Since 1978, annual studies have been conducted of the flow of transfer students from the California community colleges to the University of California (UC) and the California State University (CSU) systems. The studies have focused on trends in the numbers of transfers and the ethnicity, majors, and age of transfer students. Findings from the study of fall 1986 transfers, contrasted with findings from previous years, indicated that: (1) fewer students transferred from the community colleges to the UC and CSU systems in fall 1986 than in fall 1985, with a 1.5% decrease in UC transfers and a 6.5% decrease in CSU transfers; (2) despite the overall downward trend, community colleges and districts varied greatly with respect to their transfer gains and losses; (3) the percentages of Asian and Filipino transfer students to both UC and CSU systems continued to increase, as did the percentage of Hispanics transferring to the CSU colleges; and (4) the percentage of Hispanic students entering the UC system as transfer students decreased in fall 1986, after an increase each year since 1981, while the percentage of Black transfer students increased for the first time since 1981. A primary explanation for the downturn in transfer rates was the large decrease in the number of high school graduates and first-time freshmen in the community colleges in recent years. The community college going rate for recent high school graduates had fallen from 42.8 in fall 1982 to 33.0 in fall 1985, thus further reducing the pool of potential transfer students. Though special efforts are being made by some community colleges to improve transfer opportunities, the success of the new programs and services may not be measurable for several years. (AYC)