The University of Chicago (The “University”) and Wells Fargo Bank, National Association, As Trustee, Paying Agent and Registrar (The † * Dated: September__,2018

This Preliminary Offering Circular and the information contained herein are subject to completion, amendment or other change without any notice. Under no circumstances shall this Preliminary Offering Circular 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 registration or qualification under the securities laws of any such jurisdiction. York, NewthroughthefacilitiesofDTConoraboutSeptember __,2018. their counsel, Kutak Rock LLP, Chicago, Illinois. It is expected that the Series 2018C Bonds will be available for delivery in New of Legal Counsel and by its special transaction counsel, Chapman and Cutler LLP, Chicago, Illinois and for the Underwriters by withdrawal or modification of the offering without notice. Certain legal matters will be passed on for the University by its Office must readtheentireOfferingCirculartoobtaininformationessential tothemakingofaninformedinvestmentdecision. local incometaxpurposes.See“ entitled topaymentpriorontheSeries2018CBonds. additional indebtedness.Suchindebtedness,ifincurred,maybeeithersecuredorunsecuredand,secured, maybe I C described herein.See“ obligations outstanding.See (the “blueskylaws”)mayrequireafilingandfeetosecuretheSeries2018CBonds’exemptionfromregistration. laws securities jurisdictions’ some States; United the in jurisdiction every in registration from exempt not are Bonds 2018C Series The Act. Securities the of 3(a)(4) Section in contained registration from exemption the on reliance in issued being are and Act”), offense. TheSeries2018CBondshavenotandwillberegisteredundertheSecuritiesActof1933,asamended(the“Securities 2018C Bonds or determined that this Offering Circular is accurate or complete. Any representation to the contrary may be a criminal is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Direct DTC’s of responsibility the is Participants andtheIndirectParticipants,asmorefullydescribedherein.See“ Owners Beneficial the to payments such of disbursements and DTC, of responsibility the is Trustee, solongasDTCorCede&Co.isthesoleregisteredowner.DisbursementofsuchpaymentstoDTC’sDirectParticipants Payments oftheprincipalandinterestonSeries2018CBondswillbemadedirectlytoDTCoritsnominee,Cede&Co., bythe owners shallmeanCede&Co.,andnottheBeneficialOwnersofSeries2018CBonds. Bonds. SolongastheSeries 2018C Bonds are registered in thename of Cede&Co.,as nominee ofDTC,references herein tothe 2018C Series in the interests their representing certificates receive not will Owners”) (“Beneficial interests beneficial of Purchasers and willberegisteredinthenameofCede&Co.,asnomineeforTheDepositoryTrustCompany,NewYork,York(“DTC”). issuance oftheSeries2018CBonds,asmorefullydescribedherein. the to relating costs certain (c) pay and notes paper commercial taxable outstanding of portion a or all (b) refinance credit, of lines operating more or one (a) refinance to University the by used be will Bonds 2018C Series the of sale the from Proceeds “Trustee”). The University of Chicago (the “University”) and Wells Fargo Bank, National Association, as trustee, paying agent and registrar (the † * Dated: September__,2018. B Dated: DateofIssuance N ndepnt

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REGARDING USE OF THIS OFFERING CIRCULAR

No dealer, broker, salesperson or other person has been authorized by the University or the Underwriters to give any information or to make any representations with respect to the Series 2018C Bonds other than those contained in this Offering Circular, 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 Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the Series 2018C Bonds by any persons in any jurisdiction in which it is unlawful to make such offer, solicitation or sale prior to registration or qualification under the securities laws of any such jurisdiction. This Offering Circular is not to be construed as a contract with the purchasers of the Series 2018C Bonds.

The distribution of this Offering Circular and the offer or sale of Series 2018C Bonds may be restricted by law in certain jurisdictions. Neither the University nor the Underwriters represent that this Offering Circular may be lawfully distributed, or that any Series 2018C Bonds may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. To be clear, action may be required to secure exemptions from the blue sky registration requirements either for the primary distributions or any secondary sales that may occur. Accordingly, none of the Series 2018C Bonds may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations.

The information set forth in this Offering Circular has been obtained from the University and other sources which are believed to be reliable. The Underwriters have reviewed the information in this Offering Circular in accordance with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Statements contained in this Offering Circular which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Offering Circular nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the University or that the information contained herein is correct at any time subsequent to the date hereof.

IN CONNECTION WITH THE OFFERING OF THE SERIES 2018C BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SERIES 2018C BONDS AT A LEVEL ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

THE SERIES 2018C BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES

ACT”), NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 3(a)(4) OF THE SECURITIES ACT. THE SERIES 2018C BONDS WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2018C BONDS IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE SERIES 2018C BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE SERIES 2018C BONDS AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SERIES 2018C BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE OR FEDERAL SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

Certain statements included or incorporated by reference in this Offering Circular constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget,” “intend,” “projection” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information in APPENDIX A — “CERTAIN INFORMATION CONCERNING THE UNIVERSITY—Private Gifts, Grants and Contracts to the University,” “—Government Grants and Contracts,” “—Retirement Plans,” “—Operating Results” and “Schedule 1” and in APPENDIX B — “THE UNIVERSITY OF CHICAGO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL UNIVERSITY INFORMATION AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 (WITH INDEPENDENT AUDITORS’ REPORT THEREON).” A number of important factors, including factors affecting the University’s financial condition and factors which are otherwise unrelated thereto could cause actual results to differ materially from those stated in such forward-looking statements. THE UNIVERSITY 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.

The CUSIP numbers included in this Offering Circular are for the convenience of the Owners and the potential Owners of the Series 2018C Bonds. No assurance can be given that the CUSIP numbers for the Series 2018C Bonds will remain the same after the date of issuance and delivery of the Series 2018C Bonds.

References to website addresses herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless otherwise specified herein, such websites and the information or links contained therein are not incorporated into and are not a part of this Offering Circular.

TABLE OF CONTENTS

HEADING PAGE

INTRODUCTION ...... 1 Purpose of this Offering Circular ...... 1 The Series 2018C Bonds ...... 1 Security for the Series 2018C Bonds ...... 1 Book-Entry Only System ...... 2 Summaries...... 2

THE UNIVERSITY OF CHICAGO ...... 2

PLAN OF FINANCE AND ESTIMATED SOURCES AND USES ...... 3 Plan of Finance ...... 3 Estimated Sources and Uses ...... 3

THE SERIES 2018C BONDS...... 4 General ...... 4 Redemption ...... 4 Transfer and Exchange ...... 8 Additional Bonds ...... 8

BOOK-ENTRY ONLY SYSTEM ...... 8

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018C BONDS ...... 11

ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ...... 13

TAX MATTERS ...... 14 General ...... 14 Tax Status of the Series 2018C Bonds ...... 15 Medicare Tax ...... 16 Sale and Exchange of Series 2018C Bonds ...... 16 Backup Withholding ...... 16 Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders...... 17

ERISA CONSIDERATIONS ...... 19

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LEGAL MATTERS ...... 21 Legal Opinions ...... 21 Enforceability Limitations ...... 21

LITIGATION ...... 21

UNDERWRITING ...... 22 Purchase of the Series 2018C Bonds ...... 22 Information Regarding the Underwriters ...... 22

RATINGS ...... 23

FINANCIAL ADVISOR TO THE UNIVERSITY ...... 23

MISCELLANEOUS ...... 24

APPENDIX A CERTAIN INFORMATION CONCERNING THE UNIVERSITY ...... A-1

APPENDIX B THE UNIVERSITY OF CHICAGO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL UNIVERSITY INFORMATION AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 (WITH INDEPENDENT AUDITORS’ REPORT THEREON) .....B-1

APPENDIX C DEFINITIONS AND SUMMARY OF INDENTURE ...... C-1

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$400,000,000∗ THE UNIVERSITY OF CHICAGO TAXABLE FIXED RATE BONDS, SERIES 2018C

INTRODUCTION

Purpose of this Offering Circular

The purpose of this Offering Circular, which includes the cover page and appendices, is to set forth certain information concerning the sale and delivery by the University of Chicago (the “University”) of $400,000,000* aggregate principal amount of the University of Chicago Taxable Fixed Rate Bonds, Series 2018C (the “Bonds”).

Certain capitalized terms used in the forepart of this Offering Circular and not otherwise defined herein are defined in APPENDIX C attached hereto.

The Series 2018C Bonds

The Series 2018C Bonds will be issued in accordance with the provisions of an Indenture dated as of September 1, 2018 (the “Indenture”), by and between the University and Wells Fargo Bank, National Association, as trustee, paying agent and registrar (the “Trustee”). The proceeds from the sale of the Series 2018C Bonds will be used by the University to (a) refinance one or more operating lines of credit, (b) refinance all or a portion of outstanding taxable commercial paper notes and (c) pay certain costs relating to the issuance of the Series 2018C Bonds, as more fully described herein. See “PLAN OF FINANCE; ESTIMATED SOURCES AND USES.”

The Series 2018C Bonds will mature as shown on the cover page hereof. As described herein, interest on the Series 2018C Bonds will be payable on April 1 and October 1 of each year, commencing October 1, 2018.*

The Series 2018C Bonds will be subject to optional and mandatory sinking fund redemption prior to maturity. See “THE SERIES 2018C BONDS—Redemption.”

Under certain circumstances, Additional Bonds may be issued and consolidated for purposes of CUSIP identification with the Series 2018C Bonds. See APPENDIX C – “DEFINITIONS AND SUMMARY OF THE INDENTURE – Issuance and Delivery of Additional Bonds.”

Security for the Series 2018C Bonds

The Series 2018C Bonds constitute unsecured general obligations of the University. The Series 2018C Bonds are not secured by a reserve fund, mortgage lien or security interest on or in

∗ Preliminary, subject to change.

any funds or other assets of the University, except for funds held from time to time by the Trustee for the benefit of the Holders of the Series 2018C Bonds under the Indenture.

The Indenture does not contain any financial covenants limiting the ability of the University to incur indebtedness, encumber or dispose of its property or merge with any other entity, or any other similar covenants.

Book-Entry Only System

The Series 2018C Bonds will be initially issued through a book-entry only system maintained by The Depository Trust Company, New York New York (“DTC”). The Series 2018C Bonds will be initially registered in the name of Cede & Co., as DTC’s nominee. See “BOOK-ENTRY ONLY SYSTEM.”

Summaries

Descriptions of the University and summaries of the Series 2018C Bonds and the Indenture are included in this Offering Circular, including the Appendices attached hereto. Such information, summaries and descriptions do not purport to be comprehensive or definitive. All references in this Offering Circular to the specified documents are qualified in their entirety by reference to each such document, copies of which are available from the Trustee, and all references to the Series 2018C Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the aforesaid documents. The information in this Offering Circular concerning the University has been supplied by the University.

THE UNIVERSITY OF CHICAGO

The University is an Illinois not for profit corporation and is a non-sectarian, co-educational institution of higher learning and research which was founded by John D. Rockefeller in 1890. The University’s 217-acre campus is located eight miles south of downtown Chicago in Hyde Park, a historic Chicago neighborhood. The campus is a blend of traditional English Gothic and award-winning modern buildings designed by renowned architects. The University has emphasized both research and teaching from its inception. A number of Nobel Laureates have been students, researchers or faculty at the University. For further information relating to the University see APPENDIX A to this Offering Circular.

Audited consolidated financial statements of the University as of and for the years ended June 30, 2017 and 2016 are included in APPENDIX B hereto. KPMG LLP, the University’s independent auditor, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the consolidated financial statements addressed in that report. KPMG LLP also has not performed any procedures relating to this Offering Circular.

The consolidated financial statements included in APPENDIX B to this Offering Circular include certain information with respect to The University of Chicago Medical Center (the

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“Medical Center”) and the Marine Biological Laboratory (the “Laboratory”). The Medical Center and the Laboratory are not obligated to pay principal or interest on the Series 2018C Bonds.

PLAN OF FINANCE AND ESTIMATED SOURCES AND USES

Plan of Finance

The proceeds from the sale of the Series 2018C Bonds will be used by the University to (a) refinance one or more operating lines of credit, (b) refinance all or a portion of outstanding taxable commercial paper notes, and (c) pay certain costs relating to the issuance of the Series 2018C Bonds.

Estimated Sources and Uses

The following table shows the estimated sources and uses of the proceeds from the sale of the Series 2018C Bonds:

ESTIMATED SOURCES OF FUNDS Proceeds of the Series 2018C Bonds TOTAL SOURCES OF FUNDS

ESTIMATED USES OF FUNDS Refinance Operating Lines of Credit Refinance Commercial Paper Notes Costs of Issuance TOTAL USES OF FUNDS

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THE SERIES 2018C BONDS

General

The Series 2018C Bonds will be issued as fully registered bonds without coupons in denominations of $1,000 or any integral multiple thereof (each an “Authorized Denomination”). The Series 2018C Bonds will mature as shown on the cover page hereof. The Series 2018C Bonds will be initially dated as of the date of issuance thereof.

The Series 2018C Bonds, when issued, will be registered in the name of Cede & Co., as nominee for DTC. Payment of the principal of, premium, if any, and interest on the Series 2018C Bonds will be made directly to DTC or its nominee, Cede & Co., by the Trustee. See “BOOK-ENTRY ONLY SYSTEM.”

Interest on the Series 2018C Bonds will be payable on April 1 and October 1 (each, an “Interest Payment Date”) of each year, commencing October 1, 2018∗ and will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The principal of, premium, if any, and interest on the Series 2018C Bonds will be payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and such principal and premium, if any, shall be payable at the designated corporate trust office of the Trustee, or its successor as Trustee, if any. Payment of the interest on any Series 2018C Bond on any Interest Payment Date shall be made to the person appearing on the Series 2018C Bond registration books of the Trustee as the Owner thereof and shall be paid by check or draft mailed to the Owner at his address as it appears on such registration books or at such other address as is furnished the Trustee in writing by such Owner or, upon request, by electronic transfer of funds, but only as to any depository which is holding any Series 2018C Bonds or any Owner of an aggregate principal amount of $1,000,000 or more of Series 2018C Bonds, to such wire transfer address within the United States as the depository or the Owner shall direct in such request, not later than the close of business on the fifteenth day of the calendar month immediately preceding each Interest Payment Date (the “Record Date”); provided, however, that electronic transfers of such funds may be made to a depository which is holding any Series 2018C Bonds without such request if such transfers are required by a letter of representations, or similar agreement, with such depository.

Redemption

Optional Redemption. Make-Whole Optional Redemption Prior to April 1, 2053.∗ Prior to April 1, 2053∗, the Series 2018C Bonds are subject to optional redemption, in whole or in part (and, if in part, in Authorized Denominations and on a pro rata basis, subject to the provisions described below under “Selection of Series 2018C Bonds to be Redeemed”), on any Business

∗ Preliminary, subject to change.

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Day at the Make-Whole Redemption Price at the direction of the University. The University shall retain an independent accounting firm or an independent financial advisor to determine the Make-Whole Redemption Price and perform all actions and make all calculations required to determine the Make-Whole Redemption Price. The Trustee and the University may conclusively rely on such accounting firm’s or financial advisor’s calculations in connection with, and determination of, the Make-Whole Redemption Price, and neither the Trustee nor the University will have any liability for their reliance. The determination of the Make-Whole Redemption Price by such accounting firm or financial advisor shall be conclusive and binding on the Trustee, the University and the Owners of the Series 2018C Bonds.

“Business Day” means any day other than a Saturday, Sunday, or holiday or a day on which banks located in the city in the United States of America in which the designated corporate trust office of the Trustee is located is required or authorized to close, or on which The New York Stock Exchange is closed.

“Make-Whole Adjustment” means ______(__) basis points;

“Make-Whole Redemption Price” means the greater of (i) 100% of the principal amount of a Series 2018C Bond to be redeemed and (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of such Series 2018C Bond, not including any portion of those payments of interest accrued and unpaid as of the date on which such Series 2018C Bond is to be redeemed, discounted to the date on which such Series 2018C Bond is to be redeemed on a semi- annual basis assuming a 360-day year consisting of twelve 30-day months at the Treasury Rate plus the Make-Whole Adjustment, plus, in each case, accrued and unpaid interest on such Series 2018C Bond to but not including the redemption date; and

“Treasury Rate” means the yield to maturity, as of the redemption date of a Series 2018C Bond, of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available as of the most recent date that is at least two Business Days, but not more than 45 calendar days, prior to the redemption date of such Series 2018C Bond (excluding inflation indexed securities) or, if such Statistical Release is no longer published, any publicly available source of similar market data most nearly equal to the period from the redemption date to the maturity date of such Series 2018C Bond (taking into account any mandatory sinking fund redemption for such Series 2018C Bond); provided, however, that if the period from the redemption date to such maturity date is less than one

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year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

Optional Redemption On or After April 1, 2053.* The Series 2018C Bonds are subject to optional redemption in whole or in part (and, if in part, in Authorized Denominations and on a pro rata basis, subject to the provisions described below under “Selection of Series 2018C Bonds to be Redeemed”) on any Business Day on or after April 1, 2053∗ at the redemption price equal to 100% of the principal amount of such Series 2018C Bonds to be redeemed, plus accrued interest to the redemption date and without premium, at the direction of the University, out of any moneys received by the Trustee from the University and deposited in the Optional Redemption Fund.

Mandatory Sinking Fund Redemption. The Series 2018C Bonds are subject to mandatory sinking fund redemption prior to maturity on a pro rata basis, subject to the provisions described below under “Selection of Series 2018C Bonds to be Redeemed,” and in Authorized Denominations, on the dates and in the amounts set forth below, at the redemption price of 100% of the principal amount of such Series 2018C Bonds being redeemed plus accrued interest to the redemption date and without premium:

OCTOBER 1 AMOUNT ($)

* Maturity date.

Purchase in Lieu of Redemption. In lieu of optionally redeeming Series 2018C Bonds (or portions thereof), the Trustee may, at the request and written direction of the University, use such funds otherwise available under the Indenture for the redemption of Series 2018C Bonds (or portions thereof) to purchase Series 2018C Bonds (or portions thereof) in the open market at a price not exceeding the optional redemption price then applicable under the Indenture.

Selection of Series 2018C Bonds to be Redeemed. If the Series 2018C Bonds are registered in book-entry only form and so long as DTC or its nominee or a successor securities depository is the sole registered owner of the Series 2018C Bonds, if less than all of the Series 2018C Bonds are called for redemption, the particular Series 2018C Bonds or portions thereof to be redeemed will be selected on a pro rata pass-through distribution of principal basis in accordance with DTC procedures, provided that the selection for redemption of such Series

* Preliminary, subject to change.

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2018C Bonds will be made in accordance with the operational arrangements of DTC then in effect.

It is the University’s intent that redemption allocations made by DTC be made on a pro rata pass-through distribution of principal basis as described above. However, the University can provide no assurance that DTC, DTC’s Direct Participants and Indirect Participants (as such terms are herein after defined) or any other intermediary will allocate the redemption of Series 2018C Bonds on such basis. If the DTC operational arrangements do not allow for the redemption of the Series 2018C Bonds on a pro rata pass-through distribution of principal basis, then the Series 2018C Bonds will be selected for redemption, in accordance with DTC procedures, currently by lot.

If DTC or its nominee or a successor securities depository is no longer the sole registered owner of the Series 2018C Bonds, if less than all of the Series 2018C Bonds are called for redemption, the Trustee will select the Series 2018C Bonds to be redeemed on a pro rata basis taking into account Authorized Denominations.

University Credits. The University shall receive a credit against its obligation to have amounts on deposit with the Trustee on any mandatory sinking fund redemption date or on the maturity date for the Series 2018C Bonds (i) to the extent that the University delivers to the Trustee one or more Series 2018C Bonds for cancellation on or prior to any such date or (ii) to the extent that Series 2018C Bonds are optionally redeemed. Any partial optional redemption of the Series 2018C Bonds shall be credited against the obligation of the University to have amounts on deposit with the Trustee on any mandatory sinking fund redemption date or on the maturity date for the Series 2018C Bonds in the manner specified by the University, or, if no such specification is provided, on a pro rata basis taking into account Authorized Denominations.

Notice of Redemption. Notice of the call for any redemption shall be given by mailing a copy of the redemption notice by first class mail, postage prepaid, at least 30 days prior to the date fixed for redemption to the Owner of each Series 2018C Bond (or portion thereof) to be redeemed at the address shown on the registration books, as further described in the Indenture; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceedings for the redemption of Series 2018C Bonds (or portions thereof) as to which proper notice was given as described above.

The University may instruct the Trustee to provide a notice of optional redemption which may be conditioned upon the receipt of moneys or any other event. Additionally, any notice of optional redemption may be rescinded by written notice given to the Trustee by the University no later than five (5) Business Days prior to the date specified for redemption. The Trustee shall give notice of such rescission, as soon thereafter as practicable, in the same manner as notice of such optional redemption was given as described above.

On or prior to the redemption date, funds shall be placed with the Trustee to pay the redemption price of Series 2018C Bonds (or portions thereof) to be redeemed on such redemption date. Upon the occurrence of the above conditions, the Series 2018C Bonds (or portions thereof) thus called shall cease bearing interest on the redemption date, shall no longer

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be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture.

Transfer and Exchange

The Series 2018C Bonds may be transferred upon surrender of the Series 2018C Bonds at the designated corporate trust office of the Trustee, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or such owner’s duly authorized attorney.

The Series 2018C Bonds may also be exchanged at the designated corporate trust office of the Trustee for like aggregate principal amounts of other Authorized Denominations. The Trustee will not be required to transfer or exchange any Series 2018C Bond after notice of call of such Series 2018C Bond for redemption has been given nor during a period of 15 days next preceding giving of a notice of redemption of any Series 2018C Bonds.

No service charge shall be made to the Owner of any Series 2018C Bond requesting an exchange or transfer of any Series 2018C Bond but the University and the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer.

As to any Series 2018C Bond the person in whose name the same shall be registered shall be deemed and regarded as the absolute Owner thereof for all purposes, and payment of or on account of the principal of, premium, if any, and interest on any Series 2018C Bond shall be made only to or upon the order of the Owner thereof or his legal representative, but such registration may be changed as hereinabove provided.

Additional Bonds

So long as no event of default under the Indenture has then occurred and is continuing, Additional Bonds may be issued, authenticated and delivered under the Indenture for purposes of CUSIP identification, upon request of the University delivered to the Trustee and the satisfaction of the requirements set forth in the Indenture. To the extent any series of Additional Bonds is issued, such Additional Bonds shall have the same form and terms as the Series 2018C Bonds (other than the date of issuance and, under certain circumstances, the date from which interest thereon will begin to accrue), including being subject to redemption at the same times and at the same redemption price as the Series 2018C Bonds, and will carry the same right to receive accrued and unpaid interest as the Series 2018C Bonds, and the Additional Bonds will form a single series of bonds with the Series 2018C Bonds. See APPENDIX C - “DEFINITIONS AND SUMMARY OF INDENTURE—Issuance and Delivery of Additional Bonds”.

BOOK-ENTRY ONLY SYSTEM

The information provided immediately below concerning DTC and the book-entry only system, as it currently exists, has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underwriters or the

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University. The following discussion will not apply to any Series 2018C Bonds issued in certificate form due to the discontinuance of the DTC book-entry only system, as described below under “Discontinuation of Book-entry only System” below.

General. DTC will act as securities depository for the Series 2018C Bonds. Initially, the Series 2018C Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for the Series 2018C Bonds, in the aggregate principal amount of the Series 2018C Bonds and will be deposited with DTC.

DTC and its Participants. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (the “Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the “Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchase of Ownership Interests. Purchases of the Series 2018C Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2018C Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2018C Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2018C Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the

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Series 2018C Bonds, except in the event that use of the book-entry system for the Series 2018C Bonds is discontinued.

Transfers. To facilitate subsequent transfers, all Series 2018C Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2018C Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2018C Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2018C Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Notices. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Beneficial Owners of the Series 2018C Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2018C Bonds, such as redemptions, tenders, defaults and proposed amendments to the Indenture. For example, Beneficial Owners of Series 2018C Bonds may wish to ascertain that the nominee holding the Series 2018C Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them.

Redemption. Redemption notices shall be sent to DTC. If less than all of the Series 2018C Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed.

Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2018C Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the University or the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2018C Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of Principal, Premium, If Any, and Interest. Payments of principal, premium, if any, and interest on the Series 2018C Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Trustee or the University, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the

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responsibility of such Participant and not of DTC, the Trustee or the University, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest on the Series 2018C Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee or the University, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

Discontinuation of Book-entry only System. DTC may discontinue providing its services as securities depository with respect to the Series 2018C Bonds at any time by giving reasonable notice to the Trustee or the University. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered as described in the Indenture.

The University may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository) as described in the Indenture. In that event, Bond certificates will be printed and delivered as described in the Indenture.

The information set forth above under this caption has been obtained from sources that the University believes to be reliable, but the University takes no responsibility for the accuracy thereof.

None of the Underwriters, the Trustee or the University will have any responsibility or obligations to any Direct Participants or Indirect Participants or the persons for whom they act with respect to (i) the accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (ii) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of, premium, if any, or interest on the Series 2018C Bonds; (iii) the delivery by any such Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Indenture to be given to Bondholders; or (iv) any consent given or other action taken by DTC as Bondholder.

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018C BONDS

The Indenture provides that, on or before each Bond Payment Date, the University will pay the Trustee a sum equal to the amount payable on such Bond Payment Date as principal (whether at maturity, by redemption or upon acceleration), premium, if any, and interest on the Series 2018C Bonds. In addition, the Indenture provides that each such payment made will at all times be sufficient to pay the total amount of principal (whether at maturity, by redemption or upon acceleration), premium, if any, and interest becoming due and payable on the Series 2018C Bonds on such Bond Payment Date. If on any Bond Payment Date, the amounts held by the Trustee are insufficient to make any required payments of principal of, premium, if any, and interest on the Series 2018C Bonds as such payments become due, the University is required to pay such deficiency to the Trustee. Upon the receipt thereof, the Trustee will deposit all payments received from the University into certain funds established pursuant to the Indenture for application in accordance with the Indenture.

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The Series 2018C Bonds constitute unsecured general obligations of the University. The University has other unsecured general obligations outstanding. See APPENDIX A— “CERTAIN INFORMATION CONCERNING THE UNIVERSITY” and APPENDIX B—“THE UNIVERSITY OF CHICAGO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL UNIVERSITY INFORMATION AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 (WITH INDEPENDENT AUDITORS’ REPORT THEREON).” Moreover, the University is not restricted by the Indenture or otherwise from incurring additional indebtedness. Such additional indebtedness, if incurred by the University, may be either secured or unsecured and, if secured, may be entitled to payment prior to payment on the Series 2018C Bonds.

The Series 2018C Bonds are not secured by a reserve fund, mortgage lien or security interest on or in any funds or other assets of the University, except for funds held from time to time by the Trustee for the benefit of the Holders of the Series 2018C Bonds under the Indenture. Pursuant to the Indenture, the University is not required to deposit with the Trustee amounts necessary to pay the principal of and interest on the Series 2018C Bonds until the Bond Payment Date on which such amounts become due and payable; therefore, the funds held from time to time by the Trustee for the benefit of the Holders of the Series 2018C Bonds under the Indenture are expected to be minimal.

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ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth the estimated amounts for each fiscal year of the University required to be made available for payment of debt service by the University. Fiscal Year Ended Existing Debt Bonds Aggregate Debt (June 30) Service(1)(2)(3) Principal Interest Debt Service Service(1)(2) (3) 2019 $163,345,222 2020 179,015,453 2021 224,388,093 2022 178,979,837 2023 201,638,398 2024 191,286,682 2025 214,760,719 2026 241,490,950 2027 214,647,343 2028 214,526,516 2029 183,140,215 2030 216,181,418 2031 216,084,092 2032 168,997,967 2033 168,995,771 2034 168,995,179 2035 168,993,589 2036 168,993,210 2037 182,817,872 2038 168,993,357 2039 168,997,907 2040 168,993,791 2041 168,993,420 2042 168,997,323 2043 168,993,206 2044 168,992,688 2045 168,996,571 2046 136,780,919 2047 119,551,513 2048 74,378,063 2049 74,371,588 2050 57,853,513 2051 57,855,125 2052 57,849,638 2053 26,523,431 Totals $5,624,400,576 ______(1) Amounts may not total due to rounding. (2) Excludes debt service related to the University’s lines of credit and commercial paper. (3) Debt service assumes a rate of (i) 3.7500% on the Series 2003B and Series 2004B Bonds, (ii) 3.8040% on the Series 2004C Bonds, and (iii) 3.2139% on the Series 2008 Bonds. Debt service for the Series 1998B Bonds and Series 2001B Bonds assumes actual rates for current adjustable rate periods and a rate of 3.7500% thereafter.

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TAX MATTERS

General

Interest on the Series 2018C Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”).

The following is a summary of certain material federal income tax consequences of holding and disposing of the Series 2018C Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect. Legislative, judicial and administrative changes may occur, possibly with retroactive effect, that could alter or modify the continued validity of the statements and conclusions set forth herein. This summary does not discuss all aspects of federal income taxation that may be relevant to investors. This summary is intended as a general explanatory discussion of the consequences of holding the Series 2018C Bonds generally and does not purport to furnish information in the level of detail or with the investor’s specific tax circumstances that would be provided by an investor’s own tax advisor. For example, except as explicitly provided below, it generally is addressed only to original purchasers of the Series 2018C Bonds that are “U.S. Holders” (as defined below), deals only with Series 2018C Bonds held as capital assets within the meaning of Section 1221 of the Code and does not address tax consequences to holders that may be relevant to investors subject to special rules, such as individuals, trusts, estates, tax-exempt investors, cash method taxpayers, dealers in securities, currencies or commodities, banks, thrifts, insurance companies, electing large partnerships, mutual funds, regulated investment companies, real estate investment trusts, S corporations, persons that hold Series 2018C Bonds as part of a straddle, hedge, integrated or conversion transaction, and persons whose “functional currency” is not the U.S. dollar. In addition, this summary does not address alternative minimum tax issues or the indirect consequences to a holder of an equity interest in a holder of Series 2018C Bonds. This summary was prepared in connection with the offering of the Series 2018C Bonds. Each prospective investor should consult with its own tax advisor regarding the application of United States federal income tax laws, as well as any state, local, foreign or other tax laws, to such investor’s particular situation.

As used herein, a “U.S. Holder” is a “U.S. person” that is a beneficial owner of a Series 2018C Bond. A “Non-U.S. Holder” is a holder (or beneficial owner) of a Series 2018C Bond that is not a U.S. Person. For these purposes, a “U.S. person” is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof (except, in the case of a partnership, to the extent otherwise provided in Treasury regulations), an estate the income of which is subject to United States federal income taxation regardless of its source or a trust if (i) a United States court is able to exercise primary supervision over the trust’s administration and (ii) one or more United States persons have the authority to control all of the trust’s substantial decisions.

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Tax Status of the Series 2018C Bonds

The Series 2018C Bonds will be treated, for federal income tax purposes, as a debt instrument. Accordingly, interest will be included in the income of the holder as it is paid (or, if the holder is an accrual method taxpayer, as it is accrued) as interest.

If the excess of the stated redemption price at maturity of a Series 2018C Bond over its “issue price” exceeds a specified de minimis amount (generally equal to 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity), the excess is treated as original issue discount (“OID”). The issue price of the Series 2018C Bonds is the first price at which a substantial amount of the Series 2018C Bonds is sold to the public. The issue price of the Series 2018C Bonds is expected to be the amount set forth on the cover page of this Offering Circular but is subject to change based on actual sales.

With respect to a U.S. Holder that purchases in the initial offering a Series 2018C Bond issued with OID, the amount of OID that accrues during any accrual period equals (i) the “adjusted issue price” of the Series 2018C Bond at the beginning of the accrual period (which price equals the issue price of such Series 2018C Bond plus the amount of OID that has accrued on a constant-yield basis in all prior accrual periods minus the amount of any payments, other than “qualified stated interest,” received on the Series 2018C Bond in prior accrual periods) multiplied by (ii) the yield to maturity of such Series 2018C Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of each accrual period) less (iii) any qualified stated interest payable on the Series 2018C Bond during such accrual period. The amount of OID so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period.

A U.S. Holder of a Series 2018C Bond issued with OID must include in gross income for federal income tax purposes the amount of OID accrued with respect to each day during the taxable year that the U.S. Holder owns the Series 2018C Bond. Such an inclusion in advance of receipt of the cash attributable to the income is required even if the U.S. Holder is on the cash method of accounting for United States federal income tax purposes. The amount of OID that is includible in a U.S. Holder’s gross income will increase the U.S. Holder’s tax basis in the Series 2018C Bond. The adjusted tax basis in a Series 2018C Bond will be used to determine taxable gain or loss upon a disposition (for example, upon a sale or retirement) of the Series 2018C Bond.

Holders of the Series 2018C Bonds that allocate a basis in the Series 2018C Bonds that is greater than the principal amount of the Series 2018C Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code.

If a holder purchases the Series 2018C Bonds after the initial offering for an amount that is less than the principal amount of the Series 2018C Bonds, and such difference is not considered to be de minimis, then such discount will represent market discount that ultimately will constitute ordinary income (and not capital gain). Further, absent an election to accrue market discount currently, upon a sale or exchange of a Series 2018C Bond, a portion of any

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gain will be ordinary income to the extent it represents the amount of any such market discount that was accrued through the date of sale. In addition, absent an election to accrue market discount currently, the portion of any interest expense incurred or continued to carry a market discount bond that does not exceed the accrued market discount for any taxable year, will be deferred.

Medicare Tax

An additional 3.8% tax will be imposed on the net investment income (which includes interest, original issue discount and gains from a disposition of a Series 2018C Bond) of certain individuals, trusts and estates. Prospective investors in the Series 2018C Bonds should consult their tax advisors regarding the possible applicability of this tax to an investment in the Series 2018C Bonds.

Sale and Exchange of Series 2018C Bonds

Upon a sale or exchange of a Series 2018C Bond, a holder generally will recognize gain or loss on the Series 2018C Bonds equal to the difference between the amount realized on the sale and its adjusted tax basis in such Series 2018C Bond. Such gain or loss generally will be capital gain (although any gain attributable to accrued market discount of the Series 2018C Bond not yet taken into income will be ordinary) if the holder holds the Series 2018C Bond as a capital asset. The adjusted basis of the holder in a Series 2018C Bond (without OID) will (in general) equal its original purchase price and decreased by any payments of principal received on the Series 2018C Bond. In general, if the Series 2018C Bond is held for longer than one year, any gain or loss would be long term capital gain or loss, and capital losses are subject to certain limitations.

If the liability of the University in respect of a Series 2018C Bond ceases as a result of an election by the University to pay and discharge the indebtedness on such Series 2018C Bond by depositing with the Trustee sufficient cash and/or Government Obligations to pay or redeem and discharge the indebtedness on such Series 2018C Bond (a “legal defeasance”), under current tax law a holder will be deemed to have sold or exchanged such Series 2018C Bond. In the event of such a legal defeasance, a holder generally will recognize gain or loss on the deemed exchange of the Series 2018C Bonds. Ownership of the Series 2018C Bonds after a deemed sale or exchange as a result of a legal defeasance may have tax consequences different than those described in this “TAX MATTERS” section and each holder should consult its own tax advisor regarding the consequences to such holder of a legal defeasance of the Series 2018C Bonds.

Backup Withholding

The University or its paying agent, if any (the “payor”), must report annually to the IRS and to each U.S. Holder any interest that is payable to the U.S. Holder, subject to certain exceptions. Under Section 3406 of the Code and applicable Treasury Regulations, a non-corporate U.S. Holder of the Series 2018C Bonds may be subject to backup withholding at the current rate of 24% (subject to future adjustment) with respect to “reportable payments,” which include interest paid on the Series 2018C Bonds and the gross proceeds of a sale,

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exchange, redemption or retirement of the Series 2018C Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) there has been a failure of the payee to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts paid as back-up withholding do not constitute an additional tax and will be credited against the U.S. Holder’s federal income tax liabilities (and possibly result in a refund), so long as the required information is timely provided to the IRS.

Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders

This section describes certain U.S. federal income and estate tax consequences to Non-U.S. Holders.

If, under the Code, interest on the Series 2018C Bonds is “effectively connected with the conduct of a trade or business within the United States” by a Non-U.S. Holder, such interest will be subject to U.S. federal income tax in a similar manner as if the Series 2018C Bonds were held by a U.S. Holder, as described above, and in the case of Non-U.S. Holders that are corporations may be subject to U.S. branch profits tax at a rate of up to 30%, unless an applicable tax treaty provides otherwise. Such Non-U.S. Holder will not be subject to withholding taxes, however, if it provides a properly executed Form W-8ECI to the payor.

Interest on the Series 2018C Bonds held by other Non-U.S. Holders may be subject to withholding taxes of up to 30% of each payment made to the Non-U.S. Holders unless the “portfolio interest” exemption applies. In general, interest paid on the Series 2018C Bonds to a Non-U.S. Holder will qualify for the portfolio interest exemption, and thus will not be subject to U.S. federal withholding tax, if (1) such Non-U.S. Holder is not (i) a “controlled foreign corporation” (within the meaning of Section 957 of the Code) related, directly or indirectly, to the University or (ii) a bank; (2) the payor receives a certification of such facts from the Non-U.S. Holder; and (3) the payor receives from the Non-U.S. Holder who is the beneficial owner of the obligation a statement signed by such person under penalties of perjury, on IRS Form W-8BEN or IRS Form W-8BEN-E (or successor form), certifying that such owner is not a U.S. Holder and providing such owner’s name and address. Alternative methods may be applicable for satisfying the certification requirement described above. Foreign trusts and their beneficiaries are subject to special rules, and such persons should consult their own tax advisors regarding the certification requirements.

If a Non-U.S. Holder does not claim, or does not qualify for, the benefit of the portfolio interest exemption, the Non-U.S. Holder may be subject to a 30% withholding tax on interest payments on the Series 2018C Bonds. However, the Non-U.S. Holder may be able to claim the benefit of a reduced withholding tax rate under an applicable income tax treaty between the Non- U.S. Holder’s country of residence and the U.S. Non-U.S. Holders are urged to consult their own tax advisors regarding their eligibility for treaty benefits. The required information for claiming treaty benefits is generally submitted on Form W-8BEN or IRS Form W-8BEN-E. In

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addition, a Non-U.S. Holder may under certain circumstances be required to obtain a U.S. taxpayer identification number.

A Non-U.S. Holder will generally not be subject to U.S. federal income tax or withholding tax on gain recognized on a sale, exchange, redemption or other disposition of a Series 2018C Bond. (Such gain does not include proceeds attributable to accrued but unpaid interest on the Series 2018C Bonds, which will be treated as interest.) A Non-U.S. Holder may, however, be subject to U.S. federal income tax on such gain if: (1) the Non-U.S. Holder is a nonresident alien individual who was present in the United States for 183 days or more in the taxable year of the disposition, or (2) the gain is effectively connected with the conduct of a U.S. trade of business, as provided by applicable U.S. tax rules (in which case the U.S. branch profits tax may also apply), unless an applicable tax treaty provides otherwise.

The payor must report annually to the IRS and to each Non-U.S. Holder any interest that is subject to U.S. withholding taxes or that is exempt from U.S. withholding taxes pursuant to an income tax treaty or certain provisions of the Code. Copies of these information returns may also be made available under the provisions of a specific tax treaty or agreement with the tax authorities of the country in which the Non-U.S. Holder resides.

Payments to Non-U.S. Holders will be net of any applicable withholding tax. The University is not providing any indemnification or gross-up in regard to such taxes.

A Non-U.S. Holder generally will not be subject to backup withholding with respect to payments of interest on the Series 2018C Bonds as long as the Non-U.S. Holder (i) has furnished to the payor a valid IRS Form W-8BEN or IRS Form W-8BEN-E certifying, under penalties of perjury, its status as a non-U.S. person, (ii) has furnished to the payor other documentation upon which it may rely to treat the payments as made to a non-U.S. person in accordance with Treasury regulations, or (iii) otherwise establishes an exemption. A Non-U.S. Holder may be subject to information reporting and/or backup withholding on a sale of the Series 2018C Bonds through the United States office of a broker and may be subject to information reporting (but generally not backup withholding) on a sale of the Series 2018C Bonds through a foreign office of a broker that has certain connections to the United States, unless the Non-U.S. Holder provides the certification described above or otherwise establishes an exemption. Non-U.S. Holders should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption.

Amounts withheld under the backup withholding rules may be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.

In addition to the rules described above concerning the potential imposition of withholding on interest payments to Non-U.S. Holders, payments of interest to Non-U.S. Holders that are “financial institutions” may be subject to a withholding tax of 30% unless an agreement is in place between the financial institution or the jurisdiction in which the Non-U.S. Holder is a tax resident and the U.S. Treasury to collect and disclose information about accounts, equity investments, or debt interests in the financial institution held by one or more U.S. persons

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or the financial institution is a resident in a jurisdiction that has entered into such an agreement. For these purpose, a “financial institution” means any entity that (i) accepts deposits in the ordinary course of a banking or similar business, (ii) holds financial assets for the account of others as a substantial portion of its business, or (iii) is engaged (or holds itself out as being engaged) primarily in the business of investing, reinvesting or trading in securities, partnership interests, commodities or any interest (including a futures contract or option) in such securities, partnership interests or commodities.

Payments of interest to non-financial non-U.S. entities (other than publicly traded foreign entities, entities owned by residents of U.S. possessions, foreign governments, international organizations, or foreign central banks), will also be subject to a withholding tax of 30% if the entity does not certify that the entity does not have any substantial U.S. owners or provide the name, address and TIN of each substantial U.S. owner.

If a Non-U.S. Holder would be subject to the withholding on payments of interest described in the two preceding paragraphs, the gross proceeds from a disposition of a Series 2018C Bond may also be subject to a withholding tax of 30% after December 31, 2018.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain fiduciary obligations and prohibited transaction restrictions on employee pension and welfare benefit plans subject to Title I of ERISA (“ERISA Plans”). Section 4975 of the Code imposes essentially the same prohibited transaction restrictions and some of the general fiduciary standards on tax-qualified retirement plans described in Section 401(a) and 403(a) of the Code, which are exempt from tax under Section 501(a) of the Code, other than governmental and church plans referred to below (“Qualified Retirement Plans”), and on individual retirement accounts described in Section 408 of the Code (“IRAs” and, collectively with Qualified Retirement Plans, “Tax-Favored Plans”). Governmental plans (as defined in Section 3(32) of ERISA) and, if no election has been made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA requirements and are not subject to the requirements of Section 4975 of the Code. Accordingly, assets of such plans may be invested in the Series 2018C Bonds without regard to ERISA and the Code considerations described below, but may be subject to similar provisions of applicable federal and state law (the “Similar Law”). Moreover, fiduciaries of non-U.S. benefit plans should determine the effect of foreign laws on the acquisition of the Series 2018C Bonds.

Fiduciaries of plans covered by ERISA and Tax-Favored Plans should determine if the acquisition and retention of the Series 2018C Bonds satisfy ERISA’s general fiduciary obligations, including those of investment prudence and diversification and the requirement that a plan’s investment be made in accordance with the documents governing the plan. In addition, Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving assets of ERISA Plans and Tax-Favored Plans and entities whose underlying assets include plan assets by reason of ERISA Plans or Tax-Favored Plans investing in such entities (collectively, “Benefit Plans”) and persons who have certain specified relationships to the Benefit Plans (“Parties in Interest” or “Disqualified Persons”), unless a statutory or

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administrative exemption is available. Certain Parties in Interest (or Disqualified Persons) that participate in a prohibited transaction may be subject to a penalty (or an excise tax) imposed pursuant to Section 502(i) of ERISA or Section 4975 of the Code and parties may be liable for losses suffered by plan investors if prohibited transactions occur unless a statutory or administrative exemption is available.

The acquisition or holding of Series 2018C Bonds by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the University or the Trustee, or any of their respective affiliates, is or becomes a Party in Interest (or a Disqualified Person) with respect to such Benefit Plan. In such case, certain exemptions from the prohibited transaction rules could be applicable depending on the type and circumstances of the plan fiduciary making the decision on behalf of a plan to acquire a Series 2018C Bond. Included among these exemptions are Prohibited Transaction Class Exemption (“PTCE”) 96-23, regarding transactions effected by certain “in-house asset managers”; PTCE 90-1, regarding investments by insurance company pooled separate accounts; PTCE 95-60, regarding transactions effected by “insurance company general accounts”; PTCE 91-38, regarding investments by bank collective investment funds; and PTCE 84-14, regarding transactions effected by independent “qualified professional asset managers.” In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code generally provide for a statutory exemption from the prohibited transaction rules for certain transactions between Benefit Plans and persons who are Parties in Interest (or Disqualified Persons) solely by reason of providing services to such Benefit Plans or that are affiliated with such service providers, provided generally that such persons are not fiduciaries (or affiliates of fiduciaries) with respect to the “Plan Assets” of any Benefit Plan involved in the transaction and that certain other conditions are satisfied.

Any ERISA Plan fiduciary considering whether to purchase Bonds on behalf of an ERISA Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such investment and the availability of any of the exemptions referred to above. Persons responsible for investing the assets of plans that are not ERISA Plans should seek similar counsel with respect to the effect of any applicable law.

By acquiring the Series 2018C Bonds (or interest therein), each purchaser thereof (and if the purchaser is a Benefit Plan, its fiduciary) is deemed to represent and warrant that either (i) it is not acquiring such Series 2018C Bonds (or interests therein) with the assets of a Benefit Plan, governmental plan or church plan or (ii) the acquisition of such Series 2018C Bonds (or interests therein) will not give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of Similar Law.

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LEGAL MATTERS

Legal Opinions

Certain legal matters will be passed upon for the University by its Office of Legal Counsel and by its special transaction counsel, Chapman and Cutler LLP, Chicago, Illinois and for the Underwriters by their counsel, Kutak Rock LLP, Chicago, Illinois.

In addition to the legal representation described above, each of the law firms referred to above represents one or more of the Underwriters or the University from time to time with respect to matters unrelated to the Series 2018C Bonds.

Enforceability Limitations

The enforceability of the rights and remedies of the Trustee or the Holders of the Series 2018C Bonds under the Indenture and the availability of remedies to any party seeking to enforce the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code), the enforceability of the rights and remedies under the Indenture and the availability of remedies to any party seeking to enforce the security granted thereby may be limited.

The various legal opinions to be delivered concurrently with the delivery of the Series 2018C Bonds will be qualified as to the enforceability of the various legal instruments limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a preceding in equity or at law).

LITIGATION

There is no litigation or proceeding pending or, to the University’s knowledge, threatened against the University which (i) seeks to restrain or enjoin the issuance or delivery of the Series 2018C Bonds or the execution or the performance by the University of its obligations under the Indenture, (ii) in any way contests or affects the issuance or the validity of the Series 2018C Bonds or the Indenture or (iii) in any way contests the legal existence or powers of the University. There is no litigation or proceeding pending or, to the University’s knowledge, threatened against the University except for (i) litigation being defended by insurance carriers on behalf of the University, the claims in which are entirely within the insurance policy limits of the University, (ii) litigation in which the expected maximum aggregate recovery against the University could be satisfied from the self-insurance liability fund maintained by the University or (iii) claims for damages arising in the ordinary course of its operations, none of which are deemed to be material to the operation or condition, financial or otherwise, of the University.

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UNDERWRITING

Purchase of the Series 2018C Bonds

Wells Fargo Securities, LLC (the “Representative”) has entered into a Bond Purchase Agreement (the “Bond Purchase Agreement”) with the University on behalf of the underwriters named therein (collectively with the Representative, the “Underwriters”). The Underwriters agree in the Bond Purchase Agreement, subject to certain conditions, to purchase the Series 2018C Bonds from the University at an aggregate purchase price of $______(representing the aggregate principal amount of the Series 2018C Bonds, less an underwriting discount of ______, and no accrued interest). Additional information regarding this Offering Circular and copies of the documents referred to herein can be obtained by contacting the Representative.

The Bond Purchase Agreement provides that the Underwriters will purchase all of the Series 2018C Bonds, if any are purchased, and requires the University to indemnify the Underwriters against losses, claims, damages and liabilities to third parties arising out of any materially incorrect or incomplete statements or information contained in this Offering Circular pertaining to the University. The Underwriters reserve the right to join with dealers and other underwriters in offering the Series 2018C Bonds to the public. The Underwriters may offer and sell the Series 2018C Bonds to certain dealers (including dealers depositing Series 2018C Bonds into investment trusts) and others at prices lower than the offering prices set forth on the cover page of this Offering Circular. In connection with the offering, the Underwriters may overallot or effect transactions that stabilize or maintain the market price of the Series 2018C Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

Information Regarding the Underwriters

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, advisory, investment management, principal investment and hedging, financing and brokerage activities. Certain of the Underwriters and their respective affiliates have provided, from time to time, performed, and may in the future perform, various investment banking services for the University and to persons and entities with relationships with the University, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the University.

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The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views with respect to assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC member NYSE, FINRA, NFA and SIPC. Wells Fargo Securities, LLC, serving as one of the Underwriters, and Wells Fargo Bank, National Association, serving as Trustee, are affiliates of each other and subsidiaries of Wells Fargo & Company.

J.P. Morgan Securities LLC ("JPMS"), one of the Underwriters of the Series 2018C Bonds, has entered into negotiated dealer agreements (each, a "Dealer Agreement") with each of Charles Schwab & Co., Inc. ("CS&Co.") and LPL Financial LLC (“LPL”) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to each Dealer Agreement, if applicable to this transaction, each of CS&Co. and LPL will purchase Series 2018C Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any Series 2018C Bonds that such firm sells.

RATINGS

The Series 2018C Bonds have been assigned ratings of “AA+” (with a stable outlook) by Fitch Ratings, Inc. (“Fitch”), “Aa2” (with a stable outlook) by Moody’s Investors Service (“Moody’s”) and “AA-” (with a stable outlook) by S&P Global Ratings (“S&P”).

Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same. Certain information and materials not included in this Offering Circular were furnished to the rating agencies by the University. Generally, rating agencies base their ratings on the information and materials furnished to them and on investigations, studies and assumptions made by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the rating agency originally establishing the rating, circumstances so warrant. The Underwriters have undertaken no responsibility either to bring to the attention of the owners of the Series 2018C Bonds any proposed revision or withdrawal of the ratings of the Series 2018C Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such ratings could have an adverse effect on the market price of the Series 2018C Bonds. Such ratings should not be taken as a recommendation to buy or hold the Series 2018C Bonds.

FINANCIAL ADVISOR TO THE UNIVERSITY

The University has retained PFM Financial Advisors LLC (“PFM”) to act as financial advisor in connection with certain aspects of the issuance of the Series 2018C Bonds. PFM has provided advice on the plan of financing and structure of the issue and has reviewed and

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commented on certain legal and disclosure documents. PFM has not been engaged, nor has it undertaken, to make an independent verification or to guarantee the accuracy, completeness or fairness of the information contained in this Offering Circular.

MISCELLANEOUS

The references herein, and in the Appendices attached hereto and to the Indenture are brief outlines of certain provisions thereof. Such outlines do not purport to be complete. For full and complete statements of such provisions, reference is made to such documents. Copies of the documents mentioned under this heading are on file at the office of the Representative and following delivery of the Series 2018C Bonds will be on file at the designated corporate trust office of the Trustee.

References herein to web site addresses are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Offering Circular.

The attached APPENDICES A, B and C are integral parts of this Offering Circular and should be read in their entirety together with all foregoing statements.

The University has supplied and reviewed the information contained herein relating to the University and has approved all such information for use within this Offering Circular.

The execution and delivery of this Offering Circular have been duly authorized by the University.

THE UNIVERSITY OF CHICAGO

By : ______Vice President and Chief Financial Officer

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APPENDIX A

CERTAIN INFORMATION CONCERNING THE UNIVERSITY

APPENDIX A

CERTAIN INFORMATION CONCERNING THE UNIVERSITY

TABLE OF CONTENTS

General Description of the University ...... A-1 Academic Organization ...... A-1 The University of Chicago Medical Center ...... A-3 Board of Trustees and Officers ...... A-4 Select Officer Biographies ...... A-6 Faculty ...... A-7 Employee Relations ...... A-8 Enrollment and Admissions ...... A-8 Student Life ...... A-10 Tuition, Room and Board ...... A-11 Financial Aid ...... A-11 Land, Buildings, Equipment and Books ...... A-12 Endowment and Similar Funds Assets ...... A-13 Private Gifts, Grants and Contracts to the University ...... A-14 Government Grants and Contracts ...... A-15 Retirement Plans ...... A-16 Other Postretirement Benefits ...... A-17 Operating Results ...... A-17 Long-Term Indebtedness ...... A-17 Insurance Program ...... A-18 Litigation ...... A-18 Financial Reporting ...... A-18 Schedule 1 ...... A-24

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APPENDIX A

CERTAIN INFORMATION CONCERNING THE UNIVERSITY

General Description of the University

The University of Chicago (the “University”) is a private, non-sectarian, co-educational institution of higher learning and research founded by John D. Rockefeller in 1890. The University has emphasized both research and teaching from its inception. It has had a major impact on American higher education— including inventing the four-quarter system, developing extension courses and programs in the liberal arts for adults, establishing a coherent program of general education of undergraduates, initiating a full-time medical school teaching faculty, and establishing the first executive MBA program. The University is a highly respected teacher of teachers, and curricula throughout the country reflect the University’s emphasis on broad humanistic and scientific undergraduate education.

At the University, campus and community are interconnected in partnerships that serve both to support the community and to train future policymakers, social workers, artists, and social and political leaders. The University of Chicago Charter School, run by the Urban Education Institute, serves students in pre-kindergarten through high school at four campuses. The Mandel Legal Aid Clinic teaches Law School students advocacy skills, professional ethics, and the effect of legal institutions on the poor, while assisting indigent clients. While the University contributes specifically to the metropolis, the City of Chicago in turn serves as a living laboratory for addressing social issues on a national and global scale.

The University’s 217-acre campus is located eight miles south of downtown Chicago in Hyde Park, a historic Chicago neighborhood. The campus, designated a botanic garden in 1997, stretches along both sides of the Midway Plaisance, a broad parkway designed by Frederick Law Olmstead for the city’s South Park System which was used for the World’s Columbian Exposition in 1893. The campus is arranged in a series of quadrangles, with a blend of traditional English Gothic and award-winning modern buildings designed by renowned international architects.

Academic Organization

The University consists of the College, where all undergraduate education is concentrated, and the Graduate Divisions of the Biological Sciences, the Humanities, the Physical Sciences and the Social Sciences. In addition, there are six graduate and professional schools—Chicago Booth School of Business, Divinity School, Law School, Pritzker School of Medicine, Harris School of Public Policy Studies, and School of Social Service Administration. The University also operates the Graham School of Continuing Liberal and Professional Studies, which offers continuing education programs for adults, and the Laboratory Schools, which provide education for children in early development through high school. The University of Chicago Press, the largest academic press in the nation, is an academic unit of the University, which publishes scholarly books and journals.

The University’s extensive library resources are located in the Joseph Regenstein Library, housing collections for the humanities and social sciences including the Special Collection Research Center; the Joe and Rika Mansueto Library, featuring a unique high-density automated storage and retrieval system as well as conservation and digitization laboratories; the John Crerar Library, Eckhart Library; the D’Angelo Law Library; the Harper Library and several other departmental libraries.

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Together, the library collections total over eleven million print and electronic volumes and 63,800 linear feet of manuscripts and archival pieces. Manuscripts and archival collections include the Sir Nicholas Bacon collection of English estate and manorial records from the 13th through the 17th centuries; the papers of Harriet Monroe and of Poetry Magazine; the Reuben T. Durret collection on the history of Kentucky and the Ohio River valley; the Albert Mayer papers on India; and the papers of the University of Chicago and other scientists of the post-World War II period concerned with the peaceful control and use of atomic energy. Other manuscript resources include the papers of William Benton, Michael Polyanyi, Stephen A. Douglas, Julius Rosenwald, William Beaumont, James Franck, Enrico Fermi, William Vaughn Moody, Charles E. Merriam, and John Gunther. Other resources include a large number of major sets of microform materials, electronic indices and abstracting services, and a wide variety of full-text electronic books and journals. The computer clusters in Crerar and Regenstein Libraries, as well as the Computer Science Department’s Instructional Computing Laboratories in Regenstein Library, enhance the available services.

The University’s traditional commitment to advanced scholarship and research is realized in such longtime research centers as the Oriental Institute (an internationally recognized pioneer in scholarship on the archaeology, philology, and history of early Near Eastern civilizations), the James Franck Institute (known for its contributions to the study of physical chemistry and condensed matter physics), and the Enrico Fermi Institute (which has played a central role in the development of basic research in nuclear physics and nuclear chemistry, elementary particle physics, and astrophysics), and research programs such as the Center for the Study of Race, Politics and Culture (which investigates the material condition, the expressive culture and the meaning-making of racialized groups, nationally and internationally), the Chicago Materials Research Center (whose interdisciplinary research groups seek to address fundamental scientific problems of technological significance), the Institute for Biophysical Dynamics (creating a new approach to scientific research at the interface of biology and the physical sciences), the Computation Institute (seeking to address the most challenging problems arising in the use of strategic computation and communications), the Becker Friedman Institute for Research in Economics (supporting inquiry on central questions of economic and social significance), and the Institute for Molecular Engineering (the “IME”) (exploring innovative technologies that address fundamental societal problems through advances in nanoscale manipulation and design at the molecular level). In addition to its research activities IME matriculated its first class of graduate students in the Fall of 2014 and added Molecular Engineering as a major to its undergraduate curriculum in the Spring of 2015. This is the first engineering undergraduate program to be implemented at the University.

The University also conducts scientific research in collaboration with Argonne National Laboratory (“Argonne”), owned by the United States Government and operated by the University through UChicagoArgonne, LLC, under the terms of a cost reimbursement contract with the U.S. Department of Energy. In addition, Fermi Research Alliance, LLC, an entity jointly owned by the University and Universities Research Association Inc., operates Fermi National Accelerator Laboratory (“Fermilab”) for the U.S. Department of Energy. Fermilab is the nation’s preeminent center for high-energy physics and an international center for scientific research in elementary particle physics and astrophysics.

In July 2013, the University and the Marine Biological Laboratory (“MBL”), in Woods Hole, Massachusetts, formed an affiliation to strengthen both institutions’ missions of leadership and innovation in scientific research and education. The affiliation is intended to bring additional resources to the MBL, including greater access to federal and private grants, enhanced philanthropic efforts, and expansion of educational programs. To date, the affiliation has resulted in numerous grants to University faculty and MBL scientists, fellowship awards to College students to conduct summer research, a new ten week course offered at the MBL for undergraduate students, and the Biological Science Division Quantitative Boot Camp for incoming University biology graduate students, the first of which was held at the MBL in the Fall of 2015, with over 100 graduate students participating. The tables in this Offering Circular, including debt services tables, exclude financial information pertaining to MBL. A-2

In December 2014, the University finalized its commitment to contribute $50 million toward the planning, design, construction and operation of the Giant Magellan Telescope (“GMT”), a proposed astronomical telescope and associated buildings, equipment and instrumentation intended to be built by a consortium of research institutions in Chile at a total cost in excess of $1 billion. As of June 30, 2018, the University has paid $30 million of this commitment and anticipates funding the remainder in installments over a 4-year period. The University’s role as a founder of the GMT is anticipated to further the University’s position as a premier research institution in the field of astronomy and astrophysics.

The University also maintains an international presence through its Centers in Beijing, Delhi, and Paris, and the Hong Kong campus with each providing a place for research, teaching and dialogue among scholars from the University across the region and around the world. The University also offers its executive MBA program at Booth School of Business campuses in London and Hong Kong. As of June 30, 2018, the University has relocated its Hong Kong campus and Chicago Booth’s Executive MBA program to its new Mt. Davis location. The official opening of the Hong Kong campus is anticipated to take place on November 30, 2018.

The University is a member of many cooperative organizations, including the American Council on Education, Committee on Institutional Cooperation, Council on Graduate Schools in the United States, Institute of International Education Inc., Higher Learning Commission, and Universities Research Association.

The University of Chicago Medical Center

The University of Chicago Medical Center (the “Medical Center”), an Illinois not-for-profit corporation, was incorporated in 1986 to assume the operations of the University’s hospitals and clinics.

The relationship between the University and the Medical Center is defined in an Affiliation Agreement dated October 1, 1986 (as amended, the “Affiliation Agreement”), that specifies the responsibilities of each in relation to the provision of patient care, teaching and research. The University and the Medical Center are also parties to an Operating Agreement dated October 1, 1986 (as amended, the “Operating Agreement”), that provides for the management and operation by the Medical Center of the clinical facilities owned by the University and for the transfer of certain University property devoted to hospital use to the Medical Center. The Affiliation Agreement has an initial term of 40 years ending October 1, 2026 unless sooner terminated by mutual consent or as a result of a continuing breach of a material obligation therein or in the Operating Agreement. The Affiliation Agreement automatically renews for additional successive 10-year terms following expiration of the initial term, unless either party provides the other with at least two years’ prior written notice of its election not to renew. The Operating Agreement is coterminous with the Affiliation Agreement.

The Affiliation Agreement provides that, among other things: (1) the University will continue to have available to it a hospital for use in connection with its medical education, training and research activities; (2) all members of the Medical Center’s medical staff will have academic appointments at the University except to the extent such members treat patients exclusively at off-campus Medical Center facilities; and (3) if the Affiliation Agreement is terminated in accordance with its terms either by mutual consent or upon a default, the Medical Center is obligated to return all the Hospital’s facilities and assets to the University, without payment of any kind by the University to the Medical Center.

The Operating Agreement provides that, among other things: (1) the University gives the Medical Center the right to use and operate certain facilities; (2) the University contributes to the Medical Center for its use the equipment, supplies, furniture and other personal property located in the hospitals and clinics;

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(3) the Medical Center undertakes the operations of the hospitals and clinics; and (4) each party will furnish specified services to the other, including insurance, at agreed-upon rates.

A strong tradition in the University of interdisciplinary study and research encourages faculty and students from different disciplines to work together on problems of common interest. Research, teaching, and patient care are integrated elements of this tradition. The University owns the physical facilities housing the Medical Center, but has leased parts of it to the Medical Center to use for health care purposes supportive of the University’s academic and research mission under a 40-year lease expiring in fiscal year 2027 (the “Lease”). The University also has granted a leasehold interest to the Medical Center in certain land and parking facilities, including the land on which the Duchossois Center for Advanced Medicine, Comer Children’s Hospital, and Comer Emergency Department are located, and the land on which the Medical Center’s Center for Care and Discovery, a 10-story, approximately 1.2 million square foot hospital pavilion, stands. Each such lease, except the parking lot lease, will end if the Affiliation Agreement terminates or ends.

The University may terminate the Lease upon the occurrence of an “event of default” under the Lease. An “event of default” under the Lease includes, among other things, an event of default by the Medical Center under the Affiliation Agreement, its Operating Agreement with the University for the Medical Center’s facilities, or its loan and related agreements with the Illinois Finance Authority. The Lease does not provide for early termination by the Medical Center. In the event the Lease is terminated (whether as a result of the termination of the Affiliation Agreement or at the University’s election following an event of default), the Lease requires the University to assume and agree to perform the obligations of the Medical Center under the Medical Center’s loan agreements with the Illinois Finance Authority. As of June 30, 2017, the Medical Center had outstanding notes and bonds (including certain debt not issued by the Illinois Finance Authority) for which the University would become liable in the event the Lease was terminated of $879.0 million.

The University appoints the Medical Center’s Board of Trustees, designates the Chairman of its Board of Trustees, and approves its President. The President of the Medical Center serves as its senior executive officer, reporting to the Executive Vice President of the University for Biology and Medicine and Dean of the Biological Sciences Division, and to the Medical Center Board of Trustees. The Medical Center requires approval of the University for certain actions, including incurring additional long-term debt.

On October 1, 2016, the Medical Center acquired Ingalls Health System, an independent health system serving Chicago’s south suburbs, through an affiliation and member substitution. As a result of this transaction, Ingalls Health System became a wholly owned subsidiary of the Medical Center, and its results of operations are included in the Medical Center’s consolidated financial statements from the date of acquisition.

The tables in this Offering Circular, including debt service tables, exclude financial information pertaining to the Medical Center. Neither the Medical Center nor the University is obligated to make any payments of principal or interest on the other’s debt obligations, except as described above.

Board of Trustees and Officers

Board of Trustees: The University is governed by a Board of Trustees (the “Board”) which has general authority for the direction and management of the University. The by-laws of the University provide that the Board shall not exceed 55 members, each elected for a five-year term. The following table sets forth the names and affiliations of the members of the Board of Trustees as of September 1, 2018.

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Trustees Affiliation

Andrew M. Alper Chairman, Alper Investments Inc. Frank A. Baker II Co-Founder and Managing Partner, Siris Capital Group, LLC David G. Booth Founder and Executive Chairman, Dimensional Fund Advisors David B. Brooks Op-Ed Columnist, New York Times Company Debra A. Cafaro Chairman and CEO, Ventas, Inc. Thomas A. Cole Senior Counsel and Chair Emeritus of the Executive Committee, Sidley Austin LLP James S. Crown President, Henry Crown and Company Daniel L. Doctoroff CEO, Sidewalk Labs Brady W. Dougan Managing Partner, Scepter Partners Craig J. Duchossois CEO, The Duchossois Group, Inc. John A. Edwardson Retired Chairman and CEO, CDW James S. Frank President and CEO, Wheels Inc. Timothy M. George Vice Chairman, Investment Banking, Lazard Rodney L. Goldstein Co-Managing Partner, Wealth Strategist Partners Mary Louise Gorno Managing Director, Ingenuity International LLC Kenneth C. Griffin CEO and Founder, Citadel Kenneth M. Jacobs Chairman and CEO, Lazard Ashley D. Joyce President, The Duchossois Family Foundation Karen L. Katen Senior Advisor, EW Health Partners Dennis J. Keller Retired Chairman and CEO, Co-Founder, Adtalem Global Education Steven A. Kersten President, Water Saver Faucet Company James M. Kilts Founding Partner, Centerview Partners Michael J. Klingensmith Publisher and CEO, Minneapolis Star Tribune Rachel D. Kohler Principal, KoHop Ventures John Liew Co-Founder, AQR Capital Management, LLC Rika Mansueto Vice President, Mansueto Foundation Joseph Neubauer (Chairman) Next Egg Group Emily Nicklin Partner, Kirkland & Ellis LLP Brien M. O’Brien Chairman and Chief Executive Officer, Port Capital LLC Michael P. Polsky Founder, President, and CEO, Invenergy, LLC Myrtle S. Potter President and CEO, Myrtle Potter and Company LLC Thomas J. Pritzker Executive Chairman, Hyatt Hotels Corporation Guru Ramakrishnan CEO and Founder, Meru Capital Group John W. Rogers, Jr. Chairman and CEO, Ariel Investments, LLC Emmanuel Roman CEO, PIMCO Andrew M. Rosenfield Managing Partner, Guggenheim Partners David M. Rubenstein Co-Founder and Co-CEO, The Carlyle Group Alvaro J. Saieh Chairman of the Board, CorpGroup Nassef O. Sawiris CEO, OCI N.V. Steve G. Stevanovich President, SGS Group of Companies Mary A. Tolan Founder and Co-Managing Director, Chicago Pacific Founders Byron D. Trott Chairman and CEO, BDT & Company Gregory W. Wendt Partner, Capital Research Company Donald R. Wilson, Jr. CEO, Partner, DRW Paula Wolff Director, Illinois Justice Project Paul G. Yovovich President, Lake Capital Francis T. F. Yuen Chairman, Advisory Board, Ortus Capital Management Ltd. Robert J. Zimmer President, The University of Chicago A-5

Committees of the Board: The principal committee of the Board is the Executive Committee which is comprised of the President, Chairman of the Board, Vice Chairman of the Board and eight appointed members. The Executive Committee has responsibility for reviewing and approving executive compensation and benefits, acting upon budgetary and financial matters recommended to it by the Financial Planning Committee, including major capital projects, and reviewing and providing oversight of the University’s long-range plans.

Other committees of the Board include the Audit Committee, the Financial Planning Committee, the Institutional Capacity Committee, the Investment Committee, the Medical Center Executive Committee, the Outward Engagement Committee, the Trusteeship and Governance Committee and the University Advancement Committee.

University Officers: The following sets forth the names of the principal executive officers of the University and the position held by each as of September 1, 2018.

Robert J. Zimmer President of the University Daniel Diermeier Provost David B. Fithian Executive Vice President Juan de Pablo Vice President for National Laboratories Kenneth S. Polonsky Executive Vice President of the University for Biology and Medicine, President of the University of Chicago Health System. Dean, Division of the Biological Sciences Dean, Pritzker School of Medicine Katie Callow-Wright Vice President and Secretary of the University Derek R. B. Douglas Vice President for Civic Engagement and External Affairs Sharon Marine Vice President for Alumni Relations and Development James G. Nondorf Vice President for Enrollment and Student Advancement Dean of College Admissions and Financial Aid Paul M. Rand Vice President for Communications Michele Rasmussen Dean of Students in the University Darren Reisberg Vice President for Strategic Initiatives Ivan Samstein Vice President and Chief Financial Officer Mark A. Schmid Vice President and Chief Investment Officer Balaji Srinivasan Vice President for Global Initiatives and Strategy Kimberly Taylor Vice President and General Counsel

Select Officer Biographies

Robert J. Zimmer, Ph.D., President of the University, became the 13th President of The University of Chicago on July 1, 2006. President Zimmer returned to the University from Brown University, where he had served as Provost since 2002. Prior to his position at Brown, President Zimmer was a University of Chicago faculty member and administrator for more than two decades specializing in the mathematical fields of geometry, particularly ergodic theory, lie groups, and differential theory. As a University of Chicago administrator, Zimmer served as chairman of the mathematics department, deputy provost, and Vice President for Research and for Argonne National Laboratory. The recipient of an Alfred P. Sloan Foundation Fellowship, he served on the Board of Mathematical Sciences of the National Research Council from 1992 to 1995, and was on the executive committee from 1993 to 1995. Zimmer held the title of Max Mason Distinguished Service Professor in Mathematics at Chicago before leaving for Brown, where he was the Ford Foundation Professor of Mathematics in addition to being provost. President Zimmer earned his A.B., summa cum laude, from Brandeis University and a Ph.D. in mathematics from Harvard

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University. He joined the University faculty as an L.E. Dickson Instructor of Mathematics in 1977. He was also on the faculty at the U.S. Naval Academy from 1975 to 1977.

Daniel Diermeier, Provost, serves as the 13th Provost of the University of Chicago. Prior to his appointment as Provost, Diermeier was Dean of the Harris School of Public Policy from 2014 to 2016. He is the Emmett Dedmon Professor at the Harris School and the College and a member of the Board of the University of Chicago Medical Center, the Board of Governors for Argonne National Laboratory, and the Board of Trustees of NORC. Diermeier is a fellow of the American Academy of Arts and Sciences, the Guggenheim Foundation, and the Canadian Institute of Advanced Research (CIFAR). His teaching and research focuses on formal political theory, political institutions, the interaction of business and politics, text analytics, public perception, as well as crisis and reputation management. Prior to joining the University of Chicago, Diermeier taught at the Graduate School of Business at Stanford University and the Kellogg School of Management, Northwestern University. Diermeier earned an M.A. in Philosophy from the University of Southern California and an M.A. in Political Science from each of the University of Munich in Germany and the University of Rochester. He also holds a Ph.D. in Political Science from the University of Rochester.

Ivan Samstein, Vice President and Chief Financial Officer, was appointed in June 2017. Samstein oversees the University’s financial operations, working with the President, Provost, Board of Trustees, Deans and Officers to ensure that the University’s financial services, fiscal strategy and operational analyses best support the academic mission and priorities. In addition to overseeing all aspects of financial services, Internal Audit and Compliance, and Risk Management, Samstein also oversees Information Technology Services, Human Resources and Shared Services. Prior to joining the University, he served as the Chief Financial Officer of Cook County, Illinois from 2012 to 2016, where he had oversight of eight departments and was primary fiscal policy advisor to Cook County Board President Toni Preckwinkle. Samstein was previously an investment banker covering municipal fixed income markets in both New York and Chicago in the Public Finance Department at Bank of America Merrill Lynch and predecessor organizations from 2004 to 2011, was a municipal bond rating analyst in the Public Finance Department at Moody’s Investors Service from 1999 to 2004, and is a veteran of the United States Army. Samstein earned a Master of Business Administration from the University of Illinois at Urbana-Champaign, and a Bachelor of Arts (Economics) magna cum laude from Hunter College, City University of New York.

Faculty

Presidents of eight of the country’s most prestigious colleges and universities resigned their positions to join the University’s first faculty. From that time to the present, the University has maintained that its greatness would depend primarily on the quality of the men and women it attracted to its faculty.

There are approximately 2,377 full-time faculty members, of which approximately 50% have tenure or are on the tenure track. Nearly all of the faculty members have an earned doctorate and/or other professional degrees. The University has a strong commitment to undergraduate teaching. Due to the University’s large faculty and the relatively small size of the College, classes are small and nearly all are taught by faculty. Because of the University’s strong tradition of research and graduate education, the faculty is continuously engaged in a substantial number of research projects, which are typically interrelated with instruction.

The University of Chicago counts among its current and former faculty and alumni, 197 members of the American Academy of Arts and Sciences, 44 members of the National Academy of Sciences, 49 recipients of a MacArthur Fellowship (commonly known as a “genius grant”), 15 recipients of the National Medal of Science, 20 recipients of the National Humanities Medal/Charles Frankel Prize, 24 Pulitzer Prize winners, and 14 recipients of the Presidential Medal of Freedom. A-7

Ninety Nobel Laureates have been University of Chicago faculty members, students, or researchers at some point in their careers, including most recently, Richard H. Thaler, for his work in Economic Sciences. Additional laureates whose work is closely associated with the University are Milton Friedman (Economic Sciences, 1976), Subrahmanyan Chandrasekhar (Physics, 1983), Saul Bellow (Literature, 1976), Charles Huggins (Physiology or Medicine, 1966), and Willard Libby (Chemistry, 1960). Six Nobel Prize winners are current members of the faculty.

In addition to these Laureates, Alexei Abrikosov of Argonne National Laboratory (which has been operated by the University of Chicago for the U.S. Department of Energy since the laboratory was established in 1946) shared the 2003 Nobel Prize in Physics “for pioneering contributions to the theory of superconductors and superfluids.” The University of Chicago’s first Nobel Laureate was Albert A. Michelson. The first American to win the Nobel Prize in any of the sciences, Michelson was recognized in 1907 for his measurements of the speed of light. Robert A. Milikan (Physics, 1923) did both of his prize- winning experiments on campus in the Ryerson Laboratory.

Employee Relations

The University’s support staff, other than the faculty, totals approximately 9,613 full-time and part- time employees. As of August 2018, approximately 1,202 of the support staff are represented by eight unions. The largest units include Clerical (650), Laboratory School Teachers (260), Skilled Trades (167), Police (79) and Service and Maintenance (46).

In December 2015, two bargaining units of academic appointees voted to be represented for purposes of collective bargaining by the Service Employees International Union Local 73. One of these units consists of approximately 170 part-time and full-time lecturers, and non-supervisory senior lecturers, and the other unit consists of 34 collegiate assistant professors. The University recently reached a four- year agreement with the unit of collegiate assistant professors in November 2017. A three-year agreement was reached with the lecturer unit on April 10, 2018. In June 2017, a unit of approximately 225 part-time, hourly-paid student employees of the University Library voted to be represented for purposes of collective bargaining by Teamsters Local 743. Negotiations have not commenced with this unit.

Enrollment and Admissions

First-year applications to the College for the 2017-2018 academic year were 27,694 and offers of admission were 2,419. Since 2010-2011, first-year applications to the College have increased 42% allowing the University to become more selective. Its admissions rate declined from 19% in 2010-2011 to 9% in 2017-2018. Over the same period the mean SAT scores for entering undergraduates rose 61 points from 1469 to 1530.

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Enrollment data for the past five full academic years, including 2017-2018, is shown in the table below:

Academic Graduate and Year The College Professional 1 Non-Degree 2 Total 2013 - 2014 5,692 8,905 597 15,194 2014 - 2015 5,724 8,932 656 15,312 2015 - 2016 5,860 9,129 737 15,726 2016 - 2017 5,978 9,449 489 15,916 2017 - 2018 6,286 9,540 619 16,445

Note that all numbers above represent total enrollment, not full time enrollment (FTE) totals. 1Includes students in the off-campus MBA Program and Executive Program. 2 Includes post-doctoral fellows, students-at-large and other special students.

The growth in College enrollment from 5,692 students in 2013-2014 to 6,286 in 2017-2018 continues a deliberate University strategy begun in the early 1990’s to gradually increase the undergraduate student population. The following tables show miscellaneous entering undergraduate enrollment statistics, applications, acceptances and matriculation rates for the past five academic years through 2017-2018, based on fall quarter registration. The decline in the number of applications to the College for the 2014-2015 academic year is primarily attributable to a temporary but substantial technology failure associated with an online platform that serves as the University’s primary means of receiving and processing student applications. These technology failures did not recur in subsequent enrollment cycles.

Miscellaneous Entering Undergraduate Enrollment Statistics

st Academic % From Outside Retention from 1 Year Year Mean SAT Mean ACT Illinois to 2nd Year Student 2013 - 2014 1492 33 81% 99% 2014 - 2015 1489 33 83% 99% 2015 - 2016 1520 34 84% 99% 2016 - 2017 1525 34 82% 99% 2017 - 2018 1530 34 87% 99%

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Applications, Acceptances and Matriculation Rates – The College

Academic Offers of % Year Applications Admission Admitted Matriculants % Matriculated 2013 - 2014 30,271 2,670 9% 1,426 53% 2014 - 2015 27,500 2,409 9% 1,447 60% 2015 - 2016 30,068 2,521 8% 1,537 61% 2016 - 2017 31,484 2,499 8% 1,591 64% 2017 - 2018 27,694 2,419 9% 1,736 72%

Applications, Acceptances and Matriculation Rates – The Graduate Divisions

Academic Offers of % Year Applications Admission Admitted Matriculants % Matriculated

2013 - 2014 11,170 3,425 31% 1,029 30% 2014 - 2015 11,597 3,434 30% 1,041 30% 2015 - 2016 11,168 3,616 32% 1,058 29% 2016 - 2017 11,814 3,686 31% 1,180 32% 2017 - 2018 13,340 3,564 27% 1,193 33%

Applications, Acceptances and Matriculation Rates – The Professional Schools

Academic Offers of % Year Applications Admission Admitted Matriculants % Matriculated

2013 - 2014 17,925 3,454 19% 1,448 42% 2014 - 2015 17,348 3,392 19% 1,429 42% 2015 - 2016 17,543 3,571 20% 1,402 39% 2016 - 2017 17,992 3,985 22% 1,593 40% 2017 - 2018 19,412 4,440 23% 1,775 40%

Student Life

In the 2017-2018 academic year, the University enrolled 16,445 students, of which 6,286 were undergraduate students. All University first-year undergraduate students are required to live in University residence halls. Approximately 3,399 undergraduates live in College housing. Of the total undergraduate on-campus population, first-year students account for 50%, second-year students for 33%, third-year students for 10%, and fourth-year students for 6%. In addition, over 300 graduate students currently live in University owned residential buildings in Hyde Park. See “Land, Buildings, Equipment and Books” herein for more information regarding University owned residential properties.

The Dean of Students in the University is responsible for the following areas: undergraduate housing and dining system, extra-curricular student organizations and activities, the community service A-10 center and physical education and athletics. The University student government organization sets minimum eligibility requirements for membership in the more than 400 student organizations and determines the status of existing and proposed student organizations.

Tuition, Room and Board

The cost of educating a student at the University is covered by tuition charges, gifts, grants, investment income, and other sources. The University offers substantial scholarship aid to students who require financial assistance.

Annual tuition rates for full-time students based upon three quarters of enrollment are as follows for the programs and academic years shown:

Academic Year The College1 Graduate Divisions and Room and Board Rates Professional Schools2

2014-2015 $48,253 $30,357 to $64,800 $14,205 2015-2016 $50,193 $31,572 to $67,110 $14,772 2016-2017 $50,997 $32,832 to $69,045 $15,093 2017-2018 $53,292 $34,146 to $70,965 $15,726 2018-2019 $55,425 $34,146 to $72,000 $16,350

Financial Aid

The University is a “need blind” institution, meaning that the University admits the most qualified students regardless of their financial circumstances. The University supports this policy with an extensive financial aid program. During fiscal year 2017, approximately 59% of all students in the College received a total of $132.7 million of financial aid in the form of grants and scholarships. University-wide expenditures for scholarships and fellowships amounted to $404.5 million. Of this amount, approximately $307.8 million was provided from unrestricted funds; the remaining $98.0 million came from restricted sources.

In 2007, the University awarded its first Odyssey Scholarships provided by a $100 million gift from an anonymous donor to be allocated over a 25-year period. By fiscal year 2014 more than 1,000 College students were receiving Odyssey Scholarships. Under the terms of the gift, undergraduate students with family income below $75,000 had their full loan obligation eliminated and those within the $75,000 to $90,000 family income band had their loan obligation halved. In 2014, the University launched the No Barriers initiative, which eliminated student loans for undergraduate students from the University’s need- based financial packages. The No Barriers initiative was phased in starting with students who entered the College in the Fall of 2015.

1 The tuition and fees figures do not include one-time transcript fees and mandatory first year fees 2 Tuition figures only. The lower rate represents the Divinity School MDIV full time program and the higher rate represents the Booth School of Business Executive MBA program in North America A-11

In 2018, the University announced the Empower initiative, which includes new financial aid policies providing aid to cover full direct cost for students with family income under $60,000 and full tuition for students with family income under $125,000.

A Graduate Aid Initiative allocated almost $50 million in additional funding through 2013 to graduate students in the Humanities and Social Sciences. In 2014, aid for graduate students continued to grow and was extended to include doctoral students in the School of Social Service Administration. Funding for all students is guaranteed for five years and allows the University to remain competitive with peer institutions. These programs expanded upon the University’s longstanding commitment to financial assistance for students.

The following table sets forth the history of financial aid for the fiscal years ended June 30, 2013 through 2017 (in thousands of dollars).

Financial Aid Aid as a % Fiscal Year Tuition & Fees Unrestricted Restricted Total of Tuition

2013 $ 671,779 $ 232,650 $ 77,406 $ 310,056 46% 2014 $ 704,846 $ 246,838 $ 79,754 $ 326,592 46% 2015 $ 735,384 $ 263,248 $ 83,904 $ 347,152 47% 2016 $ 778,382 $ 290,897 $ 92,550 $ 383,447 49% 2017 $ 828,714 $ 307,780 $ 96,706 $ 404,486 49%

During the 2017-2018 academic year more than 6,516 student loans from various sources were disbursed by the University to over 3,315 students. Two federal sources of loan funds were available to these University students: the Direct Stafford Student Loan Program and the Direct PLUS program. In addition, the University administered disbursement of loan funds for numerous private loan fund programs.

Land, Buildings, Equipment and Books

The following table sets forth the book value of the land, buildings, equipment and books of the University net of depreciation as of June 30 for the fiscal years 2013 through 2017 (in thousands of dollars):

Land, Buildings, Equipment June 30 and Books (Net)

2013 $2,543,765 2014 $2,935,803 2015 $3,064,814 2016 $3,185,722 2017 $3,180,298

The replacement value of the University’s physical plant, as determined for insurance purposes as of June 30, 2018, was approximately $8.342 billion. A-12

Endowment and Similar Funds Assets

The following table sets forth the market value of the University’s Endowment and Similar Funds Assets as of June 30 for the fiscal years 2013 through 2017 (in thousands of dollars):

June 30 Market Value

2013 $5,886,968 2014 $6,460,254 2015 $6,461,809 2016 $6,045,003 2017 $6,536,946

The University utilizes the total return concept in allocating endowment income. In accordance with the University’s total return objective, between 4.5% and 5.5% of a twelve-quarter moving average of the fair value of endowment investments, lagged by one year, is available each year for expenditure in the form of endowment payout. The payout percentage, which is set each year by the Board of Trustees with the objective of a 5.0% average payout over time, was 5.5% for the fiscal years ended June 30, 2018 and 2017 and was approved at 5.5% for the fiscal year ending June 30, 2019. The Board of Trustees may also approve special payouts, in addition to the payout determined under the formula, in support of the annual budget or to fund programmatic or strategic initiatives. For the fiscal year ended June 30, 2017 and the fiscal year ending June 30, 2018, the Board of Trustees approved special payouts to fund certain strategic initiatives and certain costs of Alumni Relations and Development staff associated with the University’s current fundraising campaign and operational support.

If endowment income received is not sufficient to support the total return objective, the balance is provided from capital gains. If income received is in excess of the objective, the balance is reinvested in the endowment.

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Investments at Fair Value at June 30, 2017 (in thousand of dollars)

All other Endowment Investments Total %

Cash Equivalents $ 285,245 $ 192,504 $ 477,749 6% Global public equities 1,538,536 220,306 1,758,842 24% Private debt 318,128 20,173 338,301 5% Private Equity: U.S. venture capital 326,010 20,648 346,658 5% U.S. corporate finance 256,814 16,350 273,164 4% International private equity 375,841 23,876 399,717 5% Real estate 387,732 42,935 430,667 6% Natural resources 487,665 31,004 518,669 7% Absolute Return: Equity oriented 644,400 40,849 685,249 9% Global macro relative value 432,027 27,377 459,404 6% Multi-strategy 507,085 32,269 539,354 7% Credit oriented 365,442 23,184 388,626 5% Protection oriented 118,201 7,499 125,700 2% Fixed Income: U.S. Treasuries, including TIPS 403,027 25,534 428,561 6% Other fixed income 53,954 108,193 162,147 2% Funds held in trust 36,839 21,149 57,988 1% $ 6,536,946 $ 853,850 $ 7,390,796 100%

Private Gifts, Grants and Contracts to the University

During fiscal year 2017, the University recorded $635.1 million in fund-raising progress. Fund- raising progress is a measure that includes new gifts, pledges, realized bequests, life income commitments, and grants from private sources. The primary differences between fund-raising progress and amounts shown in the University financial statements include split interest agreements; documented bequest intentions; future grant commitments, which are recognized in financial statements only in the year expended; and an accounting provision for potentially uncollectible pledges and present value adjustments.

Contributions were received from foundations, corporations and other organizations, and individuals. In fiscal year 2017, corporations and other organizations gave $74.2 million in gifts and commitments to the University; private foundations made gifts and grants totaling $53.1 million; major giving from individuals, including bequests and life-income gifts, was $458.9 million; and the University’s Annual Funds accounted for $31.5 million in gifts.

During this same fiscal year, the University received cash payments of $494.0 million in private gifts and grants.

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The following table sets forth private gifts, grants, and contracts reported in the University’s audited financial statements as of June 30 for the fiscal years 2012 through 2017 (in thousands of dollars):

2013 2014 2015 2016 2017 (1)

Unrestricted operating $ 160,091 $ 229,452 $ 233,529 $ 212,602 Temporarily restricted 115,948 166,036 139,105 150,123 Permanently restricted 82,981 116,684 80,250 162,721 Net assets w/o donor restrictions 223,513 Net assets with donor restrictions 327,674 Total $ 359,020 $ 512,172 $ 452,884 $ 525,446 $ 551,187

(1) During 2017, the University adopted ASU No 2016-14 - Not-for-Profit Entites ( Topic 958): Presentation of Financial Statements fo Not-for-Profit Entities.

In October 2014 the University formally launched the public phase of a comprehensive campaign, “Inquiry and Impact”, to raise $4.5 billion. In March of 2017, the University officially expanded its campaign goal to $5 billion. It is scheduled to conclude in 2019. The priorities of the campaign, the most ambitious in the University’s history, include support for faculty and researchers who are shaping fields of inquiry, distinctive educational opportunities for students at all levels, and innovative programs to enhance the University’s local and global reach and impact. As of June 30, 2018, the campaign has raised a total of $4.42 billion in pledges and gifts, $1.41 billion of which was contributed by the University’s Trustees and has engaged over 112,000 alumni in the campaign.

Government Grants and Contracts

During fiscal year 2017, the University received $355.0 million in government grants for sponsored projects. Of this total, $263.9 million was for direct costs and $91.1 million for indirect costs.

Direct costs are those that can be identified with an individual sponsored project. Examples of sponsored project costs that are accounted for as direct costs include the salary of the principal investigator and materials consumed by the project.

Unlike direct costs, indirect costs cannot be traced easily to a specific sponsored project. Indirect costs are the costs of services and resources that benefit sponsored projects as well as nonsponsored projects and activities. Indirect costs consist of expenses incurred for administration, libraries, plant maintenance, and building and equipment depreciation.

An indirect cost rate is used to charge indirect costs to individual sponsored projects. The rate is the result of a number of complex cost allocation procedures which allocate the University’s indirect costs to both sponsored and non-sponsored activities. Once those cost allocations are completed, the costs allocated to sponsored projects are divided by a direct cost base to arrive at a rate. The rate that is calculated must be approved by the Department of Health and Human Services (“DHHS”) before it can be used to charge indirect costs to federally sponsored projects.

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The following table sets forth the University’s government grants and contracts, earned through expenditure, as of June 30 for the fiscal years 2013 through 2017 (in thousands of dollars):

Grant Details 2013 2014 2015 2016 2017

Direct Cost Funding$ 274,478 $ 249,421 $ 256,055 261,034$ 263,939$ Indirect Cost Recovery 82,460 79,791 85,375 89,094 91,093 Total $ 356,938 $ 329,212 $ 341,430 350,128$ 355,032$ The University and DHHS agreed to final indirect cost rates of 58% for fiscal years 2013 through 2016. The University is currently under a rate of 60.5% for fiscal year 2017 and 62% for fiscal years 2018 and 2019.

Based on preliminary, unaudited results, the University anticipates research awards for fiscal 2018 to be modestly higher than fiscal 2017.

Retirement Plans

Substantially all personnel of the University participate in either the defined contribution pension plan for academic staff or the defined benefit and contribution pension plans for nonacademic personnel. The majority of Medical Center employees participate in the University’s pension plans for nonacademic employees. The University and Medical Center make annual contributions to the defined benefit pension plans at a rate necessary to maintain plan funding on an actuarially recommended basis. The University and Medical Center share contributions to the defined benefit pension plans based primarily on participation. Based on plan funding, the University and Medical Center made contributions of $2.5 million in fiscal year 2018 and expect to make contributions to the defined benefit pension plans in fiscal year 2019 of $13.3. million.

In fiscal year 2009, the University’s 403(b) defined benefit pension plan was frozen and a new 401(a) plan was initiated to be in compliance with revised Internal Revenue Service regulations. Effective July 1, 2016, the 401(a) defined benefit pension plan was frozen for the majority of University employees participating in the plan and was replaced with an enhanced defined contribution plan. The remaining University employees participating in the 401(a) plan were given the option to move to the enhanced defined contribution plan in November 2016. Effective January 1, 2017, the 401(a) defined benefit pension plan was frozen for all Medical Center employees participating in the plan and replaced with an enhanced defined contribution plan.

Retirement benefits are provided for academic staff and senior administrators of the University through the University’s Contributory Retirement Plan, a defined contribution pension plan. Retirement benefits are provided for faculty and staff through the University’s three 403(b) defined contribution plans: the Contributory Retirement Plan (CRP); the Retirement Income Plan for Employees (ERIP); and the Supplemental Retirement Plan (SRP). In April 2018, the University transitioned these plans to a more limited number of investment options and to a single recordkeeper. The University contributed $72 million to the CRP in fiscal year 2017. No contributions were made to ERIP in fiscal year 2017. SRP is limited to voluntary employee contributions.

At June 30, 2017, the University’s defined benefit pension plan was underfunded by $195.8 million (compared to $275.4 million at June 30, 2016), as measured by the projected benefit obligation (“PBO”) of $967.8 million (compared to $1,071.1 million at June 30, 2016) and plan assets of $772.0 million (compared

A-16 to $741.7 million at June 30, 2016). See the University’s audited consolidated financial statements (the “Consolidated Financial Statements”), Note 12 in APPENDIX B for additional information.

Other Postretirement Benefits

In addition to providing pension benefits, the University provides certain healthcare benefits for retired employees and a retirement incentive bonus for eligible faculty electing to participate in a retirement incentive program. In addition to a retirement bonus, all Medicare eligible-tenured faculty who elect to participate in the retirement incentive program receive supplemental health insurance at no cost for themselves and their spouses. All other academic and nonacademic employees are entitled to supplemental health insurance coverage subject to deductibles, copayment provisions, and other limitations.

At June 30, 2017, the University’s other postretirement benefits were underfunded by $296.0 million as measured by an accumulated benefit obligation of $342.0 million and plan assets of $46.0 million. Over the past five years the unfunded status of the plan has increased by $21.9 million from $274.1 million at the beginning of fiscal year 2013 to $296.0 million in fiscal year 2017. Unlike the University’s defined benefit pension plan, ERISA does not require retiree health plans to be funded. See the Consolidated Financial Statements, Note 12 in Appendix B, for additional information.

Operating Results

Operating results of the University, or the excess (deficiency) of operating revenue over expenses, reflect all transactions increasing or decreasing net assets without donor restrictions except those items associated with long-term investments and other infrequent gains and losses.

As part of the University’s plan to return to balanced operations, management is undertaking various revenue generating and cost containment initiatives while continuing to invest in its research and teaching mission and providing financial support to attract the best students regardless of their economic means. To support these initiatives and to better align with the University financial reporting structure, all academic and administrative units have been moved to GAAP based budgeting and are subject to GAAP based performance targets to achieve operational efficiencies at the individual unit-level. In addition, as of June 30, 2018, the University has implemented a shared services model for certain University administrative functions.

In 2017, the University began production of a new five-year financial plan referred to as the Long- Term Model (the “Model”). The Model aims to provide a comprehensive, bottom-up forecast of the University’s GAAP financial statements and cash flows over a five-year horizon. The University is currently targeting GAAP neutral net income, where operating revenues equal expenses, by fiscal year 2020. The Model was refined between March and July of 2018 based on discussions with the Board of Trustees. Projections will continue to be refined and updated for annual review by the Board.

Management of the University has prepared a preliminary operating statement for the year ended June 30, 2018, included as Schedule 1 to this Appendix A. The preliminary operating statement is unaudited and subject to change. The preliminary operating statement does not include all of the information and footnotes required by accounting principles generally accepted in the United States for financial statements.

Long-Term Indebtedness

As of June 30, 2017, the University had outstanding indebtedness amounting to approximately $3.6 billion evidenced by bonds and notes. In FY2018, the University issued $164,705,000 of fixed rate revenue bonds, reduced outstanding commercial paper by $72,265,000, and amortized $59,251,000 of principal. A-17

The debt service payments are general obligations of the University. See the Consolidated Financial Statements, Note 9 in APPENDIX B for additional information.

Insurance Program

Since fiscal year 1977, the University has maintained a self-insurance program for its medical malpractice liability. This program is supplemented with commercial excess insurance. For the fiscal year ended June 30, 2017, the University’s self-insurance retention was $5.0 million per claim and unlimited in annual aggregate. Claims in excess of $5.0 million are subject to an additional self-insurance retention limited to $12.5 million per claim and $22.5 million in the aggregate.

The University also maintains a self-insurance program for workers’ compensation liability claims and has commercial insurance coverage for other major risks.

The estimated liability for medical malpractice and workers compensation self-insurance is actuarially determined based upon University-estimated claims reserves and various assumptions and represents the estimated present value of self-insurance claims that will be settled in the future. The estimate considers anticipated payout patterns as well as interest to be earned on available assets prior to payment. See the Consolidated Financial Statements, Note 11 in Appendix B for additional information.

Litigation

The University is a party in various legal proceedings arising in the ordinary course of its operations. Although the outcome of any such proceedings cannot be currently determined, the University’s management is of the opinion that the eventual liability from such proceedings, if any, have been adequately provided for, are without merit, or are of such kind that if disposed of unfavorably, would not have a material adverse effect on the consolidated financial position of the University.

Financial Reporting

The University’s financial reporting encompasses three basic financial statements: a) the Balance Sheet, b) the Statement of Activities and c) the Statement of Cash Flows.

During 2017, the University adopted ASU No. 2016-14 – Not for Profit (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. This guidance is intended to improve the net asset classification requirements and the information presented in the financial statements and notes about a not- for-profit entity’s liquidity, financial performance, and cash flows. Main provisions of this guidance include: presentation of two classes of net assets versus the previously required three; recognition of capital gifts for construction as a net asset without donor restrictions when the associated long-lived asset is placed in service; and recognition of underwater endowment funds as a reduction in net assets with donor restrictions. The guidance also enhances disclosures for board designated amounts, compositions of net assets without donor restrictions, liquidity and expenses by both their natural and functional classification.

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FY17 Net Asset Crosswalk (in thousands of dollars)

FY17 Net Asset Category Classification Using FY16 Net Asset Categories With Donor Temporarily Permanently Restrictions Restricted restricted Total

Operating $ 25,256 $ 25,256 $ - $ 25,256 Unamortized capital gifts for construction 21,897 21,897 - 21,897 Pledges receivable 648,341 508,683 139,658 648,341 Student loan funds 24,552 - 24,552 24,552 Endowment funds 4,627,648 2,727,440 1,900,208 4,627,648 Annuity and life income funds 67,298 24,899 42,399 67,298

Total Restricted Net Assets at June 30, 2017$ 5,414,992 $ 3,308,175 $ 2,106,817 $ 5,414,992

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Balance Sheets (in thousands of dollars) 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 Five Year Balance Sheet Assets: Cash and cash equivalents 25,578$ 19,985$ 31,636$ $ 48,579 $ 11,060 Notes and accounts receivable 183,234 196,597 211,693 223,426 222,152 Prepaid expenses and other assets 54,387 65,270 93,734 70,140 139,119 Pledges receivable 417,617 503,267 519,136 603,814 648,341 Investments 6,889,568 7,126,781 7,258,420 6,983,346 7,390,796 Land, buildings, equipment, and books 2,543,765 2,935,803 3,064,814 3,185,722 3,180,298 Total assets 10,114,149$ 10,847,703$ 11,179,433$ $ 11,115,027 $ 11,591,766

Liabilities: Accounts payable and accrued expenses $ 324,597 397,557$ $ 394,768 $ 409,990 $ 413,362 Deferred revenue 89,480 84,791 99,272 111,753 111,250 Assets held in custody for others 58,923 61,469 65,169 109,894 129,102 Self-insurance liability 264,164 249,521 262,729 250,642 249,864 Pension and other post-retirement benefit obligations 484,912 447,418 469,860 557,136 491,828 Asset retirement obligation 53,726 51,955 51,440 49,614 48,488 Notes and bonds payable 2,732,426 2,830,162 3,285,364 3,628,943 3,630,376 Refundable U.S. Government student loan funds 38,390 38,711 39,041 39,414 39,375 Total liabilities 4,046,618 4,161,584 4,667,643 5,157,386 5,113,645

Net assets: Unrestricted 1,363,342 1,470,443 1,238,363 790,805 - Temporarily restricted 3,158,451 3,532,094 3,478,415 3,195,148 - Permanently restricted 1,545,738 1,683,582 1,795,012 1,971,688 - Without donor restrictions - - - - 1,063,129 With donor restrictions - - - - 5,414,992 Total net assets 6,067,531 6,686,119 6,511,790 5,957,641 6,478,121 Total liabilities and net assets 10,114,149$ 10,847,703$ 11,179,433$ $ 11,115,027 $ 11,591,766

Notes and bonds outstanding: Fixed $ 2,166,788 2,155,129$ 2, 551,984$ $ 2,896,649 $ 2,854,362 Variable 565,638 675,033 733,380 732,294 776,014 Total $ 2,732,426 2,830,162$ 3, 285,364$ $ 3,628,943 $ 3,630,376

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Statements of Activities (in thousands of dollars) 2013 2014 2015 2016 2017 Changes in unrestricted net assets:

Operating:

Revenue:

Tuition and fees - gross 671,779 704,846 735,384 778,382 828,714 Less:

Undergraduate student aid (103,116) (105,089) (113,823) (129,545) (135,073)

Graduate student aid (206,940) (221,503) (233,329) (253,902) (269,413)

Tuition and fees - net 361,723 378,254 388,232 394,935 424,228

Government grants and contracts 356,938 329,212 341,430 350,128 355,032 Private gifts, grants, and contracts 160,091 229,452 233,529 212,602 223,513

Endowment payout 326,578 344,338 389,555 413,381 403,867

Patient care 224,320 239,985 239,352 256,199 271,920

Auxiliaries 210,945 204,501 213,960 212,947 212,101

Other income 223,712 251,087 277,372 307,924 309,555 Net assets released from restrictions 52,071 72,742 85,460 82,067 138,133

Total operating revenue 1,916,378 2,049,571 2,168,890 2,230,183 2,338,349

Expenses:

Compensation:

Academic salaries 484,507 496,711 518,272 541,399 574,977 Staff salaries 500,439 528,646 556,019 573,355 588,203

Benefits 278,801 282,133 301,920 300,862 300,137

Total Compensation 1,263,747 1,307,490 1,376,211 1,415,616 1,463,317

Other operating expenses Utilities, alterations, and repairs 42,457 54,552 55,998 51,046 52,670

Depreciation 152,674 159,723 169,372 188,923 199,581

Interest 88,437 95,283 94,053 111,227 126,096

Supplies, services, and other 438,199 455,481 503,256 493,371 520,073

Total other operating expenses 721,767 765,039 822,679 844,567 898,420

Total operating expenses 1,985,514 2,072,529 2,198,890 2,260,183 2,361,737 Deficiency of operating revenue over expenses (69,136) (22,958) (30,000) (30,000) (23,388)

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Statements of Activities (continued) (in thousands of dollars) 2013 2014 2015 2016 2017 Changes in unrestricted net assets: Nonoperating: Investment gains (losses) 3,906$ 117,316$ $ (84,705) $ (211,855) $ 57,181

Postretirement benefit changes other than net periodic benefit cost 85,168 32,041 (21,959) (138,423) (16,195)

Defined benefit pension plan curtailment (partial) - - - 45,926 64,241

Other postretirement benfit changes - - - - 31,778 Change in value of derivative instruments 23,207 (1,631) (6,083) (21,545) 20,531 Loss on debt refinancing (1,143) - (70,258) (16,946) -

Other, net 24,373 (17,667) (19,075) (74,715) (39,189) Change in unrestricted net assets from nonoperating activities 135,511 130,059 (202,080) (417,558) 118,347

Increase (decrease) in unrestricted net assets 66,375 107,101 (232,080) (447,558) 94,959

Changes in temporarily restricted net assets: Private gifts 115,948 166,036 139,105 150,123 -

Endowment payout - - - - - Investment gains (losses) 82,852 306,283 (70,516) (352,453) -

Other, net (43,457) (25,934) (36,808) 1,130 - Net assets released from restrictions (52,071) (72,742) (85,460) (82,067) - Increase (decrease) in temporarily restricted net assets 103,272 373,643 (53,679) (283,267) -

Changes in permanently restricted net assets: Private gifts 82,981 116,684 80,250 162,721 -

Endowment payout 2,156 1,969 1,880 1,990 - Investment losses (33,658) (3,013) (426) (3, 342) - Other, net 41,832 22,204 29,726 15,307 - Net assets released from restrictions

Increase in permanently restricted net assets 93,311 137,844 111,430 176,676 -

Changes in net assets with donor restrictions:

Private gifts - - - - 327,674

Endowment payout - - - - 923 Investment gains - - - - 201,392

Other, net - - - - 33,665

Net assets released from restrictions - - - - (138,133) Increase in net assets with donor restrictions - - - - 425,521

Increase (decrease) in net assets 262,958 618,588 (174,329) (554,149) 520,480

Net assets at the beginning of the year 5,804,573 6,067,531 6,686,119 6,511,790 5,957,641 Net assets at the end of the year 6,067,531$ 6,686,119$ 6,511,790$ $ 5,957,641 $ 6,478,121

A-22

Statements of Cash Flows (in thousands of dollars) 2013 2014 2015 2016 2017 Cash flows from operating activities:

Increase (decrease) in net assets $ 262,958 $ 618,588 $ (174,329) $ (554,149) $ 520,480

Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities: Depreciation 152,674 159,723 169,372 188,923 199,581 Change in value of derviative instruments (23,207) 1,631 6,083 21,545 (20,531) Loss on debt refinancing 1,143 - 70,258 16,946 - Loss on disposal of land, buildings, and equipment 28,472 9,624 3,538 4,770 10,469 Gain on sale of property - - (8,217) (61,053) (44,687) Donated property - - (4,726) - - Net Loss (gain) on investment (288,789) (666,083) (161,735) 213,817 (594,027) Private gifts and grants restricted for long-term investment (198,929) (282,720) (219,355) (312,844) (327,674) Other nonoperating changes 46,514 120,186 114,535 99,350 138,040 Postretirement benefit (85,168) (32,041) 21,959 92,497 (79,824) Changes in operating assets and liabilities: Notes and accounts receivable (14,651) (13,121) (15,356) (12,113) (3,663) Prepaid expenses and other assets (4,797) (10,883) (39,732) 38,877 (68,979) Accounts payable and other liabilities 27,237 49,418 1,529 69,845 64,124 Self-insurance Liability 8,132 (14,643) 13,208 (12,087) (778) Total adjustments (351,369) (678,909) (48,639) 348,473 (727,949) Net cash used in operating activities (88,411) (60,321) (222,968) (205,676) (207,469) Cash flows from investing activities: Purchase of investments (1,832,926) (1,414,351) (1,388,420) (1,055,000) (1,810,457) Proceeds from sale of investments 1,748,592 1,843,221 1,418,516 1,116,257 1,997,034 Contribution of Ingalls Health System - - - - - Acquisition of land, buildings, equipment, and books (260,518) (548,519) (391,364) (364,566) (232,353) Proceeds form sale of property - - 110,462 70,100 64,248 Loans disbursed (6,895) (6,844) (7,262) (7,055) (2,976) Principal collected on loans 6,118 6,602 7,522 7,435 7,914 Net cash provided by (used in) investing activities (345,629) (119,891) (250,546) (232,829) 23,410 Cash flows from financing activities: Proceeds from issuance of debt instruments 1,383,766 1,388,101 2,324,780 1,980,981 1,528,265 Principal payments on debt instruments (1,092,004) (1,290,365) (1,928,568) (1,654,348) (1,526,832) Proceeds from private gifts and grants restricted for long term investment 87,726 126,443 133,764 163,818 154,533 Other nonoperating changes 8,200 (49,560) (44,811) (35,003) (9,426) Net cash provided by financing activities 387,688 174,619 485,165 455,448 146,540 Increase (decrease) in cash and cash equivalents (46,352) (5,593) 11,651 16,943 (37,519) Cash and cash equivalents at: Beginning of year 71,930 25,578 19,985 31,636 48,579 End of year 25,578$ 19,985$ 31,636$ $ 48,579 $ 11,060 Supplemental disclosure of cash flow information: Cash paid for interest 100,829$ $ 105,549 97,141$ $ 110,229 $ 135,994 Change in construction payable - - - - (8,166)

A-23

Schedule 1

UNAUDITED - SUBJECT TO CHANGE

THE UNIVERSITY OF CHICAGO Preliminary Operating Statement Year Ended June 30, 2018 (in thousands of dollars)

University

Revenue: Tuition and fees - gross $ 901,909 Less: Student aid (434,612) Tuition and fees - net $ 467,297 Government grants and contracts 333,772 Private gifts, grants, and contracts 280,831 Endowment payout 454,462 Patient service 286,768 Auxiliaries 221,884 Other income 246,604 Net assets released from restrictions 126,244 Total operating revenue 2,417,862

Expenses: Compensation: Academic salaries 612,173 Staff salaries 636,210 Benefits 305,877 Total compensation 1,554,260

Other operating expenses: Utilities, alterations, and repairs 47,835 Depreciation 199,290 Interest 132,333 Supplies, services and other 508,032 Total other operating expenses 887,490 Total operating expenses 2,441,750

Deficiency of operating revenue over expenses $ (23,888)

A-24

APPENDIX B

THE UNIVERSITY OF CHICAGO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL UNIVERSITY INFORMATION AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 (WITH INDEPENDENT AUDITORS’ REPORT THEREON)

[THIS PAGE INTENTIONALLY LEFT BLANK] The University of Chicago

2016-2017 Financial Statements and Supplemental University Information THE UNIVERSITY OF CHICAGO Years ended June 30, 2017 and 2016

Table of Contents

Page

Consolidated Financial Statements and Related Notes

Management’s Responsibility for Consolidated Financial Statements 1

Independent Auditors’ Report 2

Consolidated Balance Sheets 4

Consolidated Statements of Activities 5

Consolidated Statements of Cash Flows 7

Notes to Consolidated Financial Statements 8

Supplemental Information 1 Consolidating Balance Sheet 46

2 Consolidating Statement of Activities 47

3 Consolidating Statement of Cash Flows 49 THE UNIVERSITY OF CHICAGO Management's Responsibility for Consolidated Financial Statements June 30, 2017 and 2016

The management of The University of Chicago (University) is responsible for the preparation and fair presentation of the consolidated financial statements. The consolidated financial statements, presented on pages 4 to 49, have been prepared in conformity with U.S. generally accepted accounting principles and, as such, include amounts and disclosures based on judgments and estimates by management.

The consolidated financial statements have been audited by the independent accounting firm KPMG LLP (KPMG), which was given unrestricted access to all financial records and related data, including minutes of all meetings of Trustees. The University believes that all management representations made to KPMG during its audit were valid, complete, and appropriate. KPMG's audit opinion is presented on pages 2 and 3.

The University maintains a system of internal control over financial reporting, which is designed to provide reasonable assurance that the consolidated financial statements are free from material misstatement, whether due to fraud or error. Such controls are maintained through the establishment and communication of accounting and financial policies and procedures, selection and training of qualified personnel, and an internal audit program designed to identify internal control weaknesses in order to permit management to take appropriate corrective action on a timely basis. There are, however, inherent limitations in the effectiveness of any system of internal control, including the possibility of human or system error and the intentional circumvention of controls. Accordingly, even an effective internal control system can provide only reasonable assurance.

The Trustees of the University, through its Audit Committee comprised of Trustees not employed by the University, are responsible for engaging the independent accountants and meeting with management, internal auditors, and the independent accountants to ensure that each is carrying out their responsibilities. Both internal auditors and the independent accountants have full and free access to the Audit Committee.

Ivan Samstein Vice President and Chief Financial Officer KPMG LLP Aon Center Suite 5500 200 East Randolph Drive Chicago, IL 60601-6436

Independent Auditors’ Report

The Board of Trustees The University of Chicago:

Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of The University of Chicago (the University), which comprise the consolidated balance sheets as of June 30, 2017 and 2016, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated 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 entity’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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The University of Chicago as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

.

KPMG LLP is a Delaware limited liability partnership2 and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Emphasis of Matters

As discussed in note 1(m) to the consolidated financial statements, in 2017, the University adopted Accounting Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, and ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Our opinion is not modified with respect to these matters.

Other Matter

Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating supplemental information included in schedules 1 through 3 is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. The consolidating supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Chicago, Illinois November 1, 2017

3 THE UNIVERSITY OF CHICAGO Consolidated Balance Sheets June 30, 2017 and 2016 (In thousands of dollars)

Assets 2017 2016 Cash and cash equivalents $ 50,384 72,119 Notes and accounts receivable, net 659,593 517,245 Prepaid expenses and other assets 254,309 149,459 Pledges receivable, net 655,584 612,672 Investments 8,704,732 7,999,523 Land, buildings, equipment, and books, net 4,912,286 4,674,581 Total assets $ 15,236,888 14,025,599

Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 1,005,745 923,003 Deferred revenue 115,633 116,108 Assets held in custody for others 129,832 110,556 Self-insurance liability 287,581 256,947 Pension and other postretirement benefit obligations 491,828 570,276 Asset retirement obligation 55,827 57,292 Notes and bonds payable 4,691,832 4,513,220 Refundable U.S. government student loan funds 39,375 39,414 Total liabilities 6,817,653 6,586,816 Net assets: Without donor restrictions 2,815,466 2,282,205 With donor restrictions 5,603,769 5,156,578 Total net assets 8,419,235 7,438,783 Total liabilities and net assets $ 15,236,888 14,025,599

See accompanying notes to consolidated financial statements.

4 THE UNIVERSITY OF CHICAGO Consolidated Statements of Activities Years ended June 30, 2017 and 2016 (In thousands of dollars)

2017 2016 Changes in net assets without donor restrictions: Operating: Revenue: Tuition and fees – gross $ 830,550 780,083 Less student aid (405,833) (384,309) Tuition and fees – net 424,717 395,774 Government grants and contracts 367,577 364,940 Private gifts, grants, and contracts 229,526 219,857 Endowment payout 454,220 466,478 Patient service 2,128,591 1,746,208 Auxiliaries 216,622 217,420 Other income 393,729 373,089 Net assets released from restrictions 140,293 73,432 Total operating revenue 4,355,275 3,857,198 Expenses: Compensation: Academic salaries 590,246 549,422 Staff salaries 1,279,412 1,133,161 Benefits 475,024 430,000 Total compensation 2,344,682 2,112,583 Other operating expenses: Utilities, alterations, and repairs 85,109 77,732 Depreciation 321,327 280,768 Interest 166,571 145,667 Supplies, services, and other 1,409,963 1,173,741 Total other operating expenses 1,982,970 1,677,908 Total operating expenses 4,327,652 3,790,491 Excess of operating revenue over expenses $ 27,623 66,707

5 (Continued) THE UNIVERSITY OF CHICAGO Consolidated Statements of Activities Years ended June 30, 2017 and 2016 (In thousands of dollars)

2017 2016 Changes in net assets without donor restrictions : Nonoperating: Investment gains (losses) $ 105,275 (251,114) Net periodic benefit cost other than service cost (16,485) (22,831) Defined benefit pension plan curtailment (partial) 64,241 45,926 Other postretirement benefit changes 34,669 (142,939) Changes in fair value of derivative instruments 67,401 (74,139) Loss on debt refinancing (27,028) (16,946) Contribution of Ingalls Health System net assets 309,740 — Other, net (32,175) (82,502) Nonoperating changes in net assets without donor restrictions 505,638 (544,545) Increase (decrease) in net assets without donor restrictions 533,261 (477,838) Changes in net assets with donor restrictions: Private gifts 334,589 323,303 Endowment payout 923 1,990 Investment gains (losses) 212,306 (388,516) Contribution of Ingalls Health System net assets 13,122 — Other, net 26,544 11,225 Net assets released from restrictions (140,293) (73,432) Increase (decrease) in net assets with donor restrictions 447,191 (125,430) Increase (decrease) in net assets 980,452 (603,268) Net assets at beginning of year 7,438,783 8,042,051 Net assets at end of year $ 8,419,235 7,438,783

See accompanying notes to consolidated financial statements.

6 THE UNIVERSITY OF CHICAGO Consolidated Statements of Cash Flows Years ended June 30, 2017 and 2016 (In thousands of dollars) 2017 2016 Cash flows from operating activities: Increase (decrease) in net assets $ 980,452 (603,268) Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities: Contribution of Ingalls Health System net assets (322,862) — Depreciation 321,327 280,768 Change in value of derivative instruments (71,358) 78,334 Loss on debt refinancing 27,028 16,946 Loss on disposal of land, buildings, equipment, and books 10,537 5,623 Gain on sale of property (44,687) (61,053) Net (gain) loss on investments (676,860) 245,222 Private gifts and grants restricted for long-term investment (338,944) (317,371) Other nonoperating changes 207,400 167,948 Postretirement benefit changes (84,375) 97,013 Changes in operating assets and liabilities: Notes and accounts receivable (113,809) (94,477) Prepaid expenses and other assets (106,206) 11,875 Accounts payable and other liabilities 140,725 66,087 Self-insurance liability (2,510) (9,246) Total adjustments (1,054,594) 487,669 Net cash used in operating activities (74,142) (115,599) Cash flows from investing activities: Purchase of investments (2,216,663) (1,106,553) Proceeds from sale of investments 2,491,198 1,224,468 Contribution of Ingalls Health System 28,003 — Acquisition of land, buildings, equipment, and books (444,570) (573,647) Acquisition of physician practice — (1,447) Proceeds from sale of property 64,716 70,100 Loans disbursed (2,976) (7,055) Principal collected on loans 7,914 7,435 Net cash used in investing activities (72,378) (386,699) Cash flows from financing activities: Proceeds from issuance of debt instruments 1,787,661 1,980,981 Principal payments on debt instruments (1,749,925) (1,670,084) Proceeds from private gifts and grants restricted for long-term investment 158,706 162,844 Other nonoperating changes (71,657) (97,679) Net cash provided by financing activities 124,785 376,062 Decrease in cash and cash equivalents (21,735) (126,236) Cash and cash equivalents at: Beginning of year 72,119 198,355 End of year $ 50,384 72,119 Supplemental disclosure of cash flow information: Cash paid for interest $ 178,968 147,347 Change in construction payable (46,800) 1,452

See accompanying notes to consolidated financial statements.

7 THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(1) Summary of Significant Accounting Policies (a) Description of Business The University of Chicago (the University) is a private, nondenominational, coeducational institution of higher learning and research. The University provides education and training services, primarily for students enrolled in undergraduate, graduate, and professional degree programs, and performs research, training, and other services under grants, contracts, and other agreements with sponsoring organizations, including both government agencies and private enterprises. Certain members of the University’s faculty also provide professional medical services to patients at The University of Chicago Medical Center (the Medical Center) and other healthcare facilities located in the area.

Significant accounting policies followed by the University, the Medical Center, and the Marine Biological Laboratory (MBL) are set forth as follows. Accounting policies specific to the Medical Center and MBL are discussed in notes 2 and 3, respectively.

(b) Basis of Presentation The consolidated financial statements of the University have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of the University, the Medical Center, and MBL. The organization of the Medical Center and MBL and associated agreements with the University are discussed in notes 2 and 3, respectively.

The University maintains its accounts in accordance with the principles of fund accounting. Under this method of accounting, resources for various purposes are classified into funds that are in accordance with activities or objectives specified by donors. Separate accounts are maintained for each fund.

For financial reporting purposes, however, the University follows the reporting requirements of GAAP, which requires that resources be classified for reporting purposes based on the existence or absence of donor-imposed restrictions. This is accomplished by classification of fund balances into two classes of net assets: without donor restrictions and with donor restrictions. Descriptions of the two net asset categories and the types of transactions affecting each category follow:

 Without Donor Restrictions – Net assets that are not subject to donor-imposed restrictions. Items that affect this net asset category principally consist of fees for service and related expenses associated with the core activities of the University: instruction, conduct of sponsored research, and provision of healthcare services. In addition to these exchange transactions, changes in this category of net assets include investment returns on “funds functioning as endowment” funds, actuarial adjustments to self-insurance liabilities, and certain types of philanthropic support.

Such philanthropic support includes gifts without restrictions, including those designated by the Board of Trustees (the Board) to function as endowment and restricted gifts whose donor-imposed restrictions were met during the fiscal year, as well as previously restricted gifts and grants for buildings and equipment that have been placed in service.

8 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

 With Donor Restrictions – Net assets subject to donor-imposed restrictions that will be met either by actions of the University or the passage of time. Items that affect this net asset category are gifts for which donor-imposed restrictions have not been met in the year of receipt, including gifts and grants for buildings and equipment not yet placed in service; endowment, annuity, and life income gifts; pledges; and investment returns on “true” endowment funds, and endowments where the principal may be expended upon the passage of a stated period of time (term endowments). Expirations of restrictions on net assets with donor restrictions, including reclassification of restricted gifts and grants for buildings and equipment when the associated long-lived asset is placed in service, are reported as net assets released from restrictions. Also included in this category are net assets subject to donor-imposed restrictions to be maintained permanently by the University, including gifts and pledges wherein donors stipulate that the corpus of the gift be held in perpetuity (primarily gifts for endowment and providing loans to students) and that only the income be made available for program operations. Other permanently restricted items in this net asset category include annuity and life income gifts for which the ultimate purpose of the proceeds is permanently restricted. Net assets consisted of the following at June 30:

2017 2016 Without donor With donor Without donor With donor Detail of net assets restrictions restrictions Total restrictions restrictions Total

University: Operating $ (987,160) 25,256 (961,904) (977,900) 33,680 (944,220) Unamortized capital — gifts for construction 140,991 21,897 162,888 150,913 16,119 167,032 Pledges receivable — 648,341 648,341 — 603,814 603,814 Student loan funds — 24,552 24,552 — 23,555 23,555 Endowment funds 1,909,298 4,627,648 6,536,946 1,795,157 4,249,846 6,045,003 Annuity and life income funds — 67,298 67,298 — 62,457 62,457 Subtotal 1,063,129 5,414,992 6,478,121 968,170 4,989,471 5,957,641 Medical Center: Operating 849,046 11,635 860,681 421,179 10,374 431,553 Pledges receivable — 3,619 3,619 — 4,150 4,150 Endowment funds 813,993 92,652 906,645 804,437 75,513 879,950 Subtotal 1,663,039 107,906 1,770,945 1,225,616 90,037 1,315,653 Marine Biological Laboratories Operating 79,704 5,486 85,190 79,234 4,077 83,311 Pledges receivable — 3,624 3,624 — 4,708 4,708 Annuity and life income funds — 1,225 1,225 — 1,207 1,207 Endowment funds 9,594 70,536 80,130 9,185 67,078 76,263 Subtotal 89,298 80,871 170,169 88,419 77,070 165,489 Total $ 2,815,466 5,603,769 8,419,235 2,282,205 5,156,578 7,438,783

The endowment component of net assets without donor restrictions is comprised of amounts designated by the Board to function as endowment which amounted to $2,732,885 and $2,608,779 as of June 30, 2017 and 2016, respectively. Included in the University’s endowment without donor

9 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

restrictions is a fund designated by the Board to be used to support the University’s strategic initiatives which amounted to $288,123 and $297,583 as of June 30, 2017 and 2016, respectively.

(c) Operations Operating results in the consolidated statements of activities reflect all transactions increasing or decreasing net assets without donor restrictions except those items associated with long-term investment, actuarial adjustments to self-insurance liabilities, changes in postretirement benefit obligations other than service cost, changes in the fair value of derivative instruments, unamortized capital gifts associated with the acquisition or construction of long-lived assets placed in service, and other infrequent transactions. Operating results also include a reclassification associated with amortization of capital gifts placed in service, as described below.

(d) Capital Gifts to Acquire or Construct Long-Lived Assets Capital gifts to acquire or construct a long-lived asset are recorded as a donor restricted gift until the related asset is placed in service, at which time the capital gift is released from net assets with donor restrictions to net assets without donor restrictions and subsequently amortized into operations over the estimated useful life of the acquired or constructed asset. This amortization, which amounted to $10,302 in fiscal year 2017 and $10,284 in fiscal year 2016, is recorded as a reclassification between the non-operating and operating sections of the change in net assets without donor restrictions in the consolidated statements of activities.

(e) Tuition and Fees Student tuition and fees are recorded as revenue during the year in which the related academic services are rendered. Student tuition and fees received in advance of services to be rendered are recorded as deferred revenue.

(f) Gifts, Grants, and Contracts Gifts, including unconditional pledges, are recognized in the appropriate category of net assets in the period received. Contributions of assets other than cash are recorded at their estimated fair value at the date of gift. Pledges receivable are stated at the estimated net present value, net of an allowance for uncollectible amounts. Conditional promises to give are not recognized until the conditions on which they depend are substantially met.

Revenue from government and private grant and contract agreements is recognized as it is earned through expenditure in accordance with the agreements. Any funding received in advance of expenditure is recorded as deferred revenue on the consolidated balance sheets. Included in deferred revenue at June 30, 2017 and 2016 are $50,693 and $50,326, respectively, of private grant and contract receipts, that have not been expended.

10 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Private gifts, grants, and contracts operating revenue for fiscal years 2017 and 2016 consist of the following:

2017 Medical 2016 University Center MBL Consolidated Consolidated

Private gifts: Unrestricted as to use $ 19,185 263 1,196 20,644 18,422 Restricted gifts whose restrictions were met during the fiscal year and reported as operating revenue 108,057 — — 108,057 113,215 Private grants and contracts 96,271 — 4,554 100,825 88,220

Total $ 223,513 263 5,750 229,526 219,857

(g) Patient Service Patient service revenue is reported net of a provision for doubtful accounts of $7,302 and $6,997 for the University and $152,888 and $84,243 for the Medical Center for the years ended June 30, 2017 and 2016, respectively. This provision reflects the estimated net realizable amounts due from third-party payors for services rendered. The Medical Center analyzes its past history and identifies trends for each of its major payor sources of revenue to estimate the appropriate allowance for uncollectible accounts and provision for uncollectible accounts receivable. A majority of patient service revenue is derived from contractual agreements with Medicare, Medicaid, Blue Cross/Blue Shield, managed care, and certain other programs. Payments under these agreements and programs are based on specific amounts per case or contracted prices. Certain revenue received from third-party payors is subject to audit and retroactive adjustment. Any changes in estimates under these contracts are recorded in operations currently. The Medical Center’s gross write-offs increased from approximately $146,200 in fiscal year 2016 to $210,841 in fiscal year 2017. The Medical Center did not have significant write-offs from third-party payors.

(h) Capitalized Interest The University capitalizes interest costs incurred on debt during the construction of major projects exceeding one year. During fiscal years 2017 and 2016, the amount of interest capitalized amounted to $3,141 and $12,288 for the University and $2,766 and $3,168 for the Medical Center, respectively.

(i) Fair Value Fair value is defined as the price that the University would receive upon selling an asset or pay to settle a liability in an orderly transaction between market participants.

11 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

The University uses a framework for measuring fair value that includes a hierarchy that categorizes and prioritizes the sources used to measure and disclose fair value. This hierarchy is broken down into three levels based on inputs that market participants would use in valuing the financial instruments based on market data obtained from sources independent of the University. Inputs refer broadly to the assumptions that market participants would use in pricing the asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset developed based on the best information available. The three-tier hierarchy of inputs is summarized in the three broad levels as follows:

Level 1 – quoted market prices in active markets for identical investments

Level 2 – inputs other than quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, or inputs other than quoted prices that are observable including model-based valuation techniques

Level 3 – valuation techniques that use significant inputs that are unobservable because they trade infrequently or not at all

(i) Cash Equivalents Cash equivalents include U.S. Treasury notes, commercial paper, and corporate notes with original maturities of three months or less, except that such instruments purchased with endowment assets or funds on deposit with bond trustees are classified as investments. Cash equivalents are classified in Level 1 of the fair value hierarchy.

(ii) Investments Investments are recorded in the consolidated financial statements at estimated fair value. If an investment is held directly by the University and an active market with quoted prices exists, the market price of an identical security is used as reported fair value. Reported fair values for shares in mutual funds are based on share prices reported by the funds as of the last business day of the fiscal year and are classified in Level 1. The University’s interests in alternative investment funds such as private debt, private equity, real estate, natural resources, and absolute return are generally reported at the net asset value (NAV) reported by the fund managers, which is used as a practical expedient to estimate the fair value, unless it is probable that all or a portion of the investment will be sold for an amount different from NAV. As of June 30, 2017 and 2016, the University had no plans to sell investments at amounts different from NAV. Funds measured at NAV as a practical expedient to estimate fair value are not classified in the fair value hierarchy.

The University does not engage directly in unhedged speculative investments; however, the Board has authorized the use of derivative investments to adjust market exposure within asset class ranges.

12 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

A summary of the inputs used in valuing the University’s investments as of June 30, 2017 and 2016 is included in note 5.

(iii) Pledges Receivable Unconditional promises to give are recognized initially at fair value as private gift revenue in the period the promise is made by a donor. The fair value of the pledge is estimated based on anticipated future cash receipts (net of an allowance for uncollectible amounts), discounted using a risk-adjusted rate commensurate with the duration of the payment plan. These inputs to the fair value estimate are classified in Level 3 of the fair value hierarchy. In subsequent periods, the discount rate is unchanged and the allowance for uncollectible amounts is reassessed and adjusted if necessary.

(iv) Land, Buildings, Equipment, and Books Land, buildings, equipment, and books are generally stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, ranging from 20 to 45 years for buildings and building improvements, 3 to 10 years for equipment, and 10 years for library books.

(v) Split-Interest Agreements Split-interest agreements with donors consist primarily of charitable remainder trusts for which the University serves as trustee, gift annuity contracts, and pooled life income agreements. Assets associated with split-interest agreements are included in investments. A liability for split-interest obligations is recorded when the agreement is established at the estimated net present value of future cash flows using a risk-adjusted discount rate commensurate with the duration of the estimated payments. These inputs to the fair value estimate are classified in Level 3 of the fair value hierarchy. At June 30, 2017 and 2016, the University had liabilities of $55,439 and $55,669 associated with its charitable remainder trust and gift annuity contracts and deferred revenue of $5,369 and $5,474 associated with its pooled income agreements, respectively. In subsequent periods, the discount rate is unchanged.

(vi) Interest Rate Swap Agreements In order to reduce exposure to adjustable interest rates on variable rate debt, the University has entered into debt-related interest rate swap agreements. These agreements have the effect of fixing the rate of interest for the variable rate debt. The fair value of these swap agreements is the estimated amount that the University would have to pay or receive to terminate the agreements as of the consolidated balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparty. These inputs to the fair value estimate are classified in Level 2 of the fair value hierarchy.

(vii) Assets Held in Custody For Others Assets held in custody for others consist of resources, primarily investments, held by the University as a custodian for affiliated organizations. Investments held for others are included in the University’s investment portfolio. The leveling of these investments is presented in note 5.

13 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(viii) Self-insurance Liability The self-insurance liability is the estimated present value of self-insured claims that will be settled in the future and considers anticipated payout patterns as well as investment returns on available assets prior to payment. The discount rate used to value the self-insurance liability is a risk-adjusted rate commensurate with the duration of anticipated payments. These inputs to the fair value estimate of the liability are considered Level 2 in the fair value hierarchy.

(ix) Pension and Other Postretirement Benefit Obligations The pension and other postretirement benefit obligations consider anticipated payout patterns as well as investment returns on available assets prior to payment. The discount rate used to value the pension and other postretirement benefit obligation is a risk-adjusted rate commensurate with the duration of anticipated payments. These inputs to the fair value estimate are classified in Level 2 of the fair value hierarchy.

(x) Asset Retirement Obligation Asset retirement obligations arise primarily from regulations that specify how to dispose of asbestos if facilities are demolished or undergo major renovations or repairs. The obligation to remove asbestos is estimated using site-specific surveys where available and a per square foot estimate where surveys were unavailable.

(xi) Notes and Bonds Payable The carrying value of long-term debt does not differ materially from its estimated fair value based on quoted market prices for the same or similar issues.

(xii) All Other Assets and Liabilities The carrying value of all other assets and liabilities do not differ materially from their estimated fair value.

14 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(j) Internally Managed Investment Derivatives The following tables set forth the gross and net notional values and the University’s gain (loss) related to internally managed investment derivative activities as of June 30, 2017 and 2016 and for the fiscal years then ended:

2017 Gross notional Net notional Gain (loss)

Equity derivatives $ 159,191 159,191 7,191

2016 Gross notional Net notional Gain (loss) Equity derivatives $ 19,638 19,638 (11,145)

To minimize the risk of loss, externally managed absolute return investments are diversified by strategy, external manager, and number of positions. In addition, the activities of external hedge fund managers are externally audited and reviewed by the University Investment Office. The risk of any derivative exposure associated with an externally managed hedge fund is limited to the amount invested with each manager. Investment managers report derivative investments at fair value and valuation gains and losses are included in investment gains (losses) in the consolidated statements of activities.

(k) Income Taxes The University, Medical Center, and MBL are tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code and, except for unrelated business income, are exempt from federal income taxes. There was no provision for income taxes due on unrelated business income in fiscal years 2017 and 2016, and there are no uncertain tax positions considered to be material.

(l) Use of Estimates The preparation of the consolidated financial statements in accordance with GAAP requires that management make a number of estimates and assumptions related to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the consolidated balance sheet dates, and the reporting of revenue, expenses, gains, and losses during the reporting periods. Actual results may differ from those estimates.

15 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(m) Recent Accounting Pronouncements (i) Pension and Postretirement Benefit Cost During 2017, the University adopted Accounting Standards Update (ASU) No. 2017-07 – Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This guidance requires the service cost component of net periodic benefit cost for pension and other postretirement benefits be presented as a component part of employee benefit expense. The other components of net periodic benefit cost, such as interest, expected return on plan assets, and amortization of other actuarially determined amounts, are required to be presented as a nonoperating change in net assets without restrictions. These changes have been applied retrospectively in the 2016 consolidated statement of activities by reclassifying $22,831 of non-service related components of net periodic benefit cost from benefits expense to other nonoperating changes in net assets without donor restrictions. (ii) Not-for-Profit Financial Statement Presentation Also during 2017, the University adopted ASU No. 2016-14 – Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. This guidance is intended to improve the net asset classification requirements and the information presented in the financial statements and notes about a not-for-profit entity’s liquidity, financial performance, and cash flows. Main provisions of this guidance include: presentation of two classes of net assets versus the previously required three; recognition of capital gifts for construction as a net asset without donor restrictions when the associated long-lived asset is placed in service; and recognition of underwater endowment funds as a reduction in net assets with donor restrictions. The guidance also enhances disclosures for board designated amounts, composition of net assets without donor restrictions, liquidity, and expenses by both their natural and functional classification. A recap of the net asset reclassifications driven by the adoption of ASU 2016-14 as of June 30, 2016 follows: ASU 2016-14 Classifications Without donor With donor Total Net Ne t Asse ts Cla ssifica tions re strictions re strictions Asse ts As previously presented: Unrestricted $ 2,104,760 — 2,104,760 Temporarily Restricted — 3,298,132 3,298,132 Permanently Restricted — 2,035,891 2,035,891 Net assets as previously presented 2,104,760 5,334,023 7,438,783

Reclassifications to implement ASU 2016-14: Capital gifts for construction 150,913 (150,913) — Underwater endowments 26,532 (26,532) — Net assets, as reclassified $ 2,282,205 5,156,578 7,438,783

16 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(n) Subsequent Events The University has performed an evaluation of subsequent events through November 1, 2017 which is the date the consolidated financial statements were issued.

(2) The University of Chicago Medical Center (a) Organization The Medical Center, an Illinois not-for-profit corporation, operates the Center for Care and Discovery, the Bernard Mitchell Hospital, the University of Chicago Comer Children’s Hospital, the Duchossois Center for Advanced Medicine, the University of Chicago Medicine Care Network, various other outpatient clinics and treatment areas, and as of October 1, 2016, Ingalls Health System. The University, as the sole corporate member of the Medical Center, elects the Medical Center’s Board of Trustees and approves its bylaws.

(b) Acquisition of Ingalls Health System On October 1, 2016 the Medical Center acquired Ingalls Health System through an affiliation and member substitution agreement. As a result of this transaction, Ingalls Health System became a wholly owned subsidiary of the Medical Center through a newly created Community Health and Hospital Division of the Medical Center. Amounts included in the accompanying notes and consolidated financial statements and supplemental schedules reflect Ingalls activity beginning on October 1, 2016. Ingalls net assets of $322,862 at October 1, 2016 have been recognized as a contribution in the consolidated statements of activities in fiscal 2017.

The following table sets forth the fair value of Ingalls assets and liabilities at October 1, 2016 which have been recognized in the consolidated financial statements.

Cash $ 28,003 Investments 298,975 Land, buildings, and equipment 187,641 Notes and bonds payable (111,990) Other assets and liabilities, net (79,767)

Net assets $ 322,862

17 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(c) Agreements with the University The relationship between the University and the Medical Center is defined in an Affiliation Agreement and an Operating Agreement along with an associated Lease Agreement. The Affiliation Agreement specifies University and Medical Center responsibilities for the provision of patient care, teaching, and research at the hospitals and clinics. The Operating Agreement provides for the management and operation by the Medical Center of the University’s hospital and clinic facilities. The Lease Agreement provides the Medical Center a leasehold interest in certain University facilities and land.

(d) Community Benefits The Medical Center’s policy is to treat patients in immediate need of medical services without regard to their ability to pay for such services, including patients transferred from other hospitals and patients accepted through the Perinatal and Pediatrics Trauma Networks. Patients are offered discounts of up to 100% of charges on a sliding scale based both on income as a percentage of the Federal Poverty Level guidelines and the charges for services rendered. The Medical Center policy also contains provisions that are responsive to those patients subject to catastrophic healthcare expenses. Since the Medical Center does not pursue collection of these amounts, they are not reported as net patient care revenue. The unreimbursed cost of providing such care, along with the unreimbursed cost of government sponsored indigent healthcare programs, unreimbursed cost to support education, clinical research, and other community programs, amounted to $374,957 and $328,591 for the years ended June 30, 2017 and 2016, respectively.

(e) Basis of Presentation The Medical Center maintains its accounts and prepares stand-alone financial statements in conformity with GAAP applicable to not-for-profit health care entities. For purposes of presentation of the Medical Center financial position and changes in net assets in the accompanying consolidated financial statements, several reclassifications have been made as follows: (1) investment gains used for operations of $41,389 in fiscal year 2017 and $45,045 in 2016 have been recorded as operating revenue and (2) transfers to the University of $61,002 in fiscal year 2017 and $68,843 in fiscal year 2016 have been recorded as a reduction of other income.

(3) Marine Biological Laboratory (MBL) (a) Organization MBL is a private, independent not-for-profit research and educational institution dedicated to establishing and maintaining a laboratory and station for scientific study and investigations, and a school for instruction in biology and natural history. MBL is located in Woods Hole, Massachusetts. The University is the sole corporate member of MBL, elects MBL’s Board of Trustees, and approves its bylaws.

(b) Agreements with the University The relationship between the University and MBL is defined in an Affiliation Agreements which specifies the University and MBL responsibilities for the provision of research and education in biology, biomedicine, ecology, and related fields.

18 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(4) Financial Assets and Liquidity Resources As of June 30, 2017, financial assets and liquidity resources available within one year for general expenditure, such as operating expenses, scheduled principal payments on debt, and capital construction costs not financed with debt, were as follows:

2017 Medical University Center MBL Consolidated

Financial assets: Cash and cash equivalents $ 11,060 37,446 1,878 50,384 Notes and accounts receivable, net 133,759 432,100 4,119 569,978 Pledge payments available for operations 115,972 1,256 625 117,853 Working capital investments 202,408 — — 202,408 Board designations: Funds functioning as endowment available for operations 288,123 — — 288,123 Fiscal 2018 endowment payout 382,841 50,933 4,414 438,188 Total financial assets available within one year 1,134,163 521,735 11,036 1,666,934 Liquidity resources: Taxable commercial paper 200,000 — — 200,000 Bank lines of credit 500,000 50,000 3,000 553,000

Total financial assets and liquidity resources available within one year $ 1,834,163 571,735 14,036 2,419,934

The University’s cash flows have seasonal variations during the year attributable to tuition billing, patient service reimbursement from the State of Illinois, and a concentration of contributions received at calendar and fiscal year-end. To manage liquidity, the University maintains lines of credit with several banks and a taxable commercial paper program that are drawn upon as needed during the year to manage cash flows. As of June 30, 2017, amounts outstanding under these lines of credit facilities amounted to $476,765.

In addition, as of June 30, 2017 the University, Medical Center, and MBL had an additional $1,621,175, $813,993, and $9,594 in funds functioning as endowment, respectively, which is available for general expenditure with Board approval.

19 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(5) Investments Investments at June 30, 2017 and 2016 are comprised of the following:

2017 2016 Consolidated Consolidated

Cash equivalents $ 538,277 233,304 Global public equities (primarily international) 2,085,220 1,774,567 Private debt 380,089 358,522 Private equity: U.S. venture capital 482,875 375,962 U.S. corporate finance 306,809 311,726 International 449,109 401,184 Real estate 497,359 485,153 Natural resources 582,574 459,791 Absolute return: Equity-oriented 769,693 768,992 Global macro/relative value 515,996 511,965 Multistrategy 605,844 580,936 Credit-oriented 436,552 365,223 Protection-oriented 141,202 140,332 Fixed income: U.S. treasuries, including TIPS 481,345 309,290 Other fixed income (primarily credit funds) 318,756 665,928 Funds in trust 113,032 256,648 Total $ 8,704,732 7,999,523

(a) Overall Investment Objective The overall investment objective of the University is to invest its assets in a prudent manner that will achieve a long-term rate of return sufficient to fund a portion of its annual operating activities and increase investment value after inflation. The University diversifies its investments among various asset classes incorporating multiple strategies and external investment managers. Major investment decisions are authorized by the Board’s Investment Committee, which oversees the University’s investment program in accordance with established guidelines.

(b) Investment Strategies Cash equivalent investments include cash equivalents and fixed-income investments with maturities of less than one year, which are valued based on quoted market prices in active markets. The majority of

20 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

these investments are held in U.S. money market accounts. Global public equity investments consist of separate accounts, commingled funds with liquidity ranging from daily to monthly, and limited partnerships. Securities held in separate accounts and daily traded commingled funds are generally valued based on quoted market prices in active markets. Commingled funds with monthly liquidity are valued based on independently determined NAV. Limited partnership interests in equity-oriented funds are valued based upon NAV provided by external fund managers.

Fixed-income investments consist of directly held actively traded treasuries, separately managed accounts, commingled funds, and bond mutual funds that hold securities, the majority of which have maturities greater than one year and are valued based on quoted market prices in active markets, except for a commingled fund that is valued on independently determined NAV.

Funds in trust investments consist primarily of project construction funds and externally managed endowments.

Investments in private debt, private equity, real estate, and natural resources are in the form of limited partnership interests, which typically invest in private securities for which there is no readily determinable market value. In these cases, market value is determined by external managers based on a combination of discounted cash flow analysis, industry comparables, and outside appraisals. Where private equity, private debt, real estate, and natural resources managers hold publicly traded securities, these securities are generally valued based on market prices. The value of the limited partnership interests are held at the manager’s reported NAV, unless information becomes available indicating the reported NAV may require adjustment. The methods used by managers to assess the NAV of these external investments vary by asset class. The University monitors the valuation methodologies and practices of managers.

The absolute return portfolio is comprised of investments of limited partnership interests in hedge funds and drawdown private equity style partnerships whose managers have the authority to invest in various asset classes at their discretion, including the ability to invest long and short. The majority of the underlying holdings are marketable securities. The remainder of the underlying holdings is held in marketable securities that trade infrequently or in private investments, which are valued by the manager on the basis of an appraised value, discounted cash flow, industry comparables, or some other method. Most hedge funds that hold illiquid investments designate them in special side pockets, which are subject to special restrictions on redemption.

The University believes that the reported amount of its investments is a reasonable estimate of fair value as of June 30, 2017 and 2016. Because of the inherent uncertainties of valuation, these estimated fair values may differ significantly from values that would have been used had a ready market existed.

21 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(c) Fair Value Hierarchy of Investments Following is the fair value hierarchy of investments as of June 30, 2017:

2017 Consolidated Level 1 Level 2 total

Cash equivalents $ 538,278 — 538,278 Global public equities (primarily international) 608,390 44,956 653,346 Real estate 102,113 — 102,113 Natural resources 48,884 — 48,884 Absolute return: Global macro/relative value 83,583 27,754 111,337 Fixed income: U.S. treasuries, including TIPS 481,345 — 481,345 Other fixed income (primarily credit funds) 282,558 50 282,608 Funds in trust 74,928 20,370 95,298 $ 2,220,079 93,130 2,313,209

Investments measured at net asset value 6,391,523

Total investments at fair value as of June 30, 2017 $ 8,704,732

22 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Following is the fair value hierarchy of investments as of June 30, 2016:

2016 Consolidated Level 1 Level 2 total Cash equivalents $ 233,304 — 233,304 Global public equities (primarily international) 452,674 44,181 496,855 Real estate funds 50,282 — 50,282 Absolute return: Equity-oriented — 50,617 50,617 Global macro/relative value 85,888 26,015 111,903 Fixed income: U.S. treasuries, including TIPS 309,291 — 309,291 Other fixed income (primarily credit funds) 546,023 — 546,023 Funds in trust 250,104 — 250,104 $ 1,927,566 120,813 2,048,379

Investments measured at net asset value 5,951,144 Total investments at fair value as of June 30, 2016 $ 7,999,523

During fiscal years 2017 and 2016, there were no transfers between investment Levels 1 and 2.

A summary of the University’s investment return by entity, net of expenses, is presented below for the years ended June 30, 2017 and 2016:

2017 Medical 2016 University Center MBL Consolidated Consolidated

Investment return: Interest and dividends $ 69,921 14,391 815 85,127 73,449 Net realized and unrealized gains (losses) 593,442 86,906 7,249 687,597 (244,611)

Investment return $ 663,363 101,297 8,064 772,724 (171,162)

Investment return is reported in the accompanying consolidated statements of activities as endowment payout and investment gains (losses).

23 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

The University is obligated under certain limited partnership investment fund agreements to advance additional funding periodically up to specified levels. At June 30, 2017, the University had unfunded commitments of $1,240,860, which are likely to be called through 2026. Details of these commitments are as follows:

Unfunded commitments

Private equity $ 471,679 Real estate 281,855 Natural resources 182,711 Absolute return 25,810 Private debt 278,805 Total $ 1,240,860

The University has made investments in various long-lived partnerships and, in other cases, has entered into contractual agreements that may limit its ability to initiate redemptions due to notice periods, lock-ups, and gates. Details on typical redemption terms by asset class and type of investment are provided as follows:

Redemption restrictions or side Remaining Redemption Redemption restrictions and pockets at life terms terms June 30, 2017

Cash N/A Daily None None

Global public equities:

Commingled N/A Daily to annual Lock-up provisions for up to $0.1 million funds with notice 2 years, some investments have periods of 2 to a portion of capital held in side 180 days pockets with no redemptions permitted

Partnerships N/A Monthly to Lock-up provisions for up to $36.1 million biennial with 4 years, some investments have notice periods a portion of capital held in side of pockets with no redemptions 7 to 90 days permitted

24 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Redemption restrictions or side Remaining Redemption Redemption restrictions and pockets at life terms terms June 30, 2017

Separate N/A Daily with Lock-up provisions ranging for None accounts notice periods up to 1 year of 1 to 7 days

Private debt:

Drawdown 1 to Redemptions N/A N/A partnerships 11 years not permitted

Partnerships N/A Redemptions Capital held in side pockets with $0.5 million not permitted no redemptions permitted

Private equity:

Drawdown 1 to Redemptions N/A N/A partnerships 20 years not permitted

Separate N/A Daily with None None account notice period of 1day

Partnerships N/A Semi-annual A portion of capital is held in side $7.2 million with notice pockets with no redemption period of permitted 90 days

Real estate:

Drawdown 1 to Redemptions N/A N/A partnerships 15 years not permitted

Separate N/A Daily with None None account notice period of 5days

Natural resources: 1 to Redemptions N/A N/A 18 years not permitted

25 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Redemption restrictions or side Remaining Redemption Redemption restrictions and pockets at life terms terms June 30, 2017

Drawdown partnerships

Commingled N/A Daily with None None Funds notice period of 1day

Absolute return:

Commingled N/A Daily to Lock-up provisions for up to $8.9 million funds triennial with 3 years, some investments have notice periods a portion of capital held in side of 1 to pockets with no redemptions 122 days permitted

Drawdown 1 to 3 years Redemptions N/A N/A partnerships not permitted

Partnerships N/A Quarterly to Lock-up provisions for up to $151.0 million triennial with 5 years, some investments have notice periods a portion of capital held in side of 45 to pockets with no redemptions 180 days permitted

Fixed income: Weekly to monthly with Commingled N/A notice periods None None funds of 5 to 10 days

Separate N/A Daily to None None accounts monthly with notice periods of 1 to 30 days

Funds in Trust N/A Daily None None

26 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(6) Endowments The University’s endowment consists of approximately 4,000 individual funds established for a variety of purposes. The endowment includes both donor-restricted “true” endowment funds and funds designated by the Board to function as endowments commonly referred to as “funds functioning as endowment” (FFE). Net assets associated with endowment funds, including funds functioning as endowment, are classified and reported based on the existence or absence of donor-imposed restrictions.

The University, Medical Center, and MBL endowment each invest in an investment pool, the Total Return on Investment Pool (TRIP). As of June 30, 2017, 99%, 85%, and 100% of the University, Medical Center, and MBL endowments respectively, are invested in TRIP.

(a) University Endowment Changes in the fair value of the University endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2017:

2017 Without Donor With Donor Restrictions Restrictions Total

Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 19,813 49,523 69,336 Net appreciation (realized and unrealized) on investments 190,812 403,210 594,022 Total investment return 210,625 452,733 663,358 Endowment payout (153,444) (251,346) (404,790)

Investment return, net at payout 57,181 201,387 258,568 Other changes in endowment investments: Gifts and pledge payments received in cash — 140,920 140,920 Transfers to create funds functioning as endowment 56,409 — 56,409 Other changes 551 35,495 36,046 Total other changes in endowment investments 56,960 176,415 233,375 Net change in endowment investments 114,141 377,802 491,943 Endowment investments at: Beginning of year 1,795,157 4,249,846 6,045,003 End of year $ 1,909,298 4,627,648 6,536,946

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 1,900,208 1,900,208 Appreciation — 2,727,440 2,727,440 Board-designated “funds functioning as endowment" 1,909,298 — 1,909,298 Total – as above $ 1,909,298 4,627,648 6,536,946

27 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Changes in the fair value of the University endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2016:

2016 Without donor With donor restrictions restrictions Total Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 18,676 42,862 61,538 Net depreciation (realized and unrealized) on investments (50,240) (163,562) (213,802) Total investment return (31,564) (120,700) (152,264) Endowment payout (180,291) (235,080) (415,371) Investment return, net of payout (211,855) (355,780) (567,635) Other changes in endowment investments: Gifts and pledge payments received in cash — 114,495 114,495 Transfers to create funds functioning as endowment 24,445 — 24,445 Other changes 350 11,539 11,889 Total other changes in endowment investments 24,795 126,034 150,829 Net change in endowment investments (187,060) (229,746) (416,806) Endowment investments at: Beginning of year 1,982,217 4,479,592 6,461,809 End of year $ 1,795,157 4,249,846 6,045,003

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 1,745,000 1,745,000 Appreciation — 2,504,846 2,504,846 Board-designated “funds functioning as endowment" 1,795,157 — 1,795,157 Total – as above $ 1,795,157 4,249,846 6,045,003

28 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(b) Medical Center Endowment Changes in the fair value of the Medical Center endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2017:

2017 Without donor With donor restrictions restrictions Total Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 29,989 1,001 30,990 Net appreciation (realized and unrealized) on investments 42,567 6,843 49,410 Investment return, net of payout 72,556 7,844 80,400 Endowment payout (40,953) (4,997) (45,950) Net investment return 31,603 2,847 34,450 Other changes in endowment investments: Gifts and pledge payments received in cash — 799 799 Contribution - Ingalls Health System — 13,122 13,122 Withdrawal to finance capital expenditures (25,000) — (25,000) Other changes 2,953 371 3,324 Total other changes in endowment investments (22,047) 14,292 (7,755) Net change in endowment investments 9,556 17,139 26,695 Endowment investments at: Beginning of year 804,437 75,513 879,950 End of year $ 813,993 92,652 906,645

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 17,445 17,445 Appreciation — 75,207 75,207 Board-designated “funds functioning as endowment" 813,993 — 813,993 Total – as above $ 813,993 92,652 906,645

Included in board-designated “funds functioning as endowment” are $395,515 of net assets that are separately invested by the Medical Center.

29 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Changes in the fair value of the Medical Center endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2016:

Without donor With donor restrictions restrictions Total Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 16,383 737 17,120 Net depreciation (realized and unrealized) on investments (34,742) (3,162) (37,904) Total investment return (18,359) (2,425) (20,784) Endowment payout (44,622) (4,229) (48,851) Investment return, net of payout (62,981) (6,654) (69,635) Other changes in endowment investments: Gifts and pledge payments received in cash — 10 10 Withdrawal to finance capital expenditures (50,000) — (50,000) Other changes 2,939 487 3,426 Total other changes in endowment investments (47,061) 497 (46,564) Net change in endowment investments (110,042) (6,157) (116,199) Endowment investments at: Beginning of year 914,479 81,670 996,149 End of year $ 804,437 75,513 879,950

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 8,112 8,112 Appreciation — 67,401 67,401 Board-designated “funds functioning as endowment" 804,437 — 804,437 Total – as above $ 804,437 75,513 879,950

Included in board-designated “funds functioning as endowment” are $213,898 of net assets that are separately invested by the Medical Center.

30 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(c) MBL Changes in the fair value of the MBL endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2017:

2017 Without donor With donor restrictions restrictions Total Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 99 714 813 Net appreciation (realized and unrealized) on investments 794 6,455 7,249 Total investment return 893 7,169 8,062 Endowment payout (564) (3,839) (4,403) Investment return, net of payout 329 3,330 3,659 Other changes in endowment investments: Gifts and pledge payments received in cash — 205 205 Other changes 80 (77) 3 Total other changes in endowment investments 80 128 208 Net change in endowment investments 409 3,458 3,867 Endowment investments at: Beginning of year 9,185 67,078 76,263 End of year $ 9,594 70,536 80,130

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 52,513 52,513 Appreciation — 18,023 18,023 Board-designated “funds functioning as endowment" 9,594 — 9,594 Total – as above $ 9,594 70,536 80,130

31 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Changes in the fair value of the MBL endowment investments and net assets by type of fund were as follows for the fiscal year ended June 30, 2016:

2016 Without donor With donor restrictions restrictions Total Changes in the fair value of endowment investments: Investment return: Endowment yield (interest and dividends) $ 91 651 742 Net depreciation (realized and unrealized) on investments (327) (2,324) (2,651) Total investment return (236) (1,673) (1,909) Endowment payout (617) (3,629) (4,246) Investment return, net of payout (853) (5,302) (6,155) Other changes in endowment investments: Gifts and pledge payments received in cash — 413 413 Other changes (250) 242 (8) Total other changes in endowment investments (250) 655 405 Net change in endowment investments (1,103) (4,647) (5,750) Endowment investments at: Beginning of year 10,288 71,725 82,013 End of year $ 9,185 67,078 76,263

Investments by type of fund: Donor-restricted “true” endowment: Historical gift value $ — 52,304 52,304 Appreciation — 14,774 14,774 Board-designated “funds functioning as endowment" 9,185 — 9,185 Total – as above $ 9,185 67,078 76,263

(d) Interpretation of Relevant Law The “Uniform Prudent Management of Institutional Funds Act” (UPMIFA), which was enacted in the state of Illinois in 2009, does not preclude the University from spending below the original gift value of donor-restricted “true” endowment funds.

For accounting and reporting purposes, the University, Medical Center, and MBL classify as net assets with donor restrictions the historical value of donor-restricted “true” endowment funds, which includes (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) changes to the permanent endowment made in accordance with the direction of the applicable donor gift instrument. Also included in net assets with donor restrictions is accumulated appreciation on donor restricted “true” endowment funds which are available for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA, and deficiencies associated with funds where the value of the fund has fallen below the original value of the gift.

32 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(e) Funds with Deficiencies From time to time, the fair value of assets associated with individual donor restricted “true” endowment funds may fall below the level that the donor or UPMIFA requires to be retained as a fund of perpetual duration. Deficiencies of this nature are reported in net assets with donor restrictions. As of June 30, 2017 and 2016, funds with an original gift value of $216,528 and $589,053 were “underwater” by $5,905 and $26,532, respectively.

(f) Endowment Payout Approximately 97% of the University, Medical Center, and MBL endowment is merged into one investment pool referred to as the Total Return Investment Pool (TRIP). The University utilizes the total return concept in allocating endowment income from TRIP. In accordance with the University’s return objective, between 4.5% and 5.5% of a 12 quarter moving average of the fair value of endowment investments lagged by one year, is available each year for expenditure in the form of endowment payout. The payout percentage, which is set each year by the Board with the objective of a 5% average payout over time, was 5.5% for the fiscal years ended June 30, 2017 and 2016. Periodically, the University’s Board will adjust the endowment payout to fund specifically approved strategic initiatives.

If endowment income received is not sufficient to support the total return objective, the balance is provided from capital gains. If income received is in excess of the objective, the balance is reinvested in the endowment.

The endowment payout is comprised of the TRIP formula payout, payout from separately held investments, as well as special payouts for the funding of Alumni Relations and Development and University wide strategic initiatives as follows:

2017 Medical 2016 University Center MBL Consolidated Consolidated

TRIP formula payout $ 353,116 38,151 4,403 395,670 379,974 Payout from separately invested endowment 4,177 7,799 — 11,976 12,246 Special payouts: Alumni Relations and Development 21,897 — — 21,897 21,055 Strategic initiatives 16,600 — — 16,600 21,513 Operational support 9,000 — — 9,000 33,680

Total $ 404,790 45,950 4,403 455,143 468,468

33 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(7) Notes and Accounts Receivable Components of notes and accounts receivable at June 30, 2017 and 2016 are shown as follows:

2017 Allowance 2016 for doubtful Net Net Receivable accounts receivable receivable

Univers ity: Patients $ 32,121 (1,398) 30,723 21,971 Students: Loans 42,272 (3,000) 39,272 44,053 Tuition and fees 2,895 (1,454) 1,441 647 U.S. government 50,301 — 50,301 54,206 All other 106,010 (5,595) 100,415 102,549

Total University 233,599 (11,447) 222,152 223,426

Medical Center - patients 572,978 (140,878) 432,100 288,401 MBL 5,376 (35) 5,341 5,418

Total $ 811,953 (152,360) 659,593 517,245

Accounts receivable are carried at estimated net realizable value. Management regularly assesses the adequacy of the allowance for doubtful accounts, and balances are written off when deemed uncollectible.

(8) Land, Buildings, Equipment, and Books Components of land, buildings, equipment, and books at June 30, 2017 and 2016 are shown as follows:

2017 Medical 2016 University Center MBL Consolidated Consolidated

Land $ 119,271 54,505 52,931 226,707 209,117 Buildings 4,064,007 1,765,121 104,283 5,933,411 5,296,804 Equipment 543,314 667,388 26,646 1,237,348 1,068,582 Books 377,434 — — 377,434 361,681 Construction in progress 141,825 38,456 172 180,453 483,420

Subtotal 5,245,851 2,525,470 184,032 7,955,353 7,419,604

Less accumulated depreciation (2,065,638) (900,265) (77,249) (3,043,152) (2,764,669)

Subtotal 3,180,213 1,625,205 106,783 4,912,201 4,654,935

Residential properties held for sale 85 — — 85 19,646

Total $ 3,180,298 1,625,205 106,783 4,912,286 4,674,581

34 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(9) Notes and Bonds Payable

Notes and bonds payable at June 30, 2017 and 2016 are shown as follows:

Fiscal year maturity Interest rate 2017 2016 University: Fixed rate: Illinois Finance Authority (IFA) 2039–2053 3.2%–5.0% $ 1,704,856 1,734,854 Taxable bonds 2031–2046 3.3–5.2 1,002,885 1,012,285 Unamortized premium net of issuance costs 146,621 149,510 Total fixed rate 2,854,362 2,896,649 Variable rate: Illinois Educational Facilities Authority (IEFA) 2026–2037 0.5–1.7 226,142 299,853 IFA 2035 0.7 76,107 78,941 Taxable commercial paper ($200,000 available) 2018 0.7 172,265 100,000 Bank lines of credit ($500,000 available) 2018 1.0–1.1 301,500 253,500 Total variable rate 776,014 732,294 Total University 3,630,376 3,628,943 Medical Center: Fixed rate: IFA 2027–2045 3.5–5.5 765,555 703,275 Taxable bonds 2047 4.4 30,000 — New market tax credit bonds (NMTC) 2024-2032 1.2–1.5 21,296 — Unamortized premium and issuance costs 25,425 3,591 Total fixed rate 842,276 706,866 Variable rate: IFA 2034 1.2–1.3 116,402 73,757 IEFA 2038 0.7 72,567 75,671 Bank lines of credit ($50,000 available) 2018 2.3 3,000 — Total variable rate 191,969 149,428 Total Medical Center 1,034,245 856,294 MBL: Fixed rate: Massachusetts Development Finance Authority 2018–2038 3.4 27,365 28,145 Unamortized issuance cost (154) (162) Variable rate: Bank line of credit ($3,000 available) 2018 — —— Total MBL 27,211 27,983 Total notes and bonds payable $ 4,691,832 4,513,220

As of June 30, 2017, the University, Medical Center, and MBL fixed rate notes and bonds payable include variable rate debt with interest rates that have been fixed through interest rate swap agreements which amounted to $177,751, $325,000, and $27,365, respectively. As of June 30, 2016, the University, Medical Center, and MBL fixed rate notes and bonds payable include variable rate debt with interest rates that have been fixed through interest rate swap agreements which amounted to $180,909, $325,000, and $28,145, respectively.

35 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(a) Fiscal 2017 Transactions During fiscal year 2017, the University redeemed $72,265 of the IFA variable rate bonds. The redemption was funded with taxable commercial paper.

During fiscal year 2017, the Medical Center issued $187,320 in fixed rate bonds through the IFA and $30,000 in taxable fixed rate bonds. Proceeds were used to 1) advance refund $174,630 of the IFA fixed rate bonds and 2) finance the construction of a new adult emergency department and adult trauma center. During fiscal year 2017, the Medical Center also entered into NMTC financing agreements amounting to $21,296 for the purpose of financing a variety of projects that benefit the surrounding community.

(b) Interest Rate Swaps At June 30, 2017 and 2016, the fair value of the interest rate swap agreements was an accrued liability of $179,954 and $238,459, respectively as follows:

2017 2016

University $ 46,236 66,767 Medical center 129,450 165,417 MBL 4,268 6,275 Total $ 179,954 238,459

Changes in the fair value of the interest rate swap agreements are included as a nonoperating change in the without donor restrictions section of accompanying consolidated statements of activities for the years ended June 30, 2017 and 2016 as follows:

2017 2016

University $ 20,531 (21,545) Medical center 44,863 (50,775) MBL 2,007 (1,819) Total $ 67,401 (74,139)

These financial instruments involve counterparty credit exposure. The counterparties for these swap transactions are major financial institutions that meet the University’s criteria for financial stability and creditworthiness.

The Medical Center maintains two cash flow hedges against interest on variable rate debt which were entered into in August 2011 and have a combined notional amount of $325,000. The interest rate swaps terminate on February 1, 2044.

The Medical Center is required to provide collateral on one of the interest rate swap agreements when the liability of that swap exceeds $50,000. If the Medical Center’s credit rating were to be downgraded

36 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

one level, collateral would need to be provided under the swap with JP Morgan when the liability of that swap exceeds $60,000 and under the Wells Fargo swap when the liability of that swap exceeds $40,000. Upon further downgrade, the collateral requirements increase. At June 30, 2017 and 2016, $14,200 and $36,700 was held as collateral, respectively.

(c) Debt Payments Principal payments required in each of the five years ending June 30, 2018 through 2022 for the University notes and bonds are $59,251, $27,629, $43,225, $89,698 and $46,729, respectively.

Principal payments required in each of the five years ending June 30, 2018 through 2022 for the Medical Center notes and bonds are $19,418, $17,183, $18,003, $18,875, and $19,788, respectively.

Principal payments required in each of the five years ending June 30, 2018 through 2022 for MBL’s notes and bonds are $810, $840, $875, $910, and, $945, respectively.

(d) Collateral Each of the Medical Center bond series is collateralized by accounts receivable and subject to certain contractual restrictions. In addition, the Medical Center variable rate bonds are guaranteed by bank letters of credit.

(e) Remarketing Included in the University, Medical Center, and MBL’s notes and bonds payable are $953,765, $513,969, and $27,365, respectively, of variable rate notes and bonds maturing through fiscal year 2045. In the event the University, Medical Center, or MBL’s remarketing agents are unable to remarket the notes and bonds, they become demand obligations and require immediate payment. To supplement internal liquidity, the University, Medical Center, and MBL have credit facility agreements totaling $400,000, $397,567 and $27,620, respectively, which support variable rate debt in the event of a failed remarketing.

(f) Subsequent Event In September 2017 the Medical Center increased its available operating lines of credit from $50,000 to $110,000.

37 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(10) Pledges Pledges receivable at June 30, 2017 and 2016 are shown as follows:

2017 Medical 2016 University Center MBL Consolidated Consolidated

Unconditional promises expected to be collected in: Less than one year $ 161,001 1,256 1,811 164,068 171,486 One year to five years 386,639 2,440 2,789 391,868 313,070 More than five years 232,009 — — 232,009 251,053

779,649 3,696 4,600 787,945 735,609

Less: Unamortized discount (78,715) (77) (322) (79,114) (75,256) Allowance for uncollectible pledges (52,593) — (654) (53,247) (47,681)

Total $ 648,341 3,619 3,624 655,584 612,672

The University’s five largest pledges comprise 86% of pledges expected to be collected in more than five years. Included in this amount is the estimated fair value of a nonmarketable equity investment (based on discounted cash flow and market multiples) specifically aligned with a promise to give, the proceeds of which, when sold, will be used to satisfy the pledge.

In addition, at June 30, 2017, the University has received $356,815 of promises to give, that are conditional upon the raising of matching gifts from other sources, implementation of new academic programs, or future income from pledged investments. These amounts will be recognized as revenue in the periods in which the conditions are fulfilled.

(11) Self-Insurance Liability The University maintains a self-insurance program for medical malpractice liability. This program is supplemented with commercial excess insurance above the University’s self-insurance retention, which, for the years ended June 30, 2017 and 2016, was $5,000 per claim and unlimited in the aggregate. Claims in excess of $5,000 are subject to an additional self-insurance retention limited to $12,500 per claim and $22,500 in annual aggregate. The Medical Center is included under this insurance program and is charged for its portion of self-insurance costs. The University and Medical Center also maintain a self-insurance program for workers’ compensation and certain other liability claims.

Under the medical malpractice self-insurance program, the University and Medical Center make annual contributions to a related trust fund at an actuarially determined rate that is intended to provide adequate funding of the self-insurance liability over a period of years. Actual settlements of medical malpractice claims may be more or less than the liability estimated by the University.

The medical malpractice self-insurance liability is the estimated present value of self-insured claims that will be settled in the future, and considers anticipated payout patterns as well as interest to be earned on

38 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

available assets prior to payment. If the present value method was not used, the liability for medical malpractice self-insurance claims would be approximately $33,953 higher than the amount recorded in the consolidated financial statements at June 30, 2017. The interest rate assumed in determining the present value was 3.8%. The University recorded nonoperating actuarial adjustments of ($2,195) and ($39,005) during the years ended June 30, 2017 and 2016, respectively, which are included in the without donor restrictions section of the accompanying consolidated statements of activities.

In addition, the Medical Center’s Community Health and Hospital Division maintains a separate self- insurance program for medical malpractice and workers’ compensation. Coverage from commercial insurance carriers is maintained for claims in excess of self-insured retentions at various levels by policy year. Under this program, annual contributions are made to a related trust at an actuarially determined rate.

The estimated liability for incurred malpractice, workers’ compensation, and other claims (filed and unfiled) as of June 30, 2017 and 2016 is presented as follows:

2017 Medical 2016 University Center Consolidated Consolidated Medical malpractice $ 236,770 29,509 266,279 238,213 Workers’ compensation 8,299 7,877 16,176 14,737 Others 4,795 331 5,126 3,997 Total $ 249,864 37,717 287,581 256,947

(12) Pension Plans and Other Postretirement Benefits (a) Pension Plans Substantially all personnel of the University participate in either the defined contribution pension plan for academic staff or the defined benefit and contribution pension plans for nonacademic personnel. The majority of Medical Center employees participate in the University’s pension plans for nonacademic employees. The University and Medical Center make annual contributions to the defined benefit pension plans at a rate necessary to maintain plan funding on an actuarially recommended basis. The University and Medical Center share contributions to the defined benefit pension plans based primarily on participation.

Effective July 1, 2016, the 401(a) defined benefit pension plan was frozen for the majority of University employees participating in the plan and was replaced with an enhanced defined contribution plan. This curtailment resulted in a current year reduction in the defined benefit pension obligation of $45,926 and a curtailment credit of $7,119 in pension cost.

Effective January 1, 2017, the 401(a) plan was frozen for all Medical Center employees participating in the plan and replaced with an enhanced defined contribution plan. This curtailment, along with a further reduction of University employees participating in the 401(a) plan, resulted in a current year reduction in the defined benefit obligation of $64,241 and a curtailment credit of $5,002 in pension cost.

39 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(b) Postretirement Benefits In addition to providing pension benefits, the University and MBL provide certain healthcare benefits for retired employees and a retirement incentive bonus for eligible faculty electing to participate in a retirement incentive program. In addition to a retirement bonus, all Medicare eligible-tenured faculty who elect to participate in the retirement incentive program receive supplemental health insurance at no cost for themselves and their spouses. All other academic and nonacademic employees are entitled to supplemental health insurance coverage subject to deductibles, copayment provisions, and other limitations.

(c) Funded Status The funded status and amounts recognized in the consolidated financial statements for the defined benefit pension plans and other postretirement benefit plans are shown as follows:

Other postretirement Defined benefit pension plans benefit plans 2017 2016 2017 2016

Change in benefit obligation: Benefit obligation at beginning of year $ 1,017,137 954,886 318,714 241,379 Service cost 14,061 41,662 12,496 10,205 Interest cost 34,597 40,869 11,568 10,812 Benefits paid (46,835) (47,455) (7,822) (10,267) Plan amendment — (18,728) (26,503) (8,945) Curtailment (effect of partial plan freeze) (64,241) (45,926) — — Actuarial loss, net 13,098 91,829 33,585 75,530

Benefit obligation at end of year 967,817 1,017,137 342,038 318,714 Change in fair value of plan assets: Fair value of plan assets at beginning of year 741,696 695,869 37,019 30,536 Actual return on plan assets 77,171 28,282 3,470 1,830 Employer contributions — 65,000 13,328 14,920 Benefits paid (46,835) (47,455) (7,822) (10,267) Fair value of plan assets at end of year 772,032 741,696 45,995 37,019 Funded status – liability $ 195,785 275,441 296,043 281,695

The accumulated benefit obligation for the defined benefit pension plans was $963,930 and $935,609 at June 30, 2017 and 2016, respectively.

40 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(d) Components of Net Periodic Benefit Cost Other postretirement Defined benefit pension plans benefit plans 2017 2016 2017 2016 Operating - Service cost $ 14,061 41,662 12,496 10,205 Nonoperating: Interest cost 34,597 40,869 11,568 10,812 Expected return on plan assets (47,094) (45,724) (2,744) (2,295) Amortization of prior service cost (benefit) (986) 611 (8,828) (7,082) Amortization of actuarial loss 24,715 26,367 10,259 6,392 Partial curtailment (5,002) (7,119) — — Total nonoperating 6,230 15,004 10,255 7,827

Net periodic benefit cost $ 20,291 56,666 22,751 18,032

Amounts included in the consolidated statements of activities: University $ 7,640 24,166 22,751 18,032 Medical Center 12,651 32,500 — — Total $ 20,291 56,666 22,751 18,032

(e) Actuarial Assumptions The weighted average assumptions used in the accounting for the pension and other postretirement benefit plans are shown as follows:

Other postretirement Defined benefit pension plans benefit plans 2017 2016 2017 2016 Discount rate 3.7 % 3.6 % 4.0 % 3.7 % Expected return on plan assets 6.5 6.5 6.5 6.5 Rate of compensation increase 3.5 3.5 4.3 4.4 Healthcare cost trend rates: Next two fiscal years 7.5%–7.8% 6.5%–6.7% Next seven fiscal years 5.3%–7.2% 5.1%–6.3% Thereafter 4.5%–5.0% 4.5%–4.9%

The expected return on plan assets assumptions for both the defined benefit pension plan and the other postretirement benefit plans is determined based on models that incorporate a number of different methodologies, including historical returns and capital market forecasts.

41 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans. A one-percentage-point change in assumed healthcare cost trend rates would have the following effects for the fiscal years ended June 30:

2017 2016 Effect on total service cost and interest cost: One-percentage-point increase $ 5,091 4,254 One-percentage-point decrease (3,764) (3,219)

Effect on year-end postretirement benefit obligation: One-percentage-point increase $ 59,667 54,970 One-percentage-point decrease (46,855) (43,120)

(f) Plan Assets Weighted average asset allocations as of fiscal year end by asset category are as follows:

Defined benefit Other postretirement pension plans benefit plans 2017 2016 2017 2016 Domestic public equities 26 % 26 % 50 % 49 % International public equities 21 20 — — Fixed income 53 54 50 51 100 % 100 % 100 % 100 %

As of June 30, 2017, 75% of plan assets for the defined benefit pension plans are invested in cash, mutual funds, exchange traded funds, or separately managed accounts comprised of individual securities and are valued based on quoted market prices in active markets for identical investments (Level 1). The remaining 25% of plan assets are primarily invested in commingled funds and limited partnerships generally reported at NAV by external fund managers.

The defined benefit plans combined target asset allocation of 49% public equities and 51% fixed income securities is meant to result in a favorable long-term rate of return from a diversified portfolio of equity and fixed income investments. Plan assets for the other postretirement benefit plans are managed by the University and were held in mutual funds (Level 1) at June 30, 2017.

(g) Contributions The University expects to make a $12,700 contribution to its postretirement healthcare plan in fiscal year 2018. The University and Medical Center do not expect to make any contributions to the defined benefit pension plans in fiscal year 2018.

42 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(h) Estimated Future Benefits Payments The following benefit payments, which reflect expected future service, are expected to be paid for each of the fiscal years ending June 30:

Defined benefit Other pension postretirement Fiscal year plans benefit plans

2018 $ 102,597 8,583 2019 60,777 10,678 2020 58,878 12,340 2021 59,278 12,305 2022 58,876 13,145 2023–2027 267,576 84,408

(i) Prescription Drug Act The Medicare Prescription Drug, Improvement, and Modernization Act provides for special tax-free subsidies to employers that offer retiree medical benefit plans with qualifying drug coverage. Effective January 1, 2014, the University ceased its participation in the Part D Retiree Drug Subsidy (RDS) program and began providing prescription drug benefits to Medicare eligible retirees through an Employer Group Waiver Plan (EGWP) design. As a result, the University is eligible for reimbursement from the federal government prescription drug program and, in addition, is eligible for government mandated rebates from pharmaceutical companies that participate in the Medicare Part D program. The University has recognized the effect of these subsidies in the calculation of its postretirement benefit obligation, the impact of which was to reduce the benefit obligation by $30,807 at June 30, 2017.

(j) Curtailed Pension Plan The Medical Center maintains a separate noncontributory defined benefit pension plan on behalf of a former affiliated organization. Prior to assumption, the benefit plan was curtailed by freezing participation and benefit accruals. At June 30, 2017 and 2016, the benefit obligation for the plan exceeded the plan’s assets thus creating an unfunded liability of $10,583 and $13,140 at June 30, 2017 and 2016, respectively.

(k) Defined Contribution Pension Plan Defined contribution pension plan expenses included in the consolidated statements of activities amounted to $71,986 in fiscal year 2017 and $52,096 in fiscal year 2016 for the University and $24,600 in fiscal year 2017 and $13,100 in fiscal year 2016 for the Medical Center.

43 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(13) Functional Classification of Expenses The University’s primary program service is academic instruction and research. Expenses reported as auxiliary enterprises, library, and student services are incurred in support of this primary program activity. Natural expenses attributable to more than one functional expense category are allocated using a variety of cost allocation techniques such as square footage and time and effort.

Expenses by functional classification for the year ended June 30, 2017 consist of the following:

2017

Academic and Healthcare Administrative research se rvice support Total Compensation $ 1,343,737 789,013 211,932 2,344,682 Utilities, alterations, and repairs 41,490 27,582 16,037 85,109 Depreciation 170,811 107,640 42,876 321,327 Interest 104,056 36,178 26,337 166,571 Supplies, services, and other 472,598 804,673 132,692 1,409,963 Subtotal $ 2,132,692 1,765,086 429,874 4,327,652

Expenses by functional classification for the year ended June 30, 2016 consist of the following:

2016

Academic and Healthcare Administrative research se rvice support Total Compensation $ 1,267,351 638,740 206,492 2,112,583 Utilities, alterations, and repairs 46,035 22,507 9,190 77,732 Depreciation 160,484 80,993 39,291 280,768 Interest 91,229 31,069 23,369 145,667 Supplies, services, and other 463,908 619,782 90,051 1,173,741 Subtotal $ 2,029,007 1,393,091 368,393 3,790,491

44 (Continued) THE UNIVERSITY OF CHICAGO Notes to Consolidated Financial Statements June 30, 2017 and 2016 (In thousands of dollars)

(14) Affiliated Organizations The University has an ongoing relationship with the National Opinion Research Center (NORC), a not-for-profit organization that conducts research in the public interest primarily for various federal agencies. The majority of NORC’s Board of Trustees are faculty members or officers of the University. Program-related revenue for the years ended December 31, 2016 and 2015 was $188,131 and $179,385, respectively. Net assets at December 31, 2016 and 2015 were $38,340 and $36,921, respectively. Consolidation of this not-for-profit organization is not required because the University does not have both control and an economic interest.

The University, through its affiliate UChicago Argonne, LLC, operates Argonne National Laboratory (ANL) under a contract with the U.S. Department of Energy (DOE). This contract provides for the payment of a fixed management allowance and an additional fee based on performance judged against established measures. The University is the sole member of UChicago Argonne, LLC; however, the performance fee is shared with a subcontractor that assists UChicago Argonne, LLC with the management and operation of ANL.

The University, as a member of Fermi Research Alliance, LLC (FRA), also operates Fermi National Accelerator Laboratory (Fermilab) on behalf of DOE. The Fermilab contract between DOE and FRA provides for the payment of a fixed management allowance and an additional performance fee. The University shares the performance fee with Universities Research Association, the other member of FRA, and with a subcontractor that assists FRA with the management and operation of Fermilab.

The expenditures under the respective contracts and the related reimbursements of $794,889 for ANL and $402,169 for Fermilab in fiscal year 2017, and $760,697 for ANL and $422,394 for Fermilab in fiscal year 2016 are not included in the consolidated statements of activities. Net assets relating to ANL and to Fermilab are owned by the U.S. government and, therefore, are not included in the consolidated balance sheets.

(15) Contingencies Various lawsuits, claims, and other contingent liabilities arise in the ordinary course of the University’s education, research, and healthcare activities. In the opinion of management, all such matters have been adequately provided for, are without merit, or are of such kind that if disposed of unfavorably, would not have a material adverse effect on the consolidated financial position of the University.

45 Schedule 1 THE UNIVERSITY OF CHICAGO Consolidating Balance Sheet June 30, 2017 (In thousands of dollars)

Medical 2017 Assets University Center MBL Consolidated Cash and cash equivalents $ 11,060 37,446 1,878 50,384 Notes and accounts receivable, net 222,152 432,100 5,341 659,593 Prepaid expenses and other assets 139,119 111,924 3,266 254,309 Pledges receivable, net 648,341 3,619 3,624 655,584 Investments 7,390,796 1,223,580 90,356 8,704,732 Land, buildings, equipment, and books, net 3,180,298 1,625,205 106,783 4,912,286 Total assets $ 11,591,766 3,433,874 211,248 15,236,888

Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 413,362 583,628 8,755 1,005,745 Deferred revenue 111,250 — 4,383 115,633 Assets held in custody for others 129,102 — 730 129,832 Self-insurance liability 249,864 37,717 — 287,581 Pension and other postretirement benefit obligations 491,828 — — 491,828 Asset retirement obligation 48,488 7,339 — 55,827 Notes and bonds payable 3,630,376 1,034,245 27,211 4,691,832 Refundable U.S. government student loan funds 39,375 — — 39,375 Total liabilities 5,113,645 1,662,929 41,079 6,817,653 Net assets: Without donor restrictions 1,063,129 1,663,039 89,298 2,815,466 With donor restrictions 5,414,992 107,906 80,871 5,603,769 Total net assets 6,478,121 1,770,945 170,169 8,419,235 Total liabilities and net assets $ 11,591,766 3,433,874 211,248 15,236,888

See accompanying independent auditors’ report.

46 Schedule 2 THE UNIVERSITY OF CHICAGO Consolidating Statement of Activities Year ended June 30, 2017 (In thousands of dollars)

Medical 2017 University Center MBL Consolidated Changes in net assets without donor restrictions: Operating: Revenue: Tuition and fees – gross $ 828,714 — 1,836 830,550 Less student aid (404,486) — (1,347) (405,833) Tuition and fees – net 424,228 — 489 424,717 Government grants and contracts 355,032 — 12,545 367,577 Private gifts, grants, and contracts 223,513 263 5,750 229,526 Endowment payout 403,867 45,950 4,403 454,220 Patient service 271,920 1,856,671 — 2,128,591 Auxiliaries 212,101 — 4,521 216,622 Other income 309,555 82,964 1,210 393,729 Net assets released from restrictions 138,133 — 2,160 140,293 Total operating revenue 2,338,349 1,985,848 31,078 4,355,275 Expenses: Compensation: Academic salaries 574,977 — 15,269 590,246 Staff salaries 588,203 690,219 990 1,279,412 Benefits 300,137 169,422 5,465 475,024 Total compensation 1,463,317 859,641 21,724 2,344,682 Other operating expenses: Utilities, alterations, and repairs 52,670 30,051 2,388 85,109 Depreciation 199,581 117,275 4,471 321,327 Interest 126,096 39,416 1,059 166,571 Supplies, services, and other 520,073 876,703 13,187 1,409,963 Total other operating expenses 898,420 1,063,445 21,105 1,982,970 Total operating expenses 2,361,737 1,923,086 42,829 4,327,652 Excess (deficiency) of operating revenue over expenses $ (23,388) 62,762 (11,751) 27,623

47 (Continued) Schedule 2 THE UNIVERSITY OF CHICAGO Consolidating Statement of Activities Year ended June 30, 2017 (In thousands of dollars)

Medical 2017 University Center MBL Consolidated Changes in net assets without donor restrictions: Nonoperating: Investment gains $ 57,181 47,765 329 105,275 Net periodic benefit cost other than service cost (16,195) (290) — (16,485) Defined benefit pension plan curtailment (partial) 64,241 — — 64,241 Other postretirement benefit changes 31,778 2,266 625 34,669 Change in value of derivative instruments 20,531 44,863 2,007 67,401 Loss on debt refinancing — (27,028) — (27,028) Contribution of Ingalls Health System net assets — 309,740 — 309,740 Other, net (39,189) (2,655) 9,669 (32,175) Nonoperating changes in net assets without donor restrictions 118,347 374,661 12,630 505,638 Increase in net assets without donor restrictions 94,959 437,423 879 533,261 Changes in net assets with donor restrictions: Private gifts 327,674 3,683 3,232 334,589 Endowment payout 923 — — 923 Investment gains 201,392 7,582 3,332 212,306 Contribution of Ingalls Health System net assets — 13,122 — 13,122 Other, net 33,665 (6,518) (603) 26,544 Net assets released from restrictions (138,133) — (2,160) (140,293) Increase in net assets with donor restrictions 425,521 17,869 3,801 447,191 Increase in net assets 520,480 455,292 4,680 980,452 Net assets at beginning of year 5,957,641 1,315,653 165,489 7,438,783 Net assets at end of year $ 6,478,121 1,770,945 170,169 8,419,235

See accompanying independent auditors’ report.

48 Schedule 3 THE UNIVERSITY OF CHICAGO

Consolidating Statement of Cash Flows

Year ended June 30, 2017

(In thousands of dollars)

Medical 2017 University Center MBL Consolidated Cash flows from operating activities: Increase in net assets $ 520,480 455,292 4,680 980,452 Adjustments to reconcile increase in net assets to net cash provided by (used in) operating activities: Contribution of Ingalls Health System net assets — (322,862) — (322,862) Depreciation 199,581 117,275 4,471 321,327 Change in value of derivative instruments (20,531) (48,820) (2,007) (71,358) Loss on debt refinancing — 27,028 — 27,028 Loss on disposal of land, buildings, equipment, and books 10,469 91 (23) 10,537 Gain on sale of property (44,687) — — (44,687) Net gain on investments (594,027) (74,763) (8,070) (676,860) Private gifts and grants restricted for long-term investment (327,674) (11,265) (5) (338,944) Other nonoperating changes 138,040 78,268 (8,908) 207,400 Postretirement benefit changes (79,824) (2,266) (2,285) (84,375) Changes in operating assets and liabilities: Notes and accounts receivable (3,663) (111,222) 1,076 (113,809) Prepaid expenses and other assets (68,979) (38,123) 896 (106,206) Accounts payable and other liabilities 64,124 75,736 865 140,725 Self-insurance liability (778) (1,732) — (2,510) Total adjustments (727,949) (312,655) (13,990) (1,054,594) Net cash provided by (used in) operating activities (207,469) 142,637 (9,310) (74,142) Cash flows from investing activities: Purchase of investments (1,810,457) (402,496) (3,710) (2,216,663) Proceeds from sale of investments 1,997,034 488,139 6,025 2,491,198 Contribution of Ingalls Health System — 28,003 — 28,003 Acquisition of land, buildings, equipment, and books (232,353) (209,244) (2,973) (444,570) Proceeds from sale of property 64,248 — 468 64,716 Loans disbursed (2,976) — — (2,976) Principal collected on loans 7,914 — — 7,914 Net cash provided by (used in) investing activities 23,410 (95,598) (190) (72,378) Cash flows from financing activities: Proceeds from issuance of debt instruments 1,528,265 259,396 — 1,787,661 Principal payments on debt instruments (1,526,832) (222,321) (772) (1,749,925) Proceeds from private gifts and grants restricted for long-term investment 154,533 4,747 (574) 158,706 Other nonoperating changes (9,426) (71,750) 9,519 (71,657) Net cash provided by (used in) financing activities 146,540 (29,928) 8,173 124,785 Increase (decrease) in cash and cash equivalents (37,519) 17,111 (1,327) (21,735) Cash and cash equivalents at: Beginning of year 48,579 20,335 3,205 72,119 End of year $ 11,060 37,446 1,878 50,384 Supplemental disclosure of cash flow information: Cash paid for interest $ 135,994 41,907 1,067 178,968 Change in construction payable (8,166) (39,109) 475 (46,800)

See accompanying independent auditors’ report.

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APPENDIX C

DEFINITIONS AND SUMMARY OF INDENTURE

APPENDIX C

DEFINITIONS AND SUMMARY OF THE INDENTURE

TABLE OF CONTENTS

HEADING PAGE

DEFINITIONS OF CERTAIN TERMS ...... C-1

SUMMARY OF THE INDENTURE ...... C-4 Pledge and Assignment to Trustee ...... C-4 Source of Payment of Bonds; General Unsecured Obligations ...... C-4 Payment of Principal and Interest ...... C-4 Issuance and Delivery of Additional Bonds ...... C-5 Closed Proceeds Fund ...... C-6 Revenue Fund ...... C-6 Optional Redemption Fund ...... C-6 Investment of Funds ...... C-7 Trust Funds ...... C-7 General Covenants ...... C-7 Extension of Payment; Events of Default ...... C-8 Acceleration ...... C-10 Remedies; Rights of Owners ...... C-10 Right of Owners to Direct Proceedings ...... C-11 Application of Moneys ...... C-11 Remedies Vested in Trustee ...... C-13 Rights and Remedies of Owners ...... C-13 Termination of Proceedings ...... C-13 Waiver of Events of Default ...... C-14 Supplemental Indentures Not Requiring Consent of Owners ...... C-14 Supplemental Indentures Requiring Consent of Owners ...... C-15 Satisfaction of the Indenture ...... C-16 Liability of University ...... C-17 Payment of a Portion of the Bonds ...... C-17 Unclaimed Moneys ...... C-18 Holidays ...... C-18

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APPENDIX C

The definitions of certain words and terms used in this APPENDIX C are set forth below under the caption “DEFINITIONS OF CERTAIN TERMS.” Reference is hereby made to the Indenture for the definition of any capitalized term used, but not otherwise defined, in this APPENDIX C.

DEFINITIONS OF CERTAIN TERMS

“Additional Bonds” means any additional bonds authorized to be issued by the University pursuant to the terms and conditions hereof in addition to the Series 2018C Bonds.

“Authorized Denominations” means $1,000 and any integral multiple thereof.

“Authorized Newspaper” means The Bond Buyer or The Wall Street Journal (national edition) or any successor thereto.

“Authorized University Representative” means any person at the time designated to act on behalf of the University by written certificate furnished to the Trustee, containing the specimen signature of that person and signed on behalf of the University by a duly authorized officer. That certificate may designate an alternate or alternates. If no such certificate is delivered, the Authorized University Representatives shall be its Chairman of the Board of Trustees, its President, its Vice President and Chief Financial Officer or any other representative of the University duly authorized by the University.

“Bond” or “Bonds” means the Series 2018C Bonds and any Additional Bonds.

“Bond Payment Date” means each Interest Payment Date and any other date on which principal of (whether by reason of maturity, redemption or acceleration), premium, if any, or interest on a Bond is required to be paid to the Owner thereof.

“Bond Purchase Agreement” means (a) with respect to the Series 2018C Bonds, one or more bond purchase agreements between the University and the underwriters named therein, including all amendments thereof and supplements thereto, providing for the sale of the Series 2018C Bonds, and (b) with respect to any series of Additional Bonds, one or more similar agreements executed and delivered in connection with the sale of such series of Additional Bonds.

“Business Day” means any day other than a Saturday, Sunday, or holiday or a day on which banks located in the city in the United States of America in which the designated corporate trust office of the Trustee is located is required or authorized to close, or on which The New York Stock Exchange is closed.

“Closed Proceeds Fund” means the fund by that name created by the Indenture. See “SUMMARY OF INDENTURE—CLOSED PROEEDS FUND” herein.

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“Counsel” means an attorney duly admitted to practice law before the highest court of any state of the United States of America and, without limitation, may include legal counsel for the University or the Trustee.

“DTC” means The Depository Trust Company, a New York corporation, and its successors and assigns.

“Eligible Investments” means any investments permitted to be made by the University by law and which are of a type permitted by the University’s then current investment policies and which mature or are otherwise available for payment as needed.

“Event of Default” or “event of default” means any of the events of default listed under the caption “SUMMARY OF INDENTURE—EXTENSION OF PAYMENT; EVENTS OF DEFAULT––Events of Default” herein.

“Government Obligations” means direct obligations of, or obligations the timely payment of principal of and interest on which are fully guaranteed by, the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America and including certificates or other instruments evidencing direct ownership interests in such direct obligations of the United States of America such as “CATS,” “TIGRS,” Treasury Receipts and Stripped Treasury Coupons), including (a) evidences of a direct ownership interest in future interest or principal payments on obligations issued or guaranteed by the United States of America, which obligations are held in a custody account by a custodian pursuant to the terms of a custody agreement and (b) obligations issued by any state of the United States of America or any political subdivision, public instrumentality or public authority of any state of the United States of America, which obligations are fully secured by and payable solely from direct obligations of, or obligations the timely payment of principal and interest on which are fully guaranteed by, the United States of America.

“Indenture” means the Indenture dated as of September 1, 2018, between the University and the Trustee, as it may from time to time be amended or supplemented pursuant to the terms thereof.

“Interest Payment Date” means each April 1 and October 1, commencing October 1, 2018.*

“Optional Redemption Fund” means the fund by that name created by the Indenture. See “SUMMARY OF INDENTURE—OPTIONAL REDEMPTION FUND” herein.

“Outstanding” or “Bonds Outstanding” means all Bonds which have been duly authenticated and delivered by the Trustee under the Indenture, except:

* Preliminary, subject to change.

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(i) Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity;

(ii) Bonds for the payment or redemption of which either cash funds or Government Obligations not redeemable prior to maturity without the consent of the owners thereof shall have been theretofore deposited with the Trustee (whether upon or prior to the maturity date or redemption date of any such Bonds); provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Trustee, shall have been filed with the Trustee; and

(iii) Bonds in lieu of which others have been authenticated under the Indenture.

“Owner” or “Owner of the Bonds” means the registered owner of any fully registered Bond as shown on the Bond registration books of the Trustee.

“Person” means any natural person, firm, joint venture, association, partnership, limited liability company, business trust, corporation, public body, agency or political subdivision thereof or any similar entity or organization.

“Purchasers” means (a) with respect to the Series 2018C Bonds, Wells Fargo Securities, LLC and the other underwriters named in the Bond Purchase Agreement and (b) with respect to any Additional Bonds, the underwriters named in the Bond Purchase Agreement relating to such Additional Bonds.

“Record Date” means the 15th day of the calendar month immediately preceding each Interest Payment Date for the Bonds.

“Revenue Fund” means the fund by that name created by the Indenture. See “SUMMARY OF INDENTURE—REVENUE FUND” herein.

“Series 2018C Bonds” means one or more of the University’s Taxable Fixed Rate Bonds, Series 2018C issued under the Indenture.

“Trustee” means Wells Fargo Bank, National Association, Chicago, Illinois, and any successor trustee under the Indenture.

“University” means The University of Chicago, an Illinois not for profit corporation.

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SUMMARY OF THE INDENTURE

The following is a summary of certain provisions of the Indenture. This summary does not purport to be complete, and all references to the Indenture in this Offering Circular are qualified in their entirety by reference to the Indenture, copies of which are available from the Trustee.

PLEDGE AND ASSIGNMENT TO TRUSTEE

In order to secure the payment of the principal of, premium, if any, and interest on the Bonds to be issued under the Indenture according to their tenor, purport and effect, and in order to secure the performance and observance of all the covenants and conditions in the Indenture and in such Bonds contained and in order to declare the terms and conditions upon which the Bonds are issued, authenticated, delivered, secured and accepted by all persons who shall from time to time be or become Owners thereof, and for and in consideration of the mutual covenants therein contained, of the acceptance by the Trustee of the trusts created by the Indenture, and the purchase and acceptance of the Bonds by the Owners or obligees thereof, the University has executed and delivered the Indenture and has assigned and pledged to the Trustee, its successors in the trust and its assigns forever, to the extent provided in the Indenture, all moneys held pursuant to the Indenture.

SOURCE OF PAYMENT OF BONDS; GENERAL UNSECURED OBLIGATIONS

The Bonds, together with interest thereon, shall be general unsecured obligations of the University payable from amounts deposited under the Indenture (including, under certain circumstances, income from the temporary investment thereof) and shall be a valid claim of the respective Owners thereof against the funds and other moneys held by the Trustee for the benefit of the Bonds. All right, title and interest of the Trustee in and to the Indenture (excepting only certain rights of the Trustee to indemnification and to the payment of its expenses) are pledged and assigned as security for the Bonds pursuant to the Indenture. The University has consented to such pledge and assignment as security in the Indenture. The University has agreed in the Indenture to pay or cause to be paid to the Trustee at its designated corporate trust office all payments on the Bonds and all other payments required by the Indenture. The Trustee further agreed in the Indenture to take all necessary action for the redemption from time to time of the Bonds as required by the Indenture or at the request of the University.

PAYMENT OF PRINCIPAL AND INTEREST

The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and such principal and premium, if any, shall be payable at the designated corporate trust office of the Trustee, or its successor as Trustee, if any. Payment of the interest on any Bond on any Interest Payment Date shall be made to the person appearing on the Bond registration books of the Trustee as the Owner thereof and shall be paid by check or draft mailed to the Owner at his address as it appears on such registration books or at such other address as is furnished to the Trustee in writing by such

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Owner, or upon request, by electronic transfer of funds, but only as to any depository which is holding any Bonds or any Owner of an aggregate principal amount of $1,000,000 or more of Bonds, to such wire transfer address within the United States as the depository or the Owner shall direct in such request not later than the close of business on the Record Date; provided, however, that electronic transfers of such funds may be made to a depository which is holding any Bonds without such request if such transfers are required by a letter of representations or similar agreement with such depository.

ISSUANCE AND DELIVERY OF ADDITIONAL BONDS

So long as no Event of Default under the Indenture has then occurred and is continuing, Additional Bonds may be issued, authenticated and delivered under the Indenture for the purpose of consolidating such Additional Bonds with the Series 2018C Bonds for the purposes of CUSIP identification, upon request of the University delivered to the Trustee and the satisfaction of the requirements set forth in the Indenture. To the extent any such series of Additional Bonds is issued, such Additional Bonds shall have the same form and terms as the Series 2018C Bonds (other than the date of issuance and, under certain circumstances, the date from which interest thereon will begin to accrue), including being subject to redemption at the same times and at the same redemption price as the Series 2018C Bonds, and will carry the same right to receive accrued and unpaid interest as the Series 2018C Bonds, and such Additional Bonds will form a single series with the Series 2018C Bonds.

Before the Trustee authenticates and delivers any series of Additional Bonds, the Trustee must receive the following items:

(a) Original executed counterparts of any amendments or supplements to the Indenture entered into in connection with the issuance of the Additional Bonds, which are necessary or advisable, in the opinion of counsel to the University, to provide that the Additional Bonds will be issued in compliance with the Indenture;

(b) A certified copy of all resolutions adopted and proceedings had by the University authorizing execution and delivery of the Additional Bonds;

(c) A request and authorization to the Trustee on behalf of the University, signed by an Authorized University Representative, to authenticate and deliver the Additional Bonds to, or on the order of, the purchaser thereof upon payment to the Trustee of the amount specified therein (including without limitation, any accrued interest), which amount shall be deposited as provided in the applicable supplemental indenture;

(d) An opinion of counsel to the University to the effect that: (i) the documents submitted to the Trustee in connection with the request then being made comply with the requirements of the Indenture; (ii) the issuance of the Additional Bonds has been duly authorized; and (iii) all conditions precedent to the delivery of the Additional Bonds have been fulfilled;

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(e) An opinion of counsel to the University, to the effect that: when executed for and in the name and on behalf of the University and when authenticated and delivered by the Trustee, those Additional Bonds will be valid and legal limited obligations of the University payable in accordance with their terms and will be secured under the Indenture equally and on a parity with all other Bonds at the time outstanding under the Indenture, except to the extent otherwise provided in any amendments to the Indenture and applicable to such Additional Bonds; and

(f) Such further documents, certificates and opinions as may be reasonably required by the Trustee.

When (x) the documents listed above have been received by the Trustee, and (y) the Additional Bonds have been executed and authenticated, the Trustee shall deliver the Additional Bonds to or on the order of the Purchasers thereof, but only on payment to the Trustee of the specified amount (including without limitation, any accrued interest) set forth in the request and authorization to which reference is made in paragraph (c) above.

CLOSED PROCEEDS FUND

The Trustee shall establish a separate account to be known as the “Closed Proceeds Fund” (the “Closed Proceeds Fund”). On the date of issuance of the Series 2018C Bonds, the Trustee shall deposit the net proceeds of the Series 2018C Bonds into the Closed Proceeds Fund. The Trustee shall disburse such net proceeds to or upon the order of the University for the purposes described in the forepart of this Offering Circular.

REVENUE FUND

The Trustee is required to establish and maintain so long as any of the Bonds are outstanding a separate account to be known as the Revenue Fund (the “Revenue Fund”). On or before each Bond Payment Date (other than with respect to an optional redemption date), the University shall pay to the Trustee for deposit in the Revenue Fund moneys sufficient for the payment of interest and principal (whether at maturity, by mandatory sinking fund redemption or upon acceleration) on the Bonds (in that order) due on such Bond Payment Date. Such amounts shall be held in the Revenue Fund until disbursed as provided in the Indenture. Moneys in the Revenue Fund shall be used by the Trustee to pay interest and principal (whether at maturity, by mandatory sinking fund redemption or upon acceleration) on the Bonds (in that order) as they become due. Payment of the principal of the Bonds through the Revenue Fund shall be without premium.

OPTIONAL REDEMPTION FUND

The Trustee is required to establish and maintain so long as any of the Bonds are outstanding a separate account to be known as the “Optional Redemption Fund” (the “Optional Redemption Fund”). In the event funds are deposited by the University with the Trustee for optionally redeeming Bonds, all such funds shall be deposited in the Optional Redemption Fund.

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Funds on deposit in the Optional Redemption Fund shall be used, first, to make up any deficiencies existing in the Revenue Fund established under the Indenture for the payment of interest and principal on the Bonds in the priority as stated and, second, for the optional redemption of Bonds in accordance with the provisions of the Indenture. See discussion in the forepart of this Offering Circular under the heading “THE SERIES 2018C BONDS—Redemption— Optional Redemption.”

INVESTMENT OF FUNDS

Moneys in the Closed Proceeds Fund, Revenue Fund and the Optional Redemption Fund shall be invested only in Eligible Investments (including Eligible Investments of the Trustee or banks affiliated with the Trustee), only upon a written request of the University filed with the Trustee, upon which the Trustee is entitled to rely and act. Under the provisions of the Indenture, the Trustee is authorized to trade with itself, or with any bank affiliated with it, in the purchase and sale of Eligible Investments. The Trustee shall not be liable or responsible for any loss resulting from any such investment. All income derived from the investment of moneys on deposit in the Revenue Fund shall be retained therein. All income derived from the investment of moneys on deposit in the Closed Proceeds Fund or the Optional Redemption Fund shall be retained therein or transferred to the Revenue Fund, as directed by the University. The University acknowledges in the Indenture that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory agency grant the University the right to receive brokerage confirmations of security transactions, the University waives receipt of such confirmations. The Trustee shall furnish to the University periodic statements which include details of all investment transactions made by the Trustee. The University may receive brokerage confirmations at no additional cost upon written request.

TRUST FUNDS

All moneys received by the Trustee under the terms of the Indenture shall not be subject to lien or attachment of any creditor of the University other than the Trustee for its fees and expenses and the Owner of the Bonds. Such moneys shall be held in trust and applied in accordance with the provisions of the Indenture.

GENERAL COVENANTS

Payment of Principal, Premium and Interest. The University covenants that it will promptly pay or cause the payment of the principal of, premium, if any, and interest on every Bond issued under the Indenture at the place, on the dates and in the manner provided in the Indenture and in the Bonds according to the true intent and meaning thereof. The principal of, premium, if any, and interest on the Bonds are payable from revenues of the University, which revenues and other amounts are specifically pledged under the Indenture to the payment thereof in the manner and to the extent specified in the Indenture. The regularly scheduled payments of the interest due on the Bonds shall be paid by the University in semi-annual installments on or before each Interest Payment Date, and the payments on the principal (whether at maturity, by mandatory sinking fund redemption or upon acceleration) and premium, if any, due on the Bonds

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shall be paid by the University on or before each Bond Payment Date on which they are due. Notwithstanding the foregoing, if on a Bond Payment Date, the Trustee has not received moneys sufficient to make the required payments on the Bonds, the Trustee shall promptly notify the University of such insufficiency by telephone or telecopy and confirm such notification by written notice, and the University shall forthwith pay the amount of any such deficiency to the Trustee.

The University agrees in the Indenture that its obligation to make all payments of principal (whether at maturity, by mandatory sinking fund redemption or upon acceleration) of, premium, if any, and interest on the Bonds shall be absolute, irrevocable and unconditional and shall not be subject to any defense (other than payment) or any right of set-off, counterclaim or recoupment arising out of any breach by the Trustee of any obligation to the University, whether under the Indenture or otherwise, or out of any indebtedness or liability at any time owing to the University by the Trustee.

Performance of Covenants. The University covenants in the Indenture that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Indenture and in any and every Bond executed, authenticated and delivered thereunder.

Appointment of Successor Trustee. Whenever necessary to avoid or fill a vacancy in the office of the Trustee, the University or, in the event that an event of default has occurred and is continuing, the Owners of 25% or more of the then Outstanding Bonds will appoint a successor Trustee in the manner provided in the Indenture.

Inspection of Books. The University covenants and agrees in the Indenture that all books and documents in its possession relating to the Indenture and the revenues derived therefrom shall at all times be open to inspection by such accountants or other agents as the Trustee may from time to time designate.

EXTENSION OF PAYMENT; EVENTS OF DEFAULT

Extension of Payment; Penalty. In case the time for the payment of principal of, premium, if any, or interest on any Bonds shall be extended, whether or not such extension be by or with the consent of the University, such principal, premium, if any, or interest so extended shall not be entitled, in case an event of default occurs under the Indenture, to the benefit or security of the Indenture except subject to the prior payment in full of the principal of and interest on all Bonds then outstanding, the time for the payment of which shall not have been extended.

Events of Default. Each of the following events is an “event of default” under the Indenture:

(a) payment of any installment of interest on any of the Bonds shall not be made when the same shall become due and payable; or

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(b) payment of the principal or premium, if any, of any of the Bonds shall not be made when the same shall become due and payable, either at maturity or by proceedings for redemption or through failure to fulfill any payment to any fund under the Indenture or otherwise; or

(c) the University shall fail to perform any of its covenants contained in the Indenture and such failure shall continue for a period of 30 days after notice of such default shall have been given to the University by the Trustee, unless the nature of the default is such that it cannot be remedied within the 30-day period and the Trustee agrees in writing to an extension of time of up to 60 days after the original notice of such default and the University institutes corrective action within the period agreed upon and diligently pursues such action until the default is remedied; or

(d) any representation or warranty made by the University in the Indenture or any statement or certificate furnished to the Trustee or the purchaser of any Bonds, in connection with the sale of any Bonds, or furnished by the University pursuant to the Indenture, proves untrue in any material respect as of the date of the issuance or making thereof and shall not be made good within 30 days after notice thereof to the University by the Trustee or such purchaser, unless the nature of the default is such that it cannot be remedied within the 30-day period but can be remedied and the Trustee agrees in writing to an extension of time of up to 60 days after the original notice of such default and the University institutes corrective action within the period agreed upon and diligently pursues such action until the default is remedied; or

(e) a default in any payment of principal of or of premium, if any, or interest on, any other obligation of the University for borrowed money in excess of $15,000,000 continuing beyond the expiration of the applicable grace period, if any, provided for therein or in the performance of any other agreement, term or condition contained in any agreement under which such obligation is created, and which is continuing beyond the expiration of the applicable grace period, if any, provided for therein, which default shall result in or permit the declaring due and payable of such obligation prior to the date on which it would otherwise have become due and payable; provided, however, that if such default shall be remedied or cured by the University or be waived by the holders of such obligation, and any such declaration be rescinded or annulled, then the Event of Default thereunder by reason thereof shall be deemed to have been thereupon cured; or

(f) the University admits insolvency or bankruptcy or its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the University, or for the major part of its property; or

(g) a trustee, custodian or receiver is appointed for the University or for the major part of its property and is not discharged within 30 days after such appointment; or

(h) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or similar law for

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the relief of debtors are instituted by or against the University (other than bankruptcy proceedings instituted by the University against third parties) and, if instituted against the University, are allowed against the University or are consented to or are not dismissed, stayed or otherwise nullified within 30 days after such institution; or

(i) any judgment, writ or warrant of attachment or of any similar process in any amount in excess of $15,000,000 shall be entered or filed against the University or against any of its property and remains unvacated, unpaid, unbonded, unstayed, uncontested or unappealed in good faith for a period of 60 days.

ACCELERATION

Upon the occurrence and continuation of any Event of Default specified under the subcaption “EXTENSION OF PAYMENT; EVENTS OF DEFAULT—Events of Default” above and subject to the provisions of the Indenture described above under “EXTENSION OF PAYMENT; EVENTS OF DEFAULT––Extension of Payment; Penalty,” the Trustee may and, upon the written request of the Owners of not less than a majority in the principal amount of the Bonds then outstanding under the Indenture (exclusive of Bonds then owned or held by or for the benefit of the University), after being indemnified at its option pursuant to the provisions of the Indenture, shall declare the entire principal amount of the Bonds then outstanding under the Indenture and the interest accrued thereon, immediately due and payable.

The foregoing provisions, however, are subject to the condition that, if at any time after the principal of the Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as provided in the Indenture, the University shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon the Bonds and principal and premium, if any, on the Bonds that shall have become due otherwise than by acceleration (with interest on overdue installments of interest (to the extent permitted by law) and on such principal at the rate borne by the Bonds to the date of such payment or deposit) and the expenses of the Trustee, and any and all Events of Default under the Indenture, other than the nonpayment of principal of, premium, if any, and accrued interest on the Bonds that shall have become due by acceleration, shall have been remedied, then and in every such case the Owners of a majority in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds then owned or held by the University), by written notice to the Trustee, may waive all Events of Default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or affect any subsequent Event of Default or shall impair any right consequent thereon.

REMEDIES; RIGHTS OF OWNERS

Upon the occurrence and continuance of an Event of Default specified under the subcaption “EXTENSION OF PAYMENT; EVENTS OF DEFAULT—Events of Default” above, the Trustee may pursue any available remedy by suit, at law or in equity, to enforce the payment of the principal of and interest on the Bonds then outstanding.

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If an Event of Default shall have occurred, and if requested to do so by the Owners of a majority in aggregate principal amount of Bonds then Outstanding (exclusive of Bonds then owned or held by or for the benefit of the University) and if indemnified as provided in the Indenture, the Trustee shall be obliged to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by Counsel, shall deem most expedient in the interests of the Owners.

No remedy conferred upon or reserved to the Trustee or the Owners by the terms of the Indenture is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to Owners under the Indenture or now or hereafter existing at law or in equity or by statute.

No delay or omission to exercise any right or power accruing upon the occurrence of an Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient.

No waiver of any Event of Default under the Indenture, whether by the Trustee or by the Owners, shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies consequent thereon.

RIGHT OF OWNERS TO DIRECT PROCEEDINGS

Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of Bonds then outstanding (exclusive of Bonds then owned or held by or for the benefit of the University) shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver or any other proceedings thereunder; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture.

APPLICATION OF MONEYS

All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Indenture shall, after payment of costs and expenses of the proceedings resulting in the collection of such moneys and of any outstanding fees, expenses, liabilities and advances incurred or made by the Trustee, including reasonable attorneys’ fees and expenses, and after the creation of a reasonable reserve for anticipated fees, costs and expenses of the Trustee in connection therewith, be deposited in the Revenue Fund and all moneys in the Revenue Fund shall be applied as follows:

(a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied:

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FIRST - To the payment to the persons entitled thereto of all interest then due on the Bonds in the order of the maturity of such interest and, if the amount available shall not be sufficient to pay in full any particular interest payment due, then to the payment ratably, according to the amounts due, to the persons entitled thereto, without any discrimination or privilege; and

SECOND - To the payment to the persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture) in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due, and if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto without any discrimination or privilege.

(b) If the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied to the payment of the principal, premium, if any, and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or premium or of interest over principal or premium, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal, premium, if any, and interest, to the persons entitled thereto without any discrimination or privilege.

(c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of the Indenture, then, subject to the provisions of subsection (b) above, in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of subsection (a) above.

Whenever moneys are to be applied pursuant to the above provisions, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate on the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the holder of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

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Whenever all principal of, premium, if any, and interest on all Bonds have been paid under the above provisions and all expenses and charges of the Trustee have been paid, any balance remaining in any of the funds established under the Indenture shall be paid to the University.

REMEDIES VESTED IN TRUSTEE

All rights of action (including the right to file proof of claims) under the Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or proceedings instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Owners of the Bonds and any recovery of judgment shall be for the equal benefit of the holders of the outstanding Bonds.

RIGHTS AND REMEDIES OF OWNERS

No holder of any Bond shall have any right to institute any suit, action or proceedings in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy thereunder, unless a default shall have become an Event of Default and the Owners of not less than a majority in aggregate principal amount of Bonds then Outstanding (exclusive of Bonds then owned or held by or for the benefit of the University) shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers granted to the Trustee or to institute such action, suit or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture, nor unless the Trustee shall thereafter fail or refuse to exercise such powers or to institute such action, suit or proceeding in its, his or their own name or names; and such notification, request and offer of indemnity are declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to any action or cause of action for the enforcement of the Indenture, or for the appointment of a receiver or for any other remedy thereunder; it being understood and intended that no one or more holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by its, his or their action or to enforce any right thereunder except in the manner provided in the Indenture, and that all proceedings at law or in equity shall be instituted and maintained in the manner provided therein and for the equal benefit of the Owners of all Bonds then outstanding. Nothing in the Indenture contained shall, however, affect or impair the right of any Owner to enforce the payment of the principal of and interest on any Bond at or after maturity thereof or the obligation of the University to pay the principal of and interest on each of the Bonds issued under the Indenture to the respective Owners thereof at the time, place, from the source and in the manner provided in the Bonds.

TERMINATION OF PROCEEDINGS

In case the Trustee shall have proceeded to enforce any right under the Indenture by the appointment of a receiver, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then and in every such case

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the University and the Trustee shall be restored to their former positions and rights under the Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceeding had been taken.

WAIVER OF EVENTS OF DEFAULT

The Trustee may in its discretion and shall, upon the written request of the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds then owned or held by or for the benefit of the University) by written notice to each Owner, waive all Events of Default thereunder and their consequences and rescind and annul any declaration and its consequences; provided, however, that there shall not be waived (a) any Event of Default in the payment of the principal of any outstanding Bonds at the date of maturity or upon mandatory sinking fund redemption or (b) any Event of Default in the payment when due of the interest on such Bonds unless prior to such waiver or rescission, all arrears of payments of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds in respect of which such event of default shall have occurred on overdue installments of interest, and all arrears of payments of principal when due, as the case may be, and all expenses of the Trustee incurred in connection with such Event of Default shall have been paid or provided for, and in case of any such waiver or rescission, then and in every such case the Trustee and the Owners shall be restored to their former positions and rights under the Indenture, but no such waiver or rescission shall extend to any subsequent or other Event of Default or impair any right consequent thereon.

SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF OWNERS

The University and the Trustee may without the consent of, or notice to, any of the Owners, enter into an indenture or indentures supplemental to the Indenture, as shall not be inconsistent with the terms and provisions thereof for any one or more of the following purposes:

(a) to cure any ambiguity or formal defect or omission in the Indenture;

(b) to grant to or confer upon the Trustee for the benefit of the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners or the Trustee or either of them;

(c) to subject additional revenues, properties or collateral to the lien and pledge of the Indenture;

(d) to modify, amend or supplement the Indenture or any indenture supplemental thereto in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute hereafter in effect;

(e) to modify, amend or supplement the Indenture or any indenture supplemental thereto in such manner as to permit the issuance of coupon Bonds under the

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Indenture and to permit the exchange of Bonds from fully registered form to coupon form and vice versa;

(f) to provide for certificated Bonds;

(g) to amend the Indenture in any other respect which, in the judgment of the Trustee, is not to the material detriment of the Owners;

(h) to modify, amend or supplement the Indenture or any indenture supplemental thereto in such manner as to permit any required qualification thereof under any federal statute hereafter in effect or under any state Blue Sky law and, in connection therewith, if they so determine, to add to the Indenture or any indenture supplemental thereto, such other terms, conditions and provisions which, in the judgment of the Trustee, are not to the prejudice of the Owners of the Bonds as may be permitted or required by said federal statute or Blue Sky law;

(i) to provide for the issuance of any Additional Bonds; and/or

(j) to provide for the refunding, advance refunding or provision for payment of all or a portion of one or more series of the Bonds.

SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF OWNERS

Exclusive of supplemental indentures summarized above under the subcaption “SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF OWNERS” above and subject to the terms and provisions contained below, and not otherwise, the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds then owned or held by or for the benefit of the University) shall have the right, from time to time, anything contained in the Indenture to the contrary notwithstanding, to consent to and approve the execution by the University and the Trustee of such other indenture or indentures supplemental thereto as shall be deemed necessary and desirable by the University for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any supplemental indenture; provided, however, that nothing in the Indenture shall permit or be construed as permitting:

(a) an extension of the stated maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying of interest on any Bonds, without the consent of the Owner of such Bonds; or

(b) a reduction in the amount or extension of the time of any payment required to be made to the Revenue Fund without the consent of the holders of all Bonds at the time outstanding which would be affected by the action to be taken; or

(c) a reduction in the aforesaid aggregate principal amount of Bonds the Owners of which are required to consent to any such supplemental indenture, without the

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consent of the holders of all the Bonds at the time outstanding which would be affected by the action to be taken; or

(d) a modification of the rights, duties or immunities of the Trustee without the written consent of the Trustee.

The Trustee shall mail to all Owners by first class mail, postage prepaid, notice of a supplemental indenture which affects any rights of the Owners as set forth above. Such notice shall briefly set forth the nature of such proposed amendment and shall state that copies of the instrument embodying the same are on file at the designated corporate trust office of the Trustee for inspection by all Owners. If the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding at the time of execution of any such amendment (exclusive of Bonds then owned or held by the University) shall have consented to and approved the execution thereof, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the University from executing the same or from taking any action pursuant to the provisions thereof.

SATISFACTION OF THE INDENTURE

If the University shall pay and discharge the entire indebtedness on all Bonds outstanding in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest on all Bonds outstanding, as and when the same become due and payable; or

(b) by depositing with the Trustee, in trust, at or before maturity, money in the full amount necessary to pay or redeem (when redeemable) all Bonds outstanding; or

(c) by delivering to the Trustee, for cancellation by it, all Bonds outstanding; or

(d) by depositing with the Trustee, in trust, cash and/or Government Obligations, not redeemable prior to the maturity thereof without the consent of the Owner thereof, in such amount as the Trustee shall determine, based upon a verification by a firm of nationally recognized independent certified public accountants or financial consultants, will, together with the income or increment at accrue thereon, be fully sufficient to pay or redeem (when applicable) and discharge the indebtedness on all Bonds at or before their maturity date; and if the University shall also pay or cause to be paid all other sums payable under the Indenture by the University, then and in that case the lien of the Indenture shall cease, determine and become null and void, and thereupon the Trustee shall, upon the written request of an Authorized University Representative, and upon receipt by the Trustee of a certificate of the University and an opinion of Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Indenture have been complied with, forthwith execute

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proper instruments acknowledging satisfaction of and discharging the lien the Indenture. The satisfaction and discharge of the Indenture shall be without prejudice to the rights of the Trustee to charge and be reimbursed by the University for any expenditures which it may thereafter incur in connection therewith.

Any moneys, funds, securities or other property remaining on deposit in the Closed Proceeds Fund, the Revenue Fund, the Optional Redemption Fund or in any fund or investment under the Indenture (other than the investments deposited in trust as above provided) shall, upon the full satisfaction of the Indenture, forthwith be transferred, paid over and distributed to the University.

The University may at any time surrender to the Trustee for cancellation by it any Bonds previously authenticated and delivered, which the University may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

LIABILITY OF UNIVERSITY

Upon the deposit with the Trustee, in trust, at or before maturity, of money or Government Obligations in the necessary amount to pay or redeem all outstanding Bonds (whether upon or prior to the maturity date or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Indenture, or provisions satisfactory to the Trustee shall have been made for the giving of such notice, the liability of the University in respect of such Bonds shall cease, and the Owners thereof shall thereafter be entitled only to payment out of the money or Government Obligations deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of the Indenture summarized below under the subcaption “UNCLAIMED MONEYS.”

PAYMENT OF A PORTION OF THE BONDS

If the University shall pay and discharge the indebtedness on any portion of the Outstanding Bonds in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest on such portion of the Outstanding Bonds as and when the same become due and payable; or

(b) by depositing with the Trustee, in trust, at or before maturity, money in an amount necessary to pay or redeem (when redeemable) such portion of the Outstanding Bonds; or

(c) by delivering to the Trustee, for cancellation by it, such portion of the Outstanding Bonds; or

(d) by depositing with the Trustee, in trust, cash and/or Government Obligations, not redeemable prior to the maturity thereof without the consent of the

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owner thereof, in such amount as the Trustee shall determine (at the option of the Trustee, on the basis of a verification by a firm of nationally recognized independent certified public accountants or financial consultants), will, together with the income or increment to accrue thereon, be fully sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such portion of the Outstanding Bonds at or before their maturity date;

and if the University shall also pay or cause to be paid all other sums payable under the Indenture by the University with respect to such portion of the Outstanding Bonds, and, if such portion of the Outstanding Bonds is to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Indenture or provisions satisfactory to the Trustee shall have been made for the giving of such notice, such portion of the Outstanding Bonds shall cease to be entitled to any lien, benefit or security under the Indenture. The liability of the University in respect of such portion of the Outstanding Bonds, if any, shall cease, and the Owners thereof shall thereafter be entitled to payment (to the exclusion of all other owners of Bonds) only out of the monies or Government Obligations deposited with the Trustee.

UNCLAIMED MONEYS

Any moneys deposited with the Trustee by the University in accordance with the terms and covenants of the Indenture, in order to redeem or pay the Bonds in accordance with the provisions of the Indenture, and remaining unclaimed by the Owners of the Bonds for one year after the date fixed for redemption or of maturity, as the case may be, shall, if the University is not at the time to the knowledge of the Trustee in default with respect to any of the terms and conditions of the Indenture or in the Bonds contained, be repaid by the Trustee to the University upon receipt of a written request of an Authorized University Representative therefor; and thereafter the Owners of the Bonds shall be entitled to look only to the University for payment thereof; provided, however, that the Trustee, before being required to make any such repayment, shall, at the expense of the University, effect publication in an Authorized Newspaper of a notice to the effect that such moneys have not been so applied and that after the date named in said notice any unclaimed balance of such moneys then remaining shall be returned to the University. Prior to such transfer, the Trustee shall receive from the University an agreement to indemnify and save the Trustee harmless from any and all loss, costs, liability and expense suffered or incurred by the Trustee by reason of having returned any such moneys to the University as provided in the Indenture.

HOLIDAYS

Any covenant in the Indenture required to be performed on any date which is not a Business Day may, at the option of the University, be performed on the first Business Day thereafter.

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The University of Chicago • Taxable Fixed Rate Bonds, Series 2018C