Risk Sharing Model for Tuition Financing. February 3, Stuart K. Adamson

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1 Risk Sharing Model for Tuition Financing February 3, 2006 Stuart K. Adamson

2 Laureate Overview International University Network

3 The Leading International Higher Education Company Campus-Based Universities Online Universities A global network of accredited universities Characterized by strong local name brands Over 189,000 international students Mostly year old students pursuing 4-5 year bachelor degrees Over 100 career-oriented degree programs Including programs for working-adults Focus on vertical markets Best of Class Content North Central Association Accreditation Over 26,000 working-adult students Mostly pursuing Masters and Doctoral degrees Over 30 career-oriented degree programs 3

4 The Leading International University Network 15 Countries 20 Institutions 51 Campuses and Online Over 215,000 Students Laureate Online Education WALDEN UNIVERSITY MINNEAPOLIS, MN LOS ANGELES, CA UNIVERSIDAD DEL VALLE DE MEXICO ( UVM ) MEXICO UNIVERSIDAD TECNOLOGICA CENTROAMERICANA ( UNITEC ) HONDURAS WORLDWIDE HEADQUARTERS BALTIMORE, MD UNIVERSIDAD INTERAMERICANA COSTA RICA & PANAMA INSTITUT FRANCAIS DE GESTION ( IFG ) and ECOLE SUPERIEURE DU COMMERCE EXTERIEUR ( ESCE ) and ECOLE CENTRALE D ELECTRONIQUE FRANCE UNIVERSIDAD EUROPEA DE MADRID ( UEM ) And INSTITUTE FOR EXECUTIVE DEVELOPMENT ( IEDE ) MADRID SPAIN LES ROCHES - MARBELLA MARBELLA, SPAIN Laureate Online Education AMSTERDAM, NETHERLANDS GLION HOTEL SCHOOL ( GLION ) MONTREUX, SWITZERLAND LES ROCHES HOTEL MANAGEMENT SCHOOL BLUCHE, SWITZERLAND CYPRUS COLLEGE CYPRUS UNIVERSIDAD DE LAS AMERICAS ( UDLA ) ECUADOR UNIVERSIDAD PERUANA DE CIENCIAS APLICADAS ( UPC ) PERU UNIVERSIDAD DE LAS AMERICAS ( UDLA ) CHILE UNIVERSIDAD NACTIONAL ANDRES BELLO ( UNAB ) CHILE ACADEMIA DE IDIOMAS Y ESTUDIOS PROFESIONALES ( AIEP ) CHILE ANHEMBI MORUMBI BRAZIL LES ROCHES JIN JIANG INTERNATIONAL HOTEL MANAGEMENT COLLEGE SHANGHAI, CHINA 4

5 Enrollment Drives Strong Financial Performance Enrollment Revenue Operating Income (1,2) 200, ,000 or more (3) 1,000 $820 - $865 (3) 180 $155 - $160 (3) 160, , , , % + CAGR 36% + CAGR 41% + CAGR (1) Excludes Corporate G&A and Non-Cash Compensation (2) See Reg G Reconciliation at (3) Estimate Based on Full Year 2005 Guidance 5

6 Wage Differentials Drive Demand Average Wage Increase for Workers with Post-Secondary Education 200% 150% 124% 150% 171% >200% 100% 62% 50% 0% U.S. Mexico Chile Brazil China Source: College Board Education Pays 2004, Valora Consultants (Mexico), ECLAC (Chile and Brazil), and Laureate analysis (China). 6

7 Huge Growth Anticipated in Current and Potential Markets Post-Secondary Students (Millions) Post-Secondary Enrollments by Region (e) CAGR ( ) Asia 5.3% US 1.1% 12.9 Western Europe 1.2% 12.0 Latin America 3.6% 9.7 Data: National Center for Education Statistics (NCES), Parthenon, OECD and Laureate Analysis 7

8 Pursuing Untapped and Rapidly Growing Markets U. S. WESTERN LATIN EUROPE AMERICA ASIA Total Population (2003) % % % % 290 M 451 M 527 M 3,300 M % % % % % % % % Population M 78 M 411 M 49 M Participation Rate (% of year olds in Post-Secondary) 47% 15% 8% 23% Data: US Census Bureau, NCES, OECD, Parthenon and Laureate analysis Western Europe: Includes Turkey 8

9 International Network: A Strategic Competitive Advantage Higher education with an international perspective Expanding study abroad opportunities Leveraging content and program development Transplantation of university best-practices Marketing, recruiting and retention Operations and financial performance MINNEAPOLIS NETHERLANDS FRANCE HOSPITALITY CALIFORNIA BALTIMORE SPAIN CHINA MEXICO COSTA RICA, PANAMA PERU CHILE/ECUADOR 9

10 Laureate Overview Online Higher Education

11 Laureate Online Education Mission To be the leading provider of graduate degrees online in North America To be the leading provider of online degree programs outside the U.S. 11

12 Laureate Online Education Focused on Graduate and Post-Graduate Students Results in: Higher Tuition, Greater Length of Stay, Low Attrition and Low Cohort Default Rate Vertical Market Focus Results in: Lower Marketing Costs, Lower Cost per Enrollment Accomplished by product management and development Unique Product Design - Rich Media Content with Renowned Experts Results in: Enhanced Student Experience International Leadership Results in: Product Innovation 12

13 Walden - The Centerpiece of Laureate Online Walden drives growth throughout the transition away from Canter third-party partners 30,000 26,023 25,000 21,995 (1) 20,000 15,000 10,000 9,200 5, , Q2005 WALDEN CANTER *As of 10/20/05 (1) Walden includes University of Liverpool and NTU 13

14 Tuition Financing Our goal for tuition financing is to provide access to higher education to academically-qualified low and middle income students who would otherwise not be able to afford post secondary education.

15 Panama Student Financing Program Structure Laureate has been successful in implementing a student loan program in Panama with the assistance of the U.S. Agency for International Development ( USAID ). USAID provides a guarantee equal to 40% of the at risk principal to a Panamanian bank. Guarantee $0.40 per $1 USAID Fees Banvivienda Loan 80% of tuition and fees Student 20% of tuition and fees Repayment Trust covers first $0.20 per dollar of defaulted loans Universidad Interamericana de Panama (UIP) Trust 15

16 Panama Loan Program Summary of Terms Size of loan program: $5 million Security - USAID guarantee for 40% of loaned funds Collateral - Trust holds 20% of loan proceeds as first loss reserve Interest rate to students % Upfront costs to students - $500 application fee Principal grace period - 4 years Principal repayment period years Lending criteria - minimum family income, must have cosigner 16

17 Panama Student Financing Program Pros and Cons Positives Favorable interest rate (9.775%). Interest only payments while student is in school; principal and interest payments begin following program completion. Provides source of tuition financing to students where none previously existed. Negatives Too much power in the hands of Banvivienda. High upfront costs to student. Strict underwriting criteria. 20% of each loan made is placed in to a trust to offset loan defaults. 17

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