Of the Commonwealth System of Higher Education Taxable University Refunding Bonds, Series B of 2017

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or filing under the securities laws of any such jurisdiction. HAS NOTAXINGPOWER. INSTRUMENTALITY THEREOF(OTHER THANTHEUNIVERSITY).UNIVERSITY POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION, AGENCY OR POWER ATANYTIMEORINMANNER TOPLEDGETHECREDITORTAXING PRINCIPAL OFORINTERESTONTHE 2017BBONDS.THEUNIVERSITYHASNO (OTHER THANTHEUNIVERSITY)ISPLEDGEDFORPAYMENTOF THE OR ANYPOLITICALSUBDIVISION,AGENCYINSTRUMENTALITYTHEREOF THE FULLFAITHANDCREDITNORTAXINGPOWEROFCOMMONWEALTH FOR THEPAYMENTOFPRINCIPALORINTEREST ON THE2017BBONDS.NEITHER INSTRUMENTALITY THEREOF (OTHER THAN THE UNIVERSITY) SHALL BE LIABLE THE COMMONWEALTHNORANYPOLITICALSUBDIVISION,AGENCY OR INSTRUMENTALITY THEREOF(OTHERTHANTHEUNIVERSITY).NEITHER “COMMONWEALTH”) OR ANY POLITICAL SUBDIVISION, AGENCY OR OR INDEBTEDNESSOFTHECOMMONWEALTHPENNSYLVANIA (THE THE 2017BBONDSDONOTCONSTITUTEAN OBLIGATION UNIVERSITY. * Preliminary, subjecttochange. The dateofthisOfficial StatementisMarch__,2017. Interest Payable:March15andSeptember net incometax.See“TAXMATTERS”herein. personal propertytaxesinPennsylvania,andtheintereston2017BBondsisexemptfromPennsylvaniaincometaxcorporate income tax.UnderthelawsofCommonwealthPennsylvania,ascurrentlyenactedandconstrued,2017BBondsareexemptfrom NEW ISSUE–BOOK-ENTRYONLY March __,2017. Levine, LLC,Pittsburgh,Pennsylvania. Itisexpectedthatthe2017BBondswillbeavailablefordelivery toDTCinNewYork,Yorkonorabout Certain legal matters will be passed upon for the University by itsOfficeof General Counsel,and for the Underwriters by theircounsel, Campbell & the approvinglegalopinionofBallardSpahrLLP,Philadelphia,Pennsylvania, BondCounsel,tobefurnishedupondeliveryofthe2017BBonds. entire OfficialStatementtoobtaininformationessentialthemaking ofaninformedinvestmentdecision. considered inconnectionwithaninvestmentthe2017BBonds. with respecttothe2017BBonds.See“SECURITYFORTHEBONDS”herein. BONDS –Redemption”herein. of the2017BBonds,asmorefullydescribedin“BOOK-ENTRYONLYSYSTEMANDGLOBALCLEARANCEPROCEDURES”herein. turn isrequiredtoremitsuchprincipalorredemptionpriceandinteresttheDTCParticipantsforsubsequentdisbursementBeneficial Owners 2017B BondsareheldbyDTC,theprincipalorredemptionpriceofandinterestonwillbepayablewiretransferto whichin representing theirownershipinterestsinthe2017BBondspurchased. thereof. Purchasers of the 2017B Bonds will not receive physical certificates (except under certain circumstancesdescribed in the Indenture) depository forthe2017BBonds.Individualpurchaseswillbemadeinbook-entryformonly,principalamountsof$1,000andanyintegralmultiple be registeredinthenameofCede&Co.,asnomineeTheDepositoryTrustCompany,NewYork,York(“DTC”).DTCwillactsecurities herein. as trustee(the“Trustee”).Theproceedsofthe2017BBondswillbeusedbyUniversityforpurposesdescribedunder“PLANOFFINANCE” supplemented fromtimetoisreferredhereinafterasthe“Indenture”),byandbetweenUniversityU.S.BankNationalAssociation, Supplemental Indenture”;theGeneralIndentureasamendedandsupplementedbySecondfurther previously amendedandsupplemented,the“GeneralIndenture”)aSecondSupplementalIndentureofTrustdatedasMarch1,2017(the“Second Bonds, SeriesBof2017(the“2017BBonds”).The2017BBondsarebeingissuedpursuanttoanIndentureTrustdatedasJanuary1,(as In theopinionofBallardSpahrLLP,BondCounsel,intereston2017BBondsisnotexcludablefromgrossincomeforpurposesfederal THE 2017BBONDSAREUNSECUREDGENERALOBLIGATIONSOF The 2017BBondsareofferedbytheUnderwriterswhen,asandif issued bytheUniversityandacceptedUnderwriters,subjectto This coverpagecontainscertaininformationforquickreferenceonly. Itisnotintendedtobeasummaryofthisissue.Investorsmustreadthe An investmentinthe2017BBondsinvolvesrisk.See“BONDHOLDERS’ RISKS”hereinforadiscussionofcertainriskfactorswhichshouldbe The 2017BBondsaregeneral,unconditionalandunsecuredobligationsoftheUniversity.NospecificrevenuesUniversitypledged The 2017BBondsaresubjecttooptionalandmandatoryredemptionpriortheirstatedmaturity,asdescribedherein.See“THE Interest onthe2017BBondswillbepayableMarch15andSeptemberofeachyear,commencing15,2017.Solongas the The 2017BBondswillbeissuedinfullyregisteredformdenominationsof$1,000andanyintegralmultiplethereofand,whenissued, The UniversityofPittsburgh–OftheCommonwealthSystemHigherEducation(the“University”)isissuingitsTaxableRefunding HUNTINGTON INVESTMENT WELLS FARGOSECURITIES COMPANY PRELIMINARY OFFICIAL STATEMENT DATED MARCH 6, 2017 Taxable UniversityRefundingBonds,SeriesBof2017

Of theCommonwealthSystemofHigherEducation UNIVERSITY OF PITTSBURGH -

$105,000,000* J.P. MORGAN

PNC CAPITALMARKETS LLC BARCLAYS

Standard &Poor’s:“___” Ratings: Moody’s:“___” Dated: DateofIssuance

$105,000,000* University of Pittsburgh - Of the Commonwealth System of Higher Education Taxable University Refunding Bonds, Series B of 2017

Due Principal Interest September 15 Amount Rate Yield Price CUSIP† 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

______* Preliminary, subject to change.

† Copyright 2012, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the 2017B Bonds and neither the University nor the Underwriters make any representation with respect to such numbers or undertakes any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2017B Bonds as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2017B Bonds.

TABLE OF CONTENTS

Page

SUMMARY OF THE OFFERING ...... vii INTRODUCTION ...... 1 Purpose of the 2017B Bonds and the Plan of Finance ...... 1 The University ...... 1 Security for the 2017B Bonds ...... 2 Outstanding Indebtedness ...... 2 Bondholders' Risks ...... 2 Continuing Disclosure ...... 2 Underlying Documents ...... 2 ESTIMATED SOURCES AND USES OF PROCEEDS ...... 3 PLAN OF FINANCE ...... 3 THE 2017B BONDS ...... 3 Description of the 2017B Bonds ...... 3 Redemption ...... 4 Partial Redemption of Bonds ...... 5 Notice of Redemption ...... 5 Effect of Redemption ...... 6 Selection of Bonds for Redemption ...... 6 BOOK-ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES ...... 6 SECURITY FOR THE 2017B BONDS ...... 11 BONDHOLDERS' RISKS ...... 13 TAX MATTERS ...... 16 ERISA CONSIDERATIONS ...... 20 APPROVAL OF LEGALITY ...... 22 LITIGATION ...... 23 THE TRUSTEE ...... 23 UNDERWRITING ...... 23 CERTAIN RELATIONSHIPS ...... 24 RATINGS ...... 24 INDEPENDENT AUDITORS ...... 24 VERIFICATION REPORT ...... 24 CONTINUING DISCLOSURE ...... 24 OTHER MATTERS ...... 26 UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION ...... APPENDIX A UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2015 AND 2016 ...... APPENDIX B DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ...... APPENDIX C PROPOSED FORM OF BOND COUNSEL OPINION...... APPENDIX D

Information contained in this Official Statement was obtained in part from officials of the University of Pittsburgh – Of the Commonwealth System of Higher Education (the "University"), trade and statistical services, and from other sources which are deemed to be reliable. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the 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. All quotations from and summaries and explanations of provisions of laws and documents in this Official Statement do not purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact. The information and expressions of opinion contained herein are subject to change without notice; neither the delivery of this Official Statement nor any sale of the 2017B Bonds shall under any circumstances create any implication that there has been no change in matters described herein since the date of this Official Statement.

This Official Statement and the information herein are subject to completion or amendment without notice. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No dealer, broker, salesman or any other person has been authorized by the University or the Underwriters to give any information or make any representation, other than those contained in this Official Statement, in connection with the offering of or solicitation of offers for the 2017B Bonds. If given or made, such information or representation must not be relied upon as having been authorized by the University or the Underwriters.

For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended, and in effect on the date hereof ("Rule 15c2-12"), this Preliminary Official Statement constitutes an official statement of the University that has been deemed final by the University as of its date except for the omission of no more than the information permitted by Rule 15c2-12.

References to website addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, SEC Rule 15c2-12.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2017B BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE.

THE ORDER AND PLACEMENT OF MATERIALS IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, ARE NOT TO BE DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE 2017B BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE OFFICIAL STATEMENT.

THE 2017B BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE 2017B BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF CERTAIN STATES, IF ANY, IN WHICH THE 2017B BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE 2017B BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

iii

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT

Certain statements included or incorporated by reference in this Official Statement 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 (the "Exchange Act"), and Section 27A of the United States Securities Act of 1933, as amended (the "Securities Act"). Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE UNIVERSITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS CHANGE, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED, OCCUR.

INFORMATION COVERING OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES

MINIMUM UNIT SALES

THE 2017B BONDS WILL TRADE AND SETTLE ON A UNIT BASIS (ONE UNIT EQUALING ONE BOND OF $1,000 PRINCIPAL AMOUNT). FOR ANY SALES MADE OUTSIDE THE UNITED STATES, THE MINIMUM PURCHASE AND TRADING AMOUNT IS 150 UNITS (BEING 150 BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF $150,000).

EUROPEAN ECONOMIC AREA

IN RELATION TO EACH MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (THE "EEA") THAT HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A "RELEVANT MEMBER STATE"), WITH EFFECT FROM AND INCLUDING THE DATE ON WHICH THE PROSPECTUS DIRECTIVE IS IMPLEMENTED IN THAT RELEVANT MEMBER STATE (THE "RELEVANT IMPLEMENTATION DATE"), AN OFFER OF ANY 2017B BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS OFFICIAL STATEMENT IS NOT BEING MADE AND WILL NOT BE MADE TO THE PUBLIC IN THAT RELEVANT MEMBER STATE OTHER THAN: (A) TO ANY LEGAL ENTITY WHICH IS A "QUALIFIED INVESTOR" AS DEFINED IN THE PROSPECTUS DIRECTIVE; (B) TO FEWER THAN 150 NATURAL OR LEGAL PERSONS (OTHER THAN QUALIFIED INVESTORS AS DEFINED IN THE PROSPECTUS DIRECTIVE) AS PERMITTED UNDER THE PROSPECTUS DIRECTIVE; OR (C) IN ANY OTHER CIRCUMSTANCES FALLING WITHIN ARTICLE 3(2) OF THE PROSPECTUS DIRECTIVE; PROVIDED THAT NO SUCH OFFER OF THE 2017B BONDS SHALL REQUIRE THE ISSUER OR ANY UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.

FOR THE PURPOSES OF THIS PROVISION, THE EXPRESSION AN "OFFER OF BONDS TO THE PUBLIC" IN RELATION TO THE 2017B BONDS IN ANY RELEVANT MEMBER STATE MEANS THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE 2017B BONDS TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE THE 2017B BONDS, AS THE SAME MAY BE VARIED IN THAT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE PROSPECTUS DIRECTIVE IN THAT MEMBER STATE. THE EXPRESSION "PROSPECTUS DIRECTIVE" MEANS DIRECTIVE 2003/71/EC (AND AMENDMENTS THERETO, INCLUDING THE 2010 PD AMENDING DIRECTIVE, TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE), AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE IN THE RELEVANT MEMBER STATE AND THE EXPRESSION "2010 PD AMENDING DIRECTIVE" MEANS DIRECTIVE 2010/73/EU.

UNITED KINGDOM

THIS COMMUNICATION IS DIRECTED ONLY AT PERSONS WHO (I) ARE OUTSIDE THE UNITED KINGDOM OR (II) ARE INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 OF THE UNITED KINGDOM AS AMENDED (THE "ORDER") OR (III) ARE HIGH NET WORTH ENTITIES FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER OR (IV) SUCH OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS COMMUNICATION MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS COMMUNICATION RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.

CANADA

THE 2017B BONDS MAY BE SOLD ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL, THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE 2017B BONDS MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A

TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS OFFICIAL STATEMENT (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER'S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER'S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 (OR, IN THE CASE OF SECURITIES ISSUED OR GUARANTEED BY THE GOVERNMENT OF A NON-CANADIAN JURISDICTION, SECTION 3A.4) OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (NI 33-105), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

SUMMARY OF THE OFFERING

Issuer University of Pittsburgh – Of the Commonwealth System of Higher Education

Securities Offered $105,000,000* Taxable University Refunding Bonds, Series B of 2017

Interest Accrual Date Interest will accrue from the date of issuance.

Interest Payment Dates March 15 and September 15 of each year, commencing September 15, 2017

Redemption The 2017B Bonds are subject to optional redemption prior to maturity as described herein. The 2017B Bonds are subject to mandatory redemption prior to maturity as described herein. See "THE 2017B BONDS – Redemption" herein.

Settlement Date March __, 2017

Authorized Denominations $1,000 and any integral multiple thereof

Form and Depository The 2017B Bonds will be delivered solely in registered form under a global book- entry system through the facilities of DTC.

Use of Proceeds The University will use the net proceeds of the 2017B Bonds to pay all or a portion of the costs of refunding certain outstanding indebtedness of the University and to pay costs of issuance of the 2017B Bonds. See "ESTIMATED SOURCES AND USES OF PROCEEDS" and "PLAN OF FINANCE" herein.

Ratings Moody's: "___" S&P: "___"

______* Preliminary, subject to change.

vii

OFFICIAL STATEMENT

Relating to

$105,000,000* University of Pittsburgh - Of the Commonwealth System of Higher Education Taxable University Refunding Bonds, Series B of 2017

INTRODUCTION

Purpose of the 2017B Bonds and the Plan of Finance

The purpose of this Official Statement, including the cover page and the Appendices hereto, is to set forth information in connection with the offering by the University of Pittsburgh - Of the Commonwealth System of Higher Education (the "University") of $105,000,000* Taxable University Refunding Bonds, Series B of 2017 (the "2017B Bonds"). It is expected that the 2017B Bonds will be issued on or about March __, 2017.

The 2017B Bonds are being issued pursuant to an Indenture of Trust dated as of January 1, 2017, as previously amended and supplemented by a First Supplemental Indenture of Trust dated as of January 1, 2017 (together, the "General Indenture") between the University and U.S. Bank National Association, as trustee (the "Trustee"), and as further supplemented by a Second Supplemental Indenture of Trust dated as of March 1, 2017 between the University and the Trustee (the "Second Supplemental Indenture"; the General Indenture as amended and supplemented by the Second Supplemental Indenture and as further amended and supplemented from time to time is referred to hereinafter as the "Indenture"). The proceeds of the 2017B Bonds will be used to undertake a project consisting of: (a) the advance refunding of a portion of the University's outstanding University Capital Project Bonds, Series A of 2005 (the "Refunded 2005A Bonds"), (b) the advance refunding of a portion of the University's outstanding University Capital Project and Refunding Bonds, Series B of 2007 (the "Refunded 2007B Bonds" and, together with the Refunded 2005A Bonds, the "Refunded Bonds"), and (c) paying all or a part of the costs of issuing the 2017B Bonds, as more fully described under "PLAN OF FINANCE" herein.

The University

The University is a non-sectarian, coeducational, state-related, research university. The University's main campus is situated on 132 acres in the City of Pittsburgh, Pennsylvania and is comprised of approximately one hundred academic, research and administrative buildings, and residence halls. In addition to the main campus in Pittsburgh, the University has four regional campuses in western Pennsylvania. The campuses located in Bradford, Greensburg, and Johnstown offer four-year baccalaureate programs. The campus located in Titusville offers an undergraduate curriculum, with associate degree offerings in a range of programs.

The University is part of the Commonwealth System of Higher Education, and as such is an instrumentality of the Commonwealth of Pennsylvania (the "Commonwealth"). However, the University retains its status as a private institution whereby the majority of the membership of the Board of Trustees is appointed by the University. Additional information about the University, including its history, operations and organization is outlined in Appendix A hereto. The consolidated financial statements of the University for the fiscal years ended June 30, 2016 and June 30, 2015 are included in Appendix B hereto.

______* Preliminary, subject to change.

Security for the 2017B Bonds

The 2017B Bonds are general, unconditional and unsecured obligations of the University. No specific revenues of the University are pledged with respect to the 2017B Bonds. See "SECURITY FOR THE 2017B BONDS" herein.

THE 2017B BONDS ARE UNSECURED GENERAL OBLIGATIONS OF THE UNIVERSITY. THE 2017B BONDS DO NOT CONSTITUTE AN OBLIGATION OR INDEBTEDNESS OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF (OTHER THAN THE UNIVERSITY). NEITHER THE COMMONWEALTH NOR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF (OTHER THAN THE UNIVERSITY) SHALL BE LIABLE FOR THE PAYMENT OF PRINCIPAL OF OR INTEREST ON THE 2017B BONDS. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF (OTHER THAN THE UNIVERSITY) IS PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2017B BONDS. THE UNIVERSITY HAS NO POWER AT ANY TIME OR IN ANY MANNER TO PLEDGE THE CREDIT OR THE TAXING POWER OF THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY THEREOF (OTHER THAN THE UNIVERSITY). THE UNIVERSITY HAS NO TAXING POWER.

The 2017B Bonds are secured by and payable solely from the sources described in the Indenture. The Indenture provides that, to secure the payment of the principal of and interest on the 2017B Bonds, together with all other bonds issued and outstanding under the Indenture (together, the "Bonds"), the University pledges to the Trustee the right, title and interest of the University in and to (a) all payments received by the Trustee from the University with respect to the Bonds, and (b) all moneys in all Funds established by the Indenture, including investments thereof and income and proceeds derived from such investments.

No specific revenues of the University are pledged with respect to the 2017B Bonds. The payment of the principal of and interest of the 2017B Bonds will be payable solely from funds of the University, as described herein. See "SECURITY FOR THE 2017B BONDS" herein.

Outstanding Indebtedness

As of January 31, 2017, the outstanding indebtedness of the University, including bonds and notes payable, totaled approximately $932.3 million (unaudited). For additional information regarding the outstanding indebtedness of the University, see APPENDIX A - "UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION" and APPENDIX B - "UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015" attached hereto.

Bondholders' Risks

There are certain risks involved in the purchase of the 2017B Bonds as more fully described under "Bondholders' Risks" herein.

Continuing Disclosure

Consistent with the continuing disclosure requirements of Securities and Exchange Commission ("SEC") Rule 15c2-12, the University will enter into a continuing disclosure agreement relating to the 2017B Bonds, as described under "CONTINUING DISCLOSURE" herein.

Underlying Documents

The descriptions and summaries of various documents set forth in this Official Statement do not purport to be comprehensive or definitive and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by the terms of each such document. Copies of all such documents are available for inspection at the designated corporate trust office of the Trustee.

ESTIMATED SOURCES AND USES OF PROCEEDS

The proceeds of the 2017B Bonds will be used for the purposes described under "PLAN OF FINANCE" herein. The estimated sources and uses of the proceeds of the 2017B Bonds are shown below.

SOURCES:

Principal Amount of 2017B Bonds ...... $______

Total Sources of Funds ...... $______

USES:

Refunding of Refunded Bonds ...... $ Costs of Issuance* ......

Total Uses of Funds ...... $______

* Includes Underwriter's discount, legal fees, Trustee fees, rating agency fees, printing costs and other fees associated with the issuance of the 2017B Bonds.

PLAN OF FINANCE

The proceeds of the 2017B Bonds will be used to undertake a project consisting of: (a) the refunding of the Refunded Bonds; and (b) paying all or a part of the costs of issuing the 2017B Bonds.

THE 2017B BONDS

Description of the 2017B Bonds

The 2017B Bonds will be dated, will bear interest at the rates and will mature on the dates (subject to prior redemption) as set forth on the inside front cover page to this Official Statement. Interest on the 2017B Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The 2017B Bonds will be delivered in the form of fully registered bonds in denominations of $1,000 and any integral multiple thereof. The 2017B Bonds will be registered initially in the name of "Cede & Co.," as nominee of DTC, and will be evidenced by one 2017B Bond for each maturity in the principal amount of such maturity. Registered ownership of the 2017B Bonds, or any portions thereof, may not thereafter be transferred except as set forth in the Indenture. See APPENDIX C – "DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" attached hereto.

The principal or redemption price of the 2017B Bonds will be payable by check or by wire transfer of immediately available funds in lawful money of the United States of America at the designated corporate trust office of the Trustee.

Interest on the 2017B Bonds will be payable from the later of (i) the date of original issuance of the 2017B Bonds and (ii) the most recent Interest Payment Date to which interest has been paid or duly provided for. An "Interest Payment Date" for the 2017B Bonds will occur on March 15 and September 15 of each year commencing on September 15, 2017. Payment of the interest on each Interest Payment Date will be made to the Person whose name appears on the bond registration books of the Trustee as the Owner thereof as of the close of business on the last day (whether or not a Business Day) of the month immediately preceding each Interest Payment Date (the "Record Date"), such interest to be paid by check mailed by first class mail to such Owner at its address as it appears on such registration books, or, upon the written request of any Owner of at least $1,000,000 in aggregate principal amount of 2017B Bonds, submitted to the Trustee at least one Business Day prior to the Record Date, by wire transfer in

immediately available funds to an account within the United States designated by such Owner. Notwithstanding the foregoing, as long as Cede & Co. is the Owner of all or part of the 2017B Bonds in Book-Entry Form, said principal or redemption price and interest payments will be made to Cede & Co. by wire transfer in immediately available funds.

Redemption

Optional Redemption at Par. The 2017B Bonds maturing on September 15, 20__ will be subject to optional redemption on or after March 15, 20__ (the "Par Call Date"), at the direction of the University, 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 2017B Bonds for Redemption"), on any Business Day, at the Redemption Price. "Redemption Price" means 100% of the principal amount of a 2017B Bond to be redeemed plus accrued and unpaid interest on such 2017B Bond to the redemption date.

Optional Redemption at Make-Whole Redemption Price.

Prior to the applicable Par Call Date, if any, the 2017B Bonds will be subject to optional redemption prior to maturity, at the option of the University, in whole or in part, in such order of maturity as directed by the University (and if in part within a maturity, in Authorized Denominations and on a pro rata basis within such maturity, subject to the provisions described below under "Selection of Bonds for Redemption"), on any Business Day, at the Make- Whole Redemption Price.

The "Make-Whole Redemption Price" means the greater of (A) 100% of the principal amount of a 2017B Bond to be redeemed and (B) an amount equal to the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of such 2017B Bond, not including any portion of those payments of interest accrued and unpaid as of the date on which such 2017B Bond is to be redeemed, discounted to the date on which such 2017B Bond is to be redeemed on a semi-annual basis assuming a 360-day year consisting of twelve 30-day months at the adjusted Treasury Rate plus ______(___) basis points, plus, in each case, accrued and unpaid interest on such 2017B Bond to the redemption date.

The Make-Whole Redemption Price will be determined by an independent accounting firm or independent financial advisor (which accounting firm of financial advisor shall be retained by the University at the expense of the University) in order to calculate such redemption price. Each of the Trustee and the University may conclusively rely on such accounting firm's or financial advisor's determination of such redemption price and will bear no liability for such reliance.

"Business Day" means a day other than (A) a Saturday or Sunday or legal holiday on which banking institutions located in the city or cities in which the Designated Office of the Trustee is located are authorized by law or executive order to close or (B) a day on which the New York Stock Exchange is closed.

"Comparable Treasury Issue" means the United States Treasury security or securities selected by a Designated Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the 2017B Bonds to redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such 2017B Bonds.

"Comparable Treasury Price" means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for the date fixed for redemption, or (2) if the Designated Investment Banker obtains only one Reference Treasury Dealer Quotation, such Reference Treasury Dealer Quotation.

"Designated Investment Banker" means the Reference Treasury Dealer appointed by the University.

"Primary Treasury Dealer" means any primary U.S. Government securities dealer in the City of New York, New York, and its successors.

"Reference Treasury Dealer" means Wells Fargo Securities, or its respective affiliates which are Primary Treasury Dealers, and its respective successors; provided that if Wells Fargo Securities or its respective affiliates or

successors shall cease to be a Primary Treasury Dealer, the University shall substitute therefor another Primary Treasury Dealer.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 p.m. New York time on the third Business Day preceding such redemption date.

"Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

Mandatory Redemption. The 2017B Bonds maturing on September 15, 20__ are subject to mandatory redemption at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption on September 15 of the years and in the respective amounts set forth below:

Bonds stated to mature on September 15, 20__

Year Amount

* Maturity

In accordance with the terms and provisions of the Indenture, the University shall receive a credit against mandatory redemption payments to the extent that the University purchases on the open market or optionally redeems 2017B Bonds subject to mandatory redemption.

Partial Redemption of 2017B Bonds

Upon surrender of any 2017B Bond redeemed in part only, the Trustee will authenticate and deliver to the Owner thereof a new 2017B Bond or Bonds equal in aggregate principal amount to the unredeemed portion of the 2017B Bond surrendered.

Notice of Redemption

Notice of redemption will be mailed by the Trustee by first class mail, not less than 20 days nor more than 60 days prior to the redemption date, to the respective Owners of any 2017B Bonds designated for redemption at their addresses appearing on the bond registration books of the Trustee. Each notice of redemption shall state the redemption date, the redemption price or Make-Whole Redemption Price (as applicable), the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the maturity dates of the 2017B Bonds to be redeemed (including CUSIP number, if any), and, in the case of 2017B Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. Each such notice will also state that on said date there will become due and payable on each of said 2017B Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a 2017B Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such 2017B Bonds be then surrendered.

Failure by the Trustee to give notice as described above or insufficiency of any such notice will not affect the validity of the proceedings for redemption.

If at the time of mailing of notice of any optional redemption for 2017B Bonds there shall not have been deposited moneys in the Bond Fund created under the Indenture, available for payment sufficient to redeem all the 2017B Bonds called for redemption, such notice shall state that it is conditional in that it is subject to the deposit of the moneys in such Bond Fund available for such payment not later than the redemption date, and the redemption proposed to be effected pursuant to such notice shall be of no effect unless such moneys are so deposited.

Effect of Redemption

Notice of redemption having been duly given as provided in the Indenture and as described above, and moneys for payment of the redemption price or Make-Whole Redemption Price (as applicable) of, together with interest accrued to the date fixed for redemption on, the 2017B Bonds (or portion thereof) so called for redemption being held by the Trustee, on the date fixed for redemption designated in such notice, the 2017B Bonds (or portion thereof) so called for redemption shall become due and payable at the redemption price or Make-Whole Redemption Price (as applicable) specified in such notice and interest accrued thereon to the date fixed for redemption, interest on the 2017B Bonds so called for redemption shall cease to accrue, said 2017B Bonds (or portion thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2017B Bonds will have no rights in respect thereof except to receive payment of said redemption price or Make-Whole Redemption Price (as applicable) and accrued interest to the date fixed for redemption from funds held by the Trustee for such payment.

Selection of Bonds for Redemption

If less than all of the 2017B Bonds are called for optional redemption, the University will select the maturity or maturities from which the 2017B Bonds are to be redeemed. If the 2017B Bonds are registered in book-entry only form and so long as DTC or a successor securities depository is the sole registered owner of the 2017B Bonds, if less than all of the 2017B Bonds of a maturity are called for prior redemption, the particular Bonds or portions thereof to be redeemed shall be selected on a pro rata pass-through distribution of principal basis in accordance with DTC procedures, provided that, so long as the 2017B Bonds are held in book-entry only form, the selection for redemption of such 2017B Bonds shall 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 within a maturity be made on a pro rata pass-through distribution of principal basis as described above. However, neither the University nor the Underwriters can provide any assurance that DTC, DTC's Direct and Indirect Participants (as defined herein) or any other intermediary will allocate the redemption of 2017B Bonds on such basis. If the DTC operational arrangements do not allow for the redemption of the 2017B Bonds within a maturity on a pro rata pass-through distribution of principal basis as discussed above, then the 2017B Bonds will be selected for redemption in accordance with DTC procedures.

BOOK-ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES

The information set forth in this section has been obtained from sources that the University and the Trustee believe to be reliable, but the University and Trustee make no representation as to the completeness or accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof.

Book-Entry Only System—The Depository Trust Company

The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the 2017B Bonds. The 2017B Bonds will be issued as fully-registered securities 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 2017B Bond certificate will be issued for each maturity of the 2017B Bonds and will be deposited with DTC. Beneficial Owners (defined below) may own beneficial interests in the 2017B Bonds in the United States through DTC and in Europe through Clearstream Banking, société anonyme ("Clearstream") and Euroclear Bank S.A./N.V. ("Euroclear), directly if they are participants of such systems, or indirectly through organizations that are participants in such systems. Clearstream and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in Clearstream's and/or Euroclear's names on the books of their respective depositories, which, in turn, hold such positions in customers' securities accounts in the depositories' names on the books of DTC. NONE OF THE UNIVERSITY, THE TRUSTEE AND THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT

AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS.

SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 2017B BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS OR REGISTERED OWNERS OF THE 2017B BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE 2017B BONDS.

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. 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 participants ("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 ("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.

Purchases of the 2017B Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2017B Bonds on DTC's records. The ownership interest of each actual purchaser of each 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 2017B 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 2017B Bonds, except in the event that use of the book-entry system for such 2017B Bonds is discontinued.

To facilitate subsequent transfers, all 2017B 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 the 2017B 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 2017B Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2017B 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.

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.

Redemption notices shall be sent to DTC. If less than all of the 2017B Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2017B 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 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 2017B Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal of, and Make-Whole Redemption Price, if any, interest or other payments on the 2017B 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 University or the Trustee 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 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 of, and Make-Whole Redemption Price, if any, interest or other payments on the 2017B Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the University or the Trustee, 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.

DTC may discontinue providing its services as securities depository with respect to the 2017B Bonds at any time if it is unwilling or unable to continue as depository by giving reasonable notice to the University or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. See "Certificated Bonds" below.

The University may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. See "Certificated Bonds" below.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the University and the Underwriters believe to be reliable, but neither the University nor the Underwriters take responsibility for the accuracy thereof.

Each person for whom a Participant acquires an interest in the 2017B Bonds, as nominee, may desire to make arrangements with such Participant to receive a credit balance in the records of such Participant, and may desire to make arrangements with such Participant to have all notices of redemption or other communications to DTC, which may affect such persons, to be forwarded in writing by such Participant and to have notification made of all interest payments. NONE OF THE UNIVERSITY, THE UNDERWRITERS AND THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE 2017B BONDS.

When reference is made to any action which is required or permitted to be taken by the Beneficial Owners, such reference shall only relate to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they shall be sent by the Trustee to DTC only.

For every transfer and exchange of 2017B Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto.

NONE OF THE UNIVERSITY, THE UNDERWRITERS AND THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECT PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE 2017B BONDS UNDER THE INDENTURE; (III) THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE 2017B BONDS; (IV) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OR INTEREST DUE WITH RESPECT TO THE 2017B BONDS; (V) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF THE 2017B BONDS; OR (VI) ANY OTHER MATTER.

Clearstream and Euroclear

The 2017B Bonds initially will be registered in the name of Cede & Co. as registered owner and nominee for DTC, which will act as securities depository for the 2017B Bonds. Purchases of the 2017B Bonds will be in book- entry form only. Clearstream and Euroclear may hold omnibus positions on behalf of their participants through customers' securities accounts in Clearstream's and/or Euroclear's names on the books of their respective U.S. Depositories, which, in turn, hold such positions in customers' securities accounts in the U.S. Depositories' names on the books of DTC.

Clearstream

Clearstream is incorporated under the laws of Luxembourg as a professional depository. Clearstream holds securities for its participating organizations, known as Clearstream participants, and facilitates the clearance and settlement of securities transactions between Clearstream participants through electronic book-entry changes in accounts of Clearstream participants, thus eliminating the need for physical movement of certificates. Clearstream provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in a number of countries. Clearstream has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream and Euroclear.

As a registered bank in Luxembourg, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de Surveillance due Secteur Financier). Clearstream participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. In the United States, Clearstream participants are limited to securities brokers and dealers and banks. Clearstream participants may include the underwriters in this offering. Other institutions that maintain a custodial relationship with a Clearstream participant may obtain indirect access to Clearstream. Clearstream is an indirect participant in DTC.

Payments with respect to the 2017B Bonds held beneficially through Clearstream will be credited to cash accounts of Clearstream participants in accordance with its rules and procedures, to the extent received by Clearstream.

Euroclear

Euroclear was created in 1986 to hold securities for its participating organizations, known as Euroclear participants, and to clear and settle transactions between Euroclear participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of certificates and the risk from lack of simultaneous transfers of securities and cash. Euroclear provides various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below.

Euroclear is a Belgian bank that is regulated by the Belgian Banking Commission. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the underwriters in this offering. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Euroclear is an indirect participant in DTC.

The Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of Euroclear and applicable Belgian law (collectively, the "Euroclear Terms and Conditions") govern securities clearance accounts and cash accounts with Euroclear. Specifically, these terms and conditions govern:

• transfers of securities and cash within Euroclear;

• withdrawal of securities and cash from Euroclear; and

• receipts of payments with respect to securities in Euroclear.

All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. Euroclear acts under the terms and conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding securities through Euroclear participants.

Payments with respect to Bonds held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Euroclear Terms and Conditions, to the extent received by Euroclear.

The foregoing information about DTC, Clearstream and Euroclear has been provided by each of them for informational purposes only and is not intended to serve as a representation, warranty, or contract modification of any kind.

Global Clearance and Settlement Procedures

Initial settlement for the 2017B Bonds will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way, in accordance with DTC's rules, and will be settled in immediately available funds using DTC's same-day funds settlement system. Secondary market trading between Clearstream participants and/or Euroclear participants will occur in the ordinary way, in accordance with the applicable rules and operating procedures of Clearstream and Euroclear, and will be settled using the procedures applicable to conventional Eurobonds in immediately available funds.

Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream or Euroclear participants, on the other, will be effected through DTC, in accordance with DTC's rules, on behalf of the relevant European international clearing system by the U.S. depositaries. However, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in this system in accordance with its rules and procedures and within its established deadlines, European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. depositary to take action to effect final settlement on its behalf by delivering or receiving 2017B Bonds in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream participants and Euroclear participants may not deliver instructions directly to DTC.

Because of time-zone differences, credits of 2017B Bonds received in Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and will be credited the business day following the DTC settlement date. These credits or any transactions in such 2017B Bonds settled during such processing will be reported to the relevant Euroclear or Clearstream participants on that business day. Cash received in Clearstream or Euroclear as a result of sales of 2017B Bonds by or through a Clearstream participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

Although DTC, Clearstream, and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of 2017B Bonds among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform these procedures, and these procedures may be revised or discontinued at any time.

THE UNIVERSITY, UNDERWRITERS AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC, CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR OR EUROCLEAR PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE 2017B BONDS (1) PAYMENTS OF PRINCIPAL OF OR INTEREST OR REDEMPTION PREMIUM ON THE 2017B BONDS; (2) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE 2017B BONDS; OR (3) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE 2017B BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS, CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR OR EUROCLEAR PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.

THE UNIVERSITY, THE UNDERWRITERS AND TRUSTEE WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT

PARTICIPANTS OF DTC CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR, EUROCLEAR PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC, CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR OR EUROCLEAR PARTICIPANTS; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC, CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR OR EUROCLEAR PARTICIPANTS OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST OR REDEMPTION PREMIUM ON THE 2017B BONDS; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC, CLEARSTREAM, CLEARSTREAM CUSTOMERS, EUROCLEAR OR EUROCLEAR PARTICIPANTS OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS UNDER THE TERMS OF THE 2017B BONDS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE REGISTERED HOLDER OF THE 2017B BONDS.

THE INFORMATION CONTAINED HEREIN CONCERNING DTC, CLEARSTREAM AND EUROCLEAR AND THEIR BOOK-ENTRY SYSTEMS HAS BEEN OBTAINED FROM DTC, CLEARSTREAM AND EUROCLEAR, RESPECTIVELY, AND THE UNIVERSITY MAKES NO REPRESENTATION AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF.

Certificated Bonds

DTC may discontinue providing its services as securities depository with respect to the 2017B Bonds at any time if it is unwilling or unable to continue as depository by giving reasonable notice to the University. In addition, the University may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). If for either reason the Book-Entry Only system is discontinued, Bond certificates will be delivered as described in the Indenture and the Beneficial Owner, upon registration of certificates held in the Beneficial Owner's name, will become the Bondowner. Thereafter, the 2017B Bonds may be exchanged for an equal aggregate principal amount of the 2017B Bonds in other authorized denominations and of the maturity, upon surrender thereof at the principal corporate trust office of the Trustee. The transfer of any 2017B Bond may be registered on the books maintained by the Trustee for such purpose only upon assignment in form satisfactory to the Trustee. For every exchange or registration of transfer of the 2017B Bonds, the Trustee may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, and the Trustee may also require the Bondholder requesting such exchange to pay a reasonable sum to cover any expenses incurred by the University in connection with such exchange. The Trustee will not be required to transfer or exchange any 2017B Bond during the 15 days next preceding the selection of 2017B Bonds for redemption if such 2017B Bond (or any part thereof) is eligible to be selected or has been selected for redemption.

Procedures May Change

Although DTC, Clearstream and Euroclear have agreed to these procedures in order to facilitate transfers of securities among DTC and its participants, Clearstream and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued and may be changed at any time by any of them.

SECURITY FOR THE 2017B BONDS

The 2017B Bonds are general, unconditional and unsecured obligations of the University. No specific revenues of the University are pledged with respect to the 2017B Bonds.

The 2017B Bonds are secured by and payable solely from the sources described in the Indenture. The Indenture provides that, to secure the payment of the principal of and interest on the 2017B Bonds and all other Bonds issued and outstanding under the Indenture, the University pledges to the Trustee the right, title and interest of the University in and to (a) all payments received by the Trustee from the University with respect to the Bonds, and (b) all moneys in all Funds established by the Indenture, including investments thereof and income and proceeds derived from such investments.

The Indenture provides that, on or before each date on which principal and/or interest are due (a "Payment Date"), the University will pay the Trustee a sum equal to the amount payable on such Payment Date as principal of and interest on the 2017B Bonds. In addition, the Indenture provides that each such payment made will at all times be sufficient to pay the total amount of interest and principal (whether at stated maturity or upon prior redemption or acceleration) becoming due and payable on 2017B Bonds on such Payment Date. If on any Payment Date, the amounts held by the Trustee in the applicable account within the Bond Fund are insufficient to make any required payments of principal of (whether at maturity or upon acceleration) and interest on the 2017B 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 with respect to the 2017B Bonds into the Bond Fund established pursuant to the Indenture.

The 2017B Bonds constitute general, unconditional and unsecured obligations of the University. The 2017B 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 Owners of the 2017B Bonds under the Indenture. Pursuant to the Indenture, proceeds of the 2017B Bonds will be held by the University, rather than the Trustee, until expended. In addition, as described above, the University is not required to deposit with the Trustee amounts necessary to pay the principal of and interest on the 2017B Bonds until the 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 Owners of the 2017B Bonds under the Indenture are expected to be minimal. Proceeds of the 2017B Bonds held by the University are not subject to any lien or charge in favor of the Owners of the 2017B Bonds and do not constitute security for the 2017B Bonds.

The Indenture does not contain any covenants, financial or otherwise, limiting the ability of the University to incur indebtedness, encumber or dispose of its property or merge with any other entity. Further, the University is not required by the Indenture to produce revenues at any specified level or to obtain any insurance with respect to its property or operations.

The University has other unsecured general obligations outstanding. See APPENDIX A – "UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION" and APPENDIX B - "UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015" attached hereto. Moreover, the University is not restricted by the Indenture or otherwise from incurring additional indebtedness. Such additional indebtedness, if issued, may be either secured or unsecured and may be entitled to payment prior to payment on the 2017B Bonds.

For information on other funds and accounts established by the Indenture, see APPENDIX C – "DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" attached hereto.

BONDHOLDERS' RISKS

Purchase of the 2017B Bonds involves a degree of risk. In order for potential investors to identify risk factors and make an informed investment decision, potential investors should be thoroughly familiar with this entire Official Statement (including the Appendices hereto) in order to make a judgment as to whether the 2017B Bonds are an appropriate investment. The following section is intended only as a summary of certain risk factors attendant to an investment in the 2017B Bonds. Such summary is not intended to be definitive, dispositive or comprehensive, but rather informational only. The Bondholders' risks discussed below relate principally to the University and are not necessarily inclusive of every risk which a purchaser of 2017B Bonds may incur.

General Obligations of the University; No Obligation of the Commonwealth

The 2017B Bonds are general, unconditional and unsecured obligations of the University. The 2017B Bonds do not constitute a debt of the Commonwealth or any political subdivision, agency or instrumentality thereof (other than the University). The University has no power at any time or in any manner to pledge the credit or the taxing power of the Commonwealth or any political subdivision or instrumentality thereof (other than the University). THE UNIVERSITY HAS NO TAXING POWER.

Adequacy of Revenues

Payment on the 2017B Bonds is dependent primarily upon the ability of the University to generate revenues sufficient to provide for their payment while meeting its operating expenses and other cash requirements. No representation or assurance can be given to the effect that the University will generate sufficient revenues in order to meet the University's payment obligations. Future legislation, competition from other educational institutions, regulatory actions, economic conditions, changes in the number of students in attendance at the University, reductions in research support from governmental, corporate or foundation sponsors or in appropriations from the Commonwealth, or other factors could adversely affect the University's ability to generate such revenues.

No Security Pledged for Repayment

No specific revenues or assets of the University are pledged as security for the repayment of the 2017B Bonds. Therefore, Bondholders do not have a lien on or claim to any specific revenues or assets of the University.

Decrease in Research Funding

The University conducts research activities sponsored by various entities, including agencies and departments of the federal government, the Commonwealth, local governmental entities, companies and foundations. Sponsored activity for the years ended June 30, 2016 and 2015 were $726.5 million and $713.9 million, respectively, with approximately 66% of the funding awarded through the National Institutes of Health. For the year ended June 30, 2016, approximately 35% of the operating revenues of the University came from grants and contracts. The University's ability to retain research staff and meet budgetary forecasts is in part dependent on receiving research funding from federal and state agencies, as well as other sponsors. There can be no assurance that these agencies and sponsors will continue to support research at their current levels. In addition, there are other organizations that compete with the University for these grants and contracts. There can be no assurance that the University will continue to receive an equal amount of research grants and contracts in the future.

Commonwealth Funding Adjustments or Failure to Appropriate

For the year ended June 30, 2016, the University's appropriation from the Commonwealth was $154.3 million and such appropriation represented approximately 7% of the operating revenues of the University. For the year ending June 30, 2017, the University's total Commonwealth appropriation is approximately $158.9 million.

The University's appropriation is dependent upon the adoption by the Commonwealth of its annual budget. There is no assurance that appropriations by the Commonwealth to the University will continue to be made, will be made at past levels, or at levels requested by the University now or in the future.

Affiliation with University of Pittsburgh Medical Center

The University has a contractual agreement (the "Affiliation Agreement") with the University of Pittsburgh Medical Center ("UPMC"). UPMC is an independent, non-profit corporation that is the parent organization for a number of hospitals, including UPMC Presbyterian (which serves as the primary teaching hospital for the University's Schools of the Health Sciences) and other health-care related entities. The University may appoint one-third of the board members of UPMC under the Affiliation Agreement; however, UPMC is not under the control of the University. Under the Affiliation Agreement, UPMC provides, among other things, financial support and certain administrative services for the benefit of the research and academic programs within the University's Schools of the Health Sciences. Effective July 1, 2006, the Affiliation Agreement was initially renewed for a period of ten years ending June 30, 2016 and automatically renews for successive two-year terms, unless either party gives the other party at least two years' written notice before the end of any term of its decision to terminate the agreement. By its terms, the Affiliation Agreement was extended to June 30, 2018, and neither party has provided any notice of termination. There can be no assurance that the Affiliation Agreement will continue to be renewed on the same terms in the future. See Appendices A and B for additional information.

Interest Rate Swap Risk

The University is party to certain interest rate management agreements ("Swap Agreements") to manage interest rate risk. Swap Agreements are subject to periodic "mark-to-market" valuations and may, at any time, have a negative value (which could be substantial) to the University. Changes in the market value of such agreements could negatively or positively materially affect the University’s financial condition. Further, such Swap Agreements may be subject to early termination upon the occurrence of certain specified events. If either the University or the swap provider terminates such an agreement when the agreement has a negative value to the University, the University could be obligated to make a termination payment to the swap provider in the amount of such negative value, and such payment could be substantial and potentially materially adverse to the University's financial condition. In the event of an early termination of a Swap Agreement, there can be no assurance that (i) the University would receive any termination payment payable to it by the applicable swap provider, (ii) the University would not be obligated to or would have sufficient monies to make a termination payment payable by it to the applicable swap provider, and (iii) the University would be able to obtain a replacement Swap Agreement with comparable terms. See Note 8 to the audited financial statements included as Appendix B hereto.

Variable Rate Exposure Risk

The University has outstanding variable rate debt as more fully described in Appendix A. A rating change of the University and/or the University's liquidity providers (if any) may adversely affect the interest costs on the University's variable rate debt, increase its put risk or may render such variable rate debt unmarketable.

Economic Factors Beyond the University's Control

The financial condition of the University as well as the market for the 2017B Bonds could be adversely affected by a variety of factors beyond the University's control including general local, state, national and international economic conditions (i.e., inflation, unemployment, and demographics). There can be no assurance that an adverse event will not occur which might affect the market price of and the market for the 2017B Bonds. If a significant event should occur in the affairs of the University, the market for the 2017B Bonds and their market value could be adversely affected.

State and Federal Legislation

In recent years, the activities of non-profit, tax-exempt corporations have been subjected to increasing scrutiny by federal, state and local legislative and administrative agencies, including the United States Congress, the Internal Revenue Service, the Pennsylvania General Assembly and local taxing authorities. Various proposals are presently being considered and may be considered in the future at the federal, state and local levels which may restrict the definitions of tax-exempt or non-profit status, impose new restrictions on the activities of tax-exempt, non-profit corporations, or tax or otherwise burden the activities of such corporations, including proposals to (i) broaden or strengthen federal and local tax law provisions respecting unrelated business income of non-profit corporations, or (ii) reduce or eliminate real estate tax exemptions available to charitable organizations. There can be no assurance that

future changes in the laws, rules, regulations, interpretations and policies relating to the definition, activities or taxation of non-profit, tax-exempt corporations will not have material adverse impacts on the future operations or costs of the University.

Default by the University

No representation or assurance can be given that the University will not default in performing its obligations under the Indenture or any of the related financing documents. If an Event of Default occurs under the Indenture, the Trustee may, and at the written direction of the holders of not less than a majority in aggregate principal amount of Bonds shall, accelerate the maturity of the 2017B Bonds, notwithstanding the fact that the Bondholders may not receive notice of such acceleration until after such date. In addition, no premium will be received upon an acceleration of the 2017B Bonds due to a default.

Enforceability of Remedies

The remedies available to Owners of the 2017B Bonds upon an Event of Default under an Indenture are in many respects dependent upon judicial action which would be subject to discretion or delay. Under existing law and judicial decisions, including specifically the Federal Bankruptcy Code, the remedies specified in the Indenture may not be readily available or may be limited. A court may decide not to order specific performance.

The various legal opinions delivered concurrently with the original delivery of the 2017B Bonds were qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws or legal or equitable principles affecting creditors' rights.

Potential Effects of Bankruptcy

If the University were to file a petition, or if a petition were filed successfully against the University, for relief under the Federal Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the University and its property. If the bankruptcy court so ordered, the University's property, including its revenues, could be used for the benefit of the University despite the claims of its creditors, including the Trustee.

In a bankruptcy proceeding, the University could file a plan for the adjustment of its debts which likely would modify the rights of creditors generally or the rights of a particular class or classes of creditors, secured or unsecured. A plan, if confirmed by the court, would bind the University and all of the University's creditors and would discharge, subject to certain limited exceptions, all claims against the University held by creditors who had notice or actual knowledge of the case. No plan may be confirmed unless, among other conditions, the plan is feasible and either (i) has been accepted by each class of claims impaired thereunder, or (ii) at least one impaired class of creditors (excluding insiders) has voted in favor of the plan and the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.

A class of claims is deemed to have accepted a plan if at least two-thirds in dollar amount and more than one- half in number of the allowed claims of the class that are voted with respect to the plan are cast in favor of the plan.

Other Risk Factors

In the future, the following factors, among many others, may adversely affect the operations of the University to an extent that cannot be determined at this time.

(1) Decreases in tuition revenues due to, among other things: (i) a reduction in student enrollment, (ii) a decrease in student loan funds or other financial aid for higher education, or (iii) changes in the demand for higher education in general or for programs offered by the University in particular.

(2) Any significant decrease in charitable gifts and other support provided by government, individuals, foundations and corporations for the benefit of the University.

(3) Increased litigation and insurance costs and decreased availability of liability insurance.

(4) Increases in employee compensation expenses (including, but not limited to, wages, health care and other fringe benefits), as well as increases in pension and postretirement obligations.

(5) Increases in other operating costs, including costs and availability of energy.

(6) Changes in the senior management of the University or in the strategic direction or mission of the University.

(7) Any failure by the University to comply with any federal, state or local law, rule or regulation, including but not limited to, financial aid, research grants and contracts, environmental and other health and safety matters, resulting in sanctions, fines or other penalties.

(8) The occurrence of natural disasters, acts of terrorism (including cyber terrorism), acts of war, imposition of governmental embargoes or sanctions, riots, or any other similar events, which may damage the facilities of the University, interrupt utility service, or otherwise impair the operations of the University.

TAX MATTERS

Pennsylvania Tax Exemption

Bond Counsel is of the opinion that the 2017B Bonds are exempt from personal property taxes in Pennsylvania, and interest on the 2017B Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax, under the laws of the Commonwealth of Pennsylvania as enacted and construed on the date of initial delivery of the 2017B Bonds. All purchasers of the 2017B Bonds should consult their tax advisors regarding the tax status of the 2017B Bonds in a particular state or local jurisdiction other than the State.

General Federal Tax Matters

The following discussion summarizes the material United States federal income tax consequences generally applicable to the purchase, ownership and disposition of the 2017B Bonds by the beneficial owners thereof ("Owners"). The discussion is limited to the tax consequences to the initial Owners of the 2017B Bonds who purchase the 2017B Bonds at the issue price within the meaning of Section 1273 of the Internal Revenue Code of 1986, as amended (the "Code"), and generally does not address the tax consequences to subsequent purchasers of the 2017B Bonds. The discussion does not purport to be a complete analysis of all of the potential United States federal income tax consequences relating to the purchase, ownership and disposition of the 2017B Bonds, nor does this discussion describe any federal estate or gift tax consequences. Furthermore, the discussion does not address all aspects of taxation that might be relevant to particular purchasers in light of their individual circumstances. For instance, the discussion does not address the alternative minimum tax provisions of the Code or special rules applicable to certain categories of purchasers including dealers in securities or foreign currencies, insurance companies, regulated investment companies, real estate mortgage investment conduits, financial institutions, tax- exempt entities, Owners whose functional currency is not the United States dollar and, except to the extent discussed below, Foreign Owners (as defined below). The discussion does not address the special rules applicable to purchasers who hold the 2017B Bonds as part of a hedge, straddle, conversion, constructive ownership or constructive sale transaction or other risk reduction transaction. The discussion does not address foreign taxes.

The discussion is based on the provisions of the Code, the regulations of the Department of the Treasury, and administrative and judicial interpretations, all as in effect today and all of which are subject to change, possibly on a retroactive basis. The discussion assumes that the 2017B Bonds are held as capital assets within the meaning of Section 1221 of the Code.

Tax Consequences to United States Owners

Interest on the 2017B Bonds is taxable to a United States Owner as ordinary income at the time the interest accrues or is received in accordance with the United States Owner's method of accounting for United States federal income tax purposes. A "United States Owner" is an Owner of a 2017B Bond that is, for United States federal income tax purposes: (1) a citizen or resident of the United States, (2) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, (3) an estate, the income of which is subject to United States federal income taxation regardless of its source, or (4) a trust, the administration of which is subject to the primary supervision of a court within the United States and which has one or more United States persons with authority to control all substantial decisions, or a trust that was in existence on August 20, 1996 and has elected to continue its then current treatment as a United States trust. If a partnership (or an entity taxable as a partnership) holds the 2017B Bonds, the United States federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership.

Tax-Exempt Organizations. Income or gain from 2017B Bonds held by a tax-exempt organization will be subject to the tax on unrelated business taxable income if the 2017B Bonds are "debt-financed property" of the organization under Section 514(b) of the Code.

Sale, Exchange, Redemption or Retirement of the 2017B Bonds. In general, upon the sale, exchange, redemption or retirement of a 2017B Bond, a United States Owner will recognize capital gain or loss equal to the difference between the amount realized on such sale, exchange, redemption or retirement (not including any amount attributable to accrued but unpaid interest that the United States Owner has not already included in gross income) and such United States Owner's adjusted tax basis in the Bond. Any amount attributable to accrued but unpaid interest that the Owner has not already included in gross income will be treated as a payment of interest. A United States Owner's adjusted tax basis in a 2017B Bond generally will equal the cost of the Bond to such United States Owner, reduced by any principal payments received by such United States Owner and increased by any accrued but unpaid interest the United States Owner has included in taxable income.

Backup Withholding. Owners will be subject to "backup withholding" of Federal income tax in the event they fail to furnish a taxpayer identification number to the paying agent or there are other, related compliance failures.

Market Discount. A holder who acquires a 2017B Bond in a secondary market transaction may be subject to Federal income tax rules providing that accrued market discount will be subject to taxation as ordinary income on the sale or other disposition of a "market discount bond." Dispositions subject to this rule include a redemption or retirement of a 2017B Bond. The market discount rules may also limit a holder's deduction for interest expense for debt that is incurred or continued to purchase or carry a 2017B Bond. A market discount bond is defined generally as a debt obligation purchased subsequent to issuance, at a price that is less than the principal amount of the obligation, subject to a de minimis rule. The Code allows a taxpayer to compute the accrual of market discount by using a ratable accrual method or a constant interest rate method. Also, a taxpayer may elect to include the accrued discount in gross income each year while holding the bond, as an alternative to including the total accrued discount in gross income at the time of a disposition, in which case the tax basis of the bond will be increased by the amount of discount included in gross income and the interest expense deduction limitation described above will not apply.

Bond Premium. A purchaser of a 2017B Bond who purchases such 2017B Bond at a cost greater than the sum of all amounts payable on the Bond after the acquisition date (other than payments made at least annually over the term of the 2017B Bonds of stated interest) will have amortizable bond premium. If the holder elects to amortize the bond premium, such election will apply to all 2017B Bonds held by the holder on the first day of the taxable year to which the election applies, and to all taxable bonds thereafter acquired by the holder. The premium must be amortized using constant yield principles based on the purchaser's yield to maturity. Amortizable bond premium is generally treated as an offset to interest income, but a reduction in basis is required for amortizable bond premium even though such premium is applied to reduce interest payments. Bond premium on a 2017B Bond held by a holder that has not elected to amortize bond premium will decrease the gain or loss otherwise recognized on the disposition of the Bond. Purchasers of any 2017B Bonds who acquire such 2017B Bonds at issue or in a secondary market at a premium should consult with their own tax advisors with respect to the determination and treatment of such premium for federal income tax purposes and with respect to state and local tax consequences of owning such 2017B Bonds.

Unearned Income Tax. A United States Owner that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the United States Owner's "net investment income" for the relevant taxable year and (2) the excess of the United States Owner's adjusted gross income (increased by certain amounts of excluded foreign income) for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual's circumstances) (the "Unearned Income Tax"). A United States Owner's net investment income will generally include its interest income and net gain from the disposition of the 2017B Bonds, unless such interest income and net gain is derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). Net investment income may, however, be reduced by properly allocable deductions to such income. United States Owners that are individuals, estates or trusts are urged to consult their tax advisors regarding the applicability of the Unearned Income Tax to their income and gains from the 2017B Bonds.

Tax Consequences to Foreign Owners

Payments of interest on a 2017B Bond to an Owner that is not a United States Owner (a "Foreign Owner") are generally not subject to United States federal income tax or nonresident withholding tax, provided that:

• the Foreign Owner is not actually or constructively a "10-percent shareholder" under Section 871(h) or 881(c)(3)(B) of the Code;

• the Foreign Owner is not, for United States federal income tax purposes, a controlled foreign corporation with respect to which the issuer is a "related person" within the meaning of Section 881(c)(3)(C) of the Code;

• the Foreign Owner is not a bank receiving interest described in Section 881(c)(3)(A) of the Code;

• the certification requirements under Section 871(h) or 881(c) of the Code and regulations (summarized below) are met; and

• the Bond interest is not effectively connected with the conduct by the Foreign Owner of a trade or business in the United States under Section 871(b) or Section 882 of the Code.

In order to obtain the exemption from income and withholding tax, either (1) the Foreign Owner must provide its name and address, and certify, under penalties of perjury on Internal Revenue Service Form W-8BEN, W- 8BEN-E, W-8IMY or W-8EXP, as applicable, to the issuer or its paying agent, as the case may be, that such Owner is a Foreign Owner or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business ("Financial Institution") and holds a 2017B Bond on behalf of the Foreign Owner must certify, under penalties of perjury, to the issuer or its paying agent that such a certificate has been received from the Owner by it or by any intermediary Financial Institution and must furnish the issuer or its paying agent with a copy of the certificate. A certificate is generally effective only with respect to payments of interest made to the certifying Foreign Owner after issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. A Foreign Owner who does not satisfy the exemption requirements is generally subject to United States withholding tax on payments of interest or accrual of original issue discount.

Interest on a 2017B Bond that is effectively connected with the conduct of a United States trade or business by the Foreign Owner is generally subject to United States federal income tax in the same manner as with a United States Owner, except to the extent otherwise provided under an applicable tax treaty. Effectively connected interest income received by a corporate Foreign Owner may also, under certain circumstances, be subject to an additional branch profits tax. Effectively connected interest income will not be subject to withholding tax if the Foreign Owner delivers a properly completed Internal Revenue Service Form W-8ECI to the issuer or its paying agent.

Sale, Exchange, Redemption or Retirement of the 2017B Bonds. In general, a Foreign Owner of a 2017B Bond will not be subject to United States federal income or withholding tax on the receipt of payments of principal on a 2017B Bond and will not be subject to United States federal income tax on any gain recognized on the sale, exchange, redemption, retirement or other taxable disposition of such 2017B Bond unless:

• the Foreign Owner is a nonresident alien individual who is present in the United States for 183 or more days in the taxable year of disposition and certain other conditions are met under Section 871(a)(2) of the Code;

• the Foreign Owner is required to pay tax pursuant to the provisions of United States tax law applicable to certain United States expatriates; or

• the gain is effectively connected with the conduct of a United States trade or business by the Foreign Owner (or pursuant to an applicable tax treaty is attributable to a United States permanent establishment of the Foreign Owner).

Foreign Account Tax Compliance Act (FATCA)

Under the Foreign Account Tax Compliance Act ("FATCA") foreign financial institutions (which generally include hedge funds, private equity funds, mutual funds, securitization vehicles and other investment vehicles regardless of their size) that are not otherwise exempt from FATCA must comply with information reporting rules with respect to their U.S. account holders and investors or, regardless of the treatment of payments on the 2017B Bonds under the general income tax rules applicable to Foreign Owners that are discussed above, confront a separate withholding tax. Specifically, FATCA requires that foreign financial institutions enter into an agreement with the United States government to collect and provide the IRS substantial information regarding U.S. account holders of such foreign financial institution, comply with the terms of an applicable intergovernmental agreement between the United States and such foreign financial institution's jurisdiction of formation ("IGA"), or establish an exemption from FATCA. Additionally, FATCA requires certain foreign entities that are not financial institutions to provide the withholding agent with a certification identifying the substantial U.S. owners of such foreign entity.

A foreign financial institution or other foreign entity that does not comply with the FATCA reporting requirements is subject to a 30% withholding tax with respect to any "withholdable payments." For this purpose, "withholdable payments" include U.S. source payments of taxable interest and the entire gross proceeds from the sale of any debt instruments of U.S. issuers. FATCA withholding on gross proceeds generally will apply to payments of gross proceeds made after December 31, 2018. The FATCA withholding tax applies regardless of whether the payment would otherwise be exempt from U.S. nonresident withholding tax (e.g., under an income tax treaty, the portfolio interest exemption or as capital gain). FATCA withholding does not apply to withholdable payments made directly to foreign governments, international organizations, foreign central banks of issue and individuals, and the Treasury is authorized to provide additional exceptions.

As its principal means for implementing FATCA's information and withholding requirements, the United States has entered into, and continues to negotiate, IGA with the vast majority of foreign jurisdictions. FATCA's information reporting and withholding requirements with respect to foreign financial institutions resident in the over 100 jurisdictions that have either signed IGA or entered into an agreement in substance with the United States supersede the FATCA requirements established by the IRS Treasury regulations, from which they may differ significantly. In addition, special transition rules currently delay the implementation of FATCA reporting and withholding in some jurisdictions that do not yet have IGA in force. On July 29, 2016, however, the IRS announced (Announcement 2016-27) that, on January 1, 2017, the U.S. Treasury will begin updating its list of IGA to provide that certain jurisdictions that have not brought their IGA into force will no longer be treated as if they have an IGA in effect. A jurisdiction will not cease to be treated as having an IGA in effect until at least 60 days after the jurisdiction's status on the IGA List is updated. Thereafter, foreign financial institutions resident in a jurisdiction that ceases to be treated as if it has an IGA in effect will no longer be able to rely on the IGA to be treated as exempt from withholding under FATCA. Unless they qualify for an exemption under the FATCA regulations, such foreign financial institutions generally will have to enter into agreements with the IRS that specify their reporting and withholding obligations with respect to their accountholders.

In order to provide sufficient notice to foreign financial institutions, a jurisdiction will not cease to be treated as having an IGA in effect until at least 60 days after the jurisdiction's status on the IGA List is updated. Thereafter, foreign financial institutions in jurisdictions that cease to be treated as if they had an IGA in effect will no longer be able to rely on the IGA to be treated as exempt from FATCA withholding. Unless they qualify for an exemption under the FATCA regulations, such foreign financial institutions s generally will have to enter into an agreement with

the United States government to collect and provide the IRS substantial information regarding their U.S. account holders in order to avoid imposition of the 30% withholding tax.

The FATCA provisions are particularly complex, and the scope and timing of their application remains uncertain. Prospective investors should consult their own tax advisors regarding how these rules may apply in their particular jurisdictional and other circumstances.

Other Matters

Special rules not discussed in this summary may apply to certain Foreign Owners that are classified for federal income tax purposes as "controlled foreign corporations," "passive foreign investment companies," "expatriates," "surrogate foreign corporations," "personal holding companies," or corporations that accumulate earnings to avoid United States federal income tax.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain restrictions on employee pension and welfare benefit plans subject to ERISA ("ERISA Plans") regarding prohibited transactions, and also imposes certain obligations on those persons who are fiduciaries with respect to ERISA Plans. Section 4975 of the Code imposes similar prohibited transaction restrictions on (i) 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 and which are not governmental and church plans as defined herein, and (ii) Individual Retirement Accounts described in Section 408 and 408A of the Code, and certain other plans described in Section 4975(e) of the Code (such plans or accounts, together with ERISA Plans, are hereinafter referred to as "Plan" and "Plans").

Certain employee benefit plans, such as 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. Additionally, such governmental and non-electing church plans are not subject to the requirements of Section 4975 of the Code. Although assets of such governmental or non-electing church plans, as well as non-U.S. plans, may be invested in the 2017B Bonds without regard to the ERISA and Code considerations described below, any such investment may be subject to provisions of applicable federal and state law, or non-U.S. law, that are, to a material extent, similar to the requirements of ERISA and Section 4975 of the Code ("Similar Law"). Accordingly, fiduciaries of such plans should consult with their counsel in considering whether to purchase the 2017B Bonds.

General Fiduciary Matters

ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code and prohibit certain transactions involving the assets of such a Plan with its fiduciaries or other interested parties. In general, under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such a Plan or the management or disposition of the assets of such a Plan, or who renders investment advice for a fee or other compensation (direct or indirect) to such a Plan, is generally considered to be a fiduciary of the Plan.

In considering the acquisition, holding and, to the extent relevant, disposition of the 2017B Bonds with a portion of the assets of a Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code and any applicable Similar Laws relating to a fiduciary's duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of such applicable laws.

Prohibited Transactions – In General

Section 406 of ERISA prohibits Plans subject to ERISA from engaging in specified transactions involving plan assets with persons or entities who are "parties in interest," within the meaning of Section 3(14) of ERISA, and Section 4975 of the Code imposes an excise tax on certain "disqualified persons," within the meaning of Section 4975 of the Code, who engage in similar prohibited transactions, in each case unless an exemption is available.

The definitions of "party in interest" and "disqualified person" are expansive. While other entities may be encompassed by these definitions, they include, most notably: (i) a fiduciary with respect to a Plan; (ii) a person providing services to a Plan; and (iii) an employer or employee organization any of whose employees or members are covered by the Plan.

A party in interest (or disqualified person) that participates 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) unless a statutory or administrative exemption is available. A party in interest or disqualified person who engages in a non- exempt prohibited transaction may be subject to other penalties and liabilities under ERISA and the Code. In the case of an IRA, the occurrence of a prohibited transaction could cause the IRA to lose its tax-exempt status.

Plan Asset Issues

Certain transactions involving the purchase, holding or transfer of the 2017B Bonds might be deemed to constitute prohibited transactions under ERISA and the Code if assets of the University were deemed to be assets of a Plan. The U.S. Department of Labor has promulgated regulations at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, describing what constitutes the assets of a Plan with respect to the Plan's investment in an entity for purposes of certain provisions of ERISA and Section 4975 of the Code, including the fiduciary responsibility provisions of Title I of ERISA and Section 4975 of the Code (the "Plan Asset Regulation"). If the University's assets were deemed to constitute "plan assets" pursuant to the Plan Asset Regulation, transactions that the University might enter into, or may have entered into in the ordinary course of business, might constitute non-exempt prohibited transactions under ERISA and/or Section 4975 of the Code.

Under the Plan Asset Regulation, the assets of the University would be treated as plan assets of a Benefit Plan for purposes of ERISA and the Code only if the Plan acquires an "equity interest" in the University and none of the exceptions contained in the Plan Asset Regulation is applicable. An equity interest is defined under the Plan Asset Regulation as an interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features.

Although there can be no assurances in this regard, it appears that the 2017B Bonds should be treated as debt without substantial equity features for purposes of the Plan Asset Regulation. Accordingly, the assets of the University should not be treated as the assets of Plans investing in the 2017B Bonds.

Prohibited Transaction Exemptions

However, without regard to whether the 2017B Bonds are treated as an equity interest for such purposes, the acquisition or holding of 2017B Bonds by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the University or an affiliate is or becomes a party in interest or a disqualified person with respect to such Plan, unless the investment is acquired and held in accordance with an applicable statutory, class or individual prohibited transaction exemption. The fiduciary of a Plan that proposes to purchase and hold any 2017B Bonds should consider, among other things, whether such purchase and holding may involve (i) the direct or indirect extension of credit to a party in interest, (ii) the sale or exchange or any property between a Plan and a party in interest, and (iii) the transfer to, or use by or for the benefit of, a party in interest, of any Plan assets.

Certain exemptions from the prohibited transaction rules recognized by the U.S. Department of Labor could be applicable depending on the type and circumstances of the plan fiduciary making the decision to acquire a 2017B Bond. These are commonly referred to as prohibited transaction class exemptions or "PTCEs." Included among these exemptions are:

• PTCE 75-1, which exempts certain transactions between a plan and certain broker dealers, reporting dealers and banks,

• PTCE 96-23, which exempts certain transactions effected at the sole discretion of an "in-house asset manager";

• PTCE 90-1, which exempts certain investments by "insurance company pooled separate accounts";

• PTCE 95-60, which exempts certain transactions effected on behalf of an "insurance company general account";

• PTCE 91-38, which exempts certain investments by bank collective investment funds; and

• PTCE 84-14, which exempts certain transactions effected at the sole discretion of a "qualified professional asset manager."

Note that IRAs (and certain other plans described in Section 4975(e)(1) of the Code) are typically not represented by banks, insurance companies or registered investment advisors so that, practically speaking, these status-based PTCEs may be unavailable.

In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code generally provide for a statutory exemption, commonly referred to as the Service Provider Exemption, from the prohibitions of Section 406(a) of ERISA and Section 4975 of the Code for certain transactions provided that neither the issuer of the securities nor any of its affiliates (directly or indirectly) have or exercise any discretionary authority or control or render any investment advice with respect to the assets of any Plan involved in the transaction and further provided that the Plan pays no more than adequate consideration in connection with the transaction. The availability of each of these PTCEs and/or the Service Provider Exemption is subject to a number of important conditions which the Plan's fiduciary must consider in determining whether such exemptions apply.

Because of the foregoing, the 2017B Bonds (and any interest therein) may not be purchased or held by any person investing "plan assets" of any Plan, unless such purchase and holding will not constitute or result in a non- exempt prohibited transaction under ERISA and the Code or similar violation of any applicable Similar Laws. No assurance is provided that any of the above-listed PTCEs or the Service Provider Exemption will apply with respect to any particular investment in Bonds by, or on behalf of, a Plan (or other entity deemed to hold assets of a Plan under the Plan Asset Regulations) or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with the investment.

Representation

It is the responsibility of each purchaser (and subsequent transferee) of a 2017B Bond that its purchase, holding and transfer of a 2017B Bond is not a prohibited transaction. Each purchaser and any fiduciary acting in connection with the purchase on behalf of a Plan will be deemed to have represented and warranted that either (i) no "plan assets" of any Plan have been used to purchase such 2017B Bond, or (ii) that the acquisition, holding and the disposition of any 2017B Bond by such holder does not and will not constitute a prohibited transaction under ERISA or Section 4975 of the Code or other Similar Laws for which there is no applicable statutory, regulatory or administrative exemption.

Any Plan fiduciary considering whether to purchase 2017B Bonds on behalf of an ERISA Plan should, prior to purchasing the 2017B Bonds, consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such investment and the availability of any of the exemptions referred to above. In addition, persons responsible for considering the purchase of 2017B Bonds by a governmental plan, non-electing church plan or non-U.S. plan should consult with its counsel regarding the applicability of any Similar Law to such an investment.

APPROVAL OF LEGALITY

Legal matters incident to the authorization, issuance and sale of the 2017B Bonds will be passed upon on the date of delivery of the 2017B Bonds by Ballard Spahr LLP, Philadelphia, Pennsylvania, Bond Counsel. The proposed form of opinion of Bond Counsel is attached hereto as Appendix D. Certain legal matters will be passed upon for the University by its Office of General Counsel and for the Underwriters by their counsel, Campbell & Levine, LLC, Pittsburgh, Pennsylvania.

LITIGATION

The University will certify that, to its knowledge, there is no action, suit, proceeding, inquiry or investigation at law or in equity or before any court, public board or body pending or threatened (or any meritorious basis for such an action, suit, proceeding, inquiry or investigation) wherein an unfavorable decision, ruling or finding (i) would adversely affect the transactions contemplated by this Official Statement or the validity or enforceability of the 2017B Bonds, the Indenture or any other agreement or instrument which is used or contemplated for use in the consummation of the transactions contemplated by this Official Statement or (ii) would materially adversely affect the financial condition or operations of the University.

THE TRUSTEE

The University has appointed U.S. Bank National Association to serve as Trustee. The Trustee is to carry out those duties assignable to it under the Indenture and documents relating to the 2017B Bonds. Except for the contents of this section, the Trustee has not reviewed or participated in the preparation of this Official Statement and assumes no responsibility for the nature, contents, accuracy or completeness of the information set forth in this Official Statement or for the recitals contained in the Indenture or the 2017B Bonds, or for the validity, sufficiency, or legal effect of any of such documents.

Furthermore, the Trustee has no oversight responsibility, and is not accountable, for the use or application by the University of any of the 2017B Bonds authenticated or delivered pursuant to the Indenture or for the use or application of the proceeds of such 2017B Bonds by the University. The Trustee has not evaluated the risks, benefits, or propriety of any investment in the 2017B Bonds and makes no representation, and has reached no conclusions, regarding the value or condition of any assets or revenues pledged or assigned as security for the 2017B Bonds, the technical or financial feasibility of any capital project, or the investment quality of the 2017B Bonds, about all of which the Trustee expresses no opinion and expressly disclaims the expertise to evaluate.

UNDERWRITING

The University has entered into a bond purchase agreement with Wells Fargo Bank, National Association, acting through its Municipal Products Group, as representative (the "Representative") of itself, Barclays Capital Inc., Huntington Investment Company, J.P. Morgan Securities LLC and PNC Capital Markets LLC (collectively, the "Underwriters"), to purchase the 2017B Bonds from the University for a purchase price of $______(representing the principal amount of the 2017B Bonds, less an underwriter's discount of $______). The bond purchase agreement between the University and the Representative provides that the Underwriters will purchase all of the 2017B Bonds if any are purchased. The Underwriters' obligation to make such purchase is subject to certain conditions set forth in the purchase contract, the approval of certain legal matters by counsel and certain other conditions. Such bond purchase agreement also provides that the University will indemnify the Underwriters against losses, claims and liabilities arising out of any materially incorrect statement or information contained in or material information omitted from this Official Statement pertaining to the University or the plan of finance. The initial public offering price set forth on the inside cover page of this Official Statement may be changed by the Underwriters from time to time without any requirement of prior notice. The Underwriters reserve the right to offer to sell 2017B Bonds to certain dealers and others at prices lower than those offered to the public.

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 Bank, National Association, which conducts its municipal securities sales, trading and underwriting operations through the Wells Fargo Bank, NA Municipal Products Group, a separately identifiable department of Wells Fargo Bank, National Association, registered with the Securities and Exchange Commission as a municipal securities dealer pursuant to Section 15B(a) of the Securities Exchange Act of 1934.

Wells Fargo Bank, National Association, acting through its Municipal Products Group ("WFBNA"), the Representative and senior managing underwriter of the 2017B Bonds, has entered into an agreement (the "WFA Distribution Agreement") with its affiliate, Wells Fargo Clearing Services, LLC (which uses the trade name "Wells Fargo Advisors") ("WFA"), for the distribution of certain municipal securities offerings, including the 2017B Bonds. Pursuant to the WFA Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the 2017B Bonds with WFA. WFBNA has also entered into an agreement

(the "WFSLLC Distribution Agreement") with its affiliate Wells Fargo Securities, LLC ("WFSLLC"), for the distribution of municipal securities offerings, including the 2017B Bonds. Pursuant to the WFSLLC Distribution Agreement, WFBNA pays a portion of WFSLLC’s expenses based on its municipal securities transactions. WFBNA, WFSLLC, and WFA are each wholly-owned subsidiaries of Wells Fargo & Company.

CERTAIN RELATIONSHIPS

Certain of the Underwriters and/or their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the University, for which they received or will receive customary fees and expenses. A Wells Fargo employee in Wells Fargo Securities, LLC, an affiliate of and separate legal entity from Wells Fargo Bank, N.A. Municipal Products Group, is related to the Chief Investment Officer and Treasurer of the University of Pittsburgh. The Wells Fargo employee has not participated and will not participate in the underwriting of the 2017B Bonds.

RATINGS

The 2017B Bonds have been assigned a rating of "____" by S&P Global Ratings, a division of Standard & Poor's Financial Services LLC ("S&P"), and "____" by Moody's Investors Service, Inc. ("Moody's") based on the credit of the University. Any explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. There is no assurance that such ratings will be maintained for any given period of time or that they may not be revised downward or withdrawn entirely by the rating agency furnishing the same if, in its judgment, circumstances so warrant. Any downward change in or withdrawal of a rating may have an adverse effect on the market price or marketability of the 2017B Bonds.

INDEPENDENT AUDITORS

The consolidated financial statements of the University of Pittsburgh – Of the Commonwealth System of Higher Education as of June 30, 2016 and 2015, and for the years then ended, included in Appendix B to this Official Statement, have been audited by KPMG LLP, independent auditors, as stated in their report appearing therein.

VERIFICATION REPORT

The arithmetical accuracy of the mathematical computations supporting the adequacy of the maturing principal amounts of, and interest earned on, the securities purchased to fund the escrow account established for the refunding of the Refunded Bonds will be verified by The Arbitrage Group, Katy, Texas, as a condition to the delivery of the 2017B Bonds.

CONTINUING DISCLOSURE

With regard to the 2017B Bonds, to comply with the requirements of Rule 15c2-12(b)(5)(i) (the "Rule") promulgated by the Securities and Exchange Commission, the University has covenanted in the Continuing Disclosure Agreement to file within 180 days after the end of each fiscal year of the University, commencing with the fiscal year ending June 30, 2017 with the Municipal Securities Rulemaking Board (the "MSRB"), which operates the Electronic Municipal Market Access ("EMMA") system for municipal securities disclosures, an annual report for each such fiscal year, via EMMA, or in the electronic format as otherwise prescribed by the MSRB.

The annual report of the University shall include: (i) annual financial statements prepared in accordance with generally accepted accounting principles and audited by a certified public accountant in accordance with generally accepted auditing standards; and (ii) certain financial information and annual operating data, including updates of the information provided in Appendix A hereto in the tables included in the Sections entitled "CERTAIN UNIVERSITY OPERATING INFORMATION" and "CERTAIN UNIVERSITY FINANCIAL INFORMATION."

The University also has covenanted in the Continuing Disclosure Agreement to provide to MSRB, via EMMA, notice, in a timely manner (not in excess of ten business days after the occurrence of the event), of the occurrence of any of the following events with respect to the 2017B Bonds:

(a) principal and interest payment delinquencies; (b) non-payment related defaults, if material; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduled draws on credit enhancement reflecting financial difficulties; (e) substitution of a credit or liquidity provider, or its failure to perform; (f) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2017B Bonds or other material events affecting the tax status of the 2017B Bonds; (g) modifications to rights of registered or beneficial owners of the 2017B Bonds, if material; (h) 2017B Bond calls, if material, and tender offers; (i) defeasances; (j) release, substitution or sale of property securing repayment of the 2017B Bonds, if material; (k) rating changes; (l) bankruptcy, insolvency, receivership or similar event of the University; (m) the consummation of a merger, consolidation, or acquisition involving the University or the sale of all or substantially all of the assets of the University, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (n) appointment of a successor or additional trustee or the change of name of a trustee, if material.

For the purposes of the event identified in subparagraph (l) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the University in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the University, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the University.

In addition, the University has covenanted to provide in a timely manner to the MSRB notice of a failure to provide the required annual financial information on or before the date specified in the Continuing Disclosure Agreement.

The University reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information to the extent necessary or appropriate in the judgment of the University; however, the University has covenanted in the Continuing Disclosure Agreement that any such modification will be done in a manner consistent with the Rule. The University reserves the right to terminate its obligation to provide annual financial information and notices of material events, as set forth above, if and when the University no longer remains an obligated person with respect to the 2017B Bonds within the meaning of the Rule. The University acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the owners of the 2017B Bonds and shall be enforceable by any owner of 2017B Bonds; provided that, the right of such owners to enforce the provisions of this undertaking shall be limited to a right to obtain specific enforcement of the University to comply with the provisions of this undertaking and shall not be an Event of Default under the Indenture with respect to the 2017B Bonds.

The University is subject to existing continuing disclosure obligations pursuant to the Rule as set forth in other written agreements. The University has not failed to comply, in all material respects, with its continuing disclosure undertakings under such agreements in the previous five years; except that the University's rating from Standard & Poor's was upgraded from "AA" to "AA+" on June 10, 2014, and the University posted notice of the upgrade on August 25, 2014.

OTHER MATTERS

The references herein to the 2017B Bonds and the Indenture are summaries of certain provisions thereof. Such outlines do not purport to be complete. For full and complete statements of such provisions, reference is made to the Indenture and the 2017B Bonds themselves.

The agreement of the University with the owners of the 2017B Bonds is fully set forth in the Indenture and this Official Statement is not to be construed as constituting an agreement with the owners of the 2017B Bonds. Statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as such and not as representations of facts. Copies of the documents mentioned under this heading are on file at the designated corporate trust office of the Trustee.

The attached Appendices are integral parts of this Official Statement and should be read together with all foregoing statements.

The University has authorized the execution and distribution of this Official Statement.

UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION

By: Chief Investment Officer and Treasurer

APPENDIX A

UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION TABLE OF CONTENTS

Page

GENERAL INFORMATION A-1 General Description A-1 Commonwealth Status of the University A-1 The Trustees of the University A-1 Administration A-9 Academic Programs A-12 Faculty A-12 Accreditation A-13 Planning and Budgeting System A-13 Retirement A-14 Facilities Plan A-15 Competition - Universities Inside and Outside of Region A-17 Institutional Advancement: University Fundraising A-18 Labor Relations A-18 Insurance A-18 Litigation A-18 University Relationship with UPMC A-19

CERTAIN UNIVERSITY OPERATING INFORMATION A-20 Enrollment A-20 Undergraduate Applications and Acceptances A-20 Academic Quality A-21 Student Tuition and Fees A-21

CERTAIN UNIVERSITY FINANCIAL INFORMATION A-22 Statement of Activities A-23 Summary of Consolidated Balance Sheets A-25 Management Discussion A-26 Contributions to the University A-26 Grants and Contracts A-27 Endowment Funds of the University A-27 Debt Structure of the University A-28

UNIVERSITY OF PITTSBURGH

GENERAL INFORMATION

General Description

The University of Pittsburgh – Of the Commonwealth System of Higher Education (the “University”) is a non- sectarian, coeducational, state-related, research university. Located in the Oakland area of the City of Pittsburgh, the University’s main campus is within an hour’s commuting distance of approximately 2.4 million people. The University’s main campus is situated on 132 acres and is comprised of approximately one hundred academic, research, and administrative buildings and residence halls. In addition to the main campus in Pittsburgh, the University has four regional campuses in western Pennsylvania. The regional campuses located in Johnstown, Greensburg and Bradford offer four- year, baccalaureate programs and the regional campus located in Titusville offers an undergraduate curriculum, with associate degree programs.

As of the 2016-2017 academic year, the University offers 477 distinct degree programs and additionally offers numerous combined major, dual, joint, and cooperative degree programs. During the 2016 fiscal year, the University conferred 10,266 degrees. The University’s full-time equivalent enrollment in Fall Term 2016 was 24,442 undergraduate students and 8,281 graduate students. In support of its educational and research programs, the University employs over 13,400 full-time and part-time faculty, research associates, and staff.

Commonwealth Status of the University

The University derives its corporate existence under the laws of the Commonwealth of Pennsylvania (the “Commonwealth”) through acts of the Pennsylvania State Legislature establishing an “Academy or Public School in the town of Pittsburgh” on February 28, 1787 and incorporating the “Western University of Pennsylvania” on February 18, 1819. The University’s name was changed to “University of Pittsburgh” by order of the Court of Common Pleas of Allegheny County on July 11, 1908. On July 28, 1966, the Pennsylvania State Legislature enacted the “University of Pittsburgh-Commonwealth Act” which further changed the name of the University to “University of Pittsburgh - Of the Commonwealth System of Higher Education” and established the University as an instrumentality of the Commonwealth to serve as a state-related institution of the Commonwealth System of Higher Education. The Commonwealth appoints twelve members of the thirty-six voting members of the University’s Board of Trustees (the “Board of Trustees” or “Board”). The full composition of the Board is described in more detail under “The Trustees of the University.”

As a state-related institution, the University receives an annual operating appropriation from the Commonwealth to provide education at the undergraduate and graduate levels for research and public service activities. The appropriation is subject to the Commonwealth’s annual budget process. The University is required to submit a request for current operating funds to the Governor. In developing the executive budget, the Governor may adjust this request. Final appropriation approval rests with the Pennsylvania State Legislature, which may also adjust the amount of the appropriation. For more information, see “BONDHOLDERS’ RISKS – Commonwealth Funding Adjustments or Failure to Appropriate” of the Official Statement.

The Trustees of the University

The Board has full and complete authority to conduct the affairs of the University and is responsible for advancing the purposes of the University; promoting and protecting its independence, academic freedom and integrity; and enhancing and preserving its assets for the benefit of future generations of students and society at large. Accordingly, the Board bears responsibility for the financial and academic development of the University, for overseeing the management of its resources and for ensuring that the University meets its obligations to the Commonwealth and to society generally. The Board establishes the educational philosophy and objectives of the University, approves the annual budget submitted by the Chancellor and Chief Executive Officer, and oversees the use and investment of all funds of the University and its property.

While the Board delegates general administrative, academic and management authority to the Chancellor and Chief Executive Officer of the University, it retains ultimate responsibility for all University affairs and reserves its direct authority in at least three areas: selection of a Chancellor and Chief Executive Officer; approval of major institutional

policies, particularly those related to the fiduciary responsibilities of the Board; and definition of the mission and goals of the University.

The Board is composed of thirty-six voting members, consisting of the Chancellor and Chief Executive Officer; seventeen Term Trustees elected by the Board; six Alumni Trustees elected by the Board from nominations from various sources, including the Pitt Alumni Association; and twelve Commonwealth Trustees, four each appointed by the Governor, the President Pro Tempore of the Senate and the Speaker of the House. There is, in addition, a class of up to sixteen Special Trustees elected by the Board, of which thirteen seats are currently filled. Special Trustees may attend all meetings of the Board and are entitled to and exercise all rights, responsibilities, and privileges of Trusteeship, except the right to vote at Board meetings. Emeritus Trustees, of which there are currently thirty, are elected for life and may attend meetings but they are not entitled to vote. The Board also includes the Governor of Pennsylvania, the Secretary of Education of Pennsylvania, the Allegheny County Executive, and the Mayor of the City of Pittsburgh, all four of whom are non-voting, ex officio members of the Board.

The Board elects its Chairperson, its Vice Chairperson(s), its Chairperson-Elect, the Chancellor and Chief Executive Officer and all other officers of the University. Three or more regular meetings of the Board, including the annual meeting, are convened each year. Special meetings may be called by the Chairperson of the Board or by the Chancellor and Chief Executive Officer, or shall be called by the Secretary at the written request of five voting members of the Board. Fifteen voting members of the Board shall constitute a quorum for the transaction of business and, except with respect to election of a Chancellor and Chief Executive Officer, amendment of bylaws or as otherwise required by law, the acts of a majority of the voting members present and voting at a meeting, at which a quorum is present, shall be the acts of the Board.

The Executive Committee exercises the power of the Board, at all times when the Board is not in session. The Executive Committee of the Board is comprised of the Chairperson; the Vice Chairperson(s) and the Chairperson-Elect (unless such offices are vacant); the Chancellor and Chief Executive Officer; and the chairperson of each standing committee of the Board.

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MEMBERSHIP OF THE BOARD 2016-2017

Members Ex Officio (non-voting) Tom Wolf Governor of the Commonwealth of Pennsylvania

Pedro Rivera Rich Fitzgerald William Peduto Pennsylvania Secretary of Education Allegheny County Executive Mayor of the City of Pittsburgh

Member Ex Officio (voting) Patrick D. Gallagher Chancellor and Chief Executive Officer

Term Trustees (voting)

John A. Barbour Patricia D. Horoho Executive Chairman Retired U.S. Army Surgeon General Buchanan Ingersoll & Rooney P.C. Managing Director Client Account Lead, Military Health Accenture Federal Services

Eva Tansky Blum Terrence P. Laughlin Retired Executive Vice President and Director, Vice Chairman and Head of Global Wealth Community Affairs and Investment Management PNC Bank, N.A. Bank of America Retired Chair & President The PNC Foundation

Suzanne W. Broadhurst Robert G. Lovett Retired Director of Corporate Giving Partner Eat’n Park Hospitality Group Lovett Bookman Harmon Marks LLP

Mary Ellen Callahan Martha Hartle Munsch Partner Partner Jenner & Block LLP Reed Smith LLP

James P. Covert John H. Pelusi, Jr. President and Chief Executive Officer Retired CEO and Vice Chairman, The Institute for Transfusion Medicine HFF, Inc. Retired Managing Member of Holliday Fenoglio Fowler, LP (HFF, LP) Current Executive Managing Director of HFF, LP and Member of Executive Committee

Edward J. Grefenstette Thomas E. Richards President, Chief Executive Officer, Chairman and Chief Executive Officer and Chief Investment Officer CDW The Dietrich Foundation

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Ira J. Gumberg Keith E. Schaefer President and Chief Executive Officer Executive Chairman J.J. Gumberg Co. City Paper Box

Dawne S. Hickton William E. Strickland, Jr. Former Vice Chair, President and Chief Executive President and Chief Executive Officer Officer Manchester Bidwell Corporation RTI International Metals, Inc. Stephen R. Tritch Retired Chairman Westinghouse Electric Company

Alumni Trustees (voting)

Jane Bilewicz Allred F. James McCarl III Retired President President Allred Marketing, Inc. The McCarl Group

Michael A. Bryson Bryant J Salter Retired Executive Vice President President and Chief Executive Officer The Bank of New York Mellon Corporation Business Diplomacy, Inc.

S. Jeffrey Kondis Jack D. Smith Manager, Corporate Marketing Chairman, Department of Orthopedics L.B. Foster Company Excela Health System

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Commonwealth Trustees (voting)

Jay Costa, Jr. Herbert S. Shear State Senator, 43rd District Executive Chairman Commonwealth of Pennsylvania Shear Family Foundation

Bradley J. Franc Thomas L. VanKirk Director Executive Vice President and Chief Legal Houston Harbaugh P.C. Officer Highmark Health

Sy Holzer Peter C. Varischetti President President PNC Bank, Pittsburgh Varischetti Holdings, LP

Thomas O. Johnson II John J. Verbanac Vice President – Government & Public Relations Chief Executive Officer CONSOL Energy, Inc. Summa Development, LLC

William K. Lieberman Kevin Washo, Jr. President Government Relations Principal W.K. Lieberman Company, LLC Cozen O'Connor Public Strategies

John A. Maher III Jake Wheatley, Jr. State Representative, 40th District State Representative, 19th District Commonwealth of Pennsylvania Commonwealth of Pennsylvania

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Special Trustees (non-voting)

G. Nicholas Beckwith III Larry J. Merlo Chairman and Chief Executive Officer President and Chief Executive Officer Arch Street Management, LLC CVS Health

Douglas M. Browning Marlee S. Myers Of Counsel, Sandler Travis & Rosenberg, PA Partner Executive Vice President, Sandler & Travis Morgan Lewis & Bockius LLP Trade Advisory Services, Inc.

David C. Chavern Robert P. Randall President and Chief Executive Officer President Newspaper Association of America RAND Group, Inc.

Brian Generalovich Emil M. Spadafore, Jr. Dentist, Private Practice Partner Thomas, Spadafore & Walker LLP

Deborah J. Gillotti A. David Tilstone Vice President and General Manager President nVoq Incorporated National Tooling and Machine Association and ADT International Consulting

Robert M. Hernandez Sam S. Zacharias Retired Vice Chairman and Chief Financial Officer Principal USX Corporation Gateway Financial Group, Inc.

Roberta A. Luxbacher Retired Vice President Wholesale and Specialties, Global Business Unit ExxonMobil Fuels, Lubricants & Specialties Marketing Company

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Emeritus Trustees (non-voting)

J. David Barnes Earl F. Hord Chairman Emeritus Retired Director BNY Mellon Department of Economic Development Allegheny County

Steven C. Beering A. Alice Kindling President Emeritus Retired Public Health Administrator Purdue University Allegheny County Health Department

Thomas G. Bigley Paul E. Lego Retired Managing Partner Retired Chairman & Ernst & Young Chief Executive Officer Westinghouse Electric Corporation

Frank V. Cahouet George L. Miles, Jr. Retired Chairman and Chief Executive Officer Chairman Emeritus BNY Mellon Chester Group

John G. Conomikes Frank E. Mosier Director, The Hearst Corporation Mosier Enterprise, Inc.

George A. Davidson, Jr. Alfred L. Moyé Retired Chairman Retired Director of University Affairs Dominion Resources, Inc. Hewlett-Packard Company

Catherine D. DeAngelis Thomas H. O’Brien Distinguished Service Professor, Emerita Chairman, Retired Johns Hopkins University PNC Financial Services Group

Herbert P. Douglas, Jr. Anthony J.F. O’Reilly Retired Vice President Chairman Schieffelin & Somerset Co. Waterford Wedgwood PLC

D. Michael Fisher Robert A. Paul Circuit Judge Chairman United States Court of Appeals for the Third Circuit The Louis Berkman Company

E. Jeanne Gleason James C. Roddey Chair Former Chief Executive Pennsylvania Council on the Arts Allegheny County

J. Roger Glunt Farrell Rubenstein President Business Consultant Glunt Development Co., Inc.

Henry L. Hillman Richard P. Simmons Chairman of the Executive Committee Chairman Emeritus The Hillman Company Allegheny Technologies, Inc.

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Charles M. Steiner Dick Thornburgh Of Counsel K&L Gates LLP

John A. Swanson Thomas J. Usher President Non-Executive Chairman of the Board Swanson Analysis Services, Inc. Marathon Petroleum Corporation

Burton M. Tansky Edward P. Zemprelli Retired Chief Executive Officer Attorney at Law The Neiman Marcus Group Retired State Senator

UNIVERSITY CORPORATE OFFICERS

Chairperson of the Board Chancellor and Chief Executive Officer Eva Tansky Blum Patrick D. Gallagher

Provost and Senior Vice Chancellor Senior Vice Chancellor for Health Sciences Patricia E. Beeson and Dean of the School of Medicine Arthur S. Levine

Senior Vice Chancellor for Engagement, Senior Vice Chancellor and Secretary of the Board, and Chief of Staff Chief Legal Officer Kathy W. Humphrey Geovette E. Washington

Senior Vice Chancellor and Chief Financial Officer Chief Investment Officer and Treasurer Arthur G. Ramicone Amy K. Marsh

Senior Vice Chancellor for Business and Operations Assistant Treasurer - Finance Gregory A. Scott Susan M. Gilbert

Deputy Secretary and Managing Director of Investments and Senior Associate General Counsel Assistant Treasurer Cynthia C. Moore Paul Lawrence

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Administration

University policy is shaped with the involvement of Trustees, administrators, faculty members, staff and students. An environment of collegiality with consultation and consensus-building are typically used for approaching decisions, especially in academic and financial matters.

The Chancellor and Chief Executive Officer is the chief academic and administrative officer of the University as well as member of the Board who is responsible to the Board as the interpreter of the public interest and as the representative of the administration, faculty, staff and students. The Chancellor and Chief Executive Officer’s deputies in guiding instruction and research are the Provost and Senior Vice Chancellor, the Senior Vice Chancellor for Health Sciences, the deans of the various schools and faculties, the presidents of the regional campuses, the department chairs and the directors of University centers and institutes. The Chancellor and Chief Executive Officer, the Provost and Senior Vice Chancellor, the Senior Vice Chancellor for Health Sciences, the deans and the regional campus presidents are recruited and selected in accordance with procedures that involve representative members of the faculty and staff, as well as student leaders. Faculty of the University, particularly those of the relevant schools, and students are urged to recommend candidates for these positions.

The University’s governance is one of shared responsibilities and authority, with the ultimate legal authority residing in the Board. The University is organized by campuses, colleges/schools and centers. Each school is administered by a dean. In most of the schools the basic organizational unit is the academic department, headed by a chair. Traditionally, and by specific delegation from the Trustees and the Chancellor and Chief Executive Officer, departmental faculties determine curriculum design, instructional practice, grading and admissions, and propose faculty appointments and promotions. In other areas, including budget operation, personnel management and salary practice, authority is specifically delegated from the Trustees through an administrative chain including the Chancellor and Chief Executive Officer, the Provost and Senior Vice Chancellor, the Senior Vice Chancellor for Health Sciences, deans and regional campus presidents and chairs of the academic departments.

Members of the faculty express their views, recommendations and requests through their departmental and school faculty meetings and committees, through the University Senate, the Faculty Assembly, and through the University Planning and Budgeting System (the “PBS”). For more information on the PBS, which has the widest participation by administrators, faculty, staff and students in planning and budgeting, see “Planning and Budgeting System.”

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The following table lists the University’s principal administrative officers:

UNIVERSITY SENIOR ADMINISTRATION Fiscal Year 2016-2017

Patrick D. Gallagher ...... Chancellor and Chief Executive Officer

Patricia E. Beeson ...... Provost and Senior Vice Chancellor

Arthur S. Levine ...... Senior Vice Chancellor for Health Sciences and Dean of the School of Medicine

Arthur G. Ramicone ...... Senior Vice Chancellor and Chief Financial Officer

Gregory A. Scott ...... Senior Vice Chancellor for Business and Operations

Geovette E. Washington ...... Senior Vice Chancellor and Chief Legal Officer

Kathy W. Humphrey ...... Senior Vice Chancellor for Engagement, Secretary of the Board of Trustees, and Chief of Staff

Amy K. Marsh ...... Chief Investment Officer and Treasurer

Brief resumes of selected officers of the University are set forth below:

Patrick D. Gallagher, Chancellor and Chief Executive Officer. B.S. 1985, Benedictine College; M.S. Physics 1987 and Ph.D. 1991, University of Pittsburgh. On February 8, 2014, Dr. Gallagher was unanimously elected the 18th Chancellor of the University. Dr. Gallagher took over as Chancellor and Chief Executive Officer of the University on August 1, 2014. Dr. Gallagher most recently served as the Undersecretary of Commerce for Standards and Technology and Director of the National Institute of Standards and Technology (NIST), a position he held from 2009 to 2014. He also served as the Acting Deputy Secretary of the U.S. Department of Commerce, which concluded on June 9, 2014. At the NIST, Dr. Gallagher served in a number of capacities, including deputy director, director of the NIST Center for Neutron Research, and leader of the Research Facilities Operation Group in the Center for Neutron Research, as well as a NIST agency representative at the National Science and Technology Council.

Patricia E. Beeson, Provost and Senior Vice Chancellor. B.S. 1977, Oregon State University; Ph.D. 1983, University of Oregon. Before becoming Provost and Senior Vice Chancellor, effective August 15, 2010, Dr. Beeson worked in the Provost’s Office for six years first as Vice Provost for Graduate Studies, then as Vice Provost for Undergraduate and Graduate Studies. Prior to that, she served three years as Associate Dean for Undergraduate Studies in the School of Arts and Sciences. She has been a faculty member of the Department of Economics since 1983 and has a secondary appointment in the Graduate School of Public and International Affairs.

Arthur S. Levine, Senior Vice Chancellor for Health Sciences and Dean of the School of Medicine. A.B. 1958, Columbia College; 1958-1960, Columbia University Graduate Faculties; M.D. 1964, Chicago Medical School. Dr. Levine served as the Scientific Director of the National Institute of Child Health and Human Development until he joined the University as Senior Vice Chancellor for Health Sciences and Dean of the School of Medicine in 1998. In May 2014, Dr. Levine was appointed the John and Gertrude Petersen Dean, marking the first time in the School of Medicine’s 128- year history that an endowed chair was established exclusively for the Dean of the School of Medicine.

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Arthur G. Ramicone, Senior Vice Chancellor and Chief Financial Officer. B.S. 1975, Pennsylvania State University; M.B.A. 1978, Pennsylvania State University. In December 2010, Mr. Ramicone was named Chief Financial Officer and served as Interim Executive Vice Chancellor from January 2015 until April 2016. At the February 27, 2015, Board of Trustees meeting, Mr. Ramicone earned the added distinction of Senior Vice Chancellor. Mr. Ramicone was a CPA with Deloitte Haskins & Sells (now known as Deloitte & Touche LLP) from 1978 to 1985 and spent three years in industry before coming to the University as Manager of Internal Audit in 1988. Appointed as Associate Vice Chancellor, Budget and Administration in July 1995, Mr. Ramicone assumed the duties of Vice Chancellor for Budget and Controller in February 1996.

Gregory A. Scott, Senior Vice Chancellor for Business and Operations. B.S. Civil Engineering, The Pennsylvania State University; M.B.A., National University. Mr. Scott was appointed to his position at the February 26, 2016 Board of Trustees meeting and assumed his role on April 1, 2016. Mr. Scott is a veteran of the U.S. Navy. He began his career as an officer in the Civil Engineering Corps in 1991 while serving as assistant resident officer in charge of construction in Twentynine Palms, CA, and assistant public works officer in Indian Head, MD. After spending four years there, his academic career started in 1997 as director of project management at Rutgers University. In 2001, he joined Pennsylvania State University as the manager of construction services in the Office of Physical Plant. Within that same office, he became the director of commonwealth services in 2005. In 2013, Mr. Scott assumed the role of Assistant Vice President at Pennsylvania State University, which he held until joining the University of Pittsburgh.

Geovette E. Washington, Senior Vice Chancellor and Chief Legal Officer. A.B. 1989, Wesleyan College; J.D. 1992, Duke University. The Board unanimously elected Ms. Washington as Senior Vice Chancellor and Chief Legal Officer of the University on June 19, 2015. Ms. Washington has served as Senior Vice Chancellor and Chief Legal Officer of the University since August 17, 2015. Previously, Ms. Washington most recently served as General Counsel and Senior Policy Advisor for the Office of Management and Budget (OMB) at the White House, a position she held from 2013 to August 2015. Prior to that, she served as Deputy General Counsel at the U.S. Department of Commerce from April 2010 to May 2013. Before joining the Department of Commerce, Ms. Washington spent fourteen years in the District of Columbia litigation firm of Baach Robinson and Lewis PLLC (now Lewis Baach), where she was an associate for four years and a partner for ten years.

Kathy W. Humphrey, Senior Vice Chancellor for Engagement, Secretary of the Board of Trustees, and Chief of Staff. B.S. Education, Central Missouri State University (now the University of Central Missouri); M.A. Higher Education Administration, University of Missouri-Kansas City; Ph.D. Educational Leadership, Saint Louis University. Dr. Humphrey was appointed as Senior Vice Chancellor for Engagement, Secretary of the Board and Chief of Staff in January 2015. She also has a faculty appointment in the School of Education and previously served as Vice Provost and Dean of Students, a position she held for nine years. Prior to joining the leadership team at the University of Pittsburgh, Dr. Humphrey served for six years as the Vice President for student development at Saint Louis University.

Amy K. Marsh, Chief Investment Officer and Treasurer. A.B. cum laude, 1978, Wittenberg University; M.M., 1981, Kellogg Graduate School of Management, Northwestern University. Ms. Marsh joined the University as Treasurer in September 1999 and earned the added distinction of Chief Investment Officer in December 2006. Ms. Marsh was a commercial banker with Mellon Bank, N.A. from 1983 to 1999 where she held various management, marketing and lending positions in corporate banking, structured finance and capital markets. Prior to joining Mellon, Ms. Marsh was a manager with AT&T Long Lines.

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Academic Programs

The distinctive character of the University is defined by its commitment to academic excellence, its specialized programs, and the array of scholarly interests and talents represented among its schools, campuses, centers, and institutes. The University addresses and supports the higher educational needs of western Pennsylvania and the nation through the following schools:

Kenneth P. Dietrich School of Arts and Sciences School of Dental Medicine College of General Studies School of Nursing University Honors College School of Pharmacy Joseph M. Katz Graduate School of Business/ Graduate School of Public Health College of Business Administration School of Medicine School of Education School of Health and Rehabilitation Sciences John A. Swanson School of Engineering University of Pittsburgh at Bradford School of Law University of Pittsburgh at Greensburg Graduate School of Public and International Affairs University of Pittsburgh at Johnstown School of Social Work University of Pittsburgh at Titusville School of Information Sciences

The University offered the following degree programs for the 2016-2017 academic year: 21 associate, 222 baccalaureate, 145 master’s, and 101 doctoral degree programs. Of these doctoral programs, there are 83 research/scholarship programs and 18 professional practice programs. The Dietrich School of Arts and Sciences offers both undergraduate and graduate degree programs across its divisions of Humanities, Natural Sciences, and Social Sciences. Also administered through the Dietrich School of Arts and Sciences is the College of General Studies which offers undergraduate degree programs. Other schools that offer both undergraduate and graduate degree programs include: the Swanson School of Engineering and the Schools of Education, Social Work, Information Sciences, Nursing, and Health and Rehabilitation Sciences. The Katz Graduate School of Business and the College of Business Administration offer graduate and undergraduate degree programs, respectively. The School of Dental Medicine offers an associate degree program in Dental Hygiene and graduate degree programs. The Schools of Law, Medicine, Pharmacy, the Graduate School of Public and International Affairs and the Graduate School of Public Health offer graduate degree programs. A Bachelor of Philosophy degree is available in all baccalaureate degree programs and is offered through the University Honors College.

Collectively, the degree program offerings at the regional campuses in Bradford, Greensburg, Johnstown, and Titusville include associate degree programs and baccalaureate programs, along with various other programs of study that go beyond the standard curriculum which are made available through inter-campus initiatives.

The University’s schools and campuses offer, in addition to degree programs, both undergraduate and graduate certificate programs. In addition to these schools, the University Center for International Studies offers undergraduate and graduate certificate programs in areas such as African Studies, Asian Studies, European Studies, European Union Studies, Global Studies, Latin American Studies, Russian and East European Studies, and Transatlantic Studies. Between the schools, there are numerous cross-disciplinary opportunities that exist such as dual, joint, and cooperative degree programs which provide students with even a wider range of degree options.

Faculty

As of the Fall Term 2016, the University had a full-time faculty of 4,522, of whom 28% had tenure. With respect to highest earned degree, 90% of the University’s faculty held doctoral degrees and 9% held Master’s degrees, which included technical degrees in some disciplines.

Most faculty members engage in both teaching and research. The research and scholarly achievements of the faculty are recognized internationally and are significant factors in attracting undergraduate and graduate students and post-doctoral fellows. Many faculty are members or fellows of the National Academy of Sciences, the Institute of Medicine, the National Academy of Engineering, the National Academy of Education, the American Academy of Arts and Sciences or other prestigious scholarly bodies. Members of the faculty have made major contributions to their particular disciplines. Landmark achievements by University faculty include the development of the polio vaccine, the

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first synthesis of a complex hormonal protein, and the development of a conservative but effective treatment for breast cancer.

Accreditation

The University is accredited by the Middle States Commission on Higher Education (the “Commission”), 3624 Market Street, Philadelphia, PA 19104. Currently, the University is preparing to submit the Periodic Review Report to the Commission by June 1, 2017. This report provides the opportunity to look at the University from a broad perspective, to evaluate past achievement, and to assess progress toward institutional goals. In addition, the University will demonstrate verification of compliance with accreditation-relevant federal regulations.

In June 2012, the University was formally awarded reaccreditation for a 10-year period, without qualification, the maximum permissible time for an extension of accreditation. In its report, the Commission praised the University’s unusually robust and integrated “culture of assessment,” and affirmed that the University is, indeed, “a world-class research university.” The 2012 reaccreditation was preceded by two years of diligent preparation and work by University leaders, faculty, administration, staff, and students who created a required self-study document titled, “Using a University- wide Culture of Assessment for Continuous Improvement.” The accreditation process required an external team of evaluators to carry out two on-site visits to the University. The first visit was in November 2011 and the evaluators reviewed hundreds of documents assembled by the University to demonstrate its compliance with the 14 standards of accreditation established by the Commission. The second visit in April 2012 focused on the University’s self-study. In addition, various individual programs of the University receive specialized accreditation from numerous professional peer-accrediting agencies.

Planning and Budgeting System

The PBS is an integrated, comprehensive system that incorporates the priorities of, and input from, senior management, responsibility centers and department units. Under the PBS, administrators, faculty, staff and students participate at the smallest organizational unit level, typically the department, where the University’s missions of teaching, research and public service are accomplished. Planning and budgeting at this level take place with consideration of detailed information on past and projected enrollments, revenues and expenditures, and in the context of long-range missions and goals. At the responsibility center level, representatives of faculty, staff and students are involved, along with the relevant administrators, in coordinating and prioritizing the plans and budgets of the constituent departments. At the Vice Chancellor level, all responsibility centers’ plans and budgets are prioritized and integrated. Consolidated plans are then submitted to the Chancellor and Chief Executive Officer and the University Planning and Budgeting Committee (“UPBC”). The Chancellor and Chief Executive Officer, with active participation by the UPBC, integrates the proposals received into performance, personnel, capital and financial plans and budgets to form a comprehensive University plan and budget. The Chancellor and Chief Executive Officer then presents the final plan and budget to the Board for appropriate action.

The four most significant sources of operating revenue for the University are: (i) research grants and contracts; (approximately 35% of University operating revenues for fiscal year 2016); (ii) tuition and fees (approximately 28% of University operating revenues for fiscal year 2016); (iii) sales and services fees (approximately 16% of University operating revenues for fiscal year 2016, of which approximately 45% were associated with housing, food service, book store and other auxiliary operations); and (iv) Commonwealth appropriations fees (approximately 7% of University operating revenues for fiscal year 2016).

The University is one of a group of 62 American research universities chosen for membership in the Association of American Universities. It consistently ranks among the top 20 American universities in overall awards for federal science and engineering research and development. According to the National Institutes of Health (“NIH”) funding most recent rankings, the faculty of the University’s medical and public health schools ranks fifth, the University ranks number three in funding from the NIH’s National Institute of Mental Health and the School of Nursing ranks sixth among U.S. nursing schools. According to the U.S. National Science Foundation’s most recent ranking of federally funded research, the University ranks ninth overall and fifth among public institutions. Please refer to “BONDHOLDERS’ RISKS – Decrease in Research Funding” of the Official Statement for additional information.

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Operating revenue from tuition and fees is estimated by the Office of the Chief Financial Officer using a comprehensive model based on full-time equivalent enrollment projections, which are estimated by the appropriate academic units and reviewed by the Office of the Provost. The annual tuition rate is determined by considering factors such as inflation, market conditions and other economic information.

The Commonwealth has made annual appropriations for current operations to the University since the University obtained its state-related status in 1966. However, there is no assurance that such appropriations will continue to be made, or will be made at current levels or at levels requested by the University. See “BONDHOLDERS’ RISKS – Commonwealth Funding Adjustments or Failure to Appropriate” of the Official Statement. In addition to an annual appropriation for current operations, the Commonwealth also appropriates funds for capital projects in support of the University’s academic mission. The capital program appropriation is based on the University’s capital budget, a five- year plan that is updated annually by the University. For example, these Commonwealth capital appropriations have most recently financed portions of the following capital projects: Parran Hall renovation, Benedum Hall renovation, Clapp/Langley/Crawford Hall addition, Cathedral of Learning elevator renovation, and Salk Hall addition and renovation.

Retirement

The University provides post-retirement medical and life insurance benefits to eligible employees and their spouses/domestic partners upon retirement through a contributory benefit plan. Additional information is detailed in Note 9 of the Audited Financial Statements in Appendix B.

The University maintains its own retirement plans and is not a member of the state’s defined benefit program. The University provides eligible employees an opportunity to participate in the Defined Contribution Program (the “403(b) and 401(a) Plans”). Prior to November 2, 2015, the University offered the Noncontributory Defined Benefit Pension Plan (the “DB Plan”) to new eligible employees. As of November 2015, only new employees that are members of certain union groups can elect to use the DB Plan. There are still several union groups that use the DB plan as the default option if a retirement plan election is not made. As union groups renegotiate their contracts, this option is being eliminated for new hires.

403(b) and 401(a) Plans. Eligible employees may contribute from 3% to 8% of base salary under the 403(b) and 401(a) Plans with eligible new hires automatically enrolled at a 3% contribution rate unless they change or opt-out of that election. The University makes a matching contribution which is subject to a vesting requirement of approximately three years of service (employees hired before January 1, 1995, were immediately vested). The University contributes one times an employee’s contributions during the vesting period and one and one-half times after fulfillment of the vesting requirement. All participant contributions and vested University contributions are available for retirement annuity income and/or other options of cashability and transferability. University contributions amounted to $76.2 million in fiscal year 2016 and $74.7 million in fiscal year 2015.

Faculty and staff may elect to make supplemental tax-deferred contributions without a University matching contribution, but within the limits permitted by tax regulations. Employees who are not eligible for the University matching contribution may make elective tax-deferred contributions within the limits permitted by tax regulations.

DB Plan. Employees who started participation in the DB Plan prior to January 1, 2016 are eligible to continue in the plan but may change enrollment to the 403(b) and 401(a) Plans. The DB Plan is a defined benefit plan and does not require employee contributions. Benefits are subject to a five-year vesting period and are payable beginning at age 65, with reduced benefits are available for earlier retirement. The benefit is computed as 2.1% of annual salary up to the Social Security Wage Base for each year of credited service. University contributions to the DB Plan was $10.9 million for fiscal year 2016 and $9.8 million for the fiscal year 2015.

The University’s pension plan funding is reviewed annually and incorporates information obtained through an annual independent actuarial valuation of the plan’s liabilities. The valuation also includes an economic assumption regarding long-term investment returns on plan assets, which, as of June 30, 2016, was 7.5% per year. In addition, the actuarial valuation includes an assumed discount rate on the plan’s liabilities of 3.9%, a reduction from 4.8% in the prior year. The unfunded net liability (plan liabilities less plan assets) as of June 30, 2016 and 2015 was $47.6 million and $23.6 million, respectively, or 69% and 80% funded, respectively, based on the fair value of the plan assets as a percentage

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of liabilities. Additional information on the University’s DB Plan obligation can be found in Note 9 of the Audited Financial Statements in Appendix B.

Facilities Plan

In May 2007, the University announced a 12-Year Facilities Plan: 2007-2018 (the “Plan”) to support programmatic direction. The Plan emphasizes modernization, rather than new construction, and includes modernized laboratories, classrooms, a book center and student housing, as well as new facilities for the baseball, softball, soccer, and marching band programs. The Plan provides a “roadmap” for ensuring the University’s facilities can meet programmatic objectives over the 12-year period and, as such, has built in contingencies to review and, if necessary, adjust the Plan’s direction. The Plan, which is divided into four-year phases, is planned to be reviewed prior to the beginning of each phase to allow for programmatic changes or to take advantage of unforeseen opportunities. Since the inception of the Plan, the University has spent approximately $10 to $15 million per annum on various campus preservation, classroom renovation and programmatic renovation projects. In addition, the University continues to add new facilities which advance the mission of the institution.

In January 2016, a facilities master plan committee and working group were formed as part of the University’s strategic planning efforts to develop the next ten year facilities plan. The committee will interact broadly across the University to develop priorities with the goal of presenting a report to the Board in 2017.

Examples of significant facilities projects that have been recently completed or are currently underway include:

• Cathedral of Learning 12th Floor Renovations and Mechanical Upgrades. This project was completed in September 2016 and consisted of the renovation of 12th floor of the Cathedral of Learning. The new design enhanced the efficiency of the floor and expanded the useable areas. The scope included removal of the existing window air conditioners, installation of central air conditioning, upgrade of the restrooms and lobby areas, installation of energy efficient lighting and Americans with Disabilities Act upgrades. The project was completed in September 2016.

• Johnstown Campus – College Park Apartments Renovation. The College Park Apartments, a property of 140 apartment style beds, was closed in the summer of 2013 for repairs to the apartment balconies and replacement of the exterior window lintels and associated masonry work. In addition, the renovation includes: upgrade to all mechanical, electrical and plumbing systems, kitchens, flooring and lighting, installation of a sprinkler system, upgrade of the fire alarm system and American with Disabilities Act upgrades. The project was completed in December 2016.

• John P. Murtha Center for Public Service and National Competitiveness. This multiple phase project on the University of Pittsburgh at Johnstown campus includes the construction of a new 7,400 gross square foot building known as the John. P. Murtha Center for Public Service. The building is expected to include a large multi-purpose room, museum exhibit space, and administrative offices. An additional component of the project consists of the renovation of The Engineering and Science Building, which will be known as the John P. Murtha Engineering & Science Building. The project is scheduled for completion in the beginning of 2017.

• Trees Fields Renovations. The project consists of the renovations of the existing natural turf fields at Trees Field, replacement of the existing synthetic turf field for intramural sports, construction of an air structure, inclusion of a new perimeter security fence with a security kiosk at the main entrance, construction of a maintenance building, and renovations of the existing grounds building. The project is scheduled for completion in the beginning of 2017.

• Scaife Hall - Modernize and Upgrade. This renovation will modernize prime medical school space in Scaife Hall and will turn existing underutilized laboratory and older office space into modern, state of the art office, and student services spaces. The project is scheduled for completion in May 2017.

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• Parran and Crabtree Halls Addition and Renovation Phase 2A&B. The recently completed Phase 1 five- story addition of Parran Hall was constructed to accommodate the relocation and expansion of research facilities. The wet laboratories are expected to be re-purposed into new office space, classrooms, conference rooms, and support space for the Graduate School of Public Health. The renovation project is registered as a Commercial Interior project and is designed to achieve LEED Gold certification. Phase 2A was completed in September 2016, and Phase 2B completion is planned for the end of 2017.

• Cost Sports Center Renovations. The project includes the interior renovations of the existing Cost Sports Center field and mechanical area. The existing interior playing surface of the Cost Sports Center is expected to be replaced with new synthetic turf and rubber shock pad. In addition, the perimeter wall padding and curtain divider system are planned to be replaced among other building upgrades and modifications. The project is scheduled for completion in the fall of 2017.

• Thomas E. Starzl Biomedical Science Tower (BST) 10th Floor West Laboratory Renovation. This project consists of the renovation of the 10th floor of the Thomas E. Starzl Biomedical Science Tower (BST) to accommodate recruitment for the Department of Immunology at the University of Pittsburgh School of Medicine. The proposed renovations are expected to create modern, open laboratory space with associated support spaces. These changes are expected to increase the efficiency of space usage, incorporate natural lighting, modernize utility distribution systems, improve overall workflows and create a dynamic environment for open resource sharing. The project is scheduled for completion in late 2017.

The capital projects set forth in the Plan, including those facilities outlined above, have or will be financed with a combination of long-term debt, Commonwealth funds, gifts, grants and internal funds.

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Competition - Universities Inside and Outside of Region

The following table compares the tuition and required fees for undergraduate students enrolled full-time for two terms in the Dietrich School of Arts and Sciences for the 2016-2017 academic year to selected competing institutions.

Undergraduate Tuition and Required Fees

Academic Year 2016-2017

Private

Carnegie Mellon University $52,310 George Washington University $51,950 Boston University $50,240 New York University $49,062 Duquesne University $35,062

Public

University of Pittsburgh: In-State $18,618 Out of-State $29,758 Pennsylvania State University: In-State $17,900 Out-of-State $32,382 University of Michigan: In-State $14,402 Out-of-State $45,410 Rutgers University: In-State $14,372 Out-of-State $30,023 University of Delaware: In-State $12,830 Out-of-State $32,250 University of Maryland: In-State $10,182 Out-of-State $32,045 The Ohio State University: In-State $10,037 Out-of-State $29,229 ______SOURCE: “The Chronicle of Higher Education” (http://www.chronicle.com/interactives/tuition-and-fees).

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Institutional Advancement: University Fundraising

Since the conclusion of its $2.1 billion Building Our Future Together Capital Campaign in June 2013, the University has remained committed to fundraising excellence in the support of students, research and institutional growth. The following table indicates cash received as reported to the Council for Aid to Education (totals reflect cash only and do not include pledges or noncash gifts) at June 30 for the periods indicated. For the six months ended December 31, 2016, the University raised $65.4 million in cash (unaudited). The amount recorded as revenue and receivables does not necessarily match with the amounts reported in the Audited Financial Statements due to differences in recognition standards.

Cash Received (in thousands) 2016 $127,155 2015 $124,602 2014 $117,068 2013 $127,859 ______SOURCE: University of Pittsburgh- Office of Institutional Advancement

Labor Relations

The University considers its relationship with organized labor to be good and has not experienced a work stoppage or strike since prior to 1980. Of the over 13,000 full and part-time faculty and staff, approximately 800 are members of eight different collective bargaining units. The collective bargaining agreements covering these employees expire between 2017 and 2021.

Insurance

The University is self-insured for certain activities and purchases commercial insurance policies for others. Self- insured programs include employee health insurance (through an agreement with UPMC), workers’ compensation and unemployment compensation. Insurance expense is accrued based on the respective third party administrators’ and actuaries’ estimates of loss experience and outstanding liabilities. The self-insurance accrual is subject to periodic adjustment by the University based on actual and projected loss experience factors for each program. The Board has designated sufficient quasi-endowment funds to be utilized as payments on such claims as required.

Other major insurance policies include: primary general liability through a Vermont-domiciled captive insurance company, educators legal liability (a.k.a. director & officers and employment practices liability), property, crime, automobile, information security (cyber), environmental, fiduciary and international liability insurance, as well as excess workers’ compensation and excess liability (umbrella) insurance. Healthcare professionals and students requiring medical malpractice coverage are insured through the Vermont captive.

Litigation

The University, as with other similar institutions, is subject to a variety of suits and proceedings arising in the ordinary course of business. In the opinion of the University, no such litigation currently pending against it would, if determined adversely to the University, have a material adverse effect on its financial condition. For additional information pertaining to commitments and contingencies, including certain contractual obligations, see Note 13 of the Audited Financial Statements in Appendix B.

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University Relationship with UPMC

The University has several contractual agreements with UPMC, namely an affiliation agreement, support services agreement, reorganization agreement and a trademark licensing agreement (collectively, the “Relationship Agreements”). UPMC is an independent, non-profit corporation that is the parent organization for a number of hospitals, including UPMC Presbyterian (which serves as the primary teaching hospital for the University’s Schools of the Health Sciences) and other health-care related entities. UPMC is not under the control of the University. Under the Relationship Agreements, UPMC provides, among other things, financial support and certain administrative services for the benefit of the research and academic programs within the University’s Schools of the Health Sciences. The Relationship Agreements automatically renew for successive two year terms, unless either party gives the other party at least two years’ written notice before the end of any term of its decision to terminate the agreement. By their terms, the Relationship Agreements were subsequently extended to June 30, 2018, and neither party has provided any notice of termination. For additional information on the University’s relationship with UPMC, see “BONDHOLDERS’ RISKS – Affiliation with University of Pittsburgh Medical Center” herein and Note 13 to the Audited Financial Statements in Appendix B.

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CERTAIN UNIVERSITY OPERATING INFORMATION

Enrollment

The following table indicates the University’s full-time equivalent (“FTE”) enrollment for periods indicated.

For the Fall Term

Students 2016 2015 2014 2013 2012 Undergraduate 24,442 24,272 24,217 24,067 24,022 Graduate 8,281 8,442 8,497 8,565 8,759 Total FTE all students 32,723 32,714 32,714 32,632 32,781 ______SOURCE: University of Pittsburgh – Office of Institutional Research.

Undergraduate Applications and Acceptances

The following data indicates direct applications, acceptances, and matriculations for full- and part-time first-time freshman at the five University campuses for the periods indicated.

For the Fall Term

2016 2015 2014 2013 2012 Applications 37,447 36,577 35,892 32,163 27,835 Acceptances 21,198 20,098 19,739 17,970 16,415 Matriculations 5,644 5,648 5,614 5,462 5,331

Acceptances/Applications 56.6% 54.9% 55.0% 55.9% 59.0% Matriculations/Acceptances 26.6% 28.1% 28.4% 30.4% 32.5%

The following table indicates direct applications, acceptances, and matriculations for full- and part-time first-time freshman students to the Dietrich School of Arts and Sciences, the Swanson School of Engineering, the School of Nursing and the College of Business Administration (collectively, the "Pittsburgh Campus Freshman Schools"), which are the Pittsburgh Campus schools that admit traditional first-time freshmen according to competitive admissions standards, for the periods indicated.

For the Fall Term

2016 2015 2014 2013 2012 Applications 29,175 30,658 30,629 27,634 24,871 Acceptances 16,165 16,504 16,271 15,047 13,959 Matriculations 3,954 4,014 3,847 3,854 3,678

Acceptances/Applications 55.4% 53.8% 53.1% 54.5% 56.1% Matriculations/Acceptances 24.5% 24.3% 23.6% 25.6% 26.3%

______SOURCE: University of Pittsburgh - Office of the Provost and University of Pittsburgh, Office of Institutional Research.

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Academic Quality

The following table indicates academic quality as shown by average SAT scores (defined as the combined average of math and reading scores, excluding the writing component) of the full-time first-time freshman students enrolled in the Pittsburgh Campus Freshman Schools for the periods indicated.

For the Fall Term

2016 2015 2014 2013 2012 Pittsburgh Campus 1309 1297 1297 1293 1277 National Average 1002 1006 1010 1010 1010 ______SOURCE: University of Pittsburgh - Office of the Provost.

Student Tuition and Fees

The following table indicates tuition and required fees for undergraduate students enrolled full-time for two terms in the Dietrich School of Arts and Sciences for the periods indicated.

For the Fall Term

2016 2015 2014 2013 2012 In-State Tuition $18,618 $18,192 $17,772 $17,100 $16,590 Out-of-State Tuition $29,758 $28,958 $28,168 $27,106 $26,280 ______SOURCE: University of Pittsburgh - Office of Institutional Research.

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CERTAIN UNIVERSITY FINANCIAL INFORMATION

The University’s consolidated statement of activities for fiscal years 2012 through 2016 and the related consolidated balance sheets at June 30, 2012 through June 30, 2016 appear in the following tables and have been derived from the Audited Financial Statements of the University. Certain amounts for fiscal years 2014, 2013, and 2012 have been reclassified to conform to the current year presentation.

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Statement of Activities (in thousands)

Changes in Unrestricted Net Assets 2016 2015 2014 2013 2012

Operating Revenues Net tuition and fees $ 588,087 $ 580,633 $ 561,438 $ 545,698 $ 525,077 Commonwealth appropriation 154,335 147,392 147,797 144,308 137,649 Commonwealth construction grants 21,289 37,513 40,392 43,996 38,019 Grants and contracts 726,531 713,892 697,577 759,392 780,405 Contributions for operations 35,158 33,537 35,923 31,967 24,234 Investment income – operating investments 6,080 5,401 5,618 8,532 13,679 Endowment distributions for operations 118,245 101,886 96,629 87,513 82,595 Sales and services, educational, auxiliary and rental revenue 355,748 350,225 319,754 293,960 287,237 Other 82,463 78,916 89,601 65,073 68,961 Net assets released from restrictions 13,753 12,521 12,633 19,687 14,797 Total Operating Revenues 2,101,689 2,061,916 2,007,362 2,000,126 1,972,653

Other (Losses) Revenues Investment (losses) gains, net of endowment distributions for operations (115,864) (34,030) 268,595 118,481 (9,740) Change in fair value of interest rate swaps (34,522) (7,315) (1,343) 41,166 (61,629) Nonperiodic changes in benefit plans (96,523) (24,540) (23,518) 43,398 (111,750) Total Other (Losses) Revenues (246,909) (65,885) 243,734 203,045 (183,119)

Operating Expenses Salaries and benefits 1,180,146 1,152,681 1,121,457 1,131,966 1,135,281 Supplies 108,607 107,841 101,930 107,384 114,140 Business and professional 354,292 336,643 298,161 297,487 300,322 Utilities 46,658 48,974 48,719 47,093 47,536 Depreciation 175,135 168,539 159,266 151,542 145,716 Interest, maintenance, facilities cost and other 137,555 146,027 151,559 145,248 146,135 Total Operating Expenses 2,002,393 1,960,705 1,881,092 1,880,720 1,889,130

(Decrease) Increase in Unrestricted Net Assets (147,613) 35,326 370,004 322,451 (99,596)

Changes in Temporarily Restricted Net Assets Operating Revenues (Losses) Contributions for operations 18,853 11,520 11,124 5,392 19,014 Net assets released from restrictions (13,753) (12,521) (12,633) (19,687) (14,797) Total Operating Revenues (Losses) 5,100 (1,001) (1,509) (14,295) 4,217

Other (Losses) Revenues Investment (losses) gains, net of endowment distributions for operations (94,750) (43,237) 176,001 65,800 (33,892) Total Other (Losses) Revenues (94,750) (43,237) 176,001 65,800 (33,892)

(Decrease) Increase in Temporarily Restricted Net Assets (89,650) (44,238) 174,492 51,505 (29,675)

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2016 2015 2014 2013 2012 Changes in Permanently Restricted Net Assets Other Revenues Contributions for endowment $ 22,123 $ 33,902 $ 23,755 $ 26,015 $ 35,790 Investment gains, net of endowment distributions for operations 2,373 2,111 1,974 2,737 2,933 Total Other Revenues 24,496 36,013 25,729 28,752 38,723

Increase in Permanently Restricted Net Assets 24,496 36,013 25,729 28,752 38,723

(Decrease) Increase in Net Assets (212,767) 27,101 570,225 402,708 (90,548)

Net Assets Beginning of Year 4,400,440 4,373,339 3,803,114 3,400,406 3,490,954

Net Assets End of Year $ 4,187,673 $4,400,440 $ 4,373,339 $ 3,803,114 $ 3,400,406

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Summary of Consolidated Balance Sheets (in thousands)

Assets 2016 2015 2014 2013 2012

Cash and cash equivalents $ 6,400 $ 49,582 $ 60,831 $ 196,807 $ 47,751 Operating investments 558,801 569,806 539,378 407,586 627,386 Inventories and deferred charges 20,984 20,546 19,258 17,695 16,760 Accounts and notes receivable, net 188,277 143,498 160,875 160,053 158,464 Contributions receivable, net 31,935 34,545 34,336 32,857 58,994 Student loans receivable, net 47,611 45,852 47,485 48,569 48,027 Deposits of bond and note proceeds 6,598 19,291 - 90,403 8,514 Foundation assets 26,351 26,419 26,006 22,726 21,234 Endowment investments at fair value 3,546,458 3,610,395 3,514,183 2,994,207 2,635,487 Endowed funds held by third parties 22,079 23,140 22,714 19,954 18,074 Property, plant and equipment, net 1,774,065 1,785,749 1,795,335 1,788,475 1,715,731

Total Assets $ 6,229,559 $ 6,328,823 $ 6,220,401 $ 5,779,332 $ 5,356,422

Liabilities

Accounts payable and accrued expenses $ 95,212 $ 98,125 $ 100,952 $ 103,358 $ 100,310 Accrued payroll and related liabilities 74,796 72,507 70,344 75,008 76,713 Deferred student and other revenue 50,801 45,252 42,638 43,775 37,815 Advanced receipt of grant funds 62,689 60,596 63,768 71,582 82,853 Refundable U.S. government student loans 33,897 33,647 33,280 32,928 32,559 Other liabilities 148,811 116,071 107,982 103,685 140,955 Pension and postretirement obligations 589,385 479,334 444,025 406,825 431,957 Conditional asset remediation obligation 37,346 41,219 40,929 40,571 40,946 Bonds and notes payable 948,949 981,632 943,144 1,098,486 1,011,908

Total Liabilities 2,041,886 1,928,383 1,847,062 1,976,218 1,956,016

Net Assets

Unrestricted 2,764,269 2,911,882 2,876,556 2,506,552 2,184,101 Temporarily Restricted 714,738 804,388 848,626 674,134 622,629 Permanently Restricted 708,666 684,170 648,157 622,428 593,676

Total Net Assets 4,187,673 4,400,440 4,373,339 3,803,114 3,400,406

Total Liabilities and Net Assets $ 6,229,559 $ 6,328,823 $ 6,220,401 $ 5,779,332 $ 5,356,422

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Management Discussion

The University’s total operating revenues for fiscal year 2016 increased by $45.9 million, or 2.2%, from the prior fiscal year. This increase is primarily attributable to increases in endowment distributions for operations of $16.4 million, grants and contracts of $12.6 million, contributions for operations of $9.0 million, net tuition of $7.5 million, commonwealth appropriations of $6.9 million, sales and services – auxiliary of $3.7 million, and other revenues of $3.5 million, offset by decreases in Commonwealth construction grants of $16.2 million.

The University’s total expenses increased $41.7 million in fiscal year 2016 from the prior fiscal year. This increase is primarily attributable to increases in compensation of $27.5 million, business and professional expenses of $17.6 million, and depreciation of $6.6 million, offset by a decrease in other expenses of $9.8 million.

Total other (non-operating) activities decreased $244.1 million primarily due to a $133.1 million increase in realized/unrealized losses on investments, a $72.0 million increase in nonperiodic changes in benefit plans (partially due to a decrease in discount rates), and a $27.2 million increase in unrealized losses on interest rate swaps.

The total assets of the University decreased 1.6% from the prior fiscal year. The University’s endowment was approximately $3.5 billion, which represents a decrease of $63.9 million, or 1.8%, from the prior fiscal year. For current information on the University's endowment portfolio, please see “Endowment Funds of the University”.

Capital spending for 2016 totaled $164.7 million, of which $21.3 million was expended by the Commonwealth on behalf of the University. See also Note 6 of the Audited Financial Statements in Appendix B for additional information regarding property, plant, and equipment.

Total net assets decreased by 4.8% and were approximately $4.2 billion at June 30, 2016. Net assets are categorized according to the existence or absence of donor-imposed restrictions. Unrestricted net assets are comprised primarily of the net investment in property, plant and equipment, donated funds designated to individual University departments and funds reserved for debt service and capital projects. Temporarily restricted net assets are comprised of cumulative realized and unrealized gains of the University’s endowment investment and unconditional pledges that are subject to certain time or event restrictions. Permanently restricted net assets are comprised of endowment contributions and unconditional endowment pledges.

Contributions to the University

The University received total aggregate contributions of $225.9 million over the three fiscal years ended June 30, 2016. The University records these funds in three categories within its financial reports. These include unrestricted, temporarily restricted or permanently restricted. The following table summarizes the activity associated with these fund groups for the periods indicated.

2016 2015 2014 (in thousands) Unrestricted $35,158 $33,537 $35,923 Temporarily Restricted 18,853 11,520 11,124 Permanently Restricted 22,123 33,902 23,755 Total $76,134 $78,959 $70,802 ______SOURCE: University of Pittsburgh Audited Financial Statements for FY 2014 through FY 2016.

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Grants and Contracts

The table below shows grants and contracts awarded to the University from governmental and private agencies during the three fiscal years ended June 30, 2016.

Grants and Contracts (in thousands)

2016 $726,531 2015 $713,892 2014 $697,577 ______SOURCE: University of Pittsburgh Audited Financial Statements for FY 2014 through FY 2016.

Endowment Funds of the University

As of June 30, 2016, the University's endowment funds had a fair value of $3.55 billion and a cost basis of $3.27 billion. Endowment net asset activity during the fiscal years 2016 and 2015 primarily consisted of contributions ($146.2 million in 2016 and $170.7 million in 2015), endowment earnings ($17.2 million in 2016 and $23.2 million in 2015), and investment losses/gains ($110.2 million loss in 2016 and $5.6 million gain in 2015.) See Notes 4 and 10 of the Audited Financial Statements for additional information regarding the University’s investment policies and management of the endowment, as well as the University’s spending policy. The following table indicates the fair value and cost basis of the University's endowment funds as of June 30 for the years indicated.

2016 2015 2014 2013 2012 (in billions) Fair Value $3.55 $3.61 $3.51 $2.99 $2.64 Cost Basis $3.27 $3.12 $2.82 $2.60 $2.32 ______Fair value as of December 31, 2016 was $3.66 billion (unaudited). SOURCE: University of Pittsburgh Audited Financial Statements for FY 2012 through FY 2016.

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Debt Structure of the University

The following is a description of the University’s outstanding bonds and notes payable as of January 31, 2017 (unaudited). See also Note 7 of the Audited Financial Statements in Appendix B for additional information regarding the University’s debt structure as of June 30, 2016, including applicable interest rate information.

Unaudited Principal Outstanding at January 31, 2017 (in thousands) BONDS PAYABLE: Fixed to Maturity Series 2017-A , taxable (1) $ 512,480 Series 2014-A , tax-exempt $ 49,000 Series 2007-B, tax-exempt 60,000 Series 2005-A, tax-exempt 35,000 $ 656,480 Commercial Paper Mode, Tax-Exempt (2) Series 2014-B1/B2 $ 46,000 Series 2007-B 44,621 Series 2005-A 40,000 Series 2005-B/C 75,000 $ 205,621

Total Bonds Payable $ 862,101

NOTES PAYABLE: Series 2016 PANTHERS™ $ 70,000 Noninterest-bearing promissory note 171

Total Notes Payable $ 70,171

Total Debt $ 932,272 ______(1) The Series 2017 A Bonds were issued on January 17, 2017. Interest rates range from 1.004% to 3.646%, with principal maturities in years 2017 through 2036. (2) Commercial Paper maturity dates range from 30 to 90 days.

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APPENDIX B

UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 [THIS PAGE INTENTIONALLY LEFT BLANK] UNIVERSITY OF PITTSBURGH

FINANCIAL REPORT FISCAL YEAR 2016

KPMG LLP BNY Mellon Center Suite 3400 500 Grant Street Pittsburgh, PA 15219-2598

Independent Auditors’ Report

The Board of Trustees of the University of Pittsburgh – Of the Commonwealth System of Higher Education:

We have audited the accompanying consolidated financial statements of the University of Pittsburgh – Of the Commonwealth System of Higher Education (the University), which comprise the consolidated balance sheets as of June 30, 2016 and 2015, 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 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 auditor considers 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 Pittsburgh – Of the Commonwealth System of Higher Education as of June 30, 2016 and 2015, 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.

Pittsburgh, Pennsylvania September 22, 2016

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. CONSOLIDATED FINANCIAL STATEMENTS

UNIVERSITY OF PITTSBURGH CONSOLIDATED BALANCE SHEETS JUNE 30, 2016 AND 2015 (in thousands of dollars)

2016 2015 ASSETS: Cash and cash equivalents (Notes 1 and 5) $ 6,400 $ 49,582 Operating investments (Notes 4 and 5) 558,801 569,806 Inventories and deferred charges 20,984 20,546 Accounts and notes receivable, net (Note 2) 188,277 143,498 Contributions receivable, net (Note 3) 31,935 34,545 Student loans receivable, net 47,611 45,852 Deposits of bond proceeds (Notes 1 and 5) 6,598 19,291 Foundation assets (Note 1) 26,351 26,419 Endowment investments (Notes 4 and 5) 3,546,458 3,610,395 Endowed funds held by third parties (Note 5) 22,079 23,140 Property, plant, and equipment, net (Note 6) 1,774,065 1,785,749

TOTAL ASSETS $ 6,229,559 $ 6,328,823

LIABILITIES: Accounts payable and accrued expenses $ 95,212 $ 98,125 Accrued payroll and related liabilities 74,796 72,507 Deferred student and other revenue 50,801 45,252 Advanced receipt of grant funds 62,689 60,596 Refundable U.S. government student loans 33,897 33,647 Other liabilities (Notes 5 and 8) 148,811 116,071 Pension and postretirement obligations (Note 9) 589,385 479,334 Conditional asset remediation obligation (Note 6) 37,346 41,219 Bonds and notes payable (Note 7) 948,949 981,632

TOTAL LIABILITIES 2,041,886 1,928,383

NET ASSETS: Unrestricted (Notes 1 and 10) 2,764,269 2,911,882 Temporarily restricted (Notes 1 and 10) 714,738 804,388 Permanently restricted (Notes 1 and 10) 708,666 684,170

TOTAL NET ASSETS 4,187,673 4,400,440

TOTAL LIABILITIES AND NET ASSETS $ 6,229,559 $ 6,328,823

The accompanying notes are an integral part of these consolidated financial statements.

1 CONSOLIDATED FINANCIAL STATEMENTS

UNIVERSITY OF PITTSBURGH CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 COMPARED TO SUMMARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2015 (in thousands of dollars)

2016 Temporarily Permanently OPERATING REVENUES: Unrestricted Restricted Restricted Total 2015 Tuition and fees $ 764,499 $ - $ - $ 764,499 $ 751,766 Tuition discounts (176,412) - - (176,412) (171,133) Net tuition and fees 588,087 - - 588,087 580,633 Commonwealth appropriation 154,335 - - 154,335 147,392 Commonwealth construction grants 21,289 - - 21,289 37,513 Grants and contracts 726,531 - - 726,531 713,892 Contributions for operations 35,158 18,853 - 54,011 45,057 Investment income – operating investments 6,080 - - 6,080 5,401 Endowment distributions for operations 118,245 - - 118,245 101,886 Sales and services, educational and other 186,864 - - 186,864 185,224 Sales and services, auxiliary 150,533 - - 150,533 146,789 Rental revenue 18,351 - - 18,351 18,212 Other 82,463 - - 82,463 78,916 Net assets released from restrictions 13,753 (13,753) - - - Total operating revenues 2,101,689 5,100 - 2,106,789 2,060,915

OPERATING EXPENSES: Salaries and wages 906,494 - - 906,494 883,682 Fringe benefits 273,652 - - 273,652 268,999 Total compensation 1,180,146 - - 1,180,146 1,152,681 Supplies 108,607 - - 108,607 107,841 Business and professional 354,292 - - 354,292 336,643 Utilities 46,658 - - 46,658 48,974 Maintenance and facilities 48,678 - - 48,678 46,410 Depreciation 175,135 - - 175,135 168,539 Interest 42,212 - - 42,212 43,124 Other 46,665 - - 46,665 56,493 Total operating expenses (Note11) 2,002,393 - - 2,002,393 1,960,705

Change in net assets from operating activities 99,296 5,100 - 104,396 100,210

OTHER ACTIVITIES: Investment (losses) gains, net of endowment distributions for operations (115,864) (94,750) 2,373 (208,241) (75,156) Contributions for endowment - - 22,123 22,123 33,902 Change in fair value of interest rate swaps (34,522) - - (34,522) (7,315) Nonperiodic changes in benefit plans (Note 9) (96,523) - - (96,523) (24,540) Total other activities (246,909) (94,750) 24,496 (317,163) (73,109)

CHANGE IN NET ASSETS (147,613) (89,650) 24,496 (212,767) 27,101 NET ASSETS, BEGINNING OF YEAR 2,911,882 804,388 684,170 4,400,440 4,373,339 NET ASSETS, END OF YEAR $ 2,764,269 $ 714,738 $ 708,666 $ 4,187,673 $ 4,400,440

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSITY OF PITTSBURGH CONSOLIDATED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 (in thousands of dollars)

2015 Temporarily Permanently OPERATING REVENUES: Unrestricted Restricted Restricted Total Tuition and fees $ 751,766 $ - $ - $ 751,766 Tuition discounts (171,133) - - (171,133) Net tuition and fees 580,633 - - 580,633 Commonwealth appropriation 147,392 - - 147,392 Commonwealth construction grants 37,513 - - 37,513 Grants and contracts 713,892 - - 713,892 Contributions for operations 33,537 11,520 - 45,057 Investment income – operating investments 5,401 - - 5,401 Endowment distributions for operations 101,886 - - 101,886 Sales and services, educational and other 185,224 - - 185,224 Sales and services, auxiliary 146,789 - - 146,789 Rental revenue 18,212 - - 18,212 Other 78,916 - - 78,916 Net assets released from restrictions 12,521 (12,521) - - Total operating revenues 2,061,916 (1,001) - 2,060,915

OPERATING EXPENSES: Salaries and wages 883,682 - - 883,682 Fringe benefits 268,999 - - 268,999 Total compensation 1,152,681 - - 1,152,681 Supplies 107,841 - - 107,841 Business and professional 336,643 - - 336,643 Utilities 48,974 - - 48,974 Maintenance and facilities 46,410 - - 46,410 Depreciation 168,539 - - 168,539 Interest 43,124 - - 43,124 Other 56,493 - - 56,493 Total operating expenses (Note11) 1,960,705 - - 1,960,705

Change in net assets from operating activities 101,211 (1,001) - 100,210

OTHER ACTIVITIES: Investment (losses) gains, net of endowment distributions for operations (34,030) (43,237) 2,111 (75,156) Contributions for endowment - - 33,902 33,902 Change in fair value of interest rate swaps (7,315) - - (7,315) Nonperiodic changes in benefit plans (Note 9) (24,540) - - (24,540) Total other activities (65,885) (43,237) 36,013 (73,109)

CHANGE IN NET ASSETS 35,326 (44,238) 36,013 27,101 NET ASSETS, BEGINNING OF YEAR 2,876,556 848,626 648,157 4,373,339 NET ASSETS, END OF YEAR $ 2,911,882 $ 804,388 $ 684,170 $ 4,400,440

The accompanying notes are an integral part of these consolidated financial statements. 3 CONSOLIDATED FINANCIAL STATEMENTS

UNIVERSITY OF PITTSBURGH CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 (in thousands of dollars)

2016 2015 CASH AND EQUIVALENTS: End of year $ 6,400 $ 49,582 Beginning of year 49,582 60,831 CHANGE IN CASH AND CASH EQUIVALENTS $ (43,182) $ (11,249) CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ (212,767) $ 27,101 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 175,135 168,539 Nonperiodic changes in benefit plans 96,523 24,540 Net bond premium amortization (4,163) (4,802) Loss on disposal of plant assets 1,254 1,926 Investment losses (gains) 110,426 (3,546) Change in fair value of interest rate swaps 34,522 7,315 Contributions restricted for long-term investment (46,431) (71,539) Changes in operating assets and liabilities: Accounts, notes, contributions, and loans receivable, net (56,695) 9,222 Other assets (438) (1,288) Accounts payable and accrued expenses (289) 7,544 Pension and postretirement obligations 13,528 10,769 Conditional asset remediation obligation (3,873) 290 Other liabilities 507 2,937 Government student loans and deferred revenue 7,892 (191) Net cash provided by operating activities 115,131 178,817 CASH FLOWS FROM INVESTING ACTIVITIES: Expended for property, plant, and equipment - University (143,416) (123,366) Expended for property, plant, and equipment - commonwealth (21,289) (37,513) Change in accounts payable for property, plant, and equipment (2,624) (10,371) Purchases/sales of operating investments, net 12,067 (33,204) Purchases of endowment investments (1,646,384) (1,604,549) Proceeds from sales/maturities of endowment investments 1,600,290 1,515,111 Change in endowed funds held by third parties, excluding gains (396) (878) Change in foundation assets 68 (413) Net cash used for investing activities (201,684) (295,183) CASH FLOWS FROM FINANCING ACTIVITIES: Principal repayment of debt (130,500) (155,000) Proceeds from issuance of debt 101,980 198,290 Change in deposits of bond and note proceeds 12,693 (19,291) Contributions restricted for long-term investment 59,198 81,118 Net cash provided by financing activities 43,371 105,117 CHANGE IN CASH AND CASH EQUIVALENTS $ (43,182) $ (11,249) Supplemental disclosure of cash flow information: Cash paid for interest (excluding fees) $ 46,194 $ 48,052 Noncash investing activity for property, plant, and equipment-accounts payable $ 20,806 $ 23,430

The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING PRACTICES

Organization Board of Trustees is comprised of fifty-two members Founded in 1787, the University of Pittsburgh (the (thirty-six voting members), including twelve University) is one of the oldest institutions of higher commonwealth trustees and sixteen special trustees education in the United States. The University’s mission elected by the board. Special trustees may attend all is to provide high-quality undergraduate and graduate meetings of the board and are entitled to and exercise all programs in the arts and sciences and professional fields; rights, responsibilities, and privileges of trusteeship, engage in research, artistic, and scholarly activities that except the right to vote at board meetings. advance learning through the extension of the frontiers of knowledge and creative endeavor; cooperate with As a state-related institution, the University receives an industrial and governmental institutions to transfer annual operating and capital appropriation from the knowledge in science, technology, and health care; offer commonwealth. The appropriation results from the continuing educational programs adapted to the personal commonwealth’s annual budget process. There is no enrichment, professional upgrading, and career assurance that such appropriation will continue to be advancement interests and needs of adult Pennsylvanians; made, or will be made, at current levels or at levels and make available to local communities and public requested by the University. The appropriation from the agencies the expertise of the University in ways that are commonwealth was $154.3 million in 2016 and $147.4 consistent with the primary teaching and research million in 2015. In addition to the annual appropriation, functions and contribute to social, intellectual, and the commonwealth also funds certain capital projects in economic development in the commonwealth, the nation, support of the University’s mission. Amounts funded by and the world. the commonwealth for capital projects were $21.3 million in 2016 and $37.5 million in 2015. The University’s main campus in the City of Pittsburgh comprises 16 schools and several academic centers Basis of Presentation educating nearly 29,000 students in various The consolidated financial statements include the undergraduate, graduate, and doctorate-professional accounts of the University, which do not include the net programs. Four regional campuses with a total assets or activities of the University of Pittsburgh Medical enrollment approximating 6,200 students are located Center (UPMC) or the University of Pittsburgh throughout western Pennsylvania. Physicians (UPP) clinical practice plans, as they are separate legal entities not controlled by the University. Relationship with the Commonwealth of Pennsylvania The University does have the right to designate one-third The University derives its corporate existence under the of the members of the UPMC Board of Directors and any laws of the Commonwealth of Pennsylvania (the Executive Committee thereof. commonwealth) by reason of the act of the General Assembly of the commonwealth establishing an The other activities section of the Consolidated “Academy or Public School in the town of Pittsburgh” on Statements of Activities includes investment (losses) February 28, 1787 and from the act of February 18, 1819 gains, net of endowment distributions for operations; incorporating the “Western University of Pennsylvania.” contributions for endowment; changes in fair value of In 1908, the University’s name was changed to the interest rate swaps; and nonperiodic changes in pension “University of Pittsburgh” by order of the Court of and postretirement benefit plans. Endowment Common Pleas of Allegheny County. In 1966, the distributions for operations represent endowment income Pennsylvania State Legislature enacted the “University of distributions not reinvested in the endowment (see Note Pittsburgh-Commonwealth Act,” which changed the name 10). of the University to the “University of Pittsburgh – of the Commonwealth System of Higher Education” and Basis of Accounting established the University as an instrumentality of the The consolidated financial statements have been prepared commonwealth to serve as a state-related institution in the on the accrual basis of accounting in conformity with Commonwealth System of Higher Education. The accounting principles generally accepted in the United University is a Pennsylvania nonprofit corporation subject States of America (GAAP) as promulgated by the to the Nonprofit Corporation Law of 1988. Financial Accounting Standards Board (FASB).

The entire management, control, and conduct of the In accordance with GAAP, the University’s net assets instructional, administrative, and financial affairs of the have been classified as unrestricted, temporarily University are vested in the Board of Trustees. The restricted, or permanently restricted based upon the

5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

existence or absence of donor-imposed restrictions. Advanced receipt of exchange transactions such as grants Unrestricted net assets are not subject to donor-imposed and contracts are also classified as deferred revenue, with restrictions and are used for general operating purposes of revenue being recognized as funds are expended and the University. This class of net assets also includes sponsored programs are executed. certain contributions and endowment earnings whose donor-imposed restrictions have been met within the Tuition discounts are recorded to the extent that either fiscal year. Temporarily restricted net assets are subject institutional financial aid or aid funded by contributions, to certain time or purpose restrictions by the donor. Upon endowment distributions, and grant activities are awarded. satisfaction of these restrictions, the net assets are Tuition discounts attributable to institutional funds in transferred to unrestricted. Amounts released from 2016 and 2015 were $152.1 million and $147.3 million, restrictions in 2016 and 2015 relate primarily to cash respectively. Tuition discounts attributable to collections on pledges, where purpose restrictions had contributions, endowment distributions, and grant already been met. Temporarily restricted net assets at activities were $24.3 million and $23.8 million in 2016 June 30, 2016 and 2015 consist of endowment balances and 2015, respectively. ($686.1 million and $781.0 million, respectively); the net present value of temporarily restricted contributions and Cash and Cash Equivalents and Operating unconditional pledges ($23.7 million and $18.1 million, Investments respectively); and split-interest agreements ($4.9 million Cash equivalents consist of operating investments with and $5.3 million, respectively). Permanently restricted original maturities of 90 days or less. Operating net assets are those subject to permanent donor-imposed investments include U.S. Treasury instruments and other restrictions and at June 30, 2016 and 2015 consist of high-quality, liquid securities that at the time of purchase endowment balances ($684.9 million and $654.0 million, are rated A3/P-1 or better by Moody’s Investors Service respectively); the net present value of permanently or A-/A-1 or better by Standard & Poor’s Ratings restricted contributions and unconditional pledges ($10.7 Services. Operating investments, together with cash, are million and $17.1 million, respectively); and private utilized to fund the University’s short-term operating student loan funds ($13.1 million in both 2016 and 2015). needs and are invested with the expectation that such securities can be liquidated at their current value within a Donor-restricted endowed contributions require that the seven-day period. Cash and cash equivalents that are part original corpus of the contributions be maintained in of endowment investments are shown therewith, as such perpetuity. The distributions from earnings generated by funds are utilized for endowment purposes rather than these contributions may be either expended or reinvested University operating needs. in the endowment, in accordance with donor restrictions and endowment contribution and spending policies (see Allowance for Doubtful Accounts Note 10). The University maintains allowances for doubtful accounts to reflect management’s best estimate of Estimates probable losses inherent in receivable balances. The preparation of the consolidated financial statements Management determines the allowances for doubtful requires management to make estimates and assumptions accounts based on known troubled accounts, historical that affect the reported amounts of assets and liabilities, experience, and other currently available evidence. disclosure of contingent assets and liabilities at the date of Receivables are written off when management determines the consolidated financial statements, and the reported they will not be collected. amounts of revenues and expenses during the reporting period. Actual results could differ materially from those Contributions estimates. The University records at fair value unconditional pledges (which are agreements with donors involving non- Revenue Recognition reciprocal transfers of cash or other assets) as either Revenue for programs or activities to be conducted in temporarily restricted or permanently restricted future periods such as student tuition and room and board contributions depending on the nature of the donor- are classified as deferred revenue. Revenue for these imposed restrictions. Contributions whose restrictions are activities is recognized as services are provided. met in the same fiscal year in which they are received are combined and reported with unrestricted contributions.

Contributions receivable (classified as Level 3 in the fair Nonmarketable alternatives are private equity or equity- value hierarchy) are discounted at a risk-adjusted rate like holdings, such as mezzanine and subordinated debt commensurate with the donor’s payment plan. interests, in venture, buyout, or recapitalized companies or properties. Real assets are physical assets, or financial Conditional pledges of cash or other assets are recognized assets associated with such physical assets, whose income as contribution revenues and receivables when the streams and/or fair values tend to rise with inflation; they conditions surrounding the pledge are substantially met. include real estate, natural resources, commodities, and other hard assets. Marketable alternatives consist of Bequests are considered to be intentions to give and do distressed debt and hedging strategies, including event- not fall within the definition of an unconditional pledge, driven hedging strategies, such as merger or credit and hence, are not recognized in the consolidated arbitrage, and value-driven hedging strategies, such as financial statements. long/short, market neutral, and other hedging strategies.

Deposits of Bond Proceeds In the case of indirect holdings, changes in market Deposits of bond proceeds consist of unspent funds, conditions, economic environment, regulatory which will be used for certain capital projects or for environment, currency exchange rates, interest rates, and repayment of certain debt obligations. These funds are commodity prices may significantly impact the NAV of invested in cash, cash equivalents, U.S. Treasury the funds holding the investments and, consequently, the instruments, and other high-quality, liquid securities and fair value of the University’s interest in such funds and are reported on the Consolidated Balance Sheets at fair could materially affect the amounts reported in the value. consolidated financial statements. Although a secondary market exists for these investments, it is not active, and Foundation Assets individual transactions are typically not observable. The University’s foundation assets represent the Bradford When transactions do occur in this limited secondary Educational Foundation (BEF). The BEF is a 509(a)(3) market, they may occur at discounts to the reported NAV. Type III supporting organization whose sole purpose is to It is therefore possible that if the University were to sell receive, administer, and distribute property for the benefit these investments in the secondary market, a buyer may of the University of Pittsburgh Bradford campus. The require a discount to the reported NAV, and the discount BEF is governed by an independent board of directors, could be significant. The University attempts to manage with the majority of members being non-University these risks through diversification, ongoing due diligence members. Although the University does not exercise of fund managers, maintaining adequate liquidity, and control of the BEF, all assets held by the BEF are held for continuously monitoring economic and market conditions. the financial benefit of the University. As such, the consolidated financial statements include the net assets Dividend income is recognized net of applicable and annual change in net assets of the BEF. withholding taxes on the ex-dividend date. Noncash dividends are recorded at the fair value of the securities Endowment Investments received. Interest income and expenses are recorded net The University’s endowment investments are reported at of applicable withholding taxes on the accrual basis of fair value. The fair value of direct University holdings in accounting. publicly traded securities is based upon quoted market prices. The fair value of all other investments, which Fair Value Measurements consist of indirect holdings in both privately and publicly As of June 30, 2016 and 2015, the carrying values of the traded assets, is determined using net asset value (NAV) University’s inventories and deferred charges, accounts per share or unit of interest. Used as a practical expedient and notes receivable, contributions receivable, accounts for the estimated fair value, NAV per share or its payable, accrued expenses, and deferred student and other equivalent is provided by the fund manager and reviewed revenue approximate their fair values because of the terms by the University. Indirect holdings of private assets and relatively short maturities. An estimate of the fair primarily consist of University interests in funds investing value of student loan receivables administered by the in nonmarketable alternatives, real assets, and/or University under federal government loan programs is not distressed securities, whereas indirect holdings of publicly practical because the receivables can only be assigned to traded assets primarily consist of University interests in the United States government or its designees. marketable alternatives or other commingled funds.

7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value is defined as the price that would be received to Activities. Costs associated with the construction of new sell an asset or paid to transfer a liability in an orderly facilities and renovation and expansion of existing transaction between market participants at the facilities are capitalized within construction in progress measurement date. The three levels of the fair value until such projects are placed in service. The University hierarchy are as follows: capitalizes software and certain implementation costs and generally depreciates such assets over 5 to 10 years. Level 1 – Unadjusted quoted prices in active markets Works of art, historical treasures, and similar assets for identical assets or liabilities that are available at include a variety of paintings, sculptures, photographs, the measurement date. antiques, and furnishings, as well as scholarly papers and archives. These assets are used for public exhibition, the Level 2 – Inputs other than quoted prices included preservation of artifacts and antiques for future within Level 1 that are observable for the asset or generations, and scholarly research. Due to their nature, liability, either directly or indirectly. these assets are not depreciated. Library books, which include hard copy publications, periodicals, and electronic Level 3 – Unobservable inputs for the asset or publications with rights to archival content, are liability that are used to measure fair value when depreciated over a period of 7 years. Maintenance and observable inputs are not available. These inputs are repairs are expensed as incurred. developed based upon the best information available in such circumstances. Insurance Liabilities The University is self-insured through an agreement with In the event that changes in the inputs used in the fair UPMC to provide medical coverage for its employees. A value measurement of an asset or liability result in a liability for estimated incurred but unreported claims of transfer of the fair value measurement into a different $6.3 million and $6.7 million has been recorded at level, such transfers are recognized at the end of the June 30, 2016 and 2015, respectively, based upon reporting period. management’s analysis of claims history. This liability is reflected in accrued payroll and related liabilities on the Derivative Financial Instruments Consolidated Balance Sheets. The University records derivatives at fair value on the Consolidated Balance Sheets with changes in fair value The University is also self-insured for certain other reflected in the Consolidated Statements of Activities (see activities, including workers’ compensation, Note 8). unemployment compensation, and litigation claims. Liabilities have been established for these programs Split-Interest Agreements generally based on third-party administrators’ estimates These agreements with donors consist primarily of using the University’s historical loss experience. The charitable gift annuities, pooled income funds, and self-insurance accrual is subject to periodic adjustment by irrevocable charitable remainder trusts for which the the University based on actual loss experience factors. University serves as trustee. Assets are invested and Liabilities for these other self-insured obligations payments are made to donors and/or other beneficiaries in aggregated $10.5 million and $8.6 million at June 30, accordance with the respective agreements. Other 2016 and 2015, respectively, and are included in accrued liabilities include $11.5 million and $10.4 million at payroll and related liabilities on the Consolidated Balance June 30, 2016 and 2015, respectively, for split-interest Sheets. agreements. Grants and Contracts Property, Plant, and Equipment The University conducts sponsored program activity with Property, plant, and equipment is recorded at cost, or if various sponsors, including agencies and departments of acquired by contribution, at fair value as of the date of the the federal government, the commonwealth, local contribution. Depreciation is calculated using the straight- government entities, companies, and foundations. line method. Useful lives generally range from 15 to 40 Sponsored activity in 2016 and 2015 was $726.5 million years for buildings and improvements and 5 to 10 years and $713.9 million, respectively, with approximately 66% for furnishings and equipment. As assets are retired, sold, of the funding awarded through the National Institutes of or otherwise disposed, the cost and related accumulated Health. Most University sponsored activity is conducted depreciation are removed from the accounts, and gains or on a cost reimbursable basis with the University receiving losses are recognized in the Consolidated Statements of funding after the related expenses have been incurred.

Certain sponsors, however, provide funding in advance of natural classifications in one location in the financial related expenses, and such funding is recorded as statements; and requires NFPs to provide quantitative and advanced receipt of grant funds on the Consolidated qualitative information about management of liquid Balance Sheets. Revenue from sponsored awards is resources and availability of financial assets to meet cash recognized as the related expenses are incurred. There is needs within one year of the balance sheet date. The no assurance that sponsored awards will continue to be University is currently evaluating the impact this ASU made at current levels. will have on the consolidated financial statements and related disclosures. The University incurs both direct and indirect costs in the conduct of its sponsored activity. Recovery of indirect In February 2016, FASB issued ASU No. 2016-02, costs through federal awards is based upon predetermined Leases (Topic 842). The ASU is effective for reporting rates negotiated with the Department of Health and periods beginning after December 15, 2018, and early Human Services. Indirect cost recovery rates from adoption is permitted. The ASU will require lessees to nonfederal sources may vary. Funds received through report most leases as assets and liabilities on the balance federal sources are subject to audit each year in sheet, while lessor accounting will remain substantially accordance with the Office of Management and Budget’s unchanged. The ASU requires a modified retrospective Uniform Guidance. transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The Government Loan Funds University is currently evaluating the impact this ASU U.S. government-sponsored student loan funds are will have on the consolidated financial statements and recorded as liabilities because these funds are refundable related disclosures. to the federal government under certain conditions. Student loan funds donated by private groups, In January 2016, the FASB issued ASU No. 2016-01, organizations, or individuals are recorded as permanently Financial Instruments – Overall (Subtopic 825-10): restricted net assets since such funds operate on a Recognition and Measurement of Financial Assets and revolving fund basis with principal and interest payments Financial Liabilities. ASU No. 2016-01 amends certain remaining in the fund for future lending. aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU exempts all Tax-Exempt Status nonpublic business entities from disclosing fair value The University is exempt from federal income tax under information for financial instruments measured at Section 501(c)(3) of the United States Internal Revenue amortized cost. The University has adopted the early Code. Accordingly, it is not subject to income taxes application guidance for this ASU as of June 30, 2016 and except to the extent it has taxable income from activities modified the related disclosures to conform. that are not related to its exempt purpose. The University annually reviews its tax positions and has determined that Effective in 2016, the University retroactively adopted the there are no material uncertain tax positions that require provisions of ASU No. 2015-10, Technical Corrections recognition in the consolidated financial statements. No and Improvements. This ASU clarified one aspect of the provision for income taxes was required for 2016 or 2015. definition of readily determinable fair value (RDFV), thereby affecting the measurement of and disclosure Recent Accounting Pronouncements about certain equity investments. During 2016, In August 2016, the Financial Accounting Standards management evaluated its investments in the pension Board (FASB) issued Accounting Standards Update plan, historically measured using NAV as a practical (ASU) No. 2016-14, Not-for-Profit Entities (NFPs)(Topic expedient in structures with characteristics similar to a 958): Presentation of Financial Statements for Not-for- mutual fund, as to whether they have an RDFV. Certain Profit Entities. The ASU is effective for the University investments aggregating $93.9 million, previously for fiscal years beginning after December 15, 2017, and presented using NAV as a practical expedient as of June early adoption is permitted. The ASU reduces the number 30, 2015 and excluded from the fair value hierarchy, were of net asset classes presented from three to two: with determined to have an RDFV and have been classified as donor restrictions and without donor restrictions; requires Level 1 investments, consistent with the June 30, 2016 all NFPs to present expenses by their functional and presentation.

9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2: ACCOUNTS AND NOTES RECEIVABLE, NET

Accounts and notes receivable, net, at June 30 consists of the following:

2016 2015 (in thousands of dollars)

Sponsored grant receivables, net $ 105,398 $ 86,250 Hospitals and affiliated organizations receivables, net 40,580 18,405 Commonwealth appropriation receivable 11,143 - Student receivables, net 9,173 10,447 Plant construction receivables due from commonwealth 9,090 15,433 Interest income receivables 1,694 1,512 Other receivables, net 11,199 11,451 Total accounts and notes receivable, net $ 188,277 $ 143,498

NOTE 3: CONTRIBUTIONS RECEIVABLE, NET

Contributions receivable, net, at June 30 consists of the following:

2016 2015 (in thousands of dollars) Amounts due in: Less than one year $ 15,599 $ 16,992 One to five years 16,558 17,754 Greater than five years 2,153 2,248 Gross contributions receivable 34,310 36,994 Less: Allowance for uncollectible pledges (1,654) (1,414) Unamortized discounts (721) (1,035) Total contributions receivable, net $ 31,935 $ 34,545

At June 30, 2016 and 2015, the five largest outstanding totaling $207.9 million and $199.6 million at June 30, pledge balances represented 37% and 39%, respectively, 2016 and 2015, respectively. These bequests and of the University’s net contributions receivable. conditional pledges are not included in the consolidated financial statements. The University has been named a beneficiary in the wills of numerous donors or has received conditional pledges

NOTE 4: ENDOWMENT AND OPERATING INVESTMENTS

Investments at June 30 consist of the following:

2016 2015 (in thousands of dollars) Endowment investments: Pooled $ 3,513,665 $ 3,577,793 Nonpooled 32,793 32,602 Subtotal endowment investments 3,546,458 3,610,395 Operating investments (Note 1) 558,801 569,806 Total endowment and operating investments $ 4,105,259 $ 4,180,201

Composition of endowment investments: Cash and cash equivalents $ 65,204 $ 98,908 Domestic equities 554,918 527,552 International equities 715,179 742,036 U.S. government and government agencies’ securities, bank acceptances and certificates, and commercial paper 173,468 170,082 Corporate bonds and other obligations 143,856 179,019 Alternative investment funds and partnerships: Marketable alternatives 679,765 740,625 Nonmarketable alternatives 624,905 622,515 Real assets 589,163 529,658 Total endowment investments $ 3,546,458 $ 3,610,395

Composition of operating investments: U.S. government and government agencies’ securities, repurchase agreements, and commercial paper $ 347,117 $ 358,130 Corporate bonds and other obligations 192,190 192,367 Other 19,494 19,309 Total operating investments $ 558,801 $ 569,806

Unless precluded by size or donor restrictions, individual the University in perpetuity. Accordingly, the endowment fund assets are pooled and collectively University’s investment policy is intended to optimize managed on a unitized basis. Each endowment fund long-term total return — income plus capital appreciation subscribes to or disposes of units in the pool using fair — relative to the level of risk taken. value per unit at the beginning of the month such subscription or disposition occurs to account for the The University’s investment policy contemplates the transaction. effects of its spending policy. The endowment spending policy balances the need for reliable and predictable The philosophies and policies employed in the earnings distributions to support current University management of the endowment are long-term by activities with the desire to maintain the purchasing power definition, as they are based on the expectation that the of endowment assets so that they can continue providing endowment will continue to provide financial support to financial support for future generations (see Note 10).

11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the University’s investments at June 30, 2016 and 2015, for which NAV was used as a practical expedient to estimate fair value:

Fair Value Unfunded Redemption Determined Using NAV Commitments Redemption Notice Asset Class 2016 2015 at June 30, 2016 Frequency Period (in thousands of dollars) International equities $ 108,485 $ 126,968 $ - Quarterly 60-120 days

Marketable alternatives: Redeemable within one year 483,100 523,206 - 90-365 days 30-180 days Redeemable beyond one year 156,848 176,352 - 1-3 years 30-60 days Nonredeemable 39,817 41,067 79 NA NA Total marketable alternatives 679,765 740,625 79

Nonmarketable alternatives 624,905 622,515 347,547 NA NA

Real assets: Redeemable 65,811 88,882 - Monthly 10 days Nonredeemable 523,352 440,776 267,989 NA NA Total real assets 589,163 529,658 267,989 Total $ 2,002,318 $ 2,019,766 $ 615,615

Descriptions follow for each of the investments set forth in equity and equity-like securities of mostly nonpublicly in the table above: traded companies over investment periods of typically three to five years during which committed capital may be International Equities called and invested. The University’s interests in private A portion of the University’s investments in emerging equity funds are considered to be illiquid in that they are market equities includes an interest in one fund that holds not easily transferable and typically achieve liquidity over publicly traded emerging market equities. multi-year periods when and if the fund managers distribute proceeds realized from underlying fund assets. Marketable Alternatives The University’s investments in marketable alternatives Real Assets are interests in commingled funds that hold various The University’s investments in real assets are interests in combinations of long and short positions predominantly commingled funds that hold various combinations of in publicly traded equities, fixed income, and financial publicly and nonpublicly traded physical assets (such as derivatives. Funds that are nonredeemable typically have real estate, natural resources, commodities, and utilities), investment periods of three or more years during which the financial assets and derivatives associated with such committed capital may be called and invested. The physical assets, and the equity and equity-like securities University’s interests in the nonredeemable funds are of companies engaged in physical asset ownership, considered to be illiquid in that they are not easily operations and/or services. Funds that are nonredeemable transferable and typically achieve liquidity over multi- typically have investment periods of three or more years year periods when and if the fund managers distribute during which committed capital may be called and proceeds realized from the underlying fund assets. invested. The University’s interests in the nonredeemable funds are considered to be illiquid in that they are not Nonmarketable Alternatives easily transferable and typically achieve liquidity over The University’s investments in nonmarketable multi-year periods when and if the fund managers alternatives are interests in commingled, private equity distribute proceeds realized from the underlying fund funds, including venture capital. These funds are invested assets.

NOTE 5: FAIR VALUE MEASUREMENTS

The following tables summarize the inputs used in valuing the University’s assets and liabilities carried at fair value, excluding investments stated at NAV as a practical expedient, at June 30, 2016 and 2015:

2016 Level 1 Level 2 Level 3 Total Assets (in thousands of dollars) Cash and cash equivalents $ 4,057 $ 2,343 $ - $ 6,400 Endowment investments: Cash and cash equivalents 35,539 29,665 - 65,204 Domestic equities 541,057 13,861 - 554,918 International equities 598,898 - 7,796 606,694 U.S. government, corporate bonds, and other obligations 257,724 55,820 3,780 317,324 Subtotal endowment investments(1) 1,433,218 99,346 11,576 1,544,140 Operating investments: U.S. government, corporate bonds, and other obligations 441,045 98,262 - 539,307 Other 1,397 - 18,097 19,494 Deposits of bond proceeds 5,806 792 - 6,598 Endowed funds held by third parties - - 22,079 22,079 Total assets $ 1,885,523 $ 200,743 $ 51,752 $ 2,138,018

Liabilities Interest rate swaps $ - $ 111,141 $ - $ 111,141

2015 Level 1 Level 2 Level 3 Total Assets (in thousands of dollars) Cash and cash equivalents $ 47,339 $ 2,243 $ - $ 49,582 Endowment investments: Cash and cash equivalents 73,686 25,222 - 98,908 Domestic equities 519,442 8,110 - 527,552 International equities 602,220 - 12,848 615,068 U.S. government, corporate bonds, and other obligations 262,257 83,064 3,780 349,101 Subtotal endowment investments(1) 1,457,605 116,396 16,628 1,590,629 Operating investments: U.S. government, corporate bonds, and other obligations 442,095 108,402 - 550,497 Other 1,123 - 18,186 19,309 Deposits of bond proceeds 18,344 947 - 19,291 Endowed funds held by third parties - - 23,140 23,140 Total assets $ 1,966,506 $ 227,988 $ 57,954 $ 2,252,448

Liabilities Interest rate swaps $ - $ 76,619 $ - $ 76,619

(1) The subtotal of endowment investments within the fair value tables above exclude investments of $2,002,318 and $2,019,766 as of June 30, 2016 and 2015, respectively, which are measured at NAV and are not classified in the fair value hierarchy (see Note 4). 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the change in the Level 3 activity for the years ended June 30, 2016 and 2015:

U.S. Government Other and Corporate Endowed Funds International Equities and Other Held by Third Parties Total (in thousands of dollars)

Balance - June 30, 2014 $ 12,262 $ 3,927 $ 40,286 $ 56,475 Capital calls/purchases 3,946 - 1,348 5,294 Distributions/sales (7,247) (147) (1,439) (8,833) Realized gains 1,312 - - 1,312 Unrealized gains 2,575 - 1,131 3,706 Balance - June 30, 2015 12,848 3,780 41,326 57,954 Capital calls/purchases 3,485 - 894 4,379 Distributions/sales (6,499) - (495) (6,994) Realized gains 263 - - 263 Unrealized losses (2,301) - (1,549) (3,850) Balance - June 30, 2016 $ 7,796 $ 3,780 $ 40,176 $ 51,752

Realized and unrealized gains (losses) for Level 3 activity There were no transfers of investments between levels in are reported in other activities in the Consolidated 2016 or 2015. Statements of Activities. Unrealized losses related to investments held at June 30, 2016 were $2.8 million. Unrealized gains related to investments held at June 30, 2015 were $3.4 million.

NOTE 6: PROPERTY, PLANT, AND EQUIPMENT, NET

Property, plant, and equipment, net, at June 30 is summarized below:

2016 2015 (in thousands of dollars)

Land $ 61,546 $ 51,321 Buildings and improvements 3,048,432 2,919,391 Equipment 750,761 714,636 Library books 276,837 267,415 Works of art, historical treasures, and similar assets 20,838 18,316 Construction in progress 93,484 135,127 Subtotal 4,251,898 4,106,206 Less: Accumulated depreciation (2,477,833) (2,320,457) Total property, plant, and equipment, net $ 1,774,065 $ 1,785,749

The amount capitalized in property, plant, and equipment analysis of such obligations and determined that asbestos related to expenditures funded by the commonwealth on remediation costs represented the primary source of the behalf of the University totaled $707.3 million and liability. The University reviewed facilities on all $657.6 million at June 30, 2016 and 2015, respectively. campuses and estimated the timing, method, and cost of The net book value of these items was $335.5 million and remediation. The resulting liability for conditional asset $311.0 million at June 30, 2016 and 2015, respectively. remediation obligations recognized at June 30, 2016 and 2015 was $37.3 million and $41.2 million, respectively. The University has recognized a liability for conditional asset retirement obligations. The University performed an

15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7: BONDS AND NOTES PAYABLE

Bonds and notes payable at June 30 are reported based upon outstanding principal and consist of the following:

Range of Years Outstanding Principal Remaining 2016 Effective (in thousands of dollars) to Maturity Interest Rates 2016 2015 Variable-rate bonds: Series 2014-B1/B2 Bonds 9-19 0.05%-0.50% $ 46,000 $ 46,000 Series 2007-B Bonds 24-25 0.04%-0.54% 44,621 44,621 Series 2005-A Bonds 21-23 0.06%-0.59% 40,000 40,000 Series 2005-B Bonds 15-22 0.04%-0.60% 45,000 45,000 Series 2005-C Bonds 16-19 0.07%-0.62% 30,000 30,000 Series 2002-B Bonds 15-20 0.06%-0.50% 15,000 15,000 Total variable-rate bonds 220,621 220,621

Fixed-rate bonds and notes: Series 2014-A Bonds 20-28 3.51%-3.65% 49,000 49,000 Series 2009-A/B Bonds 3 mos.-15 3.70%-5.10% 312,640 338,140 Series 2007-B Bonds 7-12 4.28%-4.69% 60,000 60,000 Series 2005-A Bonds 12-14 4.69%-4.83% 35,000 35,000 Series 2002-A Bonds 3 mos.-7 2.88%-4.31% 25,000 30,000 Series 2002-B Bonds 10-11 4.53%-4.74% 14,500 14,500 Series 2000-A/B/C Bonds 8-19 4.37%-5.07% 124,400 124,400 Series 2015 PANTHER Notes, due August 2, 2016 0.30% 100,000 - Series 2014 PANTHER Notes, due July 22, 2015 0.12% - 100,000 Noninterest-bearing promissory note 171 171 Total fixed-rate bonds and notes 720,711 751,211

Unamortized net premium 12,125 14,542 Debt issuance costs (4,508) (4,742) Total bonds and notes payable $ 948,949 $ 981,632

The principal payments of bonds and notes payable for the next five years ending June 30 in millions of dollars are: 2017 $ 127.4

2018 $ 26.4

2019 $ 35.0 2020 $ 35.0

2021 $ 35.0

The foregoing principal payments do not include $220.6 The 2015 Pitt Asset Notes - Tax Exempt Higher million of variable-rate demand bonds (VRDBs) in Education Series (PANTHERS of 2015) were issued in commercial paper (CP) mode, all of which have final July 2015 in the amount of $100.0 million and were maturity dates between 2031 and 2041. These bonds bear repaid on August 2, 2016. short-term rates that are fixed over staggered periods of approximately 90 days each and are remarketed at the In July 2016, the University issued its PANTHERS of expiry of each rate period. 2016 in the amount of $70.0 million. The entire amount was used to partially refund the $100.0 million of Liquidity support for the $220.6 million of outstanding PANTHERS of 2015 that matured on August 2, 2016. VRDBs in CP mode is provided by the University. In the The PANTHERS of 2016 mature on August 15, 2017. event the University receives notice of an optional tender on its VRDBs in CP mode, the purchase price of the The University had three general unsecured credit bonds will be paid from the remarketing of such bonds. facilities aggregating $75.0 million at June 30, 2016. No However, if the remarketing proceeds are insufficient, the draws were made under the facilities during 2016 or 2015. University will have a current obligation to purchase the Although each of the three credit facilities carry an expiry tendered bonds. To provide a secondary source of date of October 25, 2016, it is management’s intention to liquidity for this type of event, the University entered into extend each facility for another 364-day term. a $100.0 million unsecured standby liquidity agreement with a financial institution that matures in June 2017. Interest costs incurred in 2016 and 2015 were $42.2 Since the October 2009 effective date of the liquidity million and $43.1 million, respectively. Included in these agreement, no draws have occurred. amounts are net swap payments and capitalized interest associated with various construction projects. Capitalized On September 18, 2014, the University issued $95.0 interest for 2016 and 2015 was $0.8 million and $1.4 million in University Capital Project Bonds (2014 Bonds). million, respectively. The 2014 Bonds consist of $49.0 million of Series A Bonds (fixed-rate bonds) and $46.0 million of Series B1/B2 Bonds (variable-rate bonds issued in CP mode). The 2014 Bonds have a final maturity date of 2044.

17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8: DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS The University does not issue or trade derivative financial The University liabilities arising from variable-to-fixed instruments except as described herein. University interest rate swap agreements associated with certain financial assets are invested on its behalf with various University debt obligations had an aggregated fair value investment managers, some of whom are authorized to of $111.1 million and $76.6 million at June 30, 2016 and employ derivative instruments, including swaps, futures, 2015, respectively, and are included in other liabilities on forwards, and options. These derivatives are generally the Consolidated Balance Sheets (see Note 5). The fair used for managing interest rate or foreign currency risk or value represents the estimated amount the University to attain or hedge a specific financial market position. would be required to pay to terminate these agreements as Additionally, the University has entered into various of the respective fiscal year-end. The University recorded interest rate swap agreements to hedge its interest rate risk in the Consolidated Statements of Activities unrealized associated with certain debt obligations. losses of $34.5 million in 2016 and $7.3 million in 2015 due to changes in fair value of the swaps. The University may be exposed to financial loss should a derivative counterparty fail to perform pursuant to the The aggregate notional amount of the swap agreements instrument. In the case of exchange-traded derivatives, associated with University debt was $365.3 million and the counterparty is the exchange itself. In the case of $380.3 million at June 30, 2016 and 2015, respectively. over-the-counter derivatives, the counterparty is typically These swaps were entered into for the sole purpose of a financial institution. Counterparty risks are mitigated hedging interest payable on certain University VRDBs. by using creditworthy counterparties, settling positions The variable interest rates received by the University periodically, and requiring collateral to be posted at under the swap agreements are either 67% or 70% of one- predetermined levels of exposure. or three-month London Interbank Offered Rates (LIBOR), while the fixed rates paid by the University Not including University derivative instruments held by range from 3.25% to 5.14%. Net swap payments made or various alternative investment funds, the University received by the University are reported in interest expense invested in futures contracts with gross notional values of in the Consolidated Statements of Activities. No $51.2 million and $53.7 million at June 30, 2016 and collateral was called or posted during 2016 or 2015 with 2015, respectively. When the University uses futures to respect to these swap agreements. Furthermore, the replicate an investment position, it has opted to do so on a University does not anticipate posting collateral pursuant fully collateralized basis. Futures contracts are marked- to these swap agreements since there are no collateral to-market daily based on settlement prices established by thresholds applicable to the University given the the board of trade or exchange on which they are traded. University’s current credit ratings. Gains and losses are realized when the contracts expire or are closed. The associated unrealized gain (loss) on these assets was $1.4 million and $(0.2) million as of June 30, 2016 and 2015, respectively.

NOTE 9: PENSION AND POSTRETIREMENT OBLIGATIONS

Pension Though funding is not required, the University has elected The University provides retirement benefits under to fund its postretirement liability via a quasi-endowment contributory or noncontributory plans to substantially all fund, which is managed within the University’s pooled employees. The University’s contributory plan provides endowment investments (see Notes 4 and 10). The fair for participation in the Teachers Insurance and Annuity value of these investments at June 30, 2016 and 2015 was Association (TIAA) and College Retirement Equities $354.3 million and $353.5 million, respectively, and is Fund (CREF) and in investment funds of the Vanguard included in endowment investments on the Consolidated Group. The plan is fully funded and requires three years Balance Sheets. Although the University has established of service for vesting of the University contribution. this quasi-endowment for the postretirement plan, Employees hired before January 1, 1995 were payments to beneficiaries of this plan are currently made immediately vested. University contributions to this plan through nonendowed operating funds. in 2016 and 2015 were $76.2 million and $74.7 million, respectively. Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the federal government The noncontributory plan is a defined-benefit pension provides a subsidy to employers equal to 28% of the plan that covers employees who do not participate in the employer’s qualifying prescription drug costs for retirees contributory plan. The plan was amended to freeze if the plan offered by the employer is at least actuarially participation effective November 3, 2015. If employees equivalent to Medicare Part D. The University is have an employment commencement date on or after qualified for and receives the subsidy via a reduction in November 3, 2015, they will not be eligible to participate premiums charged by its provider. in this plan. The plan provides for vesting after five years with pension benefits accruing at 2.1% of base salary or In 2010, the Patient Protection and Affordable Care Act the Social Security wage base, whichever is lower. and the Health Care and Education Reconciliation Act Pension benefits are payable upon normal retirement at (collectively, the Health Care Acts) were signed into law. age 65 or early retirement at age 55, in accordance with The Health Care Acts include several provisions that are the conditions and pension eligibility criteria described in included in the measurement of the postretirement benefit the plan. University contributions to this plan in 2016 and obligation. 2015 were $10.9 million and $9.8 million, respectively.

Postretirement The University also provides postretirement medical and life insurance benefits to eligible employees and their spouses upon retirement through a contributory benefit plan.

19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The University uses a measurement date of June 30 for plan assets and the benefit obligations. Information related to the benefit obligation, assets, and funded status of the defined-benefit pension plan and the postretirement benefit plan as of and for the years ended June 30, 2016 and 2015 is summarized in the table below:

Defined-Benefit Plan Postretirement Plan 2016 2015 2016 2015 (in thousands of dollars) Net periodic benefit cost: Service cost $ 6,255 $ 5,660 $ 15,276 $ 15,686 Interest cost 5,605 4,737 21,431 18,572 Expected return on plan assets (6,990) (6,232) - - Actuarial loss 1,113 643 2,897 2,330 Amortization of prior service credit (52) (52) (3,964) (3,964) Net periodic benefit cost $ 5,931 $ 4,756 $ 35,640 $ 32,624

Funded status: Benefit obligation at beginning of year $ 117,822 $ 106,204 $ 455,755 $ 421,842 Service cost 6,255 5,660 15,276 15,686 Interest cost 5,605 4,737 21,431 18,572 Actuarial loss 22,722 2,186 66,435 16,510 Benefits paid (1,138) (965) (17,112) (16,855) Benefit obligation at end of year $ 151,266 $ 117,822 $ 541,785 $ 455,755

Fair value of plan assets at beginning of year $ 94,243 $ 84,021 Actual return on plan assets (370) 1,432 Actual plan contributions 10,931 9,755 Benefits paid (1,138) (965) Fair value of plan assets at end of year $ 103,666 $ 94,243

Funded status – liability recognized on Consolidated Balance Sheets: Pension and postretirement obligations $ (47,600) $ (23,579) $ (541,785) $ (455,755)

Accumulated benefit obligation $ 144,496 $ 112,680

Estimated 2017 employer contribution to the defined-benefit plan: (in thousands of dollars) $ 10,004

Defined-Benefit Plan Postretirement Plan 2016 2015 2016 2015

Weighted-average assumptions used to determine the benefit obligation (liability) at June 30: Discount rate 3.9% 4.8% 3.8% 4.8% Rate of compensation increase 3.0% 3.0% - - Assumed health care trend cost: Initial trend – pre-age 65 retirees - - 7.0% 7.0% Initial trend – post-age 65 retirees - - 7.0% 6.0% Ultimate trend - - 4.5% 4.5% Year to reach ultimate - - 2024 2023

Weighted-average assumptions used to determine the net periodic cost (expense) for the years ended June 30: Discount rate 4.8% 4.5% 4.8% 4.5% Rate of compensation increase 3.0% 3.0% - - Expected long-term return on plan assets 7.5% 7.5% - - Assumed health care trend cost: Initial trend – pre-age 65 retirees - - 7.0% 7.0% Initial trend – post-age 65 retirees - - 6.0% 5.0% Ultimate trend - - 4.5% 4.5% Year to reach ultimate - - 2023 2020

Defined-Benefit Postretirement Estimated future benefit payments: Plan Plan (in thousands of dollars)

2017 $ 2,454 $ 17,037 2018 $ 2,739 $ 19,233 2019 $ 3,004 $ 20,425 2020 $ 3,335 $ 21,885 2021 $ 3,727 $ 23,425 2022 - 2026 $ 25,191 $ 139,280

21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A one-percentage point change in assumed health care cost trend rates would have the following effects on the postretirement plan:

Increase Decrease (in millions of dollars)

Revised Percent Revised Percent Amount Change Amount Change

Service and interest cost (medical component only) $ 36.2 5.8% $ 29.8 12.9% Total periodic benefit cost $ 39.1 9.6% $ 28.7 19.4% Benefit obligation for health care benefits $ 526.5 5.8% $ 445.9 10.4% Total benefit obligation $ 570.5 5.3% $ 489.8 9.6%

Pension Assets participants and beneficiaries; cover reasonable expenses Assets related to the University’s defined-benefit pension incurred to provide such benefits, including expenses plan are segregated in a trust managed by a third-party incurred in the administration of the trust and the plan; investment manager. The fair value of these assets at provide sufficient liquidity to meet benefit and expense June 30, 2016 and 2015 was $103.7 million and $94.2 payment requirements on a timely basis; and provide a million, respectively. The fund is invested through total return that, over the long term, maximizes the ratio common collective trust funds in domestic and of trust assets to liabilities by maximizing investment international equities and fixed-income securities using return, at an appropriate level of risk. The expected return the S&P 500 Index as a benchmark for domestic equities, on plan assets is based on a weighted average of the the MSCI EAFE Index for international equities, and the individual expected return for each asset category in the Barclays Intermediate Government/Credit Bond Index for plan’s portfolio. Expected return comprises inflation plus the fixed-income securities. Common collective trust the real rate of return for each asset class. funds are similar to mutual funds; however, they are generally not registered with the U.S. Securities and Over the long term, asset allocation is believed to be the Exchange Commission and participation is not open to the single greatest determinant of risk and return. Asset public but limited to institutional investors. The specific allocation will deviate from the target percentages due to investment objective is to meet or exceed the investment market movement, cash flows, and investment manager policy benchmark over the long term. Plan investments performance. Material deviations from the asset are determined using NAV per share available at the allocation target can alter the expected return and risk of measurement date. The plan has no unfunded the trust. However, frequent rebalancing to the asset commitments. Pension plan assets are Level 1 in the fair allocation targets may result in significant transaction value hierarchy. costs, which can impair the trust’s ability to meet its investment objective. The long-term investment strategy for pension plan assets is to meet present and future benefit obligations to all

The target allocation for both fiscal years and the fair value of the University’s pension plan assets at June 30, by asset category, were as follows:

Target Allocation 2016 2015 Asset class (in thousands of dollars) Equity securities: Stock index and small cap 35% $ 36,616 $ 32,800 International 35% 35,438 33,326 Debt securities 30% 31,312 27,793 Cash and cash equivalents - 300 324 Total pension plan assets $ 103,666 $ 94,243

23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10: ENDOWMENT NET ASSETS

The commonwealth has not adopted The Uniform Prudent percentage of 4.25% of the endowment’s three-year Management of Institutional Funds Act of 2006 average fair value, provided that such distribution is not (UPMIFA) and, instead, enacted in December 1998 less than the amount distributed in the previous year. The Pennsylvania Act 141 (codified as Title 15 of the endowment income distribution amounts for both 2016 Pennsylvania Consolidated Statutes §5548(c) and referred and 2015 were 4.25% of the endowment’s three-year to herein as “Title 15”) to govern the investment of average fair value. restricted funds held in trust by Pennsylvania nonprofit corporations. Title 15 permits Pennsylvania nonprofit Employing the total return approach, the University corporations to elect a total return approach for records the original value of an endowed contribution as a determining income distributions from restricted funds permanently restricted asset, along with any endowment held in trust, whereby income is defined as a stipulated income distributions that are reinvested in the percentage of the value of the assets held; the stipulated endowment. Nonendowed funds that lack third-party percentage must be determined at least annually and may donor restrictions but function as endowments (quasi- be no less than 2% nor more than 7%, and the value of the endowments) are classified as unrestricted net assets. assets held must be averaged over a period of three or Gains and losses attributable to donor-restricted endowed more preceding years. A resolution to elect a total return funds are recorded as temporarily restricted net assets, approach for determining endowment income whereas gains and losses attributable to quasi-endowment distributions for the University’s consolidated investment funds are recorded as unrestricted net assets. pool was passed by the University’s Board of Trustees on October 21, 1999. The University’s endowment income distribution is determined annually using a stipulated

The University’s endowment net assets at June 30 were as follows:

2016 Temporarily Permanently Unrestricted Restricted Restricted Total (in thousands of dollars) Donor-restricted endowment funds $ - $ 686,118 $ 684,922 $ 1,371,040 Quasi-endowment funds 2,163,439 - - 2,163,439 Total endowment net assets $ 2,163,439 $ 686,118 $ 684,922 $ 3,534,479

2015 Temporarily Permanently Unrestricted Restricted Restricted Total (in thousands of dollars) Donor-restricted endowment funds $ - $ 780,998 $ 653,935 $ 1,434,933 Quasi-endowment funds 2,164,556 - - 2,164,556 Total endowment net assets $ 2,164,556 $ 780,998 $ 653,935 $ 3,599,489

The change in endowment net assets for the years ended June 30, 2016 and 2015 was as follows:

Temporarily Permanently Unrestricted Restricted Restricted Total (in thousands of dollars)

Endowment net assets – June 30, 2014 $ 2,056,794 $ 824,655 $ 620,510 $ 3,501,959 Endowment return: Endowment earnings 21,714 - 1,469 23,183 Gains (losses) 48,786 (43,657) 438 5,567 Total endowment return 70,500 (43,657) 1,907 28,750 Contributions 334 - 31,518 31,852 Distributions for operations (101,886) - - (101,886) Net transfers 138,814 - - 138,814 Endowment net assets – June 30, 2015 2,164,556 780,998 653,935 3,599,489 Endowment return: Endowment earnings 14,978 - 2,237 17,215 (Losses) (15,270) (94,880) (62) (110,212) Total endowment return ( 292) (94,880) 2,175 (92,997) Contributions 173 - 28,812 28,985 Distributions for operations (118,245) - - (118,245) Net transfers 117,247 - - 117,247 Endowment net assets – June 30, 2016 $ 2,163,439 $ 686,118 $ 684,922 $ 3,534,479

Approximately 99% of the University’s endowment funds provides general oversight, policy guidance, and are collectively managed in a broadly diversified pool of performance review of the consolidated investment pool assets called the consolidated investment pool. The and approves asset allocation and spending policies. Investment Committee of the Board of Trustees

25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11: FUNCTIONAL EXPENSES

The University accounts for expenses according to major classes of program services or functions. Functional expenses for the years ended June 30 consist of the following:

2016 2015 (in thousands of dollars) Instruction $ 566,786 $ 554,616 Research 676,069 655,546 Public service 85,449 86,489 Academic support 193,807 191,288 Libraries 47,240 48,979 Student services 150,751 145,153 Institutional support 139,898 137,527 Auxiliary enterprises 142,393 141,107 Total functional expenses $ 2,002,393 $ 1,960,705

Costs related to the operation and maintenance of property, including depreciation of property and equipment and interest on related debt, are primarily allocated to program and support activities based upon salary effort.

NOTE 12: RELATED PARTIES

The University has relationships and affiliation transactions with these entities, which include providing agreements with separately incorporated entities including certain facilities-related services, telephone, mailing, UPMC and affiliated hospitals and UPP. These printing, and various other services, which are reimbursed relationships include a common paymaster arrangement at cost. Reimbursements from UPMC, UPP, and for certain University School of Medicine (SOM) faculty affiliated hospitals for clinical compensation and other with academic and clinical responsibilities; contractual costs totaled $137.6 million and $138.9 million in 2016 obligations for UPMC and UPP to support certain and 2015, respectively. educational and research functions at the University; and property rental agreements. Transactions with all related In 1998, the University signed a 10-year agreement with entities are conducted in the ordinary course of business UPMC that included financial commitments designed to and are discussed below. further the two entities’ commitment to their interrelated teaching, research, clinical care, and community service Certain University SOM faculty and staff provide clinical missions. As part of the agreement, UPMC provides services through their University appointments to UPMC, $12.5 million annually in funding for the SOM. UPMC UPP, and affiliated hospitals. The University invoices also provides additional funding up to $2.5 million these entities monthly for reimbursement of the clinical annually on a matching basis. The match is on a one-to- portion of the associated compensation costs. SOM two basis with UPMC matching $1 for every $2 provided faculty members, having both a University academic by the University to support health sciences programs. appointment and a separate, external appointment for The University has received this match each year since clinical responsibilities, participate in the common the inception of the agreement. This agreement was paymaster arrangement for purposes of determining amended in 2007 under essentially the same terms, except appropriate FICA taxation. In addition to the reimbursable for a provision to provide an additional $10.0 million per compensation costs, the University also engages in other year in 2007, increased annually by $0.5 million from

2008 through 2016. The University received $29.5 as sales and services, educational and other in the million and $29.0 million (including the annual match) in Consolidated Statements of Activities. 2016 and 2015, respectively. Effective July 1, 2014, the term of the agreement was extended through June 30, The University is involved in certain rental arrangements 2018. These amounts are reported as other revenue in the where the University acts as both lessor or lessee with Consolidated Statements of Activities. UPMC and its affiliates. Rental revenue from UPMC and affiliates totaled $10.0 million and $9.9 million in 2016 The UPMC agreement was further amended in 2009 to and 2015, respectively. Rent expense paid to UPMC and include additional financial support through the affiliates totaled $21.9 million and $21.0 million in 2016 Children’s Hospital of Pittsburgh of UPMC (CHP) to the and 2015, respectively. University of at least $7.5 million annually related to an agreement detailing the transfer of certain pediatric In April 2013, the University entered into a five-year research programs from CHP to the University. This agreement with UPMC to provide full-time, armed police transfer standardized procedures, eliminated duplication aid, support, and assistance for certain UPMC facilities. of services, improved efficiency, reduced costs, and Payments made by UPMC for these services totaled $2.3 enhanced recruitment efforts for pediatric programs. The million and $2.5 million in 2016 and 2015, respectively, University received $10.9 million and $10.8 million in and are reported as other revenue in the Consolidated 2016 and 2015, respectively, related to this additional Statements of Activities. support. These amounts are reported as sales and services, educational and other in the Consolidated UPMC serves as the provider of health insurance Statements of Activities. coverage to all eligible University employees who enroll in the plan. The University is self-insured for these costs UPMC also provided $14.7 million and $14.3 million in and reimburses UPMC for actual claims cost. Health 2016 and 2015, respectively, of contractual dean’s tax, insurance expense including administrative fees totaled which represents support for the academic and research $107.2 million and $107.5 million in 2016 and 2015, activities of the SOM. This activity is reported as sales respectively, and is reported as fringe benefits in the and services, educational and other in the Consolidated Consolidated Statements of Activities. Statements of Activities. UPMC receives federal matching funds for costs incurred UPMC also provides additional academic support to the by academic medical centers for medical assistance SOM. These funds are used to support new programs, services. The funds are remitted to the University to recruit faculty, and for general support of the School’s support the activities of the SOM, the Western Psychiatric academic mission. The University received $59.5 million Institute and Clinic (WPIC), the Center for Public Health and $60.3 million in 2016 and 2015, respectively, related Practice, and the clinic within the School of Dental to this additional support. These amounts are reported as Medicine. These remittances were $11.1 million in both sales and services, educational and other in the 2016 and 2015 and are reported as commonwealth Consolidated Statements of Activities. appropriation revenue in the Consolidated Statements of Activities. UPMC also provided $2.9 million and $3.3 million in 2016 and 2015, respectively, for the Institute for In 2003, the University and UPMC created the Medical Personalized Medicine. These amounts are reported as and Health Sciences Foundation (MHSF), a separate other revenue in the Consolidated Statements of 501(c)(3) organization. The mission of MHSF is to create Activities. a unified fundraising organization for the University’s schools of the health sciences and UPMC. The Additionally, UPMC provided support to various arrangement calls for the cost of MHSF to be split evenly departments within the SOM to augment their operating between the University and UPMC. UPMC’s share of budgets. These payments were made to those total operating costs for MHSF totaled $3.7 million and departments that do not generate sufficient revenues to $4.4 million in 2016 and 2015, respectively, and is meet their research and academic costs. Payments made reported as other revenue in the Consolidated Statements by UPMC for this purpose totaled $9.0 million and $8.9 of Activities. All contributions generated by MHSF are million in 2016 and 2015, respectively, and are reported credited to the University or UPMC based upon donor intent.

27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2004, the University entered into an and equipment is $190.7 million and $189.2 million at agreement with UPMC to jointly construct and own the June 30, 2016 and 2015, respectively, related to the land, Carrillo Street steam plant, a gas-fired steam-generating buildings, and equipment used by WPIC. Accumulated facility. The University funded 78.1% of construction depreciation related to these assets totaled $159.9 million costs with UPMC funding the remaining 21.9%. The and $155.8 million at June 30, 2016 and 2015, plant provides steam to each entity’s respective buildings respectively. and is managed by the University. The University also has an arrangement with UPMC A lease arrangement exists between the University and whereby certain research-related costs incurred by UPMC the commonwealth for WPIC. Since 1949, the University (primarily staff compensation) in relation to WPIC and has managed WPIC under an agreement between the the University of Pittsburgh Cancer Institute (UPCI) University and the commonwealth whereby the research awards are charged to such awards via an University rents for a consideration of $1 per year the electronic billing and reimbursed to UPMC each month. land, building, equipment, and other items that are used Payments totaled $23.2 million in 2016 and $24.7 million by WPIC. The agreement provides for continuing terms in 2015 and are recorded as expenses in the Consolidated of 10 years each; however, this agreement is cancelable Statements of Activities. All billings are recorded at cost. by either party on one year’s written notice. In 1992, the University subleased to UPMC the land, building, UPMC provided support payments to UPCI for various equipment, and other items subject to the current lease subsidies, research initiatives, and general support. These arrangement between the commonwealth and the payments totaled $14.4 million and $14.2 million in 2016 University. This sublease arrangement continued to be in and 2015, respectively, and are primarily reported in other effect during 2016 and 2015. Included in property, plant, revenue in the Consolidated Statements of Activities.

NOTE 13: COMMITMENTS AND CONTINGENCIES

At June 30, 2016 and 2015, the University had The University receives significant financial assistance outstanding contractual commitments of $63.4 million from the federal government including the sponsorship of and $51.5 million, respectively, for property, plant, and federal research projects. Grants and contracts normally equipment expenditures. provide for the recovery of direct and indirect costs. Recovery of indirect costs is recorded at predetermined The University engages in various leasing activities as rates negotiated with the federal government. Entitlement both a lessor and lessee. Rental revenue from operating to these resources for the recovery of the applicable direct leases was $18.4 million and $18.2 million in 2016 and and related indirect costs is generally conditioned upon 2015, respectively. Rental expense for operating leases compliance with the terms and conditions of the grant was $45.5 million in 2016 and $45.1 million in 2015. agreements and applicable federal regulations, including Minimum future rental revenue and expense under the expenditure of the resources for eligible purposes. operating leases that have initial or remaining Substantially all grants and the University’s indirect cost noncancelable lease terms for the years ended June 30 are rate are subject to financial and compliance reviews and as follows: audits by the grantors. In management’s opinion, the likelihood of a material adverse outcome upon the Rental Rental University’s financial position from those reviews and Revenue Expense audits is remote. (in thousands of dollars) 2017 $ 16,650 $ 45,537 As part of ongoing operations, the University enters into 2018 $ 14,631 $ 43,415 utility contracts to secure electric and natural gas rates. 2019 $ 11,863 $ 43,302 These contracts are with various utility suppliers and 2020 $ 5,036 $ 34,246 some of the contracts cover multiple years. The 2021 $ 4,536 $ 20,084 University monitors the energy markets on an ongoing Thereafter $ 9,934 $ 108,914 basis and will make commitments on new rates if deemed in the best interest of the University. The University is a defendant in a number of legal actions seeking damages and other relief from the University. The University conducts a review of contracts and While the final outcome of each action cannot be agreements that may contain guarantees, including loan determined at this time, legal counsel and University guarantees such as standby letters of credit and management are of the opinion that the liability, if any, in indemnifications. In certain contracts, the University these legal actions will not have a material adverse effect agrees to indemnify a third-party service provider under on the University’s consolidated financial statements. certain circumstances. Pursuant to its bylaws, the University provides indemnification to directors, officers, The University receives significant support from UPMC and, in some cases, employees and agents against certain to continue the two entities’ commitment to their liabilities incurred as a result of service provided on interrelated teaching, research, clinical care, and behalf of or at the request of the University. The terms of community service missions. There are various indemnity vary from agreement to agreement, and the agreements between the University and UPMC that amount of indemnification, if any, cannot be reasonably provide for this support (see Note 12), but there is no determined. guarantee these agreements will be renewed in future periods.

NOTE 14: SUBSEQUENT EVENTS

The University has evaluated subsequent events through there were no subsequent events requiring disclosure or September 22, 2016, the date on which the consolidated adjustment to the consolidated financial statements. financial statements were issued, and determined that

MEMBERSHIP OF THE BOARD OF TRUSTEES FISCAL YEAR 2016

2015 – 19 M EMBERS A LUMNI T RUSTEES E MERITUS T RUSTEES E X OFFICIO Robert G. Lovett

(NONVOTING) Martha Hartle Munsch J. David Barnes 2013 – 17 William E. Strickland Jr. Steven C. Beering Tom Wolf, Governor Bryant J Salter Stephen R. Tritch of the Commonwealth of Thomas G. Bigley Pennsylvania 2014 – 18 Frank V. Cahouet 2016 – 20 Jane Bilewicz Allred John G. Conomikes Pedro Rivera, John A. Barbour F. James McCarl III George A. Davidson Jr. Secretary of Education Eva Tansky Blum Catherine D. DeAngelis 2015 – 19 of the Commonwealth of Edward J. Grefenstette Herbert P. Douglas Jr. Michael A. Bryson Pennsylvania Patricia D. Horoho D. Michael Fisher John H. Pelusi Jr. 2016 – 20 E. Jeanne Gleason Rich Fitzgerald, Chief S. Jeffrey Kondis J. Roger Glunt Executive of Allegheny Jack D. Smith Henry L. Hillman County Earl F. Hord

A. Alice Kindling William Peduto, Mayor of Paul E. Lego the City of Pittsburgh George L. Miles Jr. Frank E. Mosier Alfred L. Moyé M EMBER S PECIAL T RUSTEES C OMMONWEALTH Thomas H. O’Brien E X O FFICIO T RUSTEES (VOTING) Anthony J.F. O’Reilly 2013 – 17 G: Governor appointment Robert A. Paul Patrick Gallagher, Chancellor Douglas M. Browning H: House appointment James C. Roddey and Chief Executive Officer Deborah J. Gillotti S: Senate appointment Farrell Rubenstein Roberta A. Luxbacher Richard P. Simmons John A. Swanson Larry J. Merlo 2012 – 16 Burton M. Tansky Jay Costa Jr. (S) 2014 – 18 Dick Thornburgh Bradley J. Franc (G) Brian Generalovich Thomas J. Usher Thomas O. Johnson III (H) T ERM T RUSTEES Robert M. Hernandez Edward P. Zemprelli Robert P. Randall 2013 – 17 2013 – 17 Sam S. Zacharias Sy Holzer (G) Suzanne W. Broadhurst William K. Lieberman (S) Ira J. Gumberg 2015 – 19 Thomas VanKirk (H) Dawne S. Hickton G. Nicholas Beckwith III Thomas E. Richards Emil M. Spadafore Jr. 2014 – 18 A. David Tilstone John A. Maher III (H) 2014 – 18 John J. Verbanac (S) Mary Ellen Callahan 2016 – 20 Kevin Washo Jr. (G) James Covert David C. Chavern Terrence P. Laughlin Marlee S. Myers 2015 – 19 Keith E. Schaefer Herbert S. Shear (H) 2016 – 20 Peter C. Varischetti (S)

The consolidated financial statements have been reviewed and approved by the University’s Audit Committee. The Audit Committee is comprised of outside directors having requisite financial expertise and meets regularly with University reporting matters. The committee meets with the external auditors in private sessions and is also responsible for approving University’s administration as well as student, faculty, and staff representatives.

30 APPENDIX C

DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

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DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

THE FOLLOWING SUMMARIES ARE OF CERTAIN PROVISIONS OF THE INDENTURE. THEY ARE NOT FULL STATEMENTS OF THE INDENTURE AND REFERENCE SHOULD BE MADE TO THE INDENTURE ITSELF FOR ALL OF ITS TERMS AND PROVISIONS.

DEFINITIONS OF CERTAIN TERMS

Unless the context otherwise requires, the terms defined below shall for purposes of the Indenture and/or the Official Statement have the meanings set forth below:

“Act” means the University of Pittsburgh - Commonwealth Act, Act of July 28, 1966, P.L. 87, as amended.

“Bank” means any issuer of a Liquidity Facility.

“Bond Fund” means the Fund by that name created under the Indenture and described in this Appendix C under the heading “THE INDENTURE—Bond Fund.”

“Bonds” means the bonds issued pursuant to the Indenture, including without limitation, the Series 2017B Bonds.

“Business Day” means a day on which the Trustee, any Remarketing Agent, the Bank or banks or trust companies in Pittsburgh, Pennsylvania or New York, New York, are not authorized or required by law or executive order to remain closed and on which the New York Stock Exchange is not closed.

“Clearing Fund” means the Fund by that name created under the Indenture.

“Event of Default” means any occurrence or event specified in the Indenture and described in this Appendix C under “THE INDENTURE—Events of Default.”

“Favorable Opinion of Counsel” means, with respect to any action, the occurrence of which requires such an opinion, an unqualified Opinion of Counsel, to the effect that such action is permitted under the Act and the Indenture.

“First Supplemental Indenture” means the First Supplemental Indenture of Trust dated as of January 1, 2017, pursuant to which the University’s Taxable University Refunding Bonds, Series A of 2017 were issued.

“Fitch” means Fitch Ratings, Inc., a nationally recognized bond rating agency, and its successors and assigns.

“Funds” shall mean, collectively, the Purchase Fund, the Bond Fund and the Clearing Fund created pursuant to the Indenture.

“Government Obligations” means any of the following securities, if and to the extent the same are non- callable and not subject to redemption at the option of the issuer (but may be subject to a right of withdrawal, redemption or tender for purchase by the owner of the securities), at the time legal for investment of the University’s funds, as determined by the University: direct obligations of, or obligations the principal of and interest on which are unconditionally 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 a receipt, certificate or any other evidence of an ownership interest in an aforementioned obligation, or in specified portions thereof (which may consist of specified portions of interest thereon).

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“Interest Payment Date” means, with respect to the Series 2017B Bonds, March 15 and September 15 of each year, commencing September 15, 2017.

“Indenture” means the Indenture of Trust dated as of January 1, 2017, as amended and supplemented by the First Supplemental Indenture, the Second Supplemental Indenture and as further amended and supplemented from time to time.

“Liquidity Facility” means a standby bond purchase agreement or other liquidity facility issued with respect to a series of Bonds in accordance with the terms of the Supplemental Indenture providing for the issuance of such Bonds.

“Maturity Date” means, with respect to any Bond, the maturity date set forth in the Supplemental Indenture providing for the issuance of such Bond.

“Maximum Rate” means, with respect to any Bond in a variable rate Mode, the maximum interest rate payable on such Bond, as set forth in the Supplemental Indenture providing for the issuance of such Bond.

“Mode” means an interest rate determination method with respect to any series of Bonds as set forth in set forth in the Supplemental Indenture providing for the issuance of such Bonds and may include, without limitation, a commercial paper mode, a daily mode, a weekly mode, a term rate mode, an auction rate mode or an index rate mode.

“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the University.

“Office” means, with respect to the Trustee, the designated corporate trust office of the Trustee located at 225 W. Station Square Drive, Suite 620, Pittsburgh, Pennsylvania 15219 or such other office as may be designated in writing to the University and the Remarketing Agent.

“Opinion of Counsel” means a written legal opinion from the University’s in-house legal office or a firm of attorneys experienced in the matters to be covered in the opinion.

“Outstanding,” when used as of a particular time with reference to Bonds, means (subject to the provisions of the Indenture relating to disqualification of Bonds held for the account of the University) all Bonds delivered under the Indenture except:

(i) Bonds cancelled by the Trustee or surrendered to the Trustee with irrevocable written direction to cancel;

(ii) Bonds paid or deemed to have been paid within the meaning of the Indenture provisions described in this Appendix C under the heading “THE INDENTURE—Defeasance;” and

(iii) Bonds in lieu of or in substitution for which replacement Bonds shall have been executed by the University and delivered by the Trustee under the Indenture.

Notwithstanding the foregoing, Bonds registered in the name of (i) the Bank or its nominee following the purchase of such Bond with proceeds of a draw on the Liquidity Facility provided by such Bank shall remain Outstanding in the hands of the Bank until the Bank is paid all amounts due on such Bonds and (ii) the University or its nominee shall remain Outstanding in the hands of the University until the University notifies the Trustee, in writing, to cancel the same. Furthermore, Bonds, the Purchase Price of which was paid with a draw on the Liquidity Facility, which draw has not been reimbursed, shall remain Outstanding until the Bank is reimbursed in full for such draw. In determining whether the Owners of a requisite aggregate principal amount of Bonds Outstanding have concurred in

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any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, University-Owned Bonds and any other Bonds which the Trustee knows to be owned by the University (unless all of the Outstanding Bonds are then University-Owned Bonds) shall be disregarded for the purpose of any such determination.

“Owner” or “Registered Owner” means the registered owner of a Bond.

“Permitted Investments” means any of the following securities, if and to the extent the same are at the time legal for investment of the University’s funds, as determined by the University:

(i) Government Obligations;

(ii) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and have a rating by S&P of AAAm-G, AAAm or AAm including, without limitation, the money market mutual funds or any other mutual fund comprised of allowable investments for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (ii) the Trustee charges and collects fees for services rendered pursuant to this Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates;

(iii) bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal National Mortgage Association, the Bank for Cooperatives, or the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Federal Land Banks, the Government National Mortgage Association or any other agency or instrumentality of or corporation wholly owned by the United States of America when such obligations are backed by the full faith and credit of the United States;

(iv) obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated “A1/P-1” or higher by Moody’s and “A+” or higher by S&P; or which are rated by Moody’s “VMIG 1” or better and by S&P “A-1” or better with respect to commercial paper, or “MIG 1” and “SP-1+,” respectively, with respect to municipal notes;

(v) bank time deposits evidenced by certificates of deposit and bankers’ acceptances, issued by any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation or the Securities Investors Protection Corp.; provided that (a) such bank, trust company, or national banking association is rated “A1/P-1” or better by Moody’s and “A+” or better by S&P, or else that all of the securities acquired pursuant to the provisions described in this subparagraph (iv) are for amounts of $100,000 or less, and with maturities of no longer than 365 days; and (b) provided that (x) the aggregate of such bank time deposits and bankers’ acceptances issued by any bank, trust company or banking association does not exceed at any one time ten percent (10%) of the aggregate of the capital stock, surplus and undivided profits of such bank, trust company or banking association and that such capital stock, surplus and undivided profits shall not be less than twenty-five million dollars ($25,000,000), or (y) such deposits are fully and continuously secured by a valid and perfected prior security interest in obligations described in paragraph (i) or (ii) of this definition;

(vi) repurchase agreements with any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation or the Securities Investors

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Protection Corp., provided that such bank, trust company or national banking association is rated “A1” or better by Moody’s and “A+” or better by S&P, or with any government bond dealer recognized as a primary dealer by the Federal Reserve Bank of New York, which agreements are fully and continuously secured by a valid and perfected priority security interest in obligations described in paragraph (i) or (ii) of this definition;

(vii) investment agreements with any corporation, including banking or financial institutions, the corporate debt of which is rated, at the time of investment, “A1” or better by Moody’s and “A+” or better by S&P;

(viii) guaranteed investment contracts or similar funding agreements issued by insurance companies, the corporate debt of which, at the time of investment, is rated “A1” or better by Moody’s and “A+” or better by S&P;

(ix) corporate commercial paper rated “P-1” or better by Moody’s and “A-1” or better by S&P at the time of investment;

(x) shares or interests in taxable government money market portfolios restricted to obligations with maturities of one year or less issued by, or the payment of principal and interest with respect to which is guaranteed by, the United States of America, and which are rated “Aa” or better by Moody’s and “AA” or better by S&P at the time of investment;

(xi) interests in money market portfolios exempt from federal income taxation and having assets in excess of one billion dollars ($1,000,000,000); and

(xii) any other investment permitted by Moody’s or S&P with respect to an issuer having a rating equal to that of the University, or permitted by the University’s investment guidelines.

“Principal Payment Date” means any date upon which the principal amount of Bonds is due under the Indenture, including the Maturity Date, any Redemption Date, or the date the maturity of any Bond is accelerated pursuant to the terms or otherwise.

“Purchase Date” means the date on which any Bond is subject to optional or mandatory tender for purchase, as provided in the Supplemental Indenture providing for the issuance thereof.

“Purchase Fund” means the Fund by that name created in pursuant to the Indenture and described in this Appendix C under the heading “THE INDENTURE—Purchase Fund.”

“Purchase Price” means an amount equal to the principal amount of any Bonds purchased on any Purchase Date, plus accrued unpaid interest, if any, to the Purchase Date.

“Record Date” means, with respect to the Series 2017B Bonds, the last day (whether or not a Business Day) of the month immediately preceding each Interest Payment Date.

“Redemption Date” means the date fixed for redemption of Bonds subject to redemption in any notice of redemption given in accordance with the terms of the Indenture and of the applicable Supplemental Indenture. Where applicable, Redemption Price shall mean the Make-Whole Redemption Price.

“Redemption Price” means an amount equal to the principal of and premium, if any, and accrued interest, if any, on the Bonds to be paid on the Redemption Date.

“Remarketing Agent” means an entity appointed by the University to act in such capacity with respect to any series of Bonds.

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“S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, duly organized and existing under and by virtue of the laws of the State of New York, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the University.

“Second Supplemental Indenture” means the Second Supplemental Indenture of Trust dated as of March 1, 2017, pursuant to which the Series 2017B Bonds are issued.

“Series 2017B Bonds” means the University’s Taxable University Refunding Bonds, Series B of 2017.

“Supplemental Indenture” means any indenture that supplements or amends the Indenture in accordance with the provisions of the Indenture, including without limitation, the First Supplemental Indenture and the Second Supplemental Indenture.

“Trust Estate” means (a) all payments received by the Trustee from the University with respect to the Bonds and (b) all of the moneys in all Funds established by the Indenture (except the Purchase Fund) including the investments, if any, thereof, and all income and proceeds derived from such investments (except investments of funds in the Purchase Fund).

“Trustee” means U.S. Bank National Association, a national banking association, or any other bank or trust company duly incorporated and existing under and by virtue of the laws of any state or of the United States of America, which may be substituted in its place as provided in the Indenture and described in this Appendix C under the heading “THE INDENTURE—Provisions Relating to the Trustee.”

“University” means University of Pittsburgh—Of the Commonwealth System of Higher Education, a body corporate and politic and a public instrumentality of the Commonwealth.

“University-Owned Bonds” means any Bonds the Purchase Price of which has been paid from funds provided by the University and deposited in a University Purchase Account and which have not been cancelled at the request of the University nor remarketed.

“University Purchase Account” means an account by that name established pursuant to the Indenture and described in this Appendix C under the heading “THE INDENTURE—Purchase Fund.”

“University Representative” means the Chancellor, Chief Financial Officer, Treasurer, Assistant Treasurer, or any other person at the time designated to act on behalf of the University for purposes of the Indenture by a written instrument furnished to the Trustee containing the specimen signature of such person and signed on behalf of University by any of its officers. The certificate may designate an alternate or alternates.

“Written Request” with reference to the University means a written order or request signed in the name of the University by a University Representative and delivered to the Trustee.

Notwithstanding any provisions contained herein to the contrary, (i) during any period in which no Remarketing Agent has been appointed with respect to any series of Bonds, all references to the Remarketing Agent contained in this Summary shall be null and void and of no further force and effect, and (ii) during any period in which no Liquidity Facility is in effect, and after the expiration or termination of the Liquidity Facility and after all obligations owed to the Bank pursuant to the Liquidity Facility (other than the right to indemnification and other rights which purport to survive satisfaction of present payment obligations) have been paid in full or discharged, all references to the Bank contained in this Summary shall be null and void and of no further force and effect.

THE INDENTURE

The following summarizes certain provisions of the Indenture but is not to be regarded as a full statement thereof, and reference should be made to the Indenture itself for all of the terms and provisions thereof.

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Pledge and Assignment

Under the Indenture the University grants a security interest in the Trust Estate to the Trustee for the equal and pro rata benefit and security of each and every owner of the Bonds.

Payment of Principal and Interest of Bonds

The interest on each Bond shall become due and payable on the Interest Payment Dates in each year to and including the Maturity Date for such Bond, and on each Redemption Date and on the date of any acceleration prior thereto. The principal of the Bonds shall become due and payable on the Principal Payment Dates.

Bond Fund

The Indenture establishes a Fund designated as the “University of Pittsburgh Bond Fund” (the “Bond Fund”) into which the University shall pay to the Trustee funds at the times and in the amounts necessary for the Trustee to pay principal of, premium, if any, and interest on the Bonds becoming due on each Interest Payment Date, Principal Payment Date and Redemption Date. The Trustee may, at the direction of the University or as set forth in the Supplemental Indenture providing for the issuance of a series of Bonds, establish separate principal and interest accounts within the Bond Fund and/or separate accounts or subaccounts for each series of Bonds. The Bond Fund (including the 2017B Account established within the Bond Fund pursuant to the Second Supplemental Indenture) shall constitute a trust fund for the benefit of the Owners of the Bonds, and the money in each such Fund or account or subaccount therein shall be disbursed only for the purposes and uses described above.

Investments

Except as otherwise provided in the Indenture and described in this Appendix C under the heading “THE INDENTURE—Purchase Fund—Investment,” so long as the Bonds are Outstanding and there is no default under the Indenture, moneys on deposit to the credit of any Funds shall, at the Written Request of a University Representative specifying and directing that such investment of such funds be made, be invested by the Trustee in a Permitted Investment specified in such direction. The Trustee is entitled to conclusively rely on said instructions for purposes described in the paragraph.

The Trustee may commingle any of the money held by it under the Indenture, except money derived from remarketing proceeds and draws under a Liquidity Facility (if any) and remarketing proceeds received from the Remarketing Agent (if any), which shall not be commingled with each other or with any other Funds under any circumstances. The Trustee may present for redemption or sell any such deposit or investment whenever it shall be necessary in order to provide money to meet any payment of the money so deposited or invested. The Trustee shall not be liable or responsible for any loss, fees, taxes or other charges resulting from any such deposit or investment presented for redemption or sold.

Any interest or profits on deposits and investments in the Bond Fund shall be retained therein.

The Trustee will not be responsible for any losses on investments made in compliance with the requirements described under this heading. Although the University recognizes that it may obtain brokerage confirmations or written statements containing comparable information at no additional cost, the University agrees that confirmations of Permitted Investments are not required to be issued by the Trustee for each month in which a monthly statement of investments is provided to them. No statement needs to be provided, however, for any Fund or account therein for any month in which no investment activity occurred during such month in such Fund or account.

Events of Default

If any of the following events occur, it is hereby declared to constitute an “Event of Default” under the Indenture:

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(a) Default in the due and punctual payment of interest on any Bond, whether at the stated Interest Payment Date thereof, upon proceedings for redemption thereof, by acceleration or otherwise;

(b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond, whether at the stated maturity thereof, upon proceedings for redemption thereof, by acceleration or otherwise, or default in the due and punctual payment of the Purchase Price of any Bonds upon optional and mandatory tender for purchase;

(c) The University shall fail to observe or perform in any material way any covenant, condition, agreement or provision contained in the Bonds or in the Indenture on the part of the University to be performed other than payment covenants, and such failure shall continue for sixty (60) days after written notice specifying such failure and requiring the same to be remedied shall have been given to the University by the Trustee, which notice may be given by the Trustee in its discretion and shall be given by the Trustee at the written request of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of all Bonds then Outstanding; provided, however, that if such performance requires work to be done, actions to be taken or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such sixty (60) day period, no Event of Default shall be deemed to have occurred or existed if, and so long as, the University shall commence such performance with such sixty (60) day period and shall diligently and continuously prosecute the same to completion.

If an Event of Default occurs and is continuing, the Trustee will mail notice of the Event of Default to the Owners of the Bonds and (if a Liquidity Facility is then in effect, the Bank) as promptly as practicable after it occurs.

Acceleration

If an Event of Default occurs and is continuing, the Trustee may, and at the written direction of the Owners of not less than a majority in aggregate principal amount of Bonds then Outstanding, shall by notice in writing to the University, may declare the principal of and accrued interest on the Outstanding Bonds to be due and payable immediately. Upon any such declaration the principal of and accrued interest on the Outstanding Bonds shall be due and payable immediately. The Trustee may rescind an acceleration and its consequences if (1) any payment default has been cured and (2) the Owners have not been notified of the acceleration. Except as described under this heading, the Trustee shall not declare the Bonds to be due and payable.

Other Remedies

If an Event of Default occurs and is continuing with respect to the Bonds, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the principal of and premium, if any, or interest on the Bonds or to enforce the performance of any provision of the Bonds, the Indenture or any Liquidity Facility (if applicable).

The Trustee may maintain a proceeding even if it does not possess any of the Bonds or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Owner in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

Waiver of Past Defaults

The Owners of a majority in principal amount of the Outstanding Bonds by notice to the Trustee may waive an existing Event of Default and its consequences. When an Event of Default is waived, it is cured and stops continuing, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent to it.

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Control by Majority of Owners

The Owners of a majority in aggregate principal amount of Bonds Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on it. Regardless of whether the Owners of a majority in aggregate principal amount of Bonds Outstanding are in control, the Trustee may refuse to follow any direction that a responsible officer of the Trustee reasonably believes conflicts with law or the Indenture, that the Trustee determines is unduly prejudicial to the rights of other Owners, or that would involve the Trustee in personal liability.

Limitation on Suits

An Owner may not pursue any remedy with respect to the Indenture or the Bonds issued pursuant to such Indenture unless (a) the Owner gives the Trustee notice stating that an Event of Default is continuing, (b) the Owners of at least 25% in principal amount of the Outstanding Bonds make a written request to the Trustee to pursue the remedy, (c) such Owner or Owners offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense and (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity.

Other Provisions Relating to Remedies

Notwithstanding any other provision of the Indenture, the right of any Owner to receive payment of principal of premium, if any, and interest on a Bond, on or after the due dates expressed in the Bond, or the Purchase Price of a Bond on or after the date for its purchase as provided in the Bond, or to bring suit for the enforcement of any such payment on or after such dates, shall not be impaired or affected without the consent of the Owner.

If an Event of Default described under paragraph (a) or (b) above under the heading “THE INDENTURE—Events of Default” occurs and is continuing with respect to the Bonds, the Trustee may recover judgment in its own name and as trustee of an express trust against the University or the Bank (but against the Bank only to the extent that the Event of Default results from the Bank’s failure to provide funds under its Liquidity Facility) for the whole amount remaining unpaid.

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Owners allowed in any judicial proceedings relative to the University or the Bank, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Owners in any election of a trustee in bankruptcy or other person performing similar functions.

Except as described in this paragraph, funds drawn under the Liquidity Facility (if one is in effect) will be used only for the payment of Purchase Price of Bonds secured by the Liquidity Facility, as provided in the Liquidity Facility. If the Trustee collects any money pursuant to the foregoing provisions, it shall pay out the money in the following order: first to the Trustee for amounts to which it is entitled under the Indenture; second to Owners for amounts due and unpaid on the Bonds for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Bonds for principal, premium and interest, respectively; third to the Bank for amounts to which it is entitled under the Liquidity Facility (if any) other than pursuant to the immediately preceding clause second; and fourth to the University. The Trustee may fix a payment date for any payment to the Owners.

In any suit for the enforcement of any right or remedy under the Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. The foregoing provisions do not apply to a suit by the Trustee, a suit by an Owner pursuant to the provisions described in this Appendix C under the heading “THE INDENTURE—Limitation of Suits” or a suit by Owners of more than 25% in aggregate principal amount of Bonds Outstanding.

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Provisions Relating to the Trustee

The University in the Indenture appoints and employs the Trustee to act as paying agent with respect to the Bonds and to perform the obligations contained therein, all in the manner provided therein and subject to the conditions and terms thereof.

The Trustee shall not be liable to the parties to the Indenture or deemed in breach or default under the Indenture if and to the extent its performance under the Indenture is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include acts of God, terrorism, war, riots, strikes, floods, earthquakes, epidemics or other similar occurrences.

The Trustee may resign by notifying the University. The Owners of a majority in principal amount of the Outstanding Bonds may remove the Trustee by notifying the Trustee and may appoint a successor Trustee with the consent of the University. The University will remove the Trustee by notifying the Trustee if (a) the Trustee fails to meet the requirements set forth in the penultimate sentence of the first paragraph of this paragraph, (b) the Trustee is adjudged a bankrupt or an insolvent, (c) a receiver or other public officer takes charge of the Trustee or its property or (d) the Trustee otherwise becomes incapable of acting. The University may also, in its sole discretion, remove the Trustee at any time for any reason upon 30 days’ written notice, provided that at the time of such notice the University is not in default under the Indenture and a successor trustee has been identified. Upon any such removal or resignation, the University shall promptly appoint a successor Trustee by an instrument in writing, which successor Trustee shall give notice of such appointment to all Owners as soon as practicable; provided, that in the event the University does not appoint a successor Trustee within sixty (60) days following the giving of any such notice of removal or the receipt of any such notice of resignation, the removed or resigning Trustee may, at the expense of the University, petition any appropriate court having jurisdiction to appoint a successor Trustee. Any successor Trustee shall be a bank, national banking association or trust company doing business and having a designated corporate trust office in New York, New York or Pittsburgh, Pennsylvania, having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000) and subject to supervising or examination by state or national authorities. If such bank, national banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this heading the combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Any removal or resignation of a Trustee and appointment of a successor Trustee shall become effective only upon the acceptance of the appointment by the successor Trustee and, upon receipt by the Trustee of all amounts owed it under the Indenture, the transfer by the retiring Trustee to the successor Trustee of all property held by it under the Indenture as Trustee.

If an event occurs which, with the giving of notice or lapse of time, or both, would be an Event of Default under an Indenture, and if the event is continuing and if it is known to the Trustee under such Indenture, the Trustee shall mail to each Owner and the Bank notice of the event within 90 days after it occurs. Except in the case of a payment default, the Trustee may withhold the notice if and so long as a committee of its officers in good faith determines that withholding the notice is in the interest of the Owners.

Amendment or Supplement by Consent of Owners

The Indenture, the Bonds and the rights and obligations of the University, the Trustee, the Remarketing Agent, the Bank and the Owners thereunder may be amended or supplemented at any time by an amendment of the Indenture or supplement thereto which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding affected by such amendment, exclusive of Bonds disqualified as provided in the Indenture (because such Bonds are held for the account of the University), and the written consent of the Bank when a Liquidity Facility is in effect and so long as the Bank is not in default on the Liquidity Facility (provided that the Bank shall be under no liability by reason of giving or withholding such consent) but only if such amendment or supplement would materially adversely affect the rights of the Bank, are

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filed with the Trustee, together with a Favorable Opinion of Counsel. No such amendment or supplement shall (1) reduce the rate of interest on any Bond or extend the time of payment thereof or reduce the amount of principal or redemption premium, if any, on any Bond or extend the Principal Payment Date thereof without the prior written consent of the Owner of the Bond so affected, or (2) reduce the percentage of Owners whose consent is required for the execution of any amendment of the Indenture or supplement thereto, or (3) modify any of the rights or obligations of the Trustee, the Bank or the Remarketing Agent without its prior written consent thereto.

Amendment or Supplement Without Consent of Owners

The Indenture, the Bonds and the rights and obligations of the University, the Trustee, the Remarketing Agent, the Bank and the Owners under the Indenture may also be amended or supplemented at any time by an amendment of the Indenture or supplement thereto which shall become binding upon execution without the written consent of any Owners, but with the written consent of the Bank when a Liquidity Facility is in effect and so long as the Bank is not in default on the Liquidity Facility (provided that the Bank shall be under no liability by reason of giving or withholding such consent) but only if such amendment or supplement would materially adversely affect the rights of the Bank, and (if the amendment or supplement modifies any of the rights or obligations of the Bank or the Remarketing Agent under the Indenture) with the written consent of the Bank or the Remarketing Agent, as applicable, only after receipt of a Favorable Opinion of Counsel and only for any one or more of the following purposes:

(i) to provide for the issuance of one or more series of Bonds;

(ii) to add to the conditions, covenants and terms contained in the Indenture required to be observed or performed by the University, other conditions, covenants and terms thereafter to be observed or performed by the University, or to surrender any right reserved in the Indenture to or conferred in the Indenture on the University;

(iii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective, inconsistent or conflicting provision contained in the Indenture or in regard to questions arising under the Indenture which the University may deem desirable or necessary;

(iv) to comply with the requirements of Moody’s, S&P or Fitch, as applicable, as a condition of obtaining a rating on, or maintaining or upgrading an existing rating on, the Bonds;

(v) to provide for (or subsequently modify) an additional Mode for a series of Bonds and the provisions relating thereto. Such amendment shall specify the period for payment of the interest, the intervals and dates at which the rate will be set by the Remarketing Agent and the intervals and procedures by which the Bonds may be tendered for purchase. These changes will be noted on the Bonds in accordance with the Indenture, or an amended Bond form will be provided for in the amendment in order to reflect them. A change to an additional Mode from another interest rate determination method will cause a mandatory purchase of the Bonds;

(vi) to provide for the delivery of Bonds in book-entry form;

(vii) to provide for the provision of a letter of credit or other credit or Liquidity Facility to provide liquidity and/or security for the Bonds, or to comply with the requirements of the provider of such letter of credit or other facility or a Rating Agency in connection therewith; or

(viii) to make any other change that is not materially adverse to the interest of the Owners of the Bonds.

Defeasance

If and when the Bonds shall become due and payable in accordance with their terms or through redemption proceedings as provided in the Indenture, or otherwise, and the whole amount of the principal, or Redemption Price

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and the interest so due and payable upon all of the Bonds shall be paid, or provision shall have been made for the payment of the same, together with all other sums payable under the Indenture by the University, including all fees and expenses of the Trustee and any other obligations then unpaid and outstanding under the Liquidity Facility (if any) as certified in writing by the Bank to the Trustee, then and in that case, the Indenture and the lien created hereby shall be discharged and satisfied and the University shall be released from the covenants, agreements and obligations of the University contained in the Indenture, and the Trustee shall assign and transfer to or upon the order of the University all property (in excess of the amounts required for the foregoing) then held by the Trustee free and clear of any encumbrances and shall execute such documents as may be reasonably required by the University in this regard.

Subject to the provisions described in the above paragraph, when any of the Bonds shall have been paid and if, at the time of such payment, the University shall have kept, performed and observed all the covenants and promises in such Bonds and in the Indenture required or contemplated to be kept, performed and observed by the University or on its part on or prior to that time then the Indenture shall be considered to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien of the Indenture and such lien and all covenants, agreements and other obligations of the University under the Indenture shall cease, terminate, become void and be completely discharged as to such Bonds.

Notwithstanding the satisfaction and discharge of the Indenture or the discharge of the Indenture in respect of any Bonds, those provisions of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, tender and exchange provisions, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the University, the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of, Redemption Price and interest on the Bonds, to pay to the Owners of Bonds the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the satisfaction and discharge of the Indenture or the discharge of the Indenture in respect of any Bonds, those provisions of the Indenture relating to the compensation of the Trustee shall remain in effect and shall be binding upon the Trustee and the University.

Any Outstanding Bond or Bonds shall, prior to the maturity, acceleration or Redemption Date thereof, be deemed to have been paid within the meaning and with the effect described above if (a) in case said Bonds are to be redeemed on any date prior to their maturity, the University shall have given to the Trustee in form satisfactory to the Trustee irrevocable instructions to mail, in accordance with the provisions of the Indenture, notice of redemption of such Bonds on said Redemption Date, (b) there shall have been deposited with the Trustee either moneys, in an amount which shall be sufficient, or Government Obligations, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time, shall be sufficient (as verified by a report of an independent accountant or financial consultant), to pay when due the principal or Redemption Price (if applicable) of, and interest due and to become due on, said Bonds on and prior to the Redemption Date or maturity date thereof, as the case may be, and (c) in the event any of said Bonds are not to be redeemed within the next succeeding sixty (60) days, the University shall have given the Trustee in form satisfactory to the Trustee irrevocable instructions to mail, as soon as practicable in the same manner as a notice of redemption is mailed pursuant to the Indenture, a notice to the Owners of such Bonds and to the MSRB that the deposit required as described in clause (b) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with this paragraph and stating such maturity or Redemption Dates upon which moneys are to be available for the payment of the principal or Redemption Price (if applicable) of said Bonds. Neither the securities nor moneys deposited with the Trustee pursuant to the provisions of the Indenture described in this paragraph nor principal or interest payments on any such securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal or Redemption Price (if applicable) of, and interest on said Bonds; provided that any cash received from such principal or interest payments on such obligations deposited with the Trustee, if not then needed for such purpose, shall, to the extent practicable, and at the direction of the University, be reinvested in Government Obligations maturing at times and in amounts, together with the other moneys and payments with respect to Government Obligations then held by the Trustee pursuant to the provisions of the Indenture described under this heading, sufficient to pay when due the principal or Redemption Price (if applicable) of, and interest to become due

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on said Bonds on and prior to such Redemption Date or maturity date thereof, as the case may be, and interest earned from such reinvestments shall, upon receipt by the Trustee of a written direction of a University Representative, be paid over to the University, as received by the Trustee, free and clear of any trust, lien or pledge.

The foregoing is subject to the following conditions if the Bonds are in a variable rate Mode: (1) if the interest rate on such Bonds will change prior to their final payment or Redemption Date, then the interest due and payable upon such Bonds shall be calculated based upon the applicable Maximum Rate for purposes of this Section; and (2) if the Bonds are subject to optional tender prior to their final payment or Redemption Date, then either (a) a Liquidity Facility shall remain in effect with respect to such Bonds until their final payment or Redemption Date and the escrow or similar agreement entered into in connection with the defeasance of such Bonds shall direct the Trustee to draw on such Liquidity Facility to pay the Purchase Price of any such Bonds that are tendered in accordance with the terms thereof; or (b) the amounts held for such defeasance shall be available to pay the Purchase Price of any such Bonds that are tendered in accordance with the terms thereof (and investment earnings thereon shall not be taken into account in determining the sufficiency of the amount deposited).

Any release described under this heading shall be without prejudice to the right of the Trustee to be paid reasonable compensation for all services rendered by it under the Indenture and all its reasonable expenses, charges and other disbursements and those of its attorneys, agents and employees, incurred on and about the administration of trusts by the Indenture created and the performance of its powers and duties under the Indenture; provided, however, that the Trustee shall have no right, title or interest in, or lien on, any moneys or securities deposited pursuant to the provisions of the Indenture described under this heading.

Unclaimed Money

Anything contained in the Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of the interest, principal, Purchase Price or Redemption Price of any Bonds which remains unclaimed for five (5) years after the date when the payments on such Bonds have become payable, if such money was held by the Trustee on such date, or for five (5) years after the date of deposit of such money if deposited with the Trustee after the date when the interest and principal on such Bonds have become payable, shall upon written notice from the University be repaid by the Trustee to the University as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the University for the payment of the interest, principal or Purchase Price or redemption premiums, if any, on such Bonds; provided that before being required to make any such payment to the University, the Trustee shall, at the expense of the University, give notice by mail to the Owners of such Bonds that such money remains unclaimed and that after a date named in such notice, which date shall not be less than sixty (60) days after the date of giving such notice, the Trustee shall promptly pay to the Bank so much of such money as the Bank certifies to the Trustee that the University owes to the Bank with respect to any Bond or under the Liquidity Facility, if any, and the balance of such money then unclaimed will be returned to the University.

C-12 APPENDIX D

PROPOSED FORM OF BOND COUNSEL OPINION

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PROPOSED FORM OF BOND COUNSEL OPINION

Bond Counsel is planning to deliver its approving opinion in the form below in connection with the delivery of the Bonds.

Re: University of Pittsburgh - Of the Commonwealth System of Higher Education $ Taxable University Refunding Bonds, Series B of 2017

Ladies and Gentlemen:

We have acted as bond counsel to the University of Pittsburgh - Of the Commonwealth System of Higher Education (the “University”) in connection with the issuance by the University of its $[______] Taxable University Refunding Bonds, Series B of 2017 (the “Bonds”). The Bonds are issued pursuant to the University of Pittsburgh - Commonwealth Act, Act of July 28, 1966, P.L. 87, as amended (the “Act”), and an Indenture of Trust dated as of January 1, 2017 (the “General Indenture”), as amended by the First Supplemental Indenture dated as of January 1, 2017 (the “First Supplemental Indenture”) and by the Second Supplemental Indenture dated as of March 1, 2017 with respect to the Bonds (the “Second Supplemental Indenture” and together with the General Indenture and the First Supplemental Indenture, the “Indenture”), each by and between the University and U.S. Bank National Association, as trustee (the “Trustee”).

Proceeds of the Bonds will be used by the University to pay the costs of refunding certain bonds previously issued by the University and to pay costs of issuance of the Bonds (the “Project”). The Bonds are general, unconditional and unsecured obligations of the University.

Pursuant to Section 1317(24) of the Tax Reform Act of 1986, obligations of certain educational organizations, including the University, shall be treated as obligations issued for a governmental purpose, but only with respect to a trade or business carried on by the University that is not an unrelated trade or business, as determined pursuant to Section 513(a) of the Internal Revenue Code of 1986, as amended.

In our capacity as bond counsel, we have examined such matters of law, documents, records of the University and other instruments as we deemed necessary to enable us to express the opinions set forth below, including original counterparts or certified copies of the Indenture and the other documents listed in the closing memorandum in respect of the Bonds filed with the Trustee. We also have examined an executed Bond and we assume that all other Bonds have been similarly executed and have been authenticated and delivered. For the purposes of the opinions set forth below, we have assumed that the Indenture has been duly authorized, executed and delivered by the Trustee.

D-1 Based on the foregoing, we are of the opinion that, under existing law:

1. The University is a nonprofit corporation and an instrumentality of the Commonwealth of Pennsylvania (the “Commonwealth”) validly subsisting under the laws of the Commonwealth pursuant to the Act and has the power to undertake the Project and to issue and sell the Bonds.

2. The Indenture has been duly authorized, executed and delivered by the University and constitutes the valid and binding obligation of the University enforceable against the University in accordance with its terms, except as the rights created thereunder and the enforcement thereof may be limited by bankruptcy, insolvency or other laws or equitable principles affecting the enforcement of creditors’ rights generally.

3. The issuance and sale of the Bonds have been duly authorized by the University and, on the assumption as to execution, authentication and delivery stated above, the Bonds have been duly executed and delivered by the University and authenticated by the Trustee, are valid and binding obligations of the University and are entitled to the benefit and security of the Indenture, except as the rights created thereunder and the enforcement thereof may be limited as described in paragraph 2 above.

4. Under the laws of the Commonwealth as presently enacted and construed, the Bonds are exempt from personal property taxes in Pennsylvania, and interest on the Bonds is exempt from Pennsylvania personal income tax and corporate net income tax.

We express no opinion regarding the accuracy, completeness, sufficiency or fairness of the information set forth in the official statements or other offering documents of the University delivered to purchasers of the Bonds.

We call your attention to the fact that the Bonds are not obligations of, and do not pledge the credit or taxing power of, the Commonwealth of Pennsylvania or any political subdivision thereof. The University has no taxing power.

Very truly yours,

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UNIVERSITY OF PITTSBURGH - Of the Commonwealth System of Higher Education • Taxable University Refunding Bonds, Series B of 2017