2009 Credit Rating Report - Standard & Poors - Full Report June 11/10

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Essex (County of) Major Rating Factors Strengths: • Strong liquidity • Low and declining stand -alone debt • Stable budgetary performance Weaknesses: Lack of control over debt issuance at the lower -tier municipal level Low - but - improving economic diversification Rationale AA-/Stable/-- The ratings on the County of Essex, in the Province of Ontario (AA- /Stable /A -1 +), reflect Standard & Poor's Ratings Services' view of the following factors: • In our opinion, Essex's healthy financial position is largely a result of its strong liquidity. Its reserves and liquidity levels easily surpass its net debt obligations. Reserve and reserve fund balances increased moderately in 2008 to $70.2 million, from a five -year average of C$52.2 million. Similarly, cash and investment balances have been more than C$40 million since 2003 (cash balances and liquid assets represented about 63.5% of operating expenses in 2008). As a result, the county has been a strong net creditor in each of the past 10 years. • Further bolstering its financial risk profile, Essex's stand -alone debt and debt - service burdens are low compared with those of similarly rated peers. By the end of the fiscal 2008 (Dec. 31), direct debt represented 32.8% of operating revenues, while interest expense accounted for only 1.9% of operating revenues. Absent any projected debt issuance, we expect the county's own debt levels to decline to less than 25% of operating revenue by 2012, lower than the median of similarly rated Canadian peers. • Essex's budgetary performance is stable, in our view. In fiscal 2008, the county generated about a 13% surplus of operating revenue, a moderate decline compared with stable performances of 15% of operating revenue since 2002. Conversely, Essex's balance after capital expenditures improved notably to about 6.0% of total revenue, compared with 1.6% in fiscal 2007. The increase was the result of a marked increase in grants that somewhat mitigated elevated capital spending. We believe that the ability to generate sizable operating surpluses is a key credit strength, because it provides the county with the financial flexibility to maximize pay -as- you -go financing and limit debt issuance. We believe the following somewhat offset these credit strengths: • Despite having a strong stand -alone financial risk profile, the financial risk profile of lower -tier member municipalities influences Essex's credit quality. Lower -tier debt issuance indirectly influences the county's overall debt - carrying capacity. Essex's economy is relatively less diversified than that of most domestic peers. The county's economy is heavily concentrated in manufacturing, particularly in the cyclical automotive sector, with remaining employment largely rural. As a result of the recent downturn, especially in Ontario's manufacturing sector, indicators point to Standard & Poor's I RatingsDirect on the Global Credit Portal I June 11, 2010 2 8038461300071004