1. DBRS Approach to Rating Universities Eric Beauchemin Vice President - Public Finance June 15, 2004 Eric Beauchemin Vice President - Public Finance June 15, 2004

2. Assessing University Credit Risk - The Foundations - Financial Profile Financial Profile Operating Profile Operating Profile Academic Profile Academic Profile 11

3.  Reputation  Location  Competition  Student applications  Size  Adequacy of facilities Assessing University Credit Risk - Academic Profile - 22

4.  Management practices (budget, investments, infrastructure, etc.)  Operating balance & cash flow generation  Revenue structure (tuition, gov’t. funding, donations, investments, research, etc.)  Enrolment trends & momentum  Operating expenditures  Capital expenditures – recent projects & future requirements  Government’s policies and financial strength  Other: ancillary operations, fundraising, investments, etc. Assessing University Credit Risk - Operating Profile - 33

5.  Debt level  Liquidity position & reserves  Interest burden & coverage ratios  Financial resources (unrestricted & restricted)  Other resources (e.g. non-core real estate assets)  Pension fund status  Contingencies & commitments Assessing University Credit Risk - Financial Profile - 44

6. THANK YOU

7. THANK YOU

8. Dealing with the Rating Agency What we like:  Stability in operations  Transparency & prudence in management activities  Stated policies & practices that are adhered to  Conservative forecasting & accounting  Timely & adequate disclosure  “Heads up” to developing situations (good and bad) 55

9. Dealing with the Rating Agency What we don’t like:  Volatility  Passive or inconsistent management  Aggressive accounting  Hockey-stick forecasts  No real capital strategy  Financial information that is difficult to comprehend or that must be “dragged out” of the institution  Surprises 66