 500,000 volumes and volume-equivalents, including law reviews, reporters, and digests. In addition to its print collection, the Library offers access to numerous online databases (Westlaw, Lexis, Bloomberg Law, HeinOnline) that support research in law as well as interdisciplinary studies. A computeroriented Learning Resources Center is also located within the library. The library's Archives and Special Collections are currently in storage due to construction on the sixth floor of the 200 McAllister building. Collections include the Roger J. Traynor Collection, the Hastings College Archives, the 65 Club Archives, and a small collection or rare books published in San Francisco before the 1906 Earthquake that are otherwise scarce and have special historical value to the College. The Hastings library is also a selective depository for federal government documents and for state materials, receiving California legislative and statutory material, legislative journals, and selected state agency annual reports. Academic Programs The Hastings full-time, three-year juris doctor ( JD ) program has a deep curriculum, a location next to courthouses and law firms, and a commitment to social justice interwoven into the fabric of the law school's urban home. Hastings offers over 125 courses, more than most law A-9

42 schools, providing students breadth and depth in their legal studies. Upper class course offerings include more than 65 lecture courses, 50 writing seminars, and 16 professional skills courses; and certificates of concentration are offered in nine areas: Civil Litigation and Dispute Resolution, Criminal Law, Environmental Law, Governmental Law, Intellectual Property, International Law, Law and Health Sciences, Social Justice Lawyering, and Taxation. Each concentration is built around a combination of advanced courses and real-world experience through clinics, externships and law journals. The JD curriculum at the College is grounded in fundamentals: research and writing, appellate advocacy, criminal and tort law, and practical lawyering skills. Public Interest Hastings has a long tradition of preparing students to work toward social justice. This legacy continues today in the variety of classroom, clinical, extra-curricular and funding opportunities that Hastings actively supports. The Civil Justice Clinic trains students in the litigation process while offering real-world opportunities to positively impact the community and gain critical experience in fields like employment law, housing law, disability law, and refugee and human rights law. Hastings hosts the annual Public Interest Public Center Career Day, one of the largest public interest law career fairs in the country. The Public Interest Career Assistance Program (PICAP) assists Hastings graduates working in public interest legal organizations or government agencies with repayment of outstanding educational loans. The Legal Education Opportunity Program (LEOP) The College s Legal Education Opportunity Program (LEOP) is intended to be a portal to increasing access to legal education. Created in 1969, LEOP is a central part of the College s effort to help equalize opportunities in the law. The College recognizes that traditional academic criteria used to determine admissions may not be the best indicators of academic potential for students from non-traditional backgrounds. The LEOP program serves both as an alternative means for evaluating an applicant s potential for the study of the law, and as an academic support program committed to the success of LEOP students in law school and in the legal profession. Students enrolled through LEOP are deemed to have the abilities and motivation to succeed in law school with the assistance provided through the program. LEOP students are those who have overcome significant obstacles educational, economic, social, or physical that have restricted their access to traditional academic opportunities and resources generally considered an indicator of a successful law school career. Approximately 20% of each Hastings entering class is comprised of LEOP students. Using Hastings s LEOP program as a state model, since 1998 the California Legislature has required the University of California s professional schools to take into consideration education, economic status, social experience, and/or physical disability of an applicant that may have limited his or her access to academic opportunities. The Legislature has further provided: A-10

43 In an effort to increase diversity, it is further the intent of the Legislature that all [University of California] professional schools establish programs similar to Hastings College of the Law s Legal Education Opportunity Program. Law Journals Hastings students help edit and publish nine law journals. In addition to the HASTINGS LAW JOURNAL, there are journals specializing in business law, communications and entertainment law, constitutional law, international and comparative law, environmental law and policy, race and poverty law, science and technology, and women s issues. Clinical Programs and Externship Opportunities The College offers numerous clinical opportunities for students. In clinics, students work on policy, legislative, transactional, or litigation matters on behalf of individual or institutional clients. As one example, the CJC Individual Representation Clinic aims to provide free legal assistance to low-income clients in the San Francisco Bay Area. This Clinic regularly focuses on Social Security disability and In Home Supportive Services (IHSS) appeals and on Wage and Hour and Unemployment Insurance appeals. The College also offers a number of other clinic and externship opportunities. Some examples include: The Criminal Practice Clinic exposes students to courtroom practice and procedure. Students participating in the clinic gain case management responsibility and involvement in the pretrial and trial practice through placement in selected county public defenders and prosecutors offices in the Bay Area; The Workers Rights Clinic is a field placement clinic in which students provide free legal assistance to low-income individuals facing employment issues. The clinic is directly supervised by attorneys from the Employment Law Center/Legal Aid Society of San Francisco and from the private bar who conduct regular group training sessions for students; The Local Government Clinic allows students to work with the General Law Team of the San Francisco City Attorney's Office or at city attorney's offices in other Bay Area locations, while supervised by a tenured full time faculty member; and The UCDC Law Program is a collaborative, full-semester externship program in Washington, DC combining a weekly seminar-style course with a full-time field placement to offer law students an unparalleled opportunity to learn how federal statutes, regulations, and policies are made, changed, and understood in the nation s capital. In addition, the College offers a supervised judicial externship program at the federal, state and county levels with a classroom component taught by a full-time tenured faculty member who visits each court placement each semester. A-11

44 Moot Court Program Hastings students compete annually in approximately twenty-two regional and national moot court intercollegiate competitions. Hastings Moot Court is ranked the second best Moot Court program in the United States of the last decade by the National Jurist Magazine. Each April, team tryouts are open to all students. Most years, more than 200 try out, and often some 50 qualified potential competitors remain wait-listed. Successful applicants are placed on three-member teams that include two oral advocates and a brief editor. In keeping with the competition s topic, students write an appellate brief and prepare to argue both sides of the case in oral arguments. The National Jurist Magazine has ranked Hastings Moot Court as one of the top 5 Moot Court Programs in the Nation in the last 5 years, including two years as number 1. In , Hastings students participated in 22 competitions. Institutes and Research Centers The College sponsors the Center for Gender and Refugee Studies, Center for Negotiation and Dispute Resolution, the Center for Work Life Law, and the UCSF/UC Hastings Consortium on Law, Science & Health Policy. The Center for Gender and Refugee Studies, established by the College in 1999, is home to several important projects dedicated to national policy research in areas focusing on human rights and international justice and to efforts fostering the rule of law and the development of legal education in countries outside the United States. The Center for Negotiation and Dispute Resolution (CNDR), established by the College in 2001, bridges theory and practice by providing a wealth of courses, practical experience, competitions, and professional programs for mastering the conflict theory and practical skills necessary for attorneys to be effective advocates. The Center for Work Life Law, established by the College in 2002, is a nonprofit research and advocacy organization. WorkLife Law works with employees, employers, attorneys, legislators, journalists, and researchers to identify and prevent Family Responsibilities Discrimination. WorkLife Law is supported by grants, university funding and private donations. The Center s work is made possible through support from the Alfred P. Sloan Foundation, The Rockefeller Family Fund, The Wallace A. Gerbode Foundation, the Women s Bar Association of the District of Columbia, and Abigail Disney. UCSF/UC Hastings Consortium on Law, Science & Health Policy is dedicated to promoting research, education, and service opportunities that bridge the gap between law and science. To a large extent, scientists and health care professionals operate largely insulated from one another, both in their formal training and their daily practice. Increasingly, the demands of modern law and science require a sophisticated understanding of the other's form and function. Lawyers and scientists can no longer continue to work in isolation. Instead, they must be well-versed in one another's vocabulary and their practices need to be integrated. The UCSF/UC Hastings Consortium was founded to promote this collaboration. A-12

45 International Programs As a diverse, international community of students and faculty, Hastings seeks to provide an education that is truly global, both in scope and in outlook. International opportunities include: A concentration in International Law that focuses on public and private international law, as well as a joint J.D./LL.M. program with the School of Oriental and African Studies (SOAS) in London and the University of Paris, II; Formal exchange relationships with law schools in Argentina, Australia, China, Denmark, France, Germany, Hungary, Israel, Italy, Japan, Korea, the Netherlands, Spain, Taiwan, and the United Kingdom; International Summer Stipends, which fund student internships in the field of public international law; An International and Comparative Law Journal, as well as numerous special programs that connect prominent internationalists and foreign law scholars to Hastings every year; An Immigrant s Rights Clinic that is on the front line of immigration issues; and A Master of Laws (LL.M.) degree program that brings foreign lawyers to Hastings, and connects students from around the world. Master of Laws (LL.M.) Program The Master of Laws program is a one-year course of study for international students who previously have been licensed to practice law in a country outside of the United States. LL.M. candidates must enroll in a total of 24 units, including a legal writing and research class specifically designed for them, and take at least one first-year course in the fall semester. With the exception of the legal writing class, they are fully integrated into the J.D. curriculum. 25 students are currently enrolled in the program. The Master of Studies in Law (MSL) The Master of Studies in Law (MSL) is a 1-year degree program for professionals seeking to equip themselves with a sophisticated understanding of legal reasoning and doctrine. The program is designed for professionals who want to bring knowledge of the law to their fields and careers, without becoming practicing lawyers. Students in the MSL program gain an understanding of the law and how it shapes their professional landscape, through public policy and regulation. There are currently 7 students enrolled in the MSL program. Accreditation The College was a charter member of the American Association of Law Schools (AALS) and has continuously been a member since The law school has been approved by the American Bar Association since The J.D. program is accredited by the American Bar Association. The American Bar Association is recognized by the U.S. Department of Education as the official accrediting body A-13

46 for law schools. In a letter of July 15, 2015, the American Bar Association reaffirmed the College s accreditation. As is customary, the College will be reviewed again in The College is also accredited by the WASC Senior College and University Commission (WSCUC). The WASC Senior College and University Commission is the regional accreditor recognized by the U.S. Department of Education as certifying institutional eligibility for federal funding in a number of programs, including student access to federal financial aid. Hastings pursued and was granted this accreditation in 2012 in order to offer additional degrees in law beyond the JD and foreign LLM, and to provide financial aid to students seeking those degrees, In early 2016, the ABA granted acquiescence for and WSCUC granted approval of the new online joint degree a Masters of Science in Health Policy & Law (HPL) with the University of California, San Francisco. The program enrolled its first class Fall Other joint degree programs include the UCSF-UC Hastings Consortium on Law, Science and Health Policy; the UC Santa Cruz 3+3 BA/JD Program accelerated law degree program; and UC Davis concurrent JD/MBA degree program. UCSF-UC Hastings Consortium on Law, Science and Health Policy is an interdisciplinary collaboration between UCSF and the College focusing on education, research, and clinical training and service. The Consortium's main goals is to expand interdisciplinary educational opportunities for current UC Hastings and UCSF students. To do this, the Consortium oversees 1) the health concentration program for Hastings students and 2) a companion certificate program for UCSF students. UC Santa Cruz 3+3 BA/JD Program accelerated law degree program is an accelerated program in which students complete a Bachelor of the Arts and a JD degree in six years rather than the typical seven years. The Hastings-UCSC 3+ 3 B.A./J.D. Program is the first and only such program in the UC system. UC Davis concurrent JD/MBA degree program is an arrangement with UC Davis Graduate School of Management offerings qualified students who independently gain admission to both schools either at the same time that they are admitted to Hastings or during their first or second years may be eligible to earn the JD and Master of Business Administration concurrently. Litigation In September 2017, the California Supreme Court granted a petition for review to decide whether the City and County of San Francisco can compel state universities - the University of California, California State University and Hastings College of the Law - that operate parking lots and garages in the city to collect city taxes from parking users and remit them to San Francisco. The San Francisco Superior Court and the Court of Appeal Lower courts ruled in favor of the College, finding that the universities are exempt from otherwise-valid local regulation when engaged in governmental activities, and that parking operations are governmental activities. Should the California Supreme Court find in favor of the City and County of San Francisco, the College s future revenues derived from parking fees would be negatively impacted, the effect on future revenues would be approximately $400,000 per year based on budgeted parking revenues. The City and County of San Francisco is not A-14

47 seeking collection of back taxes. See "RISK FACTORS Litigation" and LITIGATION AND OTHER MATTERS in the forepart of this Official Statement. The College is subject to lawsuits and claims in the ordinary course of its operations. In the opinion of the College, the aggregate amount of uninsured liability for such lawsuits and claims will not materially affect the finances or operations of the College. Student Enrollment ENROLLMENT Hastings has traditionally been one of California s largest law schools. During the 1990s and 2000s, the College s total enrollment exceeded 1,200 and graduating classes were typically around 400 students. In 2012, the Board approved a strategic enrollment plan which reduced the entering class size from 400 to 320. The decision to reduce enrollment was made in order to preserve admission selectivity during a time of declining applications to law schools nationwide and to maintain the College s traditionally high job placement numbers. According to data provided by the Law School Admission Council (LSAC), the number of people applying to ABA-accredited law schools continued to decline from 2012 to From 2015 to the present, the number has remained essentially flat, with about 55,000 people applying to law schools during the last three application cycles compared to a high of 87,000 in Like most law schools, Hastings has experienced a decline in applications and an increase in its acceptance rate due to this weak demand. Despite the anemic market, however, the academic metrics of the College s incoming classes have remained stable, with an LSAT median of 159 or 158 for the past five years and a median undergraduate cumulative grade point average of approximately First-year enrollment for the past two cycles has exceeded the entering class size target of 320, with 346 first-year students in 2016 and 326 in The College s yield on first-year admits, measured as the percentage of admitted students who enrolled at Hastings, has climbed 3% since In tandem with recent stronger hiring in the legal job market and because of the smaller size of the College s graduating classes from 2015 onwards, employment outcomes for College graduates have improved during the past two years. Based on the ABA s employment data reporting framework, more than 80% of the College s graduating classes of 2015 and 2016 were employed in JD-required or JD-advantaged jobs within ten months of receiving their degrees. For the 2017 application cycle, the College received 3,009 applications compared to 3,416 in 2016, a decline of 12%. About half of the decline in applications was from California and the other half was from other states. The decline may be attributed in part to the negative publicity surrounding the College s 51% bar passage rate announced in late November 2016 (compared to a statewide ABA accredited law school average of 68%) and a four-position drop, from 50 to 54, in the annual U.S. News and World Report rankings announced in March The high cost of housing in San Francisco is also thought to be a factor as well, as the College can only provide subsidized housing for 30% of its students. The bar passage rate for the July 2017 administration of the California bar exam for Hastings Class of 2017 graduates taking the exam was 62%. While this result remains below the A-15

48 statewide average 70% passage rate among graduates of all California ABA accredited schools, the 2017 results reflect a material improvement from the bar passage rate of 51% among Hastings graduates taking the July 2016 administration of the exam. For the fall 2017 academic year, the College slightly exceeded its JD enrollment target of 320 students with 326 students matriculating in the Class of In contrast, for the fall 2016 entering class, 346 students matriculated. The decision to limit the size of the fall 2015 entering class to 289 first year law students (a variance of -9.7% from the enrollment target of 320) was made to maintain institutional quality as it was determined that bringing in the targeted class size of 320 would lower academic medians below 2014 benchmarks (a 158 median LSAT and a 3.45 GPA). See "RISK FACTORS Enrollment Levels" in the forepart of this Official Statement. In total, the College enrolled 965 students in fall 2017 studying for a Doctorate of Jurisprudence (J.D.) degree, the Master of Laws (LL.M.) degree, or the Masters of Studies in Law (MSL) degree. The following table sets forth the College s full time equivalent enrollment for the current academic year and each of the past four academic years and the number of degrees conferred in each such year completed. Student Enrollment and Degrees Awarded Academic Year Total Enrollment J.D. Degrees Awarded LL.M. Degrees Awarded MSL Degrees Awarded (1) , Source: Hastings College of the Law. (1) Enrollment for the academic year as of September (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) A-16

49 The following table sets forth applications, admissions and new enrollments for the current academic year and the prior four academic years: Application Pool Fall Applications Offered Selectivity New Semester Received Admissions Index (1) Enrollments Yield ,009 1, % % ,416 1, % % ,613 1, % % ,114 1, % % ,944 1, % % (1) The Selectivity Index is calculated based on data found in the US News rankings using the median LSAT Score, median undergraduate GPA and acceptance rate for each school's full-time program entrants. Source: Hastings College of the Law. Competition The major competitors of the College for its students are generally private law schools in California including University of San Diego, Loyola, Pepperdine, University of San Francisco and Santa Clara University. The law school at the University of California, Davis is also considered a major competitor. Outside of California, the College s major competitors are Boston College and George Washington University. The College has been able to successfully compete in the past and expects to be able to continue to do so in the future due to its high quality of education and comparatively lower fees relative to private institutions. Other strengths of the College in attracting students include practical programs such as judicial internship opportunities and clinical practice, foreign exchange program opportunities, scholarly journal opportunities, the availability of student housing and a downtown location in a major urban city providing easy access to the courts and a practicing bar. Financial Aid Programs Approximately 85% of the student body receives some type of financial aid in the form of grants, loans, work-study or scholarships. A significant number of students at the College depend on sources of student financial aid other than the College to pay tuition and fees. The majority of such aid comes from federal government loan programs. The continued availability of those funds is contingent upon continued congressional support. Beginning in 2016, the College changed its financial aid strategy to award larger meritbased scholarships competitive with peer schools to attract and retain students with credentials meeting institutional standards. Merit-based grants (i.e., tuition discounts) are renewable during the students second and third years conditional to maintaining good academic standing. While scholarships from endowed funds continued to be awarded in accordance with gift instruments, the average Hastings grant was increased to approximately $20,600), representing a tuition discount of 46%. This represented a market increase in tuition discounting above historical A-17

50 ranges of between 28-31%. The discount rate was maintained for the entering class in fall 2017 and will be reduced to 37.5% for fall Significant Accounting Policies FINANCIAL OPERATIONS The financial statements of the College are prepared in accordance with accounting principles generally accepted in the United States of America, including all applicable effective statements as promulgated by the Governmental Accounting Standards Board ( GASB ). In accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary funds and Other Governmental Entities that Use Proprietary Fund Accounting, the College applies all applicable Financial Accounting Standards Board pronouncements issued on or before November 30, 1989 that do not conflict or contradict GASB pronouncements, using the economic resources measurement focus and the accrual basis of accounting. The College uses enterprise fund accounting. Financial Statements The audited financial statements of the College for the fiscal years ending June 30, 2017 and June 30, 2016 are presented in Appendix B hereto. In addition, set forth below under the caption Summary of Statement of Revenues, Expenses and Changes in Net Assets is information for the last five fiscal years with respect to revenues, expenses and other changes in net assets. Reports of Independent Auditors In fulfilling its fiduciary responsibility the Board engages an external, independent auditor to annually perform a financial statement audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.. Historically, the College has not engaged its auditor to provide consulting services. Periodically, the Board may select an audit of certain areas within the College, as it deems necessary and prudent. The auditors present their report and findings to the Board s Finance Committee and its Sub-Committee on Audit. Additionally, the UC Board of Regents are responsible for reviewing the College s audit report, management letter and investment policies. The Regents are required to report their findings to the State Legislature. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) A-18

51 Revenues and Expenditures The following table, which should be read in conjunction with the Financial Statements and accompanying notes and the Financial Analysis section following the table provides a summary of Revenues, Expenses and Changes in Net Assets for each of the five fiscal years ending June 30, 2013, 2014, 2015, 2016 and For comparison purposes, set forth in the following table are corresponding numbers based on the adopted budget. Summary of Statement of Revenues, Expenses and Changes in Net Assets Fiscal Year Ending June 30, 2013 Fiscal Year Ending June 30, 2014 Fiscal Year Ending June 30, 2015 Fiscal Year Ending June 30, 2016 Fiscal Year Ending June 30, Budget REVENUES Operating Revenues Tuition and fees $49,531,621 $46,934,614 $42,799,942 $40,411,210 $41,451,656 $41,750,502 Less: Hastings s grants (13,800,337) (12,571,257) (10,335,966) (11,766,346) (15,075,040) (17,866,296) Less: Tuition and fee scholarships (1,034,213) (1,035,550) (1,254,514) (1,422,643) (1,691,656) (2,505,945) Tuition and fees, net 34,697,071 33,327,807 31,209,462 27,222,221 24,684,963 21,378,261 Government grants and contracts 593, ,353 1,927, , , ,873 Private grants and contracts 221, , ,716 1,212,281 1,304,329 1,099,997 Sales and services of auxiliary enterprises 7,737,196 7,314,372 7,758,107 8,189,087 8,598,847 9,170,820 Other operating revenues 531, , ,314 1,073, , ,684 Loan interest, net of expenses 45,939 49,344 52,783 49,119 42,692 7,000 Federal Perkins Loan Interest 172, , , , ,931 0 Total operating revenues $44,000,203 $42,965,854 $42,680,048 $38,629,414 $36,567,457 $32,985,635 Operating Expenses Salaries and wages Faculty $12,804,538 $12,869,576 $13,075,095 $12,508,192 $12,379,399 13,154,314 Staff 13,673,919 13,800,433 14,555,099 14,265,315 14,466,142 15,431,731 Benefits non-pension 7,039,112 8,042,354 4,928,416 5,072,523 5,271,073 9,295,930 Pension Benefits 3,154,755 3,379,979 5,308,379 2,725,435 0 Scholarships and fellowships 707, , , , , ,112 Supplies and services 9,312,796 10,720,183 11,215,633 9,924,590 10,513,038 14,013,372 Depreciation, excluding auxiliary enterprise 2,303,606 2,139,681 2,193,912 2,070,930 2,044,784 0 Other 2,470,872 2,334,738 2,523,703 1,707,113 2,331,531 5,553,736 Total operating expenses $54,988,928 $56,812,789 $58,562,388 $57,520,146 $56,515,188 $60,202,939 Operating income (loss) $(10,988,725) $(13,846,935) $(15,562,388) $(18,890,732) $(19,947,731) $(27,217,304) A-19

52 Summary of Statement of Revenues, Expenses and Changes in Net Assets (continued) Fiscal Year Ending June 30, 2013 Fiscal Year Ending June 30, 2014 Fiscal Year Ending June 30, 2015 Fiscal Year Ending June 30, 2016 Fiscal Year Ending June 30, Budget Non-operating Revenues (Expenses) State operating appropriations $8,027,024 $8,505,122 $9,741,315 $10,784,243 $13,785,556 $12,851,000 Gifts, capital campaign 1,673,848 2,417,857 1,879,930 1,954, Gifts, noncapital 1,737, , , ,874 3,143,015 1,169,676 Investment income 910,003 1,036, , , ,256 1,521,557 Realized and unrealized net gains on investments 6,187,561 9,599,733 4,369,323 (3,075,925) 9,524,892 0 Interest on debt (1,652,195) (1,431,992) (985,523) (965,657) (944,200) (920,811) Block grant from Foundation 1,049,000 1,049, , , , ,000 Net non-operating revenues $17,933,143 $21,607,406 $17,477,140 $10,629,653 $27,095,519 $15,546,422 Income before other changes in net assets $6,944,418 $7,760,471 $1,594,800 $(8,261,079) $7,147,788 $(11,670,882) Other Changes in Net Position Capital grants and gifts 99,947 92, ,472 Endowed gifts, capital campaign 179, , , ,279 Gifts and other changes to endowment 1,023, , ,363 (140,176) 1,484,595 Changes in allocation for pension payable to University of California (374,203) 1,027,562 1,605, ,014 Total other changes in net position $1,302,654 $1,478,701 $2,400,368 $1,889,939 $2,320,081 Increase in Net Position $8,247,072 $9,239,172 $3,995,168 $(6,371,140) $9,467,869 Net Assets Net Position, beginning of year $145,013,719 $153,260,791 $127,640,728 $131,635,896 $125,264,756 Net Position, end of year $153,260,791 $162,499,963 $131,635,896 $125,264,756 $134,732,625 Source: Hastings College of the Law. A-20

53 Available Funds, Net Expenses and Revenues Available for Debt Service The table below summarizes Available Funds, Net Expenses and Revenues Available for Debt Service as defined in the forepart of the Official Statement. Historical Operating Revenues, Available Funds, Net Expenses and Revenues Available for Debt Service Fiscal Year Ending June 30, Total Operating Revenues Available Funds Net Expenses Revenues Available for Debt Service Debt Service (1) Coverage Ratio (2) 2017 $36,567,457 $18,524,784 $18,524,784 $1,596, x ,629,414 14,246,278 $3,658,838 10,587,440 1,593, x ,680,048 14,455,506 3,644,835 10,810,671 1,593, x ,934,614 13,457, ,457,136 1,592, x ,000,203 12,008,956 5,823,113 6,185,842 2,121, x (1) Includes debt service payable from Available Funds, including annual debt service on energy loans due to the State of California. For a description of the College s existing liabilities, see APPENDIX A under FINANCIAL OPERATIONS Liabilities. (2) In calculating the Coverage Ratio, the College determines how much, if any, of the Available Funds are Available for Debt Service. To determine this amount, the following calculation is made: In calculating Net Expenses, Annual Debt Service is not included in Net Expenses, and total operating expenses are adjusted to: remove depreciation expense remove those expenses funded by restricted private gifts and grants remove those expenses funded by state appropriations remove those expenses funded by resident student fees This calculation may result in zero or negative total Net Expenses indicating that no Available Funds are needed to support the College s operating expenses. In other words, the College s operating expenses, as adjusted for depreciation expense, may be supported by restricted private gifts and grants, state appropriations and resident student fees. As such, all other revenues of the College are Available for Debt Service. Source: Hastings College of the Law. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) A-21

54 The following figure is calculated on this basis using, for illustrative purposes, historical data from fiscal year : Revenues Available for Debt Service Fiscal Year Available Funds Tuition and other fees $41,451,656 LESS: Resident student fees (38,412,942) PLUS: Sales and services of auxiliary enterprises 8,598,547 Other Operating revenues 807,966 Loan Interest 42,692 Investment Income 679,256 Realized net gains on investments 4,450,609 Block grant 907,000 Net Expenses Available Funds: 18,524,784 Total Operating Expenses 56,515,188 LESS: Depreciation expense auxiliary (987,550) Depreciation expense non-auxiliary (2,044,784) Expenses funded by State appropriations (13,785,556) Expenses from Resident student fees (38,412,942) Expenses funded by private gifts (3,143,015) Adjustment for negative net expenses 1,858,659 Revenues Available for Debt Service (1) Net Expenses: 0 Available Funds 18,524,784 LESS: Net Expenses 0 Revenues Available for Debt Service: $18,524,784 (1) Restricted revenues and expenditures are excluded from the definition of Revenues Available for Debt Service. These amounts are reflected in the College s audited financial statements. (2) Although the definition of Available Funds in the Trust Agreement excludes resident student fees, this revenue can be made available for debt service for the Series 2017 Bonds at the election of the Board, subject to any limitations that may be imposed in the future by the State Legislature. There are no currently imposed legal restrictions which would preclude the use of resident student fees to pay debt service. Source: Hastings College of the Law. Investment Income and Unrealized Loss/Gain on Investments. The College invests its funds with the Treasurer s Office of the University of California. It is the College s policy to allocate 100% of its invested funds in the General Endowment Pool (GEP). A-22

55 GEP is a balanced portfolio containing equities and fixed-income securities that provides diversification and economies of scale. For GEP, the portfolio s total return for was down 3.54% and the total return for was a gain of 7.41%. The College also utilizes the Short Term Investment Pool (STIP). STIP serves as a cash management tool where the College deposits funds for transfer to its commercial bank accounts held by Wells Fargo Bank. Short term and long term investments results are summarized below: Annualized Total Returns (As of 8/31/2017) Calendar Year To Date Three Years Five Years Ten Years General Endowment Pool 9.62% 6.42% 9.39% 5.60% Short Term Investment Pool Source: Chief Investment Officer of the Regents. Student Tuition and Fee Revenues The Board has independent fee setting authority for the College. The Board has determined that Hastings fees should be in substantial parity with its public, benchmark institutions to provide necessary revenues to maintain and enhance academic programs and to provide resources to achieve priority institutional objectives. Student fees are the primary revenue source supporting the educational mission of Hastings. In , 41 percent of total revenue of $59.6 million (excluding realized and unrealized gain on investments) was derived from net student and related fees of $24.7 million. Although the definition of Available Funds in the forepart of this Official Statement excludes resident student fees, this revenue can be made available for debt service for the Series 2017 Bonds at the election of the Board, subject to any limitations that may be imposed in the future by the State Legislature. The current-year ( ) fee structure at Hastings consists of the following charges and assessments. General Enrollment Fee The General Enrollment Fee represents the primary fee at Hastings and is its main revenue source. This fee is analogous to the Education Fee, Registration Fee, Professional School Fee and Special Fee for Professional School Students (i.e., mandatory system-wide fees) charged by the University of California. Nonresident Tuition The establishment of nonresident tuition is based on state policy guidelines developed by the California Postsecondary Education Commission (CPEC). Typically students achieve residency status after their first year of attendance. Health Services Fee Hastings operates a health clinic. The policy adopted by the Board requires that the health center be self-supporting. This fee provides the revenue necessary to fund all direct costs associated with its operation including physicians, psychiatrists, A-23

56 nursing and administrative staff, the cost of liability insurance, and expenses for supplies, equipment repair, and reference materials. UCSHIP Insurance Premium Insurance coverage is required of all students except those who produce evidence of comparable coverage. Activity Fee This fee supports a number of activities including the fitness center, wellness programs, student events and other miscellaneous activities. In the current year, Hastings fees are lower than the average of other University of California law schools. For , resident fees are 3.9 percent below the average fee charged by the University of California. Hastings nonresident tuition is 4.4 percent below the average nonresident fee charged by University of California Fee Comparison Resident Campus Health Total Nonresident Total Fees (1) Fees Insurance (2) Resident Tuition Nonresident Hastings $43,486 $840 (3) $4,774 $49,100 $6,000 $55,100 Berkeley law school 47,794 1,570 4,462 53,826 12,245 57,777 (4) Davis law school 46, ,284 52,047 12,245 61,298 (5) Irvine law school 44, ,932 49,087 12,245 55,581 (6) UCLA law school 44,385 1,273 3,816 49,474 12,245 55,968 (7) (1) For other UC campuses, Resident Fees are referred to as Mandatory System-wide fees consisting of the Registration Fee, Educational Fee, Professional School Fee and Special Fee for Law/Medicine. (2) Health Insurance premiums can be waived upon presentation of proof of alternative, comparable coverage. (3) Consists of Health Services Fee of $683 and Activity Fee of $157. (4) The Nonresident Tuition for Berkeley is nominally identified as $12,245. However, a lower Professional Degree Supplemental Tuition is provided for nonresidents resulting in an effective Total Nonresident of $57,777. (5) The Nonresident Tuition for Davis is nominally identified as $12,245. However, a lower Professional Degree Supplemental Tuition is provided for nonresidents resulting in an effective Total Nonresident of $61,298. (6) The Nonresident Tuition for UC Irvine is nominally identified as $12,245. However, a lower Professional Degree Supplemental Tuition is provided for nonresidents resulting in an effective Total Nonresident of $55,581. (7) The Nonresident Tuition for UCLA is nominally identified as $12,245. However, a lower Professional Degree Supplemental Tuition is provided for nonresidents resulting in an effective Total Nonresident of $55,968. Source: Hastings College of the Law. The State Budget assumes a freeze on resident tuition through to avoid contributing to higher student debt levels. The State budget also stipulated that professional school fees be held constant for the fifth consecutive year. The table on the following page compares authorized and fee levels for Resident Tuition. A-24

57 RESIDENT TUITION* - University of California Change Percent Berkeley $47,458 $47,794 $336 1% Los Angeles 44,049 44, % Davis 46,476 46, % Hastings 43,486 43,486-0% Irvine 44,049 44, % * Figures excludes campus fees and health insurance premiums. Source: Hastings College of the Law. The following table summarizes total fees charged in by other law schools. Other National Benchmark Institutions Fees Nonresident USC $62,711 N/A Boston College 52,500 N/A George Washington 58,520 N/A University of Texas 35,015 $51,995 University of Minnesota 44,066 52,586 University of Michigan 57,262 60,508 University of Virginia 58,300 61, California Private Institutions Fees University of Santa Clara $52,410 University of San Diego 52,571 Pepperdine 54,260 Loyola Marymount 55,110 Stanford University 58,041 University of San Francisco 49,130 Golden Gate University 49,310 Source: Hastings College of the Law. A-25

58 State of California s Budget for Fiscal Year On June 27, 2017, the Governor signed into law the State budget for fiscal year (the Budget ). The following information is drawn from the Office of the Legislative Analyst ( LAO ) preliminary review of the Budget for the State of California. For fiscal year , the Budget projects total general fund revenues and transfers of $118.5 billion and total expenditures of $121.4 billion. The State is projected to end the fiscal year with total available reserves of $7.4 billion, including $642 million in the traditional general fund reserve and $6.7 billion in the State s Budget Stabilization Account. For fiscal year , the Budget projects total general fund revenues of $125.9 billion, reflecting a 6% increase over the prior year and driven primarily by a projected 5% increase in personal income, sales and use tax collections. The Budget authorizes expenditures of $125.1 billion. The State is projected to end the fiscal year with total available reserves of $9.9 billion, including $1.4 billion in the traditional general fund reserve and $8.5 billion in the State s Budget Stabilization Account. The Budget includes total funding of $32.5 billion ($17.7 billion General Fund and local property tax and $14.8 billion other funds) for all higher education entities in Information about the State budget and State spending is regularly available at various State-maintained websites. Text of the budget may be found at the website of the Department of Finance, under the heading California Budget. An impartial analysis of the budget is posted by the LAO at In addition, various State official statements, many of which contain a summary of the State budgets may be found at the website of the State Treasurer, Information on these websites has not been reviewed or verified by Hastings, the Underwriter or the Municipal Advisor and is not incorporated by reference in this Official Statement. The State contributes directly and indirectly to a number of the College's activities. The Budget provides $ million of State general funds, an increase of 9.2% ($1.1 million) from the $ million State appropriation provided for the College in However, the Budget also includes a technical adjustment that removed $2 million in one time funding provided in the budget for deferred maintenance projects. As a result of this technical adjustment, general fund support declined by 6.8% ($933,000) from the level. Adopted Operating Budget for the Hastings, like most law schools, has increased financial aid allocations and merit-based scholarships in an effort to attract and retain students and protect Law School Admission Test and Grade Point Average medians in a period of applicant decline. Tuition Discounting benefits students by reducing aggregate student debt. However, it does so in tension with the fiscal wellbeing of the law school. Tuition Discounting has historically ranged between 28-31%. The budget plans a discount rate of 45% for students entering fall The College s Board of Directors, at its September 2017 meeting, affirmed the plan to reduce the Tuition A-26

59 Discount to 37.5% for fall Scholarships from gifts and endowments continued to be awarded in accordance with gift instruments. On an all-funds college-wide Summary of Revenues, Expenses and Changes in Net Position Consolidated Revenues basis, the approved budget projects a decrease in net assets of $11,670,882 or a decrease of 16.7% of budgeted revenues. It should be noted that unrealized/realized gains/losses on investments are not budgeted; in this totaled $9,524,892. The following display summarizes the College s budget for The figures are reported in a functional classification format APPROVED BUDGET Core Operations Revenues Tuition and related fees $ 41,573,872 State appropriations 12,851,000 Sales and services of Auxiliary Enterprises 9,170,820 Investment income 242,500 Other revenues 82,125 Total Revenues, Core Operations $ 63,920,317 Expenses Salaries and benefits $ 33,971,534 Scholarships and fellowships 18,168,296 Operating expenses, state 11,481,248 Auxiliary Enterprises 4,484,268 Interest on debt 920,811 Total Expenses, Core Operations $ 69,026,157 Net Increase/Decrease from Core Operations $ (5,105,840) Capital Projects Deferred Maintenance Projects, State $ 2,357,776 Long Range Campus Plan 708,432 Other 405,618 Net Increase/Decrease from Capital Projects $ (3,471,826) Gift, Grant, Contract and Other Non-State Programs Revenues Gifts, grants and contracts $ 3,633,546 Investment income 1,279,057 Other revenues 992,189 Total Revenues, Non-state Programs $ 5,904,792 Expenses Salaries and benefits 2,983,833 Scholarships and fellowships 2,822,057 Operating expenses, non-state 3,192,118 Total Expenses, Non-State Programs $ 8,998,008 Net Increase/Decrease from Non-State Programs $ (3,093,216) Total Net Increase/Decrease $ (11,670,882) Source: Hastings College of the Law. A-27

60 Of the $11.7 million budgeted decrease in net assets, $8.9 million results from Statefunded core operations (i.e., use of reserves) driven by increased tuition discounts and another $2.0 million represents the expenditure of State funding for deferred maintenance received in but being spent in Expenditure of restricted grants and gifts received in prior years is budgeted at $2.5 million (including student scholarship support at $1.8 million) and an additional $1.2 million in plant fund expenditures is funded from prior year fund balances. Auxiliary enterprises and other unrestricted non-state fund activities are projected to generate $2.8 million in Hastings maintains significant reserves and has strategically managed their use. The table below lists the primary reserves available for discretionary use as of June 30, NET ASSETS AMOUNT Operating Reserve $15,831,535 Plant Fund Reserve 9,139,570 Hastings-Digardi-Hall (Current Use) 2,714,444 Auxiliary Enterprises 4,078,060 TOTAL $31,817,609 Source: Hastings College of the Law. Liabilities The College s liabilities as of June 30, 2017 are shown on the balance sheet included in the College s financial statements set forth in Appendix B. Funds Functioning as Endowments Funds Functioning as Endowments, also referred to as quasi-endowments, designated by the Board, had a market value of $7.6 million in This represents an increase from the $7.0 million in 2016 due to unrealized gains in market value. Except for investment income thereon, Funds Functioning as Endowments are not included in the Available Funds from which the Series 2017 Bonds are payable under the Trust Agreement, but could be used at the discretion of the College s Board to pay debt service on the Series 2017 Bonds or other liabilities of the College. Fundraising There are approximately 22,000 living Hastings graduates, making the Hastings alumni base one of the nation s largest legal networks. The College is especially well known for producing judges and more than 550 graduates are presently serving or have recently served on the bench. Until recently, two justices on the California Supreme Court were Hastings alumni; one of them, Associate Justice Marvin Baxter, retired last year. There are also two Hastings graduates on the Hawaii Supreme Court. Other well-known graduates of the College include US Senator Kamala Harris (D-CA), San Francisco Public Defender Jeff Adachi, and Former Deputy US Attorney General James Cole. A-28

61 The Department of Development & Alumni Engagement is charged with developing pathways for alumni engagement with the desired outcome of increasing and strengthening alumni connections to the College. This is achieved through on-campus and off-campus events, on-campus engagement opportunities, regional groups, leadership volunteer opportunities (e.g., Board of Trustees and Board of Governors), and direct and personal outreach. Ultimately, it is the objective of the department to lead alumni engagement into philanthropic action. Philanthropic outreach and activity is divided into three main categories: 1) annual giving; 2) individual and major giving; and 3) planned giving. Annual giving consists of annual campaigns centered mainly on traditional solicitation methods such as direct mail and telephone. The College s program also includes significant outreach with an increase in mobile based giving such as crowdfunding and social media platforms. Major giving is driven by personal outreach led by individual gift officers. These individuals manage portfolios of donors ranging in size from Gift officers reach out on a one-by-one basis, set meetings and appointments, and build relationships. These are guided by the donor and interest they possess. Ultimately, gift officers ask for major gifts ($50K+) that are typically pledged out over a number of years. Planned giving is an area of increased focus for the department. This consists of targeted outreach to donors and alumni possessing characteristics typical of those likely to make a planned gift. These gifts are typically deferred but provide critical future income to the college. For the fiscal year 2016, a total of $5,420,763 was raised. For the fiscal year 2017, a total of $5,672,796 was raised. Restricted gifts to the College are not Available Funds of the College, except to the extent such amounts are from time to time designated by the College's Board of Directors for the payment of Annual Debt Service. The UC Hastings Foundation The UC Hastings Foundation (formerly the 1066 Foundation) is a separate 501(c)(3) nonprofit entity created to lead fundraising for the College. The Foundation was established in 1971 by a group of loyal alumni in order to provide private sources of restricted and unrestricted funds to allow academic programs to grow and to create unique opportunities in legal education. The initial founding alumni have since been joined by faculty, staff, and other contributors to the College. Annual gifts from Foundation members support a variety of purposes, such as moot court activities, scholarly publications, lectureships, and faculty professional development. Additionally, the Foundation has provided student scholarships and faculty research support with funds raised from class campaigns and from memorial and endowment gifts. The College and the Foundation have entered into an Operating Agreement that sets forth their relationship in greater detail. Pursuant to the Operating Agreement, the Chancellor and A-29

62 Dean works with the Foundation. Together they prepare short- and long-term fundraising goals. The Chancellor and Dean also consults with the Foundation on strategic planning. Fundraising by Hastings is undertaken in the name of the Foundation or is characterized as such. Property and Equipment Property and equipment acquired by gift or bequest are stated at market value at the date of acquisition. Property, Plant and Equipment June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 Capital assets, not being depreciated Land $5,088,532 $5,088,532 $5,088,532 $5,088,532 $5,088,532 Construction in progress 2,117,575 1,919, , ,565 0 Works of Art 421, , , , ,309 Intangible assets 115, , , , ,920 Total Capital assets, not being depreciated 7,743,336 7,545,090 6,610,051 5,768,326 5,625,761 Capital assets, being depreciated Buildings 84,402,917 84,402,917 84,402,917 84,402,917 84,402,917 Buildings and improvements 34,097,260 33,820,169 33,779,725 33,221,082 32,990,349 Equipment, furniture and fixtures 5,994,614 6,035,262 6,121,412 6,319,026 6,584,224 Computer software 935, , , , ,441 Library books 2,832,808 11,699,416 11,699,416 15,400,451 15,303,673 Total Capital assets, being depreciated 128,262, ,892, ,938, ,278, ,258,604 Accumulated Depreciation Buildings (26,852,771) (25,520,630) (24,188,489) (22,856,348) (21,635,218) Buildings and improvements (16,147,752) (14,975,848) (13,807,040) (12,648,104) (11,597,485) Equipment, furniture and fixtures (4,896,754) (4,702,732) (4,513,733) (4,400,202) (4,640,487) Computer software (685,754) (608,100) (539,108) (461,103) (390,234) Library books (1,516,114) (10,188,408) (9,992,178) (13,100,753) (12,746,988) Total accumulated depreciation (50,099,145) (55,995,718) (53,040,548) (53,466,510) (51,010,412) Total capital assets, being depreciated, net 78,163,526 80,897,118 3,897,994 86,812,038 89,248,192 Capital Assets, net $85,906,862 $88,442,208 $90,508,045 $92,580,364 $94,873,953 Source: Hastings College of the Law. Qualified Retirement Plan Substantially all College employees are participants in the University of California Retirement System (UCRS). UCRS consists of a basic a cost-sharing multiple-employer defined benefit plan, University of California Retirement Plan (UCRP), and several supplemental plans, University of California Defined Contribution Plans (UCDCP). The latest available actuarial and financial information for the Plan is for the year ended June 30, UCRP issues a publicly available financial report that includes financial statements and supplemental information of the A-30

63 plan and is available by writing to UC Retirement System, 300 Lakeside Drive Suite 442, Oakland, California Membership in UCRP is required for a career employee appointed to work at least 50% of the time for a year or more. Five years of service is required for vesting, entitlement to retirement benefits. The amount of benefit is determined by salary rate, age and years of service. UCRP is funded by contributions from both the employer and employee. The College is required to contribute to UCRP at a rate set by the Regents. The pension liability includes the College s share of the net pension liability for UCRP. The College s share of net pension liability, deferred inflows or resources, deferred outflows of resources and pension expense have been determined based upon its proportionate share of covered compensation for the fiscal year. The fiduciary net position and changes in the fiduciary net position of UCRP have been measured consistent with the accounting policies used by the plan. For purposes of measuring UCRP s fiduciary net position, investments are reported at fair value and benefit payments are recognized when due and payable in accordance with the benefit terms. For UCRP eligible employees, participation in UCDCP is mandatory on a temporary basis until contribution to UCRP can begin. Participation in other defined contribution plans (such as 403(b) and tax deferred annuities) are optional. Commencing in the 1993 fiscal year, ineligible UCRP employees began participating in UCDCP (Safe Harbor). Effective July 1, 2015, employee member contributions range from 7.0% to 9.0%. The College pays a uniform contribution rate of 14.0% of covered payroll on behalf of UCRP members. The College s contributions for the fiscal years ended June 30, 2017 and 2016 were $4,387,000 and $4,718,000 respectively. See "APPENDIX B" for more information on the College s contributions to the UCRP and its net pension liability. Postretirement Health Care Benefits In addition to the benefits described above, participation in UCRP entitles College employees to certain post-retirement health care benefits. Retired employees are eligible to have a portion of their medical and dental insurance coverage paid by the college, up to 100%, subject to certain restrictions and eligibility criteria. An employee s eligibility for this benefit is based primarily on the date he or she was hired and his or her years of service credit in UCRP at the time of retirement. The College has historically funded these benefits on a pay-as-you-go basis. For the year ended June 30, 2017, the College s contribution was $758,312. The amount the College paid for the year ended June 30, 2016 was $769,209. Employment Contracts and Retirement Agreement In January 2017, the Board approved a five and one-half year employment contract with the then newly appointed Chancellor and Dean that includes salary and other benefits. The contract obligates the College to annual costs of $444,000 (i.e., compensation, housing and auto allowances) for the duration of the agreement (June 30, 2022). In addition, there are annual A-31

64 annuitant payments the College is obligated to make under its participation in UCRS. Future commitments of both of these obligations is as follows: Fiscal Year ending June 30, Annual College Obligations Under Annuitant Retirement Agreements 2018 $153, , , ,861 Source: Hastings College of the Law. Inclusion in the Official Statement The information contained herein is submitted by the College for inclusion in the Official Statement relating to the Series 2017 Bonds. A-32

65 APPENDIX B AUDITED FINANCIAL STATEMENTS OF HASTINGS COLLEGE OF THE LAW FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND JUNE 30, 2017 B-1

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67 Report of Independent Auditors and Financial Statements with Supplementary Information University of California Hastings College of the Law June 30, 2017 and 2016

68 Table of Contents REPORT OF INDEPENDENT AUDITORS... 1 MANAGEMENT DISCUSSION AND ANALYSIS... 4 FINANCIAL STATEMENTS Statements of Net Position Statements of Revenues, Expenses, and Changes in Net Position Statements of Cash Flows Notes to Financial Statements SUPPLEMENTARY INFORMATION Net Pension Liability Required Supplementary Information (Unaudited)... 48

69 Report of Independent Auditors To the Board of Trustees University of California Hastings College of the Law Report on the Financial Statements We have audited the accompanying financial statements of University of California Hastings College of the Law (the College and UC Hastings ) and its discretely presented component unit, the UC Hastings Foundation (the Foundation ), as of and for the years ended June 30, 2017 and 2016, and the related notes to the financial statements, which collectively comprise the College s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1

70 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of University of California Hastings College of the Law and its discretely presented component unit, the UC Hastings Foundation, as of June 30, 2017 and 2016, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information The accompanying Management s Discussion and Analysis on pages 4 through 18, and the supplementary information on net pension liability on page 48 are not a required part of the financial statements but are supplementary information required by the Governmental Accounting Standards Board who considers them to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. This supplementary information is the responsibility of management. We have applied certain limited procedures in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management s response to our inquiries, the financial statements, and other knowledge we obtained during our audit of the financial statements. We do not express an opinion or provide any assurance on the supplementary information because limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. San Francisco, California October 24,

71 Management Discussion and Analysis

72 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) The University of California, Hastings College of the Law (the College or UC Hastings ) presents its financial statements for fiscal year 2017 with comparative data presented for fiscal years 2016 and The emphasis of discussions concerning these statements will be for the fiscal years ended June 30, 2017 and 2016 (2017 and 2016, respectively). There are three financial statements presented: the Statements of Net Position; the Statements of Revenues, Expenses, and Changes in Net Position; and the Statements of Cash Flows. The following discussion and analysis is intended to help readers of the College s financial statements to better understand its financial position and operating activities. It should be read in conjunction with, and is qualified in its entirety by, the related financial statements and footnotes. The financial statements, footnotes, and this discussion and analysis were prepared by the College and are the responsibility of its management. THE COLLEGE The College was founded in 1878 as the law department of the University of California ( UC ). UC Hastings is the oldest public law school in California. Founded by Chief Justice Serranus Clinton Hastings, the College was established by the California Legislature with its own Board of Directors which has operated the College independently of the Board of Regents of the University of California since its founding. The Board of Regents possesses degree-granting authority but all other aspects of the College are under the control of the UC Hastings Board of Directors. The College is the only stand-alone, public law school in the nation. The mission of UC Hastings is to provide an academic program of the highest quality, based upon scholarship, teaching, and research, to a diverse student body and to assure that its graduates have a comprehensive understanding and appreciation of the law and are well trained for the multiplicity of roles they will play in a society and profession that are subject to continually changing demands and needs. UC Hastings reputation for academic excellence, its formal affiliation with the University of California, and its location in San Francisco s downtown civic center are major factors contributing to the overall strength of the law school. This intrinsic quality is reflected in the large number of applications received for a limited number of seats. Hence, UC Hastings enrollment management objectives are to matriculate select students of the highest academic credentials. THE UC HASTINGS FOUNDATION The UC Hastings Foundation (the Foundation ) was organized for the purpose of providing an organization for individuals dedicated to the support of the College and to provide a means for soliciting, receiving, and making financial contributions and garnering volunteer support to the College, and to otherwise assist its students, alumni, administration, faculty, and Board of Directors. The Foundation is a California nonprofit public benefit corporation exempt from federal income tax pursuant to Internal Revenue Code Section 501(c)(3) and a public charity pursuant to Code Section 170(b)(1)(A)(iv). 4

73 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Substantially all restricted gifts and unrestricted gifts made to the College are recognized and accounted for within the Foundation s accounts. To support the College s efforts, the Foundation allocates block grants to the College from the proceeds of unrestricted gifts made to the Foundation. These blocks grants are designated by the Foundation to support the College s alumni office and non-state costs associated with institutional advancement functions along with funding for special events and other programs based on the Chancellor and Dean s institutional priorities. Additionally, the Foundation supports a variety of purposes such as student scholarships, faculty research and professional development, lectureships, and moot court activities with funds raised from annual giving, class campaigns, and from memorial and endowment gifts. The Governmental Accounting Standards Board ( GASB ) Statement No. 39, Determining Whether Certain Organizations are Component Units, is further clarified by GASB Statement No. 61, The Financial Reporting Entity: Omnibus, detailing the major component unit concept. Major component units are determined based on the nature and significance of their relationship to the primary government. This determination would generally be based on any of the following factors: (a) the services provided by the component unit to the citizenry are such that separate reporting as a major component unit is considered to be essential to financial statement users, (b) there are significant transactions with the primary government, or (c) there is a significant financial benefit or burden relationship with the primary government. The GASB requires the Foundation, as the College s legally separate, tax-exempt, affiliated campus foundation, to be considered a component unit of the College and presented discretely in the College s financial statements due to the nature and significance of the Foundation s relationship with the College. Overview of the College On a nationwide basis, the Juris Doctor ( JD ) application cycle was the fourth in a row in which the number of applications submitted to ABA-accredited law schools remained essentially flat. As of the end of August 2017, there were approximately 56,200 applicants to the nation s 205 ABA-accredited law schools, compared to 56,500 in For law schools in the Law School Admission Council ( LSAC ) defined Far West region, which includes Nevada, California, and Hawaii, the number of applicants was down 2.6% from 2016, but the number of applications received by Far West law schools was up 1%. The 2017 national applicant pool was characterized by a sharp drop in the number of Law School Admission Test scores between 165 and 180. Conversely, there was an increase in the number of LSAT scores between 145 and 159, although it was not as pronounced as the declines in the higher score bands. For the 2017 application cycle, UC Hastings received 3,009 applications compared to 3,416 in 2016, a decline of 12%. About half of the decline in applications was from California and the other half was from other states. The decline may be attributed in part to the negative publicity surrounding our 51% bar passage rate announced in late November 2016 (compared to a statewide ABA accredited law school average of 68%) and a four-position drop, from 50 to 54, in the annual U.S. News and World Report rankings announced in March The high cost of housing in San Francisco is also thought to be a factor as well as the College can only provide subsidized housing for only 30% of its students. In 2016, UC Hastings received 3,416 applications for the JD program to fill its targeted enrollment of 320 first year students. Applications were down 5.5% from the 2015 total of 3,613. For the 2017 and 2016 cycles, a universal application fee waiver policy was adopted in part because both UC Davis and UC Irvine, two significant competitors, were also not charging application fees. UCLA and UC Berkeley continued to charge $75 application fees. 5

74 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) In order to preserve selectivity, 132 fewer offers of admission in 2017 were made than were extended in The reasoning for this was based on (1) the 2016 entering class was larger than expected due to higher than expected yield; and (2) a prediction that the yield on 2017 admits would remain steady since our scholarship awards were consistent with the prior year. This reasoning proved to be prescient, as our entering class size came in higher at 326. Initial yield on offers in 2017 (known as the May Yield ) was 28.4% compared to 26.9% in The 2017 summer melt was consistent with the previous two cycles and our final yield (the August Yield ) was 22% compared to 21% in The uptick in the yield figures is due to our scholarship offers being generous and competitive with our overlap institutions, along with a series of successful Admitted Student Receptions in San Diego, Los Angeles, San Francisco, Seattle, and New York. The higher May Yield meant that offers to students on the waitlist were minimal was the second year in a row where use of the waitlist was limited. Ten students out of the 326 in the Class of 2020 were enrolled from the waitlist. For the fall 2017 academic year, the College exceeded its JD enrollment target of 320 students with 326 students matriculating in the Class of In contrast, for the fall 2016 entering class, 348 students matriculated. The decision to limit the size of the fall 2015 entering class to 292 first year law students (a variance of -8.8% from the enrollment target of 320) was made to maintain institutional quality as it was determined that bringing in the targeted class size of 320 would lower academic medians below 2014 benchmarks (a 158 median LSAT and a 3.45 Grade Point Average). Because of the dearth of applicants with LSAT scores from 165 to 180, there was an expectation that the academic quality of the incoming class could have been detrimentally affected. This belief was based on the fact that higher ranked law schools would have needed to accept applicants with lower LSAT scores than they accepted in the past in order to meet their class size targets. However, this did not happen, and the medians for the incoming Class of 2020 are virtually identical to the incoming class in 2016: medians of 159 on the LSAT and a 3.42 undergraduate GPA. For enrollment planning, in the near term, targets call for enrollment levels of between 900 and 960 JD students for upcoming years representing an overall enrollment target of 1,000 full-time equivalent ( FTE ) including students matriculating in the JD, Master of Laws ( LLM ) and Master of Studies in Law ( MSL ) programs. The gender split in the Class of 2020 is 53% women and 47% men, which is much less lopsided than last year s 1L class (61% women and 39% men). Nationally, the number of male applicants declined by 2.3% and the number of female applicants increased by 1.9% compared to last year. The gender breakdown in our 1L class is identical to the gender split in the nationwide LSAC applicant pool. Students of color in the Class of 2020, comprised of African Americans, Asian Americans (including students who identify as Indian or South Asian), Latinx (Latinx is the new gender neutral term used in lieu of Latino and Latina) Americans, Native Americans, and international JD students account for 43% of the class. This percentage is up from last year s figure of 33%. The biggest swing in ethnicity from last year to this year was an increase in Asian American enrollment from 27 students in the Class of 2019 to 68 students in the Class of Enrollment of Native American students also increased. Conversely, African American and Latinx American enrollment decreased. 6

75 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Total FTE enrollment for the academic year was JD students, 30 LLM students, 2.4 MSL students and 3.3 visitors for a total of full-time equivalent students. In addition, we also had 11 FTE students. In academic year there were 878 JD students, 22.5 LLM students, 5 MSL students and 2.2 visitors for a total of full-time equivalent students. In , fee waivers and exchange discounts equated to 16 FTE students for a net enrollment of full-time equivalent students (for the academic year, the corresponding figure is FTEs). In , total FTE enrollment was JD students, 36.5 LLM students, 7.8 MSL students and 16.9 visitors for a total of full-time students. In , fee waivers and exchange discounts equated to 17.1 FTE students for a net enrollment of full-time equivalent students. Highlights of Financial Operations Progress was achieved in a number of areas pertaining to financial and other operations. Outlined below are the developments that have had an impact on the operations of the College. State of California Increased Operating and Capital Support State funding has rebounded from the depths of the State of California s recession. State operating support has increased by an average of 9.4% annually over the past five years. The 2017 budget continues the Governor s commitment to a multiyear funding plan for higher education. The plan provides annual increases in General Fund appropriations over a six-year period ( through ). The plan addresses affordability and assumes a freeze on resident tuition through to avoid contributing to higher student debt levels. For 2017, the Budget Act increased state operating support by $1 million (9.4%), stipulated that professional school fees for law be held constant for the fourth consecutive year, appropriated $2 million to fund deferred maintenance needs in the College s two state supported facilities and allocated an additional $18.8 million to bring total appropriations to $55 million in lease revenue bond financing for the new academic building at 333 Golden Gate. Tuition Discounting UC Hastings, like most law schools, has increased financial aid allocations for students at the College in an effort to protect LSAT/GPA medians in a period of applicant decline. While it is obvious that tuition discounting benefits students by reducing aggregate student debt, it does so in tension with the economic well-being of the law school. This trend is common in institutions of higher education as tuition discounting strategies have affected the bottom line at many colleges. Beginning in 2015 and continuing in 2016, to increase the College s competitive position, the financial aid strategy was changed to award larger merit-based scholarships competitive with peer schools to attract and retain students with credentials meeting institutional standards. In 2015, UC Hastings changed its financial aid strategy to award larger merit-based grants (i.e., tuition discounts) renewable during the students 2L and 3L years conditional to maintaining good academic standing. While scholarships from endowed funds continued to be awarded in accordance with gift instruments, the average Hastings grant was $20,600 (i.e., that portion of financial aid delivered through tuition discounting), a tuition discount of 46%. Tuition discounting has historically ranged between 28-31%. 7

76 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Looking forward to 2019, the Board of Directors at its September 2017 meeting set as a planning guide that the discount rate for the Fall 2018 entering class reduce the discount rate to 37.5% accompanied by a renewed emphasis on fundraising for current-use scholarships to mitigate the impact of reduced discounting. Financial Position The narrative detailing UC Hastings financial position combines figures for the College and the Foundation, unless otherwise indicated. The statements of net position present the financial position of the College and the Foundation at the end of 2017 and The purpose of the statements of net position is to present to the reader a fiscal snapshot of UC Hastings. From the data presented, readers of the statements of net position are able to determine the assets available to support the operations of the College. They are also able to determine its liabilities in terms of how much the College owes vendors, investors and lending institutions. Finally, the statements of net position provide an overview of net position (assets, deferred outflows of resources minus liabilities, deferred inflows of resources) and their availability for expenditure. The net position section is classified into three major categories. The first category, Net Investment in Capital Assets, presents the College s equity in property, plant, and equipment. The next asset category is Restricted Assets, which is divided into two categories, Nonexpendable and Expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the College, but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is Unrestricted Assets which are those net assets available for any lawful purpose to support the College. 8

77 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Detailed statements of net position are included with the financial statements. A condensed version is shown below: Condensed Statement of Net Position 2017, 2016, and 2015 (in thousands) College Foundation 2017 Total 2016 Total 2015 Total ASSETS Current assets $ 22,817 $ 108 $ 22,925 $ 16,770 $ 18,765 Noncurrent assets 179, , , ,551 Total assets 202, , , ,316 Deferred outflows of resources 2,091 2,091 10,645 11,603 Total assets and deferred outflows of resources $ 204,238 $ 604 $ 204,842 $ 207,014 $ 215,919 LIABILITIES Current liabilities $ 7,035 $ - $ 7,035 $ 7,740 $ 8,635 Noncurrent liabilities 57,233-57,233 67,635 60,783 Total liabilities $ 64,268 $ - $ 64,268 $ 75,375 $ 69,418 Deferred inflows of resources $ 5,237 $ - $ 5,237 $ 5,756 $ 14,231 TOTAL NET POSITION Net investment in capital Assets $ 65,440 $ - $ 65,440 $ 67,318 $ 68,763 Restricted: Nonexpendable 23, ,428 22,159 22,124 Expendable 31, ,728 27,564 28,282 Unrestricted 14, ,741 8,842 13,101 Total net position $ 134,733 $ 604 $ 135,337 $ 125,883 $ 132,270 Total liabilities, deferred Inflows of resources and net position $ 204,238 $ 604 $ 204,842 $ 207,014 $ 215,919 Assets For 2017, for the College and the Foundation, current assets increased by $6.1 million (36%), from $16.8 million in 2016 to $22.9 million. Cash position increased by $626,000 (6%) in large measure due to the sale of $5 million in long-term investments in June 2017 necessary to support liquidity needs given negative operating results. Restricted cash and cash equivalents increased by $2.1 million (87%) to $4.4 million reflecting collection activity associated with the federal Perkins Student Loan Program. This program is set to expire on September 30, 2017, and is an extension to an earlier program expiration of September 30, The extension was made possible by the General Education Provisions Act ( GEPA ); however, this act also prohibits any further extensions of the Perkins Loan Program. For 2016, for the College and the Foundation, current assets decreased by $2 million (-11%), from $18.8 million to $16.8 million. The primary reason for the change was the one-time nature of a $1.3 million account receivable from 2015 related to cost reimbursement for the McAllister Streetscape improvement project funded by a grant from the City and County of San Francisco. Cash and cash equivalents held primarily in the Short-Term Investment Pool ( STIP ) declined by $206,000 (-1.5%) which was a function of negative operating results. 9

78 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) For 2017, the noncurrent assets of the College and the Foundation increased by $227,000 (.1%). Investment returns on the General Endowment Pool ( GEP ) managed by the University of California, Office of the Treasurer, were 14.8% for the year; these positive investment returns favorably impacted the closing values of endowment investments and other long-term investments as balances residing in these accounts were fully invested in the GEP. For the College and Foundation, endowment investments under the College s control increased by $3.2 million (11.8%): from totals of $27.3 million to $30.6 million. Other long-term investments increased by $787,000 (1.9%) as increases generated by favorable market returns were substantially offset by the liquidation of $5 million of investments held in the GEP. This was necessary as the approved budgets for Core Operations (i.e., activities funded by state appropriations and student fee revenues) and Auxiliary Enterprises authorized deficit spending of $5.1 million to support the school s financial aid strategy and cash was needed to provide sufficient liquidity to fulfill budgeted financial obligations. Notes receivable net of allowance for doubtful accounts decreased by $1.9 million (-12.4%) due to collections from the soon-to-be-expired federal Perkins Student Loan Program. Prepaid expenses and other assets increased by $3.1 million. The State of California has appropriated $55 million in lease revenue bond financing to fund a new academic building on land owned by the College at 333 Golden Gate Avenue; supplementing this amount in $3.1 million in nonstate funds to enhance the scope of the state-funded work. The new building is scheduled for occupancy in For 2016, the noncurrent assets of the College and the Foundation decreased by $6.0 million (-3.3%). Investment returns on the GEP managed by the University of California, Office of the Treasurer, were -3.54% for the year. Negative investment returns adversely impacted the closing values of endowment investments and other long-term investments as balances residing in these accounts were fully invested in the GEP. The College invests with the University of California, Office of the Treasurer: The GEP experienced total returns of 14.8% in This compares favorably to the negative -3.54% total return in The Short Term Investment Pool (STIP) experienced total returns of 1.25 percent in 2017, approximate to the 1.24 percent achieved in Total market value of the GEP-Operating Pool and GEP-Endowment Pool increased to $72.7 million as of June 30, 2017, from $68.7 million as of June 30, 2016, an increase of $4 million (5.8%). For the College and Foundation, total assets for 2017 increased to $202.7 million, an increase of $6.3 million (3%). Total assets for 2016 declined by $7.9 million (-3.9%) going to $196.4 million from $204.3 million in the prior year. Liabilities For 2017, current liabilities totaled $7 million, a decrease of $705,000 (-9%) from Accounts payable and accrued liabilities declined $1.4 million (-27%) as accrued payroll expense declined by $1.3 million from 2016 to 2017 due to the implementation of bi-weekly pay cycles for hourly employees; the 2017 accrual of $134,000 represents pay earned but not remitted for the last two weeks of June Further, as the pay period ended on June 30, 2017, no accrual of regular payroll was necessary. 10

79 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) For 2016, current liabilities totaled $7.7 million, a decrease of $895,000 (-10.4%) from Unearned revenues recorded in 2016 totaled $581,000; in 2015, $1.2 million was accrued. The primary reason for fluctuations in this category are instances where housing and enrollment fee deposits, or awards for grants and contracts, are received in a given year but associated services are not provided until a subsequent fiscal year. The largest examples of this being $318,000 received 2015 but not expended for the Center for Work Life Law s Hourly Workers' Project, and a $237,000 reduction in enrollment deposits from 2015 to For 2017, noncurrent liabilities decreased by $10 million (-15.4%). The primary reason for the decrease in noncurrent liabilities was a -31% reduction in the College's net pension liability caused by favorable investment returns enjoyed by the University of California Retirement Program (UCRP). Total assets managed by UCRP increased from $54.1 billion to $61.6 billion in Other factors include principal payments associated with debt service for the Series 2008 Bonds ($650,000) and larger than normal payments ($339,000) of accrued vacation due to employee transitions brought about by the closure of the Safety & Security Department and the retention of the University of California at San Francisco ( UCSF ) Police Department to provide campus-wide, integrated safety and security services. For 2016, noncurrent liabilities increased by $6.9 million (11.3%) reflecting the impact of GASB 68. The net pension liability in 2016 at $32.1 million is an increase of $7.9 million over $24.2 million in 2015 offset by the change in pension payable to the University of California with a decrease of $281,000. Decreases include $651,000 in the Series 2008 bonds payable and reduction of $95,000 in accrued vacation. On an overall basis, total liabilities decreased by $11.1 million from $75.4 million in 2016 to $64.3 million in In 2015, total liabilities increased to $69.4 million (9%). Deferred Outflows and Inflows of Resources Deferred Outflows and Inflows of Resources are reflected below for the ending fiscal year periods Deferred outflows of resources $ 2,091,000 $ 10,645,000 $ 11,603,000 Deferred inflows of resources $ 5,237,000 $ 5,756,000 $ 14,231,000 These amounts reflect the acquisition (outflows) or consumption (inflows) of net assets to support employer pension benefits in the current accounting period but applicable to a future period. Specifically, these amounts are related to the College s share of pension benefits, the calculation of which is guided by GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions, made subsequent to the measurement date, an Amendment of GASB Statement No. 68. These amounts fluctuate as actuarial data, such as mortality tables, salary increases, cost of living adjustments, length of service, inflation, investment rates and other assumptions change from year to year. For example, if employees are living longer than expected, the total pension liability increases. With no change to the total pension assets, deferred outflows of resources would increase. The source of these figures is provided for by Segal Consulting report dated September 1, 2017, as commissioned by the University of California Controller s Office. 11

80 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) NET POSITION For 2017, nonexpendable restricted net assets the corpus of endowed funds increased in value to $23.2 million (6%). Gifts supporting the Elkamp and Turriff Endowment, Roger and Carol Dreyer Trial Attorneys Scholarship, Hawaii Scholarship Fund, and the Bernard and Joan Maier Scholarship Fund added $377,000 to those accounts. For 2016, nonexpendable restricted net assets were substantially unchanged at $22 million. In 2015, this category increased by $1.1 million (5.1%) to $22 million primarily due to fundraising that increased the endowment. For 2017, expendable restricted net assets increased by $4.1 million (15%) due to an increase of $1.5 million (24%) in instruction and research primarily grants and contracts undertaken by the Center for Refugee Studies, Center for Worklife Law, and Institute for Innovation and Law, $278,000 (40%) in capital projects to support the Long-Range Campus Plan, and $2 million (19%) in increased fundraising for current-use scholarships and fellowships along with favorable investment returns. For 2016, expendable restricted net assets decreased by $719,000 (-2.5%) due to negative investment returns allocated to participating accounts. Net position in instruction and research declined primarily due to lower levels of contracting and grant activities coupled with fund drawdowns reflective of expenditures linked to contracts and grant funded activities. In 2015, this category increased by $237,000 to $28.3 million due to $466,000 increased gifts to scholarships and research offset by spend down of capital project funds allocated to the McAllister Street Campus Streetscape Project and Parking Garage tenant improvements. Favorable investment returns also had a positive effect. A key measure of financial status is an entity s unrestricted net position. Unrestricted net position is defined as a group of items with commercial or exchange value that have no external restrictions regarding their use or function. Unrestricted net position can be utilized for any decided-upon purpose. This is in contrast to restricted net position that is assigned to specific purposes. For 2017, the unrestricted net position of the College and its Foundation totaled $14.7 million, an increase of $5.9 million. This outcome, largely driven by a $9.6 million in realized and unrealized gain on investments from the 14.8% total return on funds invested in the GEP, and reductions in liabilities. In 2016, the unrestricted net position of the College and its Foundation totaled $8.8 million, a decrease of $4.3 million driven by the $7.9 million increase in net pension liabilities; absent this change the College s unrestricted net position increased by $3.3 million (25.5%). Results of Operations The Statements of Revenues, Expenses, and Changes in Net Position presents UC Hastings operating results, as well as the nonoperating revenues and expenses. Operating revenues primarily include net student tuition and fees, grants and contracts, and auxiliary activities. Given a public institution s dependency on revenues such as state appropriations, gifts and investment income, which are prescribed by GASB as nonoperating revenues, operating expenses will always exceed operating revenues resulting in an operating loss. Net nonoperating revenues or expenses are an integral component in determining the increase or decrease in net position. For 2017, the College (with the Foundation) experienced net income of $7.1 million; when other changes to net assets are included, the total increase in net assets grows to $9.5 million. 12

81 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) In 2016, the College (with the Foundation) experienced a loss with total revenues $8.3 million less than total expenses inclusive of an unrealized loss on funds invested with the UC GEP of -$3 million reflective of -3.54% total returns. Condensed Statement of Revenues, Expenses, and Changes in Net Position For the years ended June 30, 2017, 2016, and 2015 (in thousands) REVENUES Tuition and fees, net of grants and scholarships 24, Operating Non-operating College Foundation College Foundation Total Total Total $ $ - $ - $ - $ 24,685 $ 27,222 $ 31,209 State appropriations ,786-13,786 10,784 9,741 Grants and contracts 2, ,093 1,212 2,399 Auxiliary enterprises 8, ,599 8,189 7,758 Private gifts - 4,547 3,143-7,690 6,988 6,416 Block grant - allocation from Foundation Investment income Realized/unrealized gain (loss) on investments - - 9, ,577 (3,094) 4,396 Other revenues , Loan interest, net of expense Total revenues 36,568 4,557 28, ,224 54,144 65,029 EXPENSES Salaries and benefits 34, ,842 37,154 35,938 Auxiliary enterprises 5, ,216 5,182 5,168 Utilities 1, , Supplies and services 10, ,513 9,949 11,221 Depreciation 2, ,045 2,071 2,194 Scholarships and fellowships Grants to UC Hastings - 4, ,608 3,758 4,035 Interest on debt Events Other 2, ,332 1,716 2,577 Total expenses 56,516 4, ,089 62,422 63,654 Income (Loss) $ (19,948) $ (72) $ 27,096 $ 59 $ 7,135 $ (8,278) $ 1,375 OTHER CHANGES IN NET POSITION Capital grants and gifts $ - $ - $ - $ - $ 598 $ - $ - Endowed gifts, capital campaign Changes in allocation for pension payable to University of California ,606 1,028 Other changes in endowments ,484 (140) 447 Total other changes in net position ,319 1,890 2,400 Increase (decrease) in net position $ - $ - $ - $ - $ 9,454 $ (6,388) $ 3,775 Revenues The College s instructional program is primarily supported by a combination of net tuition and fees and state appropriations; for 2017, these revenues represented 65% of total operating and nonoperating revenues (excluding realized gain on sale of investment and unrealized gain on market value of investment). As planned, tuition and fees net of grants and scholarships declined in 2017 dropping from $27.2 million in 2016 to $24.7 in 2017, a decrease of $2.5 million (-9.2%). The decline is a function of the College s financial aid strategy which relies heavily on tuition discounting. UC Hastings, like most law schools, has increased financial aid allocations for students at the College in an effort to protect LSAT/GPA medians in a period of market turbulence. For 2017, the College s overall discount rate was 40%. Enrollment roughly conformed to planned levels at a total of FTE s. 13

82 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Tuition discounting has historically ranged between 28-31% driven in large measure by state policy regarding returnto-aid. For 2016, increased tuition discounting was instituted to allow the College to offer merit-based awards competitive with benchmark institutions. The budget for is predicated on a 42% discount for all three cohorts of enrolled students. The College s Board of Directors has adopted a plan that will set the discount rate for the entering class in fall 2018 at 37.5% returning to historical averages in the 30% range in subsequent years. In 2016, net tuition and fee revenue decreased by $4 million (-12.8%). The drop in net revenue was a function of lower enrollment levels coupled with increased levels of tuition discounting. On enrollment, the combined impact of an entering class of 292 (as opposed to a planned level of 320) and a larger than anticipated level of students transferring out after their first year to other law schools to complete the legal education was higher than normal; the retention rate from the first to second year was 83.9% whereas the average from the preceding four years was 91.7%. For the spring semester of 2016, there were 878 FTE JD students. Support from the State of California increased in 2017 from $10.8 million to $13.8 million. Of this augmentation, $1 million is ongoing funding representing a 9.3% increase for the continuation of the Governor s multi-year funding plan. The remaining $2 million was specifically designated as one-time deferred maintenance funding for statesupported facilities. This increase was predicated on the commitment to maintain student fees constant; 2017 marked the fifth consecutive year of flat tuition at $44,326 (including activity and student health center fees). The College s financial position continues to benefit from auxiliary enterprises, primarily student housing and parking operations, with net income of $3.4 million in The comparable figure for 2016 was $3.1 million. Revenue associated with sales and services of auxiliary enterprises increased by $410,000 (5%) in 2017 and $431,000 (5.6%) in The GEP experienced total returns of 14.8 percent in This level of market performance generated realized and unrealized returns of $9.6 million. Cultivating alumni support and private foundation support continues to be a priority. In 2017, the UC Hastings Foundation had a successful year transmitting to the College $4.6 million in gifts both restricted and unrestricted to UC Hastings, an increase of $850,000 (22.6%) over 2016 fundraising levels. Solicitations are focused on fundraising for private, need and merit based current-use scholarship awards and physical plant, brick and mortar donations to support the College s long range campus plan. For 2017 total operating and non-operating revenues were $59.6 million excluding $9.6 million in realized and unrealized gains on investments. In 2016, the comparable figure was $57.2 million. On an overall basis, total revenues increased by 4.2% as growth in state appropriations, fundraising and auxiliary enterprises more than offset reductions in student fee revenue. 14

83 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Expenses For 2017, for the College, total operating expense decreased by $1 million (1.7%); from $57.5 million in 2016 to $56.5 million in Salaries and non-pension benefits for faculty and staff were held constant, increasing by $270,000 (0.9%) notwithstanding collective bargaining pay adjustments for represented staff. The fluctuation in pension benefits from $5.3 million in 2016 to $2.7 million in 2017 is a function of pension liability accrual adjustments that reduced the annual required contribution as once again favorable investment results benefitted the financial operations of the College. Utility expenses increased by $106,000 (12%) due almost entirely to steam usage. Predevelopment expenses associated with the collaboration with UCSF to develop new student housing at 198 McAllister Street and upgrade existing housing at 100 McAllister accounted for $455,000 of the overall amount of $10.5 million expensed for supplies and services (a total increase of $588,000, or 6% from 2016). In 2016, for the College, total operating expense decreased to $57.5 million from $58.6, a reduction of -$1.1 million, or -1.9%. Pension benefit expense at $5.3 million in 2016 is $1.9 million more than 2015 ($3.4 million) reflective of increases in both the pension payable to the University of California and net pension liability. Total salaries and wages decreased by $857,000 with faculty salaries reduced by $567,000 and non-faculty by $290,000 in 2016 compared to 2015; non-pension benefits (health and welfare) increased by $144,000. Expenditure reduction also occurred in 2016 due to non-recurring costs of $2 million in 2015 for the McAllister Streetscape project. As shown in the 2017 Condensed Statement of Revenues, Expenses, and Changes in Net Position the College closed the fiscal year with net income of $7.1 million (before an additional gain of $2.3 million in other changes in net position for a total increase in net assets of $9.4 million). Cash Flows The Statements of Cash Flows provides information about cash receipts and cash payments during the year. These statements also help users assess the College s ability to generate net cash flows, its ability to meet obligations as they come due, and its need for external financing. College (In thousands) Foundation (In thousands) Cash provided (used) by Operating activities $ (20,412) $ (13,520) $ (12,075) $ (52) $ 108 $ (154) Non capital financing activities 18,267 14,560 14, Capital and related financing activities (1,529) (2,583) (3,152) Investing activities 6,355 1,213 1, Net increase (decrease) in cash 2,681 (330) 83 (33) 124 (124) CASH, beginning of year 13,198 13,528 13, (15) 109 CASH, end of year $ 15,879 $ 13,198 $ 13,528 $ 76 $ 109 $ (15) As required under GASB reporting standards, negative cash flow for operating activities is due to the classification of revenue from state general support appropriations as a noncapital financing activity and investment income as an investing activity. 15

84 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) Looking Forward The path forward for the College is marked both by major opportunities to enhance the school s competitive position through physical plant improvements and student attraction and retention initiatives and the constraints imposed by what continues to be a daunting marketplace for legal education. Outlined are major developments that will affect the near-term future of the institution. Market for Legal Education The number of LSAT test-takers rose 19.8% in June, the first test administration in the admissions season. The 19.8% increase is the biggest increase since the September/October 2009 test administration and comes on the heels of a 3.3% increase in and a 4.1% increase in , which followed five consecutive years of declines. This positive development that the demand for legal education is increasing and holds forth the hope that less aggressive fee discounting strategies will be needed in the future. Long-Range Campus Plan The California Budget Acts of 2015 and 2016 appropriated $55 million of Lease Revenue Bond financing to construct a new academic building at 333 Golden Gate Avenue to replace that portion of Snodgrass Hall (198 McAllister) that was constructed in The project will develop a new academic facility of approximately 57,000 gross square feet on a vacant surface lot owned and controlled by UC Hastings. The Governor s support allows the College s long-range campus plan to proceed. The latter phases of the plan contemplates the development of additional student housing in collaboration with UCSF as well as other campus enhancements. Conclusion UC Hastings is moving forward pursuing both academic improvements and a physical rejuvenation of the campus. The Long Range Campus Plan ( LRCP ) provides a road map for capital improvements at UC Hastings, but in many ways and more importantly, describes the future of UC Hastings. The capital projects, the buildings, set the stage for what can be created culturally to serve an educational function and support the academic mission of UC Hastings. Through the LRCP planning process it has been determined that UC Hastings needs to build or renovate nearly ¾ of our existent campus. To adapt to the changing academic needs of students and faculty, replace academic buildings where systems are no longer reliable, increase the stock of campus housing by developing new facilities and upgrading the College scurrent housing stock. 16

85 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) These needs combined with our unique location in San Francisco position the College for an unparalleled transformation. Needing new buildings means that not only can we reformat our academic spaces as contemporary learning environments in a cost-effective manner, help further our goals of environmental stewardship by integrating greening and sustainability into all aspects institutional planning and overcome a key barrier to student success by expanding access to affordable campus housing. The LRCP re-imagines UC Hastings campus as an academic village formed from our collaboration with UCSF and others both inside and outside of the UC system. Most significantly from the students perspective, it will bring innovative, public service-oriented professional and graduate students from many disciplines together in the dynamic heart of San Francisco. The College has begun realizing this vision due to our partnership with the State of California which has appropriated funds for a new academic building at 333 Golden Gate Avenue, the first in the queue, on undeveloped land owned by the College. This building will replace the functionality of the existing academic buildings at 198 McAllister and 50 Hyde Streets with right-sized, well-appointed classrooms, offices and larger conference areas, and a roof deck. The building will seek Platinum LEED status. 333 Golden Gate will be connected to Kane Hall at 200 McAllister Street with a sky-bridge and a spacious indoor-outdoor plaza giving us a true campus heart. That will free about a quarter of a city block at 198 McAllister/ 50 Hyde Streets to develop the next stage of the academic village; it will include 590 new units of campus housing with about 700 beds. This new complex will allow us to compete at a higher level in many respects. First, it allows us to relieve one of the biggest barriers for students to study law in San Francisco, one of the great, if not the greatest city on earth: the sky-high cost of living and rent by providing subsidized housing. When the residence hall at 198 McAllister is complete we will go on to renovate the historic 27-story Tower and Great Hall at 100 McAllister. From the 252 units, we will increase to provide almost 1,000 units by 2025 taking into account both sites. This means a dramatic increase in the size of our academic community in this neighborhood. We will need to be cognizant of the effect on the community. UC Hastings is very proud and extremely honored to be a good neighbor in the Tenderloin, Civic Center, and Mid-Market. So as we build, we will include design spaces to be activated at the sidewalk level. For example, in addition to a fitness center, we may work with a coalition of legal services groups that will bring additional legal services to both help the neighborhood and give our students internship and externship opportunities for legal practice. Other small street-facing retail stores will enliven the local economy and the atmosphere for everyone. Looking for these kinds of partnerships and working through these kinds of collaborations at the neighborhood, municipal, state and national scale is what the academic village is about. In keeping with our tradition of being a good neighbor the College needs to be a big contributor to our community. This highlights another important dimension of the LRCP: sustainability. The first building at 333 Golden Gate will be Platinum LEED certified, a standard which will be modeled through each project. In alignment with UC Hastings legacy of bold innovation the LRCP Cool Island Sustainability program is on track to ameliorate urban heat island effects both through capital and cultural programming, and exceed the Governor s net zero challenge by 2025 so that our academic village will become the most sustainable campus in North America. 17

86 University of California Hastings College of the Law Management Discussion and Analysis June 30, 2017, 2016, and 2015 (Unaudited) This fall, 2017, the University of California Davis Graduate School of Business will be running a masters of science program in business analytics on our campus. Northeastern University will also be on campus in the fall 2017 semester with a cooperative program offering a certificate in entrepreneurship. Many campuses, not only in California, but around the nation and around the world would like a footprint in San Francisco. So with real estate in one of the core, great areas in San Francisco there s phenomenal opportunity to partner with these world-class institutions that will yield expanded benefits not only for UC Hastings law students and those public service and policy - oriented students who join us from other graduate and professional schools and to our neighborhood and wider region. 18

87 FINANCIAL STATEMENTS

88 University of California Hastings College of the Law Statements of Net Position June 30, 2017 and 2016 ASSETS College Foundation College Foundation Current assets Cash and cash equivalents $ 11,453,177 $ 75,896 $ 10,826,704 $ 109,238 Restricted cash and cash equivalents 4,425,914-2,371,206 - Accounts receivable, net 2,567,781-2,101,526 - Current portion of notes receivable 1,215,502-1,240,325 - Pledges receivable, net - 32,054-20,000 Prepaid expenses and other assets 3,154, ,064 - Total current assets 22,816, ,950 16,640, ,238 Noncurrent assets Endowment investments 30,147, ,259 26,960, ,528 Other long-term investments 42,149,082 3,691 41,362,686 3,075 Notes receivable, net 12,122,875-13,991,213 - Pledges receivable, net - 45,000-77,000 Assets held by others 9,003,594-8,353,738 - Capital assets, net 85,906,862-88,442,208 - Total noncurrent assets 179,330, , ,110, ,603 Total assets $ 202,147,012 $ 603,900 $ 195,750,861 $ 617,841 Deferred outflows of resources $ 2,091,000 $ - $ 10,645,000 $ - 20 See accompanying notes.

89 University of California Hastings College of the Law Statements of Net Position June 30, 2017 and College Foundation College Foundation LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 3,903,694 $ - $ 5,341,837 $ - Compensated absences 1,254, ,793 - Deposits 372, ,996 - Unearned revenues 829, ,655 - Current portion of long-term debt 675, ,000 - Total current liabilities 7,035,489-7,740,281 - Noncurrent liabilities Bonds payable, net 19,803,520-20,474,264 - Compensated absences ,501 - Revolving fund advance from the State 811, ,900 - Federal contributions to Perkins loan funds 7,453,257-7,493,924 - Pension liability, net 21,931,000-32,086,000 - Payable to University of California 7,233,221-6,430,235 - Total noncurrent liabilities 57,232,898-67,634,824 - Total liabilities $ 64,268,387 $ - $ 75,375,105 $ - Deferred inflows of resources $ 5,237,000 $ - $ 5,756,000 $ College Foundation College Foundation NET POSITION Net investment in capital assets $ 65,438,477 $ - $ 67,317,944 $ - Restricted for Nonexpendable Scholarships and fellowships 15,989,965-15,011,671 - Instruction and research 7,009,339-6,718,162 - Institutional support 250, , , ,755 Sub-total restricted, nonexpendable 23,249, ,755 21,979, ,755 Expendable Student services 112, ,555 - Instruction and research 7,732,538-6,231,212 - Public and professional services 148, ,149 - Institutional support 207, , , ,661 Capital projects 964, ,305 - Scholarships and fellowships 12,898,023-10,858,136 - Perkins loan funds 9,234,103-8,894,171 - Other 118, ,476 - Sub-total restricted, expendable 31,415, ,413 27,288, ,661 Unrestricted 14,629, ,732 8,678, ,425 Total net position $ 134,732,625 $ 603,900 $ 125,264,756 $ 617,841 See accompanying notes. 21

90 University of California Hastings College of the Law Statements of Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2017 and College Foundation College Foundation REVENUES Operating revenues Tuition and fees $ 41,451,656 $ - $ 40,411,210 $ - Less: UC Hastings' grants (15,075,040) - (11,766,346) - Less: Tuition and fee scholarships (1,691,653) - (1,422,643) - Tuition and fees, net 24,684,963-27,222,221 - Contributions, capital campaign - 4,546,838-3,909,914 Government grants and contracts 788, ,748 - Private grants and contracts 1,304,329-1,212,281 - Sales and services of auxiliary enterprises 8,598,847-8,189,087 - Other operating revenues 807,966 9,950 1,073,687 25,200 Loan interest, net of expenses 42,692-49,119 - Federal Perkins loan interest 339, ,271 - Total operating revenues 36,567,457 4,556,788 38,629,414 3,935,114 EXPENSES Operating expenses Salaries and wages Faculty 12,379,399-12,508,192 - Non-faculty 14,466,142-14,265,315 - Benefits non-pension 5,271,073-5,072,523 - Pension benefits 2,725,435-5,308,379 - Scholarships and fellowships 544, ,577 - Auxiliary enterprises, including depreciation expense of $987,550 ($985,006 in 2016) 5,215,734-5,182,093 - Utilities 1,023, ,434 - Supplies and services 10,513, ,924,590 24,091 Depreciation, excluding auxiliary enterprise portion 2,044,784-2,070,930 - Events - 21, ,399 Grants - 3,700,640-3,001,682 Block grant - allocation to the College - 907, ,000 Other 2,331,531-1,707,113 8,845 Total operating expenses 56,515,188 4,629,222 57,520,146 3,937,017 Operating loss (19,947,731) (72,434) (18,890,732) (1,903) NONOPERATING REVENUES (EXPENSES) State operating appropriations 13,785,556-10,784,243 - Gifts, capital campaign - - 1,954,640 - Gifts, noncapital 3,143, ,874 - Investment income 679,256 6, ,478 3,398 Realized and unrealized net gains (losses) on investments 9,524,892 51,893 (3,075,925) (18,079) Interest on debt (944,200) - (965,657) - Block grant - allocation from the Foundation 907, ,000 - Net nonoperating revenues 27,095,519 58,493 10,629,653 (14,681) Income (loss) before other changes in net position 7,147,788 (13,941) (8,261,079) (16,584) OTHER CHANGES IN NET POSITION Capital grants and gifts 598, Endowed gifts, capital campaign ,279 - Other changes to endowments 1,484,595 - (140,176) - Changes in allocation for pension payable to University of California 237,014-1,605,836 - Total other changes in net position 2,320,081-1,889,939 - INCREASE (DECREASE) IN NET POSITION 9,467,869 (13,941) (6,371,140) (16,584) NET POSITION, beginning of year 125,264, , ,635, ,425 NET POSITION, end of year $ 134,732,625 $ 603,900 $ 125,264,756 $ 617, See accompanying notes.

91 University of California Hastings College of the Law Statements of Cash Flows Years Ended June 30, 2017 and College Foundation College Foundation CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees (net of all scholarships and grants) $ 24,230,069 $ - $ 26,733,645 $ - Contributions - 4,576,732-3,970,720 Grants and contracts 2,093,058-1,764,029 - Events - (21,408) - (146,399) Payments to vendors (18,150,119) (174) (12,927,698) 40,781 Salaries and benefits (35,922,049) - (35,467,409) - Loans issued to students (1,730,727) - (4,060,242) - Collections of student loans 3,623,887-3,983,620 - Foundation awards - (4,607,640) - (3,757,682) Sales - auxiliary enterprises 8,598,847-8,189,087 - Expenses - auxiliary enterprises (4,222,251) - (4,195,825) - Loan interest income net of expenses 382, ,390 - Other receipts 684,666-2,080,111 - Net cash (used) provided by operations (20,411,996) (52,490) (13,520,292) 107,420 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State appropriations 13,700,973-10,699,576 - Gifts for endowment 605, ,687 - Other gifts 3,960,473-3,206,514 - Net cash provided by noncapital financing activities 18,267,189-14,559,777 - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets 581, Purchases of capital assets (513,058) - (990,105) - Amortization of bond premium/discount 4,256 - (955) - Principal paid on long term debt (650,000) - (620,000) - Interest paid on long-term debt (951,106) - (972,245) - Net cash used by capital and related financing activities (1,528,828) - (2,583,305) - CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of investments 8,731,922 14,845 1,106,880 16,287 Interest on investments 39,800 4, , Purchase of investments (2,416,906) Net cash provided by investing activities 6,354,816 19,148 1,213,883 16,326 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,681,181 (33,342) (329,937) 123,746 CASH AND CASH EQUIVALENTS, beginning of year 13,197, ,238 13,527,847 (14,508) CASH AND CASH EQUIVALENTS, end of year $ 15,879,091 $ 75,896 $ 13,197,910 $ 109,238 See accompanying notes. 23

92 University of California Hastings College of the Law Statements of Cash Flows Years Ended June 30, 2017 and College Foundation College Foundation RECONCILIATION OF OPERATING LOSS TO NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES Operating loss $ (19,947,731) $ (72,434) $ (18,890,732) $ (1,903) Depreciation 3,032,334-3,055,937 - Allowance for doubtful accounts 74,144 - (69,749) 8,685 Loss on disposal of capital assets 22,324-15,089 - Scholarship expense 90,000-75,000 - Pension expense (1,080,000) - 1,687,000 - Changes in operating assets and liabilities Accounts receivable, net (381,673) - 1,715,290 - Notes receivable, net 1,893,161 - (76,622) - Pledges receivable, net - 19,944-35,766 Accounts payable and accrued liabilities (1,431,236) - (292,348) - Deposits 9,683 - (72,364) - Unearned revenues 248,689 - (636,501) - Prepaid expenses and other assets (3,053,169) - (18,231) 64,872 Compensated absences 111,478 - (12,061) - Net cash (used) provided by operations $ (20,411,996) $ (52,490) $ (13,520,292) $ 107,420 NONCASH TRANSACTIONS Scholarships from assets held by others $ 90,000 $ - $ 75,000 $ - Gifts in kind $ 17,392 $ - $ - $ - COMPONENTS OF CASH AND CASH EQUIVALENTS Current, cash and cash equivalents 11,453,177 75,896 10,826, ,238 Current, restricted cash and cash equivalents 4,425,914-2,371,206 - Total Cash and Cash Equivalents, end of year $ 15,879,091 $ 75,896 $ 13,197,910 $ 109, See accompanying notes.

93 University of California Hastings College of the Law Notes to Financial Statements NOTE 1 ORGANIZATION University of California, Hastings College of the Law (the College or UC Hastings ) was established as the law department of the University of California in The College, established by the California Legislature with its own Board of Directors, has operated independently of the Board of Regents of the University of California since its founding. The Board of Regents possesses degree-granting authority, but all other aspects of the College are under control of the College's Board of Directors. The College is a charter member of the Association of American Law Schools and is fully accredited by the American Bar Association. The College is also accredited by the Western Association of Schools and Colleges ( WASC ). The UC Hastings Foundation (the Foundation ), formerly known as the 1066 Foundation, was established in 1971 by a group of alumni in order to provide private sources of funds to allow academic programs to grow and to create unique opportunities exclusively at Hastings. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The financial statements of the College and the Foundation have been prepared in accordance with accounting principles generally accepted in the United States of America, including all applicable effective statements as promulgated by the Governmental Accounting Standards Board ( GASB ). In accordance with GASB Statements No. 62 and No. 76, the College and the Foundation have incorporated certain accounting and financial reporting guidance included in the Financial Accounting Standards Board ( FASB ) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the American Institute of Certified Public Accountants ( AICPA ) Committee on Accounting Procedure (collectively, referred to as the FASB and AICPA pronouncements ), which were issued on or before November 30, 1989, and which do not conflict or contradict GASB pronouncements. The College and the Foundation consider assets to be current that can reasonably be expected, as part of their normal business operations, to be converted to cash and be available for liquidation of current liabilities within twelve-months of the date of the Statement of Net Position. Liabilities that reasonably can be expected, as part of the College s and Foundation s normal business operations, to be liquidated within twelve-months of the date of the Statement of Net Position are considered to be current. All other assets and liabilities are considered to be noncurrent; with the exception of those amounts that are required to be reported as deferred outflows or inflows of resources. The College and the Foundation follow GASB Statements No. 63 and No. 65 which provides guidance for reporting deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. The standard defines deferred outflows or inflows of resources as transactions that result in the consumption or acquisition of net position in one period that are applicable to future periods. 25

94 University of California Hastings College of the Law Notes to Financial Statements GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units, is further clarified by GASB Statement No. 61, The Financial Reporting Entity: Omnibus, and clarifies the concept of what a major component unit is. Major component units are determined based on the nature and significance of their relationship to the primary government. This determination would generally be based on any of the following factors: (a) the services provided by the component unit to the citizenry are such that separate reporting as a major component unit is considered to be essential to financial statement users, (b) there are significant transactions with the primary government, or (c) there is a significant financial benefit or burden relationship with the primary government. The GASB standards require the College's legally separate, tax-exempt, affiliated campus foundation to be considered a component unit of the College and presented discretely in the College's financial statements due to the nature and significance of the Foundation's relationship with the College. Cash and cash equivalents Cash and cash equivalents consist of demand deposits and pooled cash invested in the University of California Office of the Treasurer's Short-Term Investment Pool ( STIP ), since such amounts are readily convertible to known amounts of cash. All cash and cash equivalents are carried at cost, which approximates fair market value. Legally restricted cash balances The College holds legally restricted cash balances totaling $4,425,914 and $2,371,206 at June 30, 2017 and 2016, respectively. Restricted cash of $4,410,168 and $2,339,380 for 2017 and 2016, respectively, relates to the Federal Perkins student loan program. The remaining funds of $15,746 and $31,826 at June 30, 2017 and 2016, respectively, relate to institutional loan funds. These balances are recorded in restricted cash and cash equivalents. Accounts receivable, net Accounts receivable are $2,567,781 and $2,101,526 as of June 30, 2017 and 2016, respectively. Of these amounts, $1,715,825 and $1,631,242 are due from the State of California as of June 30, 2017 and 2016, respectively, for general appropriations. Investments Investments are reported at fair value. The College s investments consist of investments in the UC Regents General Endowment Pool ( GEP ). The basis of determining the fair value of pooled funds or mutual funds is determined as the number of units held in the pool multiplied by the price per unit share, computed on the last day of the fiscal year. Securities are generally valued at the last sale price on the last business day of the fiscal year, as quoted on a recognized exchange or by utilizing an industry standard pricing service, when available. Securities for which no sale was reported as of the close of the last business day of the fiscal year are valued at the quoted bid price of a dealer who regularly trades in the security being valued. Certain securities may be valued on the basis of a price provided by a single source. Investment transactions are recorded on the date the securities are purchased or sold (trade date). Realized gains or losses are recorded as the difference between the proceeds from the sale and the average cost of the investment sold. Dividend income is recorded on the ex-dividend date and interest income is accrued as earned. Gifts of securities are recorded at estimated fair value at the date of donation. Prepaid expenses Prepaid expenses primarily consist of deposits to secure space for future events. Pledges Pledges of private gifts to the Foundation to be received in the future are recorded as pledges receivable and revenue in the year promised. Endowment pledges are recorded in accordance with GASB Statement No. 33 and are recognized as revenue once the proceeds are received. 26

95 University of California Hastings College of the Law Notes to Financial Statements The allowance for uncollectible pledges is calculated based on ten percent of all pledge balances in which scheduled pledge payments are past due for twelve-months. Management s estimation of the uncollectible pledge amount is based on past collection experience, current conditions and specific identification of accounts with known uncertainty. Capital assets Land and improvements, buildings and improvements, equipment, and library books and collections of works of art are stated at cost at the date of acquisition, or fair value at the date of donation in the case of gifts. Significant additions, replacements, major repairs and renovations are generally capitalized if the cost exceeds $25,000; equipment and furniture are capitalized if the cost exceeds $5,000 and they have a useful life of more than one year. Minor renovations are charged to operations, as incurred. Depreciation is calculated using the straight-line method over the estimated economic useful lives of the assets. Estimated economic lives are generally as follows: Land improvements Buildings Building improvements Furniture and equipment Computer software Library books and materials 20 years years 30 years 5-15 years 10 years 15 years Inexhaustible capital assets such as land, special collections that are protected, preserved and held for public exhibition, education or research, and intangible assets of indefinite life, are not depreciated. Deposits Deposits include amounts received in advance of being earned for the following: rental of various College facilities, non-student library usage, and payments from employers who have hired students with federal work-study grants. Deposits on work-study wages and the library are fully refundable. Deposits are recognized as revenue when earned. Unearned revenues Unearned revenues primarily represent non-refundable enrollment deposits and deposits related to the on-campus interview program along with revenue invoiced for the new Summer Session program. Unearned revenues are recognized when earned, generally in the following fiscal year. Revolving fund advance from the State The revolving fund advance from the State is an advance on the College's general appropriation from the State of California. It is expected that the revolving fund advance will be renewed annually; hence, the entire amount has been classified as a noncurrent liability. Federal contributions to the Perkins Loan Fund The noncurrent liability of the federal contributions to the Perkins loan funds consists of the federal capital contribution net of the principal and interest assigned to the U.S. Department of Education and the administrative cost allowance. All other activity associated with the Federal Perkins loan program such as loan repayments and cancellations due to death, disability, and law enforcement service, is reflected in Restricted, Expendable Net Position Perkins loan funds. A net position balance represents capital that has not yet been issued as loans to students. As of July 1, 2017, all institutions of higher education, including the College, may no longer disburse Perkins loans to graduate students. 27

96 University of California Hastings College of the Law Notes to Financial Statements Deferred outflows of resources and deferred inflows of resources Deferred outflows and deferred inflows of resources represent changes in net pension liability not included in pension expense, including proportionate shares of collective pension expense from the University of California Retirement Plan in which the College participates in. Pension liability, net The University of California Retirement Plan ( UCRP ) provides retirement benefits to retired employees of the College. The College is required to contribute to UCRP at a rate set by The Regents of the University of California ( The Regents ). The pension liability includes the College's share of the net pension liability for UCRP. The College's share of net pension liability, deferred inflows of resources, deferred outflows of resources and pension expense have been determined based upon its proportionate share of covered compensation for the fiscal year. The fiduciary net position and changes in the fiduciary net position of UCRP have been measured consistent with the accounting policies used by the plan. For purposes of measuring UCRP's fiduciary net position, investments are reported at fair value and benefit payments are recognized when due and payable in accordance with the benefit terms. Payable to University of California Additional deposits in UCRP have been made using the University of California (the University ) resources to make up the gap between the approved contribution rates and the required contributions based on the University Regents funding policy. These deposits, carried as internal loans by the University, are being repaid by the College, plus accrued interest, over a 30-year period through a supplemental pension assessment. The College s share of the internal loans has been determined based upon its proportionate share of covered compensation for the fiscal year. Supplemental pension assessments are reported as pension expense by the College. Additional deposits in UCRP by the University, and changes in the College s share of the internal loans, are reported as other changes in net position. Net position The College's net position is required to be classified for accounting and reporting purposes into the following categories: Net investment in capital assets This category includes all of the College's capital assets, net of accumulated depreciation, reduced by the outstanding balances of bonds or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. The portion of the debt attributable to unspent proceeds is excluded from the calculation, in accordance with GASB Statement No. 34. Restricted The College and the Foundation classify assets resulting from transactions with purpose restrictions as restricted assets until the resources are used for the specific purpose or for as long as the provider requires the resources to remain intact. Nonexpendable Assets subject to externally imposed restrictions that they be maintained in perpetuity by the College and the Foundation are classified as nonexpendable net position. Such assets include the College and the Foundation's permanent endowment funds. 28

97 University of California Hastings College of the Law Notes to Financial Statements Expendable Assets whose use by the College and the Foundation are subject to externally-imposed restrictions by donors, grantors, creditors or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation are classified as expendable net position. Unrestricted This category includes assets of the College and the Foundation that are neither restricted nor invested in capital assets, net of related debt. Unrestricted net position may be designated for specific purposes by the Board of Directors. Revenues and expenses Operating revenues include receipts from student tuition and fees, grants and contracts for specific operating activities, and sales and services from auxiliary enterprises. Operating expenses incurred in conducting the programs and services of the College and the Foundation are presented in the statements of revenues, expenses, and changes in net assets as operating activities. In accordance with GASB Statement No. 35, certain significant revenues relied upon and budgeted for fundamental operational support of the core instructional mission of the College and the Foundation are mandated to be recorded as nonoperating revenues, including state general appropriations, private gifts and investment income. Nonoperating revenues and expenses include State general appropriations (for the support of College operating expenses), private gifts for other than capital purposes, investment income, realized and net unrealized gains or losses on investments and interest expense. All grants expended by the Foundation are reflected by the College as either noncapital or capital gifts, or gifts for endowment. Other changes in net assets include State capital appropriations, gifts for capital funds for specified purposes and gifts of endowments. Student tuition and fees All of the student tuition and fees provide for current operations of the College. Certain waivers of the student tuition and fees considered to be scholarship and financial aid grant allowances (i.e., tuition remission) are recorded as an offset to revenue. Tuition and fee revenue is recognized in the fall, spring, and summer semesters of each year. Scholarship allowances The College recognizes certain financial aid allowances (e.g., UC Hastings grants) and enrollment fee waivers as the difference between the stated charge for tuition and fees and the amount that is paid by the student, as well as third parties making payments on behalf of the student. Payments of financial aid and scholarships made directly to students from private gifts, donations, and endowment income are classified as scholarship and fellowship expenses. State appropriations The State of California provides appropriations to the College on an annual basis. State educational appropriations for the general support of the College are recognized as nonoperating revenue, however related expenses incurred to support either educational operations or other specific operating purposes are designated as operating expenses. State appropriations for capital projects are recorded as revenue under other changes in net assets when the related expenditures are incurred. 29

98 University of California Hastings College of the Law Notes to Financial Statements Use of estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New accounting pronouncements adopted or under consideration The GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of GASB Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and GASB No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The statement is applicable for June 30, 2018, and the College is currently assessing the impact of this statement. In March 2016, GASB issued Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73. The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The majority of the requirements of this Statement are effective for reporting periods beginning after June 15, There is no material impact to the College. In March 2016, GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. The objective of this Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The requirements of this Statement are effective for reporting periods beginning after December 15, The College is analyzing the effects of the adoption of GASB 81. In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This Statement establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for AROs, which are legally enforceable liabilities associated with the retirement of tangible capital assets. The requirements of this Statement are effective for reporting periods beginning after June 15, The College is analyzing the effects of the adoption of GASB 83. In March 2017, GASB issued Statement No. 85, Omnibus 2017, to enhance consistency in the application of government accounting and financial reporting standards. This Statement is effective for reporting periods beginning after June 15, The College is analyzing the effects of the adoption of GASB 85. In June 2017, GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement is effective for reporting periods beginning after December 15, The College is analyzing the effects of the adoption of GASB

99 University of California Hastings College of the Law Notes to Financial Statements NOTE 3 CASH AND CASH EQUIVALENTS Cash and cash equivalents at June 30, 2017 and 2016, consist of the following: College Foundation College Foundation Cash in banks and on hand $ 10,884,581 $ - $ 8,079,764 $ - Pooled cash included in STIP 4,994,510 75,896 5,118, ,238 Total cash and cash equivalents $ 15,879,091 $ 75,896 $ 13,197,910 $ 109,238 The College and the Foundation follow the practice of pooling cash. The cash and cash equivalents pools allocate earnings based on the number of units held of the total on a monthly basis. The College and the Foundation utilize STIP, which is managed by the University of California Office of the Treasurer. STIP consists of money market and fixed income investments with a maximum maturity of five years. The objective of STIP is to maximize returns consistent with liquidity and cash flow needs. The College and the Foundation consider STIP to operate as a demand deposit. At June 30, 2017 and 2016, respectively, the carrying amounts of the College's deposits in banks were $10,884,581 and $8,079,764 and the bank balances were $11,281,931 and 8,210,726. Of the bank balances for 2017, $250,000 was covered by federal depository insurance and $11,031,931 was uninsured but collateralized with securities held by a third-party financial institution in accordance with the State of California Government Code, but not in the College's name. NOTE 4 INVESTMENTS The College and Foundation follow the investment philosophy of the University and invest their excess cash and long-term investments with the University Office of the Treasurer ( Office of the Treasurer ). Accordingly, all investments held by the Office of the Treasurer are uninsured and unregistered and are not held in the College's or Foundation's name. 31

100 University of California Hastings College of the Law Notes to Financial Statements Fair value is defined in the accounting standards as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities reported at fair value are organized into a hierarchy based on the levels of inputs observable in the marketplace that are used to measure fair value. Inputs are used in applying the various valuation techniques and take into account the assumptions that market participants use to make valuation decisions. Inputs may include price information, credit data, liquidity statistics and other factors specific to the financial instrument. Observable inputs reflect market data obtained from independent sources. In contrast, unobservable inputs reflect the entity s assumptions about how market participants would value the financial instrument. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used for financial instruments measured at fair value on a recurring basis: Level 1 Prices based on unadjusted quoted prices in active markets that are accessible for identical assets or liabilities are classified as Level 1. Level 1 investments include equity securities commingled funds (exchange traded funds and mutual funds) and other publicly traded securities. Level 2 Quoted prices in the markets that are not considered to be active, dealer quotations or alternative pricing sources for similar assets or liabilities for which all significant inputs are observable, either directly or indirectly are classified as Level 2 investments include fixed or variable-income securities, commingled funds (institutional funds not listed in active markets) and other assets that are valued using market information. Level 3 Investments classified as Level 3 have significant unobservable inputs, as they trade infrequently or not at all. The inputs into the determination of fair value of these investments are based upon the best information in the circumstance and may require significant management judgment. Net Asset Value (NAV) Investments whose fair value is measured at NAV are excluded from the fair value hierarchy. Investments in non-governmental entities that do not have readily determinable fair value may be valued at NAV. Investments measured at NAV include commingled balanced funds. Not leveled Cash and cash equivalents are not measured at fair value and, thus, are not subject to the fair value disclosure requirements. The University managed commingled funds (UC pooled funds) serve as the core investment vehicle for the College and the Foundation. GEP An investment pool in which a large number of individual endowments participate in order to benefit from diversification and economies of scales. GEP is a balanced portfolio of equities, fixed income securities, and alternative investments. The primary goal is to maximize long-term total return, growth of principal and a growing payout stream to ensure that future funding for endowment-supported activities can be maintained. Where donor agreements place constraints on allowable investments, assets associated with endowments are invested in accordance with the terms of the agreements. The College s investment in GEP is classified as commingled funds. GEP is considered to be an external investment pool from the College s perspective. 32

101 University of California Hastings College of the Law Notes to Financial Statements The fair value of the College s and the Foundation's share in the GEP's investments all measured at NAV at June 30, 2017 and 2016, are as follows: College Foundation College Foundation Total investments $ 72,297,073 $ 450,950 $ 68,322,877 $ 411,603 Risk profile of the investments Financial instruments that potentially subject the College and the Foundation to concentrations of credit risk consist principally of investments with the Office of the Treasurer, which may invest in cash equivalents, U.S. Government and federal agency obligations, common stocks, and corporate debt securities; the remainder of the Office of the Treasurer's portfolio is diversified and issuers of the securities are dispersed throughout many industries and geographies. There are many factors that can affect the value of investments. Some, such as custodial credit risk, concentration of credit risk and foreign currency risk may affect both equity and fixed income securities. Equity securities respond to such factors as economic conditions, individual company earnings performance and market liquidity, while fixed income securities are particularly sensitive to credit risks and changes in interest rates. Credit risk Fixed income securities are subject to credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer's ability to make these payments will cause security prices to decline. These circumstances may arise due to a variety of factors such as financial weakness, bankruptcy, litigation and/or adverse political developments. Certain fixed income securities, primarily obligations of the U.S. government or those explicitly guaranteed by the U.S. government, are considered to have minimal credit risk. The Office of the Treasurer recognizes that credit risk is appropriate in balanced investment pools such as GEP, by virtue of the benchmark chosen for the fixed-income portion of that pool. That fixed-income benchmark, the Barclay s Capital US Aggregate Bond Index is comprised of approximately 34.9 percent corporate bonds and 22.2 percent mortgage/asset-backed securities, all of which carry some degree of credit risk. The remaining 42.9 percent are government-issued bonds. Credit risk in the GEP is managed primarily by diversifying across issuers and portfolio guidelines mandate that no more than 10 percent of the market value of fixed income may be invested in issues with credit rating below investment grade. Further, the weighted-average credit rating must be A or higher. Interest rate risk Interest rate risk is the risk that the value of fixed income securities will decline because of changing interest rates. The prices of fixed income securities with a longer time to maturity, measured by effective duration, tend to be more sensitive to changes in interest rates and, therefore, more volatile than those with shorter durations. Effective duration is the approximate change in price of a security resulting from a 100 basis point (1 percentage point) change in the level of interest rates. It is not a measure of time. The Office of the Treasurer portfolio guidelines for the fixed and variable income portion of GEP limit weightedaverage effective duration to plus or minus 20 percent of the effective duration of the benchmark (Barclay s Capital US Aggregate Index). This constrains the potential price movement due to interest rate changes of the portfolio to be similar to that of the benchmark. The effective durations of total investments of the College and the Foundation in the office of the Treasurer's GEP as of June 30, 2017 and 2016, were 5.01 and 4.48 months, respectively. 33

102 University of California Hastings College of the Law Notes to Financial Statements Foreign currency risk The Office of the Treasurer's strategic asset allocation policy for GEP includes an allocation to non U.S. equities and nondollar denominated bonds. The benchmark for these investments is not hedged; therefore, foreign currency risk is an essential part of the investment strategy. Portfolio guidelines for U.S. investment-grade fixed income securities also allow exposure to non U.S. dollar denominated bonds up to 10 percent of total the portfolio market value. Exposure to foreign currency risk from these securities is permitted and it may be fully or partially hedged using forward foreign currency exchange contracts. Under the investment policies, such instruments are not permitted for speculative use or to create leverage. The portions of total investments of the College and the Foundation in the Office of the Treasurer's GEP associated with various foreign currency denominations as of June 30, 2017 and 2016, were $24,707,664 and $18,725,165, respectively. NOTE 5 NOTES RECEIVABLE Notes receivable of the College at June 30, 2017 and 2016, consists of the following: Federal Perkins and NDSL loans $ 12,984,794 $ 14,776,603 O'Neill loans 492, ,025 Hastings loans 374, ,499 California Bar Preparation loans 188, ,147 Public Interest Career Assistance Program (PICAP) loans - 1,775 Less: Allowance for doubtful accounts (702,047) (801,511) $ 13,338,377 $ 15,231,538 All loans, except PICAP and the California Bar Preparation loans, are payable over approximately ten years following College attendance. Federal Perkins loans accrue interest at five percent. O'Neill loans made prior to July 1, 1996, are interest-free; and loans made July 1, 1996, or after accrue interest at five percent. Funding for the O'Neill Loan program is made by a private gift to the College. O'Neill loans are advanced to students who resided in Sacramento County. During 2015, the College transitioned the O'Neil loan fund to a scholarship fund. Therefore, there will be no new loans given out from this fund after this fiscal year. Hastings loans are also funded by private gifts to the College and accrue interest at five percent. The PICAP loans are designed to aid and encourage the College students interested in working in public interest legal organizations or government agencies by assisting with repayment of qualifying, outstanding educational loans upon graduation. The PICAP loans accrue interest at five percent and are generally payable over five years. Through gifts received from members of the College's Board of Directors and Faculty, the California Bar Preparation loans are used to assist Hastings graduates with academic need with the costs of bar review courses and living expenses while preparing for the Bar Exam. The allowance for doubtful accounts is based upon five percent of the outstanding balance of all loans. Management's estimation of the collectible notes receivable amount is based on past collection experience, current conditions, and specific identification of accounts with known uncertainty. 34

103 University of California Hastings College of the Law Notes to Financial Statements NOTE 6 ASSETS HELD BY OTHERS Assets held by others represent the College's right to the perpetual income streams resulting from two irrevocable and perpetual trusts held by external trustees. The College's right to the income from these trusts is valued at the market value of the investments held by the trusts. One trust is administered by Deutsche Bank and the other by The Regents of the University of California ( UC ). Investment income of $90,000 and $75,000 for 2017 and 2016, respectively, was distributed by the external trustees to recipients of the Tony Patino Fellowship. In addition, UC holds seven endowments (not pursuant to irrevocable agreements) for which income is allocated to the College and recorded in the accompanying financial statements as other changes in net position, gifts and other changes to endowment. The endowment payout amount received from these endowments in fiscal 2017 and 2016 was $228,539 and $229,408, respectively. Income generated from three of these endowments has been designated by the donor to be distributed exclusively to the College s students. For the remaining four, the income allocated to the College conforms to the donors' intent that endowment income be used for financial support of University of California law students. The market value of the College s share of the remaining four endowments as of June 30, 2017 and 2016, is $863,284 and $782,356, respectively. These four endowments are not reflected on the College's statements of net position. Assets held by others also include $35,000 held as an interest account in Citizens Business Bank for workers' compensation payments. In addition, assets held by others include the beneficial interest in a charitable remainder trust of $144,412 and $144,869, for June 30, 2017 and 2016, respectively. The following table summarizes the assets held by others reported at fair value within the fair value hierarchy as of June 30, 2017: Assets Held by Others Total Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Net Asset Value (NAV) Not Leveled Tony Patino Memorial Fellowship Trust: Cash and Cash Equivalents $ (17,550) $ - $ - $ - $ - $ (17,550) Fixed Income 815, , , Equities 1,588,853 1,588, Equity Investment Funds 898, , Alternative Investments 262, , Patino Subtotal 3,547,665 2,860, , (17,550) Beneficial Interest in Charitable Remainder Trust (CRT) 144, ,412 - Endowments Held by UC 5,276, ,276,517 - Workers' Compensation 35, ,000 Total Assets Held by Others $ 9,003,594 $ 2,860,783 $ 704,432 $ - $ 5,420,929 $ 17,450 35

104 University of California Hastings College of the Law Notes to Financial Statements The following table summarizes the assets held by others reported at fair value within the fair value hierarchy as of June 30, 2016: Assets Held by Others Total Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Net Asset Value (NAV) Not Leveled Tony Patino Memorial Fellowship Trust: Cash and Cash Equivalents $ 228,676 $ - $ - $ - $ - $ 228,676 Fixed Income 774, , , Equities 1,324,337 1,324, Equity Investment Funds 769, , Alternative Investments 128, , Patino Subtotal 3,224,757 2,330, , ,676 Beneficial Interest in Charitable Remainder Trust (CRT) 144, ,869 - Endowments Held by UC 4,949, ,949,112 - Workers' Compensation 35, ,000 Total Assets Held by Others $ 8,353,738 $ 2,330,592 $ 665,489 $ - $ 5,093,981 $ 263,676 NOTE 7 CAPITAL ASSETS The activities related to capital assets during fiscal 2017 for the College are summarized below: Additions/ Disposals/ 2016 Transfers Transfers 2017 Capital assets, not being depreciated: Land $ 5,088,532 $ - $ - $ 5,088,532 Construction in progress 1,919, ,337 (277,091) 2,117,575 Works of art 421, ,309 Intangible assets 115, ,920 Total capital assets, not being depreciated 7,545, ,337 (277,091) 7,743,336 Capital assets, being depreciated: Buildings 84,402, ,402,917 Building improvements 33,820, ,091-34,097,260 Equipment, furniture and fixtures 6,035,262 55,113 (95,761) 5,994,614 Computer software 935, ,072 Library books and materials 11,699,416 - (8,866,608) 2,832,808 Total capital assets, being depreciated 136,892, ,204 (8,962,369) 128,262,671 Less accumulated depreciation for: Buildings (25,520,630) (1,332,141) - (26,852,771) Building improvements (14,975,848) (1,171,904) - (16,147,752) Equipment, furniture, and fixtures (4,702,732) (256,321) 62,299 (4,896,754) Computer software (608,100) (77,654) - (685,754) Library books and materials (10,188,408) (194,314) 8,866,608 (1,516,114) Total accumulated depreciation (55,995,718) (3,032,334) 8,928,907 (50,099,145) Total capital assets, being depreciated, net 80,897,118 (2,700,130) (33,462) 78,163,526 Capital assets, net $ 88,442,208 $ (2,224,793) $ (310,553) $ 85,906,862 36

105 University of California Hastings College of the Law Notes to Financial Statements The activities related to capital assets during fiscal 2016 for the College are summarized below: Additions/ Disposals/ 2015 Transfers Transfers 2016 Capital assets, not being depreciated: Land $ 5,088,532 $ - $ - $ 5,088,532 Construction in progress 984, ,039-1,919,329 Works of art 421, ,309 Intangible assets 115, ,920 Total capital assets, not being depreciated 6,610, ,039-7,545,090 Capital assets, being depreciated: Buildings 84,402, ,402,917 Building improvements 33,779,725 40,444-33,820,169 Equipment, furniture and fixtures 6,121,412 29,706 (115,856) 6,035,262 Computer software 935, ,072 Library books and materials 11,699,416-11,699,416 Total capital assets, being depreciated 136,938,542 70,150 (115,856) 136,892,836 Less accumulated depreciation for: Buildings (24,188,489) (1,332,141) - (25,520,630) Building improvements (13,807,040) (1,168,808) - (14,975,848) Equipment, furniture and fixtures (4,513,733) (289,766) 100,767 (4,702,732) Software (539,108) (68,992) - (608,100) Library books (9,992,178) (196,229) (1) (10,188,408) Total accumulated depreciation (53,040,548) (3,055,936) 100,766 (55,995,718) Total capital assets, being depreciated, net 83,897,994 (2,985,786) (15,090) 80,897,118 Capital assets, net $ 90,508,045 $ (2,050,747) $ (15,090) $ 88,442,208 NOTE 8 LONG-TERM DEBT Long-term debt of the College consists of the following at June 30, 2017 and 2016: Hastings College of the Law Series 2008 Bonds, due serially to 2037, with interest from 3.625% to 5.00% (average coupon rate of 4.36%) $ 20,605,000 $ 21,255,000 Unamortized bond discount (126,480) (130,736) Total bonds payable $ 20,478,520 $ 21,124,264 The College issued the Series 2008 Bonds for $25,080,000 for the construction of the UC Hastings Parking Garage, and to reimburse the College for associated development costs. Located at 376 Larkin Street in San Francisco, California, the multi-level structure contains 395 parking stalls, and 12,612 square feet of ground-level retail space. 37

106 University of California Hastings College of the Law Notes to Financial Statements The activity with respect to the College's current and noncurrent debt for the years ended June 30, 2017 and 2016, is as follows: Series 2008 Bonds Current portion at June 30, 2016 $ 650,000 Principal payments in fiscal 2017 (650,000) Reclassification from noncurrent 675,000 Current portion at June 30, 2017 $ 675,000 Noncurrent portion at June 30, 2016 $ 20,605,000 Unamortized bond discount (126,480) Reclassification to current (675,000) Noncurrent portion at June 30, 2017 $ 19,803,520 Series 2008 Bonds Current portion at June 30, 2015 $ 620,000 Principal payments in fiscal 2016 (620,000) Reclassification from noncurrent 650,000 Current portion at June 30, 2016 $ 650,000 Noncurrent portion at June 30, 2015 $ 21,255,000 Unamortized bond discount (130,736) Reclassification to current (650,000) Noncurrent portion at June 30, 2016 $ 20,474,264 Principal and interest payments required to be made for each of the next five fiscal years and thereafter are summarized as follows: Principal Interest Total 2018 $ 675,000 $ 919,225 $ 1,594, , ,538 1,595, , ,981 1,594, , ,606 1,597, , ,156 1,593, ,455,000 3,521,763 7,976, ,535,000 2,434,938 7,969, ,960,000 1,021,094 7,981,094 $ 20,605,000 $ 11,298,301 $ 31,903,301 38

107 University of California Hastings College of the Law Notes to Financial Statements NOTE 9 ENDOWMENTS The endowments held by the College at June 30, 2017, are as follows: Restricted Net Position Unrestricted Nonexpendable Expendable Net Position Total Endowments $ 14,425,122 $ 10,470,697 $ - $ 24,895,819 Funds functioning as endowments - - 7,643,551 7,643,551 Endowment assets held by others 8,824, ,824,182 College's endowments $ 23,249,304 $ 10,470,697 $ 7,643,551 $ 41,363,552 The endowments held by the College at June 30, 2016, are as follows: Restricted Net Position Unrestricted Nonexpendable Expendable Net Position Total Endowments $ 13,805,964 $ 8,378,917 $ - $ 22,184,881 Funds functioning as endowments - - 6,994,225 6,994,225 Endowment assets held by others 8,173, ,173,869 College's endowments $ 21,979,833 $ 8,378,917 $ 6,994,225 $ 37,352,975 Endowments held by the Foundation at June 30, 2017 and 2016, are as follows: Restricted Net Position Restricted Net Position Nonexpendable Expendable Nonexpendable Expendable Foundation's endowments $ 178,755 $ 268,504 $ 178,755 $ 229,773 The College's endowment income distribution policies are designed to preserve the value of the endowment in real terms (after inflation) and to generate a predictable stream of spendable income. Endowment investments are managed to achieve a maximum long-term total return. As a result of this emphasis on total return, the portion of the annual income distribution funded by dividend and interest income and by capital gains may vary significantly from year to year. Under provisions of California law, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) allows for investment income, as well as a portion of realized and unrealized gains, to be expended for the operational requirements of the College's programs. The College utilizes a total return spending policy governing the payout on endowed funds. Total return policies permit the expenditure of both current income and appreciation. The portion of investment returns earned on endowments held by the College and distributed each year to support current operations is based upon a payout rate that is approved by the Board of Directors. The payout rate for both 2017 and 2016 was 4.35%, calculated on the 12-quarter average market value of endowed funds. Endowment income is available to meet spending needs, subject to donor terms and conditions and the approval of the Board. Net appreciation on investments of donor-restricted endowments is reflected in the above tables as restricted expendable net position. 39

108 University of California Hastings College of the Law Notes to Financial Statements Generally, the College's practice is to spend restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net position is available. In addition, Endowment Net Position reflects not only endowment investments but also cash gifted to endowments and not yet invested. The total distribution from endowments was $1,159,946 and $1,093,308 for the years ended June 30, 2017 and 2016, respectively. $1,143,802 and $1,077,021 was distributed to the College, and $16,144 and $16,287 was distributed to the Foundation, for the years ended June 30, 2017 and 2016, respectively. NOTE 10 RETIREMENT BENEFITS Substantially all full-time employees of the College participate in the University of California Retirement System ( UCRS ) that is administered by the University. The UCRS consists of the University of California Retirement Plan ( UCRP ), a cost-sharing defined benefit pension plan, and the University of California Retirement Savings Program ( UCRSP ) that includes four defined contribution pension plans with several investment portfolios generally funded with employee nonelective and elective contributions. The Regents have the authority to establish and amend the benefit plans. Additional information on the retirement plans can be obtained from the annual reports for the University of California Retirement System. UCRP provides lifetime retirement income, disability protection, death benefits, and post-retirement and preretirement survivor benefits to eligible employees of the University, and its affiliates. Membership is required in UCRP for all employees appointed to work at least 50 percent time for one year or more of for an indefinite period or for a definite period of a year or more. An employee may also become eligible by completing 1,000 hours within a 12-month period. Generally, five years of service are required for entitlement to plan benefits. The amount of pension benefit is determined under the basic formula of covered compensation times age factor times years of service credit. The maximum monthly benefit cannot exceed 100 percent of the employee's highest average plan compensation over a 36-month period, subject to certain limits imposed under the Internal Revenue Code. Annual cost-of-living adjustments ( COLAs ) are made to monthly benefits accordingly to a specified formula based on the Consumer Price Index. Ad hoc COLAs may be granted subject to funding availability. Contributions Contributions to the UCRP may be made by the College and the employees. The rates for contributions as a percentage of payroll are determined annually pursuant to The Regents' funding policy and based upon recommendations of the consulting actuary. The Regents determine the portion of the total contribution to be made by the College and by the employees. Employee contributions by represented employees are subject to collective bargaining agreements. Effective July 1, 2015, employee member contributions range from 7.0% to 9.0%. The College pays a uniform contribution rate of 14.0% of covered payroll on behalf of UCRP members. Employee contributions to UCRP are accounted for separately and currently accrue interest at 6.0% annually. Upon termination, members may elect a refund of their contributions plus accumulated interest; vested terminated members who are eligible to retire may also elect monthly retirement income or lump sum equal to the present value of their accrued benefits. 40

109 University of California Hastings College of the Law Notes to Financial Statements Contributions were as follows during the years ended June 30, 2017 and 2016: College $ 4,387,000 $ 4,718,000 Employee 1,859,000 1,913,000 Total contributions $ 6,246,000 $ 6,631,000 Additional deposits were made by the University to UCRP of $481.0 million and $700.0 million for the fiscal years ended June 30, 2017 and 2016, respectively. The College s reported pension expense and an increase in the pension payable to the University for its portion of these additional deposits based upon its proportionate share of covered compensation for the years ended June 30, 2017 and 2016, were $1,040,000 and $1,325,000, respectively. The University received $171.0 million and $96.0 million in one-time funds from the state of California for UCRP in fiscal years ended June 30, 2017 and 2016, respectively, and the University contributed the funds directly to UCRP. The College s net pension liability and pension expense have been reduced by $370,000 and $226,000 in fiscal years ended June 30, 2017 and 2016, respectively, representing the College s share of these funds. Net pension liability College's proportionate share of the net pension liability for UCRP as of June 30, 2017 and 2016, is as follows: Proportion of the net pension liability 2.0% 2.0% Proportionate share of net pension liability $ 21,931,000 $ 32,086,000 College's net pension liability was measured as of June 30, 2017 and 2016, and calculated using the plan net position valued as of the measurement date and total pension liability determined based upon rolling forward the total pension liability from the results of the actuarial valuations as of July 1, 2016 and 2015, respectively. Actuarial valuations represented a long-term perspective and involve estimates of the value of reported benefits and assumptions about the probability of certain events occurring far into the future. The College's net pension liability was calculated using the following methods and assumptions: Inflation 3.00% 3.00% Salary increase (varying by service, including inflation) % % Investment rate of return (net of pension plan investment expense, including inflation) 7.25% 7.25% COLAs 2.00% 2.00% 41

110 University of California Hastings College of the Law Notes to Financial Statements Actuarial assumptions are subject to periodic revisions as actual results are compared with past expectations and new estimates are made about the future. The actuarial assumptions used in 2017 and 2016 were based upon the results of an experience study conducted for the period July 1, 2010 through June 30, For pre-retirement mortality rates, the RP-2014 White Collar Employee Mortality Tables (separate table for males and females) projected with the two-dimensional MP-2014 projection scale to 2029 were used. For post-retirement, healthly mortality rates are based on the RP-2014 White Collar Healthly Annuitant Mortality Table projected with the twodimensional MP-2014 projection scale to 2029, and with ages then set forward one year. For disabled members, rates are based on the RP-2014 Disabled Retiree Mortality Table projected with the two-dimensional MP-2014 projection scale to 2029, and with ages then set back on year for males and set forward five years for females. The long-term expected investment rate of return for UCRP was determined in 2015 based on a building-block method in which expected future real rates of return (expected returns, net of inflation) are developed for each major asset class. These returns are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage, adding expected inflation and subtracting expected investment expenses and a risk margin. The target allocation and projected arithmetic real rates of return for each major asset class, after deducting inflation, but before investment expenses, used in the derivation of the long-term expected investment rate of return assumption are summarized in the following table: Long-term expected real Asset Class Target rate return U.S. Equity 28.5% 6.08% Developed International Equity 18.5% 6.97% Emerging Market Equity 8.0% 8.58% Core Fixed Income 12.5% 0.82% High Yield Bonds 2.5% 2.97% Emerging Market Debt 2.5% 3.85% TIPS 4.5% 0.43% Real Estate 5.5% 4.76% Private Equity 8.0% 11.15% Absolute Return 6.5% 4.15% Real Assets 3.0% 4.36% Total 100% Discount rates The discount rate used to estimate the net pension liability as of June 30, 2017 and 2016, was 7.25 percent. To calculate the discount rate, cash flows into and out of UCRP were projected in order to determine whether UCRP has sufficient cash in future periods for projected benefit payment for current members. For this purpose, College contributions that are intended to fund benefits of current plan members and their beneficiaries are included. Projected College and member contributions that are intended to fund the service costs of future plan members and their beneficiaries, as well as projected contributions of future plan members, are not included. UCRP was projected to have assets sufficient to make projected benefit payments for current member for all future years as of June 30, 2017 and

111 University of California Hastings College of the Law Notes to Financial Statements Sensitivity of the net pension liability to the discount rate assumption The following presents the June 30, 2017 net pension liability of the College calculated using the June 30, 2017 discount rate assumption of 7.25 as well as what the net pension liability would be if it were calculated using a discounted rate different than the current assumption: % Decrease Current Discount 1% Increase 1% Decrease Current Discount 1% Increase (6.25%) (7.25%) (8.25%) (6.25%) (7.25%) (8.25%) $ 39,654,000 $ 21,931,000 $ 7,132,000 $ 50,358,000 $ 32,086,000 $ 16,817,000 Deferred outflows of resources and deferred inflows of resources Deferred outflows of resources and deferred inflows of resources for pensions were related to the following sources as of June 30, 2017 and 2016: Deferred Outflows of Resources Changes in proportion and differences between the College's contributions and proportionate share of contributions $ 5,000 $ 4,000 Changes of assumptions or other inputs 1,698,000 4,210,000 Net excess of projected over actual earnings on plan investments (if any) 388,000 6,117,000 Difference between actual and expected experience in the Total Pension Liability - 314,000 Total deferred outflows of resources $ 2,091,000 $ 10,645,000 Deferred Inflows of Resources Changes in proportion and differences between the College's contributions and proportionate share of contributions $ 3,667,000 $ 3,057,000 Changes of assumptions or other inputs 819,000 2,063,000 Net excess of actual over projected earnings on pension plan investments (if any) 424,000 - Difference between expected and actual experience in the Total Pension Liability 327, ,000 Total deferred inflows of resources $ 5,237,000 $ 5,756,000 Net deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense during the years ending June 30 as follows: Year Ended June 30, 2018 $ (1,951,000) , , (1,897,000) 2022 (181,000) Thereafter - $ (3,146,000) 43

112 University of California Hastings College of the Law Notes to Financial Statements The UCRSP plans (DC Plan, Supplemental DC Plan, 403(b) Plan, and 457(b) Plan) provide savings incentives and additional retirement security for all eligible employees. The DC Plan accepts both pre-tax and after-tax employee contributions. The Supplemental DC Plan accepts employer contributions on behalf of certain qualifying employees. The 403(b) and 457(b) Plans accept pre-tax employee contributions and the College may also make contributions on behalf of certain members of management. Benefits from the Plans are based on participants mandatory and voluntary contributions, plus earnings, and are immediately vested. NOTE 11 RETIREE HEALTH PLAN Plan Description. UC Hastings contributes to the University of California Retiree Health Benefit Trust ( UCRHBT ) (the Trust), a cost-sharing multiple-employer defined benefit, postemployment healthcare plan administered by The Regents. The Trust provides nonpension post-employment medical benefits and other health and welfare benefits to eligible retirees and their spouses, domestic partners, dependents and beneficiaries to retired University employees and retired employees of other employers affiliated with the University. UC Hastings contributes as an authorized affiliate. The contribution requirements of the eligible retirees and the participating cost-sharing employers such as Hastings are established and may be amended by the University. Membership in the UCRP is required to become eligible for retiree health benefits. Contributions toward benefits are shared with the retiree. The University determines the employer s contribution. Retirees are required to pay the difference between the employer s contribution and the full cost of the health insurance. Retirees employed by UC Hastings prior to 1990 are eligible for the maximum employer contribution if they retire between the ages of 50 and 54 and have at least ten years of service credit, or if they retire at age 55 or later and have at least five years of service credit. Retirees employed by UC Hastings after January 1, 1990, or who were rehired after that date following a break in service of four or more consecutive months are subject to graduated eligibility provisions that generally require ten years of service before becoming eligible for 50% of the maximum employer contribution, increasing to 100 percent after 20 years of service. Funding Policy Section 4.5 provides that the Trust Administrator shall, in accordance with the applicable requirements of GASB, periodically determine each cost-sharing location s contractually required contributions and shall notify each cost-sharing location of the relevant contribution amount within a reasonable period after such determination. All contributions made to the Trust are irrevocable. Participants are contractually required to make contributions at a rate assessed each year by the Trust. For the fiscal year ended June 30, 2017, the assessed rate was 3.10% per $ of UCRP covered compensation, and the rate for fiscal 2018 is 2.97%. The assessed rate for fiscal year 2016 was 3.10%. Currently, this rate is based on the projected pay-as-you-go financing requirements. The College s contributions to UCRHBT for the year ended June 30, 2017, were $758,312 which equaled the required contribution for the year; the amount the College paid for retiree costs for the year ended June 30, 2016, was $769,209. The University of California Office of the Treasurer issues a publicly available financial report that includes financial statements and required supplementary information for UCRHBT. That report may be obtained by writing to University of California, Office of the Treasurer, 1111 Broadway, 14 th Floor, Oakland, California

113 University of California Hastings College of the Law Notes to Financial Statements NOTE 12 FEDERAL AND STATE INCOME TAXES As a separate law department of the University of California, the College is an instrument of the State and accordingly, is not subject to federal or state income taxes, except for taxes on unrelated business income. NOTE 13 CONTINGENCIES The College receives substantially all of its unrestricted revenue from tuition and fees and State appropriations. The College tuition and fee schedule is established annually by the Board of Directors. The State legislature establishes the annual appropriation to the College. The appropriation may increase or decrease during the year due to State budget changes. Substantial amounts are received and expended by the College under federal and state grants and contracts, and are subject to audit by cognizant governmental agencies. This funding relates primarily to student financial assistance and related programs. College management believes that liabilities, if any, arising from such audits will not have a significant effect on the College's financial condition or results of operations. NOTE 14 INSURANCE The College is exposed to various risks of loss including general liability, property and casualty, workers' compensation, employee health, and legal defense. The College purchases insurance through commercial and risk retention insurance companies with various ranges of deductibles depending on the policy type. Settled claims have not exceeded this coverage in any of the past three fiscal years. The College continues to self-insure its workers' compensation program. NOTE 15 LITIGATION From time to time, the College is subject to various claims and legal proceedings covering a range of matters that arise in the ordinary course of its business activities. In the opinion of management, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the College in connection with its legal proceedings is expected not to have a material adverse effect on the College's financial position and activities. NOTE 16 SUBSEQUENT EVENTS Construction Contract State of California, Department of General Services and Clark Construction Group for 333 Golden Gate Avenue In August 2016, the State of California s Department of General Services (DGS) entered into a contract with Clark Construction Group to build an academic building for UC Hastings at a stipulated sum of $50,500,000. The Budget Acts of 2015 and 2016 appropriated a total of $55,596,000 of lease revenue bond (LRB) authority for UC Hastings to support the construction of a new 57,000 gross square foot academic building at 333 Golden Gate Avenue in San Francisco (currently a vacant lot owned by UC Hastings). The new building will include classrooms, offices, clinical programs, meeting areas, conference rooms, and student life study space. 45

114 University of California Hastings College of the Law Notes to Financial Statements Lease revenue bonds (LRBs) are a form of long-term borrowing issued by the State of California to finance public improvements, including state office buildings, state universities, prisons, and food and agricultural facilities. The revenue stream backing LRBs consists of lease payments made by the governmental agency which uses the facility, in this case UC Hastings, to the governmental financing entity which finances and constructs the facility. The financing entity is the State Public Works Board (SPWB). The SPWB through the DGS, constructs the facility, issues the LRBs bonds, and leases the facility to the governmental agency user, UC Hasting, until the LRB is paid in full. Lease payments by UC Hastings are made from annual appropriations from the State general fund, and are used by the SPWB to make debt service payments on LRBs. The Budget Acts of 2015 and 2016 provides the legal authority for the issuance of LRB financing and the basis for subsequent appropriations of annual debt service to UC Hastings consistent with the State of California s capital outlay program. In addition, the budget authorized UC Hastings to supplement state funds appropriated for the project with legally available non-state institutional funds and private gifts, grants and donations. UC Hastings has committed $3.1 million to the project to provide funds for plaza and a sky bridge connection to the existing campus. Construction is scheduled to commence in early 2018 with occupancy slated for spring

115 Supplementary Information

116 University of California Hastings College of the Law Net Pension Liability Required Supplementary Information (Unaudited) Year Ended June 30, 2017 NET PENSION LIABILITY REQUIRED SUPPLEMENTAL INFORMATION The schedule of the College s proportionate share of UCRP s net pension liability as of June 30 is: Proportionate Plan fiduciary share of the net net position as Proportion pension liability a percentage of of the net Proportionate as a percentage the total UC Hastings pension share of net Covered of its covered- pension College of the Law liability pension liability employee payroll employee payroll liability % $ 21,931,000 $ 23,788, % 84.0% % $ 32,086,000 $ 24,451, % 77.2% % $ 24,207,000 $ 24,499, % 82.9% % $ 18,664,000 $ 24,039, % 86.3% 48

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