Borrowing Strategy Presentation to CAUBO June 17, 2008 Sheila Brown

Maximum Borrowing Capacity Maximum External Borrowing: 40% of net assets, averaged over 5 years. $675.2 million for Maximum Internal Borrowing: Portion of expendable funds that can be invested long- term. $200.0 million for

External Borrowing Underlying parameter: balance sheet health. Considered: – impact of maximum external borrowing capacity on various balance sheet and operating ratios utilized by credit rating agencies. –impact of debt service on operations and budget. –impact of credit rating on borrowing cost. External borrowing strategy is reviewed annually.

Internal Borrowing Underlying parameters: –investment of expendable funds on l-t basis. –any internal borrowing required for operations would have to be re-financed externally. Considered: –quality of cash flow analysis and forecasting. –short, medium and long term cash requirements. –impact of debt service on operations and budget budget. Internal borrowing strategy is reviewed annually.

Annual Review Process: Review cash forecasts and confirm continued internal borrowing capacity. Project net assets and external debt capacity out several years. Compare U of T to selected credit rating agency ratios for U.S. public colleges and universities. Consider impact of debt service on operations and budget. Consider impact on credit ratings. Presented annually to U of T governing body. Made available annually to credit rating agencies.

Credit Rating Agency and Lending Community Reaction Reaction to original strategy was good. Strategy is viewed as evidence of discipline around borrowing. Reaction to annual review is positive, shows ongoing careful review and consideration of impact of borrowing on financial health.