University of South Carolina

This Preliminary Official Statement and the information contained herein are subject to completion or amendment without notice. The Series 2017A Bonds may not be sold nor may offers be accepted prior to the time the Official Statement is delivered in final form. 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 the Series 2017A Bonds in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction. expected thattheSeries2017A Bondswill beavailablefordeliverythroughthefacilitiesofDTConor aboutMarch1,2017. is It 2017A Bonds. Series the of issuance the with connection in University the to advisor financial as served has Inc. Management, LLC, as Disclosure Counsel; and for the University by Walter H. Parham, Esquire, General Counsel to the University. Public Financial legal matters will be passed upon for the Underwriter by Nexsen Pruet, LLC, as Underwriter’s Counsel; by Howell Linkous & Nettles, Firm, other Law Certain McNair Counsel. by Bond legality as of P.A., approval the to and notice, without offer the of modification or entire OfficialStatementtoobtaininformationessentialthe makingofaninformedinvestmentdecision. does nothavetaxingpower. subdivision oftheState,are pledgedfor thepaymentofprincipalor interest ontheSeries2017A Bonds. The University and credit of theUniversity, theState,or anypoliticalsubdivisionoftheState,nor thetaxingpower oftheStateor anypolitical Special StudentFeetosecure thepaymentofprincipalandinterest ontheSeries 2017A Bonds,andneither thefullfaith Net Revenues of the University’s Athletic Department and the gross receipts from the imposition of the Admissions Fee and the of theUniversityor theStateor uponanyincome,receipts or revenues oftheUniversityor theState,saveandexceptfrom the special sources notinvolvingrevenues from anytax),nor acharge,lien,or encumbrance,legalor equitable,uponanyproperty statutes oftheState(other than Article X,Section13(9)oftheSouthCarolina Constitutionauthorizingobligationspayablefrom constitute anindebtednessoftheStatewithinmeaninganyprovision, limitation,or restriction oftheconstitutionor Bonds heretoforeorhereafterissuedbytheUniversitypursuanttoBondResolution. Special Student Fee. Such pledge shall be on a parity in all respects with the pledge securing the outstanding Athletic Facilities Revenue the and the Fee of Admissions imposition the from receipts gross the University’sfrom the and of Department Revenues Athletic Net hereto, towhichattentionisdirected. defined on this cover page shall have the meanings given to such terms in the body of this Official Statement and Appendix Battached Bonds. Bonds. U.S. Bank National Association in Columbia, South Carolina, will serve as the Registrar and Paying Agent for the Series 2017A 2017ASeries as Trusteethe serve for will Carolina South of State State Treasurerthe 2017. The of 1, May commencing 1, November interest at the rates as set forth on the inside cover page. Interest on the Series 2017A Bonds is payable semiannually on each May 1 and principal such of and interest on such Series Bond, 2017A 2017A Bond. The Series 2017A Series Bonds mature in each of a the years and in the amounts, of and bear owner of payment receive to order beneficial in participant DTC a the through, acts or is, who is dealer or broker a with purchaser account an maintain must purchaser any as long so For Bonds. 2017A Series the of delivery physical receive to entitled be not will Purchasers participants. DTC through, act or are, who dealers and brokers through DTC by maintained system book-entry-only a under Bonds 2017A Series the for depository securities as act will which York,YorkNew New (“DTC”), Company,Trust Depository The of nominee as Co., & Cede of name the in thereof multiple integral any or $5,000 of denomination the in bonds fully-registered as issuable are 2017ABonds Series 2017A The Bonds. Series the of herein), issuance of costs defined the pay to (as (ii) and Facility Operations Football the equip and construct acquire, to (i) issued being are “University”) (the Carolina * Preliminary, subject tochange. Dated: February__, 2017 Dated: March 1,2017 transfer andcertainfranchisetaxes.See“FEDERAL TAX EXEMPTION AND OTHERTAX MATTERS.” county,imposed withintheStateofSouthCarolina, municipalandschooldistrictothertaxesorassessments except estate, recipients of interest onthe Series 2017A Bonds.TheSeries 2017A Bondsandthe interest thereon will also be exempt from all State, EXEMPTION AND OTHERTAX MATTERS” forabriefdescriptionofcertain other federal income taxconsequencestocertain in thecomputationofadjustedcurrent earningsforpurposesofthealternative minimum taxforcorporations.See“FEDERAL TAX federal alternative minimum tax imposed onindividuals or corporations. However, interest on the Series 2017A Bondsisincluded statutes, regulations andjudicial decisions. Interest ontheSeries2017A Bondsisnotanitemoftaxpreference forpurposesofthe covenants, interest onthe Series 2017A Bondsisexcludable from gross income for federal income tax purposes underexisting BOOK-ENTRY-ONLY NEW ISSUE The Series 2017A Bonds are offered when, as, and if issued and received by the Underwriter, subject to prior sale or to withdrawal the read should only.Investors reference issue. quick the for of information summary certain a contains not page is cover It This The Series2017A Bondsare notgeneralobligationsoftheStateSouthCarolina (the“State”)anddonotinanyevent the of, pledge a by secured and from, solely payable are and University the of obligations special are 2017ABonds Series The The Series 2017A Bonds are subject to redemption prior to maturity as described herein. Capitalized terms used and not otherwise South of University the of Bonds”), 2017A “Series (the 2017A Series Bonds, Revenue Facilities Athletic $40,000,000* The In the opinion of McNair Law Firm, P.A., Bond Counsel, assuming continuing compliance by the University with certain ATHLETIC FACILITIES REVENUEBONDS UNIVERSITY OF SOUTH CAROLINA

PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 8, 2017 SERIES 2017A $40,000,000*

Due: May1, As ShownOnInsideCover RATING: Moody’s: “Aa3” (See “Rating”herein)

MATURITY SCHEDULE

$40,000,000* UNIVERSITY OF SOUTH CAROLINA ATHLETIC FACILITIES REVENUE BONDS SERIES 2017A

Due Principal Interest May 1 Amount Rate Yield CUSIP† 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047

$______% Term Bond, due May 1, ____, Yield ______%, CUSIP† ______$______% Term Bond, due May 1, ____, Yield ______%, CUSIP† ______

______* Preliminary, subject to change. † Copyright, 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 Series 2017A Bonds and the University makes no representation with respect to such numbers nor 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 Series 2017A Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or 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 Series 2017A Bonds.

THE INFORMATION AND EXPRESSIONS OF OPINION IN THIS OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE UNIVERSITY SINCE THE DATE HEREOF.

The Series 2017A Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law, and the same will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, or other governmental entity or agency will have passed upon the accuracy or adequacy of this Official Statement or approved the Series 2017A Bonds for sale. Any representation to the contrary is a criminal offense.

No dealer, broker, salesman, or other person has been authorized by the University to give any information or to make any representations with respect to the Series 2017A Bonds other than as contained in this Official Statement and, if given or made, it must not be relied upon as having been authorized by the University. Certain information contained in this Official Statement may have been obtained from sources other than records of the University and, while believed to be reliable, is not guaranteed as to completeness or accuracy.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE UNIVERSITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

In connection with this offering, Barclays Capital Inc. (the “Underwriter”) may over allot or effect transactions which stabilize or maintain the market price of the Series 2017A Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

Reference herein to laws, rules, regulations, resolutions, agreements, reports, and other documents do not purport to be comprehensive or definitive. All references to laws, rules, regulations, agreements, reports, and other documents are qualified in their entirety by reference to the particular laws, rules, regulations, agreements, reports, and other documents, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Official Statement, they will be furnished on request.

For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or corrected by the University from time to time (collectively, the “Official Statement”), may be treated as an Official Statement with respect to the Series 2017A Bonds described herein that is deemed final as of the date hereof (or as of the date of any such supplement or correction) by the University. The Official Statement, when further supplemented by the final Official Statement specifying the interest rates, principal amounts, in the aggregate and per maturity, and delivery dates of the Series 2017A Bonds, together with any other information required by law, shall constitute a “Final Official Statement” of the University with respect to the Series 2017A Bonds, as that term is defined in Rule 15c2-12. Any addendum or amendment shall, on and after the date thereof, be fully incorporated herein and made a part hereof by reference.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT

This Official Statement contains statements which should be considered “forward-looking statements,” meaning they refer to possible future events or conditions. Such statements are generally identifiable by the use of the future tense or by terms such as “may,” “intend,” “will,” “expect,” “forecast,” “project,” “anticipate,” “estimate,” “plan,” “budget,” “believe,” “should,” “strategy,” “position,” or the negative of such terms or variations of such words or similar expressions. In particular, any statements, express or implied, concerning future operating results or the ability to generate Net Revenues, gross receipts from the Admissions Fee or Special Student Fee, or cash flow to service indebtedness or to receive future appropriations or other sources of funding from governmental entities or capital campaigns are forward-looking statements. Investors are cautioned that reliance on any of those forward-looking statements involves risks and uncertainties and that, although the University’s management believes that the assumptions on which those forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate. Those forward-looking statements, including forecasts, projections, and estimates, are based on currently available information, expectations, estimates, assumptions, and projections, and management’s judgment about future enrollment, expenses of operations, and general economic conditions. The forward-looking statements are not guarantees of future performance. Actual results may vary materially and adversely from what is contained in a forward-looking statement. Factors which may cause results different from those expected or anticipated include, among others, decrease in student enrollment, reduction in student demands for housing, increases in housing competition, increases in costs of operation, decreases in levels of State financial support, general economic and business conditions, and various other events, conditions, and circumstances, many of which are beyond the control of the University. As a result, the forward-looking statements based on those assumptions also could be incorrect, and actual results may differ materially and adversely from any results indicated or suggested by those assumptions.

Although the University believes in making any such forward-looking statement, and its expectations are based on assumptions considered reasonable by the University, any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to factors both identified within this Official Statement and from publicly available sources about trends in higher education that could cause the actual financial operating results of the University to differ materially and adversely from those contemplated in such forward-looking statements.

Any forward-looking statement speaks only as of the date such statement is made, and the University undertakes no obligation to update any forward-looking statement in this Official Statement to reflect events or circumstances after the date of this Official Statement or to reflect the occurrence of unanticipated events. New factors arise or emerge from time to time, and it is not possible for the University to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially and adversely from those contained in any forward- looking statement.

BOARD OF TRUSTEES OF THE UNIVERSITY OF SOUTH CAROLINA

OFFICERS OF THE BOARD

Ex Officio Chairman Henry D. McMaster Permanent Chairman John C. Von Lehe, Jr. Vice Chairman Hubert F. “Hugh” Mobley Chairman Emeritus Eugene P. Warr, Jr. Secretary J. Cantey Heath, Jr.

ELECTED MEMBERS

1st Judicial Circuit Charles H. Williams Orangeburg 2nd Judicial Circuit Miles Loadholt Barnwell 3rd Judicial Circuit C. Dorn Smith, III, M.D. Lake City 4th Judicial Circuit Eugene P. Warr, Jr. Lamar 5th Judicial Circuit William C. Hubbard Columbia 6th Judicial Circuit Hubert F. “Hugh” Mobley Lancaster 7th Judicial Circuit Toney J. Lister Spartanburg 8th Judicial Circuit A.C. “Bubba” Fennell, III Greenwood 9th Judicial Circuit John C. Von Lehe, Jr. Mt. Pleasant 10th Judicial Circuit Chuck Allen Anderson 11th Judicial Circuit Thad H. Westbrook Lexington 12th Judicial Circuit C. Edward Floyd, M.D. Florence 13th Judicial Circuit Mack I. Whittle, Jr. Greenville 14th Judicial Circuit William W. Jones, Jr. Bluffton 15th Judicial Circuit J. Egerton Burroughs Conway 16th Judicial Circuit Leah B. Moody Rock Hill

APPOINTED MEMBERS

Gubernatorial Appointee Thomas C. Cofield Lexington Gubernatorial Designee Mark W. Buyck, Jr. Florence

EX OFFICIO MEMBERS

State Superintendent of Molly Spearman Education

President, USC Alumni Tommy D. Preston, Jr. Association

CERTAIN EXECUTIVE OFFICERS

President Dr. Harris Pastides

Executive Vice President Joan T. A. Gabel For Academic Affairs and Provost

Senior Vice President for Administration Edward L. Walton and Chief Operating Officer

Vice President for Finance and Leslie Brunelli Chief Financial Officer

Secretary, Board of Trustees, J. Cantey Heath, Jr. University Secretary

University Treasurer Pat Lardner

General Counsel Walter H. Parham, Esq.

iii

TABLE OF CONTENTS

SUMMARY STATEMENT ...... vi THE SERIES 2017A BONDS ...... 1 General ...... 1 Use of Proceeds ...... 1 Authorization ...... 1 Security for the Series 2017A Bonds ...... 2 Redemption of the Series 2017A Bonds ...... 2 Book-Entry-Only System ...... 4 Plan of Finance ...... 4 Estimated Sources and Uses of Proceeds ...... 4 SECURITY FOR THE SERIES 2017A BONDS ...... 4 Outstanding Bonds ...... 5 Pledge of Net Revenues and Gross Receipts of Admissions Fee and Special Student Fee ...... 5 Admissions Fee ...... 6 Special Student Fee ...... 6 Rate Covenants ...... 7 Additional Bonds ...... 7 Junior Lien Bonds ...... 8 Flow of Funds ...... 9 THE ATHLETIC DEPARTMENT ...... 11 General Description ...... 11 Athletic Facilities ...... 11 Football ...... 12 Basketball ...... 14 Baseball ...... 15 Softball ...... 16 Soccer ...... 16 Volleyball ...... 16 Scholarships ...... 17 Gamecock Club ...... 17 Southeastern Conference ...... 18 Other Significant Contracts ...... 19 NCAA ...... 19 Receipts of Admissions Fee and Special Student Fee ...... 20 Yearly Equitable Seating (YES) Program ...... 20 CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT ...... 21 Historical Five-Year Statement of Revenues ...... 21 Management's Discussion and Analysis ...... 22 Historical Net Revenues ...... 23 Debt Service Coverage Ratio ...... 23 Debt Service Requirements ...... 24 DESCRIPTION OF THE UNIVERSITY ...... 25 History ...... 25 Organization and Administration ...... 25 The Schools and Colleges ...... 29 Tuition Fees ...... 29 Enrollment ...... 30 Marketing ...... 30 Selected Undergraduate Enrollment Data (Columbia Campus Only) ...... 31 Faculty ...... 31 Research ...... 32 Degrees Offered ...... 32 Libraries ...... 32 Alumni ...... 32

Reserve Officer Training ...... 33 University System Campuses ...... 33 Economic Impact ...... 33 DEBT STRUCTURE OF THE UNIVERSITY ...... 33 Outstanding Debt ...... 33 Debt Payment Record ...... 34 FINANCIAL MATTERS ...... 34 Budget ...... 34 Pension Plans ...... 35 Postemployment and Other Employee Benefits ...... 35 Insurance ...... 36 Tort Liability and Insurance ...... 37 LEGAL MATTERS ...... 37 Litigation ...... 37 United States Bankruptcy Code ...... 37 Legal Proceedings ...... 38 FEDERAL TAX EXEMPTION AND OTHER TAX MATTERS ...... 38 Original Issue Discount ...... 40 Original Issue Premium ...... 40 State Tax Exemption ...... 40 FINANCIAL ADVISOR ...... 41 MISCELLANEOUS ...... 41 Underwriting ...... 41 Rating ...... 41 Audited and Other Financial Information ...... 41 Continuing Disclosure ...... 42 Paying Agent’s Disclaimer ...... 42 Closing Certifications ...... 42 Conclusion ...... 43

Appendix A: Comprehensive Annual Financial Report of the University For Fiscal Year Ended June 30, 2016...... A-1 Appendix B: Summary of Certain Provisions of the Bond Resolution ...... B-1 Appendix C: Form of Opinion of Bond Counsel ...... C-1 Appendix D: Form of Continuing Disclosure Undertaking ...... D-1 Appendix E: DTC and Book-Entry-Only System ...... E-1

SUMMARY STATEMENT

The following Summary Statement is qualified in its entirety by the more detailed information and financial statements contained elsewhere in this Official Statement and the Appendices hereto (collectively, the “Official Statement’’). The Official Statement, including the cover page, the inside cover page, and the attached Appendices, contains specific information relating to the Series 2017A Bonds, the University, the Athletic Department, and other information pertinent to this issue. See Appendix A for the Comprehensive Annual Financial Report of the University for Fiscal Year ended June 30, 2016, with attached Independent Accountant’s Report. The offering of the Series 2017A Bonds to potential investors is made only by means of this entire Official Statement, and no person is authorized to detach this Summary Statement from the Official Statement or to otherwise use it without the entire Official Statement.

The Issuer The University of South Carolina (the “University”) is an institution of higher learning of the State of South Carolina with its main campus located in the City of Columbia, South Carolina. The University is governed by the Board of Trustees (the “Board of Trustees”), and is a body corporate and politic of the State of South Carolina (the “State”). See “DESCRIPTION OF THE UNIVERSITY” herein for additional information regarding the University and the Board of Trustees.

The Athletic Department The University’s Department of Athletics - Columbia Campus (the “Athletic Department”) is an auxiliary enterprise fund of the University which supports competition by more than 500 student-athletes of the University in eight men’s and eleven women’s sports. The University is a member of the Southeastern Conference and the National Collegiate Athletic Association. See “THE ATHLETIC DEPARTMENT” and “CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT” herein for additional information regarding the Athletic Department.

Series 2017A Bonds General. The University’s $40,000,000* Athletic Facilities Revenue Bonds, Series 2017A (the “Series 2017A Bonds”), are being issued initially as fully-registered bonds in the denomination of $5,000 or any integral multiple thereof in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Series 2017A Bonds under a book-entry-only system maintained by DTC through brokers and dealers who are, or act through, DTC participants. Purchasers will not be entitled to receive physical delivery of the Series 2017A Bonds. For so long as any purchaser is the beneficial owner of a Series 2017A Bond, such purchaser must maintain an account with a broker or dealer who is, or acts through, a DTC participant in order to receive payment of principal of and interest on such Series 2017A Bond. See “THE SERIES 2017A BONDS – Book-Entry-Only System” and Appendix E herein.

Date of Issue and Delivery. The Series 2017A Bonds will be dated March 1, 2017. It is expected that the Series 2017A Bonds will be available for delivery through the facilities of DTC on or about March 1, 2017.

Interest Payments. Interest on the Series 2017A Bonds is payable on each May 1 and November 1, commencing May 1, 2017.

Maturities. The Series 2017A Bonds mature as set forth on the inside cover page hereof.

Redemption. The Series 2017A Bonds will be subject to redemption prior to maturity as described herein under “THE SERIES 2017A BONDS – Redemption of the Series 2017A Bonds.”

Use of Proceeds of the Series Proceeds of the Series 2017A Bonds will be used (i) to acquire, construct, and equip the Football Operations 2017A Bonds Facility (as defined herein), and (ii) to pay the costs of issuance of the Series 2017A Bonds.

Security The Series 2017A Bonds are special obligations of the University and are payable solely from, and secured by a pledge of, the Net Revenues of the University’s Athletic Department and from the gross receipts from the imposition of the Admissions Fee and the Special Student Fee. Such pledge shall be on a parity in all respects with the pledge securing the Athletic Facilities Revenue Bonds heretofore and hereafter issued by the University pursuant to the Bond Resolution described herein.

The Series 2017A Bonds are not general obligations of the State and do not in any event constitute an indebtedness of the State within the meaning of any provision, limitation, or restriction of the constitution or statutes of the State (other than Article X, Section 13(9) of the State Constitution authorizing obligations payable from special sources not involving revenues from any tax, nor a charge, lien, or encumbrance, legal or equitable, upon any property of the University or the State or upon any income, receipts or revenues of the University or the State, save and except from the Net Revenues of the University’s Athletic Department and the gross receipts from the imposition of the Admissions Fee and the Special Student Fee to secure the payment of the principal of and interest on the Series 2017A Bonds, and neither the full faith and credit of the University, the State, or any political subdivision of the State, nor the taxing power of the State or any political subdivision of the State, are pledged for the payment of the principal of or interest on the Series 2017A Bonds. The University does not have taxing power.

______*Preliminary, subject to change.

Authorization The Series 2017A Bonds are being issued under the authority of Article X, Section 13(9) of the Constitution of the State and the laws of the State, including Act No. 518 of the 1980 Regular Session of the General Assembly of the State of South Carolina, as amended by Act No. 545 of the Regular Session of 1986, Act No. 302 of the Regular Session of 1996, Act No. 6 of the Regular Session of 1997, Act No. 182 of the Regular Session of 2005, and Act No. 17 of the Regular Session of 2007, a Bond Resolution adopted by the Board of Trustees on October 19, 2001, a Series Resolution adopted by the Board of Trustees on September 16, 2016, and a resolution adopted by the State Fiscal Accountability Authority on November 7, 2016.

Tax Status of Interest on the In the opinion of McNair Law Firm, P.A., Bond Counsel, assuming continuing compliance by the University Series 2017A Bonds with certain covenants, interest on the Series 2017A Bonds is excludable from gross income for federal income tax purposes under existing statutes, regulations and judicial decisions. Interest on the Series 2017A Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed of individuals or corporations. However, interest on the Series 2017A Bonds is included in the computation of adjusted current earnings for purposes of the alternative minimum tax for corporations. See “FEDERAL TAX EXEMPTION AND OTHER TAX MATTERS” for a brief description of alternative minimum tax treatment and certain other federal income tax consequences to certain recipients of interest on the Series 2017A Bonds. The Series 2017A Bonds and the interest thereon will also be exempt from all State, county, municipal and school district and other taxes or assessments imposed within the State, except estate, transfer and certain franchise taxes. See “FEDERAL TAX EXEMPTION AND OTHER TAX MATTERS.”

Continuing Disclosure The University will agree, in a Continuing Disclosure Undertaking, to provide to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system, (i) annually certain financial information and operating data of the Athletic Department, prepared in accordance with accounting principles generally accepted in the United States of America, and (ii) notice of the occurrence of certain enumerated events, as provided in Rule 15c2-12 promulgated by the U.S. Securities and Exchange Commission. See “MISCELLANEOUS – Continuing Disclosure” and Appendix D herein.

General This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of the Official Statement will be deposited with the Municipal Securities Rulemaking Board, 1300 I Street NW, Suite 1000, Washington, DC 20005. Copies of the Preliminary Official Statement and the Official Statement and other relevant documents and information regarding the documents are available from the Underwriter by contacting Barclays Capital Inc., 745 Seventh Avenue, 19th Floor, New York, New York 10019.

Professionals Involved in the U.S. Bank National Association in Columbia, South Carolina, is serving as the initial Registrar and Paying Offering Agent for the Series 2017A Bonds. Barclays Capital Inc. is Underwriter for the Series 2017A Bonds. McNair Law Firm, P.A., is serving as Bond Counsel. Certain other legal matters will be passed upon for the Underwriter by Nexsen Pruet, LLC, as Underwriter’s Counsel; by Howell Linkous & Nettles, LLC, as Disclosure Counsel for the University; and for the University by its General Counsel, Walter H. Parham, Esquire. Public Financial Management, Inc. has served as financial advisor to the University in connection with the issuance of the Series 2017A Bonds.

vii [THIS PAGE INTENTIONALLY LEFT BLANK]

$40,000,000* UNIVERSITY OF SOUTH CAROLINA ATHLETIC FACILITIES REVENUE BONDS, SERIES 2017A

All information included herein has been provided by the University except where attributed to other sources. The summaries and references to all laws, rules, regulations, resolutions, agreements, reports, and other documents referred to herein do not purport to be complete, comprehensive, or definitive, and each such reference or summary is qualified in its entirety by reference to each such laws, rules, regulations, resolutions, agreements, reports, and other documents. All capitalized terms not defined herein shall have the meanings ascribed to such terms in Appendix B hereto.

THE SERIES 2017A BONDS

General

The $40,000,000* Athletic Facilities Revenue Bonds, Series 2017A (the “Series 2017A Bonds”) of the University of South Carolina (the “University”) will be issued in fully-registered book-entry-only form in denominations of $5,000 or any integral multiple thereof, registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). See Appendix E herein for a more complete description of DTC and the book-entry-only system for the Series 2017A Bonds. The Series 2017A Bonds will bear interest from their dated date, payable semiannually on May 1 and November 1 of each year, commencing May 1, 2017 (each, a “Bond Payment Date”), at the rates set forth on the inside cover page hereof, to the person in whose name the Series 2017A Bond is registered (the “Bondholder” or “Holder”) at the close of business on the 15th day of the month preceding the applicable Bond Payment Date (the “Record Date”). The Series 2017A Bonds will mature on May 1 in each of the years and in the principal amounts as set forth on the inside cover page hereof. See “CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT – Debt Service Requirements” herein for the scheduled debt service on the Series 2017A Bonds. The initial Registrar and Paying Agent for the Series 2017A Bonds is U.S. Bank National Association in Columbia, South Carolina (the “Registrar” or, as the case may be, the “Paying Agent”). The initial Trustee for the Holders of the Series 2017A Bonds is the Office of the State Treasurer of South Carolina (the “State Treasurer”) in Columbia, South Carolina (the “Trustee”).

Use of Proceeds

Proceeds of the Series 2017A Bonds will be used (i) to acquire, construct and equip the Football Operations Facility (as defined herein), and (ii) to pay the costs of issuance of the Series 2017A Bonds. See “THE SERIES 2017A BONDS - Plan of Finance” and “- Estimated Sources and Uses of Proceeds” herein.

Authorization

The Series 2017A Bonds are being issued under the authority of Article X, Section 13(9) of the Constitution of the State of South Carolina (the “State”) and the laws of the State, including Act No. 518 of the 1980 Regular Session of the General Assembly of the State of South Carolina, as amended by Act No. 545 of the Regular Session of 1986, Act No. 302 of the Regular Session of 1996, Act No. 6 of the Regular Session of 1997, Act No. 182 of the Regular Session of 2005, and Act No. 17 of the Regular Session of 2007 (the “Enabling Act”), a Bond Resolution adopted by the Board of Trustees on October 19, 2001 (the “Resolution”), a Series Resolution adopted by the Board of Trustees on September 16, 2016 (the “Series 2017A Resolution” and, together with the Resolution, the “Bond Resolution”), and a resolution adopted by the State Fiscal Accountability Authority on November 7, 2016.

______*Preliminary, subject to change.

Security for the Series 2017A Bonds

The Series 2017A Bonds are special obligations of the University and are payable solely from, and secured by a pledge of, the Net Revenues of the University’s Athletic Department (the “Net Revenues”) and the gross receipts from the imposition by the University of the Admissions Fee and the Special Student Fee. Upon the issuance of the Series 2017A Bonds, such pledge shall be on a parity in all respects with the pledges previously given by the University securing the payment of the remaining outstanding Athletic Facilities Revenue Bonds and the pledges to be given by the University in the future to secure the payment of any additional parity Athletic Facilities Revenue Bonds issued pursuant to the Bond Resolution. See “SECURITY FOR THE SERIES 2017A BONDS” herein.

THE SERIES 2017A BONDS ARE NOT GENERAL OBLIGATIONS OF THE STATE AND DO NOT IN ANY EVENT CONSTITUTE AN INDEBTEDNESS OF THE STATE WITHIN THE MEANING OF ANY PROVISION, LIMITATION, OR RESTRICTION OF THE CONSTITUTION OR STATUTES OF THE STATE (OTHER THAN ARTICLE X, SECTION 13(9) OF THE SOUTH CAROLINA CONSTITUTION AUTHORIZING OBLIGATIONS PAYABLE FROM SPECIAL SOURCES NOT INVOLVING REVENUES FROM ANY TAX), NOR A CHARGE, LIEN, OR ENCUMBRANCE, LEGAL OR EQUITABLE, UPON ANY PROPERTY OF THE UNIVERSITY OR THE STATE OR UPON ANY INCOME, RECEIPTS OR REVENUES OF THE UNIVERSITY OR THE STATE, SAVE AND EXCEPT FROM THE NET REVENUES OF THE UNIVERSITY’S ATHLETIC DEPARTMENT AND THE GROSS RECEIPTS FROM THE IMPOSITION OF THE ADMISSIONS FEE AND THE SPECIAL STUDENT FEE TO SECURE THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE SERIES 2017A BONDS, AND NEITHER THE FULL FAITH AND CREDIT OF THE UNIVERSITY, THE STATE, OR ANY POLITICAL SUBDIVISION OF THE STATE, NOR THE TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION OF THE STATE, ARE PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2017A BONDS. THE UNIVERSITY DOES NOT HAVE TAXING POWER.

The pledges given in the Resolution to secure payment of the Series 2017A Bonds will be on a parity in all respects with (i) the pledges previously given by the University securing the payment of the outstanding Athletic Facilities Revenue Bonds, and (ii) the pledges to be given by the University in the future to secure the payment of any additional parity Athletic Facilities Revenue Bonds issued by the University pursuant to the authority set forth in the Resolution. See “SECURITY FOR THE SERIES 2017A BONDS - Outstanding Bonds” and “- Pledge of Net Revenues and Gross Receipts of Admissions Fee and Special Student Fee,” herein for information regarding the University’s outstanding Athletic Facilities Revenue Bonds.

Each capitalized term not defined herein, unless context clearly indicates to the contrary, has the meaning provided for the same in the Resolution. See “Appendix B – Summary of Certain Provisions of the Bond Resolution – The Bond Resolution – Definitions” attached hereto.

Redemption of the Series 2017A Bonds

Optional Redemption. The Series 2017A Bonds maturing on or prior to May 1, ____ shall not be subject to redemption prior to their stated maturities.

The Series 2017A Bonds maturing after May 1, ____, through and including May 1, ____, shall be subject to redemption at ___% of par at the option of the University on or after May 1, ____, in whole or in part at any time, and, if in part, in those maturities designated by the University and by lot within a maturity (but only in integral multiples of $5,000) upon 30 days written notice at the principal amount thereof and the interest accrued on such principal amount to the date fixed for redemption.

Mandatory Sinking Fund Redemption. The Series 2017A Bonds maturing on May 1, 20__ and May 1, 20__ (the “Term Bonds”) are subject to mandatory sinking fund redemption commencing on the dates shown in the following tables and will be redeemed (to the extent not previously redeemed as described above), at 100% of the principal amount thereof, plus interest accrued thereon to the redemption date, on May 1 of each of the following years in the respective principal amounts specified below:

Term Bond Due May 1, 20__

Date Amount

______* Final Maturity.

Term Bond Due May 1, 20__

Date Amount

______* Final Maturity.

The amount of any such mandatory sinking fund redemption shall be reduced to the extent Series 2017A Bonds of the applicable maturity have been purchased by the University or redeemed by the University pursuant to any optional redemption provisions in such manner as the University shall direct or, absent such direction, on a pro-rata basis.

Notice of Redemption. If any of the Series 2017A Bonds, or portions thereof, are called for redemption, the Registrar shall give or cause to be given notice to the Holders of any Series 2017A Bonds to be redeemed, in the name of the University, of the redemption of such Series 2017A Bonds, or portions thereof, which notice shall specify the Series 2017A Bonds to be redeemed, the redemption date and the place or places where amounts due upon such redemption will be payable and, if less than all of the Series 2017A Bonds are to be redeemed, the numbers of the Series 2017A Bonds to be redeemed, and, in the case of Series 2017A Bonds to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall be given by mailing a copy of the redemption notice by first-class mail at least thirty (30) days prior to the date fixed for redemption to the Holder of each Series 2017A Bond to be redeemed at the address shown on the registration books; provided, however, that failure to give such notice by mail, or any defect in the notice mailed to the Holder of any Series 2017A Bond to be redeemed, shall not affect the validity of the proceedings for the redemption of any other Series 2017A Bond.

Provided funds for their redemption are on deposit with the Trustee, all Series 2017A Bonds so called for redemption shall cease to bear interest on the specified redemption date and shall no longer be deemed to be Outstanding under the Bond Resolution. If said money shall not be so available on the redemption date, such Series 2017A Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption.

Book-Entry-Only System

The Series 2017A Bonds will be available to purchasers under the book-entry-only system maintained by DTC, which will act as securities depository for the Series 2017A Bonds. Purchasers will not be entitled to receive physical delivery of the Series 2017A Bonds. For so long as any purchaser is a beneficial owner of a Series 2017A Bond, such purchaser must maintain an account with a broker or dealer who is, or acts through, a DTC participant in order to receive payment of principal of and interest on such Series 2017A Bonds. See “Appendix E – DTC and Book-Entry-Only System” herein for a more complete description of the book-entry-only system for the Series 2017A Bonds.

In the event the Series 2017A Bonds are no longer held in book-entry-only form, bond certificates registered in the name of DTC or its nominee will be cancelled and the University will execute and deliver Series 2017A Bonds to the Beneficial Owners as shown on the records of the DTC Participants. See “Appendix B – Summary of Certain Provisions of the Bond Resolution” herein for a description of the payment, registration, transfer, and exchange provisions for the Series 2017A Bonds if the book-entry-only system is discontinued.

Plan of Finance

Proceeds of the Series 2017A Bonds will be used to acquire, construct, and equip an approximately 105,000 square foot football operations facility (the “Football Operations Facility”), including site acquisition, parking and associated landscaping and hardscaping, located at the west end of Gamecock Park and adjacent to the Indoor Football Practice Facility. See “THE SERIES 2017A BONDS – Estimated Sources and Uses of Proceeds” herein.

Estimated Sources and Uses of Proceeds

The following table sets forth the estimated sources and uses of proceeds of the Series 2017A Bonds.

Sources of Funds Par Amount $______Net Original Issue Discount/Premium ______TOTAL SOURCES $______

Uses of Funds Deposit to Construction Fund $______Issuance Expenses(1) ______TOTAL USES $______

(1) Includes Underwriter’s discount, legal, accounting, consulting, printing and other costs of issuing the Series 2017A Bonds.

SECURITY FOR THE SERIES 2017A BONDS

The Series 2017A Bonds issued under the Bond Resolution are special obligations of the University and are payable solely from, and secured by a pledge of, the Net Revenues and the gross receipts from the imposition by the University of the Admissions Fee and the Special Student Fee on a parity with the pledge of the Net Revenues and the gross receipts from the imposition by the University of the Admissions Fee and the Special Student Fee securing the University’s Athletic Facilities Revenue Bonds as described in the following table and any other parity bonds issued hereafter pursuant to the Bond Resolution.

Outstanding Bonds

The table below sets forth Outstanding Bonds of the University under the Bond Resolution as of January 1, 2017.

Original Outstanding Series Date of Issue Principal Amount Principal Amount 2008A June 1, 2008 $27,395,000 $ 1,385,000 2010A September 1, 2010 65,855,000 59,190,000 Refunding 2010B September 1, 2010 12,840,000 10,160,000 2012A June 1, 2012 13,580,000 12,465,000 Refunding 2012B June 1, 2012 6,350,000 6,350,000 2015 June 1, 2015 38,270,000 37,680,000 Refunding 2016A July 1, 2016 22,400,000 22,400,000

The 2008A Bonds, the 2010A Bonds, the Refunding 2010B Bonds, the 2012A Bonds, the Refunding 2012B Bonds, the 2015 Bonds, and the Refunding 2016A Bonds (collectively, the “Outstanding Bonds”), together with the Series 2017A Bonds and any other bonds issued pursuant to the Bond Resolution on a parity with the aforementioned bonds (“Additional Bonds”), are hereinafter collectively referred to as the “Bonds” or the “Athletic Facilities Revenue Bonds.” See “SECURITY FOR THE SERIES 2017A BONDS - Pledge of Net Revenues and Gross Receipts of Admissions Fee and Special Student Fee,” “SECURITY FOR THE SERIES 2017A BONDS - Admissions Fee” and “SECURITY FOR THE SERIES 2017A BONDS - Special Student Fee” herein.

THE SERIES 2017A BONDS ARE SPECIAL OBLIGATIONS OF THE UNIVERSITY AND ARE PAYABLE SOLELY FROM, AND SECURED BY A PLEDGE OF, THE NET REVENUES AND THE GROSS RECEIPTS FROM THE IMPOSITION OF THE ADMISSIONS FEE AND THE SPECIAL STUDENT FEE. SUCH PLEDGE SHALL BE ON A PARITY IN ALL RESPECTS WITH THE PLEDGE SECURING THE OUTSTANDING BONDS AND BONDS ISSUED BY THE UNIVERSITY FROM TIME TO TIME IN THE FUTURE PURSUANT TO THE BOND RESOLUTION.

THE SERIES 2017A BONDS ARE NOT GENERAL OBLIGATIONS OF THE STATE AND DO NOT IN ANY EVENT CONSTITUTE AN INDEBTEDNESS OF THE STATE WITHIN THE MEANING OF ANY PROVISION, LIMITATION, OR RESTRICTION, OR THE CONSTITUTION OR STATUTES OF THE STATE (OTHER THAN ARTICLE X, SECTION 13(9) OF THE STATE CONSTITUTION AUTHORIZING OBLIGATIONS PAYABLE FROM SPECIAL SOURCES NOT INVOLVING REVENUES FROM ANY TAX, NOR A CHARGE, LIEN, OR ENCUMBRANCE, LEGAL OR EQUITABLE, UPON ANY PROPERTY OF THE UNIVERSITY OR THE STATE OR UPON ANY INCOME, RECEIPTS OR REVENUES OF THE UNIVERSITY OR THE STATE, SAVE AND EXCEPT FROM THE NET REVENUES OF THE UNIVERSITY’S ATHLETIC DEPARTMENT AND THE GROSS RECEIPTS FROM THE IMPOSITION OF THE ADMISSIONS FEE AND THE SPECIAL STUDENT FEE TO SECURE THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE SERIES 2017A BONDS, AND NEITHER THE FULL FAITH AND CREDIT OR THE UNIVERSITY, THE STATE, OR ANY POLITICAL SUBDIVISION OF THE STATE, NOR THE TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION OF THE STATE, ARE PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2017A BONDS. THE UNIVERSITY DOES NOT HAVE TAXING POWER.

Pledge of Net Revenues and Gross Receipts of Admissions Fee and Special Student Fee

The Series 2017A Bonds are payable from, and secured by a pledge of, the Net Revenues and the gross receipts from the imposition by the University of the Admissions Fee and the Special Student Fee.

The term “Net Revenues” is defined in the Bond Resolution to mean, for the period in question, all Revenues (as defined below) remaining after payment of the operating and maintenance expenses of the Athletic Department and the Athletic Facilities but before provision is made for depreciation, amortization, nonmandatory transfers, and interest expenses of the Athletic Department for a given Fiscal Year.

The term “Revenues” is defined in the Bond Resolution to mean, for the period in question, (i) all revenues or other income received by the Athletic Department from the operation of the Athletic Department and the Athletic Facilities, including without limitation amounts received from the sale of tickets for and guarantees with respect to 5 intercollegiate athletic events, from any athletic conference (collectively, the “Conference”) with respect to the University’s share of proceeds from Conference members’ television and bowl appearances, from the University’s participation in Conference and National Collegiate Athletic Association tournaments, from rentals of executive boxes at Athletic Facilities, from sales of game programs and concessions, or commissions therefrom, from the University’s sports radio and television rights, from corporate sponsorships, and from license fees, (ii) all gifts, bequests, contributions, and donations received by the Board of Trustees or the University from any persons, including from any University-sanctioned athletic booster organization, for use in connection with the operations of the Athletic Department, (iii) any other unrestricted revenues of the Athletic Department not otherwise pledged that may be made applicable by the Board of Trustees to the payment of the principal of and interest on Bonds including such revenues which may fall into the category of non-mandatory transfers as such term is used in generally accepted accounting principles, and (iv) all income from the investment of the above; but excluding:

(i) gifts, bequests, contributions and donations restricted to a particular purpose inconsistent with their use for the payment of the principal, premium or interest on Bonds; (ii) the proceeds of any borrowings; (iii) State appropriations of any sort; and (iv) investment income restricted to a purpose inconsistent with the payment of operating expenses of the Athletic Department or debt service on Bonds including (whether or not so restricted) interest earned on any construction fund or construction account created with the proceeds of borrowing by the University.

The Bond Resolution defines “Athletic Facilities” to mean all of the facilities of the University designated from time to time by the Board of Trustees as intercollegiate athletic facilities, including any facilities providing support for facilities where intercollegiate events are held, including without limitation any related infrastructure and any administration, maintenance, practice, training, physical therapy, and related facilities of the Athletic Department, whether now owned or hereafter acquired by the University, and are deemed to include only those facilities associated with the University’s Columbia Campus.

Admissions Fee

Pursuant to the Enabling Act and the Bond Resolution, gross receipts from the imposition of the Admissions Fee are pledged to the payment of Bonds. The Admissions Fee is a specially designated fee or charge authorized by the Enabling Act (which is in addition to other charges) (i) imposed upon each person in attendance at a football game in Williams-Brice Stadium from whom an admission charge is required, excluding students admitted as a result of student fees paid to the University for a regular academic session, and (ii) imposed, at the discretion of the Board of Trustees, upon each person admitted to any event held at any other of the Athletic Facilities so designated by the University, excluding students permitted to use such Athletic Facilities as a result of student fees paid to the University for a regular session for the purpose of providing funds to assist in the repayment of the Bonds. Admissions Fee receipts are not considered Revenues of the Athletic Department.

The Admissions Fee imposed at Williams-Brice Stadium is $8 per ticket sold. The Admissions Fee imposed at the Arena (as defined below) is $4 and $1 per ticket sold for all basketball games of the men’s and women’s teams, respectively, to be played in the Arena (hereinafter defined). For a schedule setting forth historical receipts by the University from the Admissions Fee, see “THE ATHLETIC DEPARTMENT - Receipts of Admissions Fee and Special Student Fee” herein.

Special Student Fee

Pursuant to the Enabling Act and the Bond Resolution, gross receipts from the imposition of the Special Student Fee are pledged to the payment of Bonds. The Special Student Fee is the fee authorized by the Enabling Act to be established by the Board of Trustees and imposed upon each person in attendance at any regular academic session (excluding Summer sessions) of the University who is enrolled in a sufficient number of classes or courses for which credit is given toward any degree offered by the University to be classified as a regular full-time student in order to provide funds to assist in the repayment of Bonds. Special Student Fee receipts are not considered Revenues of the Athletic Department. For the current academic year, the Special Student Fee is $34.50 per semester (except Summer sessions) or $69 per year for each full-time student at the Columbia Campus. The current fee amounts have been in effect since the middle of the 2006-07 academic year.

As a part of its annual appropriations act for general funding of State agencies and institutions, the South Carolina General Assembly has from time to time imposed limits, for a given Fiscal Year, on the overall amount by which State universities and colleges may raise their level of tuition and fees. Although annual restrictions of this nature typically apply only to the overall level of tuition and fees of a State college or university, any such restrictions as may be imposed in the future could have an indirect impact on the ability of the University to raise the Special Student Fee beyond certain levels in a given year. There is, however, currently no limit in place.

See “DESCRIPTION OF THE UNIVERSITY - Enrollment” with respect to historical numbers of full-time students enrolled at the University’s Columbia Campus. See “THE ATHLETIC DEPARTMENT - Receipts of Admissions Fee and Special Student Fee” herein for a schedule setting forth historical receipts by the University of the Special Student Fee.

Rate Covenants

The University has covenanted and agreed in the Bond Resolution to maintain and collect rates and charges for attendance at events held at any Athletic Facilities which, when combined with other Revenues and the gross receipts of the Admissions Fee and the Special Student Fee, shall at all times be sufficient:

(1) To provide for the payment of the expenses of administration of the Athletic Department, including those of any University-sanctioned athletic booster organization, and such expenses for operation and maintenance of the Athletic Facilities as may be necessary to preserve the same in good repair and condition;

(2) To provide for the punctual payment of the principal of and interest on all Bonds and any Junior Lien Bonds that may from time to time hereafter be Outstanding;

(3) To maintain all Debt Service Funds and thus provide for the punctual payment of the principal of and interest on Bonds;

(4) To maintain any and all Debt Service Reserve Funds (if any) established with respect to a particular series of Bonds;

(5) To build and maintain a reserve for contingencies and for improvements, renovations, and expansions of the Athletic Facilities other than those necessary to maintain the same in good repair and condition;

(6) To pay all amounts owing under a reimbursement agreement with any provider of a surety bond, insurance policy, line of credit, letter of credit or similar instrument established with respect to a Reserve Requirement (if any) for any particular series of Bonds; and

(7) To discharge all obligations imposed by the Enabling Act and by the Bond Resolution.

The University has further covenanted and agreed in the Bond Resolution that it will at all times prescribe and maintain rates and thereafter collect charges in accordance with such rates and charges for attendance at events held at any Athletic Facilities or the use thereof which are reasonably expected to yield, along with all other Revenues, annual Net Revenues which when added to all gross receipts from the imposition of the Admissions Fee and the Special Student Fee, in the current Fiscal Year equal to at least one hundred ten percent (110%) of the Combined Annual Principal and Interest Requirement for all Bonds Outstanding in such Fiscal Year; and, promptly upon any material change in the circumstances which were contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each Fiscal Year, shall review the rates and charges for such use and shall promptly revise such rates and charges as necessary to comply with the foregoing requirement.

Additional Bonds

Non-Refunding Bonds. The University may issue Additional Bonds (exclusive of refunding bonds) from time to time which shall be payable from Net Revenues and the gross receipts of the Admissions Fee and the Special Student Fee on a parity with the Series 2017A Bonds. Other than with regard to the issuance of refunding bonds, Additional Bonds may be issued upon compliance with the following conditions, among others:

(1) Net Revenues plus gross receipts from the imposition of the Admissions Fee and the Special Student Fee during the most recent Fiscal Year for which audited financial statements of the University are completed shall be certified by the Chief Financial Officer on the basis of such audited financial statements to be, in the aggregate, not less than one hundred ten percent (110%) of the maximum Combined Annual Principal and Interest Requirement on all Bonds Outstanding immediately prior to the issuance of such proposed Series of Bonds and on such proposed Series of Bonds. For these purposes, such Net Revenues and such gross receipts may be adjusted to reflect (a) any ticket, rate or fee increases currently adopted and to be in effect prior to or coincident with the issuance of such proposed Series of Bonds and determined pro forma as though such ticket, rate or fee increases had been in continuous effect during such recent Fiscal Year; (b) in the event proceeds of such proposed Series of Bonds will be used to pay interest on such proposed Series, one hundred percent (100%) of the interest that will accrue on such Series of Bonds during the first twelve (12) full months following the date of delivery of the proposed Series and that will be paid from such proceeds, provided, however, that any such interest accruing in such twelve (12) month period that is to be paid on a date within the Fiscal Year of maximum Combined Annual Principal and Interest Requirements shall not be so added into such Net Revenues and such gross receipts; and (c) any amount allowed by clause (b) of this paragraph as an adjustment with respect to a previously- issued Series of Bonds if the proposed Series of Bonds is being issued prior to the end of the Fiscal Year in which capitalized interest on the previously issued Series of Bonds is exhausted; and

(2) If any Series of Bonds shall contain Variable Rate Bonds:

(a) The Series Resolution may provide for and specify a maximum interest rate on (i) such Bonds and (ii) any reimbursement obligation to a liquidity provider for such Bonds;

(b) The liquidity provider for such Bonds shall be rated in either of the two highest short term rating categories by Moody’s and S&P; and

(c) Any accelerated principal payments or any interest computed at a rate in excess of that on such Bonds due to the liquidity provider for such Bonds pursuant to any reimbursement agreement with such liquidity provider shall be subordinate to the payment of debt service on all Bonds; provided, however, if the tests referred to in paragraph (1) above and paragraph (1) below, as applicable, under this heading “Additional Bonds” are calculated (and met) assuming such accelerated principal payment and such excess interest amount to the liquidity provider, then such accelerated principal payment and excess interest amount may be on a parity with the payment of debt service on all Bonds.

Refunding Bonds. In the case of Additional Bonds issued for the purpose of refunding any Bonds, either:

(1) The Annual Principal and Interest Requirements of the refunding Bonds shall not exceed the Annual Principal and Interest Requirements of the refunded Bonds until a time subsequent to the last maturity of Bonds not refunded and which remain Outstanding following the issuance of the refunding Bonds; or

(2) The University shall comply with the revenue test described in paragraph (1) of the section entitled “Non-Refunding Bonds” above.

Junior Lien Bonds

Notwithstanding that Bonds may be Outstanding, the University is permitted by the terms of the Bond Resolution to issue Junior Lien Bonds in such amount as it may from time to time determine, payable from the Revenues and receipts of the imposition of the Admissions Fee and Special Student Fee; provided that any such pledge of the Revenues and the receipts of the Admissions Fee and the Special Student Fee granted for the protection of said Junior Lien Bonds shall at all times be subordinate and inferior in all respects to the pledges of Net Revenues and the receipts of the Admissions Fee and the Special Student Fee made or authorized for Bonds; and provided, further, that the maturity of Junior Lien Bonds may not be accelerated and paid in full unless all Bonds shall have been paid or provision therefor has been made. The University has no outstanding and no current plans to issue Junior Lien Bonds.

See “Appendix B – Summary of Certain Provisions of the Bond Resolution – Right to Issue Junior Lien Bonds; Accession” for a more detailed summary of provisions of the Bond Resolution pertaining to Junior Lien Bonds.

Flow of Funds

For so long a time as any sum remains due and payable by way of principal or interest on the Bonds, the Bond Resolution provides that the accounting system for the Athletic Department shall be so arranged as to reflect the following funds or accounts relating to the revenues of the Athletic Department and such funds or accounts shall be established and maintained, and deposits shall be made therein in the manner required under the Bond Resolution. When any of such funds or accounts are not required to be held by the Trustee, they may, if required by State law or otherwise agreed to by the University and the State Treasurer, be held by the State Treasurer on behalf of the University. One or more accounts or subaccounts may be established within any such funds or accounts by the University, the State Treasurer or the Trustee (if other than the State Treasurer), as the case may be, in order to enable the proper administration of such funds or accounts in the judgment of such party. (The brief descriptions of such funds or accounts being for convenience of reference only; more complete descriptions being contained in the Bond Resolution.)

Operation and Maintenance Fund.

(1) There shall be established and maintained by the University a fund or account designated as the Operation and Maintenance Fund. This account shall be so maintained as to accurately reflect Revenues and Net Revenues.

(2) The Operation and Maintenance Fund is intended to provide for the payment of all expenses incurred in connection with the administration and operation of the Athletic Department (including those of any University-sanctioned athletic booster organization) and the Athletic Facilities, including, without limiting the generality of the foregoing, such expenses as may be reasonably necessary to preserve the Athletic Facilities in good repair and condition and to pay the fees and charges of the Trustee, the Paying Agent, the Registrar and the custodian or trustee of any other fund created or to be created under the Bond Resolution, the costs of audits required thereunder, and the premiums for all insurance policies and any fidelity bonds required by the Bond Resolution.

(3) Withdrawals from the Operation and Maintenance Fund shall be made by the University in accordance, as nearly as practicable, with the Annual Budget then in effect.

Debt Service Funds. The Bond Resolution provides that separate Debt Service Funds shall be established for each Series of Bonds Outstanding. Moneys in a Debt Service Fund will be available to pay only the Series of Bonds for which such account was established. The Debt Service Funds are to be maintained by the Trustee and are intended to provide for the ratable payment of the principal of, premium, if any, and interest on the respective Series of Bonds as the same shall become due. The Bond Resolution provides that on or before the fifteenth (15th) day of each month immediately preceding each Bond Payment Date, there shall be deposited in the respective Debt Service Funds an amount sufficient to discharge all interest to become due on the respective Series of Bonds on the next ensuing interest payment date; provided, however, that if provision has been made for the payment of all or part of the next installment of interest to become due on any Series of Bonds, pursuant to any other provision of the Bond Resolution, or any Series Resolution, or by reason of investment earnings, then, in such event, the deposits so required may be omitted, or reduced accordingly. If, as a result of the provision in a Series Resolution that any Series of Bonds shall bear interest payable for a period less than semi-annually, and any Holder of such Bonds shall receive payments of interest for any period for which payments were not made to holders of Bonds bearing interest payable semi-annually, then there shall be set aside in the applicable Debt Service Fund in trust for the benefit of the Holders of Bonds bearing interest payable semi-annually an amount of money equal to the interest accrued on the Bonds bearing interest payable semi-annually for such period.

The Bond Resolution additionally provides that on or before the fifteenth (15th) day of each month immediately preceding each Bond Payment Date, there shall be deposited in the respective Debt Service Funds a sum equal to one-half of the aggregate amount of principal of all Bonds becoming due and payable on the next ensuing Bond Payment Date on which a payment of principal is due to be made. On or before the fifteenth day of the month immediately preceding each Bond Payment Date on which a payment of principal is due to be made, there shall be deposited in the respective Debt Service Funds a sum equal to the amount necessary, when added to 9 the payment made pursuant to the preceding sentence, to discharge the aggregate amount of principal of all Bonds becoming due and payable on such ensuing Bond Payment Date (whether at stated maturity or by sinking fund installment); provided, however, that if provision has been made for the payment of all or any portion of the principal to become due on the Bonds, pursuant to any other provision of the Bond Resolution, or any Series Resolution, or by reason of investment earnings, then, in such event, the deposits so required may be omitted, or reduced accordingly.

As receipts from the imposition of the Admissions Fee and the Special Student Fee are collected by the University, the same shall be promptly remitted to the Trustee, who shall deposit the same as received, pro-rata as to the Outstanding Series of Bonds, in the respective Debt Service Funds. Withdrawals from the Debt Service Funds shall be made only by the Trustee who shall transmit to the Paying Agent (for payment of each Bondholder) at such times as may be appropriate, the sums required to pay the principal of, premium, if any, and interest on the respective Series of Bonds.

Moneys in the Debt Service Funds shall be invested and reinvested by the State Treasurer in Authorized Investments.

Debt Service Reserve Funds. The Bond Resolution and the Series Resolution provide that a Debt Service Reserve Fund may be established for any Series of Bonds. There are no moneys or surety bonds on deposit in any Debt Service Reserve Fund established under the Bond Resolution that are expected to be available to pay debt service on the Series 2017A Bonds in the event that moneys on deposit in the Debt Service Fund are insufficient for that purpose. For a description of the Debt Service Reserve Funds established under the Bond Resolution with respect to other Outstanding Bonds, see Appendix B.

Improvement Fund. The Improvement Fund is to be maintained by the Trustee with respect to the Athletic Department to establish a reasonable reserve for contingencies and for improvements, expansions and renovations of the Athletic Facilities. Money in the Improvement Fund may be withdrawn for the purposes described in the next succeeding sentence in the event all required deposits have been made in the respective Debt Service Funds and any Debt Service Reserve Funds. Such moneys may be withdrawn by the University from time to time and used solely:

(1) for the purpose of restoring depreciated or obsolete items of the Athletic Facilities;

(2) for improvements, expansions and renovations to the Athletic Facilities, other than for those things which are reasonably necessary to maintain the Facilities in good repair and condition;

(3) to defray the cost of unforeseen contingencies;

(4) to prevent defaults of Bonds (should any Debt Service Fund or Debt Service Reserve Fund prove to be insufficient for such purposes) and Junior Lien Bonds; and

(5) for optional redemption of Bonds.

To the extent funds are available, there shall be paid from time to time from the Operation and Maintenance Fund, for deposit into the Improvement Fund amounts such that the entire amount deposited during a Fiscal Year equals that sum which has been budgeted for the Improvement Fund for that Fiscal Year pursuant to the Annual Budget; provided, however, that if provision has been made for the payment of all or part of that Fiscal Year’s deposit to the Improvement Fund, due to accumulations of moneys therein or by reason of investment earnings, then, in such event, the deposits described in this paragraph may be omitted, or reduced accordingly.

Use of Surplus Amounts. At any time that there is in the Operation and Maintenance Fund an amount sufficient to make all payments required by the foregoing through the next ensuing Bond Payment Date, the University may withdraw any moneys in excess of such amount and use them (a) to make additional deposits to the Improvement Fund (whether or not in excess of the amounts budgeted therefrom) or (b) in the discretion of the Board of Trustees, for any other lawful purposes of the University.

THE ATHLETIC DEPARTMENT

General Description

The Athletic Department is an auxiliary enterprise fund operation of the University which supports competition by more than 550 University student-athletes in intercollegiate sports. The University is a member of the Southeastern Conference (“SEC”) and the National Collegiate Athletic Association (“NCAA”). The University’s “Gamecocks,” as its teams are known, compete in the following varsity sports:

Men Women Baseball Swimming and Diving Basketball Swimming and Diving Basketball Tennis Cross Country Tennis Football Track and Field - Outdoor and Equestrian Track and Field - Outdoor and Golf Indoor Golf Indoor Soccer Soccer Volleyball Softball Beach Volleyball

The Director of Athletics is Ray Tanner, who has served in this position since August 2012. Coach Tanner was a three-time National Baseball Coach of the Year and SEC Coach of the Year. He completed 16 years as head coach of the University’s baseball team, establishing one of the premier programs in college baseball prior to being named Director of Athletics.

The Athletic Department currently has 261 full-time employees. In addition to the Director of Athletics, principal positions within the Athletic Department include a Deputy Athletics Director, an Executive Associate Athletics Director, a Senior Women’s Administrator, a Chief Financial Officer, an Associate Athletics Director- Facilities, and an Associate Athletics Director - Development.

The Gamecock football team has won 38 games over the last five seasons (6-7, 3-9, 7-6, 11-2, 11-2), including three bowl game wins. The women’s basketball team won the 2016 SEC regular season and tournament championship and advanced to the Sweet Sixteen. The baseball team has made NCAA tournament appearances in fifteen of the last sixteen years, won the 2004 SEC tournament, made ten College World Series appearances since 1975, and won the 2010 and 2011 NCAA men’s baseball national championships. The men’s soccer team joined Conference USA and won its first Conference USA title in 2005. The SEC does not sponsor men’s soccer. During its history, in addition to men’s baseball, the University has won national championships in women’s track & field and equestrian and produced nationally-ranked teams in men’s and women’s golf, men’s and women’s tennis, women’s soccer, and softball.

Athletic Facilities

Primary Athletic Facilities on the University’s Columbia Campus include: Williams-Brice Stadium (football), Colonial Life Arena (basketball), Founder’s Park (baseball), Weems-Baskin Track, Eugene E. Stone III Stadium (soccer), Carolina Natatorium (swimming and diving), Carolina Tennis Complex at the Village at the Roost, Volleyball Competition and Basketball Practice Facility, the Wardle Golf House and Teaching Center at The University Club (golf), The Coop (golf practice facility), Beckham Field (softball), Onewood Farm (equestrian), the Rice Athletic Center (coaches offices and athletic administration), the Kay and Eddie Floyd Football Building (football coaches offices), an indoor practice facility for football and an additional indoor facility for tennis, track & field, soccer, baseball, and softball, the Terry Spring Sports Center (offices, locker rooms, and training rooms for Olympic sports), a ticket office, the Charles F. Crews Football Facility, and The Dodie Academic Enrichment Center (education support facility for student athletes).

In December 2006, the Board of Trustees approved an Intercollegiate Athletic Facilities Master Plan (the “Master Plan”). The Master Plan contemplated construction of, and renovations and additions to, various Athletic Facilities of the University, including renovations and additions to Williams-Brice Stadium, construction of a new indoor football facility, the Farmer’s Market property, construction of a new baseball stadium, construction of new Roost facilities consisting of an academic enrichment center, coaches support building, Gamecock Club office, new tennis complex, and parking garage. Components of the Master Plan have commenced and will continue to be implemented through 2017.

As of December 31, 2016, the following components of the Master Plan have been completed: portions of the renovations to Williams-Brice Stadium and Plaza and addition of new video board, an indoor football practice facility, outdoor football practice fields, purchase and the development of the Farmer’s Market property now known as Gamecock Park, Founders Park for baseball, The Dodie Academic Enrichment Center, parking garage, Carolina Tennis Stadium, Rice Athletics Center administration building, the new Carolina Softball Stadium at Beckham Field, and Wheeler Beach. Future facilities in progress include a new outdoor and indoor track and field facility, Carolina Natatorium locker room upgrades, and a new soccer complex.

Football

Williams-Brice Stadium. Formerly known as Carolina Stadium, Williams-Brice Stadium was built by the Works Progress Administration (“WPA”) in 1934 with a seating capacity of 17,000. It was expanded in 1948, and again in 1952 to enclose the end zones and increase seating capacity to 43,000. In 1972, a grant given to the University increased seating capacity to 54,000 with the addition of an upper West side deck and a new lower seating area that included a weight room, equipment room, meeting rooms, and an indoor practice facility under the stands. In 1982, an upper deck was added to the existing lower deck on the East side, expanding capacity to 72,400. In 1995, a $10.3 million addition to the West side added executive boxes, premium club seats, and a new, two-story press box. In 1996, the Kay and Eddie Floyd office building opened outside the North end zone at a cost of $1.6 million. In 1996, a $13.3 million South end zone addition was added, which included a 11,500-square foot banquet and meeting facility, as well as premium club level and upper deck seating, increasing capacity to a current 80,250. In 2004, the Charles F. Crews Football Facility was added to the South end zone. Today, Williams-Brice Stadium is one of the largest on-campus football stadiums in the nation.

General Information. The University typically plays a minimum of seven (7) home football games each season in Williams-Brice Stadium out of a 12-game regular season. Four of the home games each year are played against SEC opponents. The University’s football team has participated in post-season bowl games twenty-one (21) times in its history.

Set forth below is the University football team’s win-loss record (including post-season bowl games) for the past ten seasons:

FOOTBALL RECORDS

Record Record Year (wins-losses) Year (wins-losses) 2016 6 - 7 2011 11 - 2 2015 3 - 9 2010 9 - 5 2014 7 - 6 2009 7 - 6 2013 11 - 2 2008 7 - 6 2012 11 - 2 2007 6 - 6

During the period 2017-2022, the University currently plans to play seven home games each year. Each of the scheduled games is under contract. However, by mutual agreement, games may be cancelled or dates may be changed.

Ticket prices for home games for the 2016 season were set by the University at $365 for a full season ticket. The 2017 season ticket prices have not yet been set. Set forth in the following table are the number of home games, ticket prices, number of season tickets purchased, total attendance, student attendance, and average attendance per game at Williams-Brice Stadium for the past ten seasons:

FOOTBALL TICKETS AND ATTENDANCE

Total Average Average Season Attendance Student Attendance Calendar Year Home Games Ticket Prices (1) Tickets (2) Attendance (3) Per Game

2016 7 $365/ $20-$80 50,340 538,441 10,340 76,920 2015 6* $290/ $25-$85 51,180 472,934 9,489 78,822 2014 7 $365/ $25-$70 54,005 569,664 8,666 81,381 2013 7 $365/ $25-$70 51,967 576,805 9,016 82,401 2012 7 $320/ $30-$80 49,041 560,008 9,141 80,001 2011 7 $320/ $25-$66 46,233 553,915 9,665 79,131 2010 7 $320/ $35-$55 44,602 536,975 8,678 76,711 2009 7 $320/ $35-$60 47,851 504,989 7,693 72,141 2008 7 $320/ $35-$55 59,619 532,437 8,041 76,062 2007 7 $320/ $35-$60 60,208 542,143 9,051 77,449

Source: Athletic Department (1) Non-student prices. Includes Admission Fee ($8.00 fee beginning in 2013, $3.00 fee for 2012 and prior), State admissions taxes, and for the Clemson University and University of Georgia games, a $10.00 academic scholarship fee (none of which constitute Revenues of the Athletic Department). In addition, the rules of the NCAA and the SEC provide that certain complimentary tickets may be distributed. Amounts reflected are grouped by season ticket price followed by ranges in individual game prices as set for each season. (2) Includes students who do not pay the Admissions Fee. (3) A student athletic activity fee is charged to full-time students as a part of tuition and fees. This fee, which currently is $52.00 per semester, is allocated to the Athletic Department as Revenues for allowing student access to athletic events in lieu of ticket charges. * The scheduled LSU home game was moved to LSU due to flooding in Columbia.

Ticket Sales. Generally, the University has experienced an increase in football ticket sales since 2010 after experiencing a decline in season football ticket sales, consistent with national trends, in 2009. This increase is attributed to the success of the football team and an improving economy. Season ticket sales for 2016 were down following the 2015, 3 win season and 2014, 7 win season. Revenue for Fiscal Year 2016-2017 is expected to be consistent with past years due to increased single game ticket sales.

Executive Suites. The University maintains 18 executive suites (skyboxes) at Williams-Brice Stadium, including the suite of the University President and Athletics Director. Annual gross revenues on skybox rentals have ranged between $1,095,560 and $1,176,640 over the past three years.

Guarantees to Visiting Teams. SEC schools do not pay out guarantees to each other for conference games. Annually, there are four home conference games and four away conference games. Non-conference football games currently command between $240,000 to $1,800,000 to visiting non-conference schools, depending on the quality of the opponent.

Head Football Coach. Will Muschamp became the University’s 34th head football coach in December, 2015. Regarded as an outstanding defensive mind, Muschamp, 44, is a 21-year coaching veteran, including 13 years in the Southeastern Conference. He has previous head coaching experience, posting a 28-21 record (.571) at the University of Florida from 2011-14. He led the University of Florida Gators to three bowl games in his four seasons in Gainesville and was recognized as the SEC Coach of the Year in 2012 after guiding the University of Florida to an 11-2 record and a Top-10 finish. The Rome, Georgia, native has coached in two national championship games (in 2003 and 2009), winning with LSU in 2003, and coached in a pair of BCS bowl games, following the 2008 and 2012 seasons. Muschamp has coached in the SEC Championship Game twice and coached once in the Big 12 Championship Game, winning all three. In addition, he was a finalist for the 2007 Broyles Award presented to the nation’s top assistant coach.

Basketball

The Colonial Life Arena. The University, in November 2002, completed construction of the Colonial Life Arena (the “Arena”, formerly known as the “Colonial Center”), a single-concourse multi-purpose facility, which hosts the University’s men’s and women’s basketball games and other sporting events, as well as concerts, family shows, and consumer exhibits. The Arena has a seating capacity of 17,000 for basketball games and 18,500 for center stage concerts. The Arena is located in downtown Columbia on land (the “Land”) contributed to the Arena by the City of Columbia (the “City”). The Land is being leased by the City to the University at a nominal annual rent for a 99-year term. Under the lease, the University has the option at any time to purchase the Land at a nominal purchase price.

Men’s Basketball. The men’s basketball team typically plays 17 home games each season (plus one exhibition game), including eight SEC games. Set forth in the following table is the men’s basketball team’s win- loss record for the past ten seasons:

MEN’S BASKETBALL RECORD

Record Record Year (wins-losses) Year (wins-losses) 2015-16 25 - 9 2010-11 14 - 16 2014-15 17 - 16 2009-10 15 - 16 2013-14 14 - 20 2008-09 22 -10 2012-13 14 - 18 2007-08 14 - 18

2011-12 10 - 21 2006-07 14 - 16

Set forth in the following table are the number of home games, ticket prices, number of season tickets purchased, average home attendance, and total home attendance for men’s basketball games for the past ten seasons:

MEN’S BASKETBALL TICKETS AND ATTENDANCE

Average Home Attendance Total Year Games(1) Ticket Prices(2) Season Tickets Per Game(3) Attendance 2016 19 $20/$14 7,909 11,995 227,911 2015 17 $20/$14 6,989 11,520 184,314 2014 16 $20/$14 6,691 10,074 161,177 2013 18 $18/$15 6,144 8,603 154,858 2012 18 $18/$15 5,748 8,868 159,624 2011 17 $18/$15 7,201 9,756 165,844 2010 16 $18/$15 8,117 11,994 191,905 2009 18 $18/$15/$12 7,192 12,028 216,499 2008 17 $18/$15/$12 7,937 6,257 106,365 2007 17 $18/$15/$12 8,751 6,475 110,090

Source: Athletic Department (1) Excludes exhibition games. (2) Non-student prices. Includes Admission Fee ($4.00 fee), and State admissions taxes. Ticket charge for exhibition games is $5.00. The rules of the SEC and the NCAA provide that certain complimentary tickets may be distributed. (3) The average attendance includes students. A student athletic activity fee is charged to full-time students as a part of tuition and fees. This fee, which currently is $52.00 per semester, is allocated to the Athletic Department as Revenues for allowing student access to athletic events in lieu of ticket charges.

Guarantees to Visiting Teams. Non-conference visiting basketball opponents currently receive between $10,000 and $105,000 per game from the University. No guarantees are currently paid by the University to visiting SEC teams.

Men’s Head Basketball Coach. Frank Martin was hired in March of 2012 as the head basketball coach. Coach Martin just completed his fourth year as head coach and his team finished the 2016 season with a record of 25-9. Key wins for the Gamecocks came against Texas A&M, Tulsa, Clemson, Iowa State and Florida. The Gamecocks’ 25 wins is the most in program history and its 15-0 start was the second best in school history. South Carolina is one of the two SEC teams that have increased its SEC win total in each of the last four seasons.

Women’s Basketball. When three-time Olympic gold medalist Dawn Staley took the reins of the University’s women’s basketball program on May 10, 2008, the Gamecocks’ stature immediately rose not just in the SEC but on the national stage as well. Building on a foundation of hard work, defensive effort and a “team first” mentality, the women’s basketball team began to realize those expectations in 2011-12. Five consecutive 25-win seasons were capped with the 2015-16 squad’s 33-win effort that included the program’s third SEC regular-season championship, the second SEC Tournament Championship, and the third consecutive No. 1 seed in the NCAA Tournament. The 2015-16 squad advanced to the Sweet Sixteen before falling to Syracuse. With an overall record of 33-2 (16-0 SEC) the University’s women’s basketball team led the nation for the second straight season in average attendance and averaged more than 14,000 per game and hosted the first two rounds of the 2016 NCAA Tournament for the second time in the University’s history.

WOMEN’S BASKETBALL RECORD

Record Record Year (wins-losses) Year (wins-losses) 2015-16 33 - 2 2010-11 18 - 15 2014-15 34 - 3 2009-10 14 - 15 2013-14 29 - 5 2008-09 18 - 10 2012-13 25 - 8 2007-08 16 - 16 2011-12 25 - 10 2006-07 18 - 15

WOMEN’S BASKETBALL TICKETS AND ATTENDANCE

Average Attendance Total Year Home Games(1) Ticket Prices(2) Season Tickets Per Game(3) Attendance 2016 17 $60/$40/$30/$8/$4 11,068 14,364 244,196 2015 16 $50/$25/$7/$4 8,508 12,293 196,684 2014 16 $50/$25/$7/$4 4,227 6,371 101,935 2013 16 $50/$25/$7/$4 2,278 3,952 63,224 2012 15 $50/$25/$7/$4 1,666 3,139 47,082 2011 19 $50/$25/$7/$4 1,830 2,996 56,925 2010 12 $50/$25/$7/$4 1,962 3,442 41,300 2009 15 $100/$7/$4 1,559 2,793 41,898 2008 18 $7/$4 n/a 1,802 32,431 2007 20 $7/$4 n/a 1,845 36,906

Source: Athletic Department (1) Excludes exhibition games. (2) Non-student prices. No Ticket charge for exhibition games. The rules of the SEC and the NCAA provide that certain complimentary tickets may be distributed. (3) A student athletic activity fee is charged to full-time students as a part of tuition and fees. This fee, which currently is $52.00 per semester, is allocated to the Athletic Department as Revenues for allowing student access to athletic events in lieu of ticket charges.

Baseball

Chad Holbrook was named head baseball coach for the University on July 16, 2012. Coach Holbrook was promoted to the top spot by Athletics Director, Ray Tanner, after four seasons as associate head coach and recruiting coordinator for the Gamecocks. Coach Holbrook came to the University in July 2008 as associate head coach. Along with his recruiting coordinator duties, he served as hitting instructor, overseeing the Gamecock offense, including base running and the short game and was the third base coach. He also worked with the outfielders. Coach Holbrook 15 came to the Gamecock program after serving 15 seasons as a member of the University of North Carolina coaching staff. He was the 2011 ABCA/Baseball America Assistant Coach of the Year after the Gamecocks won a second consecutive national championship.

A tremendous evaluator of talent, Coach Holbrook was named the No. 10 best recruiter in all of college sports by ESPNU & ESPN The Magazine in the publication’s 2011 January edition. The list was put together in conjunction with three-dozen experts who were asked the question: Who are the top 20 recruiters in college sports? Coach Holbrook was the only baseball coach on the list.

Founders Park has approximately 5,400 permanent chair-back seats with a total capacity of 8,200-plus fans. In addition the stadium has five private suites, two club areas, a 3,900 square foot weight room, coaches offices, and a sports medicine/ training room. The new baseball stadium replaced Sarge Frye Field that was built in the 1950’s and had been home to the University’s baseball team for nearly 50 years. The baseball team drew an annual attendance in 2016 of 293,677 fans for an average attendance of 7,162 per game.

Softball

The University began its women’s softball program in 1974 and has been playing at its current location since 1986. Originally opened as Lady Gamecock Field, the site was renamed Beckham Field in 1999, and is the oldest in the SEC and among the oldest in the sport. This facility was renovated in 2013 and is now known as Carolina Softball Stadium at Beckham Field. Carolina Softball Stadium at Beckham Field raised the seating capacity to over 1,200, brought a new locker room and indoor hitting facility to the Gamecocks and added a new elevated press box and suites to the site. Construction began in early June 2012 and finished during Summer 2013. The softball program has made 19 NCAA appearances. The softball team also won the SEC Championship in 1997. Six NCAA Regionals have been hosted at Beckham Field since 1994, most recently in 2007, when the University’s softball team won that tournament and advanced to the Super Regionals. Beckham Field played host to the 2014 SEC Tournament, with all nine games televised on the ESPN family of networks. The 2016 total record was 38-23, with an SEC record of 7-17.

Soccer

Men’s Soccer. Eugene E. Stone III Stadium, with a seating capacity of 5,000, is home to the University’s men’s and women’s soccer teams. The men’s team, which advanced to the NCAA semifinals in 1988 and 1993, has played in the NCAA Tournament a total of 22 times in its history and 21 times in the last 32 years. South Carolina was the only soccer program in 2016 with its men’s and women’s teams in the top-10 for national attendance average. The Gamecocks broke the single-game attendance record at Stone Stadium when 6,892 fans attended their match vs. No. 3 Clemson to open the season. Men’s soccer has been a member of Conference USA since 2005, winning two tournament titles and one regular-season championship in its history. The men’s team finished the 2016 season with a record of 11-8-1, advancing to the second round of the NCAA Division I Men’s Soccer Championship for the second consecutive season. 2016 marked the 31st time under head coach Mark Berson that the Gamecocks recorded double-digit wins.

Women’s Soccer. The South Carolina women’s soccer program has competed in the SEC for the past 22 years, capturing three conference titles. The Gamecocks qualified for the NCAA Tournament for the ninth time in the last 10 years in 2016, reaching the Elite Eight for the second time in three seasons. The University earned its first No. 1 NCAA Tournament seed after becoming the only team amongst 334 programs in NCAA Division I to go undefeated in the regular season (17-0-1). They claimed the 2016 SEC Regular-Season Championship after becoming the third school in league history to go undefeated in conference play. The Gamecock women led the nation in average home attendance during the regular season and set single-season program records for wins (21) and victories over ranked opponents (5) in 2016. Head coach Shelly Smith and her staff earned SEC and NSCAA Regional coaching awards for the third time in University’s history.

Volleyball

Indoor Volleyball. The Carolina Volleyball Competition and Basketball Practice Facility (CVC), with a seating capacity of 1,600, was opened in 1995 for competition. In addition to the gym, the facility includes offices for the volleyball and women’s basketball staffs. In October of 2011, the volleyball staff received new offices lining the Park Street side, while the team gained a film room and lounge in the space that was once the Frank McGuire

Room. The volleyball team’s locker, athletic training and weight rooms are located in the Carolina Coliseum, which is adjacent to the CVC and connected via an underground tunnel.

Since first competing at the CVC in 1996, the Gamecocks have a 184-102 (.643) record and have advanced to the NCAA Tournament five times. The University has posted a 93-87 mark in SEC contests at the CVC, which comes out to a .517 winning percentage. The Gamecocks drew the largest crowd in the gym’s history on September 4, 2016, when the team’s match against rival Clemson was witnessed by a standing-room-only crowd of 2,041. In fact, during the 2016 season alone, the University welcomed in three of the top five crowds in the CVC’s history. Along with an average of 1,094 fans in attendance, the Gamecocks won 10 home matches in 2016, including the fifth upset of a top-25 team in the building’s history - a 3-1 win over No. 21 Missouri. The University’s 10 wins marks the seventh season with double-digit home wins in CVC history, and its 18 wins overall for 2016 were the most since 2008.

Beach Volleyball. The University’s beach volleyball team began play in 2014 and finished the 2016 season with a program record 20 wins. It was the team’s first season in the new Coastal College Sports Association, a conference dedicated to beach volleyball, and it was the sport’s first season with a NCAA-sponsored championship. The Gamecocks play at Wheeler Beach, the first collegiate sand volleyball facility of its kind and the first ever in the SEC. It features five courts with lights and electronic scoreboards on each court, the first collegiate sand volleyball facility to have this feature. At the end of the complex is a master scoreboard that keeps fans informed with the latest scores on each of the five courts and the overall dual. It's the first electronic scoreboard specifically for sand volleyball in the world. Since the program’s inception, the University owns a 23-8 record at Wheeler Beach.

Scholarships

The University offers the maximum number of athletic scholarships allowed by the NCAA in the respective sports offered by the University. The cost of athletic scholarships is funded from contributions to the University by the Gamecock Club (see “Gamecock Club” under this heading below).

ATHLETIC SCHOLARSHIPS CURRENTLY OFFERED BY THE UNIVERSITY

Full-Scholarship Full-Scholarship Sport Equivalents Sport Equivalents Baseball 11.7 Softball 12.0 Men’s basketball 13.0 Men’s swimming and diving 9.9 Women’s basketball 15.0 Women’s swimming and diving 14.0 Football 85.0 Men’s tennis 4.5 Men’s golf 4.5 Women’s tennis 8.0 Women’s golf 6.0 Men’s Track 12.6 Men’s soccer 9.9 Women’s Track 18.0 Women’s soccer 12.0 Volleyball 12.0 Equestrian 15.0 Beach Volleyball 6.0

______Source: Athletic Department.

Gamecock Club

The University of South Carolina Gamecock Club (the “Gamecock Club”) is a non-profit organization operating within the Athletic Department. The Gamecock Club was established in 1942 with the primary purpose of providing grants-in-aid (scholarships) for student-athletes attending the University. In addition to providing financial aid to student-athletes in the University’s intercollegiate athletics program, Gamecock Club revenues are also used to support club operations, capital improvements to Athletic Facilities, recruiting, academic support services, “junior” Gamecock Club operations, sports medicine, and a portion of University airplane operations associated with recruiting costs.

The Gamecock Club generates its funds through annual solicitation of membership. The Government of the Gamecock Club Board was restructured in the Spring of 2016 and is now governed by a 23-member board of directors, each of whom is elected annually. There are twenty-one (21) representatives from the 16 judicial districts

17 of the State and two (2) representatives for out-of-State clubs, whom meet regularly to make recommendations concerning policy matters. The Director of Athletics appoints the director of the Gamecock Club, who is an associate athletic director within the Athletic Department.

Annual contribution categories to the Gamecock Club range from a minimum of $100 to a top category of $31,500. Gamecock Club members receive priority in their purchase of tickets, based on a combination of length of membership and amount contributed. All contributions to the Gamecock Club are received by the University which deposits such funds with the State Treasurer.

Membership of the Gamecock Club is more than 14,000 with annual contributions of over $15 million dollars for the 2015/2016 Fiscal Year.

Since Fiscal Year 2010-11 the Gamecock Club has seen a significant increase in contributions due to the success of the athletic programs, specifically football, and an improving economy. See “CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT - Management’s Discussion and Analysis” hereafter for further discussion of these revenues.

Summary of Gamecock Club Contributions and Donations

Fiscal Year Amount 2015-16 $15,228,986 2014-15 14,283,487 2013-14 14,498,999 2012-13 14,086,375 2011-12 13,970,887 2010-11 12,536,014 2009-10 13,122,033 2008-09 13,382,229 2007-08 14,294,332 2006-07 13,753,694

The accounting records of the Gamecock Club are maintained within the Athletic Department accounting system as a distinct set of sub-fund accounts. Contributions from the Gamecock Club are recorded as revenue within the Athletic Department’s “Contributions and Donations” category.

Southeastern Conference

The University is a member of the SEC, which was founded in 1933. The University joined the conference in 1990 and began competition for all sports other than football in the 1991-92 academic year. The University began competition in SEC football with the 1992 season. In addition to the University, the current members of the SEC are the University of Alabama, the University of Arkansas, Auburn University, the University of Florida, the University of Georgia, the University of Kentucky, Louisiana State University, the University of Mississippi, Mississippi State University, the University of Missouri, the University of Tennessee, Texas A&M University and Vanderbilt University. Prior to the University’s membership in the SEC, it was a non-football-playing member of the Metro Conference (1982-91) and was a charter member of the Atlantic Coast Conference and participated in all sports in that conference from 1953 to 1971. The University was independent from 1971 to 1982.

The SEC has signed contracts on behalf of its members with established television networks covering the television appearances of conference members in football, basketball, and certain other sports. The SEC currently has agreements with CBS, ESPN and ESPN2. In addition, the SEC, in a joint venture with ESPN, has created the SEC Network, which televises all conference sports and is available in more than 90 million homes. Payouts for football bowl appearances, as well as basketball post-season tournaments, net of payments to the participating SEC team which essentially cover its costs of making the appearance, are split equally among all conference members. SEC revenues for each member school averaged $37,436,461 for Fiscal Year ended June 30, 2016. These revenues consist of bowl revenues, revenue from the football and basketball television packages referred to above, the NCAA’s broad-based distribution, NCAA and SEC men’s basketball tournament television revenues, and SEC Football Championships game revenues. Such amounts are net of any conference expenses and post-season (including both football bowls and basketball post-season tournaments) expense distributions to participating teams. 18

Set forth below are the distributions received by the University from the SEC for the past ten Fiscal Years, and in the sports, indicated:

SEC Distributions

Fiscal Year Football Basketball Other Total

2015-16 $18,639,460 $5,557,085 $13,535,645 $37,732,190 2014-15 17,747,238 5,248,182 8,338,289 31,333,709 2013-14 13,996,854 5,066,479 1,990,575 21,053,908 2012-13 13,348,266 4,999,688 2,473,186 20,821,140 2011-12 13,804,946 5,104,920 1,278,911 20,188,777 2010-11 13,447,256 4,984,506 1,158,681 19,590,443 2009-10 12,710,904 4,842,889 872,066 18,425,859 2008-09 7,343,308 3,341,338 1,770,684 12,455,330 2007-08 7,839,310 3,115,511 606,388 11,561,209 2006-07 7,576,070 3,042,249 463,670 11,081,989 ______Source: Athletic Department

Other Significant Contracts

The Athletics Department outsources food and drink concessions and novelty concessions for all athletic events. Centerplate, Inc. of Spartanburg, South Carolina, has food and beverage and certain merchandising rights at the Arena, at Williams-Brice Stadium, and at the University’s baseball, softball, volleyball, soccer, track, and tennis venues. International Sports Properties and Learfield Communications d/b/a Gamecock Sports Properties acquired Action Sports Media, Inc. of Portland Oregon and now owns all rights to sell advertising, pouring and naming rights at the Arena and Williams-Brice Stadium. In addition, Gamecock Sports Properties holds the multi-media rights, courtside advertising in the Arena, and exterior ramp signage in Williams-Brice Stadium. This contract was renewed in 2016 and will end June 30, 2027. The official apparel of the University of South Carolina Athletics is provided by Under Armour. Under Armour is a Maryland corporation and this contract runs through June 30, 2026. In connection with its bookstore contract with the University, Barnes & Noble has the rights to sell certain soft goods and novelties at football and basketball games.

NCAA

The NCAA periodically conducts inquiries into activities of its member institutions in the event questions are raised with respect to alleged violations of NCAA regulations governing the conduct of student athletes and athletic programs. The University does not believe that any NCAA inquiry of the Athletic Department, if decided adversely to the University, would have a materially adverse effect upon the ability of the University to satisfy its covenant and payment obligations pursuant to the Bond Resolution.

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Receipts of Admissions Fee and Special Student Fee

The following table sets forth revenues received by the University from imposition of the Admissions Fee and the Special Student Fee for the past ten Fiscal Years.

Admissions Fiscal Year Fee Student Fee Total 2016 $ 3,515,850 $ 1,764,679 $ 5,280,529 2015 4,026,918 1,724,044 5,750,962 2014 4,072,001 1,691,154 5,763,155 2013 1,694,772 1,585,049 3,279,821 2012 1,708,602 1,550,886 3,259,488 2011 1,754,229 1,491,191 3,245,420 2010 1,803,288 1,497,605 3,300,893 2009 2,060,479 1,391,449 3,451,928 2008 2,125,561 1,315,867 3,441,428 2007 2,185,834 1,291,238 3,477,072 ______Source: Athletic Department The University imposes a per ticket Admissions Fee of $8 for all football games played at Williams-Brice Stadium (for 2012 and prior, the fee was $3) and $4 and $1 for all basketball games of the men’s and women’s teams, respectively, played in the Arena. The Special Student Fee for debt service is currently $34.50 per semester (except Summer sessions) or $69 per year for each full-time student at the Columbia Campus.

Yearly Equitable Seating (YES) Program

During the 2008-09 year, the Athletic Department implemented a seat donation program for football named the Yearly Equitable Seating Donation (“YES”). Based on seat location, ticket purchasers make a donation to the Athletic Department, in addition to the cost of their tickets, with the proceeds to be used for facility needs of the various athletic programs. During Fiscal Year 2015-2016, the program received over $6.6 million in revenues.

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CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT

Historical Five-Year Statement of Revenues

Set forth on the following page is the Statement of Net Revenues for the Athletic Department for the Fiscal Years ended June 30, 2012, through June 30, 2016.

Athletic Department Statement of Net Revenues

2012 2013 2014 2015 2016 REVENUES Admissions/Ticket Sales(1) $ 20,049,785 $ 20,086,354 $ 21,346,746 $ 21,571,812 $ 17,210,772 Student Athletic Fees 2,338,268 2,537,697 2,592,673 2,636,141 2,744,945 Guarantees 303,500 256,500 302,500 103,000 5,041,500 Contributions 25,165,877 25,887,641 30,203,751 31,209,408 30,346,425 Comp. & Benefits-3rd Party 4,165,125 5,412,250 5,750,000 5,945,000 6,695,000 Broadcast, TV, Radio, Internet 1,282,375 493,457 260,000 270,000 200,000 Direct Institutional Support -0- -0- 3,039,303 2,947,429 3,229,616 NCAA & SEC Distribution 22,345,352 22,349,976 22,903,539 32,855,333 39,166,979 Program, Concession, Novelty, Parking (Aux. Svcs.) 3,625,654 4,268,988 4,162,143 3,861,155 3,993,971 Royalties, Licensing, Adv. Sponsor 3,578,562 4,107,225 4,267,844 4,143,324 4,535,817 Sports Camp Revenues 13,341 188,054 31,050 338,903 152,340 Endowment and Investment Inc. 695,287 1,040,975 405,198 339,665 875,491 Other Operating 4,045,229 3,855,305 3,354,733 4,022,172 5,892,794 Total Revenues 87,608,355 90,484,422 98,619,479 110,243,342 120,085,650

EXPENDITURES Personnel 31,025,737 31,918,773 35,887,161 38,036,376 42,840,765 Athletics Student Aid - Grants (Scholarships) 8,836,380 9,062,390 12,430,711 13,047,438 14,848,951 Team Travel 5,022,449 5,600,232 6,162,410 6,235,039 6,276,218 Recruiting 950,180 1,103,215 1,198,126 1,325,408 1,479,493 Game Services 6,103,197 5,243,957 5,532,120 5,906,220 6,351,147 Equipment, Uniforms and Supplies 2,555,524 3,078,835 3,182,187 3,383,240 3,747,388 Fund Raising, Mktg. & Promotion 2,490,191 2,561,672 3,581,317 2,306,497 3,170,047 Sports Camp Exp. 89,213 141,624 97,637 110,455 140,135 Direct Facilities and Admin. Support 7,759,135 6,639,878 7,171,358 13,406,665 15,183,796 Spirit Groups 597,844 360,833 326,968 388,612 427,923 Med. Exp. and Insurance 1,105,995 907,314 931,642 1,051,062 1,132,894 Memberships and Dues 86,382 64,115 86,168 85,624 103,411 Other Services 8,739,882 8,385,878 8,450,044 8,832,367 7,326,809 Guarantees 2,240,439 2,084,389 1,587,843 2,770,495 1,250,668 Total Expenditures 77,602,548 77,153,105 86,625,691 96,885,498 104,279,645 NET REVENUES $10,005,807 $13,331,317 $11,993,788 $13,357,844 $15,806,005

Transfers To The University University General Scholarships 1,326,260 846,285 2,311,009 2,868,962 4,433,239 University Band & Other Support (net) 2,216,744 1,969,263 2,380,140 2,347,561 1,990,595 Debt Service(2) 3,725,000 2,650,000 750,000 1,275,401 4,728,358 Capital Projects 2,272,448 7,497,260 6,332,249 6,425,650 3,645,196 Total Transfers 9,540,452 12,962,809 11,773,398 12,917,574 14,797,388 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES AND TRANSFERS 465,355 368,508 220,390 440,270 1,008,617 NET ASSETS, BEG. OF YEAR 11,732,244 12,197,599 12,566,107 12,786,497 13,226,767 NET ASSETS, END OF YEAR $12,197,599 $12,566,107 $12,786,497 $13,226,767 $14,235,384 (1) Excludes Admissions Fees. (2) Represents discretionary transfers to the Debt Service Fund to pay a portion of principal annually due on then outstanding bond anticipation notes.

Management’s Discussion and Analysis

Revenues. Over the past five Fiscal Years, total revenues of the Athletic Department have increased from approximately $87.6 million to approximately $120 million, resulting primarily from increases in contributions, the SEC distribution including bowl agreements and the SEC Network, and corporate sponsorships. Beginning in Fiscal Year 2013-14 the Athletic Department recorded “Direct Institutional Support” in the amount of $3 million as a result of changes in the NCAA reporting requirements. This support is also recorded as an expense in the Athletics Student Aid category and is a tuition abatement discount provided by the University for out-of-state athletic scholarships.

In Fiscal Year 2015-16 a decline in football ticket sales was attributed to hosting six games instead of seven due to the floods in Columbia and surrounding areas. This was mitigated by moving the game to LSU and receiving a guarantee from LSU. This increased the guaranteed revenue during this fiscal year and helped offset the ticket revenue loss. The SEC conference currently purchases a revenue protection insurance policy that covers all teams in the SEC. These costs are deducted from the SEC annual distribution.

SEC revenues have increased due to the overall success of the member schools of the SEC and from addition of the SEC Network. Contributions have increased as a result of the YES program and gifts made by season ticket holders. The increase in Royalties, Licensing and Advertising Sponsorship revenues is primarily attributable to increases in Under Armour and multimedia rights sponsorships.

Expenditures. Over the past five Fiscal Years, total operating expenses of the Athletic Department have increased from approximately $77.6 million to approximately $104.3 million. The Athletic Department added a new sport in 2013, Beach Volleyball, and has increased the number of facilities that it operates and maintains on an annual basis.

Personnel costs experienced significant increases over the period due to substantial increases in employer- paid health care costs and benefits and increased costs of hiring and retaining coaches.

Grants-in-Aid are subject to increases in tuition by the University. In Fiscal Year 2013-14 this amount increased by $3 million due to the recognition of the athletic scholarship out-of-state tuition abatement provided as direct support from the University to the Athletic Department. Increases in tuition, new NCAA legislation allowing athletes to receive full cost of attendance aid, and placing athletes in the new 650 Lincoln Street dorms have attributed to the increase from Fiscal Year 2014-15 to Fiscal Year 2015-16.

Team travel expenses have increased over the last five Fiscal Years primarily due to increased fuel costs, post-season bowl travel for football, increased regional jet usage and costs of charter air travel in men’s and women’s basketball.

Direct Facilities and Administrative Support have increased and these increases can be attributed to capital improvements made by the Athletic Department with the increase in revenues paid for within the current year operating budget.

Transfers to the University. These transfers include those to the Debt Service Fund, those for purposes of facility improvements and new facility construction, and those for University student purposes such as transfers to support various student organizations and projects as well as University academic scholarship support. During Fiscal Year 2015-16, the Athletic Department made substantial transfers to capital projects for the construction of various projects including upgrades to the Men and Women’s coaching offices at the Carolina Coliseum and other maintenance projects at Williams-Brice Stadium.

Economic Impact. Consistent with patterns across the country, the Athletic Department has been impacted by the downturn in the economy in recent years. Constrained discretionary income has resulted in donors and event attendees limiting their entertainment spending, which impacts season ticket sales and Gamecock Club contributions. However, with the implementation of the Yearly Equitable Seating (YES) Program, success of our athletic programs, and increases in SEC distributions, total revenues have increased. A 2014 economic impact study of South Carolina Athletics stated that the Athletic Department provides $198 million annually to the local economy. The 2016 Georgia football home game was moved to a Sunday due to Hurricane Matthew. The game was played and the Athletic Department will see no financial impact from moving this game as increased costs of law enforcement were covered through the SEC umbrella revenue protection insurance policy. 22

Historical Net Revenues

Based on the definition of Net Revenues in the Bond Resolution, Net Revenues of the Athletic Department for the last five Fiscal Years are as follows:

Fiscal Year 2012 2013 2014 2015 2016

Total Revenues $87,608,355 $90,484,422 $98,619,479 $110,243,343 $120,085,650 Less Total Operating Expenses (77,602,548) (77,153,105) (86,625,691) (96,885,499) (104,279,645)

Net Revenues $10,005,807 $13,331,317 $11,993,788 $13,357,844 $15,806,005

Debt Service Coverage Ratio

The following table sets forth the historical Net Revenues of the Athletic Facilities and the gross receipts from the imposition of the Admissions Fee and Special Student Fee, as well as debt service coverage on outstanding Bonds, for the Fiscal Years indicated. The coverage ratio set forth in this table is not intended to reflect compliance with the Additional Bonds Test set forth in the Bond Resolution.

Fiscal Year

2012 2013 2014 2015 2016 Net Revenues $ 10,005,807 $ 13,331,317 $ 11,993,788 $ 13,357,844 $ 15,806,005 Less Mandatory Transfers (2,025,064) (2,457,890) (2,388,039) (2,103,245) (1,668,028) Net Revenues Available for Debt Service 7,980,743 10,873,427 9,605,749 11,254,599 14,137,977

Special Student Fee 1,550,886 1,585,049 1,691,154 1,724,044 1,764,679 Admissions Fee 1,708,602 1,694,772 4,072,000 4,026,918 3,515,850 Interest Earnings and Miscellaneous 261,505 213,804 161,074 125,670 194,527 Funds Available for Debt Service 11,501,736 14,367,052 15,529,978 17,131,231 19,613,033

Debt Service Principal (1) $ 2,195,000 $ 2,535,000 $ 2,665,000 $ 2,770,000 $ 3,480,000 Interest and Other 5,472,231 5,790,570 5,644,280 5,794,301 7,307,835 Total Debt Service 7,667,231 8,325,570 8,309,280 8,564,301 10,787,835 Coverage Ratio 1.50 1.73 1.87 2.00 1.82 ______(1) Principal payments include the servicing of the outstanding Bonds and the net annual principal reduction of outstanding bond anticipation notes.

Debt Service Requirements

The following table sets forth the principal and interest requirements on the Outstanding Bonds together with the principal and interest requirements on the Series 2017A Bonds, as of the date of delivery of the Series 2017A Bonds:

Debt Service Fiscal Outstanding Series 2017A Bonds Total Year Bonds Principal Interest Total Debt Service 2017 $ 10,195,631 2018 10,348,006 2019 10,303,906 2020 10,311,406 2021 10,300,006 2022 10,299,806 2023 10,295,406 2024 10,298,981 2025 10,296,194 2026 10,361,744 2027 11,738,694 2028 10,383,519 2029 10,392,369 2030 10,393,544 2031 10,396,119 2032 10,391,744 2033 9,011,531 2034 9,014,138 2035 9,012,950 2036 9,016,200 2037 9,019,550 2038 9,017,250 2039 7,320,450 2040 7,321,000 2041 3,038,000 2042 3,040,000 2043 2,277,800 2044 2,276,800 2045 2,277,600 2046 -0- 2047 -0- Totals $248,350,344 ______Note: Totals may not add due to rounding.

DESCRIPTION OF THE UNIVERSITY

History

The University is the 25th oldest institution of higher education in the nation and the first to be fully supported by any state. Founded in 1801, it opened its doors in 1805. The University is the largest teaching and research institution of higher education in the State, with eight campuses enrolling more than 49,000 students. It is expanding academically and physically to meet the challenges of the times and to better perform its function of service to the citizens of the State and nation. The University has a prime influence on the economic and social growth of the State and region.

The University’s central campus is located in downtown Columbia (“Columbia Campus”) within two blocks of the State Capitol. Midway between New York and Miami on US 1 (with Interstate 20, Interstate 26, Interstate 77, and many other federal highways intersecting there), Columbia has twice been designated an “All America City” in national competition. With a population of over 500,000 in the Columbia metropolitan area, Columbia lies almost at the geographical center of the State. Major airlines offer jet service only 15 minutes from the University’s Columbia Campus. A widespread system of modern highways brings the Columbia Campus of the University within a three-hour drive of any point in South Carolina.

Organization and Administration

The University is governed by a Board of Trustees composed of three ex officio members – the Governor of the State (or his designee), the State Superintendent of Education, and the President of the University of South Carolina Alumni Association – and seventeen other members, including one member from each of the sixteen judicial circuits elected by the general vote of the General Assembly, and one at-large member appointed by the Governor. The administrative structure includes: president; provost; vice presidents; chancellors; and deans of each of the schools, colleges, and regional campuses.

The following sets forth the members of the Board of Trustees elected by the State General Assembly, the dates their terms expire and their place of residence:

Name Term Expires Residence John C. Von Lehe, Jr., Chairman 6/30/2018 Mt. Pleasant Hubert F. “Hugh” Mobley, Vice Chairman 6/30/2020 Lancaster Eugene P. Warr, Jr., Chairman Emeritus 6/30/2020 Lamar Chuck Allen 6/30/2020 Anderson J. Egerton Burroughs 6/30/2020 Conway A.C. “Bubba” Fennell, III 6/30/2020 Greenwood C. Edward Floyd, M.D. 6/30/2018 Florence William C. Hubbard 6/30/2018 Columbia William W. Jones, Jr. 6/30/2020 Bluffton Tony J. Lister 6/30/2018 Spartanburg Miles Loadholt 6/30/2020 Barnwell Leah B. Moody 6/30/2020 Rock Hill C. Dorn Smith, III, M.D. 6/30/2018 Lake City Thad H. Westbrook 6/30/2018 Lexington Mack I. Whittle, Jr. 6/30/2018 Greenville Charles H. Williams 6/30/2018 Orangeburg

The following are the appointed member and the three ex officio members of the Board of Trustees:

Mark W. Buyck, Jr., Representing The Honorable Henry D. McMaster, Governor and Ex Officio Chairman Thomas C. Cofield, Gubernatorial Appointee Molly Spearman, State Superintendent of Education Tommy D. Preston, Jr., President, University of South Carolina Alumni Association

The following are the Executive Officers of the University:

Dr. Harris Pastides, President Leslie Brunelli, Vice President for Finance and Chief Financial Officer Chris Byrd, Vice President of Human Resources Dr. Susan Elkins, Palmetto College Chancellor Dr. Mary Anne Fitzpatrick, USC Upstate Interim Chancellor Douglas R. Foster, Vice President for Information Technology and Chief Information Officer Joan T. A. Gabel, Executive Vice President for Academic Affairs and Provost J. Cantey Heath, Jr., Secretary, Board of Trustees, University Secretary Jancy L. Houck, Vice President for Development & Alumni Relations Derek E. Huggins, Vice President for Facilities and Transportation Dr. Sandra J. Jordan, USC Aiken Chancellor Pat Lardner, University Treasurer Dr. Prakash Nagarkatti, Vice President for Research Dr. Al M. Panu, USC Beaufort Chancellor Walter H. Parham, Esquire, General Counsel Dr. Dennis A. Pruitt, Sr., Vice President for Student Affairs, Vice Provost for Academic Support, and Dean of Students Ray Tanner, Director of Athletics Edward L. Walton, Senior Vice President for Administration and Chief Operating Officer

The President of the University is the chief executive and administrative officer appointed by the Board of Trustees.

Set forth below is selected biographical information relating to the current President and other Executive Officers referred to above.

Dr. Harris Pastides, President, age 62. Dr. Pastides became president on August 1, 2008. Before joining the University, Dr. Pastides served as a professor of epidemiology and chairman of the Department of Biostatistics and Epidemiology at the University of Massachusetts at Amherst. He received his Master’s of Public Health and his Ph.D. in Epidemiology from Yale University. Dr. Pastides served as dean of the University’s Arnold School of Public Health from 1998-2003. He was named Vice President for Research and Health Sciences at the University in 2003. In that role he was charged with achieving major growth in federal and industrially sponsored research. Dr. Pastides managed the university’s research budget and directed investments toward faculty hiring, enhancing research infrastructure, and developing the Innovista research and innovation district. In his economic development role, Dr. Pastides was the University’s chief contact with business, industry, and the state’s Department of Commerce.

Leslie Brunelli, Vice President for Finance and Chief Financial Officer, age 48. Leslie Brunelli was named Vice President for Finance and Chief Financial Officer on February 21, 2014. Ms. Brunelli coordinates the day-today and long-term planning of the financial operations of the University system including overseeing the compilation of financial and budget reporting. In this role, she is responsible for perfecting and implementing University finance policies and procedures from an institutional perspective and for coordinating the institutional mission and plans into operational reality. Ms. Brunelli has 18 years of experience in higher education previously serving as Associate Vice President for Finance, University Budget Director and also the Vice Chancellor for Finance and Operations at the USC Beaufort campus. Ms. Brunelli is a Phi Beta Kappa graduate of the University of South Carolina with a bachelor’s degree in Philosophy and she also received a Master of Business Administration from the University.

Chris Byrd, Vice President for Human Resources, age 56. Mr. Byrd joined the University in October 2007 and was appointed to the Vice President position in February 2011. Mr. Byrd was named to this position after several years in an administrative leadership position at the University and over 20 years in a management role with the State’s central human resources organization. Mr. Byrd received both his B.S. in Financial Management and his M.Ed. in Personnel Services from Clemson University.

Dr. Susan Elkins, Palmetto College Chancellor, age 60. Dr. Elkins was named Chancellor of the University of South Carolina Palmetto College in February 2013. Dr. Elkins previously served as Vice President of Extended Programs and Regional Development and Dean of the College of Interdisciplinary Studies at Tennessee Technological University (TTU). She holds bachelor’s and master’s degrees in Education from TTU and completed her doctoral work in Educational Leadership with an emphasis in Higher Education Administration at Vanderbilt University. Her publications and numerous presentations have focused on leadership, continuing higher education, and student success issues such as retention and dropout prevention. Dr. Elkins has spent her career of over 35 years focusing on student access and success issues in K-12 and higher education, coupled with internal and external partnerships involving P-16 education, business/industry, and government.

Dr. Mary Anne Fitzpatrick, USC Upstate Interim Chancellor, age 67. Dr. Fitzpatrick was appointed Interim Chancellor of USC Upstate on August 1, 2016. She is a Carolina Distinguished Professor of Psychology and the Vice President of the University of South Carolina System. An internationally recognized scholar of the complex dynamics of family systems, she is a fellow of the American Association for the Advancement of Sciences (AAAS) and past President of the International Communication Association (ICA). Dr. Fitzpatrick served for ten years as the dean of USC Columbia’s College of Arts and Sciences. Prior to her appointment at the University, Dr. Fitzpatrick served in leadership positions at the University of Wisconsin-Madison where she held the WARF Kellett Professorship.

Douglas R. Foster, Vice President for Information Technology and Chief Information Officer, age 55. Mr. Foster joined the University on January 17, 2017. Prior to joining the University, he served as Associate Vice President of IT Application Services and Deputy CIO at Purdue University. He has more than 25 years of experience in project management, technology architecture and design, large-scale IT systems integration, and strategic planning. He earned a B.S. in business administration from the University of Phoenix and a Master of Science in technology from Purdue University.

Joan T. A. Gabel, Executive Vice President for Academic Affairs and Provost, age 48. Ms. Gabel was named Provost of the University effective August 24, 2015. Prior to joining the University, she served as the Dean of the Trulaske College of Business at the University of Missouri. She also served on the faculty of Florida State University and Georgia State University colleges of business. Ms. Gabel has earned numerous awards including the Bunche, Kemper and Holmes- Cardozo Awards for Excellence in Research and has served as the Editor-in-Chief of the American Business Law Journal. She earned her Bachelor’s Degree from Haverford College and her Juris Doctor from the University of Georgia.

J. Cantey Heath, Jr., Secretary, Board of Trustees, University Secretary, age 57. Mr. Heath assumed this role effective January 1, 2017. Prior to his current position, he served as Chief of Staff and Special Assistant to the USC President for eight years. He holds both a B.A. and a Masters in History from the University. His 31-plus year- career at the University includes service as Assistant Director of Alumni Relations, Director of Major Gifts, Senior Director of Development, and Assistant Vice President for Advancement Administration. He also serves as Vice President of the Agricultural and Mechanical Society of South Carolina (SC State Fair Association).

Jancy L. Houck, Vice President for Development & Alumni Relations, age 63. Ms. Houck joined the University in September, 2013. Prior to joining the University, Ms. Houck served as Yale University’s associate vice president for development and director of medical development. At Yale, she managed development and alumni affairs programs for the schools of medicine, public health and nursing, playing a central role in university’s YaleTomorrow $3.5 billion capital campaign. Under her leadership, she raised more than $800 million for the three schools for the campaign, which exceeded its goal, raising $3.88 billion. A native of Albany, N.Y., Ms. Houck is a graduate of SUNY Albany with bachelor’s and master’s degrees in rhetoric and communication.

Derrick E. Huggins, Vice President for Facilities and Transportation, age 50. Mr. Huggins was appointed Vice President in February of 2014. In this position, he is responsible for facilities operations, maintenance and construction projects as well as parking and transportation operations. Prior to this position, he served as Associate Vice President for Vehicle Management/Parking Services, and Director of Transportation. In addition, he has served in various other capacities throughout the University with over 20 years of experience in higher education; Mr. Huggins holds a B.S. degree from the University.

Dr. Sandra J. Jordan, USC Aiken Chancellor, age 59. Dr. Jordan became the fourth Chancellor of the University of South Carolina Aiken on July 1, 2012 and, as Chancellor, serves as the chief executive officer and principal spokesperson for USC Aiken. Over the past 30 years, Dr. Jordan has served in a number of leadership positions at universities, including Department Chair, Dean, Vice Provost, and Provost before becoming Chancellor. 27

Dr. Jordan received her Doctorate (Ph.D.) and Master of Arts degree in the History of Art from the University of Georgia. Dr. Jordan attended the Management Development Program at Harvard University’s Institute for Higher Education; the 21st Century Leadership Institute sponsored by ALIA and AASCU, and was a Summer fellow at Vanderbilt University’s Institute for Higher Education Management. Through her career, Dr. Jordan has worked extensively to expand international educational partnerships by negotiating agreements and building alliances with universities in Malaysia, Indonesia, Japan, China, Thailand, Bahrain, Jordan, Korea, Taiwan, Great Britain, the Caribbean, and India.

Pat Lardner, University Treasurer, age 52. Mr. Lardner was named University Treasurer on November 1, 2014. Mr. Lardner has 28 years of experience in the Administration and Finance division at the University to include experience in the Bursar’s, Payroll offices and was University Controller for seven years. Mr. Lardner is a graduate of the University with a bachelor’s degree in Accounting.

Dr. Prakash Nagarkatti, Vice President for Research, age 64. Dr. Nagarkatti joined the University in 2005 and was named Vice President for Research in 2011. He also serves as Carolina Distinguished Professor, and Director of the NIH Center of Research Excellence in Inflammatory and Autoimmune Diseases. From 2005-2011, he served as Associate Dean at the School of Medicine. His research has been continuously supported by numerous grants from NIH, NSF/EPA, and American Cancer Society, totaling more than $20 million. Dr. Nagarkatti has published over 160 scientific papers and book chapters and has trained over 28 graduate students, 16 post-doctoral fellows and 17 junior faculty. He has chaired and served as a member on numerous NIH Review Panels. Dr. Nagarkatti is a Fellow of the American Association for the Advancement of Science.

Dr. Al M. Panu, USC Beaufort Chancellor, age 60. Dr. Panu assumed the leadership of USC Beaufort on August 16, 2015. Prior to his appointment as Chancellor at USC Beaufort, he served as Senior Vice President for University Affairs at University of North Georgia. Most recent administrative roles include Vice President for Academic Affairs; Dean, School of Science, Technology, Engineering & Mathematics; and Chair, Division of Science, Engineering & Technology at Gainesville State College in Georgia where he also held the rank of Professor of Chemistry. At Kennesaw State University in Kennesaw, Georgia, Dr. Panu served as Associate Dean of the College of Science and Mathematics. He holds a bachelor’s degree in chemistry from Tuskegee Institute, Tuskegee, Alabama; a master’s degree in chemistry from the University of Alabama Birmingham; and a Ph.D. in chemistry from the University of Georgia. After completing his Ph.D., he worked as a post-doctoral fellow at Emory University, Atlanta, Georgia prior to beginning his academic career.

Walter H. Parham, Esquire, General Counsel, age 60. Mr. Parham graduated from the University with B.A. and Juris Doctor degrees. He came to the University in November 1988 as Associate General Counsel and became General Counsel in 1991. Prior to that time he served as the Greenville County (South Carolina) Attorney.

Dr. Dennis A. Pruitt, Sr., Vice President for Student Affairs, Vice Provost for Academic Support, and Dean of Students, age 66. Dr. Pruitt obtained a B.A. degree from Armstrong State College, a M.Ed. degree from West Georgia College, and a Ph.D. degree from the University of South Carolina. Dr. Pruitt has served the University in various capacities since 1980, including Director of the Russell House University Union and Acting Dean of Student Affairs.

Ray Tanner, Director of Athletics, age 58. Mr. Tanner began his duties as Athletics Director on Aug. 2, 2012. Prior to being appointed athletics director, he completed 16 years as the head baseball coach establishing one of the premier programs in college baseball. He led the Gamecocks to two NCAA Division I Baseball Championships in 2010 and 2011. He posted a 738-316 record with a .700 winning percentage, second highest all- time among SEC coaches. Mr. Tanner has a bachelor of science degree in recreational administration from North Carolina State (1980) and a master’s of public affairs, public administration (1983).

Edward L. Walton, Senior Vice President for Administration and Chief Operating Officer, age 56. Mr. Walton was named Senior Vice President for Administration and Chief Operating Officer on March 1, 2014. Prior to that, he served as Chief Financial Officer since March 1, 2011. Mr. Walton joined the University in 1997. With over 20 years of experience in finance, accounting, and auditing, Mr. Walton has spent the past 15 years in positions of increasing responsibilities across a wide spectrum of the University. His service in various financial positions at the University include: Director of Contract and Grant Accounting; Chief Financial Officer of the University of South Carolina Research Foundation; Chief Financial Officer for Health Sciences South Carolina, Chief Research Administrator, and Associate Provost for Finance and Administration. Prior to joining the University he served as Audit Supervisor in the State Auditor’s Office. Mr. Walton graduated Summa Cum Laude with a B.A. in Accounting from Saint Leo College and is a Certified Public Accountant. 28

The Schools and Colleges

The University consists of the following schools and colleges:

Arnold School of Public Health College of Social Work College of Arts and Sciences Graduate School College of Education School of Law College of Engineering and Computing School of Medicine College of Hospitality, Retail and Sport Management School of Music College of Information and Communications South Carolina Honors College College of Nursing Darla Moore School of Business College of Pharmacy

The University is accredited by the Southern Association of Colleges and Secondary Schools. All of its colleges and schools are fully accredited by accrediting agencies in their respective fields.

Tuition Fees

Set forth below are the Tuition Fees charged by the University for resident and nonresident students for the 2016-2017 academic year for full-time students on a semester basis.

I. Columbia III. Beaufort (Undergraduate) A. Undergraduate A. Resident(3) $ 4,890 1. Resident $ 5,727 B. Non-Resident 10,122 2. Non-Resident 15,441 C. Non-Resident Scholarship 7,593 3. Non-Resident Dept. Scholarship 8,502 D. Matriculation Fee (entering semester) 75 4. Active Duty Military(1) 3,351 E. Technology Fee 168 5. Matriculation Fee (entering semester) 80 B. Graduate(1) IV. Upstate (Undergraduate) 1. Resident 6,399 A. Resident $ 5,355 2. Non-Resident 13,704 B. Non-Resident 10,854 C. Law C. Non-Resident Scholarship 8,142 1. Resident 12,297 D. Matriculation Fee (entering semester) 75 2. Non-Resident 24,825 E. Technology Fee 140 3. Non-Resident Scholarship 13,599 F. Health Fee (on Campus Student Only) 65 D. Technology Fee 200 E. Medical (MD students only) V. Palmetto Campuses 1. Resident 19,836 A. Lancaster, Salkehatchie, Sumter, Union 2. Non-Resident 43,575 1. Resident (Less than 75 credit hours) $ 3,351 3. Non-Resident Scholarship 24,876 2. Non-Resident (Less than 75 credit hours) 8,367 4. Technology Fee 300 3. Resident (75 or more credit hours) 4,941 4. Non-Resident (75 or more credit hours) 9,894 II. Aiken (Undergraduate) B. Matriculation Fee (entering semester) 50 A. Resident(2) $ 4,941 C. Technology Fee 200 B. Non-Resident 9,894 C. Non-Resident Scholarship 7,419 D. Matriculation Fee (entering semester) 85 E. Technology 132

(1) Rates apply to all campuses. (2) Aiken resident rate applies to students who are legal residents of Richmond and Columbia counties of Georgia. (3) Beaufort resident rate applies to students who are legal residents of Chatham and Effingham Counties of Georgia.

Enrollment

Total final Fall semester enrollments for the years 2012 through 2016 are as follows:

Year Columbia Campus Other (Fall) Undergrad Law Grad/Prof Medical(1) Total Campuses Total 2012 23,363 648 6,863 414 31,288 14,976 46,264 2013 24,180 621 6,691 472 31,964 14,708 46,672 2014 24,864 621 6,927 560 32,972 15,195 48,167 2015 25,237 620 7,215 652 33,724 15,725 49,449 2016 25,556 609 7,228 706 34,099 16,000 50,099

(1) Doctorate of Pharmacy and graduate medical enrollment as shown is contained in Grad/Prof amounts for all years.

The University received 25,444 freshman applications for the Fall 2016 semester, compared with 25,738 applications received for the Fall 2015 semester (a 1.1% decrease).

Total final Spring semester enrollments for the years 2012 through 2016 are as follows:

Year Columbia Campus Other (Spring) Undergrad Law Grad/Prof Medical(1) Total Campuses Total 2012 21,650 669 6,880 339 29,538 13,549 43,087 2013 22,040 628 6,677 407 29,752 13,201 42,953 2014 22,767 609 6,419 467 30,262 13,117 43,379 2015 23,037 617 6,869 544 31,067 13,414 44,481 2016 23,315 597 7,066 643 31,621 14,549 46,170

(1) Doctorate of Pharmacy and graduate medical enrollment as shown is contained in Grad/Prof amounts for all years.

Total final Summer semester enrollments for the years 2012 through 2016 are as follows:

Year Columbia Campus Other (Summer) Undergrad Law Grad/Prof Medical(1) Total Campuses Total 2012 11,537 130 5,729 1 17,397 5,322 22,719 2013 10,680 132 4,919 0 15,731 5,496 21,227 2014 8,969 147 4,376 0 13,492 5,076 18,568 2015 6,430 122 4,287 0 10,839 4,068 14,907 2016 6,556 142 4,390 0 11,088 4,169 15,257

Note: Prior to 2014, there were two Summer sessions combined for the reported figures, resulting in some duplication of the student enrollments. For 2014 and beyond, a single Summer semester was instituted. (1) Doctorate of Pharmacy and graduate medical enrollment as shown is contained in Grad/Prof amounts for all years.

Marketing

Undergraduate. The recruitment staff of the Office of Undergraduate Admissions at the Columbia Campus of the University strives to take a personalized approach in its student recruitment efforts. Each admissions counselor is assigned geographic areas, both in-state and out-of-state, as their target recruitment areas. Counselors travel in those areas for college-day programs and high school private visits, and communicate with applicants and prospective applicants from those areas. All accepted students receive a series of personalized letters from various offices on campus and many receive telephone calls from faculty members in their chosen academic area. Information sessions and receptions are held in cities throughout the State and select out-of-State areas so that prospective students and their parents have an opportunity to talk with representatives from the University, and campus visitation days for special groups are held several times a year.

Graduate. The Graduate School provides assistance and support to applicants seeking information or admission to the University’s graduate program. Applicants to a graduate program generally seek out the University. However, recruiting is conducted along the east coast and in the southeastern United States.

The Graduate School publishes the Graduate Bulletin and provides it free of charge. The Graduate School also advertises in popular graduate publications. Limited counseling to applicants choosing between two courses of study is also available through the Graduate School.

Brochures, applications and other materials which could be used to solicit enrollment are collected by the Graduate School from individual departments and distributed at graduate affairs and similar functions.

Selected Undergraduate Enrollment Data (Columbia Campus Only)

Certain selected data relating to Fall undergraduate enrollment for the years 2012 through 2016 is as follows: Year Applications Acceptance Matriculation Median SAT (Fall) Applications Accepted Rate Enrollment Rate(1) Score(2) 2012 23,429 14,199 60.6% 4,625 32.6% 1200 2013 23,035 14,843 64.4 5,049 34.0 1200 2014 23,341 15,455 66.2 4,982 32.2 1190 2015 25,738 16,611 64.5 5,194 31.3 1200 2016 25,444 17,278 67.9 5,107 29.6 1210

(1) Based on enrollment in relation to applicants accepted. (2) Based on first-time, full-time freshmen.

Faculty

The following table sets forth certain information relating to the faculty for the Fiscal Years ended June 30, 2012 through 2016. Faculty data is reported with Integrated Postsecondary Education Data System (IPEDS) A1, A2, and D1 faculty, and does not include librarians.

Fiscal Year Full-Time Part-Time Tenure Track 2012 2,072 1,036 1,371 2013 2,089 1,109 1,390 2014 2,229 1,043 1,486 2015 2,329 1,376 1,567 2016 2,307 1,401 1,567

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Research

One of the primary functions of the University is research. Total research and service grants at the University to bureaus, departments and individual professors during the Fiscal Year ended June 30, 2016 amounted to $250 million.

Permanently established research bureaus and institutes include:

Belle W. Baruch Institute for Marine Biology & Coastal Research Center of Management of Risk Behavior Carolina Institute for Leadership and Engagement in Music Constitutional Law Resource Center Center for Advancement of Accounting Daniel Management Center Center for Applied Real Estate Education Research Earth Sciences & Resources Institute Center for Asian Studies Electron Microscopy Center Center for Bioethics and Medical Humanities End of Life Care Center Center for Child and Family Studies Farber Entrepreneurship Center Center for Citizenship Frank L. Roddey Small Business Development Center Center for Disability Resources Hazards & Vulnerability Research Institute Center for Economic and Community Development Industrial Mathematics Institute Center for Electrochemical Engineering Institute for Families in Society Center for Enterprise Development Institute for Public Service and Policy Research Center for Environmental Policy Institute for Southern Studies Center for Geographic Info Systems & Remote Sensing Institute for Superconductivity Center for Health Policy Institute for Tourism Research Center for Health Promotion & Risk Reduction in Special Populations Institute of Biological Research and Technology Center for Health Promotion and Disease Prevention Insurance Studies Center Center for Health Services and Policy Research International Institute for Foodservice Research Center for Information Assurance Engineering L. DeQuincey Newman Institute for Peace & Social Change Center for Information Technology National Resource Center for First-Year Experience and Student in Transition Center for International Business Education & Research Nelson Mullins Riley & Scarborough Center on Professionalism Center for Literary Biography Nutrition Research Center Center for Marketing Studies Palmetto Poison Center Center for Mass Communications Research Penn Education Center (joint w/ USC Beaufort) Center for Mechanics Materials & Non-Destructive Richard L. Walker Institute of International Studies Center for Mediation and Conflict Resolution Riegel and Emory Human Resource Research Center Center for Nursing Leadership SC Cancer Center Center for Oral Narration at USC-Sumter SC Educational Policy Center Center for Outcome Research and Evaluation Studies (CORE) SC Institute of Archaeology & Anthropology Center for Reliability and Quality Sciences SC Rural Health Research Center (SC RHRC) Center for Retailing Science Education Center Center for Science Education Sea Island Institute Center for Southern African-American Music (CSAM) Small Business Development Center Center for the Advancement of Engineering and Computing Education South Carolina Center for Gerontology Center for Water Research & Policy Southern Regional Violence & Substance Abuse Center Center of Excellence for the Assessment of Student Learning The SC Center for Children’s Books and Literacy Center of Excellence in Geographic Education/ South Travel and Tourism Industry Center Carolina Geographic Alliance USC Nano Center Center of Global Supply Chain and Process Management USC Speech & Hearing Center

Degrees Offered

The University offers more than 345 degree programs, in 120 areas of study, including professional doctorates in law, medicine and pharmacy.

Libraries

The University’s library collection of over three million volumes, 800,000 government documents, 300,000 maps and aerial photographs, and rare books and manuscripts, is held in seven libraries on the Columbia Campus.

Alumni

The University of South Carolina Alumni Association serves more than 300,000 alumni in 50 states and 154 foreign countries. More than half of alumni live in South Carolina.

Reserve Officer Training

Military training is not compulsory at the University. Through Army, Naval and Air Force Reserve Officers Training programs, the University is cooperating with the United States Department of Defense in an effort to provide a steady supply of well-educated officers for active and reserve forces of the nation.

University System Campuses

Three comprehensive and four regional campuses complement the flagship campus in Columbia. USC Aiken, USC Beaufort and USC Upstate are separately accredited institutions offering four year degree programs. The four regional campuses, USC Lancaster, USC Salkehatchie, USC Sumter and USC Union, are the Palmetto College Campuses and are accredited as two-year degree-granting institutions under the USC Columbia umbrella. The Palmetto College concept was launched in the Fall of 2013 as an academic program coordinating unit to expand baccalaureate degree programs to rural populations via on-line learning.

By making its freshman-sophomore and some upper level offerings available in areas close to the homes of prospective students, the University has been able to devote increased space to its academic program with consequent savings to both students and taxpayers. Additionally, graduate programs are offered at the Aiken and Upstate campuses.

Economic Impact

Based on an economic impact study conducted by the Darla Moore School of Business in November 2011, the University contributes more than $4.1 billion in annual output to the State through alumni impact and the impact from non-state funded expenditures. More specifically, this economic output represents the total dollar value of all goods and services associated with the University, including both increases in alumni wages and business activity resulting from non-state funded expenditures. In addition, the University contributes approximately $1.3 billion toward personal income in the State, approximately $2.3 billion towards gross state product (value added), and supports approximately 53,000 jobs in the State.

DEBT STRUCTURE OF THE UNIVERSITY

Outstanding Debt

The University’s debt consists of the following categories:

(1) General Obligation State Institution Bonds of the State of South Carolina (the “State Institution Bonds”), which are secured by a pledge of the full faith, credit and taxing power of the State and in addition by a pledge of tuition fees collected at the University. State Institution Bonds are issued by the State on behalf of the University.

(2) Revenue bonds (the “Revenue Bonds”), the proceeds of which are used by the University for, but not limited to:

(A) Dormitories, apartment buildings, dwelling houses, bookstores and other University operated stores, laundries, dining halls, cafeterias, parking facilities, student recreational, entertainment and fitness related facilities, inns, conference and other non-degree educational facilities and similar auxiliary facilities of the University and any other facilities which are auxiliary to any of the foregoing excluding, however, athletic department projects which primarily serve varsity athletic teams of the University.

(B) Those academic facilities as may be authorized by joint resolution of the General Assembly.

The Revenue Bonds under this category are payable from and secured by a pledge of the revenues derived by the University from the operation of the student and faculty housing facilities and the parking facilities; and are additionally secured by a pledge of subsidies and available funds and academic fees of the University not otherwise designated or restricted. Funds of the University derived from appropriations received from the General Assembly and any tuition funds pledged to the repayment of State Institution Bonds are not considered available funds.

(3) Athletic Facilities Revenue Bonds, the proceeds of which are used by the University for the financing or refinancing of the costs of acquiring, constructing, reconstructing, renovating, or equipping Athletic Facilities. The Athletic Facilities Revenue Bonds are payable from and secured by a pledge of (A) the Net Revenues, (B) the gross receipts from the imposition of the Admissions Fee, and (C) the gross receipts from the imposition of the Special Student Fee. The Series 2017A Bonds are being issued under this category of indebtedness.

The following table shows the categories of outstanding long-term obligations of the University as of January 1, 2017.

Category of Indebtedness Amount Outstanding State Institution Bonds $ 147,990,000 Revenue Bonds 264,380,000 Athletic Facilities Revenue Bonds 149,630,000 Total $ 562,000,000

Debt Payment Record

There has been no default in the payment of principal or interest on any bonds issued by or on behalf of the University. The University has never borrowed for the purpose of refunding any bonds in order to prevent a default, nor has the University borrowed for the purpose of paying the cost of operations or for funding a deficit.

FINANCIAL MATTERS

Budget

The University is a State institution of higher learning, governed by the Board of Trustees. The amount of State appropriations received is determined by the State Legislature upon recommendation from the South Carolina Commission on Higher Education, a coordinating body for all South Carolina public higher education institutions. The Board of Trustees must approve the annual operating budget and is empowered to establish tuition and fee amounts, subject to such limits as may be imposed from time to time by the General Assembly.

The internal University budget process is that generally used by public higher education institutions. The budget is determined in the following manner:

1. Amount of expense budget to sustain current operations is determined. 2. Expense budget reductions are made to continuing operations where programmatically warranted. 3. Expense budget increases for institutional priorities are determined. 4. Realistic revenue budget estimates are determined. 5. Necessary expense budget reductions are made to current operating bases or planned institutional priorities as circumstances warrant in order to ensure that the expense budget does not exceed the revenue budget.

The total current funds budget of the University for the Fiscal Year ended June 30, 2016 was approximately $1,442 million as approved by the Board of Trustees. Of that amount, $147 million was appropriated by the State with the remainder derived from student tuition and fees, grants, contracts, auxiliary enterprises and other revenue.

The total current funds budget approved by the Board of Trustees on June 24, 2016 for Fiscal Year 2017 is $1,518 million. Of that amount State appropriations are $160 million.

Total revenues of the University for the Fiscal Years ended June 30, 2012 through June 30, 2016 were as follows:

Fiscal Total Year Revenues 2012 $1,023,257,702 2013 1,061,103,742 2014 1,132,092,169 2015 1,224,836,380 2016 1,236,543,468

The percentages of the sources of the revenues shown above were as follows:

Fiscal Years Source of Revenue 2012 2013 2014 2015 2016 State Appropriations (including Capital) 12% 14% 14% 13% 14% Tuition and Fees 35 36 36 36 39 Gifts, Grants and Contracts 35 34 32 32 29 Sales and Services and Other Sources 18 16 18 19 18

Pension Plans

The University’s employees participate in one of several pension plans maintained by the Retirement Division of the South Carolina Public Employees Benefits Authority (“PEBA”). Although the University is a participating employer in the pension plans, the University is in no way involved in the management or administration of the pension plans, which is conducted by PEBA, nor is the University responsible for investment decisions made regarding the assets of the pension plans, which is the responsibility of the Retirement System Investment Commission. Policy for the pension plans is set by the State legislature and the State Fiscal Accountability Authority. A description of the pension plans is set forth in “Appendix A - Comprehensive Annual Financial Report of the University for Fiscal Year Ended June 30, 2016 – Basic Financial Statements - Notes to the Financial Statements – Note 5 - Pension Plans.”

Postemployment and Other Employee Benefits

Plan Description. In accordance with the South Carolina Code of Laws of 1976, as amended, and the annual Appropriations Act, the State provides post-employment health and dental and long-term disability benefits to retired State and school district employees and their covered dependents. The University contributes to the South Carolina Retiree Health Insurance Trust Fund (“SCRHITF”) and the South Carolina Long-Term Disability Insurance Trust Fund (“SCLTDITF”), cost-sharing multiple employer defined benefit postemployment healthcare, and long-term disability plans administered by the Insurance Benefits Division (“IB”), a part of the PEBA. Generally, retirees are eligible for the health and dental benefits if they have established at least ten years of retirement service credit. For new hires beginning employment May 2, 2008 and after, retirees are eligible for benefits if they have established 25 years of service for 100% employer funding and 15 through 24 years of service for 50% employer funding. Benefits become effective when the former employee retires under a State retirement system. Basic Long-Term Disability (“BLTD”) benefits are provided to active state, public school district, and participating local government employees approved for disability.

Funding Policies. Section 1-11-710 of the South Carolina Code of Laws of 1976, as amended, requires these postemployment and long-term disability benefits be funded through annual appropriations by the General Assembly for active employees to the IB and participating retirees to the PEBA, except for the portion funded through the pension surcharge and provided from the other applicable sources of the IB, for its active employees who are not funded by State General Fund appropriations. Employers participating in the Retiree Medical Plan are mandated by State statue to contribute at a rate assessed each year by the Office of the State Budget, 5.33% of annual covered payroll for 2016 and 5.00% of annual covered payroll for 2015. The IB sets the employer contribution rate based on a pay-as-you-go basis. The University paid approximately $27,002,023 and $24,685,000 applicable to the surcharge included with the employer contribution for retirement benefits for the fiscal years ended June 30, 2016 and 2015, respectively. BLTD benefits are funded through a person’s premium charged to State agencies, public school districts, and other participating local governments. The monthly premium per active employee paid to IB was $3.22 for the fiscal years ended June 30, 2016 and 2015. The University recorded employer contributions expenses applicable to these insurance benefits for active employees in the amount of approximately $255,000 and $247,000 for the years ended June 30, 2016 and 2015, respectively.

Effective May 1, 2008 the State established two trust funds through Act 195 for the purpose of funding and accounting for the employer costs of retiree health and dental insurance benefits and long-term disability insurance benefits. The SCRHITF is primarily funded through the payroll surcharge. Other sources of funding include additional State appropriated dollars, accumulated IB reserves, and income generated from investments. The SCLTDITF is primarily funded through investment income and employer contributions.

One may obtain a copy of the complete financial statements for the benefit plans and the trust funds from PEBA Retirement Benefits and Insurance Benefits, 202 Arbor Lake Drive, Suite 360, Columbia, SC 29223.

Insurance

The University is exposed to various risks of loss and maintains State or commercial insurance coverage for each of those risks. The University believes such coverage is sufficient to preclude any significant uninsured losses to the University. Settled claims have not exceeded this coverage in any of the past three years. The University pays insurance premiums to certain other State agencies to cover risks that may occur in normal operations. Several State funds accumulate assets and the State itself assumes substantially all risks for the following:

(1) Claims of State employees for unemployment compensation benefits; (2) Claims of covered employees for workers’ compensation benefits; and (3) Claims of covered employees for health, dental, and group-life insurance benefits.

In addition, the University pays premiums to the State’s Insurance Reserve Fund which accumulates assets to cover the risks of loss related to the following assets and activities:

(1) Real property and its contents; (2) Motor vehicles and aircraft; (3) General tort liability claims; (4) Medical malpractice claims against covered employees, faculty and students; (5) Business interruption; (6) Builder’s risk; (7) Inland marine; and (8) Data processing.

The State’s Insurance Reserve Fund reinsures for a portion of the coverage for these liabilities.

The University also purchases a portion of its medical malpractice insurance coverage for health care providers through the State’s public entity risk pool, the Patients’ Compensation Fund. The University obtains employee fidelity bond and directors’ and officers’ liability insurance coverage through a commercial insurer for financial losses arising from mismanagement, theft or misappropriation.

The University has implemented a comprehensive Enterprise Risk Management (“ERM”) program which incorporates the fundamentals of risk identification, assessment, treatment, monitoring, and review. The University has established an ERM process using the guidance of International Standards Organization (“ISO”) 3100-2009 “Risk Management - Principals and Guidelines.” ISO provides a framework and process for managing any form of risk in a systematic, transparent and credible manner. The ERM program is committed to preventing losses through training, education and inspection; advising and assisting University managers in identifying potential risks and losses; and advising and assisting University managers in implementing controls to mitigate risks. Tort Liability and Insurance

The State Supreme Court, in the case of McCall v. Batson on April 18, 1985, abolished the doctrine of sovereign immunity in the State of South Carolina. In response to this decision, the General Assembly in its 1986 session enacted the South Carolina Torts Claim Act which reestablished a qualified doctrine of sovereign immunity with respect to local government in South Carolina. Subject to specific immunity set forth in the South Carolina Tort Claims Act, local governments including the University are liable for damages not to exceed $300,000 per incident/person and $600,000 per occurrence/aggregate (except in the case of physicians and dentists employed by local governments, for which the per incident limit is $1,200,000). No punitive or exemplary damages are permitted under the South Carolina Tort Claims Act. Insurance protection to local government is provided by either the Insurance Reserve Fund, private carriers, self-insurance or pooled insurance funds. The University currently maintains liability insurance coverage with the Insurance Reserve Fund.

LEGAL MATTERS

Litigation

No litigation is presently pending or, to the knowledge of the University, threatened in any court to restrain or enjoin the sale, execution, issuance, or delivery or otherwise affect the validity of the Series 2017A Bonds, or in any way contesting or affecting the validity of the Series 2017A Bonds or any proceedings of the Board of Trustees or State Fiscal Accountability Authority taken with respect to the authorization, sale, or issuance of the Series 2017A Bonds or the pledge or application of any moneys provided for the payment of or security for the Series 2017A Bonds. Certifications to those effects will be delivered at the time of the original delivery of the Series 2017A Bonds.

The University is involved in a number of legal proceedings and claims with various parties arising in the normal course of business. However, the University’s insurance should cover most potential liabilities should the University be found at fault, and these are not expected to have a material adverse effect on the financial position of the University.

United States Bankruptcy Code

The undertakings of the University should be considered with reference to Chapter 9 of the Bankruptcy Code, 11 U.S.C. 901, et. seq., as amended (the “Bankruptcy Code”), and other laws affecting creditors’ rights and certain public bodies generally. Chapter 9 permits a municipality, political subdivision, public agency, or other instrumentality of the State that is insolvent or unable to meet its debts as such debts mature to file a petition in the United States Bankruptcy Court for the purpose of effecting a plan to adjust its debts; directs such a petitioner to file with the court a list of its creditors; provides that the filing of the petition under that Chapter operates as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner; directs a petitioner to file a plan for the adjustment of its debts; permits the petitioner in its plan to modify the rights to payment of its creditors; and provides that the plan must be accepted in writing by or on behalf of creditors of each impaired class of claims holding at least two-thirds in amount and more than one-half in number of the creditors which have accepted or rejected the plan. The plan may be confirmed notwithstanding the negative vote of one or more classes of claims if the court finds that the plan is in the best interest of creditors, is feasible, and is fair and equitable with respect to the dissenting classes of creditors. A petitioner has the right to reinstate indebtedness under its plan according to the original maturity schedule of such indebtedness notwithstanding any provision in the documents under which the

indebtedness arose relating to the insolvency or financial condition of the debtor before the confirmation of the plan, the commencement of a case under the Bankruptcy Code, or the appointment of or taking possession by a trustee in a case under the Bankruptcy Code or by a receiver or other custodian prior to the commencement of a case under the Bankruptcy Code.

Legal Proceedings

All quotations from and summaries and explanations of provisions of laws of the United States of America and of the State herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof. All references to the Series 2017A Bonds, the Bond Resolution and the Series 2017A Resolution are qualified in their entirety by reference to the definitive forms of the Series 2017A Bonds, the Bond Resolution and the Series 2017A Resolution. All such summaries, explanations and references are further qualified in their entirety by reference to the exercise of the sovereign powers of the State and the constitutional powers of the United States of America, and to valid bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors.

Certain legal matters with regard to the issuance of the Series 2017A Bonds are subject to the approval of McNair Law Firm, P.A., Bond Counsel, whose approving opinions will be available at the time of the delivery of the Series 2017A Bonds. Certain other legal matters will be passed upon for the Underwriter by Nexsen Pruet, LLC, as Underwriter’s Counsel, Howell Linkous & Nettles, LLC, as Disclosure Counsel for the University; and for the University by Walter H. Parham, Esquire, General Counsel to the University.

The various legal opinions to be delivered concurrently with the delivery of the Series 2017A Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

FEDERAL TAX EXEMPTION AND OTHER TAX MATTERS

In the opinion of McNair Law Firm, P.A., Bond Counsel, assuming continuing compliance by the University with certain covenants and the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations promulgated thereunder (the “Regulations”), interest on the Series 2017A Bonds is excludable from gross income of the registered owners thereof for federal income tax purposes under existing statutes, regulations, and judicial decisions. Interest on the Series 2017A Bonds is not an item of tax preference in computing the alternative minimum taxable income of individuals or corporations. However, interest on the Series 2017A Bonds is included in the adjusted current earnings in the computation of alternative minimum tax for corporations.

The Code and the Regulations impose restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2017A Bonds. The University has made certain representations and covenanted to comply with certain restrictions, conditions, and requirements designed to ensure that interest on the Series 2017A Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2017A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2017A Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to their attention after the date of issuance of the Series 2017A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2017A Bonds.

Certain requirements and procedures contained or referred to in the Bond Resolution and the Series Resolution, tax certificates, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Series 2017A Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Series 2017A Bonds or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than McNair Law Firm, P.A.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents its judgment as to the proper treatment of the Series 2017A Bonds for federal income tax purposes. Such opinion is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the University or about the effect of future changes in the Code, the applicable Regulations, the interpretation thereof, or the enforcement thereof by the IRS. The University has covenanted, however, to comply with the requirements of the Code.

Although Bond Counsel is of the opinion that interest on the Series 2017A Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Series 2017A Bonds may otherwise affect an owner’s federal, state, or local tax liability. The nature and extent of these other tax consequences depend upon the particular tax status of the owner or the owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences with respect to the Series 2017A Bonds.

Prospective purchasers of the Series 2017A Bonds should be aware that ownership of the Series 2017A Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, life insurance companies, certain foreign corporations, certain subchapter S corporations, individual recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit or the refundable credit for coverage under a qualified health plan, taxpayers subject to the application of backup withholding and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2017A Bonds. Bond Counsel expresses no opinion concerning such collateral income tax consequences and prospective purchasers of the Series 2017A Bonds should consult their tax advisors as to the applicability thereof.

Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause the interest on the Series 2017A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. As one example, the Obama Administration offered a legislative proposal which generally would have limited the exclusion from gross income of interest on obligations like the Series 2017A Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that would significantly reduce the benefit of, or otherwise affect, the exclusion from gross income on obligations like the Series 2017A Bonds. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2017A Bonds. Prospective purchasers of the Series 2017A Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Series 2017A Bonds. Bond Counsel’s engagement with respect to the Series 2017A Bonds ends with the issuance of the Series 2017A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the University or owners of the Series 2017A Bonds regarding the tax-exempt status of the Series 2017A Bonds in the event of an audit by the IRS. Under current procedures, parties other than the University and their appointed counsel, including the Series 2017A Bond owners, would have little, if any, right to participate in the audit process. Moreover, because achieving judicial review in connection with an audit of tax- exempt bonds is difficult, obtaining an independent review of IRS positions with which the University legitimately 39

disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2017A Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2017A Bonds, and may cause the University or the Series 2017A Bond owners to incur significant expense, regardless of the ultimate outcome.

[Original Issue Discount

Certain of the Series 2017A Bonds have been sold at initial public offering prices which are less than the principal amounts payable at maturity (a “Discount Bond” or the “Discount Bonds”). The difference between the initial public offering prices to the public (excluding bond houses and brokers) at which price a substantial amount of each maturity of the Discount Bonds is sold and the amount payable at maturity constitutes original issue discount.

Under Section 1288 of the Code, original issue discount accrues on a constant yield to maturity basis. The amount of original issue discount that accrues to an owner of a Discount Bond during any accrual period generally equals (i) the issue price of such Discount Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Discount Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Discount Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income to the same extent as interest on the Series 2017A Bonds for federal income tax purposes, and will increase the owner’s tax basis in such Discount Bond. Such adjusted tax basis will be used to determine taxable gain or loss upon the disposition of a Discount Bond (including, sale, exchange, redemption or payment at maturity).

Purchasers of the Discount Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the amount of original issue discount or interest properly accruable with respect to such Discount Bond, other tax consequences of owning Discount Bonds and other state and local tax consequences of owning Discount Bonds.]

[Original Issue Premium

Certain maturities of the Series 2017A Bonds were sold at an initial public offering price, or may be subsequently purchased at a price, which is greater than the amount payable at maturity (a “Premium Bond” or the “Premium Bonds”). An amount equal to the excess of the purchase price of a Premium Bond over its stated redemption price at maturity constitutes premium on such bond. A purchaser of a Premium Bond must amortize any premium over such bond’s term using constant yield principles, based on the bond’s yield to maturity. As premium is amortized, the purchaser’s basis in such Premium Bond and the amount of tax-exempt interest received will be reduced by the amount of the amortizable premium properly allocable to such purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed.

Purchasers of the Premium Bonds, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Premium Bonds.]

State Tax Exemption

Bond Counsel is of the further opinion that the Series 2017A Bonds and the interest thereon are exempt from all State, county, municipal, and school district and other taxes and assessments imposed within the State, except estate, transfer or certain franchise taxes. Interest paid on the Series 2017A Bonds is currently subject to the tax imposed on banks by Section 12-11-20, Code of Laws of South Carolina 1976, as amended, which is enforced by the South Carolina Department of Revenue as a franchise tax. The opinion of Bond Counsel is limited to the laws

of the State of South Carolina and federal tax laws. No opinion is rendered by Bond Counsel concerning the taxation of the Series 2017A Bonds or the interest thereon under the laws of any other jurisdiction.

FINANCIAL ADVISOR

PFM Financial Advisors LLC (“PFM”) of Arlington, VA has acted as financial advisor to the University in connection with the issuance of the Series 2017A Bonds. PFM is not obliged to undertake, and has not undertaken, an independent verification of, nor has assumed responsibility for the accuracy, completeness or fairness of the information obtained in this Official Statement. PFM is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

MISCELLANEOUS

Underwriting

The Series 2017A Bonds have been purchased by Barclays Capital Inc. (the “Underwriter”) at a price of $______(representing par of $______, plus a net premium of $______, less an underwriter’s discount of $______), plus accrued interest from the dated date to the date of closing. The initial public reoffering prices set forth on the inside cover page hereof with respect to the Series 2017A Bonds may be changed from time to time by the Underwriter.

Rating

As noted on the cover page of this official statement, Moody’s Investors Service, Inc. (“Moody’s”) has assigned the Series 2017A Bonds the rating of “Aa3.” Any desired explanation of the significance of such rating should be obtained from Moody’s. Such rating reflects only the view of Moody’s, and an explanation of the significance of such rating may be obtained from Moody’s. The University makes no representation as to the appropriateness of the rating. The University has furnished to Moody’s certain information and materials regarding the Series 2017A Bonds. Generally, Moody’s bases ratings on such information and materials and on investigations, studies, and assumptions furnished to and obtained and made by Moody’s. There is no assurance that such rating will remain unchanged for any given period of time or that such rating may not be lowered or withdrawn entirely by Moody’s, if in its judgment circumstances warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Series 2017A Bonds.

Audited and Other Financial Information

The University’s financial statements were audited by Elliott Davis Decosimo, LLC, Columbia, South Carolina, for the Fiscal Year ended June 30, 2016. The University’s CAFR for the Fiscal Year ended June 30, 2016, including the audited financial statements for the Fiscal Year ended June 30, 2016 (the “2016 Financial Statements”), is included in this Official Statement as Appendix A. The report of Elliott Davis Decosimo, LLC, October 25, 2016, is set forth in Appendix A. The 2016 Financial Statements, including the footnotes thereto, should be reviewed in their entirety by prospective purchasers of the Series 2017A Bonds. Elliott Davis Decosimo, LLC has consented to the inclusion of its report in Appendix A but has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness, or fairness of the statements made in this Official Statement, and no opinion is expressed by Elliott Davis Decosimo, LLC with respect to any event subsequent to its report dated October 25, 2016, relating to the 2016 Financial Statements.

The University’s Comprehensive Annual Financial Reports, including its audited financial statements for the Fiscal Years ended June 30 of the years 2012 through 2016 are available for review on the website of the Municipal Securities Rulemaking Board (“MSRB”) at www.emma.msrb.org.

With respect to evaluating the ability of the University to make timely payment of debt service on the Series 2017A Bonds based on information contained in the CAFR, no representation is made that such information contains all factors material to such an evaluation or that any specific information should be accorded any particular 41

significance. The 2016 Financial Statements represent a comprehensive report of the University’s finances and include funds, accounts, and revenues that are not pledged to the payment of debt service on the Series 2017A Bonds. This Official Statement should be considered in its entirety and no one factor should be considered more or less important than any other solely by reason of its location herein. See “Appendix A - Comprehensive Annual Financial Report of the University for Fiscal Year Ended June 30, 2016” attached hereto.

Continuing Disclosure

Rule 15c2-12. Pursuant to the requirements of Section (b)(5)(i)(c) and (d)(3) of Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. Part 240, Section 240.15c2-12) (the “Rule”), the University has agreed, in a Continuing Disclosure Undertaking (the “Continuing Disclosure Undertaking”), to provide to the MSRB through its Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org for the benefit of the Holders of the Series 2017A Bonds (i) annually certain financial information and operating data, including its audited financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and (ii) notice of the occurrence of certain enumerated events as provided in the Rule and within the time frame provided by the Rule. The Continuing Disclosure Undertaking will be executed and delivered substantially in the form attached to this Official Statement as Appendix D. Currently, the only “obligated person” (within the meaning of the Rule) with respect to the Series 2017A Bonds is the University. No other person or entity is obligated to provide, or is expected to provide, any continuing disclosure information with respect to the Rule.

The University posted on EMMA its annual report, including the annual financial statements and certain annual financial information and operating data for the fiscal year ended June 30, 2011 (“FY 2011”), and due February 1, 2012 (the “2011 Annual Report”), on February 22, 2012. The University’s audited financial statements for FY 2011 were posted on the University’s website and publicly available in October 2011. The 2011 Annual Report as originally posted on EMMA included a notice that FY 2011 Athletic Department financial statements were not completed at that time but would be posted when available. The 2011 Annual Report was amended by adding the FY 2011 Athletic Department financial statements and re-posted on EMMA on July 3, 2012.

State Law Requirement. Pursuant to Section 11-1-85 of the Code of Laws of South Carolina 1976, as amended, the University has covenanted to file with a central repository for availability in the secondary bond market, when requested, an annual independent audit, within 30 days of its receipt of the audit, and event specific information within 30 days of an event adversely affecting more than five (5%) percent of the revenues of the University.

Paying Agent’s Disclaimer

U.S. Bank National Association, as Paying Agent and Registrar has not provided, or undertaken to determine, the accuracy of, any of the information contained in this Official Statement and makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information, (ii) the validity of the Series 2017A Bonds, or (iii) the tax exempt status of the interest on the Series 2017A Bonds.

Closing Certifications

Upon the delivery of the Series 2017A Bonds, the University will furnish the respective purchasers with certifications of appropriate officials of the University (a) stating in substance that there is no litigation pending or, to the knowledge of the University, threatened in any court to restrain or enjoin the issuance or delivery of the Series 2017A Bonds or the collection of revenues pledged or to be pledged to pay the principal of and interest on the Series 2017A Bonds, or in any way contesting or affecting the validity of the Series 2017A Bonds, the Bond Resolution or the Series 2017A Resolution or contesting the power or authority of the University to issue the Series 2017A Bonds or adopt the Bond Resolution and the Series 2017A Resolution; (b) establishing that the Series 2017A Bonds are not “arbitrage” bonds, within the meaning of Section 148 of the Code and the applicable Treasury Regulations thereunder; and (c) stating that this Official Statement, as of its date and as of the date of delivery of the Series 2017A Bonds, does not contain any untrue statement of a material fact and does not omit to state a material fact which should be included therein for which this Official Statement is intended to be used or which is necessary to make any statement contained therein, in the light of the circumstances under which it was made, not misleading. 42

Conclusion

If additional information or explanations are desired, inquiries should be made to Charles D. FitzSimons, Director of Capital Budgets and Financing, Office of the Vice President for Finance and Chief Financial Officer, 1600 Hampton Street, Room 813, Columbia, South Carolina 29208, telephone (803) 777-1476. Requests for additional copies of this Official Statement may be addressed to the Underwriter for the Series 2017A Bonds, Barclays Capital Inc., 745 Seventh Avenue, 19th Floor, New York, New York 10019, or to PFM, Emily Abrantes, Public Financial Management, Inc., 4350 North Fairfax Drive, Suite #580, Arlington, Virginia 22203, telephone: (571) 527-5147.

UNIVERSITY OF SOUTH CAROLINA

By:______Leslie Brunelli Vice President for Finance and Chief Financial Officer

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A

COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE UNIVERSITY FOR THE FISCAL YEAR ENDED JUNE 30, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK]

Table of Contents

INTRODUCTORY SECTION

President's Letter 7 University Strategic Plan 9 Letter of Transmittal 13 Certificate of Achievement 21 University Board of Trustees 22 University Organization Chart 23 University Officers and Financial Staff 24

FINANCIAL SECTION

Independent Auditor’s Report 26 Management’s Discussion and Analysis 29 Basic Financial Statements: Statement of Net Position 40 Statement of Revenues, Expenses and Changes in Net Position 41 Statement of Cash Flows 42 Governmental Discretely Presented Component Units - Statement of Net Position 44 Governmental Discretely Presented Component Units - Statement of Revenues, Expenses and Changes in Net Position 45 Non-Governmental Discretely Presented Component Units - Statements of Financial Position 46 Non-Governmental Discretely Presented Component Units - Statements of Activities 47 Notes to the Financial Statements: Note 1 - Summary of Significant Accounting Policies 49 Note 2 - Cash and Cash Equivalents, Other Deposits, and Investments 53 Note 3 - Receivables 55 Note 4 - Capital Assets 56 Note 5 - Pension Plans 57 Note 6 - Postemployment and Other Employee Benefits 66 Note 7 - Contingencies, Litigation, and Project Commitments 67 Note 8 - Lease Obligations 67 Note 9 - Bonds and Notes Payable 68 Note 10 - Long-Term Liabilities 72 Note 11 - Component Units 73 Note 12 - Related Parties 76 Note 13 - Risk Management 80 Note 14 - Operating Expenses by Function 81 Note 15 - Endowments and Similar Funds 81 Required Supplementary Information to the Financial Statements: Schedule of the University's Proportionate Share of the Net Pension Liability 85 Schedule of the University's Contributions 86 Supplementary Information to the Financial Statements: Columbia Campus Athletics Department Schedule of Funds Available for Debt Service 88

(Continued) Table of Contents

STATISTICAL SECTION

Schedule of Revenues by Source 94 Schedule of Expenses by Use 96 Schedule of Expenses by Function 98 Schedule of Net Position and Changes in Net Position 101 Schedule of Ratios of Outstanding Debt 102 Schedule of Bond Coverage 103 Schedule of Capital Asset Information 104 Schedule of Enrollment Statistics 105 Schedule of Admissions Statistics 106 Schedule of Degree Data 107 Faculty and Staff Statistics 108 Undergraduate Required Tuition and Fees - Resident, Comparison to Peer Institutions 109 Undergraduate Required Tuition and Fees - Noesident, Comparison to Peer Institutions 110 State of South Carolina Demographic Statistics 111 State of South Carolina Employment by Industry 112 State of South Carolina Ten Largest Employers 113 JK

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We know that college graduates stimulate our economy and make more money than those employed without college degrees. And USC and its statewide alumni have a tremendous economic impact as they build the tax base and contribute more than $200 million annually in state revenue. We also bring a high return on investment with a $4.1 billion annual economic impact--$25 is returned to the state's economy for every $1 invested in higher education. This is all positive news for the Palmetto state.

In addition, our research university in Columbia is driving discovery and innovation. We were delighted to learn that U.S. News ranks USC as the top global university in the state and that the Carnegie Foundation lists us as one of only 32 public universities nationwide to receive both the top-tier research designation and the top-tier community engagement designation. Our 21 st Century university has assembled an exceptional faculty that produces scholarship and research at the highest level. Their productivity continues to set new records for research and sponsored awards, and brought in more than a quarter billion dollars in external funding during the last fiscal year alone. In addition to critical partnerships with IBM, Boeing and hundreds of smaller businesses throughout the state, we have been recognized by the National Academy of Inventers as one of the top 100 global universities to be granted U.S. patents.

The scope and depth of the USC system allows us to offer a point of admission for any South Carolina high school graduate while also offering some of the most sought after degrees in the country including those in high-growth, high-employability fields like the Health Sciences. Today, health profession jobs are in great demand in South Carolina, a state where health care needs are profound. Our undergraduates are offered unique advantages at our two medical schools--one a partner with Greenville Health Systems (GHS) and one here in Columbia partnering with Palmetto Health and the Dorn Veterans Administration Medical Center. In addition, USC's Arnold School of Public Health, the only accredited public health school in the state, will soon open a satellite campus in Greenville. We also have expanding award-winning programs in social work, pharmacy and nursing, including Palmetto College'S online nursing courses. More good news for our state.

As always, we remain committed to advancing the economic and overall wellbeing of South Carolina. Now, more than ever, it is imperative that state government and the university work together to redesign a new financial reality that is sensitive to the limited resources of our state's students and their families. State budget cuts have forced Carolina to apply moderate tuition increases of not more than 3.25 percent over the past five years. Today, parents are asking that tuition increases be reined in. With that in mind, I intend to keep advocating for increased state funding.

Clearly, USC is working tirelessly to make South Carolina more prosperous, healthier and more vibrant. This is why we often say that Carolina changes everything.

Sincerely,

)jjJr0t~Harris Pastldes

UNIVERSITY OF SOUTH CAROLINA Strategic Plan

Focus Carolina, initiated in 2008, is a strategic plan that outlines key decision-making for USC in the next decade and beyond. Focus Carolina is a comprehensive, system- wide strategic planning initiative announced by President Harris Pastides that involves the entire University family including hundreds of faculty, students, staff, and alumni.

Focus Carolina articulates the niversity's quest for quality, leadership, innovation, diversity, access, global competition, and community engagement at all eight campuses of the University system. Specific initiatives include aerospace science and engineering; alternative fuels, materials science, composites technology, and nanotechnology; sustainability and the environment; P-20 education; and Rule of Law. Other goals include improvement of student retention and on-time graduation, increasing access to baccalaureate degree through USC's regional campuses, and engaging further with communities.

The full Focus Carolina strategic plan is available on the web at this address: http://www.sc.edu/focuscarolina/

The comprehensive update from December 2011 is available on the web at this address: http://www.sc.edu/focuscarolina/pdfs/Focus_Carolina_Full_Planrev1.pdf

On September 8, 2015, President astides assembled the executive team for a day- long retreat to consider options for refining Focus Carolina and for developing a refreshed strategic plan for USC. President Pastides called for a plan for the University’s future that assumes the priorities of Focus Carolina while establishing goals that are based on the most current dynamics in the state, the nation, and the world.

At the October 18, 2015, meeting of USC’s Board of Trustees, President Pastides and Provost Joan Gabel outlined for the Board a process by which a refreshed strategic plan would be developed, vetted, discussed with University stakeholders, and then

presented to the Board in detail at a weekend retreat in late January of 2016. President Pastides and Provost Gabel committed to developing a refreshed strategic plan containing measurable goals, progress against which will be reported to the Board on a regular basis. Similarly, the strategic plan’s goals will be aligned with an institutional dashboard of metrics to be compared to data for peer institutions across time.

During the January 2016 retreat of USC’s Board of Trustees, the University’s administration presented to the Board five broad goals that are shaping the University’s refreshed strategic-planning process. A summary of these goals, with sample initiatives, is as follows:

Educating the Thinkers and Leaders of Tomorrow Goal 1: The University of South Carolina Columbia will offer superior academic and co- curricular experiences for its undergraduate and graduate students. The University will educate and graduate more students than ever in its history, while continually strengthening the quality of the student experience and while designing curricula optimized to prepare USC students to think and to lead as the 21st-century’s global economy demands. Maximize students’ participation in and the quality of modernized curricula, experiential learning, international opportunities, co-curricular activities, and distinctive programs. Improve persistence across student categories, while enacting measured growth of entering freshman classes with a focus on access and affordability. Increase students’ readiness for life as alumni: meeting certification and licensure requirements, preparing for the demands of the workforce, securing placement in jobs and graduate/professional programs, managing low levels of student debt, earning salaries worthy of their education, and otherwise enjoying the fruits of a USC degree.

Assembling a World-Class Faculty Goal 2: The University of South Carolina Columbia will hire top faculty with attention to institutional enrollment growth, disciplinary evolution, student demand, and economic trends. The University will bolster its areas of competitive strength, while promoting faculty opportunities in development of curricula, pedagogy, scholarly production, practical applications of discovery, and creative endeavors. Increase the size of the University’s faculty proportionately to student enrollment, allocating faculty lines in accordance with strategic needs. Support all categories of faculty throughout their careers with development opportunities relative to curricula, pedagogy, innovation, alternate modalities of course delivery, cross- and inter-disciplinary collaboration, and scholarly growth. Focus on workforce policy issues relative to USC’s faculty as categories and demographics of faculty evolve.

Spurring Knowledge and Creation Goal 3: The University of South Carolina Columbia will further its status as an R1 doctoral university characterized by “highest research activity” according to the Carnegie Classification of Institutions of Higher Education, by fostering increased scholarly activity among faculty—extending the University’s service to the State, the nation, and the globe through unique discoveries, applications, and creations that better the planet. The University will increasingly afford both undergraduate and graduate students with opportunities to participate meaningfully in scholarly research and creation. Increase research dollars, research expenditures, technology transfer, patent production, and external partnerships among USC faculty. Maximize applicable research opportunities for undergraduate and graduate students.

Modernize research facilities suitable for the University’s population and for learning and research modes of the future, along with library facilities to serve the University’s population with learning spaces and with holdings in both physical and digital forms.

Building Inclusive and Inspiring Communities Goal 4: The University of South Carolina Columbia will welcome all persons into University life, inclusively and equitably. The University will celebrate the diversity of its students, faculty, staff, and alumni—while documenting the successes of the University as an educational institution and as a workplace that inspires participation and contribution by all. Increase focus on the composition of USC’s student, faculty, and staff populations—offering support for all members of the University community. Foster a campus climate that is welcoming, inclusive, and befitting the University’s educational mission, while promoting deeper understandings of and appreciations for the world’s diverse populations, through engagement and dialogue. Conduct research and promote findings regarding the University’s successes in diversity, education, and excellence.

Ensuring and Communicating Institutional Excellence Goal 5: The University of South Carolina Columbia will extend its stewardship of the State of South Carolina’s trust through excellence in overseeing the University’s finances, infrastructure, physical plant, and administrative practices. The University will maximize and demonstrate its value proposition to the State and to the world. Construct a physical plant suitable for the USC population’s learning, residential, lifestyle, and working needs. Support USC’s needs and aspirations through efficiencies in administration, infrastructure, finance, and philanthropy. Further the University’s mission and benefit the State of South Carolina by offering the University’s resources, lessons, and messages to populations eager for knowledge, engagement, and betterment.

During the January 2016 retreat of USC’s Board of Trustees, the University’s administration presented further an updated set of peer and peer-aspirant institutions for comparison uses as the University assesses its progress across time according to a widened set of metrics in the institutional dashboard. Progress relative to these measures was reported to the Board of Trustees during its meeting on September 16, 2016—with unofficial data provided relative to USC’s Fall emester data and demographics of its newest freshman class. Updates regarding progress toward completing the new strategic plan and toward fulfilling the wider requirements of USC’s institutional dashboard have been provided to Board members in individual meetings hosted by Provost Gabel throughout 2016.

In January of 2017, USC administrators will present a final draft of its strategic plan to the University’s Board of Trustees. Furthermore, administrators will present the strategic plan in terms of expected costs. How revenue might support these costs in the future, perhaps through revised budget models, will be an additional focus of discussion. The plan’s initiatives will be presented in terms of metrics for achieving success beyond costs and revenue as well. Thus, strategic plans for advancing the University of South Carolina’s future will drive discussions regarding both resource allocations and measurements of progress toward goals.

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Vice President for Finance & Chief Financial Officer

Letter of Transmittal

October 31, 2016

President Pastides, Members of the Board of Trustees, and Friends of the University of South Carolina

We are pleased to present our Comprehensive Annual Financial Report of the University of South Carolina for the year ended June 30, 2016. This report includes the financial statements as well as other data that describes the University’s financial position at the end of the year and helps ensure University accountability to the public. The annual report encompasses three major sections: Introductory, Financial, and Statistical, as well as all disclosures necessary for the reader to gain an understanding of the University’s financial operations. The Financial Section presents management’s discussion and analysis (MD&A) which, when read in conjunction with the financial statements and the notes to the financial statements, provides a more complete picture of the financial health of the USC System.

Responsibility for the accuracy of the information and for the completeness, reliability and fairness of all information contained in this report, rests with the University’s administration. A comprehensive framework of internal controls has been established to provide a reasonable basis for asserting that the financial statements are fairly presented. Because the cost of controls should not exceed the benefits to be derived, the objective is to provide reasonable, rather than absolute assurance, that the financial statements are free of any material misstatements. We believe our system of internal controls is sound and sufficient to disclose material deficiencies in controls to the auditors and to the Audit and Compliance Committee of the Board of Trustees and to provide management with reasonable, although not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition.

State law, federal guidelines, and certain bond covenants require that the University’s accounting and financial records be audited each year. For the fiscal year ended June 30, 2016, the University contracted with the independent certified public accounting firm of Elliott Davis Decosimo, LLC, to perform the University’s annual audit. The auditors

University of South Carolina • Columbia, South Carolina 29208 • 803/777-7427 • FAX 803-777-5619 |

have issued an unmodified opinion, the most favorable outcome of the audit process. The University’s internal auditors also perform fiscal, compliance, and performance audits. The reports resulting from these audits are shared with University administration. Internal and external audit reports are provided to the Audit and Compliance Committee of the Board of Trustees. As a lump sum agency of the State of South Carolina, the University is required to provide a complete set of audited financial statements by October of each year for incorporation into the statewide Comprehensive Annual Financial Report. This report fulfills that requirement for the fiscal year ending June 30, 2016. Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative overview and analysis of the basic financial statements. The letter of transmittal complements the MD&A and should be read in conjunction with it.

Profile of the University The University of South Carolina is a state-supported, coeducational institution of higher education. The University of South Carolina is home to more than 200 years of history and tradition, rising from a single building in 1805 on what would become the heart of the campus, the Horseshoe. The Palmetto State established South Carolina College, the precursor to the University of South Carolina, on December 19, 1801, as part of an effort to unite South Carolinians in the wake of the American Revolution. Located in the Capital City, the University was purposefully located and positioned to become the State’s higher education leader. USC is one of only 32 public universities to receive both the top-tier research designation and the community engagement designation from the Carnegie Foundation. The University’s mission is to educate the state’s diverse citizens through teaching, research, creative activity, and service.

The University of South Carolina is governed by the Board of Trustees in accordance with Title 59 Chapter 117 of the State of South Carolina Code of Laws. The Board of the University of South Carolina is composed of 20 members including sixteen members elected by the General Assembly and one from each judicial circuit. Additionally, there are three ex officio members including the Governor (or designee), the State Superintendent of Education, and the President of the Greater University of South Carolina Alumni Association. The Governor also appoints one member at-large.

The financial reporting entity for the financial statements is composed of the Columbia campus, including the School of Medicine with locations in Columbia and Greenville, and seven system campuses. The accompanying financial statements present all funds belonging to the University and its component units. Ten separately chartered legal entities, whose activities are related to those of the University and whose primary purpose is to provide financial assistance and other support to the University and its education program, are discretely presented as component units of the University. These include the South Carolina Research Foundation, the University of South Carolina School of Medicine Educational Trust, the Beaufort-Jasper Higher Education Commission, the University of South Carolina Development Foundation; the University of South Carolina Educational Foundation; the University of South Carolina Business Partnership Foundation; the Greater University of South Carolina Alumni Association; the University ~

of South Carolina Upstate Foundation; the University of South Carolina Upstate Capital Development Foundation; and the Educational Foundation of the University of South Carolina – Lancaster. Because the activities and resources of these entities are significant, provide a direct benefit, and are accessible to the University, they are considered component units of the University and are discretely presented in the University’s financial statements. Additional information on the reporting entity can be found in the notes to the financial statements.

The University of South Carolina's Columbia campus has 329 unique degree programs through its 14 degree-granting colleges and schools. The University houses the only public law school in South Carolina and has two medical campuses. Access to the University is broad and deep. Joining the flagship campus in Columbia are four-year comprehensive, baccalaureate campuses in Aiken, Beaufort, and Upstate (Spartanburg-Greenville). Four two-year campuses-Lancaster, Sumter, Salkehatchie (Allendale and Walterboro), and Union help the University cover the state; making USC the most comprehensive and most affordable higher education system in South Carolina.

Additional access points include agreements with all technical colleges in the state and a bridge arrangement with Midlands Technical College that is designed to provide a one-year residential program that offers access, affordability and the eventual opportunity to enroll at the University of South Carolina. Palmetto College is an academic programs coordinating unit that has expanded baccalaureate degree programs to rural populations via expanded online learning. In conjunction with Academic Partnerships, the University offers master’s degree programs on line.

The University conducts business under a comprehensive set of policies and procedures to improve communication, promote administrative consistency and efficiency and ensure compliance with pertinent state and federal laws as well as state and regional accreditation requirements. Financial policies are in place for university accounting to include revenue and expenditures, contract and grant accounting, tuition and fee assessment, payroll and capital debt. Following the implementation of new administrative finance systems, policies have been updated to conform to revised practices.

Local Economy The economic position of the University is loosely tied to the State of South Carolina. The economy remains in measured recovery from the depths of the Great Recession. State tax and revenue collections continue to rebound from the lows reached in 2010. From 2008-09, the state reduced its general fund budget by $1.66 billion or 24 percent from the peak in fiscal year 2007. These reductions translated to losses in state appropriations of more than $112 million or 50 percent, for the University of South Carolina. Higher education funding across South Carolina has been reduced as a proportion of total State General Fund Appropriations. The University has increased strategic efforts to collaborate with state business organizations, education advocacy

groups and other state higher education institutions to rebuild relationships between the Universities and state legislators in an effort to bring our institutions back to prominence.

In 2016, the University received approximately $5 million in new, recurring state funds for academic initiatives, system campus parity funding and fringe benefit adjustments. An additional $10 million in non-recurring funding was received for capital projects. Additional increases in state funding are also provided for the 2017 fiscal year.

According to the South Carolina Board of Economic Advisors, final state general fund revenue estimates were at 99.79 percent of the increased annual forecast. This resulted in a $16.8 million state shortfall. However, these funds were not part of the state general fund budget, yet now indicate that the state has no additional surplus above constitutionally required amounts. The annual growth rate from the 2015 fiscal year to 2016 was approximately 4 percent. Growth in taxes from corporations, individuals and from sales and use supported the annual increase in total state revenue. Economists at the USC Moore School of Business noted that the state’s labor market continues to grow with the jobless rate at its lowest point since the early 2000s. Much of the growth in the job market has been focused on the metropolitan areas, particularly the Lowcountry region. After initially centering on the manufacturing sector, the state’s unemployment growth has become fairly broad-based, outpacing the national average.

Following Federal Sequestration, the University has expected stagnant or reductions in Federal grant funding in the 2015 and 2016 fiscal years. However, Federal grant awards for the prior year increased by approximately $7.2 million across the system and by $12.5 million in 2015.

Long Term Financial Planning and Major Initiatives The University of South Carolina engages in a systematic, integrated, system-wide process of planning and evaluation that seeks to ensure clarity regarding the institution’s mission, goals and outcomes; provide data-based feedback and assessment to ensure continual improvement for the University; and demonstrate that the University is effectively fulfilling its three-fold mission of teaching, research, and service. The University accomplishes this through Focus Carolina, the system-wide strategic planning effort, and the Annual Blueprint for Academic and Service Excellence process, which is the structured method for annual planning, evaluation, and assessment for each academic and service unit for the University. In September 2015, a new strategic planning process, Carolina 2026, was launched as an effort to describe a ten year plan that will take the University to the 225th anniversary. The Board of Trustees participates in the planning process through the Ad Hoc Committee on Strategic Planning, the Buildings and Grounds Committee, and the Executive Committee. This commitment naturally encompasses the long-term financial, budgetary, and capital planning.

The University annually prepares a balanced operating budget. The budget development process is a comprehensive planning effort representative of the vision of the University to provide research, teaching, and service for the citizens of the State of

South Carolina. Under the guidance of the Board of Trustees and in balance with the strategic plan, the University establishes priorities, creates budgets and controls expenditures. The University President determines internal budget allocations under the advice of the Chancellors, Provost, Chief Operating Officer and the Chief Financial Officer. The process requires participation beginning at the department level and reaching out to all campuses as the budget is developed to reflect the investments identified to significantly enhance the academic reputation, benefit students and contribute to the economic and societal health of the State of South Carolina. The budget includes all operating budgets of the University, including the educational and general activities, auxiliary enterprises, sponsored programs and capital projects. Upon approval of the annual operating budget each June, the Board of Trustees delegates authority for budget execution to University administration. Budget monitoring is performed on an ongoing basis. The Division of Administration and Finance prepares quarterly budget updates for the Board of Trustees and comprehensive reviews at mid- year and year-end. The budget update includes comparison of the approved budget to current budget, and comparison of budget to actual performance. Supplemental schedules of revenue and expenditures are prepared for each budget unit and by campus. Monthly financial reports are provided for each fund to individual managers responsible for each account.

The Division of Administration and Finance annually prepares a comprehensive capital budget document each spring and works with a financial underwriter to determine and revise the debt capacity and impact that capital plans will have on the financial standing of the University. The University maintains a comprehensive debt management strategy and manages debt on a portfolio basis to ensure the highest attainable credit rating and the lowest cost of capital. Recent debt capacity studies indicate that current facility plans fit within the market limits for additional debt for the institution and the University continues to clearly communicate the importance of the investments and how each translates to continued enrollment and revenue growth.

In September 2014, the University broke ground on the construction of an $80 million new home for the School of Law designed to replace a 1970’s era facility. The facility will open in summer 2017. Future renovation of the old Law School facility is expected to allow expansion of the undergraduate programs to meet the requirements of an increased student enrollment. Following years of planning and approvals, in the 2016 fiscal year, construction has begun on a new Student Health Center. Planning and implementation of both the Housing Master Plan and Athletics Master Plan continues with increased emphasis on public-private partnerships. In an effort to think ahead and plan for the future needs of facilities and facilities maintenance to support the growing academic mission of the University, the Division of Administration and Finance annually updates the University’s Five-Year Facilities Plan. Upon approval by the President and Board of Trustees, this document becomes the action plan for facilities projects.

Within the strategic plan, the financing plans include allocating existing resources and focusing existing operations toward achieving many of the objectives. Other plans require new public and private sector resources to become fully implemented. Q

University resources are committed mainly to adding to the hiring and retention of faculty while maintaining and improving the physical plant and technology infrastructure required to produce desired mission-oriented outcomes.

Highlights from 2015-2016 Total student headcount enrollment across the system increased to 49,449 in fall 2015, an all-time high and an increase of more than 1200 students over the prior year. Critical student metrics including six year graduation rate, retention rate of first-time full-time freshmen and average SAT score have increased and are targeted for improvement to ensure the quality of a USC education. The University Provost’s Office developed and maintains a comprehensive set of dashboard metrics designed to enhance academic quality. This dashboard enables the University to document and monitor progress, compare data with other institutions, set future targets, develop strategies to meet targets and detail the resource needs to support the strategies.

South Carolinians comprise approximately 68 percent of USC System enrollment, and their number of resident students has increased in the past 10 years. Conversely, South Carolinians' access to USC is never shortchanged by the admission of out-of-state students. In practical terms, the average out-of-state student pays nearly three times as much in tuition at the USC Columbia campus as do in-state students. In addition, out- of-state students pay two-and-a-half times the amount in-state students pay in fees for bond indebtedness, which is used to construct and renovate campus facilities.

Like many higher education institutions across the United States, the University relies on tuition as the primary source of funding. Both the regulatory and market environments will not tolerate future large tuition increases as a mechanism for funding the core mission. The University must gain access to new funding streams while enhancing existing revenues to more capably support the core mission. The President’s Palmetto College initiative is the best opportunity for the comprehensive and two-year regional campuses to collaborate with each other and Columbia to devise the strategies and develop the tools to open new markets and new revenue streams for all the campuses. Cost reductions and cost containment are the focus of the General Assembly and the Board of Trustees.

The University of South Carolina is investing in the information technology infrastructure with the implementation of OneCarolina across the Student Affairs, Human Resources and Finance Divisions. In the prior four fiscal years Admissions, Financial Aid, the Registrar, the Bursar and Finance met critical “go-live” dates in the conversion of the legacy student and finance systems. The Finance system moved to the live environment on July 1, 2015. The University weathered a difficult transition including significant reconfiguration and retraining, but successfully closed the books for June 30, 2016. In Payroll and Human Resources offices, we continue to work with outdated systems and processes. Conversion of these systems will begin following stabilization of the Finance modules and assessment of the implementation methodology and budget. The periods of implementation and stabilization remain critical for developing

tools and reports that provide students with a user friendly interface to the University and provide the administration with vital data to manage the University.

Within the Division of Administration and Finance, the focus remains on service and technical excellence to support the academic enterprise. The Division upholds the Carolinian Creed as the guiding principles with teamwork, knowledge, and expertise forming the framework for service. The leadership team understands these concepts, and the long term mission is to infuse all levels of Finance management and staff with these principles and framework. The staff has the responsibility to work those concepts into daily activities and practices.

Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the University of South Carolina for its comprehensive annual financial report for the fiscal year ended June 30, 2015. This was the fifth consecutive year that the University has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of this Comprehensive Annual Financial Report in a timely manner was made possible with the support of the University President and the Board of Trustees. The concerted efforts of professional staff in the Controller’s Office and other University financial staff brought the report to conclusion. We appreciate the coordinated efforts of the University community, with special assistance from the Office of Institutional Assessment, Student Affairs, University Athletics, and University Communications. We wish to thank the Board of Trustees and the President for their continued commitment to the fiscal management of the University.

Sincerely,

Leslie Brunelli Vice President for Finance & Chief Financial Officer

BOARD OF TRUSTEES

Eugene P. Warr, Jr., Chairman William W. Jones, Jr. 4th Judicial Circuit 14th Judicial Circuit Attorney Attorney

John C. von Lehe Jr., Vice Chairman Toney J. Lister 9th Judicial Circuit 7th Judicial Circuit Attorney Attorney

Miles Loadholt, Chairman Emeritus Hubert F. "Hugh" Mobley 2nd Judicial Circuit 6th Judicial Circuit Attorney Pharmacist/Business Owner

Chuck Allen Leah B. Moody 10th Judicial Circuit 16th Judicial Circuit Attorney Attorney

Paula Harper-Bethea C. Dorn Smith, III President, USC Alumni Association 3rd Judicial Circuit Businesswoman Physician

J. Egerton Burroughs Thad H. Westbrook 15th Judicial Circuit 11th Judicial Circuit Real Estate Developer Attorney

Mark W. Buyck, Jr. Mack I. Whittle, Jr. Governor's Designee 13th Judicial Circuit Attorney Retired Bank President

Thomas C. Cofield Charles H. Williams Governor's Appointee 1st Judicial Circuit Attorney Attorney

A. C. "Bubba" Fennell, III Molly M. Spearman 8th Judicial Circuit State Superintendent of Education Retired CPA

C. Edward Floyd Amy E. Stone 12th Judicial Circuit Secretary Surgeon

William C. Hubbard Nikki R. Haley 5th Judicial Circuit Governor of South Carolina Attorney - !"# $"%& -

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University of South Carolina Officers

Harris Pastides President Joan Gabel Executive Vice President for Academic Affairs and Provost Leslie Brunelli Vice President for Finance and Chief Financial Officer Chris Byrd Vice President for Human Resources Susan Elkins Chancellor, Palmetto College Mary Anne Fitzpatrick Vice President for System Planning William Hogue Vice President and Chief Information Officer Jancy Houck Vice President for University Development and Alumni Relations Derrick Huggins Vice President for Facilities & Transportation Sandra Jordan Chancellor, USC Aiken Patrick Lardner University Treasurer Thomas Moore Chancellor, USC Upstate Prakash Nagarkatti Vice President for Research Al Panu Chancellor, USC Beaufort Walter Parham General Counsel and Executive Director of Compliance Programs Dennis Pruitt Vice President for Student Affairs and Vice Provost for Academic Support Amy Stone University Secretary and Secretary of the Board of Trustees Ray Tanner Athletic Director Edward Walton Senior Vice President for Administration and Chief Operating Officer

University of South Carolina Financial Staff

Harry Bell University Budget Director Pamala Cope Director of Payroll Systems Pamela Doran Executive Director of Audit and Advisory Services Kelly Epting Associate Vice President for Finance Charles FitzSimons Director of Capital Budgets and Financing Karin Haile Director of Payroll Janis Hoffman Director of Business Process Improvement Brad Holt PeopleSoft Finance Program Manager Gloria Johnson Senior Director of Sponsored Grant Accounting Mandy Kibler Director of General Accounting Venis Manigo Director of Purchasing Richard Moak Director of Finance Information Technology Jennifer Muir University Controller Mary Peak Assistant Controller Jeffrey Perkins Associate Vice President for Business & Finance, and Medical Business Affairs Venessa Samuel University Bursar Sandra Smith Director of Financial Reporting Helen Zeigler Associate Vice President for Business Affairs

As of 6/30/2016 !

Independent Auditor's Report

The Board of Trustees University of South Carolina Columbia, South Carolina

Report on Financial Statements We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component units of the University of South Carolina (the University), a component unit of the State of South Carolina, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the University's basic financial statements as listed in the table of contents.

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

Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the South Carolina Research Foundation; the University of South Carolina School of Medicine Educational Trust; the University of South Carolina Educational Foundation; the University of South Carolina Business Partnership Foundation; the Greater University of South Carolina Alumni Association; the USC Upstate Foundation; the USC Upstate Capital Development Foundation; and the Educational Foundation of the University of South Carolina - Lancaster, which represent approximately 75 percent, 93 percent, and 94 percent, respectively, of the assets, net position/assets, and revenues of the University's aggregate discretely presented component units. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the University are based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of the University of South Carolina School of Medicine Educational Trust; the Beaufort-Jasper Higher Education Commission; the University of South Carolina Development Foundation; the University of South Carolina Educational Foundation; the University of South Carolina Business Partnership Foundation; the Greater University of South Carolina Alumni Association; the USC Upstate Foundation; the USC Upstate Capital Development Foundation; and the Educational Foundation of the University of South Carolina - Lancaster were not audited in accordance with Government Auditing Standards, issued by the Comptroller General of the United States of America.

Elliott Davis Decosimo | www.elliottdavis.com !

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 financial statements.

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

Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, and the aggregate discretely presented component units of the University as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis, the Schedule of the University’s Proportionate Share of the Net Pension Liability, and the Schedule of the University’s Contributions, as listed in the Table of Contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. !Q

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the University’s basic financial statements. The Introductory Section, Columbia Campus Athletics Department Schedule of Funds Available for Debt Service, and Statistical Section, as listed in the Table of Contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The Columbia Campus Athletics Department Schedule of Funds Available for Debt Service is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Columbia Campus Athletics Department Schedule of Funds Available for Debt Service is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 25, 2016, on our consideration of the University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance.

Columbia, South Carolina October 25, 2016 !(

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

OVERVIEW OF THE FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS

Management’s Discussion and Analysis provides an overview and analysis of the University of South Carolina’s (the University) financial activities for the fiscal year ended June 30, 2016, with comparative information for the fiscal year ended June 30, 2015. This information should be read in conjunction with the financial statements and accompanying footnotes that follow this section. Condensed fiscal year 2016 and 2015 operations and financial position data will be presented in this section in order to illustrate certain increases and decreases. However, the emphasis of discussions about these statements will be on current year data. In addition, this discussion will focus on operations and financial position of the primary institution, the University. This discussion will not include the discretely presented component units, the South Carolina Research Foundation, the University of South Carolina School of Medicine Educational Trust, the Beaufort-Jasper Higher Education Commission, the University of South Carolina Development Foundation, Educational Foundation, Business Partnership Foundation, Alumni Association, the Upstate Foundation, the Upstate Capital Development Foundation, and the Educational Foundation of the University of South Carolina - Lancaster.

This report includes a series of financial statements, prepared in accordance with the Governmental Accounting Standards Board (GASB) Codification Sections 2100-2900, Financial Reporting, and Co5, Colleges and Universities. The financial statements presented focus on the financial condition of the University, the results of operations, and cash flows of the University as a whole.

There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and the Statement of Cash Flows. These statements present financial information in a format similar to that used by private corporations. The University’s net position is one indicator of the improvement or erosion of the University’s financial health when considered with non-financial facts such as enrollment levels and the condition of the facilities.

STATEMENT OF NET POSITION

The Statement of Net Position presents the assets, liabilities, deferred outflows/inflows, and net position of the University as of the end of the fiscal year. The purpose of the Statement of Net Position is to present to the readers of the financial statements a fiscal snapshot of the University. The Statement of Net Position presents end-of-year data concerning the following:

Assets - Property that we own and what we are owed by others.

Deferred Outflows of Resources – Consumption of net position that is applicable to a future reporting period.

Liabilities - What we owe to others and have collected from others before we have provided the service.

Deferred Inflows of Resources - Acquisition of net position that is applicable to a future reporting period.

Net Position - The difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources.

The Statement of Net Position is prepared under the accrual basis of accounting, where revenues and assets are recognized when the service is provided and expenses and liabilities are recognized when others provide the service to us, regardless of when cash is exchanged.

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors, investors, and lending institutions. Finally, the Statement of Net Position provides a picture of the net position and its availability for expenditure by the institution. Net position is divided into the following three major categories:

Net investment in capital assets - Provides the institution’s equity in property, plant, and equipment owned by the institution.

Restricted net position - a. Nonexpendable restricted net position consists solely of the University’s permanent endowment funds and is only available for investment purposes. b. Expendable restricted net position is available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets.

Unrestricted net position – Represents resources available to the institution for any lawful purpose of the institution.

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

Summary of Net Position Increase Percent 2016 2015 (Decrease) Change ASSETS Current assets $ 721,032,902 $ 696,436,270 $ 24,596,632 3.53% Capital assets, net 1,355,112,682 1,320,468,300 34,644,382 2.62% Other noncurrent assets 114,689,420 115,745,252 (1,055,832) -0.91% Total assets 2,190,835,004 2,132,649,822 58,185,182 2.73%

DEFERRED OUTFLOWS OF RESOURCES Deferred loss on debt refunding 4,967,133 6,306,226 (1,339,093) -21.23% Deferred outflows related to net pension liability 63,672,437 62,770,394 902,043 1.44% Total deferred outflows of resources 68,639,570 69,076,620 (437,050) -0.63%

LIABILITIES Current liabilities 166,069,725 142,028,007 24,041,718 16.93% Noncurrent liabilities 1,418,492,320 1,373,555,518 44,936,802 3.27% Total liabilities 1,584,562,045 1,515,583,525 68,978,520 4.55%

DEFERRED INFLOWS OF RESOURCES Deferred inflows related to net pension liability 3,135,663 60,482,131 (57,346,468) -94.82%

NET POSITION Net investment in capital assets 757,731,120 747,326,595 10,404,525 1.39% Restricted - nonexpendable 82,788,474 82,076,853 711,621 0.87% Restricted - expendable 140,035,905 129,704,175 10,331,730 7.97% Unrestricted (308,778,633) (333,446,837) 24,668,204 -7.40% TOTAL NET POSITION $ 671,776,866 $ 625,660,786 $ 46,116,080 7.37%

Total assets of the University increased by $58.2 million due to an increase in capital assets of $34.6 for continued construction of the new School of Law and athletic facility projects. (See Note 4 – Capital Assets). Furthermore, during fiscal year 2016 the University implemented PeopleSoft Finance. This implementation and related business process changes enabled the University to bill for fixed price contracts based on the contractual arrangement versus cost reimbursable billing methodologies used in prior years.

Deferred outflows of resources consist of:

o The unamortized loss on debt refunding. See Note 1, Summary of Significant Accounting Policies, for more information.

o The University’s contributions after the measurement date and differences between the actual and expected experience in relation to the net pension liability recorded for the University’s proportionate share of the State of South Carolina’s SCRS and PORS net pension liability, due to the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. See Note 5, Pension Plans, for more information.

The increase in total liabilities of $69 million is attributable to a $70.5 million increase in net pension liability. Pension investments earned 1.60% during the fiscal year resulting in negative cash flows due to investment earnings not being substantial enough to offset plan costs and benefit payments. See Note 1, Summary of Significant Accounting Policies, for more information. Also, there was an increase in unearned revenue of $8.5 million due to efficiencies gained through the change in billing methodologies as a result of the PeopleSoft implementation. Furthermore, long term debt decreased by $18 million due to a $23 million decrease in bonds payable as a result of refunding and annual principal payments of bonded debt. !

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

Assets, Deferred Outflows, Liabilities, Deferred Inflows and Net Position

$2,500,000,000

$2,000,000,000 $671,776,866 $625,660,786

$1,500,000,000

$1,000,000,000 $2,259,474,574 $2,201,726,442 $1,587,697,708 $500,000,000 $1,576,065,656

$0 2016 2016 2015 2015

Total Assets & Deferred Outflows Total Liabilities & Deferred Inflows Total Net Position

The net position of the University increased during the year by $46.1 million. The increase is driven by the following:

$10.4 million increase in net investment in capital assets – Net investment in capital assets shows the difference between capital assets and the outstanding debt incurred to finance those capital assets. Not all long-term debt may be deducted from capital assets; only the debt issued to finance the University’s capital assets is subtracted. Long-term debt associated with unspent bond proceeds is subtracted from the restricted capital project component of net position. Net investment in capital assets increased due to the start-up and completion of various capital projects, including several athletic facility projects, construction of the new School of Law, academic building renovations and continued upgrades to campus technology systems.

$10.3 million increase in expendable restricted - Expendable restricted net position represents resources that are constrained to a particular purpose by externally imposed stipulations. These constraints may be derived from the donor of the resources or from an external entity. Also, restrictions can be imposed as a result of enabling legislation. The majority of the increase in expendable restricted net position is attributed to an increase in the amount expendable for debt service due to timing of the transfer of funds needed to make debt service payments, and an increase in capital project funds due to additional capital appropriations. "

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

$24.7 million increase in unrestricted net position - Unrestricted net position results from accumulated excesses of revenue over expenses derived from University operations. The University’s unrestricted current funds are derived from state appropriations, student fees, institutional revenue and auxiliary operations that are not restricted for specific purposes. Unrestricted net position includes balances from operation of education and general activities, auxiliary enterprises, quasi-endowments and unexpended plant funds. Although unrestricted net position is not subject to externally imposed stipulations, most of these resources have been committed for specific University activities including academic and research programs, capital projects and significant upgrades to the campus technology network.

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

The Statement of Revenues, Expenses and Changes in Net Position presents the revenues earned and expenses incurred during the year. Activities are reported as either operating or nonoperating. A public university’s dependency on state aid and gifts will result in operating deficits. GASB requires state appropriations and gifts to be classified as nonoperating revenues. The utilization of long-lived assets, referred to as capital assets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life.

Changes in net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution.

Operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. State capital appropriations and capital grants and gifts are considered neither operating nor nonoperating revenues. #

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

Summary of Revenues, Expenses and Changes in Net Position

Increase/ Percent 2016 2015 (Decrease) Change OPERATING REVENUES Student tuition and fees $ 760,901,254 $ 712,136,344 $ 48,764,910 6.85% Less: scholarship allowance (279,132,906) (264,078,274) (15,054,632) 5.70% Federal grants and contracts 136,661,493 138,913,630 (2,252,137) -1.62% State grants and contracts 93,078,830 87,637,878 5,440,952 6.21% Local grants and contracts 1,364,875 1,208,080 156,795 12.98% Nongovernmental grants and contracts 32,853,784 36,704,523 (3,850,739) -10.49% Sales and services of educational and other activities 32,837,349 30,901,990 1,935,359 6.26% Sales and services of auxiliary enterprises 164,992,359 151,286,254 13,706,105 9.06% Less: scholarship allowance (3,849,239) (4,593,694) 744,455 -16.21% Interest collected on student loans 295,151 305,201 (10,050) -3.29% Other fees 9,777,698 9,850,306 (72,608) -0.74% Other operating revenues 5,239,593 3,979,707 1,259,886 31.66% Total operating revenues 955,020,241 904,251,945 50,768,296 5.61%

NONOPERATING REVENUES State appropriations 149,059,413 147,511,627 1,547,786 1.05% Federal grants 52,292,875 52,451,941 (159,066) -0.30% Gifts 42,159,690 45,548,469 (3,388,779) -7.44% Investment income 3,640,446 2,629,826 1,010,620 38.43% Endowment income 6,862,342 3,144,094 3,718,248 118.26% Lease termination agreement - 31,500,000 (31,500,000) -100.00% Total nonoperating revenues 254,014,766 282,785,957 (28,771,191) -10.17% Total revenues 1,209,035,007 1,187,037,902 21,997,105 1.85%

OPERATING EXPENSES Salaries and wages 579,493,826 558,655,304 20,838,522 3.73% Fringe benefits 191,428,138 177,884,858 13,543,280 7.61% Services and supplies 278,640,688 269,854,851 8,785,837 3.26% Utilities 34,526,183 34,936,609 (410,426) -1.17% Scholarships and fellowships 21,756,291 17,951,730 3,804,561 21.19% Depreciation expense 60,565,961 66,353,807 (5,787,846) -8.72% Total operating expenses 1,166,411,087 1,125,637,159 40,773,928 3.62%

NONOPERATING EXPENSES Loss on disposal of capital assets 135,725 2,248,978 (2,113,253) -93.97% Interest on capital asset related debt 23,880,576 22,177,624 1,702,952 7.68% Total nonoperating expenses 24,016,301 24,426,602 (410,301) -1.68% Total expenses 1,190,427,388 1,150,063,761 40,363,627 3.51%

Other revenues 27,508,461 37,798,478 (10,290,017) -27.22% Change in net position 46,116,080 74,772,619 (28,656,539) -38.32% Net position, beginning of year, as originally stated 625,660,786 1,254,637,101 (628,976,315) -50.13% Restatement - (703,748,934) 703,748,934 -100.00% Net position, beginning of year, as restated 625,660,786 550,888,167 74,772,619 13.57% NET POSITION, END OF YEAR $ 671,776,866 $ 625,660,786 $ 46,116,080 7.37% $

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

Revenues, Expenses, and Changes in Net Position For the year ended June 30, 2016

$1,400,000,000

$1,200,000,000

$1,000,000,000

$800,000,000

$600,000,000

$400,000,000

$200,000,000

$- Revenue Expenses

Increase in Net Position Nonoperating Expenses

Operating Expenses Operating Revenues

Nonoperating, Other Revenues and Transfers

The Statement of Revenues, Expenses and Changes in Net Position reflects a positive year with an increase in net position at the end of the year. Some highlights of the information presented on this summary are as follows:

Operating revenues increased $50.8 million due to a net $33.7 million increase in student tuition and fees and a $14.4 million increase in sales and services of auxiliary enterprises

o Student tuition and fee revenue, net of the scholarship allowance, increased by $33.7 million primarily due to a 2.90% tuition increase for USC Columbia campus and across the system campuses. Additionally, student demand for enrollment at the Columbia campus continued to increase with growth of 2.20% in full time equivalent students. For Columbia, the combined tuition and enrollment increase accounted for the majority of the fiscal year 2016 change.

o Sales and services of auxiliary enterprises are driven by an increase in Southeastern Conference (SEC) revenues for the ESPN/SEC television network. There was also a 4.34% increase for University housing due to rate increases, and a $2 million remediation from a contractor for work on the Founder’s Park baseball stadium. %

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

o State contracts increased by $ 5.4 million due to an increase in South Carolina Education Lottery funding for student scholarships.

Nonoperating revenues decreased by $28.8 million despite a modest 1% increase in state appropriations. Gift revenue declined as expected in 2016 following completion in 2015 of the $1 billion capital campaign. Most significantly, the University completed a lease termination agreement with the Department of Justice National Advocacy Center in 2015. No similar revenue was received in 2016 accounting for the total reduction.

Operating expenses increased $40.8 million, 3.6% over the prior year. The majority of the increase, approximately $34.4 million, is due to the increase in personnel and fringe benefits from additional faculty and staff to serve the increased student enrollment, as well as increases in retirement contribution and employer health insurance, and a $12.2 million adjustment to fringe benefits due to the changes related to net pension liability. Services and supplies increased $8.8 million due to inflationary and enrollment increases, and ongoing upgrades to campus technology systems. Depreciation expense decreased $5.8 million due to the implementation of a new capital assets module and recategorization of certain assets.

STATEMENT OF CASH FLOWS The final statement presented is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into the following five parts.

Operating Activities - the net cash provided by (used for) the operating activities of the institution.

Noncapital Financing Activities - the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes.

Capital and Related Financing Activities - the cash used for the acquisition and construction of capital and related items.

Investing Activities - the purchases, proceeds, and interest received from investing activities.

Reconciliation - reconciles the net cash provided by (used for) to the operating income (loss) reflected on the Statement of Revenues, Expenses, and Changes in Net Position.

CAPITAL ASSET AND DEBT ADMINISTRATION During the year, various projects on the Columbia campus were in progress including construction of the Law School, dormitory remodels, and several projects addressing deferred maintenance. The Athletics department also had several projects in progress including Athletic Village improvements.

The University’s indebtedness consists of bonds payable of $619.2 million and notes payable of $190,218. During the current year, $6.2 million in General Revenue bonds were issued for the renovation of several dormitory buildings and, $41.9 million in General Revenue Refunding bonds were issued to achieve interest savings.

For more detailed information on capital asset and debt activity please refer to Note 4 – Capital Assets and Note 9 – Bonds and Notes Payable in the Notes to the Financial Statements. &

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

ECONOMIC OUTLOOK

The economic position of the University is loosely tied to that of the State of South Carolina (the State) as evidenced by the University’s sustained strong financial performance despite significant reductions in state appropriations following the Great Recession for the period 2008 through 2012. The University system received additional recurring state funding to begin the 2017 fiscal year to support a portion of state employee pay increases, retirement contribution and health insurance increases. Additional Education and General funding was provided to all University system campuses to support academic initiatives. Total new operating funding is approximately $8.5 million and pay and fringe benefit funding of $5.8 million was provided.

The State finished the 2016 fiscal year on a positive note with full funding of the State’s Rainy Day Fund at 5% of the prior year’s General Fund Revenues and also fully funded the Capital Reserve Account at 2% of the prior year’s General Fund Revenues. The State slightly missed the total increased revenue projection and surplus allocations were reduced. These did not directly impact the University. The University is a beneficiary of the eighth straight year of state surpluses, with just more than $8.3 million in non-recurring state funds capital projects and maintenance projects in 2017. These new funds include $5 million for a portion of the USC Columbia Honors College facility expected to cost $15 million and various deferred maintenance projects across the system campuses. The State of South Carolina has not advanced a capital bond bill for higher education since 1999/2000, but continues to make an effort to provide some funding for physical plant needs.

The University’s overall financial position remains strong. The University relies on tuition and fees to support the general operating budget and is aware of State funding support when tuition and fees are set each spring. For the 2017 year, the University of South Carolina’s tuition increase was 3.25% marking the fifth year of tuition increases at or below that percentage. Tuition increases for the 2017 year are in line with the Higher Education Price Index (HEPI) but will not cover the full impact of all inflationary needs and new initiatives. Resident undergraduate tuitions for two other public institutions in the State exceed the tuition rate for the USC Columbia campus. System campus tuitions are comparable with similar institutions in the State.

Demand for enrollment and interest in the University remains strong with record numbers of applications received and a freshman class enrolled at the USC Columbia campus for Fall 2016 of more than 5,100 students. Preliminary data indicates that this entering class is also the most academically talented in the University’s history with an average SAT score of 1215 and an average ACT score of 27.3.

Academic strategies include work with Academic Partnerships to provide marketing, recruiting and retention services primarily for on-line graduate programs. Five fully on-line graduate programs and a newly launched RN to BSN program have provided nearly $5 million annually in new funds. Another strategy is a partnership with Shorelight that brings high quality international students to campus. With 2016 as year one of the seven year contract, more than 80 new students came to USC Columbia. Projections are to grow the program to more than 250 new students each year.

The University continues to cultivate both student quality and access through innovative programs such as the Gamecock Gateway. The Gamecock Gateway is a program in its fifth year designed as a bridge to enrollment at the University. This one-year residential program is offered by invitation only to students who begin their course work at a local technical college and have access to University programs before transferring in their second year. For the Fall 2016 semester 420 new students are enrolled in the Gamecock Gateway and 227 students from last year’s Gateway class are now fully enrolled at USC Columbia. The Gamecock Guarantee program provides access to the lowest income South Carolinians and has served 993 students since its inception in 2008. The average freshman family income of program participants is $17,174 and gift aid is more than 97%. These students retain and graduate at a higher rate than the total undergraduate population.

University of South Carolina students from the state are eligible for tuition assistance based on entrance exams, rank in class and GPA. The state funding commitment for merit scholarships remains strong with funding from the South Carolina Education Lottery. Students at the USC campuses annually receive more than $80 million across the different scholarship programs. Additionally, funding from lottery proceeds supports technology needs at the system comprehensive and Palmetto College campuses. "'

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

Following completion of the largest capital campaign in University history with $1,043,265,730 collected exceeding the ambitious $1 billion goal, fundraising moderated for the 2016 fiscal year with $103.6 million in pledges and collections. This is the ninth consecutive year the University has raised more than $100 million in private support. Research grant awards were $250 million in the 2016 fiscal year, an $11.8 million increase over the prior year. USC hospital partners with Greenville Hospital Systems, Palmetto Health Systems, and the Veterans Administration led the increases in external funding. Economic engagement efforts led to the April 2016 grand opening of the Center for Applied Innovation, where university, IBM and private sector researchers – including Fluor Corporation – will use technology for real world applications. Initial projects include developing ways to enhance and personalize tools in higher education, make aircraft more reliable and supply chains more efficient.

USC System Headcount Enrollment "(

UNIVERSITY OF SOUTH CAROLINA Management’s Discussion and Analysis (Unaudited)

USC Columbia Resident Undergraduate Tuition & Required Fees

USC Columbia Non-Resident Undergraduate Tuition & Required Fees |

UNIVERSITY OF SOUTH CAROLINA Statement of Net Position As of June 30, 2016

ASSETS Current assets: Cash and cash equivalents $ 447,504,784 Restricted - cash and cash equivalents 188,749,428 Accounts receivable, net 70,336,693 Student loans receivable, current 7,403 Inventories 2,708,695 Prepaid items 2,431,865 Funds due from others 9,294,034 Total current assets 721,032,902

Noncurrent assets: Restricted - cash and cash equivalents 87,596,241 Investments 5,245,766 Prepaid items 2,000,000 Restricted - federal student loans receivable 17,005,927 Capital assets, net of accumulated depreciation 1,355,112,682 Other assets 2,841,486 Total noncurrent assets 1,469,802,102 Total assets 2,190,835,004

DEFERRED OUTFLOWS OF RESOURCES Deferred loss on debt refunding 4,967,133 Deferred outflows related to net pension liability 63,672,437 Total deferred outflows of resources 68,639,570

LIABILITIES Current liabilities: Accounts payable 22,889,978 Retainage payable - current portion 2,983,080 Accrued interest payable 4,797,253 Accrued payroll and related liabilities 18,586,918 Accrued compensated absences - current portion 21,927,398 Capital lease obligations - current portion 4,728,050 Bonds and notes payable - current portion 25,698,356 Unearned revenues 55,006,932 Deposits 2,680,354 Other liabilities 592,327 Funds held for others 6,179,079 Total current liabilities 166,069,725

Noncurrent liabilities: Accrued compensated absences 13,439,373 Federal loan liability 17,090,039 Capital lease obligations 10,095,695 Bonds and notes payable 593,722,770 Net pension liability 784,144,443 Total noncurrent liabilities 1,418,492,320 Total liabilities 1,584,562,045

DEFERRED INFLOWS OF RESOURCES Deferred inflows related to net pension liability 3,135,663

NET POSITION Net investment in capital assets 757,731,120 Restricted for: Nonexpendable 82,788,474 Expendable Scholarships, research, instruction, and other 38,007,855 Loans 2,810,835 Capital projects 91,242,151 Debt service 7,975,064 Unrestricted (308,778,633) Total net position $ 671,776,866

See Notes to the Financial Statements |

UNIVERSITY OF SOUTH CAROLINA Statement of Revenues, Expenses and Changes in Net Position For the year ended June 30, 2016

OPERATING REVENUES Student tuition and fees ($33,628,652 pledged for bonds) $ 760,901,254 Less: scholarship allowance (279,132,906) Federal grants and contracts 136,661,493 State grants and contracts 93,078,830 Local grants and contracts 1,364,875 Nongovernmental grants and contracts 32,853,784 Sales and services of educational and other activities 32,837,349 Sales and services of auxiliary enterprises ($25,945,074 pledged for bonds) 164,992,359 Less: scholarship allowance (3,849,239) Interest collected on student loans 295,151 Other fees ($3,515,850 pledged for bonds) 9,777,698 Other operating revenues 5,239,593 Total operating revenues 955,020,241

OPERATING EXPENSES Salaries and wages 579,493,826 Fringe benefits 191,428,138 Services and supplies 278,640,688 Utilities 34,526,183 Scholarships and fellowships 21,756,291 Depreciation expense 60,565,961 Total operating expenses 1,166,411,087 Operating loss (211,390,846)

NONOPERATING REVENUES (EXPENSES) State appropriations 149,059,413 Federal grants 52,292,875 Gifts 42,159,690 Investment income 3,640,446 Endowment income 6,862,342 Loss on disposal of capital assets (135,725) Interest on capital asset related debt (23,880,576) Net nonoperating revenues 229,998,465 Income before other revenues 18,607,619

State capital appropriations 23,680,584 Capital grants and gifts 3,466,385 Additions to permanent endowments 361,492 Change in net position 46,116,080 NET POSITION, BEGINNING OF YEAR 625,660,786 NET POSITION, END OF YEAR $ 671,776,866

See Notes to the Financial Statements |!

UNIVERSITY OF SOUTH CAROLINA Statement of Cash Flows For the year ended June 30, 2016

OPERATING ACTIVITIES Student tuition and fees $ 478,110,088 Research grants and contracts 253,958,960 Sales and services of educational and other activities 32,764,142 Sales and services of auxiliary enterprises 161,301,357 Student loans disbursed (2,090,905) Student loans collected 2,900,795 Interest collected on student loans 295,151 Inflows from federal direct student loans 299,785,579 Outflows from federal direct student loans (304,711,167) Payments to employees for services (578,156,825) Payments to employees for benefits (177,517,934) Payments to suppliers (300,826,995) Payments to students for scholarships and fellowships (21,756,291) Other receipts 13,436,850 Inflows from agency funds 62,065,649 Outflows from agency funds (58,296,161) Net cash used by operating activities (138,737,707)

NONCAPITAL FINANCING ACTIVITIES State appropriations 149,059,413 Federal grants 52,292,875 Gifts 44,822,855 Additions to permanent endowments 986,455 Federal loan liability (293,016) Net cash provided by noncapital financing activities 246,868,582

CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt 55,406,332 State capital appropriations 23,763,279 Capital grants and gifts 2,172,455 Purchase and construction of capital assets (97,324,639) Principal paid on capital asset related debt (72,136,519) Interest paid on capital asset related debt (28,258,732) Net cash used by capital and related financing activities (116,377,824)

INVESTING ACTIVITIES Investment income 3,961,547 Endowment income 6,463,782 Net cash provided by investing activities 10,425,329 Net increase/(decrease) in cash and cash equivalents 2,178,380 Cash and cash equivalents, beginning of year 721,672,073 Cash and cash equivalents, end of year $ 723,850,453

Reconciliation of cash and cash equivalents Cash and cash equivalents $ 447,504,784 Restricted - cash and cash equivalents, current 188,749,428 Restricted - cash and cash equivalents, noncurrent 87,596,241 $ 723,850,453

See Notes to the Financial Statements (Continued) |"

UNIVERSITY OF SOUTH CAROLINA Statement of Cash Flows For the year ended June 30, 2016

Reconciliation of net operating loss to net cash used by operating activities Operating loss $ (211,390,846) Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation expense 60,565,961 Accrued benefits related to net pension liability 12,230,461 Student loans cancelled 216,372 Change in current assets and liabilities Accounts receivable, net (24,231,761) Student loans receivable 809,891 Inventories 203,976 Prepaid items 3,241,377 Accounts payable 8,678,048 Retainage payable - noncapital 105 Accrued payroll 609,362 Accrued benefits 1,679,743 Accrued compensated absences 772,613 Unearned revenues 8,613,068 Deposits 380,369 Other liabilities 38,721 Funds held for and due from others (1,155,167)

Net cash used by operating activities $ (138,737,707)

NONCASH TRANSACTIONS Gifts of capital assets reducing proceeds of capital grants and gifts $ 1,694,770 Net change in capital grants and gifts receivables and unearned revenues $ 400,840 Loss on disposal of capital assets, net $ (135,725) Change in value of other assets for cash surrender value of life insurance recognized in endowment income $ 48,431 Change in value of investments recognized in endowment and investment income $ 350,128

See Notes to the Financial Statements |#

UNIVERSITY OF SOUTH CAROLINA Governmental Discretely Presented Component Units Statements of Net Position June 30, 2016

School of Beaufort- South Carolina Medicine Jasper Higher Research Educational Education Foundation Trust Commission Total ASSETS Current assets Cash and cash equivalents $ 239,007 $ 20,335,110 $ 6,505,785 $ 27,079,902 Restricted cash and cash equivalents 90,301,520 354,194 500,000 91,155,714 Investments - 9,866,995 1,444,070 11,311,065 Patient and other accounts receivable, net 9,810,634 13,311,916 294,221 23,416,771 Prepaid items and deposits 52,716 - 52,797 105,513 Total current assets 100,403,877 43,868,215 8,796,873 153,068,965

Noncurrent assets Capital assets, net of accumulated depreciation 134,275 10,596,148 46,049,886 56,780,309 Total noncurrent assets 134,275 10,596,148 46,049,886 56,780,309 Total assets 100,538,152 54,464,363 54,846,759 209,849,274

DEFERRED OUTFLOWS OF RESOURCES Deferred loss on debt refunding - -739,585 739,585

LIABILITIES

Current liabilities Accounts payable and accrued expenses 90,416,332 7,127,159 129,667 97,673,158 Retainage payable - -224,458 224,458 Accrued compensated - 1,198,615 21,000 1,219,615 Unearned revenue 9,532,473 - - 9,532,473 Current portion of long term debt - 4,464,975 2,032,773 6,497,748 Total current liabilities 99,948,805 12,790,749 2,407,898 115,147,452

Noncurrent liabilities Noncurrent portion of long term debt - 374,938 38,056,354 38,431,292 Total noncurrent liabilities - 374,938 38,056,354 38,431,292 Total liabilities 99,948,805 13,165,687 40,464,252 153,578,744

NET POSITION Net investment in capital assets - 7,262,317 6,475,886 13,738,203 Restricted for capital projects and debt service - - 500,000 500,000 Unrestricted 589,347 34,036,359 8,146,206 42,771,912 Total net position $ 589,347 $ 41,298,676 $ 15,122,092 $ 57,010,115

See Notes to the Financial Statements |$

UNIVERSITY OF SOUTH CAROLINA Governmental Discretely Presented Component Units Statements of Revenues, Expenses and Changes in Net Position For the year ended June 30, 2016

School of Beaufort- South Carolina Medicine Jasper Higher Research Educational Education Foundation Trust Commission Total REVENUES Operating revenues Contracts and grants $ 160,081,578 $ 33,627,244 $ - $ 193,708,822 Patient charges, net of allowances - 35,731,049 - 35,731,049 Management fees and recoveries 3,731,976 - - 3,731,976 Royalty income 184,454 - - 184,454 Realized investment income, net - 507,623 - 507,623 Housing - - 5,068,672 5,068,672 Dining - - 2,460,756 2,460,756 Other operating revenues - 3,743,476 86,000 3,829,476 Total operating revenues 163,998,008 73,609,392 7,615,428 245,222,828

EXPENSES Operating expenses Salaries and administrative expenses 994,907 51,150,512 739,096 52,884,515 Services and supplies 1,145,381 22,313,663 3,536,207 26,995,251 Research and development direct costs 161,987,593 - - 161,987,593 Depreciation and amortization - 1,129,618 1,359,894 2,489,512 Total operating expenses 164,127,881 74,593,793 5,635,197 244,356,871 Operating income (loss) (129,873) (984,401) 1,980,231 865,957

NONOPERATING REVENUES (EXPENSES) Private gifts and donations (72,526) - (1,139,920)(1,212,446) Interest and investment income 3,288 - 10,276 13,564 Unrealized gain (loss) on investment holdings, net - (495,436) - (495,436) County appropriations - - 2,000,000 2,000,000 Interest on capital asset debt - -(597,963)(597,963) Proceeds from litigation settlement - - 405,836 405,836 Net nonoperating revenues (expenses) (69,238) (495,436) 678,229 113,555 Change in net position (199,111) (1,479,837) 2,658,460 979,512

NET POSITION, BEGINNING OF YEAR 788,458 42,778,513 12,463,632 56,030,603 NET POSITION, END OF YEAR $ 589,347 $ 41,298,676 $ 15,122,092 $ 57,010,115

See Notes to the Financial Statements | %

UNIVERSITY OF SOUTH CAROLINA Non-Governmental Discretely Presented Component Units Statements of Financial Position June 30, 2016

University of Greater Educational University of University of South Carolina University of USC Upstate Foundation of South Carolina South Carolina Business South Carolina Capital the University of Development Educational Partnership Alumni USC Upstate Development South Carolina Foundation Foundation Foundation Association Foundation Foundation Lancaster Total ASSETS Cash and cash equivalents $ 7,677,045 $ 8,706,255 $ 1,709,794 $ 2,838,568 $ 633,152 $ 51,861 $ 116,244 $ 21,732,919 Investments 32,061,488 340,103,185 52,555,030 6,177,201 8,869,195 259,480 7,826,455 447,852,034 Real estate held for investment 30,235,507 1,701,527 - - - - - 31,937,034 Assets held in trust - 63,756,195 50,134,698 - 242,927 - - 114,133,820 Accounts receivable, net 1,287,945 10,000,280 803,186 2,320,224 - - - 14,411,635 Contributions receivable, net 1,795,324 44,824,519 2,530,748 - 1,979,369 - 154,716 51,284,676 Prepaid expenses 29,583 - 14,950 229,444 - - - 273,977 Other assets 898,699 251 51,645 41,355 - - - 991,950 Fixed assets, net of depreciation 134,128,065 - - 22,496,471 111,425 - 7,948,953 164,684,914 Total assets $ 208,113,656 $ 469,092,212 $ 107,800,051 $ 34,103,263 $ 11,836,068 $ 311,341 $ 16,046,368 $ 847,302,959

LIABILITIES Accounts payable and accrued expenses $ 5,937,698 $ 5,302,480 $ 473,266 $-98,393 $-$ $ 4,994 $ 11,816,831 Lines of credit 41,444,182 ------41,444,182 Deferred revenues 1,076,995 - 15,225,274 327,080 - - - 16,629,349 Bonds and notes payable 117,444,972 24,874,983 - 20,933,004 2,000,000 227,107 4,039,611 169,519,677 Interest rate swap 9,750,627 ------9,750,627 Other liabilities 1,202,373 7,876,456 77,795 91,573 104,723 - - 9,352,920 Total liabilities 176,856,847 38,053,919 15,776,335 21,450,050 2,104,723 227,107 4,044,605 258,513,586

NET ASSETS Unrestricted 3,212,861 64,618,244 14,374,206 7,935,481 99,074 84,234 4,835,679 95,159,779 Temporarily restricted 24,990,244 141,213,469 49,203,065 4,717,732 3,269,345 - 1,756,017 225,149,872 Permanently restricted 3,365,928 225,206,580 28,446,445 - 6,362,926 - 5,410,067 268,791,946 Total Foundation net assets 31,569,033 431,038,293 92,023,716 12,653,213 9,731,345 84,234 12,001,763 589,101,597 Noncontrolling interest (312,224) ------(312,224) Total net assets 31,256,809 431,038,293 92,023,716 12,653,213 9,731,345 84,234 12,001,763 588,789,373 Total liabilities and net assets $ 208,113,656 $ 469,092,212 $ 107,800,051 $ 34,103,263 $ 11,836,068 $ 311,341 $ 16,046,368 $ 847,302,959

See Notes to the Financial Statements UNIVERSITY OF SOUTH CAROLINA Non-Governmental Discretely Presented Component Units Statements of Activities For the year ended June 30, 2016

University of Greater Educational University of University of South Carolina University of USC Upstate Foundation of South Carolina South Carolina Business South Carolina Capital the University of Development Educational Partnership Alumni USC Upstate Development South Carolina Foundation Foundation Foundation Association Foundation Foundation Lancaster Total CHANGES IN UNRESTRICTED NET ASSETS Revenues, gains and other support Contributions $ 3,402 $ 23,405,047 $ 956,859 $ 1,869,208 $ 278,806 $ 50,190 $ 451,337 $ 27,014,849 Investment returns (losses)(1,061,176) 4,074,786 126,495 116,458 145,869 175,182 (25,923) 3,551,691 Net realized and unrealized gains (losses) - (7,804,071) - (249,424)(449,600)(363,842) - (8,866,937) Earned income 10,708,502 - 2,156,881 214,157 900 494,715 - 13,575,155 Other 1,018,427 1,358,082 - 2,398,936 98,010 - 202,609 5,076,064 Gain (loss) on disposal of assets - - --- (5,452,188) - (5,452,188) Net assets released from restrictions: Transfers - -1,877,178 - - -109,512 1,986,690 Reclassification based on law change- -(62,251) - - - -(62,251) Satisfaction of program restrictions 1,429,059 5,911,581 16,940,393 2,818,378 1,047,900 - 61,770 28,209,081 Expiration of time restrictions - 2,665,981 - - - - -2,665,981 Total revenues, gains and other support 12,098,214 29,611,406 21,995,555 7,167,713 1,121,885 (5,095,943) 799,305 67,698,135

Expenses Scholarships and student assistance - 10,321,727 1,263,542 305,250 143,862 - 179,889 12,214,270 Program services 8,662,430 17,387,178 20,009,687 2,811,700 306,651 - 1,408,051 50,585,697 Supporting services 4,552,226 4,476,401 327,097 1,505,839 1,099,017 - 127,150 12,087,730 Other expenses - - -2,762,857 166,067 1,039,529 - 3,968,453 Total expenses 13,214,656 32,185,306 21,600,326 7,385,646 1,715,597 1,039,529 1,715,090 78,856,150 Excess revenues over (under) expenses (1,116,442) (2,573,900) 395,229 (217,933) (593,712) (6,135,472) (915,785) (11,158,015) Interest rate swap fair value adjustment (4,773,490) - - - -(485,251) - (5,258,741) Change in unrestricted net assets $ (5,889,932) $ (2,573,900) $ 395,229 $ (217,933) $ (593,712) $ (6,620,723) $ (915,785) $ (16,416,756)

| See Notes to the Financial Statements (Continued) & #'

UNIVERSITY OF SOUTH CAROLINA Non-Governmental Discretely Presented Component Units Statements of Activities For the year ended June 30, 2016

University of Greater Educational University of University of South Carolina University of USC Upstate Foundation of South Carolina South Carolina Business South Carolina Capital the University of Development Educational Partnership Alumni USC Upstate Development South Carolina Foundation Foundation Foundation Association Foundation Foundation Lancaster Total CHANGES IN TEMPORARILY RESTRICTED NET ASSETS Contributions $ 1,451,181 $ 3,677,814 $ 45,978,186 $ 2,293,165 $-900,174 $ $ (129,572) $ 54,170,948 Investment returns (losses) - 1,753,774 (1,457,303) - - -(207,349) 89,122 Net realized and unrealized gains (losses) 138,910 (3,882,927) - - - - -(3,744,017) Other 1,200 - -225,637 146,721 - -373,558 Net assets released from restrictions: Transfers - -(2,021,119) - - -(220,364)(2,241,483) Reclassification based on law change- -62,251 - --- 62,251 Satisfaction of program restrictions (1,429,059)(8,825,341)(16,940,393)(2,818,378)(1,047,900) - (61,770)(31,122,841) Expiration of time restrictions - (3,479,665) - - - - -(3,479,665) Change in temporarily restricted net assets 162,232 (10,756,345) 25,621,622 (299,576) (1,005) - (619,055) 14,107,873

CHANGES IN PERMANENTLY RESTRICTED NET ASSETS Contributions - 8,106,644 521,631 - 292,306 - 124,497 9,045,078 Net assets released from restrictions: Transfers - -143,941 - -- 110,852 254,793 Satisfaction of program restrictions - 2,913,760 - - - - -2,913,760 Expiration of time restrictions - 813,684 - - - - -813,684 Change in permanently restricted net assets - 11,834,088 665,572 - 292,306 - 235,349 13,027,315 Change in net assets (5,727,700) (1,496,157) 26,682,423 (517,509) (302,411) (6,620,723) (1,299,491) 10,718,432 Net change attributable to noncontrolling interest (89,726) ------(89,726)

NET ASSETS, BEGINNING OF YEAR 37,386,459 432,534,450 65,341,293 13,170,722 10,033,756 6,704,957 13,301,254 578,472,891 NET ASSETS, END OF YEAR $ 31,569,033 $ 431,038,293 $ 92,023,716 $ 12,653,213 $ 9,731,345 $ 84,234 $ 12,001,763 $ 589,101,597

See Notes to the Financial Statements #(

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - The University of South Carolina (the University) is a State-supported, coeducational institution of higher education. The University’s primary purpose is to provide undergraduate, graduate, and professional education to students and conduct research and other activities that advance fundamental knowledge.

Reporting Entity - The financial reporting entity, as defined by Governmental Accounting Standards Board (GASB) Codification Section 2100, Defining the Financial Reporting Entity, consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the financial statements to be misleading or incomplete. GASB Codification Section 2600, Reporting Entity and Component Unit Presentation and Disclosure, provides criteria for determining whether certain organizations should be reported as component units based on the nature and significance of their relationship with a primary government and classifies reporting requirements for those organizations. Based on these criteria, the financial statements include the University as the primary government and other related entities as discretely presented component units. The University’s discretely presented component units are discussed in Note 11.

The University is composed of the Columbia campus, including the Columbia School of Medicine, the Greenville School of Medicine, and seven system campuses. The University is a component unit of the State of South Carolina (the State). As a discretely presented component unit of the State, the University is financially accountable to and fiscally dependent on the State. Its Board of Trustees is appointed by the Governor and/or the General Assembly of the State.

Financial Statements - The financial statement presentation for the University meets the requirements of GASB Codification Sections 2100-2900, Financial Reporting, and Co5, Colleges and Universities. The financial statement presentation provides a comprehensive, entity-wide perspective of the University’s net position, revenues, expenses and changes in net position and cash flows.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and affect disclosure of contingent assets and liabilities at the date of the financial statements. Significant estimates used include separation of accrued compensated absences between current and noncurrent and depreciation expense. Actual results could differ from those estimates.

Basis of Accounting - For financial reporting purposes, the University is considered to be engaged only in business- type activities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Student tuition and auxiliary enterprise fees are presented net of scholarships and fellowships applied to student accounts, while stipends and other payments made directly are presented as scholarship and fellowship expenses. All significant intra-agency transactions have been eliminated.

Cash and Cash Equivalents - For purposes of the statement of cash flows, the University considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The University participates in the State’s internal cash management pool, administered by the State Treasurer. Because the cash management pool operates as a demand deposit account, amounts invested in the pool are classified as cash and cash equivalents. For credit risk information pertaining to the cash management pool, see the deposits disclosures in Note 2. $

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

The State’s internal cash management pool consists of a general deposit account and several special deposit accounts. The State records each fund’s equity interest in the general deposit account; however, all earnings on that account are credited to the General Fund of the State. The University reports its deposits in the general deposit account at cost and its special deposit accounts at fair value. Interest earned, including interest income, realized gains (losses) and unrealized gains (losses), by the University’s special deposit accounts is posted at the end of each month based on the percentage of the University’s accumulated daily income receivable to the total income receivable of the pool. Realized gains and losses are allocated daily and are included in the accumulated income receivable. Unrealized gains and losses are allocated at year end based on the percentage of ownership in the pool.

Investments - The University accounts for its investments at fair value in accordance with GASB Codification Section I50, Investments. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment or endowment income in the statement of revenues, expenses and changes in net position.

Accounts Receivable - Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff. Accounts receivable also include amounts due from the Federal, State, and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.

Inventories - Inventories are carried at the lower of cost or market as determined by various methods.

Noncurrent Cash and Investments - Noncurrent cash and investments primarily consist of permanently endowed funds, debt service reserve funds and federal student loan funds. These funds are externally restricted and are classified as restricted noncurrent assets in the statement of net position.

Prepaid Items - Expenditures for services paid for in the current or prior fiscal years and benefiting more than one accounting period are allocated among accounting periods. Amounts reported in this asset account consist primarily of maintenance, license and service agreements, and travel reservations and deposits.

Capital Assets - Capital assets are recorded at cost at the date of acquisition or fair market value at the date of donation in the case of gifts. The University follows capitalization guidelines established by the State. All land is capitalized, regardless of cost. Qualifying improvements that rest in or on the land itself are recorded as depreciable land improvements. Major additions and renovations and other improvements that add to the usable space, prepare existing buildings for new uses, or extend the useful life of an existing building are capitalized. The University capitalizes movable personal property with a unit value in excess of $5,000 and a useful life in excess of two years and depreciable land improvements, buildings and improvements, and intangible assets costing in excess of $100,000. Routine repairs and maintenance and library materials, except individual items costing in excess of $5,000, are charged to operating expenses in the year in which the expense was incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 3 to 60 years for buildings and improvements and land improvements; 2 to 25 years for machinery, equipment, and vehicles; and 3 to 10 years for intangibles. A full month of depreciation is taken the month the asset is placed in service and no depreciation is taken in the month of disposition.

The University capitalizes as a component of construction in progress interest cost in excess of earnings on invested debt proceeds associated with the capital projects. Therefore, asset values in capital assets include such interest costs. Capitalized interest for fiscal year 2016 was $3,286,319. ~

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Unearned Revenues and Deposits - Unearned revenues include amounts billed for tuition and fees and certain auxiliary activities (including, but not limited to, athletic ticket sales and parking revenues) prior to the end of the fiscal year but related to the subsequent accounting period. Unearned revenues also include amounts received from grant and contract sponsors that have not yet been earned.

Deposits represent dormitory room deposits, security deposits for possible room damage and key loss, and other miscellaneous deposits. Student deposits are recognized as revenue during the semester for which the fee is applicable and earned when the deposit is nonrefundable to the student under the forfeit terms of the agreement.

Compensated Absences - Employee vacation pay expense is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued compensated absences in the statement of net position, and as a component of compensation and benefit expense in the statement of revenues, expenses and changes in net position.

Noncurrent Liabilities - Noncurrent liabilities include (1) principal amounts of bonds payable, notes payable, and capital lease obligations with contractual maturities greater than one year; (2) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year; (3) net pension liability; and (4) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.

Deferred Outflows of Resources - the consumption of net position that is applicable to future reporting periods. The University’s deferred outflows of resources consist of (1) deferred loss on debt refunding – the defeasance of previously outstanding bonds resulted in deferred refunding losses. These deferred losses are recognized as a component of interest expense over the remaining life of the old debt or the life of the new debt, whichever is shorter; (2) net pension liability - decreases in net pension liability that were not included in pension expense. Also, employer contributions subsequent to the measurement date of the net pension liability are reported as deferred outflows of resources.

Deferred Inflows of Resources - the acquisition of net position that is applicable to future reporting periods. The University’s deferred inflows of resources consist of increases in the net pension liability that were not included in pension expense.

Net Position - Components of the University’s net position are classified as follows: Net investment in capital assets: This represents the University’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.

Restricted - nonexpendable: The restricted nonexpendable component of net position consists of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal.

Restricted - expendable: The restricted expendable component of net position includes resources which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

Unrestricted: The unrestricted component of net position represents resources derived from student tuition and fees, sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for any purpose.

The University policy for applying expenses that can use both restricted and unrestricted resources is delegated to the departmental administrative level. General practice is to first apply the expense to restricted resources then to unrestricted resources. ~!

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Income Taxes - The University is a political subdivision of the State and, is therefore, generally exempt from federal and state income taxes under applicable federal and state statutes and regulations on related income. Certain activities of the University may be subject to taxation as unrelated business income.

Classification of Revenues - The University has classified its revenues as either operating or nonoperating revenues according to the following criteria:

Operating revenues: Operating revenues generally result from exchange transactions to provide goods or services related to the University’s principal ongoing operations.

These revenues include: (1) student tuition and fees received in exchange for providing educational services, housing, and other related services to students; (2) receipts for scholarships including federal grants and contract revenue where the governmental agency has identified the qualified student recipients; (3) fees received from organizations and individuals in exchange for miscellaneous goods and services provided by the University; and (4) grants and contracts that are essentially the same as contracts for services that finance programs the University would not otherwise undertake.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions. These revenues include gifts and contributions, appropriations, investment income, and any grants and contracts that are not classified as operating revenue or restricted by the grantor to be used exclusively for capital purposes.

Scholarship Allowance - Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the statement of revenues, expenses and changes in net position. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students’ behalf.

Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University’s financial statements.

To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded a scholarship discount and allowance.

Rebatable Arbitrage - Arbitrage involves the investment of proceeds from the sale of tax-exempt securities in a taxable investment that yields a higher rate of return, resulting in income in excess of interest costs. Federal law requires entities to rebate to the government such income on tax-exempt debt if the yield from these earnings exceeds the effective yield on the related tax-exempt debt issued.

Governmental units that issue no more than $5 million in total of all such debt in a calendar year are exempt from the rebate requirements. For this purpose, tax-exempt indebtedness includes bonds and certain capital leases and installment purchases. Rebates are payable every five years or at maturity of the debt, whichever is earlier. However, the potential liability is calculated annually for financial reporting purposes. The University had no rebatable arbitrage liability at June 30, 2016. ~"

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Donor-Restricted Endowments - Endowments are subject to restrictions requiring that the principal be invested and that only the income be used for specific purposes. If a donor has not provided specific timing instructions, state law permits the Board of Trustees to authorize for expenditure the endowment’s net appreciation. Any net appreciation that is spent is required to be spent for the purpose for which the endowment was established. The University has a total return policy for authorizing and spending endowment income.

At June 30, 2016, $13,400,869 of the amount reported as net position, restricted expendable - scholarships, research, instruction and other, represented net appreciation of donor-restricted endowments.

Adoption of new accounting standard - Effective for the fiscal year ending June 30, 2016, the University adopted GASB Statement No. 72, Fair Value Measurement and Application. As a result of this implementation, the Campus classifies its investments using a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The effect of this implementation is discussed in Note 2.

NOTE 2 - CASH AND CASH EQUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS

Most deposits and investments of the University are under the control of the State Treasurer who, by law, has sole authority for investing State funds. Certain deposits and investments are deposited with or managed by financial institutions and brokers as restricted by donors.

The following schedule reconciles deposits and investments within the notes to the statement of net position amounts:

Statement of Net Position Cash and cash equivalents (current) $ 447,504,784 Restricted cash and cash equivalents (current) for: Debt service 5,560,833 Scholarship, research, instruction, and other 40,828,906 University administered loans 196,168 Capital projects 142,163,521 188,749,428

Restricted cash and cash equivalents (noncurrent) for: Endowments 77,225,525 Federal student loans 2,702,335 Debt service reserves 7,668,381 87,596,241

Investments (noncurrent) 5,245,766 Total $ 729,096,219

Notes Cash on hand 1,093,142 Deposits held by State Treasurer 722,396,208 Other deposits 361,103 Investments held by State Treasurer 3,531,323 Other investments 1,714,443 Total $ 729,096,219 ~#

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 2 - CASH AND CASH EQUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS, Continued

Deposits Held by State Treasurer - State law requires full collateralization of all State Treasurer bank balances. The State Treasurer must correct any deficiencies in collateral within seven days. Information pertaining to the reported amounts, fair values, and credit risk of the State Treasurer’s deposits is disclosed in the Comprehensive Annual Financial Report of the State of South Carolina.

With respect to the investments in the State’s internal cash management pool, all of the State Treasurer’s investments are insured or registered or are investments for which the securities are held by the State or its agents in the State’s name. Information pertaining to the reported amounts, fair values, and the credit risk of the State Treasurer's investments is disclosed in the Comprehensive Annual Financial Report of the State of South Carolina. For the fiscal year ending June 30, 2016, $10,378,257 of the $722,396,208 identified in the preceding schedule as “Deposits held by State Treasurer” is attributable to unrealized appreciation.

The University has adopted applicable accounting standards for its financial assets and liabilities which clarify that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The University utilizes market data or assumptions that market participants would use in pricing the asset or liability. The standards establish a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. The University’s investments consist of $1,202,665 Level 1 assets, $163,145 Level 2 assets, and $348,633 Level 3 assets. The investment assets held in the State’s cash management pool are all Level 2 assets.

Other Deposits - The University’s other deposits at year-end were entirely covered by federal depository insurance or were fully collateralized by securities held by the pledging bank's trust department.

Investments Held by State Treasurer and Other Investments - The University’s investments include common stock held by the State Treasurer for the University.

The University has other investments which are managed by financial institutions or brokers as specified by the donors. Purchased investments are valued at fair value. Investments received from donors are valued at the lesser of their fair value on the date promised or received or fair value as of fiscal year-end.

Custodial credit risk is the risk that in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investments or collateral securities that are in possession of an outside party.

The University does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Other investments totaling $1,714,443 were collateralized by securities held by the pledging bank’s trust department but not in the University’s name.

The net change in unrealized appreciation of investments for the current fiscal year was $350,128. ~$

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 3 - RECEIVABLES

Accounts Receivable – Accounts receivable consisted of the following:

Student $ 14,635,109 Auxiliary enterprises 5,979,750 Federal grants and contracts 43,789,142 State grants and contracts 2,150,375 Local grants and contracts 569,851 Non-governmental grants and contracts 5,934,777 Accrued interest 819,993 73,878,997 Less allowance for doubtful accounts (3,542,304) Accounts receivable, net $ 70,336,693

Allowances for doubtful accounts are based upon actual losses experienced in prior years and evaluations of the current accounts.

Student Loans Receivable and Federal Loan Liability - Student loans made through the Federal Perkins and the Federal Nursing and Health Professions loan programs comprise substantially all of the student loans receivable, and are restricted for such loans. The loan programs provide various repayment options: students have the right to repay the loans over periods up to 10 years depending on the amount of the loan and loan cancellation privileges the student may exercise.

The amount reported as a federal loan liability is the amount of federal contributions and net earnings on the loans that would have to be repaid to the federal government if the University ceased to participate in the programs.

As the University determines that loans are uncollectible, the loans can be assigned to the federal agency administrating the loan programs.

Capital Improvement Bonds Proceeds Receivable - This amount represents outstanding state capital improvement and infrastructure bond fund proceeds, and capital reserve fund appropriations that have been expended but not yet drawn.

The State has authorized capital improvement bonds, research infrastructure bonds, university infrastructure bonds and capital reserve fund appropriations to fund improvements and expansion of state facilities. The University is not obligated to repay these funds to the State. Authorized funds can be requested once the State authorities have given approval to begin specific projects and project expenditures have been incurred.

At June 30, 2016 the University had no capital improvement bond proceeds receivable. ~%

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 4 - CAPITAL ASSETS

June 30, 2015 Additions Reductions June 30, 2016

Capital assets not being depreciated Land and improvements $-79,919,429 $-$ $ 79,919,429 Construction in progress 105,048,359 79,656,498 72,153,787 112,551,070 Works of art and historical treasures 31,335,637 3,415,067 - 34,750,704 Total capital assets not being depreciated 216,303,425 83,071,565 72,153,787 227,221,203

Other capital assets Land improvements 108,738,155 30,632 - 108,768,787 Buildings and improvements 1,574,583,423 66,145,991 - 1,640,729,414 Machinery, equipment and other 190,975,609 11,534,254 4,695,837 197,814,026 Vehicles 17,508,627 1,047,215 307,568 18,248,274 Intangibles 56,665,956 5,670,198 - 62,336,154 Total capital assets at historical cost 1,948,471,770 84,428,290 5,003,405 2,027,896,655

Less accumulated depreciation for Land improvements 31,827,890 4,102,951 - 35,930,841 Buildings and improvements 640,815,826 39,861,760 - 680,677,586 Machinery, equipment and other 146,941,715 9,574,379 4,560,112 151,955,982 Vehicles 11,700,782 1,072,284 307,568 12,465,498 Intangibles 13,020,682 5,954,587 - 18,975,269 Total accumulated depreciation 844,306,895 60,565,961 4,867,680 900,005,176 Other capital assets, net 1,104,164,875 23,862,329 135,725 1,127,891,479 Capital assets, net $ 1,320,468,300 $ 106,933,894 $ 72,289,512 $ 1,355,112,682 ~&

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS

The South Carolina Public Employee Benefit Authority (PEBA), which was created July 1, 2012, administers the various retirement systems and retirement programs managed by its Retirement Division. PEBA has an 11- member Board of Directors, appointed by the Governor and General Assembly leadership, which serves as co- trustee and co-fiduciary of the systems and the trust funds. By law, the Budget and Control Board, which consists of five elected officials, also reviews certain PEBA Board decisions regarding the funding of the Systems and serves as a co-trustee of the Systems in conducting that review. For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Systems and additions to/deductions from the Systems fiduciary net position have been determined on the accrual basis of accounting as they are reported by the Systems in accordance with generally accepted accounting principles (GAAP). For this purpose, revenues are recognized when earned and expenses are recognized when incurred. Benefit and refund expenses are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value.

PEBA issues a Comprehensive Annual Financial Report (CAFR) containing financial statements and required supplementary information for the South Carolina Retirement Systems’ Pension Trust Funds. The CAFR is publically available through the Retirement Benefits’ link on PEBA’s website at www.peba.gov, or a copy may be obtained by submitting a request to PEBA, PO Box 11960, Columbia, SC 29211-1960. PEBA is considered a division of the primary government of the state of South Carolina and therefore, retirement trust fund financial information is also included in the comprehensive annual financial report of the State.

Plan Description The South Carolina Retirement System (SCRS), a cost sharing multiple-employer defined benefit pension plan, was established effective July 1, 1945, pursuant to the provisions of Section 9-1-20 of the South Carolina Code of Laws for the purpose of providing retirement allowances and other benefits for employees of the state, its public school districts, and political subdivisions.

The State Optional Retirement Program (ORP) is a defined contribution plan that is offered as an alternative to SCRS to certain newly hired state, public school, and higher education employees. State ORP participants direct the investment of their funds into a plan administered by one of four investment providers.

The South Carolina Police Officers Retirement System (PORS), a cost-sharing multiple-employer defined benefit pension plan, was established effective July 1, 1962, pursuant to the provisions of Section 9-11-20 of the South Carolina Code of Laws for the purpose of providing retirement allowances and other benefits for police officers and firemen of the state and its political subdivisions.

Membership - Membership requirements are prescribed in Title 9 of the South Carolina Code of Laws. A brief summary of the requirements under each system is presented below.

SCRS – Generally, all employees of covered employers, such as the University, are required to participate in and contribute to the system as a condition of employment. This plan covers general employees and teachers and individuals newly elected to the South Carolina General Assembly beginning with the November 2012 general election. An employee member of the system with an effective date of membership prior to July 1, 2012 is a Class II member. An employee member of the system with an effective date of membership on or after July 1, 2012 is a Class III member. $'

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

ORP – As an alternative to membership in SCRS, newly hired state, public school, and higher education employees and individuals newly elected to the S.C. General Assembly beginning with the November 2012 general election have the option to participate in the State Optional Retirement Program (State ORP), which is a defined contribution plan. State ORP participants direct the investment of their funds into a plan administered by one of four investment providers. PEBA assumes no liability for State ORP benefits. Rather, the benefits are the liability of the investment providers. For this reason, State ORP programs are not part of the retirement systems’ trust funds for financial statement purposes. Employee and Employer contributions to the State ORP are at the same rates as SCRS. A direct remittance is required from the employers to the member’s account with investment providers for the employee contribution (8.16 percent) and a portion of the employer contribution (5.00 percent). A direct remittance is also required to SCRS for the remaining portion of the employer contribution (5.91 percent) and an incidental death benefit contribution (0.15 percent), if applicable, which is retained by SCRS.

PORS – To be eligible for PORS membership, an employee must be required by the terms of his employment, by election or appointment, to preserve public order, protect life and property, and detect crimes in the state; to prevent and control property destruction by fire; or to serve as a peace officer employed by the Department of Corrections, the Department of Juvenile Justice, or the Department of Mental Health. Probate judges and coroners may elect membership in PORS. Magistrates are required to participate in PORS for service as a magistrate. PORS members, other than magistrates and probate judges, must also earn at least $2,000 per year and devote at least 1,600 hours per year to this work, unless exempted by statute. An employee member of the system with an effective date of membership prior to July 1, 2012 is a Class II member. An employee member of the system with an effective date of membership on or after July 1, 2012 is a Class III member.

Benefits- Benefit terms are prescribed in Title 9 of the South Carolina Code of Laws. PEBA does not have the authority to establish or amend benefit terms without a legislative change in the code of laws. Key elements of the benefit calculation include the benefit multiplier, years of services, and average final compensation. A brief summary of benefit terms for each system is presented below.

SCRS – A Class II member who has separated from service with at least five or more years of earned service is eligible for a monthly pension at age 65 or with 28 years of credited service regardless of age. A member may elect early retirement with reduced pension benefits payable at age 55 with 25 years of service credit. A Class III member who has separated from service with at least eight or more years of earned service is eligible for a monthly pension upon satisfying the Rule of 90 requirement that the total of the member’s age and the member’s creditable service equals at least 90 years. Both Class II and Class III members are eligible to receive a reduced deferred annuity at age 60 if they satisfy the five- or eight-year earned service requirement, respectively.

The benefit formula for full benefits effective since July 1, 1989 for the SCRS is 1.82 percent of an employee’s average final compensation (AFC) multiplied by the number of years of credited service. For Class II members, AFC is the average annual earnable compensation during 12 consecutive quarters and includes an amount for up to 45 days termination pay at retirement for unused annual leave. For Class III members, AFC is the average annual earnable compensation during 20 consecutive quarters and termination pay for unused annual leave at retirement is not included. An incidental death benefit is also available to beneficiaries of active and retired members.

The annual retirement allowance of eligible retirees or their surviving annuitants is increased by the lesser of one percent or five hundred dollars every July 1. Only those annuitants in receipt of a benefit on July 1 the preceding year are eligible to receive the increase. Members who retire under the early retirement provisions at age 55 with 25 years of service are not eligible for the benefit adjustment until the second July 1 after reaching the age 60 or the second July 1 after the date they would have had 28 years of service credit had they not retired. $(

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

PORS – A Class II member who has separated from service with at least five or more years of earned service is eligible for a monthly pension at age 55 or with 25 years of credited service regardless of age. A Class III member who has separated from service with at least eight or more years of earned service is eligible for a monthly pension at age 55 or with 27 years of credited service regardless of age. Both Class II and Class III members are eligible to receive a deferred annuity at age 55 with five or eight years of earned service, respectively. An incidental death benefit is also available to beneficiaries of active and retired members. Accidental death benefits are also provided upon the death of an active member working for a covered employer whose death was a natural and proximate result of an injury incurred while in the performance of duty.

The retirement allowance of eligible retirees or their surviving annuitants is increased by the lesser of one percent or five hundred dollars every July 1. Only those annuitants in receipt of a benefit on July 1 of the preceding year are eligible to receive the increase.

Disability annuity benefits are available to Class II members if they have permanent incapacity to perform regular duties of the member’s job and they have at least 5 years of earned service (this requirement does not apply if the disability is a result of a job related injury). Class III members can apply for disability annuity benefits provided they have a permanent incapacity to perform the regular duties of the member’s job and they have a minimum of eight years of credited service. For disability applications received after December 31, 2013, a member of SCRS will have to be approved for disability benefits from the Social Security Administration in order to be eligible for SCRS disability retirement benefits. An incidental death benefit equal to an employee’s annual rate of compensation is payable upon the death of an active employee with a minimum of one year of credited service or to a working retired contributing member. There is no service requirement for death resulting from actual performance of duties for an active member. For eligible retired members, a lump-sum payment is made to the retiree’s beneficiary of up to $6,000 based on years of service at retirement.

Contributions - Contributions are prescribed in Title 9 of the South Carolina Code of Laws. Upon recommendation by the actuary in the annual actuarial valuation, the PEBA Board may adopt and present to the Budget and Control Board for approval an increase in the SCRS and PORS employer and employee contribution rates, but any such increase may not result in a differential between the employee and total employer contribution rate that exceeds 2.9 percent of earnable compensation for SCRS and 5 percent for PORS. An increase in the contribution rates adopted by the Board may not provide for an increase of more than one-half of one percent in any one year. If the scheduled employee and employer contributions provided in statute or the rates last adopted by the Board are insufficient to maintain a thirty year amortization schedule of the unfunded liabilities of the plans, the Board shall increase the contribution rates in equal percentage amounts for the employer and employee as necessary to maintain the thirty- year amortization period; and, this increase is not limited to one-half of one percent per year.

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

Required employee contribution rates for fiscal year 2015-2016 are as follows:

SCRS Employee Class II 8.16% of earnable compensation Employee Class III 8.16% of earnable compensation

ORP 8.16% of earnable compensation

PORS Employee Class II 8.74% of earnable compensation Employee Class III 8.74% of earnable compensation

Required employer contribution rates1 for fiscal year 2015-2016 are as follows:

SCRS Employer Class II 10.91% of earnable compensation Employer Class III 10.91% of earnable compensation Employer Incidental Death Benefit 0.15% of earnable compensation

ORP Employer Contribution2 10.91% of earnable compensation Employer Incidental Death Benefit 0.15% of earnable compensation

PORS Employer Class II 13.34% of earnable compensation Employer Class III 13.34% of earnable compensation Employer Incidental Death Benefit 0.20% of earnable compensation Employer Accidental Death Program 0.20% of earnable compensation

1 Calculated on earnable compensation as defined in Title 9 of the South Carolina Code of Laws. 2 Of this employer contribution, 5% of earnable compensation must be remitted by the employer directly to the ORP vendor to be allocated to the member’s account with the remainder of the employer contribution remitted to the SCRS.

Of the ORP employer contribution of 10.91% of earnable compensation, 5% of earnable compensation must be remitted by the employer directly to the ORP vendor to be allocated to the member’s account with the remainder of the employer contribution remitted to SCRS.

SCRS - The University’s actual retirement and incidental death program contributions to the SCRS for the years ended June 30, 2016, 2015, and 2014 were:

Fiscal Year Retirement Incidental Death Ended Rate Contribution Rate Contribution 2016 10.910% $29,302,000 0.150% $403,000 2015 10.750% $28,671,000 0.150% $400,000 2014 10.450% $26,410,000 0.150% $379,000

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

PORS - The University’s actual retirement, incidental death program and accidental death program contributions to the PORS for the years ended June 30, 2016, 2015, and 2014 were:

Fiscal Year Retirement Incidental Death Accidental Death Ended Rate Contribution Rate Contribution Rate Contribution 2016 13.340% $886,000 0.200% $13,300 0.200% $13,300 2015 13.010% $850,000 0.200% $13,100 0.200% $13,100 2014 12.440% $791,000 0.200% $12,700 0.200% $12,700

For fiscal year 2016, total contributions requirements to the ORP were $25,253,507 (excluding the surcharge) from the University as employer and approximately $18,888,050 from its employees as plan members.

Teacher and Employee Retention Incentive - Effective January 1, 2001, Section 9-1-2210 of the South Carolina Code of Laws allows employees eligible for service retirement to participate in the Teacher and Employee Retention Incentive (TERI) Program. TERI participants may retire and begin accumulating retirement benefits on a deferred basis without terminating employment for up to five years.

Upon termination of employment or at the end of the TERI period, whichever is earlier, participants will begin receiving monthly service retirement benefits which will include any cost of living adjustments granted during the TERI period. Because participants are considered retired during the TERI period, they do not earn service credit, and are ineligible to receive group life insurance benefits or disability retirement benefits. The TERI program will end effective June 30, 2018 and a member’s participation may not continue after this date. TERI participants and retired contributing members are eligible for the increased death benefit equal to their annual salary in lieu of the standard retired member benefit.

Net Pension Liability - At June 30, 2016, the University reported liabilities of $772,745,350 and $11,399,093 for its proportionate share of the SCRS and PORS net pension liability, respectively. The net pension liabilities were measured as of June 30, 2015, and the total pension liabilities used to calculate the net pension liabilities were determined by an actuarial valuation as of that date. The University’s proportionate shares of the net pension liabilities were based on the University’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2015, the University’s proportionate shares of the SCRS and PORS plans were 4.074352% and 0.52302%.

Pension Expense - For the year ended June 30, 2016, the University recognized pension expense of $55,614,230 and $997,905 for SCRS and PORS, respectively.

Deferred inflows of resources and deferred outflows of resources – At June 30, 2016, the University reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources for each of the respective plans:

South Carolina Retirement System

Deferred Outflows Deferred Inflows of of Resources Resources

Differences between expected and actual experience $ 13,767,903 $ 1,381,870 Net difference between projected and actual earnings on pension plan investments 5,172,204 - Changes in proportion and differences between University contributions and proportionate share of contributions - 1,680,168 University contributions subsequent to the measurement date 43,476,291 - Total $ 62,416,398 $ 3,062,038 !

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

Police Officers Retirement System

Deferred Outflows of Deferred Inflows of Resources Resources

Differences between expected and actual experience $-225,931 $ Net difference between projected and actual earnings on pension plan investments 124,725 - Changes in proportion and differences between University contributions and proportionate share of contributions - 73,625 University contributions subsequent to the measurement date 905,383 - Total $ 1,256,039 $ 73,625

The $43,476,291 and $905,383 reported as deferred outflows of resources related to pensions resulting from University contributions subsequent to the measurement date for the SCRS and PORS plans, respectively, during the year ended June 30, 2016 will be recognized as a reduction of the net pension liabilities in the year ending June 30, 2017.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows for the SCRS and PORS plans, respectively:

SCRS Year ended June 30: 2017 (2,776,564) 2018 (2,776,564) 2019 1,938,978 2020 (12,263,919) $ (15,878,069)

PORS Year ended June 30: 2017 (16,074) 2018 (16,074) 2019 (6,096) 2020 (238,787) $ (277,031)

Actuarial Assumptions and Methods - Actuarial valuations involve estimates of the reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and future salary increases. Actuarial assumptions and methods used during the annual valuation process are subject to periodic revision, typically with an experience study, as actual results over an extended period of time are compared with past expectations and new estimates are made about the future. South Carolina state statute requires that an actuarial experience study be completed at least once in each five-year period. The last experience study was performed on data through June 30, 2010, and the next experience study, performed on data through June 30, 2015, is currently underway. "

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

The June 30, 2015, total pension liability, net pension liability, and sensitivity information were determined by PEBA’s consulting actuary, Gabriel, Roeder, Smith and Company (GRS) and are based on the July 1, 2014, actuarial valuations, as adopted by the PEBA Board and Budget and Control Board which utilized membership data as of July 1, 2014. The total pension liability was rolled-forward from the valuation date to the plan’s fiscal year ended June 30, 2015, using generally accepted actuarial principles. Information included in the following schedules is based on the certification provided by GRS.

The following table provides a summary of the actuarial assumptions and methods used in the July 1, 2014 valuations for SCRS and PORS.

SCRS PORS Actuarial cost method Entry age normal Entry age normal

Investment rate of return 7.5% 7.5% Projected salary increases 3.5% to 12.5% (varies by 4.0% to 10.0% (varies by service)1 service)1

Benefit adjustments lesser of 1% or $500 annually lesser of 1% or $500 annually 1 Includes inflation at 2.75%

The post-retiree mortality assumption is dependent upon the member’s job category and gender. This assumption includes base rates which are automatically adjusted for future improvement in mortality using published Scale AA projected from the year 2000. Assumptions used in the July 1, 2014 valuations for SCRS and PORS are as follows.

Former Job Class Males Females

RP-2000 Males (with White RP-2000 Females (with White Educators Collar adjustment) multiplied by Collar adjustment) multiplied by 110% 95%

General Employees and Members of RP-2000 Males multiplied by RP-2000 Females multiplied by the General Assembly 100% 90%

RP-2000 Females (with Blue RP-2000 Males (with Blue Collar Public Safety and Firefighters Collar adjustment) multiplied by adjustment) multiplied by 115% 115% #

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

Net Pension Liability - The net pension liability is calculated separately for each system and represents that particular system’s total pension liability determined in accordance with GASB No. 67 less that System’s fiduciary net position. As of June 30, 2015, net pension liability amounts for SCRS and PORS are as follows (amounts expressed in thousands):

Plan Fiduciary Net Employers’ Net Total Pension Plan Fiduciary Net Position as a System Pension Liability Liability Position Percentage of the (Asset) Total Pension SCRS $44,097,310,230 $25,131,828,101 $18,965,482,129 57.0%

PORS 6,151,321,222 3,971,824,838 2,179,496,384 64.6%

The total pension liability is calculated by the System’s actuary, and each plan’s fiduciary net position is reported in the System’s financial statements. The net pension liability is disclosed in accordance with the requirements of GASB 67 in the System’s notes to the financial statements and required supplementary information. Liability calculations performed by the Systems’ actuary for the purpose of satisfying the requirements of GASB Nos. 67 and 68 are not applicable for other purposes, such as determining the plans’ funding requirements.

The most significant impact on a plan’s fiduciary net position relates to the rate of return on its investments. Consequently, significant fluctuations in the market value of investment substantially affect the fiduciary net position component of the NPL calculation, and as a result, cause a direct change in the NPL. Investments earned 1.60% during the plan year ended June 30, 2015 and thus the market value of the SCRS and PORS investments increased slightly. However, this resulted in negative cash flows because net investment income plus other plan additions (contributions) were not substantial enough to offset plan deductions (benefit payments and administrative costs). Accordingly, SCRS and PORS experienced an overall decreased in plan fiduciary net position for the fiscal year ended June 30, 2015. This change, coupled with the annual increase in the total pension liability, led to a $1.75 billion and $265 million increase in the NPL for SCRS and PORS, respectively, for the measurement period ended June 30, 2015.

Long Term Expected Rate of Return - The long-term expected rate of return on pension plan investments, as used in the July 1, 2014, actuarial valuations, was based upon the 30 year capital market outlook at the end of the fourth quarter 2013, as developed by the Retirement Systems Investment Commission in collaboration with its investment consultant, Aon Hewitt. The long-term expected rate of returns represent assumptions developed using an arithmetic building block approach, reflecting observable inflation and interest rate information available in the fixed income markets as well as Consensus Economics forecasts. Long-term assumptions for other asset classes are based on historical results, current market characteristics, and professional judgment.

The expected returns, along with the expected inflation rate, form the basis for the target asset allocation as adopted by the Investment Commission for fiscal year 2015. The long-term expected rate of return is produced by weighting the expected future real rates of return by the target allocation percentage and by adding expected inflation and is summarized in the table on the following page. For actuarial purposes, the 7.50 percent assumed annual investment rate of return set in statute and used in the calculation of the total pension liability includes a 4.75 percent real rate of return and a 2.75 percent inflation component. $

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

Expected Long-Term Arithmetic Expected Portfolio Target Real Rate of Real Rate of Asset Class Allocation Return Return Short Term Cash 2.0% 1.90% 0.04% Short Duration 3.0% 2.00% 0.06% Domestic Fixed Income Core Fixed Income 7.0% 2.70% 0.19% Mixed Credit 6.0% 3.80% 0.23% Global Fixed Income Global Fixed Income 3.0% 2.80% 0.08% Emerging Markets Debt 6.0% 5.10% 0.31% Global Public Equity 31.0% 7.10% 2.20% Global Tactical Asset Allocation 10.0% 4.90% 0.49% Alternatives Hedge Funds (Low Beta) 8.0% 4.30% 0.34% Private Debt 7.0% 9.90% 0.69% Private Equity 9.0% 9.90% 0.89% Real Estate (Broad Market) 5.0% 6.00% 0.30% Commodities 3.0% 5.90% 0.18% Total Expected Real Return 100.0% 6.00% Inflation for Actuarial Purposes 2.75% Total Expected Nominal Return 8.75%

Discount Rate - The discount rate used to measure the total pension liability was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that the funding policy specified in the South Carolina State Code of Laws will remain unchanged in future years. Based on those assumptions, each System’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity Analysis - The following table presents the collective net pension liability of the University calculated using the discount rate of 7.50 percent, as well as what the University’s net pension liability would be if it were calculated using a discount rate that is 1.00 percent lower (6.50 percent) or 1.00 percent higher (8.50 percent) than the current rate.

Sensitivity of the Net Pension Liability to Changes in the Discount Rate 1.00% Decrease Current Discount 1.00% Increase System (6.5%) Rate (7.5%) (8.5%) SCRS $974,179,751 $772,745,350 $603,872,036

PORS 15,528,225 11,399,093 7,707,872 %

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 5 - PENSION PLANS, Continued

Additional Financial and Actuarial Information - Detailed information regarding the fiduciary net position of the plans administered by PEBA is available in the Systems’ audited financial statements for the fiscal year ended June 30, 2015 (including the unmodified audit opinion on the financial statements). Additional actuarial information is available in the accounting and financial reporting actuarial valuation as of June 30, 2015.

Deferred Compensation Plans – Several optional deferred compensation plans are available to State employees and employers of its political subdivisions. Certain employees of the University have elected to participate. The multiple-employer plans, created under Internal Revenue Code Sections 457, 401(k), and 403(b), are administered by third parties and are not included in the Comprehensive Annual Financial Report of the State of South Carolina. Compensation deferred under the plans is placed in trust for the contributing employee. The State has no liability for losses under the plans. Employees may withdraw the current value of their contributions when they terminate State employment. Employees may also withdraw contributions prior to termination if they meet requirements specified by the applicable plan.

NOTE 6 - POSTEMPLOYMENT AND OTHER EMPLOYEE BENEFITS

Plan Description - In accordance with the South Carolina Code of Laws and the annual Appropriations Act, the State provides post-employment health and dental and long-term disability benefits to retired State and school district employees and their covered dependents. The University contributes to the South Carolina Retiree Health Insurance Trust Fund (SCRHITF) and the South Carolina Long-Term Disability Insurance Trust Fund (SCLTDITF), cost-sharing multiple employer defined benefit postemployment healthcare, and long-term disability plans administered by the Insurance Benefits Division (IB), a part of the South Carolina Public Employee Benefit Authority (PEBA). Generally, retirees are eligible for the health and dental benefits if they have established at least ten years of retirement service credit. For new hires beginning employment May 2, 2008 and after, retirees are eligible for benefits if they have established 25 years of service for 100% employer funding and 15 through 24 years of service for 50% employer funding. Benefits become effective when the former employee retires under a State retirement system. Basic Long-Term Disability (BLTD) benefits are provided to active state, public school district, and participating local government employees approved for disability.

Funding Policies - Section 1-11-710 of the South Carolina Code of Laws of 1976, as amended, requires these postemployment and long-term disability benefits be funded through annual appropriations by the General Assembly for active employees to the IB and participating retirees to the PEBA, except for the portion funded through the pension surcharge and provided from the other applicable sources of the IB, for its active employees who are not funded by State General Fund appropriations. Employers participating in the Retiree Medical Plan are mandated by State statute to contribute at a rate assessed each year by the Office of the State Budget, 5.33% of annual covered payroll for 2016 and 5.00% of annual covered payroll for 2015. The IB sets the employer contribution rate based on a pay-as-you-go basis. The University paid approximately $27,002,023 and $24,685,000 applicable to the surcharge included with the employer contribution for retirement benefits for the fiscal years ended June 30, 2016 and 2015, respectively. BLTD benefits are funded through a person’s premium charged to State agencies, public school districts, and other participating local governments. The monthly premium per active employee paid to IB was $3.22 for the fiscal years ended June 30, 2016 and 2015. The University recorded employer contributions expenses applicable to these insurance benefits for active employees in the amount of approximately $255,000 and $247,000 for the years ended June 30, 2016 and 2015, respectively.

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 7 - CONTINGENCIES, LITIGATION, AND PROJECT COMMITMENTS

The University is party to various lawsuits arising out of the normal conduct of its operations. In the opinion of University management, there are no material claims or lawsuits against the University that are not covered by insurance or whose settlement would materially affect the University’s financial position.

The University participates in certain Federal grant programs. These programs are subject to financial and compliance audits by the grantor or its representative. Such audits could lead to requests for reimbursement to the grantor agency for expenditures disallowed under terms of the grant. Management believes disallowances, if any, will not be material.

The University had outstanding commitments under construction contracts of $46,697,731 for capital and $6,113,538 for noncapital projects. The University anticipates funding these projects out of current resources, current and future bond issues, private gifts, student fees, and state capital improvement bond proceeds.

NOTE 8 - LEASE OBLIGATIONS

The future minimum lease payments for noncancelable operating leases are as follows: 2017 2,838,302 2018 1,986,502 2019 1,731,215 2020 1,347,613 2021 1,066,882 2022-2026 4,691,900 2027-2031 2,314,940 2032-2036 822,375

Total minimum lease payments $ 16,799,729

The preceding payment schedule relates to noncancelable operating leases having remaining terms of more than one year and expiring in various fiscal years from 2017-2036. These noncancelable operating leases include agreements between the University and third party vendors as well as other State agencies and related parties. Certain operating leases provide for renewal options at their fair rental value at the end of their lease term. Total real property operating lease payments were $4,141,605 for fiscal year 2016. Of this amount, $400,962 was paid to other State agencies. In the current fiscal year, the University incurred expenses of $1,114,848 for office copier contingent rentals on a cost per copy basis.

The University also has a 35 year operating lease agreement for two city blocks of parking surrounding the Colonial Life Arena for $100,000 per year. In accordance with the terms of the lease, in fiscal year 2003, the University paid $3,500,000, representing rent due for the entire term. As of June 30, 2016, the remaining unamortized prepaid balance related to the parking lease agreement was $2,100,000 with $100,000 reflected as a current asset. %'

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 8 - LEASE OBLIGATIONS, Continued

Capital Leases Buildings, land, and equipment held by the University under capital leases as of June 30, 2016:

Accumulated Cost Depreciation Net

Buildings $ 18,815,394 $ 4,047,261 $ 14,768,133 Land 270,000 - 270,000 Equipment 548,000 148,417 399,583

The future minimum capital lease obligations and the net present value of the minimum capital lease payments are as follows:

2017 $ 5,456,827 2018 1,178,233 2019 1,171,820 2020 1,006,776 2021 960,190 2022-2026 4,940,034 2027-2031 4,667,441 Total minimum lease payments 19,381,321 Less amount representing interest (4,557,576) Present value of minimum lease payments by year $ 14,823,745

Capital lease obligations consist of:

Agreement with USC Upstate Foundation for land and building, dated February 2010, payable in monthly principal payments of $6,500, with a fixed interest rate of 4.11%. This agreement expires in December 2019. $ 253,869

Agreement with the Columbia Parking Facilities Corporation payable in monthly principal payments ranging from $30,000 to $80,000 and a payment of approximately $4,000,000 due in March 2017. Interest rates range from 5.085% to 6.815%. This agreement expires in March 2031. 14,249,142

Agreement with Hewlett Packard payable in monthly principal payments of $9,859 with a fixed interest rate of 3.05%. This agreement expires in April 2019. 320,734

Present value of minimum lease payments by lease $ 14,823,745

During the fiscal year ended June 30, 2016, the Upstate campus paid $234,802 to complete the capital lease agreement with the USC Upstate Foundation for land and building dated August 2011 and expiring August 2020. %(

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 9 - BONDS AND NOTES PAYABLE

Bonds Payable – Bonds payable consisted of the following:

Original Interest Rates Maturity June 30, 2016 Debt Retired in Debt (Outstanding) Dates Balance Fiscal Year 2016 State Institution Bonds Series 2006B $ 58,000,000 5.25% 04/01/16 $ - $ 2,685,000 Series 2009B 8,550,000 3% to 5% 04/01/29 6,090,000 365,000 Series 2011A Refunding 20,085,000 2.25% to 5% 03/01/22 12,710,000 1,870,000 Series 2011E 23,955,000 2.25% to 5% 03/01/31 19,570,000 925,000 Series 2012A Refunding 21,475,000 2.5% to 5% 04/01/24 10,305,000 3,360,000 Series 2014A 15,190,000 3% to 5% 04/01/34 14,105,000 495,000 Series 2015A 56,725,000 2% to 5% 04/01/35 54,585,000 2,140,000 Series 2015B Refunding 30,625,000 4% to 5% 04/01/26 30,625,000 - Total State Institution Bonds 147,990,000 11,840,000

Revenue Bonds Series 2005A 12,400,000 5% 05/01/35 - 9,820,000 Series 2005A Refunding 43,140,000 5% 06/01/30 - 29,420,000 Series 2006A 13,995,000 4% 06/01/26 - 9,020,000 Series 2008A 64,335,000 4% to 5.25% 06/01/38 55,445,000 1,390,000 Series 2008A Athletic 27,395,000 4% to 5.5% 05/01/38 25,425,000 655,000 Series 2009A 28,920,000 3% to 5% 06/01/39 24,840,000 635,000 Series 2010A 28,510,000 3.125% to 5% 06/01/40 25,215,000 595,000 Series 2010A Athletic 65,855,000 4% to 5% 05/01/40 59,190,000 1,300,000 Series 2010B Refunding Athletic 12,840,000 3% to 5% 05/01/27 10,160,000 640,000 Series 2012 61,945,000 3% to 5% 05/01/35 60,000,000 1,945,000 Series 2012 Refunding 28,110,000 3% to 5% 05/01/34 24,440,000 1,265,000 Series 2012A Athletic 13,580,000 2.5% to 4% 05/01/42 12,465,000 295,000 Series 2012B Refunding Athletic 6,350,000 3.5% 05/01/32 6,350,000 - Series 2013 37,185,000 3% to 5% 05/01/43 35,190,000 845,000 Series 2015A Athletic 38,270,000 3% to 5% 05/01/45 37,680,000 590,000 Series 2015 48,175,000 3.5% to 5% 05/01/35 47,390,000 785,000 Total Revenue Bonds 423,790,000 59,200,000

Subtotal bonds payable 571,780,000 71,040,000 Plus unamortized bond premiums 48,021,743 2,681,229 Less unamortized bond discounts (570,835) (28,745) Total Bonds Payable $ 619,230,908 $ 73,692,484

State institution bonds are general obligation bonds of the State backed by the full faith, credit, and taxing power of the State. Tuition revenue is pledged up to the amount of the annual debt requirements for the payment of principal and interest on state institution bonds. The legal debt margin for state institution bonds shall not exceed ninety percent of tuition fees received from the preceding fiscal year for the University as a whole.

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 9 - BONDS AND NOTES PAYABLE, Continued

Tuition fees used to calculate the University's debt service limit on bond indebtedness for the preceding year were $30,034,165, which results in a legal annual debt service at June 30, 2016 of $27,030,748. The annual debt service payments for the fiscal year were $18,505,990. Tuition revenue pledged in fiscal year 2016 was $31,863,973 for state institution bonds.

General revenue bonds are payable from a pledge of net revenues derived by the University from the operation of the facilities constructed with the bond proceeds. General revenue bonds may also be payable from a pledge of additional funds. Additional funds are all available funds and academic fees of the University which are not (i) otherwise designated or restricted; (ii) funds derived from appropriations; and (iii) tuition funds pledged to the repayment of state institution bonds. Pledged net revenues for general revenue bonds in fiscal year 2016 were $20,796,296.

Athletic facilities revenue bonds are payable from a pledge of net revenues of the athletic department, gross receipts of a special admission fee to facilities and a special student fee as authorized by the governing board. Pledged revenues for athletic facilities revenue bonds in fiscal year 2016 were $1,764,679 of special student fees, $3,515,850 of special admission fees and $5,148,778 of athletic department revenues.

The University believes it is in compliance with all related bond covenants of its issued debt.

On September 1, 2015 the University issued $6,245,000 in Revenue bonds for building renovations.

On September 1, 2015 the University issued $41,930,000 in Revenue Refunding bonds to fully refund the Series 2005A Revenue Refunding bonds with a final maturity between June 1, 2017 and June 1, 2030 to be called on December 1, 2015, to fully refund the Series 2005A Revenue bonds with a final maturity of May 1, 2035 to be called on September 25, 2035 and to partially refund the Series 2006A Revenue bonds with a final maturity of June 1, 2026 to be called on June 1, 2016. The refunding transaction resulted in a deferred loss on refunding of $477,764, an aggregate debt payment reduction of $5,158,229 over the next 20 years and an economic gain of $4,385,955.

Subsequent to June 30, 2016, two bond issuances took place that resulted in significant savings to the University. On July 1, 2016, the University issued $67,800,000 in Higher Education Revenue Refunding bonds and $22,400,000 in Athletic Revenue Refunding bonds. This transaction resulted in a present value savings of $19,800,000 that will be realized in the form of annual cash flow savings ranging from $780,000 to $1,080,000 per year through 2039.

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 9 - BONDS AND NOTES PAYABLE, Continued

The scheduled maturities of the University bonds payable by type are as follows:

Principal Interest Total State Institution Bonds 2017 $ 9,330,000 $ 6,460,225 $ 15,790,225 2018 9,725,000 6,056,875 15,781,875 2019 10,105,000 5,643,725 15,748,725 2020 10,590,000 5,144,400 15,734,400 2021 10,990,000 4,716,875 15,706,875 2022-2026 48,565,000 15,926,125 64,491,125 2027-2031 30,530,000 6,541,694 37,071,694 2032-2035 18,155,000 1,482,513 19,637,513 Total $ 147,990,000 $ 51,972,432 $ 199,962,432

Principal Interest Total Revenue Bonds 2017 $ 13,235,000 $ 20,105,794 $ 33,340,794 2018 14,340,000 19,569,756 33,909,756 2019 14,595,000 18,969,481 33,564,481 2020 15,285,000 18,293,031 33,578,031 2021 15,675,000 17,553,025 33,228,025 2022-2026 88,285,000 75,903,063 164,188,063 2027-2031 98,250,000 53,633,681 151,883,681 2032-2036 95,390,000 29,590,450 124,980,450 2037-2041 56,660,000 8,927,838 65,587,838 2042-2045 12,075,000 1,046,200 13,121,200 Total $ 423,790,000 $ 263,592,319 $ 687,382,319 !

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 9 - BONDS AND NOTES PAYABLE, Continued

Notes Payable – Notes payable consisted of the following:

Note payable to acquire energy savings equipment and lighting retrofit, dated December 2008, payable in annual installments of $51,251 subject to amount drawn at any given time, matures April 2020, fixed interest rate of 3.00%. $ 190,218

The scheduled maturities of the notes payable are as follows:

Principal Interest Total

2017 $ 45,544 $ 5,707 $ 51,251 2018 46,910 4,340 51,250 2019 48,318 2,933 51,251 2020 49,446 1,804 51,250 Total $ 190,218 $ 14,784 $ 205,002

NOTE 10 - LONG-TERM LIABILITIES

Long-term liability activity was as follows: Due Within Long-Term June 30, 2015 Additions Reductions June 30, 2016 One Year Portion

Bonds Payable: State Institution Bonds $-159,830,000 $ $ 11,840,000 $ 147,990,000 $ 9,330,000 $ 138,660,000 Revenue Bonds 434,815,000 48,175,000 59,200,000 423,790,000 13,235,000 410,555,000 Subtotal Bonds Payable 594,645,000 48,175,000 71,040,000 571,780,000 22,565,000 549,215,000 Unamortized Bond Premiums 43,471,640 7,231,332 2,681,229 48,021,743 3,116,557 44,905,186 Unamortized Bond Discounts (599,580) - (28,745) (570,835) (28,745) (542,090) Total Bonds Payable 637,517,060 55,406,332 73,692,484 619,230,908 25,652,812 593,578,096 Notes Payable 265,261 - 75,043 190,218 45,544 144,674 Total Bonds and Notes Payable $ 637,782,321 $ 55,406,332 $ 73,767,527 $ 619,421,126 $ 25,698,356 $ 593,722,770

Capital Lease Obligations $-15,845,221 $ $ 1,021,476 $ 14,823,745 $ 4,728,050 $ 10,095,695 Accrued Compensated Absences $ 34,594,158 $ 25,163,955 $ 24,391,342 $ 35,366,771 $ 21,927,398 $ 13,439,373

Additional information regarding bonds and notes payable is included in Note 9. "

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 11 - COMPONENT UNITS

Certain separately chartered legal entities whose activities are related to those of the University exist primarily to provide financial assistance and other support to the University and its educational program. They include the South Carolina Research Foundation, the University of South Carolina School of Medicine Educational Trust (the Trust), and the Beaufort-Jasper Higher Education Commission, all of which are considered governmental component units. In addition, the University of South Carolina Development Foundation; the University of South Carolina Educational Foundation; the University of South Carolina Business Partnership Foundation; the Greater University of South Carolina Alumni Association; the University of South Carolina Upstate Foundation; the University of South Carolina Upstate Capital Development Foundation; and the Educational Foundation of the University of South Carolina – Lancaster are considered nongovernmental component units because they do not meet the definition of a governmental entity. Because the activities and resources of these entities are significant, provide a direct benefit, and are accessible to the University, they are considered component units of the University and are discretely presented in the University’s financial statements accordingly as governmental or non-governmental reporting entities.

Following is a more detailed discussion of each of these entities and a summary of significant transactions (if any) between these entities and the University.

Governmental Discretely Presented Component Units The South Carolina Research Foundation (the Foundation) operates as a supporting organization of the University of South Carolina’s teaching, research, and public service missions. It will support research programs of clear relevance to the state and nation. The research areas focus on the environment, new technologies, economic development, health sciences and social issues. The Foundation receives research funding from private sources and also competes for federal funds. The University receives funds for research from the Foundation. In 2013, University and Research Foundation management agreed to administrative process changes that allowed the University to resume its historic role of directly processing new federal grant and contract transactions. The University expects that over the next several years this decision will result in the University processing all federal grant and contract transactions and an equal reduction in the federal grant activities processed by the Research Foundation. Complete financial statements for the Foundation can be obtained at The South Carolina Research Foundation, 202 Osborne Building, USC, Columbia, SC 29208, Attention: Kelly Epting.

The University of South Carolina School of Medicine Educational Trust (the Trust) is organized and operates exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the University of South Carolina School of Medicine. The Trust is governed by a board consisting of the Dean of the University’s School of Medicine, the Chairman of each of the twelve departments of the School of Medicine, as well as other employees of the University School of Medicine. The Trust is exempt from income taxes under Section 501(a) of the Internal Revenue Code as an organization described under Section 501(c)(3).

The Trust is involved in continuing discussions regarding the integration of patient operations with its primary affiliated hospital/healthcare partner. During fiscal year 2015, a new 501(c)(3) entity was formed. The two members are Palmetto Health and the Trust. The new entity’s name is Palmetto Health University of South Carolina Medical Group (“PHUSCMG”). The new entity is still in the process of becoming operational. Formal Management Service Agreements and other operating agreements and documents are expected to be finalized during fiscal year 2017. Board members of PHUSCMG have been appointed and an Executive Dean has been hired and is actively working towards the operational start date. PHUSCMG will provide healthcare services to substantially the same patient and demographic populations as before. Complete financial statements for the Trust can be obtained at the University of South Carolina School of Medicine Educational Trust, Post Office Box 413, Columbia, South Carolina 29202, Attention: Jeff Perkins. #

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 11 - COMPONENT UNITS, Continued

The Beaufort-Jasper Higher Education Commission (the Commission) was created in 1994 by the General Assembly of South Carolina. The Commission’s primary purpose is to provide support and encouragement for all undertakings to improve the higher education opportunities for the benefit of the citizens and residents of Beaufort and Jasper Counties. The Commission serves as the liaison between the University of South Carolina Beaufort campus (USC Beaufort) and the Beaufort and Jasper communities as well as the oversight committee for campus residence halls and the student center including the construction and management of those facilities. Complete financial statements for the Commission can be obtained at 1 University Boulevard, Bluffton, SC 29909.

Non-Governmental Discretely Presented Component Units The University of South Carolina Development Foundation (the Foundation) operates exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the University including, but not limited to, promoting, encouraging, and aiding scientific research and investigation at the University. The University receives funds for rent, the lease of real property and reimbursement for computer and personnel services provided by the University from the Foundation. The University also pays the Foundation for the lease of real property and for research programs. As of June 30, 2016 the Foundation held approximately $26,405,753 in endowment funds for the University. Complete financial statements for the Foundation can be obtained at USC Foundations, 208 Osborne Building, USC, Columbia, SC 29208, Attention: Russell Meekins.

The University of South Carolina Educational Foundation (the Foundation) operates for the benefit and support of the University of South Carolina. Its objectives include the establishment and implementation of long-range fundraising programs to assist in the expansion and improvement of the educational functions of the University. The University receives from the Foundation funds for scholarships, awards and stipends to students, faculty and administrative staff; library collections; reimbursement for computer and personnel services provided by the University. As of June 30, 2016 the Foundation held approximately $277,954,806 in endowment funds for the University. Complete financial statements for the Foundation can be obtained at USC Foundations, 208 Osborne Building, USC, Columbia, SC 29208, Attention: Russell Meekins.

The University of South Carolina Business Partnership Foundation (the Foundation) was formed to bring together representatives of business and government to assist in conducting conferences, seminars, and management programs to further the education, development and effectiveness of management personnel in the State and region. The University receives funds for scholarships, reimbursement of personnel services, fringe benefits and other administrative costs from the Foundation. Complete financial statements for the Foundation can be obtained at University of South Carolina Business Partnership Foundation 1014 Green Street, Columbia, SC 29208, Attention: Rodney L. Roenfeldt.

The Greater University of South Carolina Alumni Association (the Association) was formed to serve the students after they graduate. The Association’s objectives are providing job placement and counseling, communicating the aspirations and needs of the University, helping graduates keep in touch with one another, and providing programs of continuing education. In October 2015, the Association opened the new 60,000 square foot Alumni Center. The University receives funds for scholarships from the Association and provides office and meeting space at no cost to the Association. Complete financial statements for the Association can be obtained at 900 Senate Street, Columbia, SC 29201, Attention: Jack Claypoole.

The USC Upstate Foundation (the Foundation) was established to accept gifts for charitable, benevolent, cultural, and education purposes and to provide student housing and other real property for the exclusive use and benefit of the University of South Carolina Upstate. The University receives funds from the Foundation for scholarships and reimbursement for personnel and student housing services provided by the University. Complete financial statements for the Foundation can be obtained at USC Upstate Foundation, 800 University Way, Spartanburg, SC 29303. $

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 11 - COMPONENT UNITS, Continued

The USC Upstate Capital Development Foundation (the Foundation) was established to accept real property donated to the University of South Carolina Upstate, serve as the purchasing agent for property on behalf of USC Upstate that is integral to the growth of the campus, and to manage property under leasing agreements to the University. Complete financial statements for the Foundation can be obtained at USC Upstate Capital Development Foundation, 800 University Way, Spartanburg, SC 29303.

The Educational Foundation of the University of South Carolina - Lancaster (the Foundation) operates for the benefit and support of the University of South Carolina at Lancaster. Its objectives include the establishment and implementation of long-range fund-raising programs to assist in the expansion and improvement of the educational functions of the University. The University receives from the Foundation funds for scholarships, rent, and reimbursement for computer and personnel services provided by the University. Complete financial statements for the Foundation can be obtained at PO Box 809, Lancaster, SC 29721.

Various transactions occur between the University and the component units. A summary of those transactions follows:

Funds Received from Component Units

South Carolina Research Foundation $ 22,060,472 USC School of Medicine Educational Trust 1,402,949 Beaufort-Jasper Higher Education Commission 1,139,920 USC Development Foundation 323,717 USC Educational Foundation 15,484,475 USC Business Partnership Foundation 1,396,801 Greater USC Alumni Association 794,993 USC Upstate Foundation 312,570 Educational Foundation of USC Lancaster - Total $ 42,915,897 %

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 11 - COMPONENT UNITS, Continued

The majority of the South Carolina Research Foundation revenues are recorded by the University as federal grants and contracts revenues and the majority of revenues from the other component units are recorded as private gifts revenue. Federal grants and contracts receivables include $8,077,369 due from the South Carolina Research Foundation at June 30, 2016.

Funds Paid to Component Units

South Carolina Research Foundation $ 43,383 USC School of Medicine Educational Trust 3,168,689 Beaufort-Jasper Higher Education Commission 4,900,000 USC Development Foundation 347,369 USC Educational Foundation 1,555,801 USC Business Partnership Foundation 54,396 Greater USC Alumni Association 1,270,942 USC Upstate Foundation 14,000 USC Upstate Capital Foundation 344,864 Educational Foundation of USC Lancaster 650 Total $ 11,700,094

NOTE 12 - RELATED PARTIES

There are several separately charted legal entities which do not meet the criteria established by GASB Statement No. 14, The Financial Reporting Entity, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units - An Amendment of GASB Statement No. 14, to be treated as component units of the University. These entities are the local higher education commissions. While they are not financially accountable to the University, these organizations exist primarily to provide financial assistance and other support to the University system campuses and the educational programs. The activities of these entities are not included in the University’s financial statements. However, the University’s statements for the year ended June 30, 2016 include significant transactions between them and the University which are as follows: &

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 12 - RELATED PARTIES, Continued

Aiken County Commission for Higher Education Commission - The Aiken County Commission for Higher Education (the Commission) was created under Act 103 of the 1961 Session of the General Assembly of South Carolina. The Commission is composed of eight members who are appointed by the Governor on the recommendation of a majority of the Aiken County Legislative Delegation. In addition, the Superintendent of Education for Aiken County and the Chair of the Aiken Commission for Technical Education are ex-officio members of the Commission. The Commission’s purpose is the establishment and maintenance of an institution of higher education in Aiken County and it is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and generally, to take such actions in its name necessary to secure for Aiken County and adjacent areas the necessary educational facilities to provide higher education. The Commission receives an annual appropriation from Aiken County to accomplish these objectives. During the year ended June 30, 2016, the Commission made grants to the University of South Carolina Aiken (USC Aiken) totaling $330,000 for campus maintenance and enhancements. USC Aiken provides accounting and cash management services to the Commission at no charge, including management of the operating portion of its cash. The Commission leases its land and buildings to USC Aiken for $1 annually. At June 30, 2016, the Commission had a net position of $1,792,087.

Lancaster County Commission for Higher Education - The Lancaster County Commission for Higher Education (the Commission) was created under Act 126 of the 1959 Session of the General Assembly of South Carolina. The Commission is composed of seven members who are appointed by the Governor on the recommendation of a majority of the Lancaster County Legislative Delegation, including the Senator. The Commission’s purpose is the encouragement of higher education in Lancaster and adjacent areas and, more specifically, the establishment in Lancaster County of facilities to offer standard freshman and sophomore college courses, and such other courses as deemed desirable. The Commission is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and, generally, take such actions in its name as are necessary to secure for Lancaster County and adjacent areas the necessary educational facilities to provide higher education. The Commission receives an annual appropriation from Lancaster County designated specifically for the University of South Carolina Lancaster (USC Lancaster). During the fiscal year ended June 30, 2016, the Commission received an annual appropriation of $1,466,286. The Commission disbursed $900,000 to USC Lancaster for operations and maintenance of the physical plant and $12,244 to vendors for insurance, professional services, and commencement expenses. There was also an $160,000 disbursement to the Educational Foundation of USC Lancaster for Founders Hall. USC Lancaster provides accounting and cash management services to the Commission at no charge. At June 30, 2016, the Commission had a net position of $793,220. &'

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 12 - RELATED PARTIES, Continued

Western Carolina Higher Education Commission - The Western Carolina Higher Education Commission (the Commission) was created under Act 270 in the 1984 Session of the General Assembly of South Carolina. The Commission is composed of ten members, two of whom are from each of the following counties: Allendale, Bamberg, Barnwell, Colleton, and Hampton. The members are appointed by the Governor upon the recommendation of a majority of the Legislative Delegations from the respective counties. The Commission’s purpose is the encouragement of higher education in the respective counties and adjacent areas and, more specifically, the establishment of facilities to offer standard freshman and sophomore college courses, and such other courses as deemed desirable. The Commission is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and, generally, take such actions in its name as are necessary to secure for its respective counties and adjacent areas the necessary educational facilities to provide higher education. The Commission receives an annual appropriation from Allendale, Bamberg, Barnwell, Colleton, and Hampton counties to accomplish these objectives. The Commission paid expenditures on behalf of the University of South Carolina Salkehatchie (USC Salkehatchie) of $52,587 for the fiscal year ended June 30, 2016. The Commission allows the use of its land and buildings to USC Salkehatchie at no cost. USC Salkehatchie provides accounting and cash management services to the Commission at no charge, including management of the operating portion of its cash. At June 30, 2016, the Commission had a net position of $129,143.

Mid-Carolina Commission for Higher Education, formerly known as Sumter County Commission for Higher Education - The Sumter County Commission for Higher Education was created under Act 50 of the 1965 Session of the General Assembly of South Carolina. In 1996, by an act of the state legislature, the Sumter County Commission for Higher Education was restructured as the Mid-Carolina Commission for Higher Education (the Commission) representing Sumter, Lee, and Clarendon Counties. The nine commission members are appointed by the Governor upon recommendation by the respective county legislative delegations, with one each from Lee and Clarendon Counties, and the remaining seven members from Sumter County. The purpose of the Commission is the encouragement of higher education in Sumter County and adjacent areas and, more specifically, the establishment in Sumter County of facilities to offer standard freshman and sophomore college courses, and such other courses as deemed desirable. The Commission is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and, generally, take such actions in its name as are necessary to secure for its respective counties and adjacent areas the necessary educational facilities to provide higher education. The University of South Carolina Sumter (USC Sumter) operates the Sumter Campus under contract with the Commission at a cost of $1 annually. During the fiscal year ended June 30, 2016, the Commission made payments to USC Sumter totaling $269,233 for the operation and maintenance of the campus. At June 30, 2016, the Commission had a net position of $564,886. &(

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 12 - RELATED PARTIES, Continued

Union Laurens Commission for Higher Education - The Union County Commission for Higher Education was created by Act 23 in the 1965 Session of the General Assembly of South Carolina and was repealed by Act 288 of the 1987 Session of the General Assembly of South Carolina which created the Union Laurens Commission for Higher Education (the Commission). The Commission is composed of nine members, with seven being residents of Union County and two being residents of Laurens County. The members are appointed by the Governor upon recommendation by the Union and Laurens County Legislative Delegations. The Commission is responsible for the encouragement of higher education in Union and Laurens Counties and adjacent areas and, more specifically, the establishment in Union and Laurens Counties of facilities to offer standard freshman and sophomore college courses and those other courses considered desirable. The Commission is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and, generally, take such actions in its name as are necessary to secure for its respective counties and adjacent areas the necessary educational facilities to provide higher education. The Commission receives an annual appropriation from Union and Laurens counties of $174,968 to accomplish these objectives. During the year ended June 30, 2016, the Commission made grants to the University of South Carolina Union (USC Union) totaling $117,290 for campus projects and maintenance, rental of facilities, community service and institutional support. The Commission provides its land and buildings to USC Union at no cost. USC Union provides clerical, accounting, and cash management services to the Commission at no charge. At June 30, 2016, the Commission had a net position of $2,465,304.

Spartanburg County Commission for Higher Education - The Spartanburg County Commission for Higher Education (the Commission) was created under Act 36 of the 1967 Session of the General Assembly of South Carolina. The Commission is composed of seventeen members who are appointed by the Governor on the recommendation of a majority of the Spartanburg County Legislative Delegation. The Commission is responsible for the encouragement of higher education in Spartanburg County and adjacent areas and, more specifically, the establishment in Spartanburg County of facilities necessary to provide for an institution of higher education. The Commission is empowered to enter into contracts, make binding agreements, negotiate with educators and educational institutions and, generally, take such actions in its name as are necessary to secure for Spartanburg County and adjacent areas the necessary educational facilities to provide higher education. The Commission receives an annual appropriation from Spartanburg County. During the year ended June 30, 2016, the Commission made grants to the University of South Carolina Upstate (USC Upstate) totaling $15,000. The Commission paid expenditures on behalf of USC Upstate of $15,222 for the fiscal year ended June 30, 2016. The Commission controls land owned by the County and provides the land to USC Upstate at no cost. USC Upstate provides accounting and record maintenance services to the Commission at no charge. The Commission owns five duplexes located adjacent to campus and will purchase a sixth in the next fiscal year. These properties are managed by a rental company and are not considered student housing. The proceeds from these rentals are added to the $300,000 endowment or operating funds of the Commission. At June 30, 2016, the Commission had a net position of $878,000. Q

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 13 - RISK MANAGEMENT The University has implemented a comprehensive Enterprise Risk Management (ERM) and Insurance program across all campuses which incorporates the fundamentals of risk identification, risk assessment, risk treatment, risk monitoring and risk review. Currently, the Columbia and Aiken campuses have established an ERM process using the guidance of International Standards Organization (ISO) 3100-2009 “Risk Management - Principals and Guidelines”. ISO provides principles, framework and process for managing any form of risk in a systematic, transparent and credible manner. The ERM program is committed to: preventing adverse claim experience through training, education and inspection; advising and assisting university managers in identifying potential risks and losses; advising and assisting university managers in implementing controls to mitigate risks; and procuring appropriate insurance policies. The University mitigates the financial consequences of physical, human, and financial loss by purchasing insurance through the State Budget and Control Board Office of the Insurance Reserve Fund (IRF). As needed, the IRF policies are supplemented by the purchase of policies through the private insurance market. Several sections of the South Carolina Code of Laws authorize and require the State Budget and Control Board, through the IRF, to provide insurance to governmental entities. These statutes in turn require most state entities to purchase insurance through the IRF. These sections include:

Title 1 - Administration of Government, Section 1-11-140 - 141. Authority to provide tort liability insurance to governmental entities, their employees, and charitable medical facilities. Title 1 - Administration of Government: Section 1-11-147. Automobile Liability Reinsurance. Title 10 - Public Buildings and Property: Section 10-7-10 through 10-7-40. Authority to insure public buildings and contents. Title 10 - Public Buildings and Property: Section 10-7-12. Authority to purchase reinsurance. Title 10 - Public Buildings and Property: Section 10-7-130. Authority to hold monies paid as premiums for the purpose of paying Insured losses. Title 11 - Public Finance: Section 11-9-75. Debt Collection Procedures. Title 15 - Civil Remedies and Procedures: Section 15-78-10 through 15-78-150. S.C. Governmental Tort Claims Act. Authority to provide liability insurance. Title 38 - Insurance: Section 38-13-190. Requires South Carolina Insurance Department Audits of Insurance Reserve Fund Finance. Title 59 - Education: Section 59-67-710 & 59-67-790. Authority to insure school buses and pupils transported by school bus. Title 59 - Education: Section 59-67-790. Pupil Injury Fund.

The IRF functions as a governmental insurance operation with the mission to provide insurance specifically designed to meet the needs of governmental entities at the lowest possible cost. The IRF operates like an insurance company, by issuing policies, collecting premiums (based on actuarially calculated rates), and by paying claims from the accumulated premiums in accordance with the terms and conditions of the insurance policies it has issued.

All premiums received by the IRF are deposited with the Office of the State Treasurer where the funds are maintained as the IRF Trust Account. By statutory requirement, these funds are to be used to pay claims and operating expenses of the fund. The Office of the State Treasurer is responsible for investing these funds. The costs of settled claims have not exceeded the University's insurance coverage in any of the past three years.

The IRF uses no agents, brokers, or advertising, and does not actively solicit accounts. The lack of a profit motive and the lack of acquisition expenses such as agents’ commissions, along with the use of the investment income in rate determination allow the IRF to maintain the lowest possible rate structure. Not all governmental entities elect to purchase their insurance through the IRF. The South Carolina Tort Claims Act allows political subdivisions of the State access to other mechanisms to meet their insurance needs at their discretion. Some entities participate in other self-insurance pools, some purchase commercial insurance, and some elect to self-insure their insurance exposures. Q

UNIVERSITY OF SOUTH CAROLINA Notes to the Financial Statements

NOTE 13 - RISK MANAGEMENT, Continued The various types of property insurance policies maintained by the University include: Building and Personal Property, Inland Marine, Data Processing Equipment, Business Interruption and Builders’ Risk. Additionally, Risk Management maintains a variety of casualty insurance policies including Automobile and Aircraft Property Damage and Liability, Directors and Officers Liability, General Tort Liability, Medical Professional Liability, an Employee Fidelity Bond, and Student Workers’ Compensation.

NOTE 14 - OPERATING EXPENSES BY FUNCTION

Operating expenses by functional classification are summarized as follows:

Salaries Fringe Services and Scholarships and Wages Benefits Supplies Utilities and Fellowships Depreciation Total

Instruction $ 265,237,052 $ 88,104,609 $ 36,551,026 $ 90,661 $-977,032 $ $ 390,960,380 Research 62,471,023 24,023,110 34,923,513 4,012 538,617 - 121,960,275 Public service 36,283,015 10,882,270 18,812,537 32,884 349,876 - 66,360,582 Academic support 46,301,030 14,996,966 27,653,998 23,526 17,781 - 88,993,301 Student services 34,749,166 10,788,145 23,879,708 732,163 179,381 - 70,328,563 Institutional support 50,478,395 16,770,373 17,772,856 197,396 217,468 - 85,436,488 Operation & plant maintenance 27,838,823 10,786,241 56,629,380 24,371,922 112 - 119,626,478 Auxiliary enterprises 56,065,858 13,507,446 62,230,521 9,073,619 1,268,342 - 142,145,786 Scholarships and fellowships 69,464 1,568,978 187,149 - 18,207,682 - 20,033,273 Depreciation - - - - - 60,565,961 60,565,961 Total operating expenses$ 579,493,826 $ 191,428,138 $ 278,640,688 $ 34,526,183 $ 21,756,291 $ 60,565,961 $ 1,166,411,087

NOTE 15 - ENDOWMENTS AND SIMILAR FUNDS

The University’s endowment funds and type consist of the following:

True Quasi Net Position Classification Endowment Endowment Total

Restricted - nonexpendable $-82,788,474 $ $ 82,788,474 Restricted - expendable Scholarships, research, instruction and other - 1,818,049 1,818,049 Unrestricted - 69,835,495 69,835,495

Total $ 82,788,474 $ 71,653,544 $ 154,442,018 RR *+

RR Q$ UNIVERSITY OF SOUTH CAROLINA Schedule of the University's Proportionate Share of the Net Pension Liability As of June 30

SCRS 2016 2015 2014 University's proportion of the net pension liability 4.074340% 4.086408% 4.086408% University's proportionate share of the net pension liability $ 772,745,350 $ 703,562,633 $ 732,955,826

University's covered-employee payroll during the measurement period $ 259,539,897 $ 254,916,138 $ 250,774,743

University's proportionate share of the net pension liability 297.74% 276.00% 292.28% as a percentage of its covered-employee payroll

Plan fiduciary net position as a percentage of the total 56.99% 59.92% 56.39% pension liability

PORS 2016 2015 2014 University's proportion of the net pension liability 0.523020% 0.527400% 0.527400% University's proportionate share of the net pension liability $ 11,399,093 $ 10,102,838 $ 10,932,795 University's covered-employee payroll during the measurement period $ 6,497,348 $ 6,360,804 $ 5,934,668 University's proportionate share of the net pension liability 175.44% 158.83% 184.22% as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total 64.57% 67.55% 62.98% pension liability Q% UNIVERSITY OF SOUTH CAROLINA Schedule of the University's Contributions For the Year Ended June 30

SCRS 2016 2015 2014 Contractually required contribution $ 43,476,291 $ 41,640,003 $ 39,325,215 Contributions made to pension plan 43,476,291 41,640,003 39,325,215 Contribution deficiency (excess) $ - $ -$ -

University's covered employee payroll $ 266,242,277 $ 259,539,897 $ 254,916,138 Contributions as a portion of covered employee payroll 16.33% 16.04% 15.43%

PORS 2016 2015 2014 Contractually required contribution $ 905,383 $ 868,899 $ 814,472 Contributions made to pension plan 905,383 868,899 814,472 Contribution deficiency (excess) $ - $ -$ -

University's covered employee payroll $ 6,589,396 $ 6,497,348 $ 6,360,804 Contributions as a portion of covered employee payroll 13.74% 13.37% 12.80% +

'Q UNIVERSITY OF SOUTH CAROLINA Columbia Campus Athletics Department Schedule of Funds Available for Debt Service For the year ended June 30, 2016

REVENUES Admissions/ticket sales (1) $ 17,210,772 Student athletic fees 2,744,945 Guarantees 5,041,500 Contributions 30,346,425 NCAA/Conference (SEC) distributions 39,166,979 Broadcast, television, radio and internet rights 6,895,000 Direct institutional support 3,229,616 Program, concession, novelty sales and parking 3,993,971 Royalties, licensing, advertisements and sponsorships 4,535,817 Sports camp revenues 152,340 Endowment and investment income 875,491 Other operating revenues 5,892,794 Total revenues 120,085,650

EXPENSES Scholarships and fellowships 14,848,951 Guarantees 1,250,668 Compensation and employee benefits 42,840,765 Recruiting 1,479,493 Team travel 6,276,218 Equipment, uniforms and supplies 3,747,388 Game expenses 6,351,147 Fund raising, marketing and promotion 3,170,047 Sports camp expenses 140,135 Direct facilities, maintenance and rental 15,183,796 Spirit groups 427,923 Medical expenses and insurance 1,132,894 Memberships and dues 103,411 Other operating expenses 7,326,809 Total expenses 104,279,645

Net revenues 15,806,005 MANDATORY TRANSFERS 1,668,028

Net revenues after mandatory transfers 14,137,977

OTHER RECEIPTS Admissions fees 3,515,850 Special student fees 1,764,679 Interest and other 194,527 Total other receipts 5,475,056

Total funds available for debt service $ 19,613,033

(1) Excludes Admission fees '( R

JK R UNIVERSITY OF SOUTH CAROLINA Statistical Section This section of the University of South Carolina Comprehensive Annual Financial Report presents detailed data as context for understanding and analyzing the information provided in the financial statements, note disclosures and required supplementary information. This supporting documentation conveys a broad perspective on the University’s and State of South Carolina’s financial condition. Contents Pages

Financial Trends:::::::::::::::::::::::::::::94-101 These schedules contain trend information to help the reader understand how the University’s financial performance has changed over time.

Debt Capacity::::::::::::::::::::::::::::...... 102-103 These schedules present information to help the reader assess the affordability of the University’s current levels of outstanding debt and its ability to issue additional debt in the future. Operating Information::::::::::::::::::::::::..:.104-110

These schedules contain information about the University’s operations and resources to help the reader understand how the University’s financial information relates to the services it provides.

Demographic and Economic Information:::::::::::::::::111-113 These schedules offer demographic and economic indicators to help the reader understand the environment within which the University’s financial activities take place and to help make comparisons over time. } } }

Sources: Unless otherwise noted, the information in these schedules is derived from the Financial Statements for the relevant years.

UNIVERSITY OF SOUTH CAROLINA Schedule of Revenues By Source Last Ten Fiscal Years (amounts in thousands)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Revenues Student tuition and fees (net of scholarship allowances) $ 481,768 $ 448,058 $ 407,914 $ 383,366 $ 359,234 $ 331,713 $ 296,871 $ 275,408 $ 314,960 $ 282,389 Federal grants and contracts 136,661 138,914 128,485 128,745 135,957 147,393 130,115 118,854 113,668 107,406 State grants and contracts 93,079 87,638 88,354 85,610 80,832 78,346 76,985 75,997 73,803 65,858 Local grants and contracts 1,365 1,208 1,167 1,329 1,337 1,439 1,245 1,061 960 774 Nongovernmental grants and contracts 32,854 36,704 38,818 34,932 38,481 26,027 26,196 26,988 28,606 25,471 Sales and services of educational and other activities 32,837 30,902 29,609 27,263 26,500 27,938 24,217 25,429 22,682 20,082 Sales and services of auxiliary enterprises (net of scholarship allowances) 161,143 146,693 131,836 128,220 125,215 116,176 110,315 102,288 99,436 92,736 Interest collected on student loans 295 305 333 301 328 309 303 253 224 224 Other fees 9,778 9,850 9,143 5,982 5,967 6,099 6,151 7,035 6,439 6,928 Other operating revenues 5,240 3,980 3,629 5,450 5,465 7,034 5,618 4,440 4,213 4,238 Total operating revenues 955,020 904,252 839,288 801,198 779,316 742,474 678,016 637,753 664,991 606,106

State appropriations 149,059 147,512 144,295 136,401 118,333 124,637 160,184 173,279 230,508 215,046 Federal grants 52,293 52,452 52,113 52,618 53,320 94,125 65,552 28,952 25,152 22,269 Gifts 42,160 45,548 46,444 43,918 38,401 37,967 42,086 53,780 37,848 45,754 Investment income 3,641 2,630 2,342 2,465 7,823 5,570 9,420 10,898 8,496 7,217 Endowment income 6,862 3,144 6,250 3,392 6,679 6,120 8,383 3,067 1,762 3,704 Other nonoperating revenues - 31,500 12,270 - -1414 - - - Gain on disposal of capital assets ------936 - - Total nonoperating revenues 254,015 282,786 263,714 238,794 224,556 268,433 285,639 270,912 303,766 293,990 Total revenues $ 1,209,035 $ 1,187,038 $ 1,103,002 $ 1,039,992 $ 1,003,872 $ 1,010,907 $ 963,655 $ 908,665 $ 968,757 $ 900,096

Total operating revenues Total nonoperating revenues

$1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Source: University of South Carolina Financial Statements UNIVERSITY OF SOUTH CAROLINA Schedule of Revenues By Source Last Ten Fiscal Years (percent of total revenues)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Revenues Student tuition and fees (net of scholarship allowances) 40% 38% 37% 37% 36% 33% 31% 30% 33% 31% Federal grants and contracts 11% 12% 12% 12% 13% 15% 13% 13% 12% 12% State grants and contracts 8%7%8%8%8%8%8%8%8%7% Local grants and contracts 0%0%0%0%0%0%0%0%0%0% Nongovernmental grants and contracts 3% 3% 3% 3% 4% 2% 3% 3% 3% 3% Sales and services of educational and other activities 3% 3% 3% 3% 3% 3% 2% 3% 2% 2% Sales and services of auxiliary enterprises (net of scholarship allowances) 13% 12% 12% 12% 12% 11% 11% 11% 10% 10% Interest collected on student loans 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Other fees 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% Other operating revenues 1% 0% 0% 1% 1% 1% 1% 1% 0% 1% Total operating revenues 80% 76% 76% 77% 78% 74% 70% 70% 69% 67%

State appropriations 12% 13% 13% 14% 11% 12% 17% 19% 24% 24% Federal grants 4%4%5%5%5%9%7%3%2%3% Gifts 3% 4% 4% 4% 4% 4% 4% 6% 4% 5% Investment income 0% 0% 0% 0% 1% 0% 1% 1% 1% 1% Endowment income 1%0%1%0%1%1%1%1%0%0% Other nonoperating revenues 0%3%1%0%0%0%0%0%0%0% Gain on disposal of capital assets 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Total nonoperating revenues 20% 24% 24% 23% 22% 26% 30% 30% 31% 33% Total revenues 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Total operating revenues Total nonoperating revenues

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 ~ Source: University of South Carolina Financial Statements

UNIVERSITY OF SOUTH CAROLINA Schedule of Expenses By Use Last Ten Fiscal Years (amounts in thousands)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Expenses Compensation and employee benefits$ 770,921 $ 736,540 $ 707,316 $ 677,157 $ 636,503 $ 595,861 $ 574,398 $ 574,690 $ 575,610 $ 529,085 Services and supplies 278,641 269,855 248,900 235,707 223,142 216,733 197,044 202,315 187,876 186,502 Utilities 34,526 34,936 34,605 31,090 29,515 29,803 28,061 26,938 26,601 24,703 Scholarships and fellowships 21,756 17,952 18,946 19,960 20,206 21,792 21,378 17,129 74,854 63,858 Depreciation 60,566 66,354 62,340 53,334 51,253 50,819 49,324 46,495 40,889 42,769 Total operating expenses 1,166,410 1,125,637 1,072,107 1,017,248 960,619 915,008 870,205 867,567 905,830 846,917

Loss on disposal of capital assets 136 2,249 720 14,313 575 1,760 717 - 777 716 Interest on capital asset related debt 23,881 22,178 18,648 18,762 19,025 19,579 19,040 16,154 12,800 12,492 Other nonoperating expenses ------4 - - Total nonoperating expenses 24,017 24,427 19,368 33,075 19,600 21,339 19,757 16,158 13,577 13,208 Total expenses $ 1,190,427 $ 1,150,064 $ 1,091,475 $ 1,050,323 $ 980,219 $ 936,347 $ 889,962 $ 883,725 $ 919,407 $ 860,125

Total operating expenses Total nonoperating expenses

$1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Source: University of South Carolina Financial Statements UNIVERSITY OF SOUTH CAROLINA Schedule of Expenses By Use Last Ten Fiscal Years (percent of total revenues)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Expenses Compensation and employee benefits 65% 64% 65% 65% 65% 64% 65% 65% 63% 62% Services and supplies 23% 23% 23% 22% 23% 23% 22% 23% 20% 22% Utilities 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% Scholarships and fellowships 2% 2% 2% 2% 2% 2% 2% 2% 8% 7% Depreciation 5% 6% 5% 5% 5% 6% 6% 5% 5% 5% Total operating expenses 98% 98% 98% 97% 98% 98% 98% 98% 99% 99%

Loss on disposal of capital assets 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% Interest on capital asset related debt2%2%2%2%2%2%2%2%1%1% Other nonoperating expenses 0%0%0%0%0%0%0%0%0%0% Total nonoperating expenses 2% 2% 2% 3% 2% 2% 2% 2% 1% 1% Total expenses 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Total operating expenses Total nonoperating expenses

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Source: University of South Carolina Financial Statements ('

UNIVERSITY OF SOUTH CAROLINA Schedule of Expenses By Function Last Ten Fiscal Years (amounts in thousands)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Expenses Instruction $ 390,960 $ 371,938 $ 361,122 $ 338,336 $ 315,093 $ 296,837 $ 291,267 $ 307,708 $ 297,188 $ 280,626 Research 121,960 121,913 118,274 117,024 116,169 113,563 109,769 108,456 106,506 101,333 Public service 66,361 64,519 54,273 57,162 57,305 55,876 53,664 57,125 58,835 55,724 Academic support 88,993 96,061 91,081 82,072 71,975 71,651 68,890 65,885 69,991 66,280 Student services 70,329 72,617 69,469 67,066 58,241 52,225 50,011 49,844 48,821 44,940 Institutional support 85,436 71,061 64,981 65,870 70,397 54,839 47,090 54,638 58,453 49,788 Operation and plant maintenance 119,626 104,374 103,108 97,133 86,999 93,328 81,146 65,453 60,896 59,964 Auxiliary enterprises 142,146 138,552 128,388 119,908 114,216 105,454 98,964 102,344 92,027 84,104 Scholarships and fellowships 20,033 18,248 19,071 19,343 18,971 20,416 20,080 9,619 72,224 61,389 Depreciation 60,566 66,354 62,340 53,334 51,253 50,819 49,324 46,495 40,889 42,769 Loss on disposal of capital assets 136 2,249 720 14,313 575 1,760 717 - 777 716 Interest on capital debt 23,881 22,178 18,648 18,762 19,025 19,579 19,040 16,154 12,800 12,492 Other nonoperating expenses ------4 - - Total expenses $ 1,190,427 $ 1,150,064 $ 1,091,475 $ 1,050,323 $ 980,219 $ 936,347 $ 889,962 $ 883,725 $ 919,407 $ 860,125

Instruction Research Public service Academic support Student services Institutional support Operation and plant maintenance Auxiliary enterprises Scholarships and fellowships Depreciation Loss on disposal of capital assets Interest on capital debt Other nonoperating expenses

$1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Source: University of South Carolina Financial Statements UNIVERSITY OF SOUTH CAROLINA Schedule of Expenses By Function Last Ten Fiscal Years (percent of total expenses)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Expenses Instruction 33% 32% 33% 32% 32% 32% 33% 35% 32% 33% Research 10% 11% 11% 11% 12% 12% 12% 12% 12% 12% Public service 6%6%5%6%6%6%6%6%6%6% Academic support 7%8%8%8%7%8%8%8%8%8% Student services 6% 6% 6% 6% 6% 6% 6% 6% 5% 5% Institutional support 7%6%6%6%7%6%5%6%6%6% Operation and plant maintenance 10% 9% 9% 9% 9% 10% 9% 7% 7% 7% Auxiliary enterprises 12% 12% 12% 12% 12% 11% 11% 12% 10% 10% Scholarships and fellowships 2% 2% 2% 2% 2% 2% 2% 1% 8% 7% Depreciation 5% 6% 6% 5% 5% 5% 6% 5% 5% 5% Loss on disposal of capital assets 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% Interest on capital debt 2%2%2%2%2%2%2%2%1%1% Other nonoperating expenses0%0%0%0%0%0%0%0%0%0% Total expenses 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 (( Source: University of South Carolina Financial Statements

UNIVERSITY OF SOUTH CAROLINA Schedule of Expenses By Function Current Fiscal Year and Nine Years Prior (percent of total expenses) 2016 2007

Interest on capital Interest on capital debt 2% debt 1% Scholarships and fellowships 2% Depreciation Depreciation 5% 5%

Scholarships and fellowships 7%

Auxiliary enterprises 12% Instruction 33% Auxiliary Instruction 33% enterprises 10%

Operation and plant maintenance Operation and 10% plant maintenance 7%

Institutional Institutional support 6% support 7%

Research 10% Student services 5% Research 12% Student services 6% Academic support 8% Academic support Public service Public service 7% 6% 6%

Source: University of South Carolina Financial Statements UNIVERSITY OF SOUTH CAROLINA Schedule of Net Position and Changes in Net Position Last Ten Fiscal Years (amounts in thousands)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Total revenues (from schedule of revenues by source) $ 1,209,035 $ 1,187,038 $ 1,103,002 $ 1,039,992 $ 1,003,872 $ 1,010,907 $ 963,655 $ 908,665 $ 968,757 $ 900,096 Total expenses (from schedule of expenses by use and function)(1,190,427)(1,150,064)(1,091,475)(1,050,323)(980,219)(936,347)(889,962)(883,725)(919,407)(860,125) Income (loss) before other revenues, and transfers 18,608 36,974 11,527 (10,331) 23,653 74,560 73,693 24,940 49,350 39,971 State capital appropriations 23,681 8,175 13,810 11,430 2,585 2,082 7,631 8,496 18,380 28,278 Capital grants and gifts 3,466 26,654 10,555 8,007 11,416 5,256 9,824 28,949 2,501 11,741 Additions to permanent endowments 361 2,970 4,725 1,674 5,384 18,090 6,446 17,594 101 6,537 Transfers to other state funds, net - - - - (1,468)(1,694)(1,296)(1,237)(1,329)(1,338) Total changes in net position 46,116 74,773 40,617 10,780 41,570 98,294 96,298 78,742 69,003 85,189

Net position, beginning, as originally stated 625,661 1,254,637 1,214,020 1,203,240 1,161,670 1,063,376 967,078 888,336 819,333 734,144 Restatement - (703,749) ------Net position, beginning, as restated 625,661 550,888 1,214,020 1,203,240 1,161,670 1,063,376 967,078 888,336 819,333 734,144 Net position, ending $ 671,777 $ 625,661 $ 1,254,637 $ 1,214,020 $ 1,203,240 $ 1,161,670 $ 1,063,376 $ 967,078 $ 888,336 $ 819,333

Net investment in capital assets 757,731 747,327 701,292 671,053 569,666 592,929 596,114 597,305 533,500 538,158 Restricted - nonexpendable 82,789 82,077 79,285 73,766 72,136 66,491 48,148 41,080 24,470 25,452 Restricted - expendable 140,036 129,704 137,629 121,396 200,308 140,672 92,909 70,678 67,378 41,062 Unrestricted (308,779)(333,447) 336,431 347,805 361,130 361,578 326,205 258,015 262,988 214,661 Total $ 671,777 $ 625,661 $ 1,254,637 $ 1,214,020 $ 1,203,240 $ 1,161,670 $ 1,063,376 $ 967,078 $ 888,336 $ 819,333 Source: University of South Carolina Financial Statements !

UNIVERSITY OF SOUTH CAROLINA Schedule of Ratios of Outstanding Debt Last Ten Fiscal Years (amounts in thousands except for the FTE students and outstanding debt per student)

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 State institution bonds $ 147,990 $ 159,830 $ 116,035 $ 109,355 $ 117,715 $ 128,435 $ 112,130 $ 118,800 $ 116,270 $ 122,015 Revenue bonds 272,520 280,065 288,140 295,415 264,725 212,100 218,320 195,300 170,370 109,640 Athletic facilities revenue bonds 151,270 154,750 119,250 121,915 124,450 112,700 47,175 48,130 48,965 19,530 Bond anticipation notes payable - - - - - 17,600 19,600 - 4,500 Subtotal bonds payable 571,780 594,645 523,425 526,685 506,890 453,235 395,225 381,830 335,605 255,685 Unamortized bond premiums 48,022 43,472 33,459 33,906 31,725 14,401 5,129 3,708 3,875 974 Unamortized bond discounts (571) (600) (628) (657) (685) (461) (479) (508) (45) (57) Unamortized loss on bond refunding (1) - -- (5,208)(5,604)(3,829)(2,221)(2,358)(2,494)(2,631) Total bonds payable 619,231 637,517 556,256 554,726 532,326 463,346 397,654 382,672 336,941 253,971 Notes payable 190 265 399 604 1,467 1,424 34,267 37,785 40,289 43,648 Capital lease obligation 14,824 15,845 16,590 16,697 17,291 17,448 17,942 - 208326 Total outstanding debt $ 634,245 $ 653,627 $ 573,245 $ 572,027 $ 551,084 $ 482,218 $ 449,863 $ 420,457 $ 377,438 $ 297,945

Full time equivalent students 44,229 43,167 42,065 41,097 40,475 39,592 37,965 36,374 35,179 34,050 Outstanding debt per student $ 14,340 $ 15,142 $ 13,628 $ 13,919 $ 13,615 $ 12,180 $ 11,849 $ 11,559 $ 10,729 $ 8,750

Total Outstanding Debt

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Note: Outstanding debt per student calculated using Fall semester full-time equivalent student enrollment data for the last ten academic years. Source: USC annual Bond Indebtedness reports, annual reports on Financial Statements, and USC Institutional Assessment & Compliance Office (1) Due to the implementation of GASB 65, Unamortized Loss on Bond Refunding is no longer reported as part of the Bonds Payable liability. Beginning in fiscal year 2014, it is now classified as a Deferred Outflow of Resources on the Statement of Net Position. UNIVERSITY OF SOUTH CAROLINA Schedule of Bond Coverage Last Ten Fiscal Years (amounts in thousands)

State Institution Bonds Debt Service Requirements Tuition and Total Revenue Fiscal Year Ended Matriculation Available for Coverage June 30, Fees Debt Service Principal Interest Other Fees Total Ratio 2016 $ 31,865 $ 31,865 $ 11,840 $ 6,525 $ 223 $118,588 .71 2015 30,034 30,034 9,395 5,259 196 14,850 2.02 2014 28,810 28,810 8,510 4,600 4 13,114 2.20 2013 27,778 27,778 8,360 4,939 19 13,318 2.09 2012 26,111 26,111 8,255 4,955 103 13,313 1.96 2011 23,638 23,638 6,920 4,987 93 12,000 1.97 2010 23,074 23,074 6,670 5,229 2 11,901 1.94 2009 21,688 21,688 6,020 5,466 3 11,489 1.89 2008 19,121 19,121 5,745 5,431 2 11,178 1.71 2007 18,584 18,584 6,660 4,808 - 11,468 1.62

Athletic Facilities Revenue Bonds Debt Service Requirements Athletic Operating Total Revenue Fiscal Year Ended Athletic Expenses & Net Athletic Special Student Admissions Interest Earnings Available for Debt Coverage June 30, Revenues Mandatory Transfers Revenues Fee Fees & Miscellaneous Service Principal Interest Other Fees Total Ratio 2016 $ 120,086 $ 105,948 $ 14,138 $ 1,765 $ 3,516 $ 194 $ 19,613 3,480$ $37,269 $ 9$110,788 .82 2015 110,243 98,989 11,254 1,724 4,027 126 17,131 2,770 5,698 97 8,565 2.00 2014 98,620 89,014 9,606 1,691 4,072 161 15,530 2,665 5,639 6 8,310 1.87 2013 90,484 79,611 10,873 1,585 1,695 214 14,367 2,535 5,784 7 8,326 1.73 2012 87,608 79,628 7,980 1,551 1,709 262 11,502 2,195 5,436 36 7,667 1.50 2011 84,010 70,511 13,499 1,491 1,754 277 17,021 1,920 4,538 44 6,502 2.62 2010 79,879 62,970 16,909 1,498 1,803 362 20,572 2,955 2,875 19 5,849 3.52 2009 76,117 62,870 13,247 1,391 2,060 415 17,113 835 2,812 - 3,647 4.69 2008 66,546 56,646 9,900 1,316 2,024 101 13,341 4,915 1,140 - 6,055 2.20 2007 60,591 51,634 8,957 1,291 2,086 100 12,434 2,750 1,250 31 4,031 3.08

Revenue Bonds Debt Service Requirements Net Revenue Fiscal Year Ended Operating Available for Debt Coverage June 30, Revenues Expenses Service Principal Interest Other Fees Total Ratio 2016 $ 64,576 $ 37,074 $ 27,502 $ 6,180 $ 10,345 $ 200 $116,725 .64 2015 62,249 36,441 25,808 8,075 10,451 3 18,529 1.39 2014 58,008 33,586 24,422 7,275 10,861 3 18,139 1.35 2013 54,711 31,895 22,816 6,495 9,398 6 15,899 1.44 2012 53,705 30,519 23,186 6,505 9,731 140 16,376 1.42 2011 49,345 29,438 19,907 6,220 10,071 5 16,296 1.22 2010 48,667 29,582 19,085 5,490 9,079 3 14,572 1.31 2009 43,764 25,675 18,089 3,990 8,241 2 12,233 1.48 2008 40,385 23,452 16,933 3,605 5,361 6 8,972 1.89 2007 37,736 21,285 16,451 3,465 4,960 4 8,429 1.95

Special Revenue Bonds Debt Service Requirements Net Revenue Fiscal Year Ended Additional Available for Debt Coverage June 30, Revenues Funds Service Principal Interest Other Fees Total Ratio 2016 $ 68,807 $ 751,413 $ 820,220 $ 1,945 $23,008 $ $ 4,955 165.53 2015 74,263 699,171 773,434 - 3,018 2 3,020 256.10 2014 73,562 642,077 715,639 - 3,018 2 3,020 236.97 2013 67,284 610,187 677,471 - 3,018 - 3,018 224.48 2012 70,425 579,634 650,059 - 159 - 159 4,088.42

Source: University of South Carolina Financial Statements #

UNIVERSITY OF SOUTH CAROLINA Schedule of Capital Asset Information Last Ten Fiscal Years

Fiscal Year Ended June 30, 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Assignable Area By Room Use/Function Use Codes (1) Classrooms 432,238 485,392 433,447 468,616 418,613 414,930 418,832 407,832 406,683 403,166 Laboratories 1,078,722 1,034,664 950,490 982,770 983,826 983,594 967,433 923,919 919,989 905,021 Office, Support and Other 4,042,039 4,448,249 4,306,921 4,193,336 4,164,334 4,240,663 4,054,742 4,014,410 3,884,131 3,876,890 Auxiliary Services 4,296,138 3,872,022 3,865,428 3,627,060 3,589,702 4,213,104 4,120,283 3,970,535 3,992,422 3,950,146 Total Assignable Square Feet 9,849,137 9,840,327 9,556,286 9,271,782 9,156,475 9,852,291 9,561,290 9,316,696 9,203,225 9,135,223

Student Housing (2) Traditional Residence Hall Beds 1,172 1,172 1,206 1,521 1,481 1,481 2,086 2,082 2,179 2,191 Suite-Style Hall Beds 3,295 3,295 3,299 2,982 2,972 2,416 2,420 1,883 1,887 1,887 Apartments and Apartment-Style Hall Beds 2,215 2,215 2,198 2,277 2,269 2,274 2,274 2,274 2,271 2,275 Units available 6,682 6,682 6,703 6,780 6,722 6,171 6,780 6,239 6,337 6,353 Units in use 6,643 6,593 6,539 6,739 6,658 6,218 6,303 6,185 6,154 6,294 Percent occupancy 99.4% 98.7% 97.6% 99.4% 99.0% 100.8% 93.0% 99.1% 97.1% 99.1%

Dining Facilities (3) Locations 27262628272627262525 Average daily customers 18,664 18,557 12,776 15,667 13,902 14,283 13,937 13,815 13,158 12,988

Parking Facilities (4) Parking spaces available 14,509 14,519 15,058 15,509 15,801 16,822 16,822 16,822 14,447 13,959 Parking permits issued to students 15,982 16,523 18,522 17,049 18,085 17,533 16,742 16,380 16,102 15,486 Parking permits issued to faculty/staff 7,211 7,283 6,594 6,112 6,244 5,853 5,833 5,811 5,778 5,774

(1) Assignable Area by Room Use and Function Use Codes as annually reported to the South Carolina Commission on Higher Education. This is a combination of two reports. (2) Student Housing is available on the USC Columbia, USC Aiken, USC Beaufort and USC Upstate campuses. All of USC Beaufort and a portion of USC Upstate are outsourced. This reporting is USC Columbia only. Columbia Student Housing bed count does not include 743 beds in the Greek Village. These facilities are on leased University land, but the facilities are not assets of the University. (3) Dining Facilities are available on the USC Columbia, USC Aiken, USC Beaufort, and USC Upstate campuses. All dining facilities are outsourced. This reporting is USC Columbia only. (4) Parking Facilities are available on all USC campuses. Only USC Columbia treats parking operations as an auxiliary enterprise. This reporting is USC Columbia only. UNIVERSITY OF SOUTH CAROLINA Schedule of Enrollment Statistics Last Ten Academic Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 USC Columbia (including the SOMs) Undergraduate Head Count 25,254 24,864 24,180 23,363 22,556 21,383 20,494 19,765 18,827 18,648 Graduate and Professional Head Count 8,518 8,108 7,784 7,925 8,165 8,214 7,987 7,723 8,445 8,742 Total Enrollment Head Count 33,772 32,972 31,964 31,288 30,721 29,597 28,481 27,488 27,272 27,390

Percentage of Men 45.02% 44.80% 44.86% 44.79% 44.73% 44.70% 44.54% 43.83% 42.64% 42.00% Percentage of Women 54.98% 55.20% 55.14% 55.21% 55.27% 55.30% 55.46% 56.17% 57.36% 58.00% Percentage of White 73.84% 73.94% 73.92% 74.88% 74.89% 75.36% 75.01% 71.32% 70.49% 69.93% Percentage of African American or Black 10.05% 10.43% 10.56% 11.08% 11.20% 10.95% 10.98% 11.67% 12.71% 13.13% Percentage of Other Race and Not Reported 16.11% 15.63% 15.52% 14.04% 13.91% 13.69% 14.01% 17.01% 16.80% 16.94%

Undergraduate FTE 25,092 24,580 23,790 22,890 22,167 21,130 20,156 19,463 18,422 17,851 Graduate and Professional FTE 6,396 6,179 5,974 5,891 5,917 6,020 5,784 5,614 5,768 5,916 Total Enrollment FTE 31,488 30,759 29,764 28,781 28,084 27,150 25,940 25,077 24,190 23,767

USC System Undergraduate Head Count 40,569 39,683 38,627 38,118 37,451 36,220 34,934 33,577 32,294 31,378 Graduate and Professional Head Count 8,982 8,484 8,045 8,146 8,323 8,337 8,166 7,941 8,605 8,915 Total Enrollment Head Count 49,551 48,167 46,672 46,264 45,774 44,557 43,100 41,518 40,899 40,293

Percentage of Men 42.44% 42.55% 42.62% 42.07% 42.06% 41.75% 41.76% 41.23% 40.16% 39.53% Percentage of Women 57.56% 57.45% 57.38% 57.93% 57.94% 58.25% 58.24% 58.77% 59.84% 60.47% Percentage of White 68.22% 68.34% 68.45% 68.94% 69.38% 69.67% 69.73% 67.95% 67.87% 67.51% Percentage of African American or Black 14.56% 14.91% 15.16% 15.72% 16.24% 16.05% 15.58% 16.37% 16.86% 17.35% Percentage of Other Race and Not Reported 17.22% 16.75% 16.39% 15.34% 14.38% 14.28% 14.69% 15.68% 15.27% 15.14%

Undergraduate FTE 37,692 36,840 36,009 35,122 34,491 33,516 32,119 30,689 29,351 28,071 Graduate and Professional FTE 6,537 6,327 6,056 5,975 5,984 6,076 5,846 5,685 5,828 5,979 Total Enrollment FTE 44,229 43,167 42,065 41,097 40,475 39,592 37,965 36,374 35,179 34,050

USC Columbia & SOMs Head Count USC System Head Count

Graduate and Professional Head Count Undergraduate Head Count Graduate and Professional Head Count Undergraduate Head Count 35,000 50,000 45,000 30,000 40,000 25,000 35,000 30,000 20,000 25,000 15,000 20,000

10,000 15,000 10,000 5,000 5,000 0 0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 $

Source: Office of Institutional\ %

UNIVERSITY OF SOUTH CAROLINA COLUMBIA Schedule of Admissions Statistics Last Ten Academic Years

USC Columbia 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Number of Applications Received 25,736 23,341 23,035 23,429 21,311 18,485 17,698 17,018 14,994 13,946 Number of Acceptances 16,611 15,219 14,844 14,199 13,451 12,914 11,264 9,954 8,908 8,782 Number of Students Matriculated 5,156 4,980 5,046 4,625 4,636 4,468 3,917 3,859 3,719 3,697 Accepted as a Percentage of Applicants 64.54% 65.20% 64.44% 60.60% 63.12% 69.86% 63.65% 58.49% 59.41% 62.97% Enrolled as a Percentage of Accepted 31.04% 32.72% 33.99% 32.57% 34.47% 34.60% 34.77% 38.77% 41.75% 42.10% Median Combined SAT Score 1210 1210 1207 1199 1190 1187 1192 1191 1183 1172

30,000 100.00%

90.00%

25,000 80.00%

70.00% 20,000

60.00%

15,000 50.00%

40.00%

10,000 30.00%

20.00% 5,000

10.00%

0 0.00% 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Number of Applications Received Number of Acceptances Number of Students Matriculated Accepted as a Percentage of Applicants Enrolled as a Percentage of Accepted

Source: Admissions Office UNIVERSITY OF SOUTH CAROLINA Schedule of Degree Data Last Ten Academic Years

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 USC Columbia (including the SOMs) Associates 16 4 4 7 6 8 5 11 11 8 Bachelors 5,416 5,412 4,622 4,556 4,462 4,135 4,092 3,823 3,725 3,571 Masters 1,628 1,623 1,735 1,749 1,719 1,623 1,525 1,574 1,612 1,622 Doctorate 317 358 334 279 289 249 270 243 244 246 First Professional 431 393 414 395 414 394 433 396 397 396 Graduate Certificate 225 199 92 112 103 76 77 47 66 64 Specialist 24 15 40 63 48 61 64 68 31 39 Total Degrees Awarded 8,057 8,004 7,241 7,161 7,041 6,546 6,466 6,162 6,086 5,946

USC System Associates 446 513 505 436 424 403 370 394 351 455 Bachelors 7,384 7,256 6,552 6,430 6,254 5,830 5,666 5,390 5,215 4,984 Masters 1,654 1,653 1,761 1,776 1,734 1,655 1,551 1,603 1,649 1,662 Doctorate 317 358 334 279 289 249 270 243 244 246 First Professional 431 393 414 395 414 394 433 396 397 396 Graduate Certificate 226 199 94 115 105 76 79 47 66 64 Specialist 24 15 40 63 48 61 64 68 31 39 Total Degrees Awarded 10,482 10,387 9,700 9,494 9,268 8,668 8,433 8,141 7,953 7,846

USC Columbia USC System 11,000 11,000

10,000 10,000

9,000 9,000

8,000 8,000

7,000 7,000

6,000 6,000

5,000 5,000

4,000 4,000

3,000 3,000

2,000 2,000

1,000 1,000

0 0 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Associates Bachelors Masters Doctorate First Professional Graduate Certificate Specialist Associates Bachelors Masters Doctorate First Professional Graduate Certificate Specialist & Source: Office of Institutional \Assessment and '

UNIVERSITY OF SOUTH CAROLINA Faculty and Staff Statistics Last Ten Academic Years

Faculty (1) USC Columbia (including the SOMs) 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Number of FTE Faculty 2,618 2,359 2,360 2,037 1,976 1,893 1,861 1,931 1,876 1,841 Number of Full-time Faculty 1,760 1,788 1,732 1,635 1,598 1,517 1,525 1,576 1,524 1,621 Number of Part-time Faculty 883 885 706 632 581 568 533 557 580 649 Number of Tenured Faculty 1,199 1,210 1,178 1,110 1,072 1,028 1,034 1,061 1,011 1,054 Tenure Ratio (%) Full-time 68% 68% 68% 68% 67% 68% 68% 67% 66% 65%

Average Faculty Salary $93,074 $89,967 $88,005 $86,552 $83,236 $80,577 $79,615 $78,089 $77,139 $75,263

USC System (1) Number of FTE Faculty 3,517 3,134 3,237 2,875 2,827 2,748 2,678 2,745 2,632 2,592 Number of Full-time Faculty 2,367 2,393 2,317 2,175 2,153 2,078 2,078 2,142 2,037 2,165 Number of Part-time Faculty 1,401 1,376 1,043 1,109 1,036 1,037 977 962 974 1,076 Number of Tenured Faculty 1,619 1,620 1,562 1,463 1,438 1,401 1,395 1,439 1,368 1,415 Tenure Ratio (%) Full-time 68% 68% 67% 67% 67% 67% 67% 67% 67% 65%

Total Employees (2) USC Columbia (including the SOMs) Full-time FTE Position 4,722 4,799 4,730 4,633 4,503 4,475 4,499 4,704 4,653 4,540 Part-time FTE Position 78 78 92 96 93 97 80 81 414 85 Temporary 2,366 2,275 2,242 2,445 2,206 1,939 1,753 1,830 1,864 1,719 Research Grant 864 819 753 720 646 587 517 477 425 395 Students 6,217 6,003 6,114 5,803 5,743 5,370 5,471 5,620 5,241 4,979 Total Employees 14,247 13,974 13,931 13,697 13,191 12,468 12,320 12,712 12,597 11,718

Total Employees (2) USC System Full-time FTE Position 6,084 6,106 6,053 5,914 5,789 5,740 5,765 6,007 5,900 5,715 Part-time FTE Position 82 86 101 107 107 109 89 90 96 94 Temporary 3,335 3,196 3,183 3,404 3,140 2,867 2,584 2,675 2,653 2,532 Research Grant 892 848 782 752 683 630 560 519 461 437 Students 7,345 7,147 7,337 6,990 6,907 6,454 6,536 6,603 6,150 5,822 Total Employees 17,738 17,383 17,456 17,167 16,626 15,800 15,534 15,894 15,260 14,600

Students per FTE (3) USC Columbia (including the SOMs) Faculty 12.03 13.04 12.61 14.13 14.21 14.34 13.94 12.99 12.89 12.91 Full-time Employees 6.67 6.41 6.29 6.21 6.24 6.07 5.77 5.33 5.20 5.24

Students per FTE (3) USC System Faculty 12.58 13.77 13.00 14.29 14.32 14.41 14.18 13.25 13.37 13.14 Full-time Employees 7.27 7.07 6.95 6.95 6.99 6.90 6.59 6.06 5.96 5.96

Notes: (1) USC Columbia Faculty Data and System Faculty Data compiled annually by the Office of Institutional Research and Assessment in October of each year. (2) Total USC Columbia Employees and Total System Employees compiled annually by Human Resources in October of each year. (3) The FTE rates for prior years have been restated in 2016 to better represent the relationship between faculty/employees and students.

Sources: Office of Institutional \Assessment and ; Human Resources UNIVERSITY OF SOUTH CAROLINA Undergraduate Required Tuition and Fees - Resident Comparison to Peer Institutions - Last Ten Fiscal Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Undergraduate Resident University of South Carolina - Columbia$ 11,482 $ 11,158 $ 10,816 $ 10,488 $910,168 $ ,786$89,156 $8,838$7,346$ ,808

SEC Institutions - Public University of Alabama 10,170 9,826 9,450 9,200 8,600 7,900 7,000 6,400 5,700 5,278 University of Arkansas 8,522 7,848 7,818 7,554 7,174 6,768 6,460 6,400 6,038 5,808 Auburn University 10,424 10,200 9,852 9,446 8,698 7,900 6,972 6,500 5,834 5,496 University of Florida 6,310 6,310 6,263 6,143 5,657 5,045 4,373 3,777 3,257 3,206 University of Georgia 11,622 10,836 10,262 9,842 9,472 8,736 7,530 6,030 5,622 4,964 University of Kentucky 12,029 11,677 11,064 9,676 9,128 8,610 8,123 7,736 7,096 5,890 Louisiana State University 9,660 8,701 7,829 6,989 6,354 5,764 5,233 5,086 4,543 4,449 University of Mississippi 7,444 7,096 6,760 6,282 5,790 5,436 5,106 5,106 4,932 4,602 Mississippi State University 7,502 7,140 6,772 6,264 5,805 5,461 5,151 5,151 4,978 4,596 University of Missouri 10,586 10,286 9,415 9,257 8,989 8,501 8,501 8,467 8,098 7,784 University of Tennessee 12,186 11,876 11,194 9,092 8,396 7,382 6,850 6,250 5,932 5,622 Texas A&M University 9,607 9,355 8,506 8,506 8,419 8,386 8,177 7,844 7,335 6,966

ACC Institutions - Public Clemson University 13,882 13,446 13,054 12,674 12,304 11,908 11,078 10,608 9,870 9,400 Florida State University 5,644 6,507 6,507 6,402 5,826 5,238 4,566 3,988 3,355 3,307 Georgia Tech 12,204 11,394 10,650 10,098 9,652 8,716 7,606 6,040 5,642 4,926 University of Louisville 10,738 10,236 9,750 9,466 8,930 8,424 7,944 7,564 6,940 6,252 N.C. State University 8,581 8,296 8,206 7,788 7,018 6,529 5,474 5,286 5,117 4,784 University of North Carolina 8,591 8,336 8,340 7,693 7,008 6,665 5,625 5,397 5,340 5,033 University of Pittsburgh 18,192 17,772 17,100 16,590 16,132 14,936 14,154 13,642 12,876 12,138 Virginia Tech 12,485 12,017 11,455 10,923 10,509 9,459 8,605 8,189 7,397 6,973 University of Virginia 14,476 13,111 12,466 12,216 11,786 10,828 9,872 9,490 8,690 8,035

Other Peer Institutions University of Colorado - Boulder 11,273 10,789 10,347 9,482 9,152 8,511 7,932 7,278 6,635 5,643 University of Connecticut 13,366 12,700 12,022 11,242 10,670 10,416 9,886 9,338 8,852 8,362 University of Delaware 12,520 12,342 12,112 11,682 11,192 10,208 9,486 8,646 8,150 7,740 Indiana University 10,388 10,388 10,209 10,033 9,524 9,028 8,613 8,231 7,837 7,460 Rutgers University 14,131 13,813 13,499 13,073 12,754 12,559 11,886 11,540 10,686 9,958 ( Source: Institutional websites and direct contact

UNIVERSITY OF SOUTH CAROLINA Undergraduate Required Tuition and Fees - Nonresident Comparison to Peer Institutions - Last Ten Fiscal Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Undergraduate Resident University of South Carolina - Columbia$ 30,298 $ 29,440 $ 28,528 $ 27,644 $ 26,352 $ 25,362 $ 23,732 $ 22,908 $ 21,632 $ 20,236

SEC Institutions - Public University of Alabama 25,950 24,950 23,950 22,950 21,900 20,500 19,200 18,000 16,518 15,294 University of Arkansas 21,826 19,939 19,074 18,434 17,606 16,000 15,338 15,278 14,492 13,942 Auburn University 28,040 27,384 26,364 25,190 23,920 21,916 19,452 18,260 16,334 15,496 University of Florida 28,588 28,588 28,540 28,420 27,934 27,322 23,744 20,622 17,841 17,791 University of Georgia 29,832 29,046 28,472 28,052 27,682 26,946 25,740 22,342 20,726 18,040 University of Kentucky 25,353 23,947 22,150 19,864 18,740 17,678 16,678 15,884 14,896 13,970 Louisiana State University 26,820 26,411 25,735 22,265 19,362 16,549 14,383 13,800 12,843 12,749 University of Mississippi 20,674 19,144 17,628 16,266 14,796 13,890 13,044 12,468 11,436 10,566 Mississippi State University 20,142 18,478 16,960 15,828 14,670 13,801 13,021 12,503 11,469 10,552 University of Missouri 25,198 24,312 23,764 23,366 21,784 20,516 19,592 19,558 18,754 18,050 University of Tennessee 30,636 30,326 29,684 27,582 25,538 22,720 20,946 19,208 18,174 17,188 Texas A&M University 28,200 26,532 25,126 25,036 23,809 22,816 22,607 22,184 15,675 15,216

ACC Institutions - Public Clemson University 32,800 31,824 30,488 29,600 28,462 27,420 25,388 23,630 21,800 19,824 Florida State University 18,788 21,673 21,673 21,569 20,992 19,772 18,804 18,432 16,486 16,438 Georgia Tech 32,369 30,698 29,954 29,402 27,862 26,926 26,016 25,182 23,366 20,272 University of Louisville 25,044 24,124 23,638 22,950 21,650 20,424 19,272 18,354 17,734 16,072 N.C. State University 24,932 23,551 21,661 20,953 19,853 19,064 17,959 17,584 17,315 16,982 University of North Carolina 33,673 33,418 30,122 28,445 26,834 25,280 23,513 22,295 20,988 19,681 University of Pittsburgh 28,958 28,168 27,106 26,280 25,540 24,592 23,852 23,290 22,386 21,456 Virginia Tech 29,129 28,048 27,211 25,915 24,480 23,217 21,878 20,825 19,775 19,049 University of Virginia 43,772 42,297 39,852 37,546 36,108 33,102 31,430 29,572 27,705 25,959

Other Peer Institutions University of Colorado - Boulder 34,307 33,240 32,115 31,378 30,330 29,493 28,186 26,756 24,797 23,539 University of Connecticut 34,908 32,888 30,970 29,074 27,566 26,880 25,486 24,050 22,796 21,562 University of Delaware 31,420 30,692 29,932 28,772 27,462 25,408 23,186 21,126 19,400 18,450 Indiana University 33,740 33,241 32,350 31,483 29,540 27,689 26,160 24,769 22,316 20,472 Rutgers University 29,597 28,624 27,523 26,393 25,417 24,021 22,518 21,488 19,854 18,463

Source: Institutional websites and direct contact UNIVERSITY OF SOUTH CAROLINA State of South Carolina Demographic Statistics Last Ten Calendar Years

Average Annual Personal Income Population at Per Capita Unemployment Year (In thousands) (a) at July 1 (a) Income (a) Rate (b) Population Per Capita Income

5,000,000 $39,000 2015 $ 187,532,342 4,896,143$ 38,302 6.0%

2014 177,242,275 4,832,482 36,677 6.4% $38,000 4,900,000

2013 171,088,428 4,774,839 35,831 7.6% $37,000 4,800,000 2012 165,595,079 4,723,723 35,056 9.1% $36,000

2011 159,747,330 4,673,348 34,183 10.4% 4,700,000 $35,000 2010 151,536,772 4,635,835 32,688 11.2%

4,600,000 $34,000 2009 148,602,980 4,589,872 32,376 11.5% $33,000 2008 150,165,760 4,528,996 33,157 6.8% 4,500,000

2007 143,767,529 4,444,110 32,350 5.6% $32,000 4,400,000 2006 135,575,067 4,357,847 31,111 6.4% $31,000

4,300,000 $30,000 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

(a) Source: U.S. Department of Commerce, Bureau of Economic Analysis

(b) Source: U.S. Department of Labor, Bureau of labor Statistics

UNIVERSITY OF SOUTH CAROLINA State of South Carolina Employment By Industry Latest Completed Calendar Year and Nine Years Prior

2015 2006 Number of Employees Percent of Total Number of Employees Percent of Total Construction 86,600 4.33% 124,700 6.56% Manufacturing 235,900 11.79% 251,600 13.24% Trade, Transportation and Utilities 384,500 19.22% 370,400 19.49% Information 26,800 1.34% 27,500 1.45% Financial Activities 97,000 4.85% 97,400 5.12% Professional and Business Services 262,200 13.11% 219,000 11.52% Education and Health Services 235,300 11.76% 187,700 9.87% Leisure and Hospitality 237,900 11.89% 207,900 10.94% Other Services 73,700 3.68% 75,000 3.95% Government 360,400 18.03% 339,600 17.86% Total 2,000,300 100.00% 1,900,800 100.00%

Source: South Carolina Revenue and Fiscal Affairs Office UNIVERSITY OF SOUTH CAROLINA State of South Carolina Ten Largest Employers Latest Completed Calendar Year and Nine Years Prior Listed Alphabetically

2015 2006 Bi-Lo, LLC Bi-Lo, LLC Blue Cross Blue Shield of South Carolina Blue Cross Blue Shield of South Carolina Greenville Hospital System Michelin North America, Inc. Michelin North America, Inc. Palmetto Health Alliance, Inc. Palmetto Health Alliance, Inc. School District of Greenville County School District of Greenville County U.S. Department of Defense U.S. Department of Defense U.S. Postal Service U.S. Postal Service University of South Carolina University of South Carolina Wal-Mart Associates, Inc. Wal-Mart Associates, Inc. Washington Savannah River Company " Note: Due to confidentiality issues, the number of employees for each company is not available and the employers are listed alphabetically rather than in order of size. Source: South Carolina Department of Employment and Workforce. #

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APPENDIX B

SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION

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APPENDIX B

Summary of Certain Provisions of the Bond Resolution

The Bond Resolution adopted October 19, 2001, by the Board of Trustees of the University of South Carolina (the “Bond Resolution”), contains various covenants and security provisions, some of which are summarized below. Wherever particular provisions of the Bond Resolution are referred to, such provisions should be considered incorporated by reference as part of the statements made, and the statements made are qualified in their entirety by such provisions. Reference is made to the Bond Resolution for a full and complete statement of their respective provisions. Capitalized terms used in this summary, which are not defined below or elsewhere herein shall have the same meanings as in the Bond Resolution.

Definitions

“Accreted Value” shall mean the amounts set forth in and the amounts computed pursuant to a formula set forth in a Series Resolution authorizing the issuance of Bonds in the form of Capital Appreciation Bonds, the Accreted Value of which is being determined.

“Accountants” shall mean an independent firm of certified public accountants of suitable standing, or the Office of the Auditor of the State of South Carolina, which audits the books and accounts of the University relating to the Facilities.

“Admissions Fee” shall mean the specially designated admissions fee or charge which may, in addition to other charges, be imposed by the Board of Trustees upon (i) each person in attendance at a football game at the University’s football stadium, excluding students permitted to use such Athletic Facilities as a result of student fees paid to the University for a regular academic session, and (ii) in the Board of Trustee’s discretion, persons admitted to any event held at any of the other Athletic Facilities, for the purpose of providing funds to assist in the repayment of the Bonds.

“Annual Budget” shall mean the budget or amended budget adopted annually by the Board of Trustees for the ensuing Fiscal Year of the University.

“Annual Principal and Interest Requirement” shall mean, with respect to the annual period in question and to a Series of Bonds, an amount (other than amounts paid from proceeds of Bonds) equal to the sum of (1) all interest payable on such Series of Bonds during such period, less any such interest which has been capitalized in accordance with the terms of the Bond Resolution, plus (2) any Principal Installments of such Series of Bonds during such period; provided, however, with respect to any Principal Installment (whether maturing in such particular Fiscal Year or in a subsequent Fiscal Year) of a Series of Partially Amortizing Bonds, equaling 25% or more of the principal of such Series of Partially Amortizing Bonds, the amount of the principal which would be payable during such Fiscal Year shall be computed as if such principal were amortized from the date of issuance thereof over a period of twenty (20) years or the actual maturity of such Partially Amortizing Bonds, whichever is greater, on a level debt service basis at an interest rate equal to the rate borne by such Partially Amortizing Bonds on the date calculated, except that if the date of calculation is within twelve (12) months of the actual maturity of such Partially Amortizing Bonds, the full amount of the Principal Installment payable at maturity (less any sinking fund established therefor and deposited with the Trustee for such Bonds) shall be included in such calculation. For purposes of computing “Annual Principal and Interest Requirement,” the rate of interest used to determine (1) above shall be a rate per annum equal to (a) with respect to any Series of Bonds which bear interest at a fixed rate or rates, the rate or rates of interest borne or to be borne by such Bonds, and (b) with respect to any Series of Variable Rate Bonds, the following methods shall determine the interest rate to be used:

(i) in the case of determining the Annual Principal and Interest Requirement or the Combined Principal and Interest Requirement, as the case may be, for purposes of Sections 4.02(A)(7) of the Bond Resolution (Additional Bonds Test), the interest rate shall be equal to the 30-year Revenue Bond Index published by The Bond Buyer no more than two (2) weeks prior to, but in no event after, the sale of the proposed Series of Bonds to be issued; and

B-1

(ii) in the case of determining the Combined Annual Principal and Interest Requirement for purposes of applying the covenants contained in Sections 5.01(B), 5.01(C) and 6.01 of the Bond Resolution (Rate Covenants), the interest rate shall be equal to the maximum interest rate prevailing on such Variable Rate Bonds for the preceding twelve-month period; provided, however, that if the 30-year Revenue Bond Index referred to in (i) above is no longer published, any reasonably equivalent nationally recognized index published for the periods in question may be selected by the Chief Financial Officer for use in its stead.

“Authorized Investments” shall mean those investments authorized for investment of State funds under Section 11-9-660, Code of Laws of South Carolina 1976, as now or hereafter amended from time to time.

“Athletic Department” shall mean the Athletic Department - Columbia Campus of the University.

“Athletic Facilities” shall mean all of the facilities of the University designated from time to time by the Board of Trustees as intercollegiate athletic facilities for the Columbia campus, including any facilities providing support for facilities where intercollegiate events are held, including without limitation any related infrastructure and any administration, maintenance, practice, training, physical therapy and related facilities of the Athletic Department, whether now owned or are hereafter acquired by the University.

“Board of Trustees” shall mean the Board of Trustees of The University of South Carolina, or any successor body.

“Bond Counsel” shall mean any firm of attorneys which is nationally recognized as bond counsel in the field of public finance.

“Bond Insurance Policy” shall mean any municipal bond insurance policy insuring the payment, when due, of the principal of and interest on a Series of Bonds.

“Bond Insurer” shall mean, with respect to a Series of Bonds, an insurance company that has issued its Bond Insurance Policy with respect to such Series of Bonds.

“Bond Payment Date” shall mean the dates on which interest on any of the Bonds shall be payable or on which both principal and interest shall be payable on any of the Bonds, all as set forth in the Series Resolutions authorizing the issuance of the respective Series of Bonds.

“Bondholder” or “Holder”, or any similar term, when used with reference to the Bonds, shall mean any person who shall be the registered owner of any Outstanding Bond or in the case of Bonds issued in bearer form in accordance with the Bond Resolution, the holder of any such Bond.

“Bonds” shall mean any indebtedness of the University issued in accordance with the provisions of the Enabling Act, the Bond Resolution and a Series Resolution, but not including Junior Lien Bonds.

“Business Day” shall mean, except as set forth in a Series Resolution with respect to the Series of Bonds issued thereunder, any day other than a Saturday, a Sunday or a day on which banking institutions in the State or in the State of New York are required or authorized by law (including executive orders) to close.

“Capital Appreciation Bonds” shall mean Bonds that bear interest payable at maturity, upon redemption prior to maturity or prior to maturity at the date set forth in the Series Resolution authorizing the issuance of such Bonds in the amounts determined by reference to the Accreted Value of such Capital Appreciation Bonds in accordance with the provisions of the Series Resolution authorizing the issuance of such Capital Appreciation Bonds.

“Chairman” shall mean the Chairman of the Board of Trustees. The term shall include the Vice Chairman or Acting Chairman whenever by reason of absence, illness or other reason, the person who is the Chairman is unable to act.

B-2

“Chief Financial Officer” shall mean the individual to whom the Board of Trustees has delegated the responsibility of supervising and maintaining records and accounts relating to the collection and disbursement of the Revenues.

“Code” shall mean the Internal Revenue Code of 1986, as the amended from time to time. References to the Code and sections of the Code include relevant applicable regulations, temporary regulations and proposed regulations thereunder and under the Internal Revenue Code of 1954, as amended, and any successor provisions to those sections, regulations, temporary regulations or proposed regulations.

“Combined Annual Principal and Interest Requirement” shall mean, with respect to any particular Fiscal Year, the sum of the Annual Principal and Interest Requirements on all Bonds Outstanding; provided, with respect to the additional bonds test set forth in the Bond Resolution, such term shall also be deemed to include, with respect to any outstanding notes issued by the University in anticipation of the issuance of Bonds, an amount, as determined by the Chief Financial Officer, equal to annual debt service on an issue of the same principal amount of indebtedness as is outstanding on said notes, which issue shall be assumed to have level annual debt service over a period equal to the lesser of (i) twenty (20) years and (ii) the remaining reasonably expected useful life of the facilities financed or refinanced with proceeds of said notes, based on an assumed interest rate per annum equal to the then-current Municipal Market Data (or if such index is no longer maintained, such other comparable nationally- recognized index as the Chief Financial Officer shall select) yield for comparable maturities of comparable securities.

“Counsel” shall mean an attorney duly admitted to practice law before the highest court in South Carolina, who is not a full time employee of the University or the State, but may include an opinion issued by the Office of the Attorney General of South Carolina.

“Date of Issue” shall mean that date established in any Series Resolution from which interest shall accrue on the Bonds of the applicable Series.

“Debt Service Fund” shall mean the fund so designated pursuant to a Series Resolution and designed to provide for the payment of the principal of and interest on a particular Series of Bonds issued pursuant to the Bond Resolution, as the same fall due, and as established pursuant to the provisions of the Bond Resolution.

“Debt Service Reserve Fund” shall mean the fund, if any, so designated pursuant to a Series Resolution and designed (1) to insure the timely payment of the principal of and interest on a particular Series of Bonds Outstanding and issued pursuant to the Bond Resolution, and (2) to provide for the redemption of such Series of Outstanding Bonds prior to their stated maturity, as established by the provisions of the Bond Resolution.

“Enabling Act” shall mean Act No. 518 of the 1980 Session of the General Assembly of the State of South Carolina, as amended by Act No. 545 of 1986, Act No. 302 of 1996, Act No. 6 of 1997, Act No. 182 of the Regular Session of 2005 and Act No. 17 of the Regular Session 2007, as the same may be further amended from time to time.

“Fiscal Year” shall mean the period of twelve calendar months, beginning on July 1st of each year and ending with June 30th of the succeeding year, unless the same shall have been changed by the Board of Trustees pursuant to the authorization of the Bond Resolution.

“Government Obligations” shall mean and include direct general obligations of the United States of America or obligations, the payment of principal or interest on which, in the opinion of the Attorney General of the United States, is fully and unconditionally guaranteed by the United States of America.

“Improvement Fund” shall mean the fund established pursuant to Section 7.05 of the Bond Resolution. “Junior Lien Bonds” shall mean any revenue bonds or other obligations issued by the University which are secured by pledges of or liens on the Revenues, the Admissions Fee or the Special Student Fee which are junior and subordinate in all respects to the pledges and liens made to secure the Bonds.

“Moody’s” shall mean Moody’s Investors Service, Inc. and its successors.

B-3

“Net Revenues” shall mean for the period in question, all Revenues remaining after payment of the operating and maintenance expenses of the Athletic Department and the Athletic Facilities but before provision is made for depreciation, amortization, nonmandatory transfers and interest expenses of the Athletic Department for a given Fiscal Year.

“Operation and Maintenance Fund” shall mean the fund established pursuant to the Bond Resolution in order to provide for the payment of all expenses incurred in connection with the administration and operation of the Athletic Department and the Athletic Facilities, including, without limiting the generality of the foregoing, such expenses as may be reasonably necessary to preserve the Athletic Facilities in good repair and condition and to pay the fees and charges of the Trustee, the Paying Agent, the Registrar and the custodian or trustee of any other fund created or to be created under the Bond Resolution, the costs of audits required under the Bond Resolution, and the premiums for all insurance policies and any fidelity bonds required by the Bond Resolution.

“Outstanding”, when used with reference to the Bonds, shall mean, as of any date, all such Bonds theretofore or then being authenticated and delivered except:

(a) Bonds paid or redeemed and cancelled at or prior to such date;

(b) Bonds in lieu of or in substitution for which other bonds shall have been executed and delivered;

(d) for purposes of any consent or other action to be taken by the Holders of a specified percentage of the Bonds, Bonds held by, or for the account of, the University, or by any person controlling, controlled by or under common control with the University.

“Partially Amortizing Bonds” shall mean a Series of Bonds twenty-five percent (25%) or more of the principal payments of which are due in a single Fiscal Year, which portion of the principal is not required by the Series Resolution providing for their issuance to be paid by redemption prior to such maturity date.

“Paying Agent” shall mean the State Treasurer or any bank or trust company appointed by the University from time to time as Paying Agent or Paying Agents in accordance with the Bond Resolution to serve as Paying Agent for one or more Series of Bonds issued under the Bond Resolution.

“Principal Installment” shall mean, as of any date of calculation, (i) the aggregate principal amount of Outstanding Bonds stated to mature on a certain date, reduced by the aggregate principal amount of such Bonds which will be retired by reason of any mandatory sinking fund payment payable before such date, plus (ii) any mandatory sinking fund payment due on such certain date, together with the aggregate amount of the premiums, if any, applicable to such mandatory sinking fund payments, plus (iii) with respect to any Capital Appreciation Bonds required to be paid on such certain date, the Accreted Value as of such certain date of such Capital Appreciation Bonds; and in this latter respect, any reference to “principal” of Bonds in the Bond Resolution shall mean, with respect to Capital Appreciation Bonds, the Accreted Value of such Capital Appreciation Bonds.

“Registrar” shall mean the State Treasurer or any bank or trust company appointed by the University from time to time as Registrar or Registrars in accordance with the Bond Resolution to serve as Registrar for one or more Series of Bonds issued under the Bond Resolution.

“Reserve Requirement” shall mean, as of any date of calculation, the debt service reserve requirement, if any, established by a Series Resolution with respect to a particular Series of Bonds.

“Revenues” means (i) all revenues or other income received by the Athletic Department from the operation of the Athletic Department and the Athletic Facilities, including without limitation amounts received from the sale of tickets for and guarantees with respect to intercollegiate athletic events, from any athletic conference (collectively, the “Conference”) with respect to the University’s share of proceeds from Conference members’ television and bowl appearances, from the University’s participation in Conference and National Collegiate Athletic Association tournaments, from rentals of executive boxes at Athletic Facilities, from sales of game programs and concessions, or commissions therefrom, from the University’s sports radio and television rights, from corporate sponsorships, and from

B-4 license fees, (ii) all gifts, bequests, contributions and donations received by the Board of Trustees or the University from any persons, including from any University-sanctioned athletic booster organization, for use in connection with the operations of the Athletic Department, (iii) any other unrestricted revenues of the Athletic Department not otherwise pledged that may be made applicable by the Board of Trustees to the payment of the principal and interest of the Bonds including such revenues which may fall into the category of non-mandatory transfers as such term is used in generally accepted accounting principles and (iv) all income from the investment of the above; but excluding:

(i) gifts, bequests, contributions and donations restricted to a particular purpose inconsistent with their use for the payment of the principal, premium or interest on the Bonds; (ii) the proceeds of any borrowings; (iii) State appropriations of any sort; and (iv) investment income restricted to a purpose inconsistent with the payment of operating expenses of the Athletic Department or debt service on Bonds including (whether or not so restricted) interest earned on any construction fund or construction account created with the proceeds of borrowing by the University.

“S&P” means Standard & Poor’s Rating Services, a Division of The McGraw-Hill Companies, Inc. and its successors.

“Secretary” shall mean the Secretary of the Board of Trustees. The term shall include the Acting Secretary or the Assistant Secretary whenever by reason of absence, illness or other reason, the person who is the Secretary is unable to act.

“Series” shall mean all of the Bonds authenticated and delivered on original issuance in a simultaneous transaction, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for (but not to refund) such Bonds as provided in the Bond Resolution, regardless of variations in maturity, interest rate or other provisions.

“Series Resolution” shall mean a Resolution of the Board of Trustees authorizing the issuance of a Series of Bonds pursuant to the Bond Resolution in accordance with the terms and provisions thereof, adopted in accordance with the provisions of the Bond Resolution.

“Special Student Fee” shall mean the athletic bond fee established by the Board of Trustees and imposed upon persons in attendance at any regular academic session (excluding summer sessions) of the University who is enrolled in a sufficient number of classes or courses for which credit is given toward any degree offered by the University to be classified as a regular full-time student in order to provide funds to assist the repayment of the Bonds.

“State” shall mean the State of South Carolina.

“State Board” shall mean the State Fiscal Accountability Authority, as successor to the State Budget and Control Board of South Carolina.

“State Treasurer” shall mean the Office of the State Treasurer of South Carolina.

“Trustee” shall initially mean the State Treasurer or such other bank, trust company or financial institution which is authorized by the University and approved by the State Treasurer to serve in such capacity.

“University” shall mean The University of South Carolina.

“Variable Rate Bonds” shall mean, for any period of time, any Bonds which during such period bear interest at a variable rate; provided that Bonds the interest rate on which has been fixed for the remainder of the term thereof shall no longer be Variable Rate Bonds.

B-5

Mutilated, Lost Stolen or Destroyed Bonds

In the event any Bond is mutilated, lost, stolen or destroyed, the University may execute and the Registrar may authenticate a new Bond of the same Series of like date, maturity, and denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Registrar, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the University and to the Registrar evidence of such loss, theft or destruction satisfactory to the University and the Registrar together with indemnity satisfactory to them. In the event any such Bond shall have matured, instead of issuing a duplicate Bond, the University may pay the same. The University and the Registrar may charge the Holder of such Bond with their reasonable fees and expenses in this connection.

Transfer and Registry; Persons Treated as Owners

As long as any Bonds shall be Outstanding, the University shall cause books for the registration and for the transfer of Bonds to be kept. Such books shall be kept by the Registrar for each particular Series of Bonds at the corporate trust office of such Registrar. The transfer of each Bond may be registered only upon the registration books of the University kept by the Registrar for that purpose by the Holder thereof in person or by his duly authorized attorney upon surrender thereof and an assignment with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder or his duly authorized attorney. Upon the registration or transfer of any Bond, the Registrar will authenticate and deliver, subject to the provisions of Section 4.11 of the Bond Resolution, in the name of the transferee, a new Bond or Bonds of the same aggregate principal amount, maturity and interest rate as the surrendered Bond.

The University, the Trustee, the Paying Agent, if any, and the Registrar may deem and treat the person in whose name any Bond shall be registered upon the registration books of the University as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, premium (if any) and interest on such Bond and for all other purposes, and all such payments so made to any such Holder or, upon his order, shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and none of the University, the Trustee, the Paying Agent and Registrar shall be affected by any notice to the contrary.

Bonds may be issued from time to time as non-registered coupon bonds as provided in the Bond Resolution.

Interchangeability of Bonds

Bonds of a Series, upon surrender thereof at the office of the Registrar, for the Bonds of such Series with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder or his duly authorized attorney, may, at the option of the Holder and upon payment by such Holder of any charges made pursuant to Section 4.11 of the Bond Resolution, be exchanged for an equal aggregate principal amount of Bonds of any other authorized denominations.

Regulations With Respect to Exchanges and Transfers

In all cases in which the privilege of exchanging or transferring Bonds is exercised, the University shall execute and the Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. All Bonds surrendered in any such exchanges or transfers shall forthwith be cancelled and destroyed and shall not be reissued, and a counterpart of the certificate of destruction evidencing such destruction shall be furnished by the Registrar to the University. All Bonds so destroyed shall thereafter no longer be considered Outstanding for any purposes of the Bond Resolution. There shall be no charge to the Holder for such exchange or transfer of Bonds except that the Registrar may make a charge sufficient to reimburse itself for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. Neither the University nor the Registrar shall be required to issue, exchange or transfer (i) any Bond during the fifteen (15) days immediately preceding any Bond Payment Date, (ii) any Bond during a period beginning at the opening of business fifteen (15) days immediately preceding any selection of Bonds to be redeemed and ending at the close of business on the date of the mailing of the notice of such redemption, or (iii) any Bonds called for redemption in whole or in part.

B-6 Rate Covenants

(A) The University specifically covenants and agrees in the Bond Resolution that the Athletic Department will maintain and collect rates and charges which, when combined with other Revenues and the gross receipts of the Admissions Fee and the Special Student Fee, shall at all times be sufficient:

(1) To provide for the payment of the expenses of administration of the Athletic Department including those of any University-sanctioned athletic booster organization and such expenses for operation and maintenance of the Athletic Facilities as may be necessary to preserve the same in good repair and condition;

(2) To provide for the punctual payment of the principal of and interest on all Bonds and any Junior Lien Bonds that may from time to time be Outstanding;

(3) To maintain all Debt Service Funds and thus provide for the punctual payment of the principal of and interest on the Bonds;

(4) To maintain any and all Debt Service Reserve Funds in the manner prescribed in the Bond Resolution;

(5) To build and maintain a reserve for contingencies and for improvements, renovations and expansions of the Athletic Facilities other than those necessary to maintain the same in good repair and condition;

(6) To pay all amounts owing under a reimbursement agreement with any provider of a surety bond, insurance policy, line of credit, letter of credit or similar instrument as contemplated under the Bond Resolution; and

(7) To discharge all obligations imposed by the Enabling Act and the Bond Resolution.

(B) The University further covenants and agrees in the Bond Resolution that it will at all times prescribe and maintain rates and thereafter collect charges in accordance with such rates and charges for attendance at events held at any Athletic Facilities or the use thereof which are reasonably expected to yield, along with all other Revenues, annual Net Revenues which when added to all gross receipts from the imposition of the Admissions Fee and the Special Student Fee, in the current Fiscal Year equal to at least 110% of the Combined Annual Principal and Interest Requirement for all Bonds Outstanding in such Fiscal Year; and, promptly upon any material change in the circumstances which were contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each Fiscal Year, shall review the rates and charges for such use and shall promptly revise such rates and charges as necessary to comply with the foregoing requirement.

(C) For each Fiscal Year, the Board of Trustees shall adopt an Annual Budget for such Fiscal Year which shall set forth in reasonable detail the estimated revenues and operating expenses of the Athletic Department for each Fiscal Year and which shall include appropriations for the estimated operating expenses of the Athletic Department for such period and the amount, if any, to be deposited during such Fiscal Year in the Improvement Fund. The Board of Trustees may at any time adopt an amended Annual Budget for the remainder of the then current Fiscal Year, or may delegate to the Chief Financial Officer the authority to revise rates and charges as may be necessary.

General Covenants

The University covenants and agrees in the Bond Resolution that:

(1) Neither the Athletic Facilities, nor any part thereof, nor any of the income or revenues derived from the Athletic Facilities, have been or will be hypothecated, mortgaged, otherwise pledged or encumbered, save and except as herein disclosed and provided for; and provided that nothing in the Bond Resolution shall prevent the University from financing the acquisition of any item or items of equipment for or related to the Athletic Facilities, which financing is secured by a purchase money security interest or the equivalent thereof.

B-7 (2) So long as there are any Bonds outstanding and unpaid, it will perform all duties with reference to the Athletic Facilities required by the Constitution and statutes of the State, including without limitation the Enabling Act, and the University thereby irrevocably covenants, binds and obligates itself not to pledge, mortgage or otherwise encumber the Athletic Facilities or any part thereof, or any revenues therefrom, except in the manner therein authorized, and it will not sell, lease or dispose of any portion of the Athletic Facilities, necessary or useful (as determined by the University) in the operation of such facilities, until all Bonds shall be paid in full, or unless and until provision shall have been made for the payment of all Bonds and the interest thereon in full, and the University further obligates itself and covenants and agrees with the Bondholders to operate and maintain in good condition the Athletic Facilities, and to collect and charge such rates for the services provided by or the use of the Athletic Facilities so that the Net Revenues, along with the receipts from imposition of the Admissions Fee and the Special Student Fee, will be sufficient at all times to meet the requirements of the Bond Resolution.

(3) It will not discriminate, nor permit discrimination, by its employees, agents, lessees, or others operating the Athletic Facilities in the use thereof because of race, religion, creed or national origin.

(4) It will permit, so long as there are any Bonds Outstanding, any Bondholder to inspect the Athletic Facilities and all records and accounts thereof, as well as records and accounts pertaining to the imposition of any Admissions Fee and any Special Student Fee, under reasonable terms and conditions and after reasonable notice has been given.

(5) It will not make any use, and it shall not direct the Trustee and each fiduciary to make any use of the proceeds of any Series of Bonds which Bonds were intended upon the issuance thereof to be exempt from federal income taxation, which, if such use had been reasonably expected on the date of the issuance of the Bonds of such Series would have caused such Bonds or any other Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and will observe and not violate the requirements of Section 148 of the Code.

(6) As to any Series of Bonds which were intended at the time of their issuance to be exempt from federal income taxation, it will take all actions required of it under the Code that are necessary to preserve the tax- exempt status of such Bonds, including without limitation, actions necessary to comply with all information reporting requirements and any obligation to rebate arbitrage earnings on the proceeds of such Bonds to the United States Government.

(7) It will make all payments or deposits required under Articles VII (Establishment of Funds) and VIII (Disposition of Revenues) of the Bond Resolution in a timely manner.

(8) It will, from time to time, forward to the Trustee, in writing, the name of the Chief Financial Officer and any designee of such Chief Financial Officer, together with a specimen signature of such individual.

(9) Notwithstanding any provision in the Bond Resolution to the contrary:

(i) The University shall not be obligated to charge any fee for attendance at any intercollegiate athletic event held at any of the Athletic Facilities; and

(ii) The University may permit events to be held at any of the Athletic Facilities which are not related to activities of the Athletic Department and in any such cases, any fees or concessions recovered by the University in connection with attendance at such events shall not be deemed to be Revenues unless the University so elects.

The University covenants and agrees in the Bond Resolution that it will install and thereafter at all times maintain proper books of records and accounts, separate and distinct from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Athletic Department, and all revenues and receipts derived therefrom, directly or indirectly. Such books and records shall be kept in such fashion as to reveal in detail:

(1) All transactions incurred by the University with respect to the Athletic Facilities and the Athletic Department (including those of any University-sanctioned athletic booster organization);

B-8 (2) Revenues and the source from whence derived;

(3) All expenses incurred in the operation and maintenance of the Athletic Facilities suitably identified as to purpose;

(4) Net Revenues;

(5) All expenditures made from the several funds established by the Bond Resolution, and the Series Resolutions authorizing the issuance of the Bonds;

(6) The rate schedules that may from time to time be in effect as to attendance of events at any of the Athletic Facilities; and

(7) Receipts from the imposition of the Admissions Fee and the Special Student Fee.

The University further covenants and agrees in the Bond Resolution that so long as any Bonds are Outstanding, it will, as soon after the close of each Fiscal Year as possible, cause to be made and completed by the Accountants, an audit of the records, books and accounts pertaining to the Athletic Department (including those of any University- sanctioned athletic booster organization), which may be included as separate schedules in the general audit of the University, made in accordance with generally accepted accounting practices, showing, among other things, Net Revenues and gross receipts from the imposition of the Admissions Fee and the Special Student Fee, and to furnish a copy of such audit to the Trustee. Such audit shall comment upon any violation of any provision of any resolution authorizing the issuance of any Bonds or Junior Lien Bonds and any violation of any provision of the Bond Resolution or any Series Resolution noted by the Accountants, and such other matters as to them seem pertinent. The cost of such audit shall be treated as a part of the cost of operating and maintaining the Athletic Department. Copies of such audit shall also be made available to any Bondholder who shall have requested the same in writing to the Trustee.

Additional Bonds

The Bond Resolution provides that from time to time additional Series of Bonds may be issued pursuant to a Series Resolution for the purposes of:

(1) Obtaining funds for the construction of new Athletic Facilities or the permanent improvement, expansion or renovation of existing Athletic Facilities, including payment of capitalized interest during such construction, improvement, expansion or renovation on any Series of Bonds issued for such purposes plus a period not exceeding six (6) months;

(2) Providing funds for the payment of any bond anticipation note or notes that may have been issued in anticipation of the issuance and sale of Bonds;

(3) Refunding, by exchange or otherwise, Bonds or other obligations issued to provide land or facilities which are or are to become a part of the Athletic Facilities or which are or were payable in whole or in part from revenues of the Athletic Department;

(4) Funding any Debt Service Reserve Fund (including the purchase of a surety bond, insurance policy, line of credit or letter of credit as provided under the Bond Resolution) or restoring the value of the cash and securities in any Debt Service Reserve Fund to an amount equal to the applicable Reserve Requirement;

B-9

(5) Purchasing or providing for credit enhancement for any Series of Bonds; and

(6) Paying costs of issuance of Bonds;

The Bond Resolution provides that additional Bonds may be issued provided the following conditions, among others, are met:

(1) Except in the case of (a) the initial Series of Bonds issued under the Bond Resolution, namely the $21,000,000 principal amount University of South Carolina Athletic Facilities Revenue Bonds, Series 2002, (b) any Series of Bonds issued to pay the $11,250,000 University of South Carolina Athletic Facilities Revenue Bond Anticipation Notes, Series 2001 (the “2001 BANS”), which 2001 BANS were outstanding when the Bond Resolution was adopted, or to pay any subsequent bond anticipation notes issued to refinance the 2001 BANS or any successor bond anticipation notes and (c) Bonds issued for the purpose of refunding any Bonds:

Net Revenues plus gross receipts from the imposition of the Admissions Fee and the Special Student Fee during the most recent Fiscal Year for which audited financial statements of the University are completed shall be certified by the Chief Financial Officer on the basis of such audited financial statements to be not less than one hundred ten percent (110%) of the maximum Combined Annual Principal and Interest Requirement on all Bonds Outstanding immediately prior to the issuance of such proposed Series of Bonds and on such proposed Series of Bonds. For these purposes, such Net Revenues and such gross receipts may be adjusted to reflect (1) any ticket, rate or fee increases currently adopted and to be in effect prior to or coincident with the issuance of such proposed Series of Bonds and determined pro forma as though such rate increases had been in continuous effect during such recent Fiscal Year; (2) in the event proceeds of such proposed Series of Bonds will be used to pay interest on such proposed Series, one hundred percent (100%) of the interest that will accrue on such Series of Bonds during the first twelve (12) full months following the date of delivery of the proposed Series and that will be paid from such proceeds, provided, however, that any such interest accruing in such twelve (12) month period that is to be paid on a date within the Fiscal Year of maximum Combined Annual Principal and Interest Requirements shall not be so added into such Net Revenues and such gross receipts; (3) any amount allowed by clause (2) of this paragraph as an adjustment with respect to a previously-issued Series of Bonds if the proposed Series of Bonds is being issued prior to the end of the Fiscal Year in which capitalized interest on the previously issued Series of Bonds is exhausted; and

(2) If any Series of Bonds shall contain Variable Rate Bonds:

(a) The Series Resolution may provide for and specify a maximum interest rate on (i) such Bonds and (ii) any reimbursement obligation to a liquidity provider for such Bonds;

(b) The liquidity provider for such Bonds shall be rated in either of the two highest short term rating categories by Moody’s and S&P; and

(c) Any accelerated principal payments or any interest computed at a rate in excess of that on such Bonds due to the liquidity provider for such Bonds pursuant to any reimbursement agreement with such liquidity provider shall be subordinate to the payment of debt service on all Bonds; provided, however, if the tests referred to in subparagraphs (1) and (3), as applicable, of this paragraph are calculated (and met) assuming such accelerated principal payment and such excess interest amount to the liquidity provider, then such accelerated principal payment and excess interest amount may be on a parity with the payment of debt service on all Bonds.

(3) In the case of Bonds issued for the purpose of refunding any Bonds, either:

(a) The Annual Principal and Interest Requirements of the refunding Bonds shall not exceed the Annual Principal and Interest Requirements of the refunded Bonds until a time subsequent to the last maturity of Bonds not refunded and which remain Outstanding following the issuance of the refunding Bonds; or

(b) The University shall comply with the revenue test described in paragraph (1) above.

B-10

Right to Issue Junior Lien Bonds; Accession

The Bond Resolution provides that the University may without limitation and free of all conditions, issue Junior Lien Bonds, in such amount as it may from time to time determine, payable from the Revenues and the receipts of the imposition of the Admissions Fee and the Special Student Fee; provided that the pledge of the Revenues and the receipts of the Admissions Fee and Special Student Fee granted for the protection of said Junior Lien Bonds, will at all times be subordinate and inferior in all respects to the pledges of Net Revenues and receipts of the Admissions Fee and Special Student Fee, made or authorized for the Bonds and provided, further, that the maturity of Junior Lien Bonds may not be accelerated and paid in full unless all of the Bonds will have been paid or provision therefore has been made pursuant to Article XVI of the Bond Resolution.

Any Junior Lien Bonds may be further secured by any other source of payment lawfully available for such purpose.

By proceedings authorizing the issuance of Junior Lien Bonds, the University may provide for the accession of such Junior Lien Bonds to the status of Bonds provided all of the following conditions are met:

(1) The Junior Lien Bonds were issued for a purpose or purposes set forth in Section 4.01(A) of the Bond Resolution;

(2) There will exist on the date of accession (a) no default in the payment of the principal of or interest on any Bonds or any Junior Lien Bonds then Outstanding and (b) no default in the performance of any duties required under the provisions of the Bond Resolution and (c) no amount owed by the University with respect to the full funding of a Debt Service Reserve Fund, either by way of cash or reimbursement of any other funding mechanism;

(3) The University will obtain an opinion of Bond Counsel to the effect that (a) the Bond Resolution and the proceedings authorizing such Junior Lien Bonds have been duly adopted and are in full force and effect; (b) the Junior Lien Bonds have been duly and lawfully authorized and executed by the University and are valid and binding upon, and enforceable against, the University (except to the extent that the enforceability thereof may be limited by the operation of bankruptcy, insolvency and similar laws affecting rights and remedies of creditors); and (c) the Bond Resolution creates the valid pledge which it purports to create of the revenues and of moneys and securities on deposit in any of the funds established pursuant to the Bond Resolution subject to the application thereof to the purposes and on the conditions permitted by the Bond Resolution;

(4) There will be on deposit on the date of accession in a Debt Service Reserve Fund, if any such Debt Service Reserve Fund is required by the resolution authorizing the Junior Lien Bonds, an amount equal to the Reserve Requirement for such Junior Lien Bonds, considering such Junior Lien Bonds to be a Series of Bonds;

(5) There will be deposited in the Debt Service Fund for such Series of newly-acceded Bonds the amounts which would have been required under the provisions of Section 8.06 of the Bond Resolution to be accumulated therein on the date of accession if said Junior Lien Bonds had originally been issued as Bonds;

(6) On the date of accession, the earnings tests prescribed by subparagraph 7 of Section 4.02(A) of the Bond Resolution will have been met; and

(7) In the event such Junior Lien Bonds were issued with variable rates, the provisions of subparagraph (9) of Section 4.02(A) of the Bond Resolution will have been met.

B-11

Establishment and Flow of Funds

Operation and Maintenance Fund.

(A) There shall be established and maintained by the University a fund or account designated as the Operation and Maintenance Fund. This account shall be so maintained as to accurately reflect Revenues and Net Revenues.

(B) The Operation and Maintenance Fund is intended to provide for the payment of all expenses incurred in connection with the administration and operation of the Athletic Department (including those of any University- sanctioned athletic booster organization) and the Athletic Facilities, including, without limiting the generality of the foregoing, such expenses as may be reasonably necessary to preserve the Athletic Facilities in good repair and condition and to pay the fees and charges of the Trustee, the Paying Agent, the Registrar and the custodian or trustee of any other fund created or to be created under the Bond Resolution, the costs of audits required hereunder, and the premiums for all insurance policies and any fidelity bonds required by the Bond Resolution.

(C) Withdrawals from the Operation and Maintenance Fund shall be made by the University in accordance, as nearly as practicable, with the Annual Budget then in effect.

B-12

becoming due and payable on such ensuing Bond Payment Date (whether at stated maturity or by sinking fund installment); provided, however, that if provision has been made for the payment of all or any portion of the principal to become due on the Bonds, pursuant to any other provision of the Bond Resolution, or any Series Resolution, or by reason of investment earnings, then, in such event, the deposits so required may be omitted, or reduced accordingly.

As receipts from the imposition of the Admissions Fee and the Special Student Fee are collected by the University, the same shall be promptly remitted to the Trustee, who shall deposit the same as received, pro-rata as to the Outstanding Series of Bonds, in the respective Debt Service Funds. Withdrawals from the Debt Service Funds shall be made only by the Trustee who shall transmit to the Paying Agent, at such times as may be appropriate, the sums required to pay the principal of, premium, if any, and interest on the respective Series of Bonds.

Moneys in the Debt Service Funds shall be invested and reinvested by the State Treasurer in Authorized Investments.

Debt Service Reserve Funds. A Series Resolution shall provide for the establishment of a Debt Service Reserve Fund for any Series of Bonds for which a Reserve Requirement may have been established pursuant to such Series Resolution. Each Debt Service Reserve Fund so established is to be maintained at the respective Reserve Requirement as may have been established for the particular Series of Bonds. Funds in a particular Debt Service Reserve Fund will be available to secure only the payment of the Series of Bonds for which such Debt Service Reserve Fund was established. All Debt Service Reserve Funds are maintained by the Trustee and are intended to insure the timely payment of the principal of and interest on the respective Series of Bonds, and to provide for any redemption of the respective Series of Bonds prior to their stated maturities.

Money in the Debt Service Reserve Funds shall be invested and reinvested at the discretion by the State Treasurer in Authorized Investments. The earnings from such investments accumulate in the particular Debt Service Reserve Fund until each required semi -annual valuation. At the time of such valuation, if the market value of the securities and money in a Debt Service Reserve Fund exceed the applicable Reserve Requirement, such excess shall either be used to effect partial redemption of the applicable Series of Bonds or removed from the Debt Service Reserve Fund and transferred into the Operations and Maintenance Fund or the Improvement Fund, as directed by the Chief Financial Officer or his designee.

In lieu of the deposit of moneys into a Debt Service Reserve Fund, the University may satisfy the all or a portion of the applicable Reserve Requirement by causing to be credited thereto a surety bond, line of credit, letter of credit, insurance policy or similar instrument payable to the Trustee or the Paying Agent for the benefit of the Holders of the applicable Series of Bonds in an amount which together with other moneys on deposit in such Debt Service Reserve Fund, if any, is equal to such Reserve Requirement.

In the event a Debt Service Reserve Fund has been funded with a surety bond, insurance policy, line of credit, letter of credit or similar instrument and either such instrument has been drawn upon, moneys available to repay such surety bond, insurance policy, line of credit, letter of credit or similar instrument provider shall first be used to reinstate the surety bond, insurance policy, line of credit, letter of credit or similar instrument to its original amount. Any interest or fees due to the surety bond, insurance policy, line of credit, or letter of credit provider or similar instrument, other than reinstatement, shall be subordinate to any amounts payable upon the applicable Series of Bonds.

In the event a Debt Service Reserve Fund is funded with a surety bond, insurance policy, line of credit, letter of credit or similar instrument, any revenues available for debt service on the applicable series of Bonds shall be distributed on a pro rata basis among the Outstanding Bonds of each Series without regard to the method or level of funding of the respective Debt Service Reserve Funds, if any, for each Series.

Any cash or investments on deposit in or credited to a Debt Service Reserve Fund shall be withdrawn prior to any draw on its surety bond, insurance policy, line of credit, letter of credit or similar instrument with respect thereto. In the event the amount on deposit in, or credited to, a Debt Service Reserve Fund, in addition to the amount available under the surety bond, insurance policy, line of credit, letter of credit or similar instrument in question (the “Original Funding Instrument”) includes amounts available under another surety bond, insurance

B-13

policy, line of credit, letter of credit or similar instrument (the “Additional Funding Instrument”), draws on the Original Funding Instrument and the Additional Funding Instrument shall be made on a pro rata basis to fund any insufficiency in the applicable Debt Service Fund.

The market value of the cash and securities in each Debt Service Reserve Fund, if any, shall be calculated as of each Bond Payment Date (such calculation to be made within forty-five (45) days after such Bond Payment Date) in order to determine if such Debt Service Reserve Fund contains the amount required by the applicable Series Resolution and the extent to which payments therefor or withdrawals therefrom must be made. In the event the aggregate market value of such cash and securities, together with any surety bond, insurance policy, line of credit or letter of credit permitted under the Bond Resolution, in a Debt Service Reserve Fund is determined not to equal the applicable Reserve Requirement, then there shall be paid into such Debt Service Reserve Fund on the last Business Day of each of twelve (12) months following a determination of such deficiency, one-twelfth (1/12) of the amount necessary to re-establish in such Debt Service Reserve Fund its Reserve Requirement; provided, however, the University may fully re-establish the Reserve Requirement in a more timely manner.

(a) for the purpose of restoring depreciated or obsolete items of the Athletic Facilities;

(b) for improvements, expansions and renovations to the Athletic Facilities, other than for those things which are reasonably necessary to maintain the Facilities in good repair and condition;

(d) to prevent defaults of Bonds (should any Debt Service Fund or Debt Service Reserve Fund prove to be insufficient for such purposes) and Junior Lien Bonds; and

(e) for optional redemption of Bonds.

Modification of Resolution

Provided that the security of the Bonds will not be lessened or in any manner impaired, the Board of Trustees may for anyone or more of the following purposes, at any time, or from time to time, adopt a resolution which supplements the Bond Resolution for the following purposes:

(1) To provide for the issuance of a Series of Bonds in accordance with the other provisions of the Bond Resolution;

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(2) To add to the covenants and agreements of the University in the Bond Resolution and to provide for other covenants and agreements thereafter to be observed relative to the operation, maintenance, construction or administration of any part of the Athletic Facilities; it being specifically provided that the Chief Financial Officer is authorized prior to the sale of any Series of Bonds to increase the required ratios involving Net Revenues or to increase the credit rating requirements for the providers of Debt Service Reserve Fund substitutes;

(3) To surrender any right, power or privilege reserved to or conferred upon the University by the Bond Resolution; or

(4) To cure, correct and remove any ambiguity or inconsistent provisions contained in the Bond Resolution.

The rights and duties of the University and the Bondholders and the terms and provisions of the Bond Resolution may be modified or altered in any respect by resolution of the Board of Trustees with the consent of the Bondholders of 66-2/3% in principal amount of all Bonds of each Series which will be affected (with the consent of any municipal bond insurance company which has insured a Series of Bonds), provided that no modification or alteration will:

(a) Extend the maturity of any payment of principal or interest due upon any Bond;

(b) Effect a reduction in the amount which the University is required to pay by way of principal of, redemption premium or interest on any Bonds;

(c) Effect a change as to the type of currency in which the University is obligated to effect payment of the principal of, redemption premium or interest on the Bonds;

(d) Permit the creation of a pledge of or lien upon the Revenues or upon the receipts of the imposition of the Admissions Fee and the Special Student Fee prior or equal to the Bonds except as authorized by the Bond Resolution;

(e) Permit preference or priority of any Series of Bonds issued pursuant to the Bond Resolution to others;

(f) Alter or modify the provisions of Article IV (Additional Bonds), Article V (Rates and Charges), Article VII (Establishment of Funds), and Article VIII (Disposition of Revenues) of the Bond Resolution (except in the manner referred to in the immediately preceding paragraph above); or

(g) Reduce the percentage of Bonds required for the written consent of the modification or alteration of the provisions of the Bond Resolution; without the consent of the Holders of all Bonds affected by such change or modification.

Events of Default

The occurrence and continuance of any of the following is an “Event of Default” under the Bond Resolution:

(A) Payment of the principal of any of the Bonds shall not be made when the same shall become due and payable, either at maturity or by proceedings for redemption;

(B) Payment of any installment of interest on any Bonds shall not be made when the same becomes due and payable;

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(C) Payment of any installment of either interest or principal of any Junior Lien Bonds shall not be made when the same becomes due and payable or any other event of default shall exist with respect to any Junior Lien Bonds;

(D) The University shall for any reason be rendered incapable of fulfilling its obligations under the Bond Resolution.

(E) An order or decree shall be entered with the consent or acquiescence of the University appointing a receiver, or receivers, of the Athletic Facilities, the Athletic Department or of the Revenues, or any proceedings shall be instituted with the consent or acquiescence of the University for the purpose of effecting a composition between the University and its creditors whose claims relate to the Athletic Facilities or the Athletic Department, or for the purpose of adjusting claims of such creditors, pursuant to any Federal or State statute now or hereafter enacted, or if such order or decree, having been entered without the consent or acquiescence of the University, shall not be vacated or discharged or stayed on appeal within sixty (60) days after entry thereof, or if such proceeding having been instituted without the consent or acquiescence of the University, shall not be withdrawn or any orders entered shall not be vacated, discharged, or stayed on appeal within sixty (60) days after the institution of such proceedings, or the entry of such orders;

(F) The University shall fail to operate the Athletic Facilities or the Athletic Department in an efficient and business-like fashion or shall default in the due and punctual performance of any other of the covenants, conditions, agreements or provisions contained in the Bonds or in the Bond Resolution, and such default shall continue for thirty (30) days after written notice, specifying such default and requiring the same to be remedied, shall have been given to the University by any Bondholder, provided that in the case of default specified in this paragraph (F), if the default be such that it cannot be corrected within the said thirty (30) day period, it shall not constitute an event of default if corrective action is instituted by the University within said thirty (30) day period and diligently pursued until the default is corrected; or

(G) The occurrence of an event of default on the part of the University under any reimbursement agreement between the University and a provider of a surety bond, insurance policy, line of credit or letter of credit as contemplated under the Bond Resolution.

The provisions of the preceding paragraph (F) are subject to the following limitations: If by reason of force majeure the University is unable in whole or in part to carry out its agreements therein contained (other than the obligations on the part of the University contained in any of Articles IV (Additional Bonds), V (Rates and Charges), VII (Establishment of Funds) and VIII (Disposition of Revenues) of the Bond Resolution as to which this paragraph shall have no application), the University shall not be deemed in default during the continuance of such inability. The term “force majeure” as used herein shall mean, without limitation, the following: acts of God; strikes; lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States or of the State or any of their departments, agencies, or officials, or any civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquake; fire; hurricanes; storms; floods; washouts; droughts; arrests; restraint of government and people; civil disturbances; explosions; breakage or accident to machinery, tunnels or canals; partial or entire failure of utilities; or any other cause or event not reasonably within the control of the University, it being agreed that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the University, and the University shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the University unfavorable to the University.

Acceleration; Annulment

(A) Except as specifically provided in the Bond Resolution, upon the happening of an Event of Default, subject to the rights of any Bond Insurer under the Resolution to control accelerations, the Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Bonds Outstanding shall, by notice in writing to the University, declare all Bonds Outstanding immediately due and payable. Such Bonds shall become and be immediately due and payable, anything in the Bonds or in the Bond Resolution to the contrary notwithstanding. In such event, there shall be due and payable on the Bonds an amount equal to the total principal amount of all such Bonds, plus all interest accrued thereon and which will accrue thereon to the date of payment.

(B) At any time after the principal of the Bonds shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, or

B-16 before the completion of the enforcement of any other remedy under the Bond Resolution, the Trustee may annul such declaration and its consequences with respect to any Bonds not then due by their terms if:

(1) Moneys shall have been deposited in the respective Debt Service Funds sufficient to pay all matured installments of interest and principal (other than principal then due only because of such declaration) of all Outstanding Bonds;

(2) Moneys shall have been deposited with the Trustee sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Trustee;

(3) All other amounts then payable by the University under the Bond Resolution shall have been paid or a sum sufficient to pay the same shall have been deposited with the Trustee; and

(4) Every Event of Default known to the Trustee (other than a default in the payment of the principal of such Bonds then due only because of such declaration) shall have been remedied to the satisfaction of the Trustee. No such annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

Additional Remedies

(A) Upon the happening of any Event of Default, the Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds Outstanding, together with indemnification of the Trustee to its satisfaction therefor, shall proceed forthwith to protect and enforce its rights and the rights of the Bondholders under the Bond Resolution by such suits, actions or proceedings as the Trustee, being advised by counsel, shall deem expedient, including but not limited to:

(1) Requiring the University to carry out its duties and obligations under the terms of the Bond Resolution and under the Enabling Act;

(2) Suit upon all or any part of the Bonds;

(3) Civil action to require the University to account as if it were the trustee of an express trust for the Holders of Bonds;

(4) Civil action to enjoin any acts or things which may be unlawful or in violation of the rights of the Holders of the Bonds; or

(5) Enforcement of any other right of the Bondholders conferred by law or by the Bond Resolution including the right to make proper application to a court of competent jurisdiction for the appointment of a receiver to administer and operate the Athletic Facilities and the Athletic Department. Such receiver shall be given full power to fix rentals and charges for the Athletic Facilities, sufficient to provide for the payment of principal of Bonds and the interest thereon, and for the payment of the expenses of operating and maintaining the Athletic Facilities, and to apply the income and revenues of the Athletic Facilities and the Athletic Department to the payment of principal of such Bonds and the interest thereon.

(B) Regardless of the happening of an Event of Default, the Trustee, if requested in writing by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised by Counsel shall be necessary or expedient:

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(1) To prevent any impairment of the security under the Bond Resolution by any acts which may be unlawful or in violation of the Bond Resolution; or

(2) To preserve or protect the interests of the Bondholders, provided that such request is in accordance with law and the provisions of the Bond Resolution and, in the sole judgment of the Trustee, is not unduly prejudicial to the interests of the Holders of Bonds not making such request.

Defeasance

Pursuant to the Bond Resolution, defeasance of Bonds of a particular Series shall be deemed to have occurred when, among other things, the Trustee, Paying Agent or other custodian authorized by the University, shall hold, at the stated maturities of such Bonds, in trust and irrevocably appropriated thereto, sufficient money for the payment thereof, or Government Obligations, the principal of and interest on which when due (without reinvestment thereof) will provide money which, together with the money, if any, deposited at the same time, will be sufficient to pay when due the principal, interest and redemption premiums, if any, due and to become due on and prior to the maturity or, if the University has irrevocably elected to redeem such Bonds, on and prior to the redemption date of such Bonds.

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APPENDIX C

FORM OF OPINION OF BOND COUNSEL

[THIS PAGE INTENTIONALLY LEFT BLANK]

March ___, 2017

Board of Trustees of the University of South Carolina Columbia, South Carolina

Re: $______University of South Carolina Athletic Facilities Revenue Bonds, Series 2017A

Ladies and Gentlemen:

As Bond Counsel to the University of South Carolina (the “University”), we have examined a certified copy of the Transcript of Proceedings and Closing Documents and other proofs submitted to us, including the South Carolina Constitution and Acts of the General Assembly of the State of South Carolina, in relation to the issuance of the $______University of South Carolina Athletic Facilities Revenue Bonds, Series 2017A (the “Series 2017A Bonds”). The Series 2017A Bonds are issued by the University pursuant to a Bond Resolution duly adopted by the Board of Trustees of the University (the “Board of Trustees”) on October 19, 2001 (the “Bond Resolution”), a Series Resolution duly adopted by the Board of Trustees on September 16, 2016 (the “2017A Series Resolution” and, together with the Bond Resolution, the “Resolution”) and a Resolution adopted by the State Fiscal Accountability Authority on November 7, 2016, and under and in full compliance with the South Carolina Constitution and Acts of the General Assembly of the State of South Carolina, including particularly Act No. 518 of the 1980 Regular Session of the General Assembly of the State of South Carolina, as amended by Act No. 545 of the Regular Session of 1986, Act No. 302 of the Regular Session of 1996, Act No. 6 of the Regular Session of 1997, Act No. 182 of the Regular Session of 2005 and Act No. 17 of the Regular Session of 2007 (collectively, the “Enabling Act”). The Series 2017A Bonds are issued in order to obtain funds which will be used for the purposes of (i) acquiring, constructing and equipping an approximately 105,000 square foot Football Operations Facility, located at the west end of Gamecock Park and adjacent to the Indoor Football Practice Facilities, including capitalized interest, if any, and (ii) paying certain costs of issuance of the Series 2017A Bonds.

The Series 2017A Bonds will mature on May 1 in the respective principal amounts and bear interest payable on May 1, 2017 and semiannually thereafter on the first days of May and November at the interest rates per annum, all as set forth in the Official Statement dated ______, 2017, with respect to the Series 2017A Bonds (the “Official Statement”).

The Series 2017A Bonds bear interest from March __, 2017. The Series 2017A Bonds are issued in fully registered form, in the denomination of $5,000 or any whole multiple thereof, not exceeding the principal amount of the Series 2017A Bonds maturing in each year. The Series 2017A Bonds are subject to optional and mandatory sinking fund redemption prior to maturity at the times and upon the terms described in the Official Statement.

As to questions of fact material to our opinions below, we have relied upon the record of proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. As to certain matters regarding the existence and powers of the University, the due authorization of the Series 2017A Bonds, and the absence of litigation, we have relied upon the opinion this date of Walter H. Parham, Esquire, General Counsel to the University. We have been advised on this date that there is no litigation, threatened or pending, which in any manner affects the validity of the Series 2017A Bonds.

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Based upon the foregoing, we are of the opinion that, under existing law:

1. The Series 2017A Bonds are valid and binding obligations of the University, and are payable, both as to principal and interest, solely from the Net Revenues (as defined in the Resolution) derived from the operation of the Athletic Facilities and from the gross receipts of the imposition of the Admissions Fee and the Special Student Fee (as such terms are defined in the Resolution) and are being issued for purposes authorized by the Enabling Act. Neither the principal of nor interest on the Series 2017A Bonds constitutes an indebtedness of the State within the meaning of any provision, limitation or restriction of the Constitution or the laws of the State, other than those provisions authorizing obligations payable solely from a revenue-producing project or special source not involving revenues from any tax or license, nor a charge, lien, or encumbrance, legal or equitable, upon any property of the University or State or upon any income, receipts, or revenues of the State save and except the Net Revenues and from the gross receipts of the imposition of the Admissions Fee and the Special Student Fee as the same are pledged to the payment of the principal of and interest on the Series 2017A Bonds. No recourse may be had for the payment of the Series 2017A Bonds against the general fund of the University, and neither the full faith and credit nor the taxing power of the State shall be deemed pledged to the payment of the Series 2017A Bonds.

2. The pledge of the Net Revenues and gross receipts of the Admissions Fee and the Special Student Fee made to secure the Series 2017A Bonds has priority over all pledges heretofore or hereafter made, except the pledges (on a parity with the pledges securing the Series 2017A Bonds) made to secure (a) the $27,395,000 original principal amount Athletic Facilities Revenue Bonds, Series 2008A (Tax- Exempt), (b) the $65,855,000 original principal amount Athletic Facilities Revenue Bonds, Series 2010A, (c) the $12,840,000 original principal amount Athletic Facilities Revenue Bonds, Refunding Series 2010B, (d) the $13,580,000 original principal amount Athletic Facilities Revenue Bonds, Series 2012A, (e) the $6,350,000 original principal amount Athletic Facilities Revenue Bonds, Refunding Series 2012B, the $38,270,000 original principal amount Athletic Facilities Revenue Bonds, Series 2015, (f) the $22,400,000 original principal amount of Athletic Facilities Revenue Bonds, Refunding Series 2016A, and (g) any additional bonds as may hereafter be issued from time to time (“Additional Bonds”), if such Additional Bonds be issued in the manner and under the conditions prescribed by the Bond Resolution.

3. The Resolution has been duly adopted by the Board of Trustees and constitutes a binding and enforceable obligation of the University.

4. The Series 2017A Bonds have been duly and lawfully authorized and executed by the University and are valid and binding upon, and enforceable against, the University (except to the extent that the enforceability thereof may be limited by the operation of bankruptcy, insolvency and similar laws affecting rights and remedies of creditors). With respect to such Series 2017A Bonds, the Resolution creates the valid pledge which it purports to create of the revenues and money, and securities on deposit in any funds and accounts established in the Resolution subject to the application thereof to the purposes and on the conditions permitted by the Resolution, and upon the execution and delivery thereof, will have been duly and validly authorized and issued in accordance with the Resolution.

5. It is to be understood that the rights of the Series 2017A Bondholders and the obligations of the parties under the Series 2017A Bonds and the Resolution are subject to the exercise of judicial discretion in accordance with general principles of equity, the valid exercise of the constitutional powers of the United States and the police powers of the State of South Carolina and to the provisions of applicable bankruptcy, insolvency, reorganization, moratorium and similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors’ rights.

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6. Interest on the Series 2017A Bonds (including any original issue discount allocable to an owner thereof) is excludable from the gross income for federal income tax purposes under existing statutes, regulations and judicial decisions on the date hereof under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Series 2017A Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, interest on the Series 2017A Bonds is included in the computation of adjusted current earnings for purposes of the alternative minimum tax for corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the University complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2017A Bonds in order that interest thereon be, or continue to be, excludable from gross income of the owners thereof for federal income tax purposes. The University has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2017A Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series 2017A Bonds. The ownership of the Series 2017A Bonds may result in collateral federal tax consequences. We express no opinion regarding other federal tax consequences arising with respect to the Series 2017A Bonds.

7. The Series 2017A Bonds and the interest thereon are also exempt from all State of South Carolina, county, municipal and school district and other taxes or assessments imposed within the State of South Carolina, except estate, transfer and certain franchise taxes (specifically including without limitation the tax imposed on banks by Section 12-11-20, South Carolina Code of Laws 1976, as amended, and enforced by the South Carolina Department of Revenue as a franchise tax).

We have been retained solely for the purpose of examining into the validity and legality of the Series 2017A Bonds and of rendering certain specific opinions hereinbefore stated and for no other purpose. We have not verified the accuracy, completeness or fairness of any representations or information concerning the business or financial condition of the University or any other party made, prepared or issued by any party, or on behalf of any party, in connection with the sale of the Series 2017A Bonds, including the Official Statement. Accordingly, we express no opinion on the completeness, fairness or adequacy of any such representations or information. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

Very truly yours,

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APPENDIX D

FORM OF CONTINUING DISCLOSURE UNDERTAKING [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX D

CONTINUING DISCLOSURE UNDERTAKING

This Continuing Disclosure Undertaking (this “Disclosure Undertaking”) is executed and delivered this ____ day of March, 2017, by the University of South Carolina (the “Issuer”) in connection with the issuance of the Issuer’s $______Athletic Facilities Revenue Bonds, Series 2017A (the “Series 2017A Bonds”). The Series 2017A Bonds are being issued pursuant to a Bond Resolution adopted by the Board of Trustees (the “Board of Trustees”) of the Issuer on October 19, 2001 (the “Bond Resolution”), and a Series Resolution adopted by the Board of Trustees on September 16, 2016 (the “Series 2017A Resolution” and, together with the Bond Resolution, as amended and supplemented, the “Resolution”). The Issuer covenants and agrees as follows:

Section 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaking is being executed and delivered by the Issuer for the benefit of the holders and Beneficial Owners of the Series 2017A Bonds and in order to assist the Participating Underwriters in complying with the U.S. Securities and Exchange Commission (the “SEC”) Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Resolution or elsewhere in this Disclosure Undertaking, which apply to any capitalized terms used in this Disclosure Undertaking, the following capitalized terms shall have the following meanings:

“Annual Report” means the annual report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Undertaking.

“Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2017A Bonds (including persons holding Series 2017A Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2017A Bonds for federal income tax purposes.

“Dissemination Agent” means any person designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation.

“EMMA” means the Electronic Municipal Market Access system described in SEC Release No. 34-59062 (or any successor electronic information system) and maintained by MSRB as the sole repository for the central filing of electronic disclosure pursuant to the Rule.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Undertaking.

“MSRB” means the Municipal Securities Rulemaking Board or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Unless otherwise designated by MSRB or the SEC, filings with the MSRB are to be made through EMMA.

“Official Statement” means the Official Statement dated February __, 2017, prepared in connection with the Series 2017A Bonds.

“Participating Underwriter” means any of the original underwriters of the Series 2017A Bonds required to comply with the Rule in connection with the offering of the Series 2017A Bonds.

“Rule” means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“State” means the State of South Carolina.

Section 3. Provision of Annual Reports. (a) The Issuer shall, not later than February 1 of each year, commencing with the report for the fiscal year ended June 30, 2017, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Undertaking. Not later than 15 business days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent, if other than the Issuer. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-

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reference other information as provided in Section 4 of this Disclosure Undertaking; provided, however, that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report, and later than the date required for the filing of the Annual Report if they are not available by that date. If the Issuer’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a) hereof.

(b) The Annual Report shall be submitted to the MSRB either through a web-based electronic submission interface or through electronic computer-to-computer data connections with EMMA in accordance with the submission process, document format and configuration requirements established by the MSRB. The Annual Report shall also include all related information required by the MSRB to accurately identify: (i) the category of information being provided; (ii) the period covered by the Annual Report; (iii) the issues or specific securities to which the Annual Report is related (including CUSIP number, Issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate); (iv) the name of any obligated person other than the Issuer; (v) the name and date of the document; and (vi) contact information for the Dissemination Agent or the Issuer’s submitter.

(c) If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a) above, the Issuer shall, in a timely manner, send or cause to be sent to the MSRB, a notice in substantially the form attached hereto as Exhibit A.

(d) In the event that there is a Dissemination Agent, then not later than fifteen (15) business days prior to each due date, the Issuer shall provide the Annual Report to the Dissemination Agent for distribution to the MSRB. In connection with this distribution of the Annual Report, the Dissemination Agent, if any, shall file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Undertaking, and stating the date it was provided to the MSRB.

Section 4. Contents of Annual Reports. The Annual Report shall contain or incorporate by reference the following:

(a) The Issuer’s complete audited financial statements for the preceding fiscal year prepared in accordance with accounting principles generally accepted within the United States of America as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Issuer’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be provided to the MSRB in the same manner as the Annual Report when they become available;

(b) Updates of the financial information and operating data as of a date not earlier than the end of the preceding fiscal year for the type of information included under the headings in the Official Statement:

(i) THE ATHLETIC DEPARTMENT – Football – Football Tickets and Attendance – Basketball – Men’s Basketball – Men’s Basketball Tickets and Attendance

(ii) CERTAIN FINANCIAL INFORMATION OF THE ATHLETIC DEPARTMENT – Historical Five-Year Statement of Revenues

(iii) The table set forth under “CERTAIN FINANCIAL INFORMATION OF THE ATHLETICS DEPARTMENT – Debt Service Coverage Ratio”, and

(iv) DESCRIPTION OF THE UNIVERSITY – Enrollment.

The Annual Report may consist of one or more documents. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Issuer, which have been made available to the public on EMMA. The Issuer shall clearly identify each such other document so included by reference.

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Section 5. Reporting of Significant Events. (a) The Issuer shall give or cause to be given notice of the occurrence of any of the following events with respect to the Series 2017A Bonds in a timely manner not later than ten business days after the occurrence of the event:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) unscheduled draws on credit enhancements reflecting financial difficulties;

(v) substitution of credit or liquidity providers, or their failure to perform;

(vi) 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 of determinations with respect to the tax status of the Series 2017A Bonds, or other material events affecting the tax status of the Series 2017A Bonds;

(vii) modifications to rights of security holders, if material;

(viii) Bond calls, if material and tender offers;

(ix) defeasances;

(x) release, substitution, or sale of property securing repayment of the Series 2017A Bonds, if material;

(xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of any obligated person, which event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for an obligated person 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 obligated person, 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 obligated person;

(xiii) the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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

(xiv) appointment of a successor or additional trustee or the change of name of trustee, if material.

Section 6. Format for Filing With the MSRB. All documents provided to the MSRB pursuant to this Disclosure Undertaking shall be submitted in electronic format and shall identify the Series 2017A Bonds by name and CUSIP number or shall be accompanied by such identifying information as described from time to time by the MSRB.

Section 7. Termination of Reporting Obligation. This Disclosure Undertaking shall remain in full force and effect until such time as all principal, redemption premiums, if any, and interest on the Series 2017A Bonds shall have been paid in full or the Series 2017A Bonds shall have otherwise been paid or legally defeased; provided, however, that if the Rule (or any successor provision) shall be amended, modified, or changed so that all or any part of the

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information currently required to be provided thereunder shall no longer be required to be provided thereunder, then such information shall no longer be required to be provided hereunder; and provided further that if and to the extent the Rule (or any successor provision), or any provision thereof, shall be declared by a court of competent and final jurisdiction to be, in whole or in part, invalid, unconstitutional, null and void, or otherwise inapplicable to the Series 2017A Bonds, then the information required to be provided hereunder, insofar as it was required to be provided by a provision of the Rule so declared, shall no longer be required to be provided hereunder. Upon any legal defeasance, the Issuer shall electronically file notice of such defeasance with the MSRB, and such notice shall state whether the Series 2017A Bonds have been defeased to maturity or to redemption and the timing of such maturity or redemption.

Section 8. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist in its carrying out its obligations under this Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to this Disclosure Undertaking.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Undertaking, the Issuer may amend this Disclosure Undertaking, and any provision of this Disclosure Undertaking may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements or change in law, or change in the identity, nature or status of an obligated person with respect to the Series 2017A Bonds, or the type of business conducted;

(b) This Disclosure Undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2017A Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or Beneficial Owners of the Series 2017A Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Undertaking, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given by filing with the MSRB and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Undertaking shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Undertaking. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Undertaking, the Issuer shall have no obligation under this Disclosure Undertaking to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported.

Section 11. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Undertaking, any holder or Beneficial Owner of the Series 2017A Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Undertaking; provided, however, that any such action may be instituted only in the federal or State courts located in Columbia, South Carolina. A default under this Disclosure Undertaking shall

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not be deemed an event of default under the Resolution, and the sole remedy under this Disclosure Undertaking in the event of any failure of the Issuer to comply with this Disclosure Undertaking shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Undertaking, and in any separate written agreement between the Issuer and the Dissemination Agent.

Section 13. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriters and holders and Beneficial Owners from time to time of the Series 2017A Bonds, and shall create no rights in any other person or entity. This Disclosure Undertaking is not intended to create any monetary rights on behalf of any person.

UNIVERSITY OF SOUTH CAROLINA

By: ______Its: Vice President for Finance and Chief Financial Officer

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT

Issuer: University of South Carolina

Obligations: $______Athletic Facilities Revenue Bonds, Series 2017A (the “2017A Bonds”)

Date of Issuance: March __, 2017

NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Series 2017A Bonds as required by the Resolution. The Issuer anticipates that the Annual Report will be filed by______.

UNIVERSITY OF SOUTH CAROLINA

By: ______Its: ______

Date: ______, ______

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APPENDIX E

DTC AND BOOK-ENTRY-ONLY SYSTEM

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THE FOLLOWING INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY (“DTC”) AND DTC’S BOOK-ENTRY ONLY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE UNIVERSITY OF SOUTH CAROLINA (THE “UNIVERSITY”) BELIEVES TO BE RELIABLE, BUT THE UNIVERSITY TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Athletic Facilities Revenue Bonds, Series 2017A (the “Series 2017A Bonds”) of the University. The Series 2017A Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond will be issued for each maturity of the Series 2017A Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organised 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’s 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 computerised 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 Series 2017A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017A Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2017A Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2017A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2017A Bonds, except in the event that use of the book-entry system for the Series 2017A Bonds is discontinued.

To facilitate subsequent transfers, all Series 2017A 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 authorised representative of DTC. The deposit of Series 2017A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2017A 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. Beneficial Owners of Series 2017A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2017A Bonds, such as redemptions, tenders, defaults, and

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proposed amendments to any of the resolutions under which any Series 2017A Bonds are issued. For example, the Beneficial Owners of Series 2017A Bonds may wish to ascertain that the nominee holding the Series 2017A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2017A Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

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

Redemption payments and principal and interest payments on the Series 2017A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorised 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 Paying Agent 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 Paying Agent, or the University, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption payments and principal and interest payments 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 Paying Agent, 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 depository with respect to any Series 2017A Bonds at any time by giving reasonable notice to the University and the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered.

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

NEITHER THE UNIVERSITY NOR THE PAYING AGENT IS RESPONSIBLE OR LIABLE FOR THE FAILURE OF ANY DIRECT PARTICIPANTS OR ANY INDIRECT PARTICIPANTS TO MAKE ANY PAYMENT OR GIVE ANY NOTICE TO A BENEFICIAL OWNER WITH RESPECT TO THE SERIES 2017A BONDS OR ANY ERROR OR DELAY RELATING THERETO.

Neither the University nor the Paying Agent gives any assurances that DTC, DTC Participants, or Indirect Participants will distribute to the Beneficial Owners of the Series 2017A Bonds (i) payments of principal, premium, if any, and interest, with respect to the Series 2017A Bonds, (ii) confirmation of beneficial ownership interests in the Series 2017A Bonds, or (iii) redemption or other notices sent to DTC or Cede & Co., its nominee, as registered owner of the Series 2017A Bonds, or that they will do so on a timely basis, or that DTC, DTC Participants, or Indirect Participants will serve or act in the manner described in this Official Statement.

All capitalized terms not otherwise defined in this Appendix shall have the meaning ascribed to such term in this Official Statement.

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UNIVERSITY OF SOUTH CAROLINA • ATHLETIC FACILITIES REVENUE BONDS, SERIES 2017A