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Research Update: County of Essex 'AA' Ratings Affirmed On Exceptional Liquidity; Outlook Stable Overview • We are affirming our 'AA' long-term issuer credit and senior unsecured debt ratings on the County of Essex. • The ratings reflect our view of the county's exceptional liquidity, very strong budgetary performance, and very low debt burden. • The stable outlook reflects our expectations that Essex will maintain exceptional liquidity levels, its tax -supported debt will remain very low, and its budgetary performance will remain very strong. Rating Action On Nov. 12, 2015, Standard & Poor's Ratings Services affirmed its 'AA' long-term issuer credit and senior unsecured debt ratings on the County of Essex, in the Province of Ontario. The outlook is stable. Rationale The ratings reflect Standard & Poor's view of the county's exceptional liquidity, very strong budgetary performance, and very low debt burden. The ratings also reflect our view of the "very predictable and well-balanced" institutional framework for Canadian municipalities, strong economy, strong financial management, and the county's low level of contingent liabilities. We believe that Essex's budgetary flexibility, which we view as average overall, only partially mitigates these credit strengths. In our opinion, Canadian municipalities benefit from a "very predictable and well-balanced" local and regional government framework that has demonstrated a high degree of institutional stability. Although provincial governments mandate a significant proportion of municipal spending, they also provide operating fund transfers and impose fiscal restraint through legislative requirements to pass balanced operating budgets. Municipalities generally have the ability to match expenditures well with revenues, except for capital spending, which can be intensive. Any operating surpluses typically fund capital expenditures and future liabilities (such as postemployment obligations and landfill closure costs) through reserve contributions. Essex's budgetary performance is very strong, in our view. The county added another year of robust operating balances and positive after -capital spending balances. At fiscal year-end 2014 (Dec. 31), its operating surplus was 15.4% of operating revenues and its surplus balance after -capital expenditures was WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 12, 2015 2 1480044 13M76M4