The University's debt portfolio will be actively managed to maintain the stability of the standard internal lending rate and to minimize the University's risk adjusted cost of capital over the long term. The University may use short-term and long term fixed and variable interest rate debt obligations, bond refundings, and financial derivatives to achieve this goal within the following guidelines:

1. Objective. The objective of actively managing the University's external debt portfolio will be to achieve the lowest risk-adjusted cost of capital consistent with market conditions and credit rating parameters set forth below. Active management decisions will take into consideration relevant risks and terms that include, but are not limited to, market conditions, bond refunding savings, early redemption options, variable interest rate bond remarketing and auction expenses, and liquidity, tax, and counterparty risks.

2. Portfolio credit standard. The University will manage its external debt portfolio to maintain a minimum “Aa3” category credit rating on its General Revenue obligations as evaluated by Moody's Investors Service.

3. Debt structure. The University may issue fixed-rate, variable-rate (up to 20 percent of the external debt portfolio), non-amortizing, and other forms of short-term and long-term debt to achieve its external debt portfolio management objectives.

4. Refunding bonds. The University may issue current and advance refunding bonds to lower or maintain the University's cost of capital over time. Refunding bonds will be issued to capture economic benefit and to restructure the debt portfolio in order to achieve longer-term strategic objectives. Refunding bonds also may be issued in connection with the remarketing or reissuance of term bonds, put bonds, floating rate notes, and other bonds with interest rates that are set from time to time, or to effect amendments to bond terms.

5. Financial derivatives. The University may enter into financial derivative transactions to manage the institution's exposure to interest rate risk, reduce all-in borrowing costs of the external debt portfolio, and/or to manage other risks of the external debt portfolio that could adversely affect the standard internal lending rate or the Program. The University may also enter into financial derivative transactions The University enter into financial derivative transactions only for permitted statutory purposes.

6. Private Use. At least every five years, the University will identify any changes in, or other factors relating to, facility occupancy or facility/equipment use that could affect the tax-related status of University debt.

7. Core financial ratios. The University will evaluate institutional debt capacity as compared to a public higher education credit peer group by reviewing relevant core financial ratios such as ratios used by ratings agencies and key investors in University bonds. These ratios will be calculated and reported annually.