CAUBO Annual ConferenceCONSORTIA BORROWING

Saskatoon,Saskatchewan

JUNE 12, 2004

Agenda

• OSBFC Story - Our Team

• OSBFC’s Process

• Benefits of OSBFC

• Costs

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“SIGNIFICANT FINANCIAL BENEFITS TO THE SECTOR”

$200,000,000$200,000,000(conservatively!!!)

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“ROWING WITH THE PEOPLE”25 BOARDS

25 CEO’S

25 CFO’S

235 TRUSTEES

7 INVESTMENT BANKS

3 LEGAL FIRMS

2 MINISTRY’S

ONTARIO FINANCING AUTHOURITY

SO FAR……..

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HOW DID WE GET STARTED?April 1998 – RESTRUCTURING OF BOARDS

Seed $ from Ministry of Education

Set up Catholic School Board Services Corporation; spun off OSBFC

Initiatives: Purchasing Construction, Facility & Energy Utilities Employee Benefits IT Consultants

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Our Story - Our TeamFinancing Structure Description

Ontario School Boards Financing Corporation (“OSBFC”) was formed as a vehicle to issue debt on behalf of Ontario School Boards

OSBFC is a non-share capital, not-for-profit, special purpose corporation Each participating Board issues a debenture to OSBFC representing its debt

obligation The amount of the underlying debenture issued by each participating Board

is based on that Board’s capital requirements The liability of each Board is only for amounts owing under its own

debenture. There is no joint and several liability The underlying debenture for each participating Board ranks pari passu with

all other debentures and financial instruments issued by that Board OSBFC sells Ownership Interests that represent undivided co-ownership

interests in the debentures issued by the participating boards

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Participating School Boards

OSBFC

Investors

Custodian

Debentures

DepositedDebentures

Ownership Interests

Semi-AnnualPayments on Debentures

Semi-Annual Payments

Net Proceeds of Offering

Net Proceeds of Offering

Our Story - Our TeamFinancing Structure Diagram

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Series 2003 OfferingCredit Ratings

Prior to the 2003 offering, OSBFC obtained a third rating from Moody’s

– Three ratings are preferred by investors for frequent and large issuers OSBFC offerings enjoy the following strong credit ratings:

CIBC World Markets works with OSBFC and participating school boards to obtain and maintain the highest possible ratings

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Our Story - Our Team

OFAPETER

HOWARTHCSBSA

Peter Derochie - President (Simcoe Muskoka Catholic District School Board)John Sabo - Vice President (York Catholic District School Board)Cathy Dempsey - Secretary-Treasurer (Halton Catholic District School Board)David Visser - Director (Durham Catholic District School Board)Terry Miller - Director (Dufferin-Peel Catholic District School Board)Paul McMahon - Director (Toronto Catholic District School Board)

MILLER THOMSON

MINISTRYOF

FINANCE

MINISTRY OF

EDUCATION

CIBCWORLDMARKETS

McMILLAN BINCH

DAVIES WARD PHILLIPS & VINEBERG

UNDERWRITING SYNDICATE:CIBC World Markets - LeadRBC-Dominion SecuritiesNational BankScotia Capital MarketsBMO Nesbitt BurnsLaurentian BankTD Securities

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OSBFC Board of Directors GOVERNING BODY

CONTRACTING ORGANIZATION – Dealers, Lawyers, Trustee, Fund Manager, Executive Director

APPROVES FINANCING TERMS, STRUCTURE, PROJECTS

AUTHOURIZES THE EXECUTIVE (any 2) TO “PULL THE PIN”

REPRESENTS INTERESTS OF ALL PARTICIPANTS

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OSBFC Executive DO THE DEAL AS APPROVED BY EACH TEAM FACILITATE/APPROVE THE PARTICIPANTS

ACCESSDRIVE TO CONSENSUS TO MEET ALL NEEDSMARKET OSBFCLIASE WITH BOARDS, MINISTRY OF

EDUCATION, OFA, SYNDICATE, LAWYERSNEGOTIATE CONTRACTSASSESS PERFORMANCE OF DEALS,

PARTICIPANTS & PARTNERSRESPOND TO INVESTOR QUERIESSTRATEGIZE & RUN THE DAY TO DAY!

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OSBFC Participants Team

HAVE MET CREDIT QUALITY

ESTABLISH VOLUME

SET TERM(S), STRUCTURE,TIMING

AUTHOURIZE OSBFC EXECUTIVE TO COMPLETE TRANSACTION WITHIN PARAMETERS

TELL OUR STORY!!

REALIZE SIGNIFICANT BENEFITS AND RISK SHARING

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OTHER OSBFC PROGRAMS

POOLED MONEY MARKET INVESTMENTS

POOLED SINKING FUND & INVESTMENT FUND MANAGEMENT

INTER-BOARD BORROWING & INVESTING

EXPLORING A LEASING PROGRAM

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Our Story - Our TeamThe originating school boards had a number of key objectives to meet when assessing financing alternatives:

Cost To minimize all-in funding costs for participating boards To minimize cross subsidies between participating boards

Minimization of Risk To ensure that participating boards are responsible only for their own debt To ensure that debt servicing requirements are consistent with grant

payments from the Province To minimize refinancing risk

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Our Story - Our Team Flexibility

To avoid restrictive covenants To minimize constraints on raising additional debt to meet future capital

requirements To maintain flexibility to add new boards To enable participating boards to access the market as quickly as possible

and with relative ease of execution

Legal and Regulatory To ensure consistency with the current legal and regulatory framework To ensure a default by one participant has no effect on the other participants

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Summary of OSBFC Issue Participation by School Board 25 school boards (17 Catholic, 8 Public) have participated in OSBFC pools

III. The OSBFC Story

School Board

I ssue 2000-A1 2000-A2 2001-A1 2001-A2 2001-A3 2002-A1 2002-A2 2003-A1 2003-A2C oupon 7.20% 6.30% 5.90% 6.25% 6.55% 5.70% 5.90% 5.30% 5.80%Term (years) 25 10 10 15 25 15 25 10 25Bluewater DSB - - - - - - - $15,290 $19,731 $35,021Brant/Haldimand Norfolk C DSB - - $6,112 - $18,888 - - - - 25,000C sdc du C entre-Est de l'Ontario - - - - - - - 6,130 7,910 14,040C sdc des Aurores boreales - - - - - - - 4,958 6,398 11,355C sd du Nord-Est de l'Ontario - - - - - - - 6,112 7,888 14,000Dufferin-Peel C DSB $60,650 $57,596 27,842 - 86,045 $103,134 - - - 335,268Durham C DSB 21,754 48,571 - - - - - - - 70,325Durham DSB - - - - - 70,000 - - - 70,000C DSB of Eastern Ontario 9,445 9,555 - - - 1,318 $11,180 6,989 9,019 47,506Halton C DSB 22,097 36,808 19,889 - 61,466 - - 3,842 4,958 149,060Halton DSB - - - - - - - 21,830 28,170 50,000Hamilton-Wentworth C DSB 10,937 11,063 1,269 - 3,922 2,637 22,363 8,845 11,415 72,451Huron Perth C DSB - - - - - - - 2,401 3,099 5,500London DC SB - - 9,149 - 28,273 - - 4,803 6,197 48,422Niagara C DSB - - 5,867 - 18,133 2,729 23,146 4,245 5,477 59,597Peel DSB - - - $150,000 - - - - - 150,000S imcoe Muskoka C DSB 14,914 68,155 - - - 2,824 23,945 - - 109,838Sudbury C atholic DSB - - - - - - - 4,771 6,156 10,927Toronto C DSB 6,463 6,537 - - - 11,858 100,552 38,956 50,271 214,637Upper C anada DSB - - - - - - - 10,915 14,085 25,000Upper Grand DSB - - - - - 2,145 18,192 16,950 21,873 59,160Waterloo C DSB 3,828 3,872 12,383 - 38,268 - - - - 58,350Wellington C DSB - - 6,733 - 20,807 3,354 28,446 - - 59,340Windsor-Essex C DSB - - - - - - 32,177 24,013 30,987 87,177York C DSB 49,912 103,088 10,757 - 33,243 - - 18,952 24,457 240,409

Total $200,000 $345,245 $100,000 $150,000 $309,045 $200,000 $260,000 $200,000 $258,091 $2,022,381

Outstanding Amount by I ssue ($000) Total OSBFC Borrowings by School

Board

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Availability Size Cost Terms Rating

Bank FinancingGood for short termborrowing of smallamounts

Typically sufficientfor small to mediumsize borrowingrequirements

Can be relativelyexpensive if longerterm financing isrequired

May have morestringent terms andconditions thanbond marketfinancing

Rating typicallynot required

Financingthrough theMunicipality

Dependent onwillingness ofMunicipality

Dependent onrelative issuerequirements ofMunicipality

Low if Municipalrating is higher thanthe School Boardrating

Terms andconditions set bythe Municipality

Rating of theMunicipality used

IndependentBond Issue

Good, depending onamount required

Available range from$20 million to $200million

Issue size of lessthan $75 million willresult in a liquiditypremium

Limited terms andconditions, generalobligation of theschool board

One or two likelyto be required

OSBFC

Good, likely to be twoissues annually overthe short to mediumterm

Participating issuescan have sizerequirements from$10 million to $200million

Large size resultsin sharing of costsand a lower spreaddue to liquidity

Limited terms andconditions, generalobligation of theschool board

Two required

Alternate Financing Approaches Comparison of various long-term financing approaches

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Alternate Financing Approaches Comparison of financing approaches

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Alternate Financing Approaches One consideration for school boards is whether to develop a “pooled

approach” or a “go it alone” approach Over the past year, school boards in Ontario have demonstrated the viability

of both approaches: 25 school boards have raised debt through a pooled approach 3 school boards have raised debt through individual debt issues Many have “gone alone” to banks etc.

The choice of a pooled financing approach vs. individual financings will be influenced by:

Financing objectives Size of financings Relative cost Risk minimization Financing flexibility Work effort required

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Benefits of OSBFC

Multiple Member Benefits of Pooled Financing Most competitive terms and conditions Costs distributed over many participating members

Process Benefits of Pooled Financing Efficient Process

Centralized negotiations Centralized documentation Limited time and resources committed by individual participating members

Individual participating member credit ratings not necessary Only OSBFC, the special purpose funding corporation, is rated

Established framework for subsequent issues Orderly, well understood risk profile Ease of subsequent debt issues Reduced costs of subsequent issues

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Benefits of OSBFC

Size Benefits of Pooled Financing Ability to negotiate attractive issuance costs

Legal fees Marketing costs Underwriting commissions

Increased liquidity Wider investor base Individual investors able to purchase larger amounts Lower spreads

Regular issuance Borrow only for current capital requirements Borrow in small or large amounts on attractive terms Participate only in subsequent issues if new capital is required

Intermediary Cost Benefits of Pooled Financing No fees payable to municipalities for issuing debt on behalf of participating

member

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Benefits of OSBFC A pooled financing results in a number of important benefits, including:

Provides participants with modest financing requirements an opportunity to efficiently access the capital markets

Provides participants with economies of scale by spreading issue costs among multiple parties

Creates a special purpose vehicle that can be used by different groups of participants at different times to access the capital markets

Pooled issues are generally more attractive to investors as the larger issue size results in better market liquidity and therefore tighter spreads

Enables investors to diversify their exposure to a particular market segment amongst multiple issuers, while only investing in a single instrument

In general, the pooled financing concept works best for groups of participants that have the following characteristics

Each participant’s borrowing requirements cannot be optimally achieved independently

Each participant has similar strong credit quality Consensus among participants on financing structure

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Benefits of OSBFC

Benefits for Investors The OSBFC debt issues have many attractive features for investors:

Strong credit ratings Strong provincial support of educational funding and OSBFC financing

structure Large issue size provides good liquidity Pooled structure enables investors to diversify risk among participating

school boards Amortizing structure or sinking fund reduces refinancing risk OSBFC debt issues are the benchmarks for school board financings

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Syndicate In order to create a liquid market for the OSBFC bonds, a syndicate of

investment dealers is required

On a go forward basis, it’s expected that the syndicate will be adjusted based on those dealers that can add the most value

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Costs Objective of pooled financing is achieve the lowest rate of interest for school

board debenture and to minimize all-in funding costs for participating school boards

The most significant expenses are: Commission fees Legal fees Rating agency costs Printing costs

Commission fees are calculated as a percentage of the total debenture issue Legal fees are shared equally and were 50% lower in the second issue

(savings will depend on the number of boards participating) Rating agency fees are shared equally and totaled approximately $90,000 on

the first issue and zero for the second issue Printing costs were 50% lower in the second issue and were shared equally All-in funding costs for OSBFC Issue #1 amounted to approximately 1.04% Time commitments for each board to structure and bring an issue to market

have not been included; however, pooling structure should reduce aggregate time commitment

Contacts

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Questions and Answers