NEW ISSUE – Book-Entry-Only Ratings: Moody’s:A2S&P:A+

(See “RATINGS” herein)

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Under existing law, interest on the Bonds and any profit on the sale of the Bonds are exempt from Massachusetts personal income taxes and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX EXEMPTION” herein.

$173,510,000MASSACHUSETTS HEALTH AND

EDUCATIONAL FACILITIES AUTHORITYRevenue Bonds, Berklee College of Music Issue

Series 2007A

Dated: Date of Delivery Due: October 1, as shown on the inside cover

The Series 2007A Bonds (the “Bonds”) will be issued only as fully registered bonds without coupons and, when issued, will be registered in the name of Cede & Co. as Bondowner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds. See “THE BONDS -- Book-Entry-Only System” herein.

Principal of and semiannual interest on the Bonds will be paid by U.S. Bank National Association, as Trustee (the “Trustee”). So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner, as more fully described herein. Interest will be payable on October 1, 2007 and semiannually thereafter on each October 1 and April 1 to the Bondowners of record as of the close of business on the fifteenth day of the month preceding the date on which interest is to be paid.

The Bonds are subject to redemption prior to maturity as set forth in this Official Statement.

The Bonds shall be special obligations of the Massachusetts Health and Educational Facilities Authority (the “Authority”) payable solely from the Revenues, as defined herein, of the Authority, including payments to U.S. Bank National Association, as trustee, for the account of the Authority by Berklee College of Music, Inc. (the “Institution”) in accordance with the provisions of the Loan and Trust Agreement dated as of June 14, 2007, by and among the Authority, the Institution and the Trustee (the “Agreement”). Such payments pursuant to the Agreement are a general obligation of the Institution.

THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION THEREOF, OR A PLEDGE OF THE FAITH AND CREDIT OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY SUCH POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES PROVIDED UNDER THE AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE ACT DOES NOT IN ANY WAY CREATE A SO-CALLED MORAL OBLIGATION OF THE COMMONWEALTH OF MASSACHUSETTS TO PAY DEBT SERVICE IN THE EVENT OF DEFAULT BY THE INSTITUTION. THE AUTHORITY DOES NOT HAVE ANY TAXING POWER.

The Bonds are offered when, as and if issued and received by the Underwriters, subject to prior sale, to withdrawal or modification of the offer without notice, and to the approval of their legality and certain other matters by Edwards Angell Palmer & Dodge LLP, Boston, Massachusetts, Bond Counsel to the Authority. Certain legal matters will be passed upon for the Institution by its counsel, Ropes & Gray LLP, Boston, Massachusetts. Certain legal matters will be passed upon for the Underwriters by their counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts. It is expected that the Bonds in definitive form will be available for delivery to DTC in New York, New York or its custodial agent on or about August 8, 2007.

CitiBanc of America Securities LLC Merrill Lynch & Co.July 19, 2007

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$173,510,000 MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

Revenue Bonds, Berklee College of Music Issue Series 2007A

Dated: Date of Delivery Due: October 1, as shown below

DueOctober 1

Principal Amount

Interest Rate CUSIP∗

DueOctober 1

Principal Amount Interest Rate CUSIP∗

2008 $2,720,000 3.875% 57586CA54 2017 $2,135,000 5.000% 57586CC372009 2,830,000 3.900 57586CA62 2018 175,000 4.300 57586CC452010 2,940,000 4.000 57586CA70 2018† 4,025,000 5.000 57586CC522011 3,060,000 4.000 57586CA88 2019 695,000 4.375 57586CC602012 3,190,000 4.100 57586CA96 2019† 3,715,000 5.000 57586CC782013 3,125,000 4.100 57586CB20 2020 350,000 4.400 57586CC862013 195,000 5.000 57586CB38 2020† 4,285,000 5.000 57586CC942014 1,925,000 4.125 57586CB46 2021† 4,870,000 5.000 57586CD282014 1,545,000 5.000 57586CB53 2022† 5,120,000 5.000 57586CD362015 850,000 4.200 57586CB61 2023† 5,385,000 5.000 57586CD442015 2,785,000 5.000 57586CB79 2024† 5,660,000 5.000 57586CD512016 850,000 4.250 57586CB87 2025† 5,950,000 5.000 57586CD692016 2,965,000 5.000 57586CB95 2026† 6,255,000 5.000 57586CD772017 1,865,000 4.300 57586CC29 2027† 6,575,000 5.000 57586CD85

$38,300,000 5.000% Bonds due October 1, 2032† - Yield 4.710% CUSIP ∗ 57586CD93

$49,170,000 5.000% Bonds due October 1, 2037† - Yield 4.740% CUSIP ∗ 57586CE27

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

No dealer, broker, salesperson or other person has been authorized by the Authority, the Institution or the Underwriters to give information or to make representations with respect to the Bonds, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. Certain information contained herein has been obtained from the Institution, The Depository Trust Company and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of the Authority. This Official Statement is submitted in connection with the sale of securities referred to herein and may not be used, in whole or in part, for any other purpose. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof.

The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

∗ Copyright 2005, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of bondholders only at the time of issuance of the Bonds and the Authority does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but notlimited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insuranceor other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

† Priced at the stated yield to the October 1, 2017 optional redemption date at a redemption price of 100%. See “THE BONDS −Optional Redemption”.

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TABLE OF CONTENTS Page

INTRODUCTION .......................................................................................................................... 1

SOURCES OF PAYMENT AND SECURITY FOR THE BONDS.............................................. 2

THE AUTHORITY ........................................................................................................................ 2

THE BONDS .................................................................................................................................. 5

THE PROJECT............................................................................................................................... 9

PLAN OF FINANCE.................................................................................................................... 10

DEBT SERVICE REQUIREMENTS........................................................................................... 11

ESTIMATED SOURCES AND USES OF FUNDS .................................................................... 12

BONDOWNERS' RISK ............................................................................................................... 12

CONTINUING DISCLOSURE.................................................................................................... 13

TAX EXEMPTION ...................................................................................................................... 13

VERIFICATION OF MATHEMATICAL ACCURACY............................................................ 14

FINANCIAL ADVISOR .............................................................................................................. 15

LEGALITY OF THE BONDS FOR INVESTMENT AND DEPOSIT....................................... 15

RATINGS ..................................................................................................................................... 15

COMMONWEALTH NOT LIABLE ON THE BONDS............................................................. 15

UNDERWRITING ....................................................................................................................... 15

LEGAL MATTERS...................................................................................................................... 16

MISCELLANEOUS ..................................................................................................................... 16 APPENDIX A Letter from the Institution A-1 APPENDIX B Financial Statements of the Institution for Fiscal Year 2005-2006 B-1 APPENDIX C Definitions of Certain Terms and Summary of the Loan and Trust Agreement C-1 APPENDIX D Proposed Form of Bond Counsel Opinion D-1 APPENDIX E Form of Continuing Disclosure Agreement E-1

[THIS PAGE INTENTIONALLY LEFT BLANK]

MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

99 SUMMER STREET, BOSTON, MASSACHUSETTS 02110

ALLEN R. LARSON, Chairman JOSEPH M. GIGLIO MARVIN A. GORDON, Vice Chairman TIMOTHY O’CONNOR GAYL A. MILESZKO, Secretary ROBERT M. PLATT N. SCOTT BATES CHRISTINE C. SCHUSTER

BENSON T. CASWELL, Executive Director

OFFICIAL STATEMENT

Relating to

$173,510,000

MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Revenue Bonds, Berklee College of Music Issue,

Series 2007A

INTRODUCTION

Purpose of this Official Statement

The purpose of this Official Statement is to set forth certain information concerning the Massachusetts Health and Educational Facilities Authority (the “Authority”) Revenue Bonds, Berklee College of Music Issue, Series 2007A (the “Bonds”) authorized by the Loan and Trust Agreement dated as of June 14, 2007 (the “Agreement”) by and among the Authority, Berklee College of Music, Inc. (the “Institution”) and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds are secured in accordance with the provisions of Chapter 614 of the Massachusetts Acts of 1968, as amended from time to time (the “Act”) and the Agreement. The information contained in this Official Statement is provided for use in connection with the sale of the Bonds. The definitions of certain terms used and not otherwise defined herein are contained in Appendix C - “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE LOAN AND TRUST AGREEMENT.”

Application of Proceeds

The proceeds from the sale of the Bonds will be used to (i) refinance the projects financed or refinanced with the Institution’s outstanding loan from Bank of America, N.A. (the “Prior Loan”), (ii) refinance the projects financed or refinanced with the proceeds of the Authority’s Revenue Bonds, Berklee College of Music Issue, Series D and Series E (the “Series D and E Bonds”) and the Authority’s Variable Rate Revenue Bonds, Berklee College of Music Issue, Series F (the “Series F Bonds”, and together with the Series D and E Bonds, the “Prior Bonds”), (iii) pay or reimburse a portion of the costs of the Project, and (iv) pay the costs of issuing the Bonds.

A more detailed description of the use of proceeds of the Bonds, including approximate amounts and purposes, is included herein under “PLAN OF FINANCE”, and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

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SOURCES OF PAYMENT AND SECURITY FOR THE BONDS

The Authority, the Institution and the Trustee shall execute the Agreement, which provides that to the extent permitted by law the obligation of the Institution to make payments thereunder is a general obligation of the Institution and that the full faith and credit of the Institution are pledged to its performance. The Agreement also provides, among other things, that the Institution shall make payments to the Trustee equal to principal of and interest on the Bonds and certain other payments required by the Agreement. The obligation of the Institution to make payments under the Agreement is unsecured. The Agreement shall remain in full force and effect until such time as all of the Bonds and the interest thereon have been fully paid or until adequate provision for such payments has been made.

The Bonds are special obligations of the Authority, equally and ratably secured by and payable from a pledge of and lien on, to the extent provided by the Agreement, the moneys received with respect to the Bonds by the Trustee for the account of the Authority pursuant to the Agreement.

Under the Agreement, the Authority assigns and pledges to the Trustee in trust upon the terms of the Agreement (i) all Revenues to be received from the Institution or derived from any security provided thereunder, and (ii) all rights to receive such Revenues and the proceeds of such rights. Under the Act, to the extent authorized or permitted by law, the pledge of Revenues is valid and binding from the time when such pledge is made and the Revenues and all income and receipts earned on funds held by the Trustee for the account of the Authority shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Authority irrespective of whether such parties have notice thereof.

Additional long-term indebtedness and short-term indebtedness may be incurred by the Institution upon the Institution’s satisfaction of applicable requirements set forth in the Agreement. See Appendix C − DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE LOAN AND TRUST AGREEMENT under the heading “Additional Indebtedness.” In addition and with certain exceptions set forth in Appendix C, the Agreement precludes the Institution from granting a pledge, lien, mortgage security interest or other encumbrance on the Gross Receipts of the Institution or on the Institution’s Restricted Property, which consists of real estate owned by the Institution, as described in Appendix A under the heading “Facilities”, to secure additional indebtedness unless such pledge, lien, mortgage security interest or other encumbrance shall also be extended to secure on a parity basis the Bonds issued under the Agreement. See Appendix C − DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE LOAN AND TRUST AGREEMENT under the heading “Pledge of Property.”

The assignment and pledge by the Authority does not include (i) the rights of the Authority pursuant to provisions for consent, concurrence, approval or other action by the Authority, notice to the Authority or the filing of reports, certificates or other documents with the Authority, or (ii) the powers of the Authority as stated in the Agreement to enforce the provisions thereof.

THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT, LIABILITY OR MORAL OBLIGATION OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES DERIVED BY THE AUTHORITY UNDER THE AGREEMENT. THE AUTHORITY DOES NOT HAVE TAXING POWER.

THE AUTHORITY

The Authority is a body politic and corporate and a public instrumentality of The Commonwealth of Massachusetts (the “Commonwealth”), organized and existing under and by virtue of the Act. The purpose of the Authority, as stated in the Act, is essentially to provide assistance for public and private nonprofit institutions for higher education, and private nonprofit schools for the handicapped, nonprofit hospitals and their nonprofit affiliates, nonprofit nursing homes, and nonprofit cultural institutions in the construction, financing, and refinancing of projects to be undertaken in relation to programs for such institutions.

Authority Membership and Organization

The Act provides that the Authority shall consist of nine members who shall be appointed by the Governor and shall be residents of the Commonwealth. At least two members shall be associated with institutions for higher education, at least two shall be associated with hospitals, at least one shall be knowledgeable in the field of state and municipal finance (by virtue of business or other association) and at least one shall be knowledgeable in the field of building construction. All Authority members serve without compensation, but are entitled to reimbursement for

3

necessary expenses incurred in the performance of their duties as members of the Authority. The Authority elects annually one of its members to serve as Chairman and one to serve as Vice Chairman.

The members of the Authority are as follows:

ALLEN R. LARSON, Chairman; term as Member expired July 1, 2007, continues to serve until reappointed or until a successor is appointed.

Mr. Larson, a resident of Yarmouth Port, is the founding principal of a law firm and a separate consulting firm, the Enterprise Management Group, that advise business and non-profit clients on matters of government regulation, business competition, market entry, and economic development. Prior to establishing his law firm in 1984, Mr. Larson worked as an antitrust attorney for the Federal Trade Commission in Washington, D.C. Currently, he is a Trustee of Cape Cod Community College, President of the Cape Cod Center for Sustainability, a Director of the YMCA-Cape Cod, and a Member of the Yarmouth Town Finance Committee. Mr. Larson graduated from Dartmouth College and earned a J.D. from Albany Law School and an M.B.A. from the University of Minnesota.

MARVIN A. GORDON, Vice Chairman; term as Member expires July 1, 2010.

Mr. Gordon, a resident of Milton, is Chairman of the Board and Chief Executive Officer of Gordon Logistics, L.L.C. in Mansfield, Massachusetts. From 1974 to 2001, Mr. Gordon was Chief Executive Officer and Chairman of Whitehall Co. Ltd. of Norwood, Massachusetts. From 1994 to 1996, Mr. Gordon served on the Board of Directors to Techniek Development Co. of San Diego, California. He also served as Chairman of the Board of US Trust Norfolk (Milton Bank and Trust) from 1974 to 1976 and as Vice President and Member of the Executive Committee from 1971 to 1974. Mr. Gordon has been actively engaged in non-profit, charitable and civic activities. His present affiliations include Board Member and Chairman of the Audit and Compliance Committee of The Milton Hospital Foundation, Inc. and Board Member of Milton Hospital, Inc., and President of Milton Fuller Housing Corporation. Mr. Gordon has been elected to and appointed to a number of public boards including serving as a Milton Selectman from 1986 to 1993 and belongs to several civic associations. Mr. Gordon holds a degree from Harvard College and Harvard Business School.

GAYL A. MILESZKO, Secretary; term as Member expires July 1, 2012.

Ms. Mileszko, a native of Amherst and current resident of Boston, is the former Massachusetts Director of Labor, serving as a member of the Governor’s Cabinet and also as a member of the Massachusetts Economic Assistance Coordinating Council, the Massachusetts Industrial Accident Board Nominating Panel, the Massachusetts Workers’ Compensation Advisory Council, and the Massachusetts Human Resources Advisory Council. Prior to joining the Department in 2005, Ms. Mileszko served in the Massachusetts Governor’s office since 2003 as Director of External Relations/Community Affairs, and as Chief of Staff for Legislative and Intergovernmental Relations. She was associated with the investment banking firm Tucker Anthony Incorporated in Boston and New York from 1990 to 2002, serving as a Vice President in public finance and later as a Senior Vice President in the fixed income capital markets division. She was a member of the staff of the Committee on Appropriations for the U.S. House of Representatives from 1983 to 1988, and previously served as a staff assistant to Massachusetts Congressman Silvio O. Conte. Ms. Mileszko holds a B.A. from Yale College.

N. SCOTT BATES; term as Member expires July 1, 2010.

Mr. Bates, a resident of Concord, is Vice President of Tishman Construction Corporation of Massachusetts. He manages the business development for Tishman Construction Corporation throughout the New England region and is also responsible for developing the business strategy for the Tishman’s Boston office and managing its public relations with the local community. Mr. Bates has had 18 years of industry experience including nine years with Tishman Construction. From 1995 to 1997, Mr. Bates was the Manager of Business Development and Marketing for Hanscomb Inc. one of the nation’s top 50 construction management firms. He serves as a Board Member for YouthBuild Boston and The Boston Private Industry’s Youth Council; Member of the Development Subcommittee of the Greater Boston Chamber of Commerce; and serves on the Town of Concord’s School Building Committee. In 2004, Mr. Bates helped initiate Building Careers Partnership, a unique collaboration of construction industry employers and associations, the Mayor’s Office of Jobs and Community Services, building trade unions, Boston Public Schools, and local workforce development organizations. In 1999, Mr. Bates received the “Marketing

4

Executive of the Year Award” from the Society of Marketing Professional Services (SMPS). In 2004 Mr. Bates was honored by the Boston Junior Chamber of Commerce (Boston Jaycees) as one of ten recipients of the TOYL Award, which pays tribute to ten individuals ages 21 to 40 who have contributed to the Greater Boston community throughout their exceptional professional, civic, and personal achievements. Mr. Bates holds an M.B.A. from Babson Graduate School of Business and a B.A. in Economics from Colby College.

JOSEPH M. GIGLIO; term as Member expires July 1, 2013.

Mr. Giglio is an Executive Professor at Northeastern University’s College of Business Administration and an adjunct faculty member at Polytechnic University in New York City. He was appointed to the board of the Special Commission on Transportation Finance by Governor Romney and has served as Special Advisor to the U.S. Office of the Secretary of Transportation. Mr. Giglio is the Vice Chairman of the Hudson Institute, a leading public policy organization in Washington D.C. and has served as Chairman of President Reagan's National Council on Public Works Improvement, which released its report "Fragile Foundations" in 1988. He also chaired the U.S. Senate Budget Commission on Innovative Financing of Infrastructure. Mr. Giglio has also served as Chairman and Vice Chairman of the Board of Directors for the Intelligent Transportation Society of America (ITSA), a federally charted advisory committee addressing public and private sector technology applications. Mr. Giglio is a former board member of the Massachusetts Educational Financing Authority and is the former Chairman of the Public-Private Division of the American Road and Transportation Builders Association. Mr. Giglio has served as Executive Vice President at Smith Barney, President of Chase Municipal Securities and as Senior Managing Director at Bear, Stearns & Co. Inc. and served as chairman of Apogee Research Inc. He holds a B.A. degree from Rutgers University, an M.P.A. degree from New York University, an M.B.A. degree from Columbia Business School and a Ph.D. degree from Northeastern University.

TIMOTHY O’CONNOR; term as Member expires July 1, 2009.

Mr. O’Connor, a resident of Salem, is Executive Vice President, Chief Financial Officer and Treasurer of Lahey Clinic Foundation, Inc.; Lahey Clinic Hospital, Inc.; Lahey Clinic, Inc.; Lahey Clinic Affiliated Services, Inc. and Lahey Clinic Canadian Foundation. In addition Mr. O’Connor is also President, Chief Financial Officer and Treasurer of Lahey Clinic Insurance Company Limited. His memberships and affiliations include the American Medical Group Association, the Healthcare Financial Management Association, the Healthcare Information and Management Systems Society and the Massachusetts Hospital Association’s Committee on Finance.

ROBERT M. PLATT; term as Member expires July 1, 2009.

Mr. Platt, a resident of Newton, is President of National Consulting Inc., a business development and marketing strategy organization which assists clients in achieving their true market potential. Mr. Platt works in conjunction with both state and federal government to facilitate the exchange of ideas and opportunities for clients. His board memberships include Past President of the Newton Athletic Association, Past Board of Director of the Newton Youth Soccer for Boys and Girls, and Past Board Member of Youth Commission for the City of Newton. Mr. Platt’s current board memberships include Commissioner of Parks and Recreation of his ward in Newton, Advisory Board Member for Second Step which aids women who have suffered domestic violence and abuse, and Member of the Board of Trustees for Curry College. Mr. Platt holds a B.A. from Curry College.

CHRISTINE C. SCHUSTER; term as Member expires July 1, 2013.

Ms. Schuster, a resident of Sudbury, is President and Chief Executive Officer of Emerson Health System located in Concord. Ms. Schuster formerly held the position of President and Chief Executive Officer of Quincy Medical Center. She is a Member of the Board of Trustees of the South Shore Chamber of Commerce where she serves as Vice Chairman of Government Affairs; and is a Member of the Board of Trustees of the Massachusetts Hospital Association (“MHA”) where she serves as the MHA Chair of the Clinical Issues Advisory Council which provides advice and counsel to the MHA on key medical, clinical, and public policy issues. She also serves on the American Hospital Association Regional Policy Board. Ms. Schuster was recognized by Modern Healthcare magazine and Witt Kieffer Associates as one of the Year 2000 “Up and Comers Award” recipients. She is a frequent speaker both locally and nationally on a wide variety of healthcare topics. Ms. Schuster received an

5

M.B.A. with Honors from the University of Chicago Graduate School of Business and a B.S. in Nursing from Boston University.

There are nine Board Members of the Authority. Currently, there is one vacancy and a successor has not been appointed.

Staff and Advisors

BENSON T. CASWELL, a resident of North Andover, was appointed Executive Director of the Authority on April 9, 2002, and is responsible for the management of the Authority’s affairs. From 1992 through 2002, Mr. Caswell worked for Ponder & Co. in Chicago where he was a Senior Vice President. From 1987 through 1992, he was Vice President of Ziegler Securities, Chicago, Illinois. From 1983 through 1986, he was an attorney with Gardner, Carton & Douglas. Mr. Caswell holds a Juris Doctor from the University of Chicago, an MBA from Lehigh University and a BS from the University of Maine.

Edwards Angell Palmer & Dodge LLP, attorneys of Boston, Massachusetts, are serving as Bond Counsel to the Authority and will submit their approving opinion with regard to the legality of the Bonds as provided by the Agreement in substantially the form attached hereto as Appendix D.

The Act provides that the Authority may employ such other counsel, engineers, architects, accountants, construction and financial experts, or others as the Authority deems necessary.

Powers of the Authority

Under the Act, the Authority is authorized and empowered, among other things, directly or by and through a participating institution for higher education, a participating school for the handicapped, a participating hospital or hospital affiliate, a participating nursing home or a participating cultural institution as its agent, to acquire real and personal property and to take title thereto in its own name or in the name of one or more participants as its agent; to construct, reconstruct, remodel, maintain, manage, enlarge, alter, add to, repair, operate, lease, as lessee or lessor, and regulate any project; to enter into contracts for any or all of such purposes, or for the management and operation of a project; to issue bonds, bond anticipation notes and other obligations, and to fund or refund the same; to fix and revise from time to time and charge and collect rates, rents, fees and charges for the use of and for the services furnished or to be furnished by a project or any portion thereof and to enter into contracts in respect thereof; to establish rules and regulations for the use of a project or any portion thereof; to receive and accept from any public agency loans or grants for or in the aid of the construction of a project or any portion thereof; to mortgage any project and the site thereof for the benefit of the holders of revenue bonds issued to finance such projects; to make loans to any participant for the cost of a project or to refund outstanding obligations, mortgages or advances issued, made or given by such participant for the cost of a project; to charge participants its administrative costs and expenses incurred; to acquire any federally guaranteed security and to pledge or use such security to secure or provide for the repayment of its bonds; and to do all things necessary or convenient to carry out the purposes of the Act. Additionally, the Authority may undertake a joint project or projects for two or more participants.

Indebtedness of the Authority

The Authority has heretofore authorized and issued certain series of its revenue bonds for public and private colleges and universities, and private hospitals and their affiliates, community providers, cultural institutions, schools for the handicapped and nursing homes in the Commonwealth. Each series of revenue bonds has been a special obligation of the Authority.

The Authority expects to enter into separate agreements with eligible institutions in the Commonwealth for the purpose of financing projects for such institutions. Each series of bonds issued by the Authority constitutes a separate obligation of the borrowing institution for such series, and the general funds of the Authority are not pledged to any bonds or notes.

THE BONDS

Description of the Bonds

The Bonds will be dated their date of delivery and will bear interest from such date, payable on October 1, 2007 and on each October 1 and April 1 thereafter. The Bonds will mature on the dates and bear interest at the rate set forth on the cover page hereof. Interest on the Bonds will be calculated on the basis of twelve thirty-day months.

6

Subject to the provisions discussed under “Book-Entry-Only System” below, the Bonds are issuable as fully registered bonds without coupons in the minimum denomination of $5,000 or any multiple thereof. The principal of the Bonds will be payable at the principal corporate trust office of the Trustee, and interest on the Bonds will be paid by check or draft mailed to the registered owner as of the close of business on the fifteenth (15th) day of the month preceding the date on which the interest is to be paid (the “Record Date”), or by wire or bank transfer as provided in the Agreement.

Book-Entry-Only System

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant

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events with respect to the Bonds, such as redemptions, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Institution as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payment of principal or Redemption Price of and interest on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the Institution or the Trustee on payable dates in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, or the Institution, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal or Redemption Price and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Institution or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

Transfer or Exchange of the Bonds. So long as Cede & Co., as nominee for DTC, is the Bondowner of the Bonds, beneficial ownership interests in the Bonds may be transferred only through a DTC Participant or Indirect Participant and recorded on the Book-Entry Only System operated by DTC. In the event the Book-Entry Only System is discontinued, the Bonds may be transferred in accordance with the provisions set forth under “Book-Entry-Only System -- Certificated Bonds.”

For every transfer and exchange of the Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto.

THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY BELIEVES TO BE RELIABLE, BUT NONE OF THE AUTHORITY, THE INSTITUTION, THE UNDERWRITERS, OR THE TRUSTEE TAKES RESPONSIBILITY FOR THE ACCURACY THEREOF.

NONE OF THE AUTHORITY, THE INSTITUTION, THE TRUSTEE, OR THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DIRECT PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS, OR BENEFICIAL OWNERS.

SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDOWNERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS.

Certificated Bonds. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. In addition, the Authority may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interests of the Beneficial Owners of the Bonds. If for either reason the Book-Entry-Only System

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is discontinued, bond certificates will be delivered as described in the Agreement and the Beneficial Owner, upon registration of certificates held in the Beneficial Owner's name, will become the Bondowner. Thereafter, the Bonds may be exchanged for an equal aggregate principal amount of the Bonds in authorized denominations and of the same maturity, upon surrender thereof at the principal corporate trust office of the Trustee. The transfer of any Bond may be registered on the books maintained by the Trustee for such purpose only upon assignment in form satisfactory to the Trustee. For every exchange or registration of transfer of the Bonds, the Authority and the Trustee may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge may be made to the Bondowner for any exchange or registration of transfer of the Bonds. The Trustee will not be required to transfer or exchange any Bond during the notice period preceding any redemption if such Bond (or any part thereof) is eligible to be selected or has been selected for redemption.

Redemption of the Bonds

Sinking Fund Installments and Mandatory Redemption. The Bonds maturing October 1, 2032 (to be selected as described under “Selection of Bonds” below) shall be redeemed at their principal amounts without premium, plus accrued interest to the redemption date, on October 1 of each of the years and in the amounts as follows:

Year Amount Year Amount

2028 $6,915,000 2031 $8,030,000

2029 7,270,000 2032† 8,445,000

2030 7,640,000 _______________† Final Maturity.

The Bonds maturing October 1, 2037 (to be selected as described under “Selection of Bonds” below) shall be redeemed at their principal amounts without premium, plus accrued interest to the redemption date, on October 1 of each of the years and in the amounts as follows:

Year Amount Year Amount

2033 $8,875,000 2036 $10,315,000

2034 9,330,000 2037† 10,840,000

2035 9,810,000 _______________† Final Maturity.

Optional Redemption of the Bonds. The Bonds (except Bonds maturing on or before October 1, 2017, which are not subject to redemption prior to maturity unless redeemed by special redemption), are redeemable prior to maturity on or after October 1, 2017 at their principal amounts without premium, plus accrued interest to the redemption date, at the option of the Authority with the written consent of the Institution or by the written direction of the Institution to the Authority and the Trustee. Such redemption shall be in accordance with the terms of the Bonds, as a whole or in part at any time, in such order of maturity or sinking fund installments as directed by the Institution (provided that, if less than all of the Bonds outstanding of any maturity and interest rate shall be called for redemption, the Bonds to be so redeemed shall be selected as described under “Selection of Bonds” below).

Special Redemption. If excess moneys in the Project Fund or proceeds of a casualty to or taking of the Project are transferred to the Redemption Fund pursuant to the Agreement, such moneys (and earnings thereon) shall be used to redeem Bonds within one (1) year, except to the extent previously used to purchase Bonds or transferred to the Debt Service Fund. The Bonds are subject to special redemption as a whole or in part at any time from any moneys so transferred, in such order of maturity or sinking fund installments as directed by the Institution (provided that, if less than all of the Bonds outstanding of any maturity and interest rate shall be called for redemption, the Bonds to be so redeemed shall be selected as described under “Selection of Bonds” below), at their principal

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amounts without premium, plus accrued interest to the redemption date. If the amount available in the Redemption Fund to redeem Bonds at any time is less than $50,000, the Trustee may, and upon written direction of the Institution shall, transfer it to the Debt Service Fund for credit against deposits otherwise required to be made therein with respect to principal instead of calling Bonds for redemption.

Purchase of Bonds. The Institution may purchase Bonds of any maturity and interest rate and credit them against the principal payment for Bonds of such maturity and interest rate or, as the case may be, any sinking fund installment for Bonds of such maturity and interest rate at the principal amount or applicable redemption price, as the case may be, by delivering them to the Trustee for cancellation at least sixty (60) days before the principal payment date or sinking fund installment date.

Selection of Bonds. If less than all of the outstanding Bonds of any maturity and interest rate are to be called for redemption, the Bonds of that maturity (or portions thereof) and interest rate to be redeemed will be selected by the Trustee by lot or in any customary manner as determined by the Trustee, provided that any portions of Bonds not selected for redemption shall remain in authorized denominations; provided further that for so long as CEDE & CO., as nominee of The Depository Trust Company (“DTC”), is the Registered Owner, the particular Bonds or portions thereof to be redeemed within a maturity shall be selected by lot by DTC, in such manner as DTC may determine.

Notice of Redemption and Other Notices. So long as DTC or its nominee is the Bondowner, the Authority and the Trustee will recognize DTC or its nominee as the Bondowner for all purposes, including notices and voting. Conveyance of Notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect Participants, and by DTC Participants and Indirect Participants to Beneficial Owners, will be governed by arrangements among them, subject to any statutory and regulatory requirements which may be in effect from time to time.

When Bonds are to be redeemed, the Trustee shall give notice in the name of the Authority, which notice shall identify the Bonds to be redeemed, state the date fixed for redemption and state that such Bonds will be redeemed at the corporate trust office of the Trustee. The notice shall further state that on such date there shall become due and payable upon each Bond to be redeemed the redemption price thereof, together with interest accrued to the redemption date, and that moneys therefor having been deposited with the Trustee, from and after such date, interest thereon shall cease to accrue. The Trustee shall mail the redemption notice not more than forty-five (45) nor less than thirty (30) days prior to the date fixed for redemption, to the registered owners of any Bonds which are to be redeemed, at their addresses shown on the registration books maintained by the Trustee, and to the principal office of each of the managing underwriters of the Bonds. Failure to mail notice to a particular Bondowner, or any defect in the notice to such Bondowner, shall not affect the redemption of any other Bond.

Acceleration

The Trustee may declare all of the Bonds immediately due and payable prior to maturity at par, plus accrued interest, upon the occurrence of an Event of Default under the Agreement. See Appendix C - “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE LOAN AND TRUST AGREEMENT” under the heading “Remedies for Events of Default.”

THE PROJECT

The Project consists of the refinancing of approximately $80,820,000 of outstanding indebtedness and approximately $92,690,000 for new projects. The new projects include approximately $52,690,000 for equipment purchases, building renovations, online course development and other budgeted capital expenditures at the Institution’s existing facilities and approximately $40,000,000 to acquire and renovate additional real property and pay for campus master planning expenses.

The Institution has received all governmental approvals necessary for development of the Project, except those ministerial permits, licenses and approvals that are ordinarily and customarily granted only when and as construction drawings are finalized, construction contracts are awarded, and construction work is mobilized and undertaken. For further information, see Appendix A -- “LETTER FROM THE INSTITUTION -- The Project.”

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PLAN OF FINANCE

Proceeds of the Bonds will be used to: (i) pay on or about the date of issuance of the Bonds the Institution’s Prior Loan with Bank of America, N.A used to finance or refinance a portion of the Project, (ii) refund the Institution’s Prior Bonds used to finance or refinance a portion of the Project; (iii) pay or reimburse a portion of the costs of the Project and (iv) pay certain costs of issuing the Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein. The Prior Bonds will be redeemed in accordance with applicable notice requirements within 90 days after the date of issuance of the Bonds.

See “VERIFICATION OF MATHEMATICAL ACCURACY” herein.

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DEBT SERVICE REQUIREMENTS

The following table sets forth, for each respective year ending May 31, the amounts required to be made available by the Institution in such year for payment of the principal of or sinking fund installments on the Bonds, interest on the Bonds, and total debt service on the Bonds.

Year Ending May 31,

Principal or Sinking Fund Installments

Interest

Total Debt Service on Bonds

2008 - $ 5,466,563 $ 5,466,563 2009 $ 2,720,000 8,393,493 11,113,493 2010 2,830,000 8,285,608 11,115,608 2011 2,940,000 8,171,623 11,111,623 2012 3,060,000 8,051,623 11,111,623 2013 3,190,000 7,925,028 11,115,028 2014 3,320,000 7,790,695 11,110,695 2015 3,470,000 7,643,429 11,113,429 2016 3,635,000 7,477,626 11,112,626 2017 3,815,000 7,297,964 11,112,964 2018 4,000,000 7,112,304 11,112,304 2019 4,200,000 6,914,444 11,114,444 2020 4,410,000 6,701,978 11,111,978 2021 4,635,000 6,479,075 11,114,075 2022 4,870,000 6,242,500 11,112,500 2023 5,120,000 5,992,750 11,112,750 2024 5,385,000 5,730,125 11,115,125 2025 5,660,000 5,454,000 11,114,000 2026 5,950,000 5,163,750 11,113,750 2027 6,255,000 4,858,625 11,113,625 2028 6,575,000 4,537,875 11,112,875 2029 6,915,000 4,200,625 11,115,625 2030 7,270,000 3,846,000 11,116,000 2031 7,640,000 3,473,250 11,113,250 2032 8,030,000 3,081,500 11,111,500 2033 8,445,000 2,669,625 11,114,625 2034 8,875,000 2,236,625 11,111,625 2035 9,330,000 1,781,500 11,111,500 2036 9,810,000 1,303,000 11,113,000 2037 10,315,000 799,875 11,114,875 2038 10,840,000 271,000 11,111,000

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ESTIMATEDSOURCES AND USES OF FUNDS

The proceeds from the sale of the Bonds are expected to be applied as follows:

Sources of Funds

Principal amount of the Bonds $173,510,000

Original issue premium i 4,504,966

Total sources of funds $178,014,966

Uses of Funds

Deposit with Bank of America, N.A. for Repayment of Prior Loan $ 9,816,512

Deposit with trustees for Prior Bonds 72,610,864

Deposit to Project Fund 94,351,662

Costs of issuance (including Underwriters’ discount) i 1,235,928

Total uses of funds $178,014,966

BONDOWNERS’ RISKS Payment of Debt Service The principal of, redemption premium, if any, and interest on the Bonds are payable solely from the amounts paid by the Institution to the Authority under the Agreement. No representation or assurance can be made that revenues will be realized by the Institution in the amounts necessary to make payments at the times and in the amounts sufficient to pay the debt service on the Bonds. Future revenues and expenses of the Institution will be affected by events and conditions relating generally to, among other things, demand for the Institution’s educational services, the ability of the Institution to provide the required educational services, management capabilities, the Institution’s ability to control expenses, competition, costs, legislation, governmental regulation and developments affecting the federal or state tax-exempt status of non-profit organizations. Unanticipated events and circumstances may occur which cause variations from the Institution's expectations. Enforceability of Remedies Generally The remedies granted to the Trustee or the owners of the Bonds upon an Event of Default under the Agreement may be dependent upon judicial actions which are often subject to discretion and delay. Under existing law, the remedies specified in the Agreement may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the provisions of the Agreement by limitations imposed by state and federal laws, rulings and decisions affecting equitable remedies regardless of whether enforceability is sought in a proceeding at law or in equity and by bankruptcy, reorganization, insolvency, receivership or other similar laws affecting the rights of creditors generally. No Redemption Upon Loss of Tax Exemption As described under “TAX EXEMPTION” herein, non-compliance with certain requirements of the Internal Revenue Code of 1986, as amended, could cause interest on the Bonds to be included in gross income for federal income tax purposes, retroactive to the date of issuance of the Bonds. The Bonds are not required to be redeemed and the interest rates on the Bonds will not be changed in the event interest thereon is determined to be includable in gross income for federal income tax purposes. No provision has been made to compensate Bondowners for federal income

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taxes, interest and/or penalties which may be assessed in connection with any such tax liability or such determination or for any other loss or any diminution of gain which may occur.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Bonds or to any decision to purchase, hold or sell the Bonds and the Authority will not provide any such information. The Institution has undertaken all responsibilities for any continuing disclosure to owners of the Bonds as described below, and the Authority shall have no liability to the owners of the Bonds or any other person with respect to Securities and Exchange Commission Rule 15c2-12.

The Institution has covenanted for the benefit of holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the Institution (the “Annual Report”) by not later than 180 days after the end of each of the Institution’s fiscal years and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and the notices of material events will be filed by or on behalf of the Institution with each Nationally Recognized Municipal Securities Information Repository and with the State Repository, if any. These covenants have been made in order to assist the Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The Institution is not currently able to confirm that each prior annual report under its prior continuing disclosure agreements was made on a timely basis. However, it is the policy of the Institution to ensure that all such filings are made timely.

On the date of delivery of the Bonds, the Institution and the Trustee will enter into the Continuing Disclosure Agreement substantially in the form attached hereto as Appendix E - “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

TAX EXEMPTION

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income.

Bond Counsel is also of the opinion that, under existing law, interest on the Bonds and any profit on the sale of the Bonds are exempt from Massachusetts personal income taxes and that the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel has not opined as to other Massachusetts tax consequences arising with respect to the Bonds. Prospective Bondowners should be aware, however, that the Bonds are included in the measure of Massachusetts estate and inheritance taxes, and the Bonds and the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond Counsel has not opined as to the taxability of the Bonds or the income therefrom under the laws of any state other than Massachusetts. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D hereto.

Prospective holders to the Bonds should be aware that the statutory framework on which the exemptions from Massachusetts personal income taxes and from Massachusetts personal property taxes described above are based is similar to that at issue in Department of Revenue of Kentucky v. Davis, 197 S.W. 3d 557 (Ky. App. 2006), cert. granted (May 21, 2007), in which the Kentucky court held that a statute which provided more favorable income tax treatment for holders of bonds issued by Kentucky issuers than for holders of out-of-state municipal bonds violated the Commerce Clause of the United States Constitution. Should the United States Supreme Court affirm the holding of the Kentucky court, subsequent Massachusetts judicial decisions and/or legislation designed to ensure the constitutionality of Massachusetts tax law could, among other alternatives, adversely affect the Massachusetts tax exemption of outstanding bonds, including the Bonds, to the extent constitutionally permissible, or result in the exemption from Massachusetts income tax of interest on non-Massachusetts municipal bonds, either of which could affect the market price of the Bonds.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the

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difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondowners should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

Bonds purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be paid at maturity of such Bonds, or, in some cases, at the earlier redemption date of such Bonds ("Premium Bonds"), will be treated as having amortizable bond premium for federal income tax purposes and Massachusetts personal income tax purposes. No deduction is allowable for the amortizable bond premium in the case of obligations, such as the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a holder’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such holder. Holders of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The Authority and the Institution have covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these covenants. Certain requirements and procedures contained or referred to in the Agreement and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Further, no assurance can be given that pending or future legislation, including amendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or any regulatory or administrative development with respect to existing law, will not adversely affect the value of, or the tax status of interest on, the Bonds. Prospective Bondowners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondowner’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondowner or the Bondowner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondowners should consult with their own tax advisors with respect to such consequences.

VERIFICATION OF MATHEMATICAL ACCURACY

Causey, Demgen & Moore, Inc., a firm of independent accountants will deliver to the Authority on or before the date of issuance of the Bonds, its verification report which will verify the accuracy of the mathematical computations supporting the conclusion that the maturing principal and interest on the United States treasury obligations, and other cash deposits to be held in escrow for the benefit and security of the owners of the Prior Bonds are adequate to pay, when due, the principal of, premium and interest on the Prior Bonds.

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FINANCIAL ADVISOR

Public Financial Management, Inc. ("PFM") has served as financial advisor to the Institution for the issuance of the Bonds. PFM is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement. PFM is an independent financial advisory firm and is not engaged in the business of underwriting, trading, or distributing securities.

LEGALITY OF THE BONDS FOR INVESTMENT AND DEPOSIT

The Act provides that the Bonds are securities in which all public officers and public bodies of the Commonwealth and its political subdivisions, all Massachusetts insurance companies, trust companies, savings banks, cooperative banks, banking associations, investment companies, executors, administrators, trustees and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them. The Bonds, under the Act, are securities which may properly and legally be deposited with and received by any Commonwealth or municipal officer or any agency or political subdivision of the Commonwealth for any purpose for which the deposit of bonds or obligations of the Commonwealth is now or may hereafter be authorized by law.

RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. (“S&P”) have assigned ratings of “A2” and “A+,” respectively, to the Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: Moody’s, 99 Church Street, New York, New York, 10007, and S&P, 55 Water Street, New York, New York, 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own.

The above ratings are not recommendations to buy, sell or own the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any or both ratings may have an adverse effect on the market price of the Bonds.

COMMONWEALTH NOT LIABLE ON THE BONDS

The Bonds shall not be deemed to constitute a debt or liability of the Commonwealth or any political subdivision thereof, or a pledge of the faith and credit of the Commonwealth or any such political subdivision, but shall be payable solely from the Revenues derived by the Authority under the Agreement. Neither the faith and credit nor the taxing power of the Commonwealth or of any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds. The Act does not in any way create a so-called moral obligation of the Commonwealth or of any political subdivision thereof to pay debt service on the Bonds in the event of default by the Institution. The Authority does not have taxing power.

UNDERWRITING

The underwriters identified on the cover page hereof (the “Underwriters”) have agreed to purchase the Bonds at a price equal to the principal amount thereof plus an aggregate premium of $4,504,965.70 and less the underwriting discount of $817,843.65. The Underwriters have agreed to accept delivery and pay for all of the Bonds if any are delivered. The obligation of the Underwriters are subject to certain terms and conditions set forth in the purchase contract. The Institution has agreed to indemnify the Underwriters and the Authority against certain liabilities, including certain liabilities arising under federal and state securities laws. The Underwriters may allow concessions from the public offering price to certain dealers, banks and others. After the initial public offering at the offering price or prices set forth on the cover of this Official Statement, the public offering price or prices may be varied from time to time by the Underwriters.

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LEGAL MATTERS

Certain legal matters incidental to the authorization and issuance of the Bonds by the Authority are subject to the approval of Edwards Angell Palmer & Dodge LLP, Boston, Massachusetts, Bond Counsel, whose opinion approving the validity and tax exempt status of the Bonds will be delivered with the Bonds. A copy of the proposed form of the opinion of Bond Counsel is attached hereto as Appendix D. Certain legal matters will be passed on for the Institution by its counsel, Ropes & Gray LLP, Boston, Massachusetts. Certain legal matters will be passed on for the Underwriters by their counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts.

There is not now pending any litigation restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization, or existence of the Authority, nor the title of the present members or other officers of the Authority to their respective offices is being contested. See Appendix A - “LETTER FROM THE INSTITUTION” with respect to any material litigation affecting the Institution.

MISCELLANEOUS

The references to the Act and the Agreement are brief summaries of certain provisions thereof. Such summaries do not purport to be complete, and reference is made to the Act and the Agreement for full and complete statements of such provisions. The agreements of the Authority with the holders of the Bonds are fully set forth in the Agreement, and neither any advertisement of the Bonds nor this Official Statement is to be construed as constituting an agreement with the Bondowners. So far as any statements are made in this Official Statement involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. Copies of the documents mentioned in this paragraph are on file at the offices of the Authority and of the Trustee.

Information relating to DTC and the book-entry system described herein under the heading “THE BONDS -- Book-Entry-Only System” has been furnished by DTC and is believed to be reliable, but none of the Authority, the Institution or the Underwriters make any representations or warranties whatsoever with respect to such information.

The Authority and the Underwriters have relied on the information contained in Appendix A - “LETTER FROM THE INSTITUTION” and in Appendix B - “FINANCIAL STATEMENTS OF THE INSTITUTION FOR FISCAL YEAR 2005-2006” which includes the audited financial statements of the Institution for the fiscal year ended June 30, 2006 (with comparative summary information for the fiscal year ended June 30, 2005).

While the information contained therein is believed to be reliable, the Authority and the Underwriters make no representations or warranties whatsoever with respect to the information contained therein except, as to the Underwriters, as set forth on the inside cover page hereof.

Appendix C - “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE LOAN AND TRUST AGREEMENT” and Appendix D - “PROPOSED FORM OF BOND COUNSEL OPINION” have been prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority. Appendix E - “FORM OF CONTINUING DISCLOSURE AGREEMENT” has been prepared by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Underwriters.

All appendices are incorporated as an integral part of this Official Statement.

The Institution has reviewed the portions of this Official Statement describing the Institution, The Project Estimated Sources and Uses of Funds, the Plan of Finance and the second paragraph under the heading “Continuing Disclosure,” has furnished Appendix A and Appendix B to this Official Statement, and has approved all such information for use with this Official Statement. At the closing, the Institution will certify that such portions of this Official Statement, except for any projections and opinions contained in such portions, do not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading.

The execution and delivery of this Official Statement by its Executive Director has been duly authorized by the Authority.

MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

By: /s/ Benson T. Caswell Executive Director

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APPENDIX A

The Project Page 1

Background and History Page 1

Educational Mission Page 1

Accreditation and Affiliations Page 3

Governance Page 3

Administration Page 5

Faculty Page 6

Student Enrollment Page 7

Tuition Page 10

Student Financial Aid Page 10

Berklee Media Page 12

Community Outreach Page 12

Strategic Planning Page 12

Financial Matters Page 13

Management’s Discussion of Recent Financial Performance Page 13

Budget Process Page 14

Investments Page 15

Investment Management Page 15

Pension Program Page 16

Plant Assets Page 16

Facilities Page 17

Future Building Plans Page 18

Development and Alumni Relations and Capital Campaign Page 18

Insurance Page 18

Existing Debt Page 18

Litigation Page 18

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July 19, 2007

Massachusetts Health and Educational Facilities Authority 99 Summer Street – Suite 1000 Boston, Massachusetts 02110-1240

Dear Members of the Authority:

We are pleased to submit the following information with respect to Berklee College of Music, Inc. (“Berklee” or the “College”) and the Project. This letter and the information contained herein are submitted to the Massachusetts Health and Educational Facilities Authority (the “Authority”) for inclusion in its Official Statement relating to its Revenue Bonds, Berklee College of Music Issue, Series 2007A (the “Bonds”). Except where otherwise indicated, all references to statistical and financial data refer to the fiscal year ended May 31.

The Project

Proceeds of the Bonds will be used for the following purposes: approximately $52.7 million for payment of, or reimbursement to the College of internal advances previously made for, equipment purchases, building renovations, online course development and other Board approved capital expenditures and approximately $40 million for acquisition and renovation of real property and campus master planning activities. In addition, proceeds of the Bonds will be used for the repayment of existing debt.

Background and History

Berklee is a private, non-profit, non-sectarian, co-educational institution of higher education chartered under the laws of The Commonwealth of Massachusetts. The College is the successor to a proprietary institution originally known as Schillinger House that was founded in 1945 by Lawrence Berk to institute a program in music education that emphasized techniques for composing, performing, teaching, and appreciating 20th century music. Fewer than 50 students were enrolled in 1946, but the College grew quickly, becoming known as a jazz school. The name Berklee School of Music was adopted in 1955, and the school was incorporated first as a proprietary organization in 1959 and subsequently as a non-profit institution in 1961. The College acquired authority to grant the degree of Bachelor of Music in 1963 by merging with the Malkin Conservatory of Music. In 1967, Berklee was reincorporated as a Massachusetts non-profit corporation that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code and that received all of the assets of the former Berklee School of Music. In 1969, the College’s name was changed to Berklee College of Music, Inc. The College received initial accreditation from the New England Association of Schools and Colleges in 1973 and has received ten-year accreditations in each succeeding decade. Berklee completed its last accreditation in 2003.

Berklee had an enrollment of 3,894 students as of September 2006. It is the world’s largest degree-granting institution that is focused on contemporary music and dedicated primarily to the education of career musicians as composers, performers, music educators, engineers, producers, teachers as well as for careers in music therapy and music business management.

Educational Mission

Berklee’s educational mission is to educate, train, and develop students to excel in music as a career. The contemporary music field is increasingly multi-faceted. Jazz, pop, and rock styles in many forms abound. Electronic and synthesized music represent new and growing fields. Much of today’s music is produced in a studio setting,

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using increasingly complex music technology. Berklee students are ideally positioned to take advantage of this growing industry.

The College’s administration believes it is desirable for a student with career objectives in music to undertake a study program that concentrates upon practical musicianship, the actual production of contemporary music, and methods of analysis and synthesis that give a stylistic perspective and an understanding of the evolution of rhythmic, melodic, and harmonic principles. At Berklee, accepted students have established skills as players or singers; many entering students already have other degrees and professional experience.

Programs of Study and Degrees

Classes in music theory are combined with an intense program of ensemble performance and composition-arranging workshops that provide the opportunity for students to play and hear their works in practical laboratory sessions. Berklee’s multi-level elective ensemble program offers more than 65 different types of ensembles. More than 285 playing groups are in rehearsal each week at Berklee. These range in style from traditional-style concert bands, chamber ensembles and choirs, to large and small ensembles playing music from the jazz, fusion and blues idioms to pop, rock, and Latin. The playing and/or singing experience includes training in “lead” playing, section playing, and improvisation playing in mixed instrumental-vocal groups, mixing acoustic with electronic and synthesized performance, and playing both live and studio sessions. Much of this intense musical activity culminates in Berklee’s series of student concerts and recitals. More than 1,000 concerts and recitals are presented annually in the College’s performance facilities.

Berklee prepares eligible students for careers as instrumentalists, writers, arrangers, composers, engineers, producers, and teachers as well as for careers in music therapy and music business management. Berklee offers four-year programs leading to the degree of Bachelor of Music or the diploma in Professional Music. The Bachelor of Music program combines general education courses with the study of music and requires 120 credits for completion, as compared to the diploma program, which is an all-music program and only requires 96 credits. In either program, students may select a major in performance, commercial music/production, songwriting, composition, jazz composition, professional music, film scoring, music synthesis, or music production and engineering. Bachelor of Music degree candidates may also major in music therapy, music business management, and music education or may undertake a five-year dual major combining other majors. Currently, approximately 88% of the student body is enrolled in the degree program, an increase from approximately 83% five years ago and 75% eight years ago.

Berklee offers several programs beyond the traditional two-semester calendar. In the summer, both 12-week and five-week sessions are offered. The 12-week for-credit program enables continuing enrolled students to complete a full semester on either a full-time or part-time basis in the summer. The five-week session, focusing on performance skills, is not-for-credit and is designed to give primarily high school students and prospective applicants a brief Berklee experience. The College estimates that approximately 35% of the five-week program participants eventually matriculate as full-time students. The College also offers workshops led by Berklee faculty in California and abroad in such countries as Argentina, Italy, Germany, Greece, Scotland, and Spain in such areas as theory, improvisation, instrumental and ensemble skills, voice, and music synthesis. Berklee’s on-campus summer menu also includes the International Musicians’ English Language Institute (“IMELI”), workshops for guitar, voice, songwriting, and strings, and professional development opportunities for teachers already in the classroom. A significant number of participants from these workshops have subsequently enrolled as full-time students at Berklee.

Technology

To help accomplish its educational mission, Berklee has integrated technology into its educational programs, facility design, and infrastructure. As advances in technology have directly affected contemporary music in both production and distribution, Berklee has taken a leadership role in how it has integrated technology and in its commitment to preparing students to be successful professionals through their personal mastery of technology. For example, Berklee has installed a broad array of equipment used in modern music instruction and production. The recording complex consists of more than a dozen studio/control room configurations including state-of-the-art digital recording consoles featuring automatic mixing, digital recording, and video synchronization capabilities. The College maintains multiple laboratories for music synthesis studies. These facilities contain hundreds of the latest Musical Instrument Digital Interface (“MIDI”)-equipped synthesizers, sound modules, digital signal processors,

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mixers and computers including hardware and software from leading musical instrument and software companies. Berklee has fully equipped two floors in a recently renovated facility for film scoring. Berklee also maintains specialized technology-based facilities for music writing, education, and performance as well as general access labs that support student learning at all levels.

The College has connected its teaching and learning facilities with a high-speed fiber optic-based network using a multiple gigabit Ethernet backbone and provides both wired and wireless connectivity across the campus, including all classroom and student dorm rooms to provide wider electronic access to Berklee’s music learning materials. The College provides students with e-mail capability, web site storage space, and access to the Internet from both on- and off-campus, to provide access to resources available outside the College. Berklee also provides video teleconferencing to allow for two-way interactive learning experiences with teachers around the world. The College is connected to the Internet2 Consortium to provide high-speed connectivity to other educational institutions to further provide exciting new educational opportunities for students. Berklee has created online learning tools at www.berkleemusic.com for its extension school, for on-campus students to enhance their in-class interaction with teachers and for expansion of Berklee’s outreach to new audiences around the world.

Accreditation and Affiliations

Berklee is accredited by the New England Association of Schools and Colleges, Inc. The College’s music education program is accredited by The Commonwealth of Massachusetts Department of Education. The Music Therapy program is accredited by the National Association for Music Therapy. The College is a member of the International Association of Jazz Educators, the National Association of Music Manufacturers, the Association of Independent Colleges and Universities in Massachusetts, the Music Educators National Conference, the National Association of Independent Colleges and Universities and the National Association of College and University Business Officers.

The College has established curriculum transfer arrangements whereby students completing two-year programs at other colleges may transfer to Berklee. These arrangements exist with Fullerton College in California, Selkirk College in British Columbia, Grant MacEwan College in Alberta, Cuyahoga Community College in Cleveland, and Senzoku Gakuen College in Japan. In addition, the College is a member of the Pro-Arts Consortium of six area arts schools. This program provides for cross-registration of students on a full-credit basis, as well as other shared activities. Berklee is also a participant in the Boston Consortium, a group of 14 major Boston-area institutions involved in a number of shared administrative services.

Berklee has organized the Berklee International Network, which is an organization of music schools around the world. The current members, in addition to Berklee, are L’Aula of the Conservatori del Liceu, Barcelona, Spain; Rimon School of Jazz and Contemporary Music, Ramat Hasharon, Israel; Philippos Nakas Conservatory, Athens, Greece; American School of Modern Music, Paris, France; Helsinki Pop & Jazz Conservatory, Helsinki, Finland; Jazz & Rock Schule, Freiburg, Germany; Escuela de Música Contemporánea, Buenos Aires, Argentina; International College of Music-Malaysia, Kuala Lumpur, Malaysia; Koyo Conservatoire, Kobe, Japan; PAN School of Music, Tokyo, Japan; Seoul Jazz Academy, Seoul, Korea; Conservatorio Souza Lima, Sao Paulo, Brazil; and Academia de Musica Fermatta, San Angel, Mexico.

Several of these institutions are also involved in curriculum transfer arrangements, while two offer semester abroad programs for Berklee students. This network aims to advance contemporary music education internationally by providing scholarships, by arranging special programs involving multiple member schools, and by coordinating joint marketing activities.

Governance

The College is governed by a 37 member Board of Trustees (the “Board”). The Board usually meets four times a year, in October, December, February, and June. The Executive Committee meets three times per year between meetings of the full Board. Other Board committees including the Finance and Budget Committee, Audit and Fiscal Controls Committee, Investment Committee, Institutional Advancement Committee, Committee on Membership, Continuing Education/Berkleemusic Committee, Campus Planning Committee, Academic Affairs Committee, and Student Affairs Committee, have regularly scheduled meetings throughout the year. Trustees of the Board may serve

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no more than three consecutive three-year terms. The President’s Advisory Council is comprised of approximately 30 individuals who provide specialized expertise, a minimum donation and meet twice a year.

The current members of the Board and the principal business or professional affiliation of each are as follows.

Trustees

Roger H. Brown* President, Berklee College of Music

David C. Abrams* Founder and President, Abrams Capital, LLC

Luis Alvarez* Vice President, Mendez & Company, Inc.

Eduardo “Teddy” Bautista Garcia President, Spanish Society of Authors, Composers, and Publishers

Vivian C. Beard* President, Vivian Male Productions

Ernie Boch, Jr. CEO and President, Boch Automotive Enterprises

Pat Casale* Senior Vice President (retired), AOL Time Warner

David Clem Managing Director, Lyme Properties

John Connaughton Managing Director, Bain Capital, LLC

Ronald A. Crutcher President, Wheaton College

Jeff Davis* Chief Investment Officer, Lee Munder Capital Group

John Doelp Senior Vice President, A&R Operations, Columbia Records

Michael W. Dreese CEO, Newbury Comics, Inc.

Michael R. Eisenson* Managing Director and CEO, Charlesbank Capital Partners, LLC

Michael Friedman President and CEO, Purdue Pharma LP

Catherine Goldwyn Founder and Executive Director, Sound Art

Peter Gotcher Independent Investor, Co-founder of DigiDesign

Lisa Hearns Berklee New York Alumni Chapter Coordinator; Performer

Elliott D. Hillback* Senior Vice President, Corporate Affairs, Genzyme

Charles Hirschhorn Revenue Frontier, LLC

William A. Holodnak* President, J. Robert Scott, Division of Fidelity Investments

Steven H. Holtzman* Chairman and CEO, Infinity Pharmaceuticals, Inc.

Sara Lawrence-Lightfoot* Professor, Emily Hargroves Fisher Endowed Chair, Harvard Graduate School of Education

John L. Luther Chairman and CEO, Dunkin’ Brands, Inc.

William J. Lynch III President, William J. Lynch and Associates

Allan T. McLean* Vice President, Lynch Associates

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Eli H. Newberger, M.D. Physician; founding member of the New Black Eagle Jazz Band

James J. Pallotta President, Tudor Investment Corporation

Isabel Pisano Business Strategy, Oracle Corporation

Phil Ramone Record Producer/Composer, Phil Ramone, Inc

Alan D. Reese* Executive Vice President, Corporate Operations, Deutsche Bank Berkshire Mortgage

Carmichael S. Roberts, Jr. Co-Founder and CEO, WMR Biomedical, Inc.

Rhoda Sapers Retired Nursing Administrator

Jeff Shames* Executive in Residence MIT Sloan School of Management

Janet Marie Smith Senior Vice President of Planning and Development, Boston Red Sox

Bill Whelan Composer, Riverdance

Susan Whitehead Vice Chair, Whitehead Institute

*Executive Committee Members

Administration

The College President, Roger Brown, and other members of the President’s Cabinet are charged with its administration. The President’s Council, the members of which are appointed by the College’s President, includes: the Senior Vice President for Administration and Finance; the Senior Vice President for Academic Affairs; and the Senior Vice President for Institutional Advancement, as well as approximately 30 other senior academic and administrative leaders.

The following are senior members of the College’s administration.

Roger H. Brown, President. Mr. Brown, age 51, assumed the presidency of Berklee on June 1, 2004, succeeding Lee Eliot Berk.

Mr. Brown co-founded Bright Horizons Family Solutions (“Bright Horizons”) in 1986 with his wife Linda Mason and served as its Chief Executive Officer until January 2002. Prior to 1986, he was Co-Director of the Save the Children relief and development effort in Sudan, and he has worked on the border of Thailand with Cambodian refugees for CARE and UNICEF. Mr. Brown co-authored the book Rice, Rivalry, and Politics, which examined the management of emergency relief efforts. In addition, Mr. Brown served as a management consultant for Bain and Company.

Mr. Brown was also one of the founders of The Bright Horizons Foundation for Children, which aids nonprofit agencies that work with children who are at risk in communities where Bright Horizons employees live and work. In addition, he co-founded the Horizons Initiative, a Boston-based organization that serves the needs of homeless children throughout the Boston area.

Mr. Brown was the recipient of the 1999 Caring Corporation Award from the Child Care Action Campaign in recognition of his advocacy for better early childhood education. He was honored in 1997 by Working Mother magazine as one of the “25 Friends of the Family,” which recognized men who have made it easier for working parents to raise and nurture children. He was also named the “National Entrepreneur of the Year” in 1996 by Ernst and Young/USA Today, and “Best Entrepreneur” by Businessweek magazine in 1997. Mr. Brown was recently honored by the Chicago Association of Young Children for working to improve the quality of child care and early childhood education.

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He has served on the Governing Board of the National Association for the Education of Young Children (“NAEYC”) and served as chairperson for the NAEYC Commission on Accreditation, charged with reinventing the accreditation process, strengthening it to serve centers and their communities more effectively in the years to come. Mr. Brown is a board member of the Stand for Children organization and The Horizons Initiative.

Mr. Brown is a graduate of the Yale School of Management and Davidson College.

David R. Hornfischer, Senior Vice President for Administration and Finance. Mr. Hornfischer, age 64, serves as the College’s Secretary/Treasurer. In these roles he is the College’s Chief Business Officer overseeing financial and administrative operations of the College and has held this position since November 1983. Prior to joining Berklee in 1983, he was Director of Administrative Services at the Connecticut Junior Republic and Assistant Treasurer and Administrative Computer Systems Coordinator at Amherst College. He was a member of the Commission of Institutions on Higher Education of the New England Association of Schools and Colleges and has served on numerous Association review teams and committees. Mr. Hornfischer is a member of the National Association of College and University Business Officers (“NACUBO”), was a board member of the Eastern Association of College and University Business Officers (“EACUBO”), has chaired professional meetings for both NACUBO and EACUBO, has presented professional papers, and written articles on financial and administrative matters. He received a B.S. degree from Trinity College and an M.B.A degree from the University of Massachusetts, Amherst.

Dr. Lawrence J. Simpson, Senior Vice President for Academic Affairs. Dr. Simpson, age 59, is responsible for Berklee’s four academic divisions (Professional Performance, Professional Writing, Professional Education and Music Technology), international programs, institutional research and assessment, concert operations, special programs such as the 13 five-week summer programs, the library and learning resources, faculty development and faculty relations. Dr. Simpson has held this position since August 2005.

Dr. Simpson is active in the arts and higher education communities and currently serves on the following boards: National Black Arts Festival, New England Foundation for the Arts, Musical Arts Association (The Cleveland Orchestra) and JazzBoston. In addition, he has served as a panelist for the National Endowment for the Arts, Ohio Arts Council, Arts Midwest, State of Michigan’s Council for the Arts, Mid Atlantic Arts Foundation, and Arts International among others. He has also presented at numerous arts and higher education conferences on the role of arts and culture in community.

Dr. Simpson is a graduate of Kent State University, where he received his B.A. degree in Psychology, and the University of Pittsburgh, where he earned M.S. and Ph.D. degrees in Social Psychology.

Deborah Grozen Bieri, Senior Vice President of Institutional Advancement. Ms. Bieri, age 57, has been at Berklee College of Music since September 2005. She joined Berklee as the first Senior Vice President of Institutional Advancement. This position brings together the offices of external affairs, communication, advancement and alumni affairs.

Prior to coming to Berklee, Ms. Bieri spent seven years as Vice President for University Advancement at Clark University in Worcester, Massachusetts. At Clark University, she successfully completed a $100 million capital campaign. Prior to Clark University, she served at the University of Massachusetts Medical Center, the Worcester Foundation for Biomedical Research, Boston University and the Combined Jewish Philanthropies, all in similar senior development and advancement roles. She began her career at Wheelock College.

As the Vice President for Development at the Worcester Foundation for Biomedical Research, Ms. Bieri was responsible for planning and execution of all fundraising. She conducted a $10 million campaign to increase endowment, which was nearly twice the amount raised by any other campaign in the Foundation’s history.

Ms. Bieri graduated with a Bachelors of Science degree from the University of Massachusetts at Amherst.

Faculty

For the academic year 2006-2007, the College employed 222 full-time and 274 part-time faculty. In addition to the full-time faculty, 40 professionals serve as chairs and assistant chairs for the College’s instructional departments in

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addition to teaching. About half the College’s courses are offered by full-time faculty. In the fall of 2006, 92% of the classes had 15 or fewer students. Many Berklee faculty members are concurrently employed as music professionals while others are traditional, academically trained faculty. In the 2006-2007 academic year, 167 full- and part-time faculty held master’s degrees and 48 full- and part-time faculty held doctorate degrees.

The Berklee faculty has been represented by the American Federation of Teachers (“AFT”) since 1986. The faculty has multi-year individual employment contracts with Berklee. There is no tenure system. The current agreement with the Berklee Chapter of AFT is for a four-year term, expiring in November 2009. There have been no labor actions or strikes since 1986. No other employees of the College are represented by labor unions or similar organizations for the purposes of collective bargaining.

The College also offers on-campus resident and visiting artist programs that bring additional music professionals to the College to offer extensive interaction between visiting professionals and the College’s students and faculty.

Student Enrollment

The following table, based on fall semester and summer semester registrations, shows enrollments for the past five years. Full-time enrollment has increased by approximately 12% and total enrollment by approximately 11% over the five-year period. Over the same five year period, summer enrollment has increased by approximately 17%.

Enrollment

Academic Year

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Full-time 3,146 3,487 3,557 3,672 3,521

Part-time 373 312 325 365 373

Total 3,519 3,799 3,882 4,037 3,894

Full-time Equivalent 3,270 3,591 3,665 3,794 3,645

12 Week Summer Program

1,368 1,387 1,399 1,474 1,601

Source: Berklee records

The College also has a five-week summer performance program, which attracts college-age and high school music students and provides an opportunity for potential students to experience the Berklee atmosphere. In 2006, 804 students participated in this program.

The College initially admits students only on a full-time basis. Part-time students are typically taking a reduced course load to accommodate work or performance opportunities or to complete graduation requirements.

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Applications to and matriculations in the full-time undergraduate programs at Berklee over the last five years are shown in the following table.

Combined Freshman/Transfer Academic Year Applications and Enrollment

Academic Year

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Freshman/Transfer

Applications 2,674 2,954 2,828 2,964 3,710

Acceptances 2,080 2,312 2,225 1,703 1,195

Entering Freshman/Transfers

855 1,052 921 861 726

Selectivity 78% 78% 79% 57% 32%

Matriculation Rate 41% 46% 41% 51% 61%

Source: Berklee records

The number of applications among freshman and transfer students has increased by approximately 39% over the five-year period. Following a drop of 136 applications in 2004-2005 compared to the prior year, applications continued to increase to a high of 3,710 in 2006-2007. Over the five year period, selectivity improved from 78% to 32% of applicants in 2006-2007. Enrollment, however, fluctuated materially during this period with a high of 1,052 students enrolling in 2003-2004 compared to a five year low of 726 students enrolling in 2006-2007. Management attributes this volatility to a number of factors. The number of applications among freshman and transfer students has increased by approximately 39% over the five-year period ended 2006-2007. The number of applications as of March 1, 2007 was 3,736, an increase of approximately 4% from the prior year. Over the past three years, the number of applications has increased while the retention rate among upper-semester students has also increased. At the same time, Berklee has intentionally maintained total enrollment in the range of 3,950 to 4,050 students. Accordingly, the size of the freshman class has been decreased to accommodate retention of upper-semester students.

Berklee has a significant number of international students. Enrollment in this area grew in the late 1990s to approximately 40% of total enrollment, representing more than 75 foreign countries. More recently, while the number of international students has remained fairly constant, the percentage of total students who are international has declined to approximately 22% in 2006-2007 due to a higher total student population and world conditions that have made travel and work arrangements for foreign students more difficult.

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The College draws its student body from a broad geographical area within the United States as well as from abroad as shown by the following table:

Geographic Distribution of Student Body

2006-2007

New England 25.1% Mid-Atlantic 15.1% South Atlantic 9.5% Midwest 8.0% West 17.0% Other U.S. 3.0%

Total U.S. 77.7%

Asia 12.0% Western Europe 4.4% South America 1.5% Canada, Mexico (North/Central America and Caribbean)

2.7%

Eastern/Central Europe 0.6% Middle East 0.7% Other 0.4%

Total Outside U.S. 22.3%

Total 100.0%

Source: Berklee records

Berklee’s Office of Admissions has developed a number of programs intended to reach qualified applicants who might otherwise be missed because of the continuing decline in the quality of secondary school music programs. These include admissions representatives attending music educator conferences, targeting growth states for applicant receptions, regular communication with prospective applicants, an admissions newsletter, new brochures, evening phone-a-thons, individual scholarship auditions and interviews at selected music festivals, increased faculty and student involvement in recruitment efforts, an alumni representative program, and a computerized enrollment management system for targeting and tracking applicants. In recent years, increased emphasis has been placed on the College’s Internet presence, utilizing the World Wide Web to enhance domestic and international recruitment, developing web-based marketing techniques (including web-based instruction in basic music skills), and increasing alumni and faculty involvement in the recruitment process. The College’s online school at www.berkleemusic.comis also a source of new on-campus students.

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Tuition

The following table sets forth the tuition and room and board charges for full-time students in the degree program for the fall and spring semesters for the five most recent academic years. Tuition and room and board have increased by approximately 23% over the four-year period ended May 31, 2006. In addition, since 2003, all entering students must purchase a college-supplied Apple computer/software package which cost up to $3,000 in Fall 2006. Tuition for the degree program is approximately $600 more than tuition for the diploma program.

Academic Year Fees

Academic Year

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Tuition $18,290 $19,200 $20,350 $21,790 $23,450

Room and Board $9,790 $10,280 $10,900 $11,690 $12,550

Total $28,080 $29,480 $31,250 $33,480 $36,000

Percentage Increase 5.2% 5.0% 6.0% 7.1% 7.5%

Source: Berklee records

Approximately 20% of Berklee’s students live on-campus. The balance obtain housing in apartments at their own expense largely in the College’s Fenway neighborhood. The tuition rate is below that of other leading private schools of music and music programs within other private colleges. The Trustees have approved an eight percent increase for each of 2007-2008 and 2008-2009.

Berklee also competes with a variety of public institutions and certain for-profit providers of music education. Following are the tuition levels for academic year 2006-2007 at the seven institutions Berklee considers its major private music school competitors for students.

Tuition for Academic Year 2006-2007

College or University Amount

Oberlin College $34,216

School of Music, University of Miami $30,732

Eastman School of Music, University of Rochester $28,320

New England Conservatory of Music $29,000

Ithaca College $26,832

The Juilliard School $25,610

Berklee College of Music $23,450

Source: Web pages of the respective institutions

Student Financial Aid

Approximately 73% of Berklee’s students received some form of financial aid in academic year 2006-2007. In addition to Berklee-funded scholarships and grants, the Berklee financial aid program includes the Federal Title IV

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programs: Supplemental Educational Opportunity Grants (“SEOG”); Perkins Loan; the College Work-Study Program; the Pell Grant Program, the Stafford Subsidized and Unsubsidized Student Loan Programs; and the Parent Loan for Undergraduate Students (the PLUS Program). Berklee participates in Massachusetts state aid programs as well as many other New England state scholarship and/or grant programs and multiple alternative loan programs. The following table provides information about the extent of financial assistance made available to students and parents by Berklee and other sources for the academic years 2003 through 2006. These programs equate to a tuition discount of less than 15%.

Financial Aid Programs

($ in millions)

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Scholarships and Grants

Berklee Scholarships & Grants $8.1 $8.9 $9.5 $11.9 $14.5

PELL Grants $1.2 $1.4 $1.5 $1.4 $1.3

SEOG Grants $0.3 $0.4 $0.5 $0.6 $0.6

State Scholarships $0.2 $0.1 $0.2 $0.2 $0.1

Miscellaneous Outside $1.6 $1.8 $2.6 $1.5 $1.1

Total Scholarships & Grants $11.4 $12.6 $14.3 $15.6 $17.6

Loan Types and Amounts

Perkins Loans (Student) $0.5 $0.7 $0.7 $0.7 $0.7

Stafford Sub & Unsubsidized (GSL- Student)

$6.9 $7.7 $8.2 $8.3 $6.9

PLUS (Parent Loan) $10.5 $9.7 $10.9 $11.2 $7.8

Alternative Loans (Either) $8.0 $16.3 $19.8 $24.7 $23.6

Total All Loans $25.9 $34.4 $39.6 $44.9 $39.0

Berklee Work-Study $1.6 $1.6 $1.6 $1.5 $1.6

Federal Work-Study $0.3 $0.3 $0.4 $0.4 $0.4

Total Work-Study $1.9 $1.9 $2.0 $1.9 $2.0

Total Financial Aid $39.2 $48.9 $55.9 $62.4 $58.6

Source: Berklee records

APPENDIX A

A-12

Berklee Media

Berklee Media is the department of Berklee College of Music responsible for the operation of Berklee Press, the College’s publishing division, and Berkleemusic, the continuing education division of the College. Berkleemusic was established in 2001 as an online music school operating at http://www.berkleemusic.com. Berklee currently offers over 70 online courses and 40 certificate programs through Berkleemusic. These online courses and programs represent a significant asset for Berklee, and the College has invested over $8 million to develop these online materials and to establish Berkleemusic in the marketplace. To date, the College has enrolled over 11,000 online students in Berkleemusic. Revenues for the online school in fiscal year 2007 were $5.4 million, a 50% increase over the prior year. Both Berklee Press and Berkleemusic are cash flow positive, generating operating surpluses for the College.

Community Outreach

Music educators from Berklee are called upon for consultations and educational presentations to school music departments and colleges as well as to professional associations around the world that seek to add contemporary materials to their music programs. In addition, the President’s Office of Community and Governmental Affairs oversees a number of outreach programs, including a Saturday school for middle and high students, a summer youth scholarship program, faculty outreach initiatives, community grants, urban outreach performances, a community service work-study program, a tuition assistance program, a gifts and donations program, and an instrument and equipment donation program.

Strategic Planning

In 2004, the Board approved a ten-year vision for Berklee in 2015 seeking to become the world’s leading institute for contemporary music. Berklee is in the process of implementing a three-year strategic plan for the 2005-2008 period that was formulated following a community-wide process led by a committee of the Board, as part of the 2015 vision development. The core goals of the current strategic plan are to attract diverse and talented students who have a passion for music, improve the student experience outside the classroom, enhance the curriculum, meet immediate needs for improved and expanded classrooms and offices; and ensure that Berklee provides a supportive and inclusive environment.

Implementation of this strategy has included the following specific components: a new program to audition all applicants; the creation of a study abroad program, launched in Athens in fall 2006; a Los Angeles-based summer internship program in which students can earn additional credits; a pilot entering-student advising program to begin in fall 2007; additional real estate to meet immediate space needs; and several other fast-track initiatives. Longer- range initiatives are also underway, including enrollment strategy, curriculum review, campus master planning, and the college’s first capital campaign. As part of the continuing renewal by Berklee’s strategic plan, Management and Trustees are working together to develop further specific plans for the 2009-2011 period.

APPENDIX A

A-13

Financial Matters

The financial statements of the College are prepared on an accrual basis in accordance with U.S. generally accepted accounting principles for educational institutions. The financial statements of the College for the fiscal years ended May 31, 2006 and 2005, together with the report thereon of the College’s independent auditors, KPMG LLP, are included as Appendix B to the Official Statement. The following summary of the College’s unrestricted revenues and expenses for the five fiscal years ended May 31, 2002, 2003, 2004, 2005 and 2006 is derived from the audited statements of unrestricted revenues and expenses for the applicable years.

Operating 2002 2003 2004 2005 2006

Revenues:

Tuition and fees ( net of scholarships ) $56.0 $63.0 $72.3 $79.1 $86.4

Contributions, federal aid, grants, endowment returns, and other

9.4 9.8 9.1 9.3 9.8

Auxiliary enterprises (housing, Berklee Media, other) $10.3 11.4 18.9 19.1 20.9

Total revenues $75.7 $84.2 $100.3 $107.5 $117.1

Net assets released from restrictions 0.7 0.6 0.9 0.7 0.9

Total revenues and net assets released from restrictions $76.4 $84.8 $101.2 $108.2 $118.0

Expenses:

Educational and general $65.2 $71.0 $76.1 $85.9 $93.5

Auxiliary enterprises including Berklee Media startup 11.1 12.1 19.0 18.8 19.9

Total operating expenses $76.3 $83.1 $95.1 $104.7 $113.4

Increase in unrestricted net assets from operations $0.1 $1.7 $6.1 $3.5 $4.6

Nonoperating

Nonoperating, principally investment gains/(losses) $(16.3) $(13.2) $13.1 $5.7 $16.1

Increase/(Decrease) in unrestricted net assets $(16.2) $(11.5) $19.2 $9.2 $20.7

Management’s Discussion of Recent Financial Performance

Overview

During the five years ended 2006, Berklee’s operating indicator (the increase in unrestricted net assets from operations) improved from $0.1 million to $4.6 million and over the same period nonoperating income (primarily investment gains) improved from a loss of $16.3 million to a gain of $16.1 million.

These results generated an increase in net assets from $110.6 million in 2002 to $156.7 million in 2006. Following improvements in the general equity markets from conditions prevailing in 2002 and 2003, as well as reflecting gifts, net assets grew by $10.6 million or 8.9% from 2004 to 2005 and by $26.7 million or 20.6% from 2005 to 2006.

APPENDIX A

A-14

Components of Operating Income and Expenses

Tuition and fees, net of scholarships, are the largest component of operating revenues and represent the primary source of funding for the College’s academic programs. Net tuition and fees revenue increased by $7.3 million, or 9.3%, in 2006 compared to 2005. This change is comprised of an increase in tuition and fees revenues of $9.7 million, or 10.9%, partially offset by an increase in scholarship allowances of $2.4 million, or 22.7%. In 2005, net tuition and fees increased by $6.8 million, or 9.4%, comprised of an increase in tuition and fees of $7.7 million, or 9.5%, partially offset by an increase in scholarship allowances of $0.9 million, or 9.7%. Scholarship awards are presented as a reduction of student tuition and fee revenues. Total scholarships of $9.5 million, $10.5 million, and $12.8 million were awarded to students in 2004, 2005, and 2006, respectively. Over the same three-year period, total educational and general expenses increased to $93.5 million, or by 22.9% from 2004, while auxiliary enterprise expenses increased to $19.9 million, or by 4.7%. Total operating expenses increased by 19.2% to $113.4 million in 2006 compared to 2004. Management attributes the increase in revenues and expenses primarily to support the increase in student enrollment and continue to address strategic priorities. In 2006, Berklee reported a $4.6 million operating surplus after reporting a $3.5 million operating surplus in 2005 and a $6.1 million operating surplus in 2004.

Other Assets and Total Liabilities

Property, plant and equipment at May 31, 2006 was $54.2 million (valued at historical costs, net of accumulated depreciation) and more than seven percent higher than at May 31, 2004. Total liabilities remained relatively constant year-over-year, totaling $109.0, $111.0, and $112.0 million at May 31, 2004, 2005, and 2006, respectively.

Budget Process

The budget process begins in November when the Trustee Budget Committee reviews budget planning within the context of the multi-year expenditure guidelines established by the Board in the prior year. At that time, the current year’s budget projection is updated based on known factors such as enrollment, staff and faculty hiring, planned strategic initiatives and other economic conditions. Each vice president is provided detailed account lists that reflect both prior planning requests and current guidelines. The vice presidents subsequently meet with directors, deans and chairs in their respective areas to review specifics and, as a result of these discussions, each vice president prepares a textual, zero-based justification for each account.

Account justifications for each department are presented at a departmental budget review meeting. The director/dean of each department, as well as the vice president of the corresponding area, attend these budget review meetings. A review of overall operating budgets with senior leadership provides the basis for this presentation.

The capital budget is the result of a broad-based process largely driven by three committees: the Academic Technology Advisory Committee; the Administrative Systems Advisory Committee; and the Campus Planning Committee. The Capital Budget Committee, which includes representatives from each of these committees, weighs each committee’s requests and make decisions regarding the distribution of funds. The budget is reviewed with the Board in March and presented for approval in June.

APPENDIX A

A-15

Investments

Based on an unaudited investment report, the total market value of investments as of May 31, 2007 was $220.0 million, reflecting a 26.1% increase in total investments from May 31, 2006. A total of $166 million of Berklee’s $176 million investment portfolio at May 31, 2006 was unrestricted. Total long-term investments at each of the past six fiscal year-ends were as follows:

Investment Market Value, May 31

($ in millions)

2002 2003 2004 2005 2006 2007*

$127.0 $106.4 $125.7 $139.6 $176.0 $220.0

Source: Berklee records

*Unaudited; includes transfer of approximately $10 million of cash.

Investment Management

Berklee invests its funds in a diversified portfolio designed to produce growth and income, while safeguarding principal. The College’s Board-approved investment policy provides for spending up to a 5% of a trailing three year market value to be used for operations. The Investment Committee meets at least quarterly and retains an independent consultant to monitor performance and to make recommendations as to overall asset allocation and manager selections. The percentage of the College’s investments at market value are summarized as of May 31, 2007 as follows:

Domestic and International Equity 60%

Fixed Income Funds 9%

Venture Capital/Private Equity 10%

Hedge Funds 16%

Real Estate 5%

APPENDIX A

A-16

Pension Program

The College sponsors a noncontributory, defined-benefit pension plan that covers substantially all full-time employees of the College. As of the pension financial accounting (FASB 132) measurement date of February 28, 2006, total assets in the plan equaled $37.0 million. As of the same date, the projected benefit obligation was $48.9 million and the accumulated benefit obligation was $37.4 million. An independent actuarial consulting firm is retained to provide plan oversight and actuarial valuations in accordance with applicable laws.

Asset investments are guided by an independent consultant under the direction of the Investment Committee of the Board of Trustees. Plan assets as of February 28, 2007 are $37.7 million and are currently invested in various equity (approximately 60%) and fixed-income (approximately 10%) mutual funds and other alternative strategies (approximately 30%).

In January 2003, the College also began a defined contribution savings program for substantially all full-time and some part-time employees. The College’s contribution matches up to 3% of each full-time employee’s salary and 50% of each eligible part-time employee’s contributions up to a total of 5% of all such contributions in the aggregate. For further information, see note 8 to the audited financial statements included as Appendix B.

Plant Assets

The following table, derived from the audited balance sheets of the College for the last five fiscal years, indicates the book value of plant investment as follows:

Plant Assets

($ in thousands)

2002 2003 2004 2005 2006

Investment in plant

Land $4,401 $4,401 $4,401 $4,401 $4,401

Buildings and improvements $75,310 $77,673 $78,854 $81,313 $85,363

Course Development - $1,263 $2,756 $4,171 $5,001

Furniture and equipment $22,211 $20,559 $20,995 $22,615 $24,105

Library books $903 $991 $1,092 $1,194 $1,312

Vehicles $19 $40 $40 $19 $4

Construction in Progress - - - - $1,856

Total $102,844 $104,927 $108,138 $113,713 $122,042

Less: Accumulated depreciation $51,033 $53,060 $57,670 $62,965 $67,791

Net investment in plant $51,811 $51,867 $50,468 $50,748 $54,251

Source: Berklee records

APPENDIX A

A-17

Facilities

The College’s physical plant consists of eight building complexes owned by Berklee. The following table lists each building, the year of acquisition, approximate square footage, and its principal use.

Owned Space and Acquisition Date

ApproximateSquare Footage Principal Use

1140 Boylston Street (1965)

80,000 Administrative offices, conference facility performance division classrooms and two recital halls

150 Massachusetts Avenue(1972)

240,000 Recording studio complex, film scoring laboratory, 100 instrumental study practice rooms, nine ensemble performance rooms, 12 instrumental studios, library, administrative offices, two small commercial spaces, 30 classrooms, and residence facilities for approximately 450 students

130 Massachusetts Avenue(1982)

20,000 Administrative offices and classrooms

Berklee Performance Center (1974)

37,560 1,223-seat concert hall, classrooms, and ensemble rooms

98 Hemenway Street (1970)

35,000 Residence facilities for approximately 100 students

22 The Fenway (1986)

15,000 Administrative offices, classrooms, and an 82-person classroom/recital hall

264-270 Commonwealth Avenue (1990)

60,000 Three interconnected residence halls for approximately 245 students, a large hall, and practice areas

921-925 Boylston Street (1994)

58,000

Classrooms; guitar and percussion departments; all student affairs departments and student lounge; various administrative departments, including the financial aid, comptroller’s and admissions offices; and a recital hall for about 125.

25 Fordham Road(2000)

20,000 Off-campus practice facility located approximately two miles from campus connected by a subway line and also close to many off-campus students. It contains 55 modular sound-isolated practice rooms for both individual and ensemble performance, a computer lab, and about 6,000 square feet presently unused pending future space planning

1108 Boylston Street (2007)

21,000 Presently held for investment and leased to others. Berklee expects to use one floor in 2008 (20%). Boston Conservatory of Music is major tenant (55%)

Source: Berklee records

The College also leases approximately 83,000 square feet of space in Boston for classrooms and offices and 225 square feet of office space in Los Angeles for fundraising purposes.

APPENDIX A

A-18

Future Building Plans

The College is in the early stages of developing a 10-year campus master plan whose primary goals are to increase campus housing from about 800 beds to about 2,000 beds, improve theatres, and provide for a greater sense of a campus center. The College is currently in the process of reviewing redevelopment options with respect to land it owns at the intersection of Massachusetts Avenue and Boylston Street as well as exploring opportunities within a short walk of this area or on air rights projects that may be developed over the nearby Massachusetts Turnpike.

Development and Alumni Relations and Capital Campaign

In December 2006, the Board voted to launch Berklee’s first capital campaign with a goal of $40 million. In fiscal year 2006, the College received $6.6 million in direct and in-kind contributions. This was twice the level ever raised at Berklee.

The College continues to develop its ties to the music industry, especially in support of Berklee’s technology requirements. In 2006, the College received $214,192 in music industry related equipment, hardware, software and instruments.

Some pledges and gifts for fiscal year 2007 have been received, reflecting the early phases of the capital campaign.

Insurance

The College is a member of the Boston Consortium Risk Management Group and is provided risk management oversight by a shared risk manager and a contracted professional insurance brokerage firm. In addition to other coverage required by law or deemed by the Board, the College currently carries real and personal property insurance written on a replacement cost basis in the amount of approximately $96,000,000 with a $25,000 per occurrence retention.

Existing Debt

As of May 31, 2006, the College’s outstanding long-term indebtedness, all of which was issued through the Authority, was as follows:

Variable Rate Demand Revenue Bonds – Berklee College of Music Issue, Series D, dated July 31, 1997: $18,200,000

Fixed Rate Revenue Bonds – Berklee College of Music Issue, Series E, dated July 30, 1997: $33,915,000

Variable Rate Revenue Bonds – Berklee College of Music, Series F, dated July 22, 2003: $20,000,000

All of the existing bonds will be defeased or repaid with the proceeds of the Bonds (See “Plan of Finance” in the forepart of the Official Statement).

In addition, the College has an uncollateralized bank loan and line of credit with a maximum draw capacity of $19,816,512. The balance outstanding was $9,816,512 as of May 31, 2006 and $14,816,512 as of May 31, 2007. The outstanding balance of the facility upon the issuance of the Bonds is expected to be repaid with the proceeds of the Bonds. The College expects that the line of credit will remain in place after issuance of the Bonds for working capital draws if required.

Litigation

In common with several other area colleges, Berklee is involved in discussions with the Office of the Attorney General concerning its relationship with student loan providers. Management does not believe the subject matter of these discussions will have a material adverse effect on the financial condition of the College. Management is not aware of any litigation pending or threatened wherein any unfavorable decision would adversely affect its ability to

APPENDIX A

A-19

enter into the Agreement and carry out its obligations thereunder or would have a material adverse effect on the financial condition of the College.

***************

This letter and the information contained herein are submitted to the Authority for inclusion in its Official Statement relating to the Bonds. The use of this letter by the Authority in connection with the initial sale of the Bonds, and the execution and delivery thereof by its President and Senior Vice President for Administration and Finance/Secretary-Treasurer have been duly authorized by Berklee College of Music, Inc.

Berklee College of Music, Inc.

By: /s/ Roger H. Brown President

By: /s/ David R. Hornfischer Senior Vice President for Administration and Finance/Secretary-Treasurer

[THIS PAGE INTENTIONALLY LEFT BLANK]

BERKLEE COLLEGE OF MUSIC, INC.

Financial Statements

May 31, 2006 and 2005

(With Independent Auditors’ Report Thereon)

APPENDIX B

[THIS PAGE INTENTIONALLY LEFT BLANK]

Independent Auditors’ Report

The Board of Trustees Berklee College of Music, Inc.:

We have audited the accompanying statements of financial position of Berklee College of Music, Inc. (the College) as of May 31, 2006 and 2005, and the related statements of unrestricted revenues and expenses, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the College’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the College at May 31, 2006 and 2005, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

September 25, 2006

KPMG LLP Telephone 617 988 100099 High Street Fax 617 507 8323Boston, MA 02110-2371 Internet www.us.kpmg.com

KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative.

BERKLEE COLLEGE OF MUSIC, INC.

Statements of Financial Position

May 31, 2006 and 2005

Assets 2006 2005

Cash and cash equivalents $ 20,202,221 21,901,581 Accounts receivable, net (note 6) 330,940 190,024 Contributions receivable (note 7) 931,340 832,628 Other assets (note 8) 13,910,809 19,531,908 Loans receivable, net (note 6) 2,597,208 2,512,832 Deposits with bond trustees (note 5) 569,799 5,621,267 Long-term investments (note 3) 175,953,599 139,624,406 Property, plant, improvements, and equipment, net (note 4) 54,250,934 50,748,381

Total assets $ 268,746,850 240,963,027

Liabilities and Net Assets

Liabilities:Accounts payable and accrued expenses $ 13,391,259 11,480,290 Student deposits and deferred liabilities 15,001,912 14,107,630 Bonds and notes payable (note 5) 81,263,274 83,055,300 Refundable advances – U.S. Government grants 2,382,910 2,341,485

Total liabilities 112,039,355 110,984,705

Commitments and contingencies (note 9)

Net assets:Unrestricted 142,407,660 121,718,674 Temporarily restricted (note 10) 4,348,446 1,682,653 Permanently restricted (note 10) 9,951,389 6,576,995

Total net assets 156,707,495 129,978,322 Total liabilities and net assets $ 268,746,850 240,963,027

See accompanying notes to financial statements.

2

BERKLEE COLLEGE OF MUSIC, INC.

Statements of Unrestricted Revenues and Expenses

Years ended May 31, 2006 and 2005

2006 2005

Operating:Revenues:

Student tuition and fees $ 99,273,048 89,536,065 Less:

Internally funded scholarship aid to students (10,843,202) (8,455,436) Externally funded scholarship aid to students (1,979,839) (1,995,453)

Student tuition and fees, net 86,450,007 79,085,176

Contributions for operations 2,161,562 1,369,304 Federal aid to students 1,106,433 1,018,971 Grants and contracts 223,589 272,501 Investment return authorized for operations (note 3) 3,590,319 5,410,869 Other income 2,639,752 1,172,648 Sales and service of auxiliary enterprises 20,931,849 19,120,420

Total revenues 117,103,511 107,449,889

Net assets released from restrictions 890,182 734,445

Total revenues and net assets released fromrestrictions 117,993,693 108,184,334

Expenses (note 13):Educational and general:

Instruction 52,773,812 48,261,475 Academic support 7,384,782 6,370,139 Student and enrollment services 8,494,587 7,882,670 Institutional support and advancement 24,839,501 23,384,224

Auxiliary enterprises 19,937,835 18,803,978

Total operating expenses 113,430,517 104,702,486

Increase in unrestricted net assets from operations 4,563,176 3,481,848

Nonoperating:Investment return above amounts authorized (note 3) 14,561,238 5,640,930 Gain on sale of Berklee Press licensing rights (note 12) 1,781,380 — Cumulative effect of change in accounting principle (note 4) (431,000) — Contributions of capital assets 214,192 33,960

Total nonoperating income 16,125,810 5,674,890 Increase in unrestricted net assets $ 20,688,986 9,156,738

See accompanying notes to financial statements.

3

BERKLEE COLLEGE OF MUSIC, INC.

Statements of Changes in Net Assets

Years ended May 31, 2006 and 2005

2006 2005

Changes in unrestricted net assets:Total operating revenues $ 117,993,693 108,184,334 Total operating expenses (113,430,517) (104,702,486) Total nonoperating gains, net 16,125,810 5,674,890

Increase in unrestricted net assets 20,688,986 9,156,738

Changes in temporarily restricted net assets:Contributions 1,008,432 1,253,346 Investment return above amounts authorized (note 3) 2,547,543 — Net assets released from restrictions (890,182) (734,445)

Increase in temporarily restrictednet assets 2,665,793 518,901

Changes in permanently restricted net assets:Contributions to endowment 3,374,394 953,498

Increase in permanently restricted net assets 3,374,394 953,498

Increase in net assets 26,729,173 10,629,137

Net assets at beginning of year 129,978,322 119,349,185 Net assets at end of year $ 156,707,495 129,978,322

See accompanying notes to financial statements.

4

BERKLEE COLLEGE OF MUSIC, INC.

Statements of Cash Flows

Years ended May 31, 2006 and 2005

2006 2005

Cash flows from operating activities:Change in net assets $ 26,729,173 10,629,137 Adjustments to reconcile change in net assets to net

cash provided by operating activities:Depreciation and amortization 7,319,886 6,216,491 Realized and unrealized gains on investments, net (18,792,289) (9,480,128) Gifts of equipment (214,192) (33,960) Gain on disposal of fixed assets (3,516) (2,830) Contributions for long-term investment (3,193,909) (889,475) Change in current assets 5,326,092 (1,900,114) Change in current liabilities 2,673,254 4,757,860

Net cash provided by operating activities 19,844,499 9,296,981

Cash flows from investing activities:Decrease in deposits with bond trustees 5,051,468 5,108,989 Disbursements of loans to students (690,741) (728,582) Repayment of loans from students 606,365 547,022 Purchase of property, plant, improvements, and equipment (10,385,103) (6,372,094) Proceeds from sale and maturity of investments 64,526,962 28,472,635 Purchase of investments (82,063,866) (32,914,644)

Net cash used in investing activities (22,954,915) (5,886,674)

Cash flows from financing activities:Payments on long-term debt (11,640,790) (2,859,799) Proceeds from long-term debt 9,816,512 — Contributions for long-term investment 3,193,909 889,475 Increase in refundable advances – U.S. Government grants 41,425 72,428

Net cash provided by (used in) financing activities 1,411,056 (1,897,896)

Net (decrease) increase in cash and cash equivalents (1,699,360) 1,512,411

Cash and cash equivalents, beginning of year 21,901,581 20,389,170 Cash and cash equivalents, end of year $ 20,202,221 21,901,581

Supplemental data:Interest paid $ 3,730,574 3,031,108

See accompanying notes to financial statements.

5

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

6 (Continued)

(1) Background

Berklee College of Music, Inc. (the College) is a nonprofit co-educational institution of higher learning offering a bachelor of music degree as well as a four-year program leading to a professional diploma. Since its founding in 1945, the College has become an international center for the education of career musicians, composers, arrangers, music educators, and other professionals in the world of modern music. In 2003, the College began offering not-for-credit courses online through its Berklee Media Program. In 2005, the College extended its online program to offer for-credit courses.

(2) Summary of Significant Accounting Policies

(a) Basis of Statement Presentation

The accompanying financial statements, which are presented on the accrual basis of accounting, have been prepared to focus on the College as a whole and to present balances and transactions according to the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified as follows:

Permanently restricted net assets – Net assets subject to donor-imposed stipulations that they be maintained permanently by the College. Generally, the donors of these assets permit the College to use all or part of the income earned and capital gains, if any, on related investments for general or specific purposes. Permanently restricted net assets were restricted for use as student scholarships at May 31, 2006 and 2005.

Temporarily restricted net assets – Net assets subject to donor-imposed stipulations that may or will be met by actions of the College and/or the passage of time.

Unrestricted net assets – Net assets not subject to donor-imposed stipulations.

Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulations or law. Expirations of temporary restrictions on net assets, that is, the donor-imposed stipulated purpose has been accomplished and or the stipulated time period has elapsed, are reported as reclassifications between the applicable classes of net assets.

Contributions, including unconditional promises to give, are recognized as revenues in the period received. Contributions and investment income subject to donor-imposed stipulations that are met in the same reporting period are reported as unrestricted support. Promises to give that are scheduled to be received after the balance sheet date are shown as increases in temporarily restricted net assets and are reclassified to unrestricted net assets when the purpose or time restrictions are met. Promises to give subject to donor imposed stipulations that the corpus be maintained permanently are recognized as increases in permanently restricted net assets. Contributions of assets other than cash are recorded at their estimated fair value.

The College reports contributions of land, buildings, or equipment as unrestricted nonoperating support unless the donor places restrictions on their use. Contributions of cash or other assets that

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

7 (Continued)

must be used to acquire long-lived assets are reported as unrestricted nonoperating support provided the long-lived assets are placed in service in the same reporting period; otherwise, the contributions are reported as temporarily restricted support until the assets are acquired and placed in service.

(b) Operations

The statements of unrestricted revenues and expenses report the change in unrestricted net assets from operating and nonoperating activities. Operating revenues consist of those items attributable to the College’s academic programs and auxiliary enterprises. Tuition revenues are reported net of the discount attributable to reductions in the amounts charged to students, whether as unrestricted college financial aid or reductions from endowment funds or government grants awarded to students by the College. Income and gains of the College’s unrestricted investments are reported as nonoperating revenue. Contributions from unrestricted bequests or for the acquisition of capital assets are reported as nonoperating revenue; all other unrestricted contributions are reported as operating revenue.

Expenses associated with the operation and maintenance of college plant assets, excluding interest and depreciation, are allocated based on actual utilization for auxiliary enterprises and square footage utilized by the educational and general functions. Interest and depreciation expenses are allocated on the basis of square footage utilized by all functional categories. Expenses associated with fundraising activities of the College were $1,194,409 and $1,090,221 in 2006 and 2005, respectively, which are included in institutional advancement in the statements of unrestricted revenues and expenses.

(c) Cash and Cash Equivalents

For the purpose of the statements of cash flows, the College considers cash equivalents as investments with maturities at date of purchase of three months or less.

(d) Long-Term Investments

Investments, principally mutual funds, are carried at market value.

The College’s portfolio is managed by outside investment managers who invest according to the investment guidelines established by the Investment Committee of the Board. Investments are stated at market value in the case of marketable securities and at estimated fair value for certain nonmarketable securities. The market value of publicly traded securities is based upon quotes from the principal exchanges on which the security is traded. Nonmarketable securities include alternative investments such as private equity, venture capital, hedge funds, and real estate, which are valued using current estimates of fair value obtained from the general partner or investment manager in the absence of readily determinable market values. Such valuations generally reflect discounts for liquidity and consider variables such as financial performance of investments, including comparison of comparable companies’ earning multiples, cash flow analysis, recent sales prices of investments and other pertinent information. Because of the inherent uncertainty of valuation for these investments, the investment manager or general partner’s estimate may differ from the values that would have been used had a ready market existed. College management is responsible for the fair value measurements of investments reported in the financial statements. The College has

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

8 (Continued)

implemented policies and procedures to assess the reasonableness of fair values provided and believes that reported fair values at the balance sheet date are reasonable.

(e) Property, Plant, Improvements, and Equipment

Property, plant, improvements, and equipment are stated at cost, except for donated assets, which are recorded at fair market value at the date of gift. Depreciation, including amortization of leasehold improvements, is computed using the straight-line method, over the related assets’ estimated useful economic lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized. The cost of maintenance and repairs is charged to expense as incurred. Significant renewals and betterments are capitalized.

As further described in note 7, effective June 1, 2005, the College adopted Financial Accounting Standards Board (FASB) Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143, to account for conditional asset retirement obligations that existed as of that date.

Once the College determines an obligation exists, it assesses whether or not the amount of the obligation can be reasonably estimated. If the amount of the obligation can be reasonably estimated, the College records the present value of the obligation, the corresponding cost is capitalized, and the liability is accreted to fair value each reporting period until settled. Depreciation of the cost is recognized over the life of the related asset.

(f) Bond Issue Costs

Bond issue costs are amortized using the straight-line method over the life of the associated bond issue.

(g) Student Deposits and Deferred Revenue

Student deposits, along with advance payments for tuition, room, and board related to the summer semester, have been deferred and will be reported as unrestricted revenue in the year in which the semester is completed.

(h) Tax Status

The College is a tax-exempt organization as described in Section 501(c)(3) of the Internal Revenue Code (the Code), and is generally exempt from taxes pursuant to Section 501(a) of the Code.

(i) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

9 (Continued)

(j) Reclassifications

Certain 2005 balances have been reclassified to conform to the current year presentation.

(3) Long-Term Investments

The College’s investments are summarized as follows at May 31:

2006 2005Cost Market Cost Market

U.S. Equity Funds $ 68,151,566 72,461,220 56,800,154 57,592,317 International Equity Funds 26,430,355 32,123,151 30,142,834 29,743,300 Fixed Income Funds 18,068,919 17,184,357 18,151,440 18,308,756 Alternative investments 54,490,194 54,184,871 38,004,048 33,980,033

Total $ 167,141,034 175,953,599 143,098,476 139,624,406

Total return on long-term investments consisted of the following for the years ended May 31:

2006 2005

Investment return:Interest and dividends $ 1,906,811 1,571,671 Unrealized gain 12,286,635 10,975,429 Realized (loss) gain 6,505,654 (1,495,301)

Total return on investments $ 20,699,100 11,051,799

Under the College’s current endowment policy, up to 3% of a three-year average of the market value of investments is authorized for spending by the board of trustees. This amounted to $3,590,319 and $3,742,114 for the years ended May 31, 2006 and 2005, respectively. In 2005, the board approved additional spending for several strategic initiatives, including Berklee Media, in the amount of $1,668,755. This amount is classified as unrestricted operating revenues.

As of May 31, 2006, the College has unfunded investment commitments aggregating $21,467,000 for venture capital and private equity partnerships payable over the next five to ten years.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

10 (Continued)

(4) Property, Plant, Improvements, and Equipment

Property, plant, improvements, and equipment consisted of the following at May 31:

Estimated2006 2005 useful life

Land $ 4,400,651 4,400,651 — Buildings 25,881,479 25,881,479 40 yearsImprovements 59,482,207 55,431,163 15 yearsBerklee Media course development 5,000,577 4,170,617 3-10 yearsFurniture and equipment 24,105,348 22,615,491 3-5 yearsLibrary books 1,311,638 1,194,440 — Vehicles 4,740 18,765 3 yearsConstruction in progress 1,855,528 — —

122,042,168 113,712,606

Less accumulated depreciation (67,791,234) (62,964,225) $ 54,250,934 50,748,381

Total depreciation and amortization expense was $7,232,255 and $6,128,860 in 2006 and 2005, respectively.

As of June 1, 2005, the College adopted the provisions of FASB Interpretation No. 47 to account for conditional asset retirement obligations. In accordance with the standard, the College determined what its obligations were, when the obligations were incurred, and when the obligations were likely to be remediated. The College undertook an analysis of its physical plant and determined that it had an aggregate conditional asset retirement obligation related to asbestos installation in buildings on its campus, removal of underground oil tanks and ground contamination clean up, as well as the costs to be incurred to remediate leasehold improvements. Based upon its analysis, the College determined that an asset retirement obligation was incurred and recorded a cumulative effect of change in accounting principle, and a liability for $431,000 as of June 1, 2005.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

11 (Continued)

(5) Bonds and Notes Payable

Bonds payable consisted of the following at May 31:

2006 2005

(a) Massachusetts Health and Education Facilities Authority(MHEFA) Variable Demand Revenue Bonds, BerkleeCollege of Music Issue, Series D, dated July 30, 1997 $ 18,200,000 18,600,000

(b) MHEFA Revenue Bonds, Berklee College of MusicIssue, Series E, dated July 30, 1997 (net of unamortizeddiscount of $586,696 in 2006 and $614,198 in 2005) 33,328,304 34,150,802

(c) MHEFA Variable Rate Demand Revenue Bonds,Capital Asset Program Issue, Series B/C Pool,dated February 4, 2000 — 10,390,790

(d) MHEFA Variable Rate Revenue Bonds, Berklee Collegeof Music Issue F, dated July 22, 2003 (net of unamortizeddiscount of $81,542 in 2006 and $86,292 in 2005) 19,918,458 19,913,708

Bonds payable 71,446,762 83,055,300

(e) Short-term loan 9,816,512 — Bonds and notes payable $ 81,263,274 83,055,300

(a) and (b) MHEFA Revenue Bonds Series D and E

In July 1997, $60,610,000 MHEFA Revenue Bonds were issued and the proceeds thereof loaned to the College. The bonds consist of $20,800,000 Series D Variable Rate Demand Revenue Bonds and $39,810,000 Series E Revenue Bonds.

The Series D bonds are at a variable rate of interest (3.46% at May 31, 2006 and 2.9% at May 31, 2005), are payable in varying installments and mature on October 1, 2027. The Series E bonds bear interest at rates ranging from 3.85% to 5.00%, and are due in varying annual installments of $640,000 to $1,575,000 until October 1, 2027. The College is in compliance with a required liquidity ratio, as defined in the Loan and Trust Agreement, as of May 31, 2006.

During the year, principal and interest payments are made to an escrow account with the bond trustee. Total deposits with bond trustees at May 31, 2006 and 2005 for such payments were $569,799 and $522,937, respectively.

(c) MHEFA Variable Rate Demand Revenue Bonds, Capital Asset Program Issue, Series B/C Pool

On February 4, 2000, the College obtained a $15,000,000 loan from the MHEFA. Interest was payable monthly at a variable rate of interest, 5.0% at May 31, 2005. These bonds are payable in varying installments and mature on January 4, 2010. The College redeemed these bonds as of October 1, 2005.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

12 (Continued)

(d) MHEFA Variable Rate Revenue Bonds, Berklee College of Music Issue, Series F

On July 22, 2003, the College obtained a $20,000,000 loan from the MHEFA. Interest is payable monthly at a variable rate of interest that was 3.41% at May 31, 2006 and 2.9% at May 31, 2005. The Series F bonds are payable in varying installments and mature on October 1, 2024.

At May 31, 2006 and 2005, $0 and $5,098,330, respectively, remained to be drawn down and remained on deposit with the bond trustee. Principal payments are scheduled to begin in October 2011.

Scheduled long-term maturities of existing indebtedness at May 31, 2006 in each of the next five years and in the aggregate thereafter are as follows:

Amount

Year ending May 31:2007 $ 1,295,000 2008 1,335,000 2009 1,475,000 2010 1,520,000 2011 1,570,000 Thereafter 64,920,000

72,115,000

Less unamortized bond discount 668,238 $ 71,446,762

Interest expense charged to operations was $3,440,594 and $3,118,740 in 2006 and 2005, respectively.

(e) Short-Term Loan

In September 2005, the College entered into a one-year uncollateralized short-term loan with a bank in the amount of $9,816,562, which bears interest at a seven-day market rate plus 25 basis points (5.3575% at May 31, 2006). There was $9,816,562 outstanding in borrowings against this line at May 31, 2006. The College subsequently renewed the loan through 2007.

(6) Allowances for Uncollectible Accounts and Loans Receivable

Accounts receivable are net of allowances for uncollectible accounts of $415,377 and $471,899 at May 31, 2006 and 2005, respectively.

Loans receivable are net of an allowance for uncollectible accounts of $337,878 at May 31, 2006 and 2005.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

13 (Continued)

(7) Contributions Receivable

Contributions receivable consisted of the following at June 30:

2006 2005

Unconditional promises expected to be collected in:Less than one year $ 462,358 384,145 One year to five years 472,482 472,442

934,840 856,587

Less allowance for uncollectible pledges (3,500) (23,959) $ 931,340 832,628

(8) Retirement Plans

The College offers a defined-contribution plan to all employees eligible for medical benefits under the College’s health care program. This plan provides for investments through the Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), as well as Invesmart. The College matches all savings in a pay period up to 3% of pay for full-time employees and up to 50% of 10% of pay for eligible part-time employees. The College contributed $1,215,454 and $1,353,234, respectively, for the years ended May 31, 2006 and 2005.

The College also sponsors a noncontributory, defined-benefit pension plan that covers substantially all full-time employees. The plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service with the College and their compensation rates near retirement.

Pension expense for the years ended May 31 includes the following components:

2006 2005

Service cost of the current period $ 2,247,820 2,016,071 Interest cost on the projected benefit obligation 2,523,021 2,344,509 Expected return on assets held in the plan (2,401,813) (2,385,001) Amortization of prior service cost 664,576 664,576 Recognition of net actuarial loss 1,359,581 1,085,266

Pension expense $ 4,393,185 3,725,421

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

14 (Continued)

The following sets forth the change in benefit obligation, change in plan assets, and funded status of the plan and the amounts shown in the accompanying balance sheets at May 31:

2006 2005

Change in benefit obligation:Benefit obligation at beginning of year $ 44,309,326 40,518,928 Service cost 2,247,820 2,016,071 Interest cost 2,523,021 2,344,509 Actuarial loss 262,688 1,645,854 Benefits paid (449,367) (2,216,036)

Benefit obligation at end of year 48,893,488 44,309,326

Change in plan assets:Fair value of plan assets at beginning of year 34,106,533 30,724,799 Actual return on plan assets 3,305,023 1,597,770 Employer contribution — 4,000,000 Benefits paid (449,367) (2,216,036)

Fair value of assets held in the plan 36,962,189 34,106,533

Funded status (11,931,299) (10,202,793)

Unrecognized net loss 11,463,688 13,463,791 Unrecognized prior service costs 4,329,571 4,994,147 Contributions between measurement date and fiscal year end 500,000 —

Pension asset $ 4,361,960 8,255,145

Pension expense was computed based on a weighted average discount rate of 5.75% and 6.00%, expected long-term rate of return on assets of 8.25%, and future personnel expense increases of 5.00% for 2006 and 2005, respectively.

The discount rate used in determining the actuarial present value of the projected benefit obligation in 2006 and 2005 was 5.75% and 5.75%, respectively. The accumulated benefit obligation (ABO) was $37,362,256 at May 31, 2006 and $32,937,003 at May 31, 2005.

Because the ABO exceeds the plan assets as of May 31, 2006, the College is required to recognize an additional minimum pension liability equal to the difference of the ABO and plan assets of $400,067 less the prepaid pension asset of $4,361,960 adjusted for the contribution made after the measurement date of $500,000, or $4,262,027. The College is also required to recognize an intangible asset not to exceed the unrecognized prior service costs, up to the minimum pension liability. For financial statement presentation, the additional liability is combined with the prepaid pension cost. The effect of this adjustment on the College’s statement of financial position is zero.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

15 (Continued)

The benefits expected to be paid after May 31, 2006 are as follows:

Year end:2007 $ 1,057,181 2008 1,301,532 2009 1,720,703 2010 2,052,288 2011 2,318,454 2012-2016 16,913,864

The prepaid pension asset is included in other assets in the accompanying statements of financial position. The College uses an annual measurement date of February 28 to determine pension assets and benefit obligations for the plan.

The expected long-term rate of return on assets was determined by considering the current and expected asset allocations, as well as historical and expected returns on the categories of plan assets.

The College’s asset allocations and investment policy guidelines, as of the measurement date are as follows:

Target Plan assets at Plan assets atallocation February 28, 2006 February 28, 2005

Equity securities 80% 81% 78%Debt securities 20% 19% 22%

The investment strategy of the pension plan is designed to maximize total return (income plus capital change) while preserving the capital values of the funds, protecting the funds from inflation, and providing liquidity as needed for plan benefits. The objective is to provide a rate of return that meets or exceeds the expected long-term rate of return on plan assets. Equity and Fixed Income managers will be expected to achieve an annualized total rate of return over a three to five-year period which exceeds an appropriate market index rate of return by 1.5 and 0.75 percentage points compounded annually, net of costs and fees, respectively.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

16 (Continued)

(9) Lease Commitments

The following is a schedule of future minimum lease payments under operating leases together with the amount of scheduled lease payments as of May 31, 2006:

Amount

Fiscal year:2007 $ 1,394,612 2008 1,250,179 2009 1,225,280 2010 1,221,528 2011 1,245,587 Thereafter 7,803,906

Rental expense was $1,610,409 in 2006 and $1,324,779 in 2005.

(10) Restricted Net Assets

Temporarily restricted net assets consist of the following at May 31:

2006 2005

Unspent gifts:Instruction $ 60,760 25,030 Institutional support 48,209 82,517 Student aid 852,357 648,899 Student services 2,586 — Capital projects — 93,579

963,912 850,025

Unappropriated gains from permanently restricted net assets 2,547,543 — Outstanding pledges 836,991 832,628

$ 4,348,446 1,682,653

In reliance on the Massachusetts Attorney General’s June 1995 Statement of Position regarding the use and classification of unspent gains from permanently restricted funds, the College classifies unspent gains from permanently restricted funds as temporarily restricted until it appropriates and spends such sums in accordance with the terms of the underlying endowment funds, at which time, they will be reclassified to unrestricted revenues.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

17 (Continued)

Permanently restricted net assets consist of the following at May 31:

2006 2005

Student aid $ 7,804,904 4,544,850 Instruction 1,851,136 1,831,145 Institutional support 201,000 201,000 Outstanding pledges 94,349 —

$ 9,951,389 6,576,995

(11) Disclosure about Fair Value of Financial Instruments

In accordance with the requirements of Statement of Financial Accounting Standards No. 107, Disclosuresabout the Fair Value of Financial Instruments, the estimated fair values of the College’s financial instruments as of May 31, 2006 and 2005 have been determined by using, where practicable, appropriate valuation methodologies.

The College determined that the estimated fair value of its total indebtedness was substantially equivalent to its carrying value as of May 31, 2006 and 2005. The College further determined that the differences between the carrying values and estimated fair values of its other financial assets and liabilities at May 31, 2006 and 2005 was not material.

(12) Sale of Berklee Press Licensing Rights

During fiscal year 2006, production and marketing responsibility of the Berklee Press was sold to a third party in exchange for a licensing fee and royalty commitment. Under the sale agreement, the College received $2,100,000 from the third party which, net of cost of goods sold and fees, resulted in a net gain to the College of $1,781,378. Going forward, the College will receive, on a quarterly basis, a percentage of royalties.

BERKLEE COLLEGE OF MUSIC, INC.

Notes to Financial Statements

May 31, 2006 and 2005

18

(13) Components of Functional Expenses

Following is a summary of the direct and indirect cost components of functional expenses for the years ended May 31, 2006 and 2005:

May 31, 2006Indirect costsDepreciation

Direct and Interest Totalcosts Maintenance amortization expense expenses

Expenses:Education and general:

Instruction $ 44,420,401 4,158,050 2,462,046 1,733,315 52,773,812 Academic support 7,004,427 189,328 112,104 78,923 7,384,782 Student and enrollment

services 8,189,645 151,790 89,877 63,275 8,494,587 Institutional support and

advancement 22,255,892 1,286,035 761,481 536,093 24,839,501 Auxiliary enterprises 14,556,350 458,119 3,894,378 1,028,988 19,937,835

Total operatingexpenses $ 96,426,715 6,243,322 7,319,886 3,440,594 113,430,517

May 31, 2005Indirect costsDepreciation

Direct and Interest Totalcosts Maintenance amortization expense expenses

Expenses:Education and general:

Instruction $ 40,807,410 3,710,402 2,211,317 1,532,346 48,261,475 Academic support 6,030,733 168,946 100,687 69,773 6,370,139 Student and enrollment

services 7,610,559 135,448 80,725 55,938 7,882,670 Institutional support and

advancement 21,078,771 1,147,583 683,933 473,937 23,384,224 Auxiliary enterprises 14,545,745 219,289 3,139,829 899,115 18,803,978

Total operatingexpenses $ 90,073,218 5,381,668 6,216,491 3,031,109 104,702,486

DEFINITIONS OF CERTAIN TERMS

The following are definitions of certain terms used in the Loan and Trust Agreement and used in this Official Statement:

“Act” means Chapter 614 of the Massachusetts Acts of 1968 as amended from time to time.

“Authorized Officer” means: (i) in the case of the Authority, the Chairman, Vice Chairman, Secretary, Executive Director, Director of Financing Programs, Director of Finance or Deputy Director of Financing Programs, and when used with reference to an act or document of the Authority also means any other person authorized to perform the act or execute the document; and (ii) in the case of the Institution, the Chairman or other presiding officer of the Board of Trustees, the President, any Vice President or Vice Chairman, the Secretary, the Treasurer or other chief financial officer, and when used with reference to an act or document of the Institution, also means any other person authorized to perform the act or execute the document.

“Balloon Indebtedness” means Long-Term Indebtedness which is part of an issue of Indebtedness twenty-five percent (25%) or more of which has its Date of Maturity in the same twelve (12) month period.

“Bond Counsel” means any attorney at law or firm of attorneys selected by the Authority, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States, but shall not include counsel for the Institution.

“Bond Year” means each one year period (or shorter period from the date of issue of the Bonds) ending on May 31.

“Bondowners” means the registered owners of the Bonds from time to time as shown in the books kept by the Trustee as bond registrar and transfer agent.

“Bonds” means the Massachusetts Health and Educational Facilities Authority Revenue Bonds, Berklee College of Music Issue, Series 2007A, and any bond or bonds duly issued in exchange or replacement therefor.

“Business Day” means a day on which banks in the city in which the principal office of the Trustee is located is not required or authorized to remain closed and on which the New York Stock Exchange is not closed.

“Continuing Disclosure Agreement” means the Continuing Disclosure Agreement dated as of the date of issuance of the Bonds between the Institution and the Trustee, as originally executed and as it may be amended from time to time in accordance with its terms.

“Date of Maturity” means as to any Indebtedness of the Institution, as of any date of determination, the first date thereafter on which such Indebtedness is payable, whether at maturity, by mandatory redemption (or purchase) or by redemption (or purchase) at the option of the holders; provided, that if portions of any Indebtedness are payable on different dates, the Date of Maturity shall be separately determined for each such portion. Balloon Indebtedness may be deemed to be payable as provided in the Agreement in order to adjust actual Dates of Maturity for such Indebtedness to assumed Dates of Maturity, to be used in calculating Total Principal and Interest Requirements.

“Expendable Resources” means (i) Unrestricted Net Assets plus Temporarily Restricted Net Assets, each as set forth on the Institution’s most recent audited financial statements, plus (ii) all Long-Term Indebtedness included in Liabilities on such financial statements, minus (iii) Fixed Assets as set forth on such financial statements.

“Fixed Assets” means land, buildings and equipment of the Institution net of depreciation, as reflected on the Institution’s most recent audited financial statements. “Government or Equivalent Obligations” means (i) obligations issued or guaranteed by the United States; (ii) certificates evidencing ownership of the right to the payment of the principal of and interest on obligations described in clause (i), provided that such obligations are held

APPENDIX C

C-1

APPENDIX C

C-2

in the custody of a bank or trust company satisfactory to the Trustee or the Authority, as the case may be, in a special account separate from the general assets of such custodian; and (iii) shares of any open-end or closed-end management type investment company or trust registered under 15 U.S.C. §80(a)-1 et seq., provided that the portfolio of such investment company or trust is limited to obligations described in clause (i) and repurchase agreements fully collateralized by such obligations, and provided further that such investment company or trust shall take custody of such collateral either directly or through a custodian satisfactory to the Trustee or the Authority.

“Gross Receipts” means revenues and receipts of the Institution from all sources (other than gifts, grants or bequests which by their terms may not lawfully be used to fulfill the Institution’s obligations to make payments to the Debt Service Fund), whether in the form of proceeds of accounts receivable or contract rights or otherwise, but excluding insurance proceeds with respect to leases that are subject to a security interest or other right of recovery in favor of the lessor thereof.

“Hedge Agreement” means an interest rate swap, cap, collar, floor, forward, or other hedging agreement, arrangement or security, however denominated, expressly identified pursuant to its terms as being entered into in connection with and in order to hedge interest rate fluctuations on all or a portion of any Indebtedness.

“Indebtedness” shall mean all obligations of the Institution for borrowed money, or installment sale and capitalized lease obligations, incurred or assumed, including guaranties, Long-Term Indebtedness, Short-Term Indebtedness, subordinated Indebtedness or any other obligation of the Institution for payments of principal and interest with respect to money borrowed.

“IRC” means the Internal Revenue Code of 1986.

“Irrevocable Deposit” means the irrevocable deposit in trust of cash in an amount (or Government or Equivalent Obligations the principal of and interest on which will be in an amount) and under terms sufficient to pay all or a portion of the principal of, premium, if any, and interest on, as the same shall become due, any Indebtedness which immediately prior to the time of such deposit is Outstanding. The trustee of such deposit may be the Trustee or any other trustee authorized to act in such capacity.

“Lien” means any lien, pledge, charge, or other encumbrance upon the Property. “Long-Term Indebtedness” means any Indebtedness which is not Short-Term Indebtedness.

“Moody’s” means Moody’s Investors Service, Inc., or any successor rating agency.

“Opinion of Bond Counsel” means an opinion of Bond Counsel to the effect that the matter or action in question will not have an adverse impact on the tax-exempt status of the Bonds for federal income tax purposes.

“Outstanding,” when used to modify Bonds, refers to Bonds issued under the Agreement, excluding: (i) Bonds which have been exchanged or replaced, or delivered to the Trustee for credit against a principal payment or a sinking fund installment; (ii) Bonds which have been paid; (iii) Bonds which have become due and for the payment of which moneys have been duly provided; and (iv) Bonds for which there have been irrevocably set aside sufficient funds, or Government or Equivalent Obligations described in clause (i) or (ii) of the definition thereof bearing interest at such rates, and with such maturities as will provide sufficient funds, to pay or redeem them, provided, however, that if any such Bonds are to be redeemed prior to maturity, the Authority shall have taken all action necessary to redeem such Bonds and notice of such redemption shall have been duly mailed in accordance with the Agreement or irrevocable instructions so to mail shall have been given to the Trustee.

"Prior Bonds" means, collectively, the Series D and E Bonds and the Series F Bonds.

"Prior Loan" means the outstanding loan from Bank of America, N.A. to the Institution under the Loan Agreement dated as of September 29, 2005.

APPENDIX C

C-3

“Project” means the acquisition of land, site development, construction or alteration of buildings or the acquisition or installation of furnishings and equipment, or any combination of the foregoing, in connection with the following:

Existing Part of the Project: Those projects originally financed or refinanced with the proceeds of the Prior Loan and the Prior Bonds including:

Prior Loan: (a) Purchase and renovation of 25 Fordham Road, and equipment to be installed therein, (b) Renovation of the dining hall at 150 Massachusetts Avenue, (c) Renovation of 1140 Boylston Street and 921 Boylston Street, (d) Purchase and installation of new elevators at 1140 Boylston Street, (e) Installation of underground conduit between 130 Massachusetts Avenue and 921 Boylston Street and 264-270 Commonwealth Avenue, (f) Renovation of the interior of 150 Massachusetts Avenue, (g) Renovation of all floors and replacement of roof at 1140 Boylston Street, (h) Renovation of entrance and interior to 22 The Fenway, (i) Renovation of interior and purchase and installation of new elevators at 270 Commonwealth Avenue and 98 Hemenway Street, (j) Replacement of windows at 98 Hemenway Street, (k) Repointing and repair of brick exterior at 150 Massachusetts Avenue and 98 Hemenway Street, (l) Purchase of computer, telecommunications, music and other electronic equipment and systems, (m) Purchase of acoustic musical equipment, and (n) Interior renovation of leased property at 155-171 Massachusetts Avenue;

Prior Bonds: (a) exterior and interior renovations and construction related to the buildings at 921-925 Boylston Street, 1140 Boylston Street, 130, 136, 150 and 168 Massachusetts Avenue, 25 Fordham Road and 22 The Fenway, Boston; (b) renovations to dormitory facilities at 264-270 Commonwealth Avenue, 98 Hemenway Street and 150 Massachusetts Avenue, Boston; (c) planning for the acquisition and renovation and/or construction of a new building in the area bounded by Dalton and Gloucester Streets to the east, Commonwealth Avenue to the north, Huntington Avenue to the south and Yawkey Way and related extensions to the west in Boston; (d) course development of the Berklee Media on-line course; (e) the acquisition and installation of computer, networking and communications equipment; and (f) the acquisition of musical equipment, vehicles, furniture, office equipment and other capital equipment; (g) the acquisition and renovation of various buildings used as offices, music classrooms, recital halls, laboratories, dormitories, and a performance center, including the Berklee Performance Center; and (h) renovations to the library, film scoring facility, Professional Writing Division Faculty Center, residence life center and security department facilities at 150 Massachusetts Avenue, Boston.

New Part of the Project:

(a) exterior and interior renovations and construction related to the buildings at 855, 867, 899, 921-925, 1108 and 1140 Boylston Street, 130, 136, 150, 155, 168, 171 and 186 Massachusetts Avenue, 25 Fordham Road and 22 The Fenway, Boston; and renovations to dormitory facilities at 264-270 Commonwealth Avenue and 98 Hemenway Street, Boston; (b) acquisition and renovation and/or construction of one or more buildings in the area bounded by Dalton and Fairfield Streets to the East, Commonwealth Avenue to the North, Huntington Avenue to the South and Yawkey Way and related extensions to the West in Boston; (c) course development of the Berklee Media on-line course; (d) the acquisition and installation of computer, networking and communications equipment at the addresses listed in (a) and (b) above; (e) the acquisition of musical equipment, vehicles, furniture, office equipment and other capital equipment at the addresses listed in (a) and (b) above; and (f) other routine capital expenditures of the Institution at the addresses listed in (a) and (b) above. The word “Project” also refers to the facilities which result or have resulted from the foregoing activities.

“Project Costs” means the costs of issuing the Bonds and carrying out the Project, including repayment of external loans and internal advances for the same to the extent permitted by the Agreement and the Tax Certificate, working capital expenditures directly related to the Project to the extent permitted by the IRC, and interest prior to, during and for up to one year with respect to Bonds allocable to the New Part of the Project after construction is substantially complete, but excluding general administrative expenses, overhead of the Institution and interest on internal advances.

“Property” means any and all of the Institution’s rights, titles and interests in and to any and all property, whether real or personal, tangible or intangible and wherever situated including, without limitation, accounts,

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accounts receivable, contract rights and general intangibles, and all proceeds of all of the foregoing, whether cash or non-cash.

“Rebate Year” means the one year period (or shorter period beginning on the date of issue) ending on May 31.

“Restricted Property” means 1140 Boylston Street, 150 Massachusetts Avenue, 130 Massachusetts Avenue, Berklee Performance Center, 98 Hemenway Street, 22 The Fenway, 264-270 Commonwealth Avenue, 921-925 Boylston Street, 25 Fordham Road, and 1108 Boylston Street.

“Revenues” means all rates, payments, fees, charges, and other income and receipts, including proceeds of insurance, eminent domain and sale, and including proceeds derived from any security provided under the Agreement, payable to the Authority or the Trustee under the Agreement, excluding administrative fees of the Authority, fees of the Trustee, reimbursements to the Authority or the Trustee for expenses incurred by the Authority or the Trustee, and indemnification of the Authority and the Trustee.

“S&P” means Standard & Poor’s Ratings Group, Inc., or any successor rating agency.

"Series D and E Bonds" means, collectively, the Authority's Revenue Bonds, Berklee College of Music Issue, Series D and E, dated June 15, 1997 in the case of the Series E Bonds and dated August 4, 1997 in the case of the Series D Bonds.

"Series F Bonds" means the Authority's Variable Rate Revenue Bonds, Berklee College of Music Issue, Series F, Dated July 24, 2003.

“Short-Term Indebtedness” shall mean any issue of Indebtedness no portion of which has a Date of Maturity more than one year from the date of original issuance thereof.

“Tax Certificate” means the Tax Certificate and Agreement between the Authority and the Institution dated the date of original issuance of the Bonds.

“Total Principal and Interest Requirements” means amounts required during a year (or twelve (12) consecutive calendar months) to amortize principal and to pay interest (other than capitalized interest) on Long-Term Indebtedness, taking into account in determining the Total Principal and Interest Requirements for any future period that (i) at the election of the Institution, Indebtedness described in the Agreement shall be deemed payable on the dates and in the amounts contemplated in such section; (ii) principal on all Indebtedness shall be deemed to be payable on the Date of Maturity thereof; (iii) the amounts of principal and interest taken into account during such period shall exclude amounts payable from proceeds of any refunding Indebtedness issued during such period or from interest earnings on the proceeds of such refunding Indebtedness; and (iv) in the event that there shall have been issued or entered into in respect of all or a portion of any Indebtedness a Hedge Agreement, such Indebtedness shall be deemed to bear interest for the period of time that such Hedge Agreement is in effect at a net rate which takes into account the interest payments made by the Institution on such Indebtedness and the payments made or received by the Institution on such Hedge Agreement. Computations of debt service on Long-Term Indebtedness shall include an amount representing the debt service on obligations of others for borrowed money guaranteed by the Institution in accordance with the provisions of the Agreement. If any issue of Long Term Indebtedness bears other than a fixed rate of interest, calculations for the purposes of determining the maximum Total Principal and Interest Requirements with respect to such Indebtedness shall be made in accordance with the provisions of the Agreement. Anything to the contrary in the Agreement notwithstanding, so long as any Indebtedness is subject to a Hedge Agreement, any payments made by the Institution on such Hedge Agreement shall be excluded from expenses and any payments received by the Institution on such Hedge Agreement shall be excluded from revenues, in each case, for all purposes of the Agreement. Further, any so-called mark to market charge or credit attributable to any Hedge Agreement under Financial Accounting Standard 133 or otherwise shall be excluded from calculation of revenues and expenses of the Institution and for all related definitions and financial covenants of the Agreement.

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“UCC” means the Massachusetts Uniform Commercial Code.

Words importing persons include firms, associations and corporations, and the singular and plural form of words shall be deemed interchangeable wherever appropriate.

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SUMMARY OF THE LOAN AND TRUST AGREEMENT

The following is a brief summary, prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority, of certain provisions of the Loan and Trust Agreement dated as of June 14, 2007 (the “Agreement”) pertaining to the Bonds. This summary does not purport to be complete, and reference is made to the Agreement for full and complete statements of such and all provisions.

The Agreement is entered into pursuant to a resolution adopted by the Authority on June 14, 2007 which authorizes the issuance of the Bonds.

The Agreement provides for the following transactions: (i) the Authority’s issuance of the Bonds; (ii) the Authority’s loan of the proceeds of the Bonds to the Institution to finance and refinance the Project; (iii) the Institution’s repayment of the loan from the Authority through payment to the Trustee of all amounts necessary to pay the Bonds; and (iv) the Authority’s assignment to the Trustee in trust for the benefit and security of the Bondowners of certain of the Authority’s rights with respect to the loan to the Institution under the Agreement, and the Revenues to be received under the Agreement and the rights to receive the same.

The Assignment and Pledge of Revenues

The Authority assigns and pledges to the Trustee in trust upon the terms of the Agreement (a) all Revenues to be received from the Institution or derived from any security provided under the Agreement and (b) all rights to receive such Revenues and the proceeds of such rights. This assignment and pledge does not include: (i) the rights of the Authority pursuant to provisions for consent, concurrence, approval or other action by the Authority, notice to the Authority or the filing of reports, certificates or other documents with the Authority or (ii) the powers of the Authority as stated in the Agreement to enforce the provisions of the Agreement. As additional security for its obligations to make payments to the Debt Service Fund, the Redemption Fund and the Project Fund, and for its other payment obligations under the Agreement, the Institution grants to the Trustee a security interest in its interest in the moneys and other investments and any proceeds thereof held from time to time in such Funds and the Expense Fund established under the Agreement. (Section 201)

Establishment of Funds

The Debt Service Fund and the Redemption Fund shall be established and maintained with the Trustee for the account of the Institution, to be held in trust by the Trustee and applied subject to the provisions of the Agreement. A Project Fund and an Expense Fund have been established with the Authority to be held by the Authority in trust for the account of the Institution and applied subject to the provisions of the Agreement.

Project Fund

The moneys in the Project Fund and any investments held as part of such Fund shall be held in trust and, except as otherwise provided in the Agreement, shall be applied by the Authority solely to the payment or reimbursement of Project Costs, including reimbursement of capitalized interest, if any. If there is an Event of Default known to the Authority with respect to payments to the Debt Service Fund or to the Authority or the Trustee, the Authority may use the Project Fund without requisition to make up the deficiency, and the Institution shall restore the funds so used. (Section 401)

Expense Fund

The moneys and investments held in the Expense Fund shall be applied by the Authority at the written direction of the Institution, except as otherwise provided, solely to the payment or reimbursement of the costs of issuing the Bonds. The Authority shall pay from the Expense Fund the costs of issuing the Bonds, the reasonable fees and expenses of financial consultants and bond counsel, the reasonable fees and expenses of the Trustee incurred prior to the completion of the Project in accordance with the Agreement, any recording or similar fees and any expenses of the Institution in connection with the issuance of the Bonds which are approved by the Authority. Earnings on the Expense Fund shall not be applied to pay costs of issuance of the Bonds, but shall be transferred to

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the Project Fund. After all costs of issuing the Bonds have been paid any amounts remaining in the Expense Fund shall be transferred to the Project Fund. To the extent the Expense Fund is insufficient to pay any of the above costs, the Institution shall be liable for the deficiency and shall pay such deficiency as directed by the Authority. (Section 307)

Debt Service Fund

The moneys and investments held in the Debt Service Fund shall be applied solely, except as otherwise provided, to the payment of the principal (including sinking fund installments), redemption premium, if any, and interest on the Bonds. (Section 303)

Redemption Fund

The moneys and investments held in the Redemption Fund shall be applied by the Trustee on behalf of the Authority solely, except as otherwise provided, to the redemption of Bonds. If on any date the amount in the Debt Service Fund is less than the amount then required to be applied by the Trustee to pay the principal (including sinking fund installments) and interest then due on the Bonds, the Trustee shall apply the amount in the Redemption Fund (other than any sum irrevocably set aside for the redemption of particular Bonds or required to purchase Bonds under outstanding purchase contracts) to the Debt Service Fund to the extent necessary to meet the deficiency. (Section 305)

Rebate

The Institution covenants to pay when due any rebate due to the United States. (Section 306)

Application of Moneys

If available moneys in the Debt Service Fund after any required transfers from the Redemption Fund are not sufficient on any day to pay all principal (including sinking fund installments), redemption price and interest on the Outstanding Bonds then due or overdue, such moneys (other than any sum in the Redemption Fund irrevocably set aside for the redemption of particular Bonds or required to purchase Bonds under outstanding purchase contracts) shall, after payment of all charges and disbursements of the Trustee in accordance with the Agreement, be applied first to the payment of interest, including interest on overdue principal, in the order in which the same became due (pro rata with respect to interest which became due at the same time) and second to the payment of principal (including sinking fund installments) and redemption premiums, if any, without regard to the order in which the same became due (in proportion to the amounts due). Whenever moneys are to be applied pursuant to this paragraph, such moneys shall be applied at such times, and from time to time, as the Trustee in its discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall exercise such discretion it shall fix the date (which shall be the first of a month unless the Trustee shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the fixing of any such date. When interest or a portion of the principal is to be paid on an overdue Bond, the Trustee may require presentation of the Bond for endorsement of the payment. (Section 308)

Investment of Moneys

Pending their use under the Agreement, moneys in the Funds and accounts established pursuant to the Agreement may be invested by the Trustee or the Authority, as the case may be, in Permitted Investments (described below) maturing or redeemable at the option of the holder at or before the time when such moneys are expected to be needed and shall be so invested pursuant to written direction of the Institution if there is not then an Event of Default known to the Trustee or the Authority, as appropriate, provided that the Institution shall not request, authorize or permit any investment which would cause any Bonds to be classified as "arbitrage bonds" as defined in IRC §148. Notwithstanding the foregoing, any amount of moneys deposited in the Project Fund which has not been expended within three (3) years of the date of closing shall be invested only in Permitted Investments with a yield

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not more than 1/8% higher than the yield on the Bonds unless otherwise permitted by an Opinion of Bond Counsel. Any investments pursuant to this paragraph shall be held by the Trustee or the Authority, as applicable, as a part of the applicable Fund and shall be sold or redeemed to the extent necessary to make payments or transfers or anticipated payments or transfers from such Fund, subject to the notice provisions of Section 9-611 of the Uniform Commercial Code to the extent applicable.

Except as set forth below, any interest realized on investments in any Fund and any profit realized upon the sale or other disposition thereof shall be credited to the Fund with respect to which they were earned and any loss shall be charged thereto. Earnings on accrued interest in the Debt Service Fund and on the Expense Fund shall be transferred to the Project Fund not less often than quarterly. Earnings on the Redemption Fund shall be transferred to the Debt Service Fund and credited against payments otherwise required to be made thereto not less often than quarterly.

The term “Permitted Investments” means (A) Government or Equivalent Obligations, (B) “tax exempt bonds” as defined in IRC §150(a)(6), other than “specified private activity bonds” as defined in IRC §57(a)(5)(C), rated at least “AA” or “Aa2” by S&P and Moody’s, respectively, or the equivalent by any other nationally recognized rating agency, at the time of acquisition thereof or shares of a so-called money market or mutual fund that do not constitute “investment property” within the meaning of IRC §148(b)(2), provided either that the fund has all of its assets invested in such “tax exempt bonds” of such rating quality or, if such obligations are not so rated, that the fund has comparable creditworthiness through insurance or otherwise and which fund is rated “Aam” or “AAm-G” if rated by S&P, (C) negotiable certificates of deposit or other evidences of deposit issued by a nationally or state-chartered bank or a state or federal savings and loan association or by a state-licensed branch of a foreign bank, which have assets of not less than $1,000,000,000, provided that the senior debt obligations of the issuing institution are rated “Aa3” or “AA-” or better by Moody’s or S&P and mature not more than two years after the date of purchase, (D) bills of exchange or time drafts drawn on and accepted by a commercial bank (otherwise known as bankers acceptances), provided that such bankers acceptances may not exceed 180 days maturity, and provided further that the accepting bank has the highest short-term letter and numerical rating as provided by Moody’s or S&P, (E) Repurchase Agreements, (F) money market funds rated at least “Aam” or “AAm-G” by S&P, (G) investment agreements with providers rated at least “AA-” and “Aa3” by S&P and Moody’s, respectively, (H) collateralized investment agreements with providers rated at least “A-” and “A3” by S&P and Moody’s, respectively, (I) Federal Agency Securities and participation certificates issued by the Federal National Mortgage Association, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank System, Student Loan Marketing Association, World Bank or Federal Agricultural Mortgage Corporation, and (J) commercial paper which is rated at the time of purchase at least “A-1+” by S&P or “P-1” by Moody’s and which matures not more than 270 days after the date of purchase. The term “Repurchase Agreement” shall mean a written agreement under which a bank or trust company which has a capital and surplus of not less than $50,000,000 or a government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York sells to, and agrees to repurchase from the Authority or the Trustee obligations issued or guaranteed by the United States; provided that the market value of such obligations is at the time of entering into the agreement at least one hundred and three percent (103%) of the repurchase price specified in the agreement and that such obligations are segregated from the unencumbered assets of such bank or trust company or government bond dealer; and provided further that unless the agreement is with a bank or trust company, such agreement shall require the repurchase to occur on demand or on a date certain which is not later than one (1) year after such agreement is entered into and shall expressly authorize the Trustee or the Authority, as the case may be, to liquidate the purchased obligations in the event of the insolvency of the party required to repurchase such obligations or the commencement against such party of a case under the federal Bankruptcy Code or the appointment of or taking possession by a trustee or custodian in a case against such party under the Bankruptcy Code. Any such investments may be purchased from or through the Trustee. The term “Repurchase Agreement” shall mean a written agreement under which a bank or trust company which has a capital and surplus of not less than $50,000,000, or a government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York sells to, and agrees to repurchase from, the Authority or the Trustee obligations issued or guaranteed by the United States; provided that the market value of such obligations is, at the time of entering into the agreement, at least 103% of the repurchase price specified in the agreement and that such obligations are segregated from the unencumbered assets of such bank or trust company or government bond dealer; and provided further that unless the agreement is with a bank or trust company, such agreement shall require the repurchase to occur on demand or on a date certain which is not later than one (1) year after such agreement is entered into and shall expressly authorize the Trustee or the

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Authority, as the case may be, to liquidate the purchased obligations in the event of the insolvency of the party required to repurchase such obligations or the commencement against such party of a case under the federal Bankruptcy Code or the appointment of or taking possession by a trustee or custodian in a case against such party under the Bankruptcy Code. Any such investments may be purchased from or through the Trustee. (Section 312)

Payments by the Institution

Not later than the opening of business on the Business Day preceding an Interest Payment Date or the date on which a payment of principal (including sinking fund installments) is due, the Institution shall pay or cause to be paid to the Trustee for deposit in the Debt Service Fund an amount available on such payment date equal to such payment less the amount, if any, in the Debt Service Fund and available therefor.

The payments to be made under the foregoing paragraph shall be appropriately adjusted to reflect the date of issue of Bonds, accrued interest deposited in the Debt Service Fund, and any purchase or redemption of Bonds, so that there will be available on each payment date in the Debt Service Fund the amount necessary to pay the interest and principal or sinking fund installment coming due on the Bonds.

At any time when any principal (including sinking fund installments) of the Bonds is overdue, the Institution shall also have a continuing obligation to pay to the Trustee for deposit in the Debt Service Fund an amount equal to interest on the overdue principal but the installment payments required as described above shall not otherwise bear interest. Redemption premiums shall not bear interest.

Payments by the Institution to the Trustee for deposit in the Debt Service Fund under the Agreement shall discharge the obligation of the Institution to the extent of such payments; provided, that if any moneys are invested in accordance with the Agreement and a loss results therefrom so that there are insufficient funds to pay principal (including sinking fund installments) and interest on the Bonds when due, the Institution shall supply the deficiency. (Section 309)

Default

“Event of Default” means any one of the events set forth below and “default” means any Event of Default without regard to any lapse of time or notice.

Debt Service. Any principal or interest or redemption premium on the Bonds shall not be paid when due or the Institution shall fail to make any debt service payment when the same becomes due and payable as provided in the Agreement.

Other Obligations. The Institution shall fail to make any other required payment to the Trustee or shall fail to maintain required insurance, and such failure is not remedied within seven (7) days after written notice; or the Institution shall fail to observe or perform any of its other agreements, covenants or obligations under the Agreement and such failure is not remedied within sixty (60) days after written notice.

Warranties. There shall be a material breach of warranty made in the Agreement by the Institution and the breach is not cured within sixty (60) days after written notice.

Voluntary Bankruptcy. The Institution shall commence a voluntary case under the federal bankruptcy laws, or shall become insolvent or unable to pay its debts as they become due, or shall make an assignment for the benefit of creditors, or shall apply for, consent to or acquiesce in the appointment of, or taking possession by a trustee, a receiver, a custodian or similar official or agent for itself or any substantial part of its property.

Appointment of Receiver. A trustee, a custodian, a receiver or similar official or agent shall be appointed for the Institution or for any substantial part of its property and such trustee or receiver shall not be discharged within sixty (60) days.

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Involuntary Bankruptcy. The Institution shall have an order or decree for relief in an involuntary case under the federal bankruptcy laws entered against it or a petition seeking reorganization, readjustment, arrangement, composition or other similar relief as to it under the federal bankruptcy laws or any similar law for the relief of debtors shall be brought against it and shall be consented to by it or shall remain undismissed for sixty (60) days.

Breach of Other Agreements. A breach shall occur (and continue beyond any applicable grace period) with respect to the payment of Indebtedness of the Institution for borrowed money with respect to loans exceeding one percent (1%) of total annual revenues as shown on the Institution's most recent audited financial statements, or with respect to the performance of any agreement securing such other Indebtedness or pursuant to which the same was issued or incurred, or an event shall occur with respect to provisions of any such agreement relating to matters of the character referred to in this paragraph so that a holder or holders of such Iindebtedness or a trustee or trustees under any such agreement accelerates any such Indebtedness; but an Event of Default shall not be deemed to be in existence or to be continuing under the provisions of the Agreement summarized in this paragraph if (a) the Institution is in good faith contesting the existence of such breach or event and if such acceleration is being stayed by judicial proceedings, or (b) such breach or event is remedied and the acceleration is wholly annulled. Immediately upon becoming aware of such breach or event, the Institution will notify the Trustee and the Authority.

If the Trustee determines that a default has been cured before the entry of any final judgment or decree with respect to it, the Trustee may waive the default and its consequences, including any acceleration, with the written consent of the Authority, by written notice to the Institution and shall do so, with the written consent of the Authority, upon written instruction of the owners of at least twenty-five percent (25%) in principal amount of the Outstanding Bonds. (Section 601)

Remedies for Events of Default

Acceleration. If an Event of Default occurs and is continuing, the Trustee may by written notice to the Institution and the Authority declare immediately due and payable the principal of the Outstanding Bonds and the payments to be made by the Institution therefor, and accrued interest on the foregoing, whereupon the same shall become immediately due and payable.

Rights as a Secured Party. The Trustee and the Authority, as appropriate, may exercise all of the rights and remedies of a secured party under the UCC with respect to securities in the Debt Service Fund, Redemption Fund, Project Fund and Expense Fund, including the right to sell or redeem such securities and the right to retain such securities in satisfaction of the obligations of the Institution under the Agreement. (Section 602)

Remedies Cumulative

The rights and remedies under the Agreement shall be cumulative and shall not exclude any other rights and remedies allowed by law, provided there is no duplication of recovery. (Section 605)

Limitations on Bondowners’ Remedies

Upon a failure of the Institution to make a required debt service payment when the same becomes due and payable, the Trustee shall give written notice of such default to the Authority and the Institution. The Trustee shall not be required to take notice of any other breach or default by the Institution or the Authority, and the Authority shall not be required to take notice of a breach or default by the Institution, except when given written notice thereof by the owners of at least ten percent (10%) in principal amount of the Outstanding Bonds. The Trustee shall give default notices and accelerate payments, and the Authority shall give default notices, in each case when so instructed in writing by the owners of at least twenty-five percent (25%) in principal amount of the Outstanding Bonds. The Trustee shall Institution legal proceedings to enforce the obligations of the Authority and the Authority shall Institution legal proceedings to enforce the obligations of the Institution under the Agreement, in each case in accordance with the written directions of the owners of a majority in principal amount of the Outstanding Bonds. Neither the Trustee nor the Authority shall be required to take remedial action (other than acceleration, in the case of the Trustee, or the giving of notice), unless reasonable indemnity is furnished for any expense or liability to be incurred therein.

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No Bondowner shall have any right to Institution any legal proceedings for the enforcement of the Agreement or any applicable remedy under the Agreement unless the Authority and the Trustee have failed or refused to take action as required by the Agreement. (Sections 702, 802 and 901)

Tax Status of the Bonds

The Institution shall not take or omit to take any action if such action or omission would (i) cause the Bonds to be “arbitrage bonds” under Section 148 of the IRC, (ii) cause the Bonds to not meet any of the requirements of Section 149 of the IRC, or (iii) cause the Bonds to cease to be “qualified 501(c)(3) bonds” under Section 145 of the IRC. Without limiting the foregoing, the Institution shall not permit the $150,000,000 nonhospital bond limitation of IRC §145(b) to be exceeded. To the extent consistent with its status as a nonprofit educational institution, the Institution agrees that it will not take any action or omit to take any action if such action or omission would cause any revocation or adverse modification of such federal income tax status of the Institution.

Partly in furtherance of the foregoing, the Authority and the Institution are entering into the Tax Certificate with respect to matters of federal tax law pertaining to the Bonds issued under the Agreement. (Section 1002)

Maintenance of Corporate Existence

The Institution shall maintain its existence as a nonprofit corporation qualified to do business in Massachusetts and shall not dissolve, dispose of or spin off all or substantially all of its assets, or consolidate with or merge into another entity or entities, or permit one or more other entities to consolidate with or merge into it, except upon satisfaction of the conditions set forth in the Agreement which include (a) that each of the surviving, resulting or transferee entity or entities each is a corporation meeting certain requirements set forth in the Agreement as to nonprofit, tax-exempt status, (b) that the transaction not result in a conflict, breach or default as referred to in the Agreement, and (c) that the surviving, resulting or transferee entity or entities (if not the Institution) each (i) assumes by written agreement with the Authority and the Trustee all the obligations of the Institution under the Agreement and (ii) notifies the Authority and the Trustee of any change in the name of the Institution. (Section 1006)

Insurance

The Institution shall maintain insurance with insurance companies authorized to transact business in The Commonwealth of Massachusetts or otherwise satisfactory to the Authority on such of its properties, in such amounts and against such risks as is customarily maintained by similar institutions of higher education operating in the area. (Section 406)

Additional Indebtedness

No additional Long-Term Indebtedness shall be incurred by the Institution (except to refund Bonds or as Short Term Indebtedness permitted under the Agreement) unless there shall have been filed with the Authority and the Trustee:

(i) a certificate of the Institution’s chief financial officer stating that Expendable Resources, as shown on the most recent audited financial statements of the Institution, is greater than or equal to 50% of the principal amount of the proposed additional Indebtedness plus all other outstanding Long-Term Indebtedness of the Institution; and

(ii) a certificate of the Institution’s chief financial officer stating that the maximum Total Principal and Interest Requirements of the proposed additional Indebtedness and all other outstanding Long-Term Indebtedness of the Institution as shown on the most recent audited financial statements of the Institution does not exceed fifteen percent (15%) of the Institution’s Unrestricted Operating Expenses as shown on its most recent audited financial statements. (Section 501)

Pledge of Property Subject to the provisions of the Agreement with respect to Restrictions of Liens on Gross Receipts or Restricted Property, additional Indebtedness may be secured by a pledge, lien, mortgage, security interest or other encumbrance on Gross Receipts or on Property, other than money or other property on deposit in

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the funds created under the Agreement. Notwithstanding anything in the Agreement to the contrary, any pledge, lien, mortgage, security interest or other encumbrance on the Restricted Property, or any encumbrance on Gross Receipts of the Institution granted to secure additional Indebtedness shall be extended also to secure the obligations of the Institution under the Agreement on an equal and ratable basis. In the event additional Indebtedness is secured on a parity with the obligations of the Institution under the Agreement, the Institution shall enter into an intercreditor agreement with such other lender, in form and substance satisfactory to the Trustee and the Authority with respect thereto. (Section 502)

Short-Term Indebtedness The Institution may incur Short Term Indebtedness if: (i) immediately after the incurrence of such Short Term Indebtedness, the principal amount of all outstanding Short Term Indebtedness does not exceed the greater of (A) 15% of the Institution’s total revenues, or (B) 75% of the Institution’s aggregate accounts receivable (net of provision for uncollectible accounts), both as shown on the Institution’s most recent audited financial statements, and (ii) during the 12 months immediately preceding the incurrence of such Short Term Indebtedness there shall have been a period of at least twenty (20) consecutive days in which the Institution had Outstanding Short Term Indebtedness of no more than five percent (5%) of total revenues, as shown on the Institution’s most recent audited financial statements, provided that the requirement of this clause (ii) shall be waived if and to the extent that such Short Term Indebtedness could be incurred under the Agreement as if it were Long Term Indebtedness. Failure to comply with the provisions of clause (ii) shall not be a default under the Agreement, but until the provisions of clause (ii) shall be satisfied, all amounts of Short-Term Indebtedness in excess of the five percent (5%) of total revenues permitted under the Agreement shall be deemed to be Long-Term Indebtedness for the purposes of calculating Total Principal and Interest Requirements. (Section 503)

Restrictions on Liens on Gross Receipts or Restricted Property

The Institution agrees that it will not create or suffer to be created or exist any Lien upon the Gross Receipts or any Restricted Property now owned or hereafter acquired by it other than Permitted Liens.

Permitted Liens shall consist of Liens which are described in one or more of the following clauses:

(i) Any judgment lien or notice of pending action against the Institution so long as such judgment or pending action is being contested and execution thereon is stayed;

(ii) (A) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Restricted Property, to (1) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of the Restricted Property or materially and adversely affect the value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Restricted Property; (B) any Liens on any Restricted Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any Liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Restricted Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to Liens of mechanics, materialmen, and laborers, have been due for less than sixty (60) days; and (C) easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any Restricted Property which do not materially impair the use of such Restricted Property or materially and adversely affect the value thereof;

(iii) Any Lien existing on the date of the Agreement provided that no such Lien (or the amount of Indebtedness secured thereby) may be extended to apply to any Restricted Property of the Institution not subject to such Lien on such date, unless such Lien as so extended otherwise qualifies as a Permitted Lien under the Agreement;

(iv) Purchase money security interests and security interests existing on any Restricted Property prior to the time of its acquisition through purchase, merger, consolidation or otherwise, or placed upon Restricted Property to secure a portion of the purchase price thereof, or lessor’s interests in leases required to be capitalized in accordance with generally accepted accounting principles; provided that the aggregate principal amounts secured by any such interests shall not exceed at the time of incurring or assumption the fair market value of such Restricted Property;

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(v) Liens arising by reason of good faith deposits in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges, bankers’ liens and rights of set-off in favor of a custodial bank;

(vi) Any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Institution to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit-sharing plans or other similar arrangements, or to share in the privileges or benefits required for companies participating in such arrangements;

(vii) Any Lien arising by reason of an Irrevocable Deposit;

(viii) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds or on moneys to repay Indebtedness while held in a debt service reserve fund or on any moneys to secure payment of the trustee’s fees;

(ix) Liens on Restricted Property received by the Institution through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Restricted Property or the income thereon, up to the fair market value of such Restricted Property;

(x) Liens for taxes or special assessments not then delinquent or which are being contested in good faith;

(xi) Any Lien created or permitted by the Agreement;

(xii) Any Lien arising solely by reason of a lease of Restricted Property to others (A) which lease would not have any material adverse effect upon (i) the security for the Bonds, if any, or (ii) the operations of the Restricted Property, or (B) is of a customary type for a music college, such as bookstores, instrument shops, food service facilities, credit union or banking facilities, exercise facilities, copy centers, day care centers, and similar student or employee services;

(xiii) Any Lien upon Restricted Property the loss of which Restricted Property would not have any material adverse effect upon (A) the security for the Bonds, if any, or (B) the operations of the Institution;

(xiv) Any Lien on Restricted Property securing Indebtedness provided a parity Lien on such Restricted Property is granted in favor of the Authority securing the Bonds equally and ratably; and

(xv) Liens on any part of the Restricted Property, upon which no building or structure that has been used by the Institution for at least one (1) year is in existence at the time of granting of such Lien; provided that (A) the granting of such Lien is necessary to obtain financing for the construction of a structure or building upon such part of the Restricted Property, and (B) the severance of such part of the Restricted Property upon foreclosure of such Lien will not render the remaining Restricted Property in violation of applicable zoning, building or land use laws. (Section 1007)

Continuing Disclosure

The Institution and the Trustee covenant and agree that each will comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to it. The Authority shall have no liability to the owners of the Bonds or any other person with respect to such disclosure matters. Notwithstanding any other provision of theAgreement, failure of the Institution or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, the Trustee may (and, at the request of the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall) or any owner (including a beneficial owner) of Bonds may seek specific performance of the Institution’s or the Trustee’s obligations to comply with its

APPENDIX C

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obligations under the Continuing Disclosure Agreement or the Agreement and not for money damages in any amount. (Section 1008)

Amendments

The Agreement may be amended by the parties without Bondowner consent for any of the following purposes: (a) to subject additional property to the lien of the Agreement, (b) to provide for the establishment or amendment of a book entry system of registration for the Bonds through a securities depository, (c) to add to the covenants and agreements of the Institution or to surrender or limit any right or power of the Institution, or (d) to cure any ambiguity or defect, or to add provisions which are not inconsistent with the Agreement and which do not impair the security for the Bonds.

Except as provided in the foregoing paragraph, the Agreement may be amended only with the written consent of the owners of at least a majority in principal amount of the Outstanding Bonds; provided, however, that no amendment of the Agreement may be made without the unanimous written consent of the affected Bondowners for any of the following purposes: (i) to extend the maturity of any Bond, (ii) to reduce the principal amount or interest rate of any Bond, (iii) to make any Bond redeemable other than in accordance with its terms, (iv) to create a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (v) to reduce the percentage of the Bonds required to be represented by the Bondowners giving their consent to any amendment. When the Trustee determines that the requisite number of consents have been obtained for an amendment which requires Bondowner consents, it shall, within ninety (90) days, file a certificate to that effect in its records and mail notice to the Bondowners. (Section 1101)

Defeasance

When there are in the Debt Service Fund and Redemption Fund sufficient funds, or Government or Equivalent Obligations described in clause (i) or (ii) of the definition thereof in such principal amounts, bearing interest at such rates and with such maturities as will provide sufficient funds to pay or redeem the Bonds in full, and when all the rights of the Authority and Trustee have been provided for, upon written notice from the Institution to the Authority and Trustee, the Bondowners shall cease to be entitled to any benefit or security under the Agreement except the right to receive payment of the funds deposited and held for payment and other rights which by their nature cannot be satisfied prior to or simultaneously with termination of the lien of the Agreement, the security interests created by the Agreement (except in such funds and investments) shall terminate, and the Authority and the Trustee shall execute and deliver such instruments as may be necessary to discharge the lien and security interests created under the Agreement; provided, however, that if any such Bonds are to be redeemed prior to the maturity thereof, the Authority shall have taken all action necessary to redeem such Bonds and notice of such redemption shall have been duly mailed in accordance with the Agreement or irrevocable instructions so to mail shall have been given to the Trustee. Upon such defeasance, the funds and investments required to pay or redeem the Bonds in full shall be irrevocably set aside for that purpose subject to the requirements of the Agreement, and moneys held for defeasance shall be invested only as provided above in this paragraph. Any funds or property held by the Trustee and not required for payment or redemption of the Bonds in full shall, after satisfaction of all the rights of the Authority and the Trustee, be distributed to the Institution upon such indemnification, if any, as the Authority or the Trustee may reasonably require. (Section 202)

APPENDIX D

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PROPOSED FORM OF BOND COUNSEL OPINION

[Date of Delivery]

Massachusetts Health and Educational Facilities Authority 99 Summer Street, Suite 1000 Boston, Massachusetts 02110

$173,510,000Revenue Bonds, Berklee College of Music Issue, Series 2007A

Dated the Date of Delivery

We have acted as bond counsel to the Massachusetts Health and Educational Facilities Authority (the “Authority”) in connection with the issuance by the Authority of the above-referenced bonds (the “Bonds”). In such capacity, we have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion, including the Loan and Trust Agreement dated as of June 14, 2007 (the “Agreement”), among the Authority, Berklee College of Music, Inc. (the “Institution”) and U.S. Bank National Association, as trustee (the “Trustee”).

As to questions of fact material to our opinion we have relied upon representations and covenants of the Authority and the Institution contained in the Agreement and in the certified proceedings and other certifications of public officials furnished to us, and certifications of officials of the Institution and others, without undertaking to verify the same by independent investigation.

The Bonds are issued pursuant to the Agreement. The Bonds are payable solely from funds to be provided therefor by the Institution pursuant to the Agreement. Under the Agreement, the Institution has agreed to make payments sufficient to pay when due the principal (including sinking fund installments) and purchase or redemption price of and interest on the Bonds. Such payments and other moneys payable to the Authority or the Trustee under the Agreement, including proceeds derived from any security provided thereunder (collectively the “Revenues”), and the rights of the Authority under the Agreement to receive the same (excluding, however, certain administrative fees, indemnification, and reimbursements), are pledged and assigned by the Authority as security for the Bonds. The Bonds are payable solely from the Revenues.

We express no opinion with respect to compliance by the Institution with applicable legal requirements with respect to the Agreement or in connection with the construction or operation of the Project (as defined in the Agreement) being financed by the Bonds.

Reference is made to an opinion of even date of Ropes & Gray LLP, counsel to the Institution, with respect to, among other matters, the corporate existence of the Institution, the power of the Institution to carry out the Project, the power of the Institution to enter into and perform its obligations under the Agreement, and the authorization, execution and delivery of the Agreement

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by the Institution. We have relied on such opinion with regard to such matters and to the other matters addressed therein, including, without limitation, the current qualification of the Institution as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). We note that such opinion is subject to the limitations and conditions described therein. Failure of the Institution to maintain its status as an organization described in Section 501(c)(3) of the Code or to use the Project in activities of the Institution that do not constitute unrelated trades or businesses of the Institution within the meaning of Section 513 of the Code may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Bonds.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Authority is a duly created and validly existing body corporate and politic and a public instrumentality of The Commonwealth of Massachusetts with the power to enter into and perform the Agreement and to issue the Bonds.

2. The Agreement has been duly authorized, executed and delivered by the Authority and is a valid and binding obligation of the Authority enforceable against the Authority. As provided in Section 13 of Chapter 614 of the Acts of 1968 of The Commonwealth of Massachusetts, as amended, the Agreement creates a valid lien on the Revenues, the other funds pledged by the Agreement as security for the Bonds, and on the rights of the Authority or the Trustee on behalf of the Authority to receive Revenues under the Agreement (except certain rights to indemnification, reimbursements and fees).

3. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding special obligations of the Authority, payable solely from the Revenues and other funds provided therefor in the Agreement.

4. Interest on the Bonds is excluded from the gross income of the owners of the Bonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes. However, such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. In rendering the opinions set forth in this paragraph, we have assumed compliance by the Authority and the Institution with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The Institution and, to the extent necessary, the Authority have covenanted in the Agreement to comply with all such requirements. Failure by the Authority or the Institution to comply with certain of such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

5. Interest on the Bonds and any profit made on the sale thereof are exempt from Massachusetts personal income taxes and the Bonds are exempt from Massachusetts personal property taxes. We express no opinion regarding any other Massachusetts tax consequences arising with respect to the Bonds or any tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts.

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This opinion is expressed as of the date hereof, and we neither assume nor undertake any obligation to update, revise, supplement or restate this opinion to reflect any action taken or omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may hereafter arise or occur, or for any other reason.

The rights of the holders of the Bonds and the enforceability of the Bonds and the Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Edwards Angell Palmer & Dodge LLP

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APPENDIX E

CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by Berklee College of Music, Inc. (the “Institution”) and U.S. Bank National Association (the “Trustee”) on the date hereof in connection with the issuance of $173,510,000 Massachusetts Health and Educational Facilities Authority Revenue Bonds, Berklee College of Music Issue, Series 2007A (the “Bonds”). The Bonds are being issued and the proceeds thereof loaned to the Institution pursuant to the Loan and Trust Agreement dated as of June 14, 2007 (the “Agreement”) among the Massachusetts Health and Educational Facilities Authority (the “Issuer”), the Institution and the Trustee. The Institution and the Trustee covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Institution and the Trustee for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. The Institution and the Trustee acknowledge that the Issuer has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any owner of the Bonds, with respect to any such reports, notices or disclosures.

SECTION 2. Effective Date of Disclosure Agreement. This Disclosure Agreement shall take effect immediately with respect to the Bonds.

SECTION 3. Definitions. In addition to the definitions set forth in the Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings;

“Annual Report” shall mean any Annual Report provided by the Institution pursuant to, and as described in, Sections 4 and 5 of this Disclosure Agreement.

“Disclosure Representative” shall mean the Vice President of Finance of the Institution or his or her designee, or such other person as the Institution shall designate in writing to the Trustee from time to time.

“Dissemination Agent” shall mean the Institution, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Institution and which has filed with the Trustee a written acceptance of such designation.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

“National Repository” shall mean any nationally recognized municipal securities information repository for purposes of the Rule. The current National Repositories are listed on Exhibit A attached hereto.

“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

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“Repository” shall mean each National Repository and each State Depository.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“State Depository” shall mean any public or private depository or entity designated by The Commonwealth of Massachusetts as a state information depository for the purpose of the Rule. As of the date of this Disclosure Agreement, there is no State Depository.

“Transmission Agent” shall mean any central filing office, conduit or similar entity which undertakes responsibility for accepting filings under the Rule for submission to each Repository. The current Transmission Agent is listed on Exhibit A attached hereto.

SECTION 4. Provision of Annual Reports.

(a) The Institution shall, or shall cause the Dissemination Agent to, not later than 180 days after the end of each fiscal year commencing with its fiscal year presently ending May 31, 2007, provide to each Repository an Annual Report which is consistent with the requirements of Section 5 of this Disclosure Agreement. Not later than fifteen (15) business days prior to said date, the Institution shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). In each case the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 5 of this Disclosure Agreement; provided that the audited financial statements of the Institution may be submitted, when available, separately from the balance of the Annual Report. If audited financial statements for the preceding fiscal year are not available when the Annual Report is submitted, the Annual Report will include unaudited financial statements for the preceding fiscal year and the Institution shall provide the audited financial statements as soon as practicable after the audited financial statements become available.

(b) If by fifteen (15) business days prior to the date specified in subsection (a) for providing the Annual Report to the Repositories, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the Institution and the Dissemination Agent to determine if the Institution is in compliance with subsection (a).

(c) If the Trustee is unable to verily that an Annual Report has been provided to the Repositories by the date required in subsection (a), the Trustee shall send a notice to each Repository in substantially the form attached as Exhibit B.

(d) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Depository, if any; and

(ii) file a report with the Institution (if the Dissemination Agent is not the Institution), the Issuer and the Trustee (if the Dissemination Agent is not the Trustee) certifying

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that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided, and listing all the Repositories to which it was provided.

SECTION 5. Content of Annual Reports. The Institution’s Annual Report shall contain or incorporate by reference the following:

(a) Information for the preceding fiscal year of the type presented in the Issuer’s Official Statement dated July 9, 2007 relating to the Bonds regarding:

(i) Student Enrollment;

(ii) Student Applications, Acceptances and Matriculations, including Freshman Applications, Acceptances and Matriculations; and

(iii) Tuition and Fees.

(b) The most recently available audited financial statements of the Institution, prepared in accordance with generally accepted accounting principles.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which the Institution is an “obligated person” (as defined by the Rule), which have been filed with each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Institution shall clearly identify each such other document so incorporated by reference.

SECTION 6. Reporting of Material Events.

(a) This Section 6 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds, to the extent known by the Institution or Trustee as applicable:

1. Principal and interest payment delinquencies.

2. Non-payment related defaults.

3. Unscheduled draws on debt service reserves reflecting financial difficulties.

4. Unscheduled draws on credit enhancements reflecting financial difficulties.

5. Substitution of credit or liquidity providers, or their failure to perform.

6. Receipt by the Issuer of an adverse tax opinion or the occurrence of an event affecting the tax-exempt status of the Bonds.

7. Modifications to rights of the Owners of the Bonds.

8. Bond calls.

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9. Defeasance of the Bonds or any portion thereof.

10. Release, substitution or sale of property securing repayment of the Bonds.

11. Rating changes.

(b) The Trustee shall, within one (1) business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Institution promptly notify the Trustee in writing whether or not to report the event pursuant to subsection (e).

(c) Whenever the Institution obtains knowledge of the occurrence of a Listed Event, because of a notice from the Trustee pursuant to subsection (b) or otherwise, if such Listed Event is material under applicable federal securities laws, the Institution shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence pursuant to subsection (e).

(d) If such Listed Event is not material, the Institution shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence pursuant to subsection (e).

(e) If the Trustee has been instructed by the Institution to report the occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the Repositories with a copy to the Institution.

SECTION 7. Termination of Reporting Obligation. The Institution obligations under this Disclosure Agreement shall terminate upon the legal defeasance in accordance with the terms of the Agreement, prior redemption or payment in full of all of the Bonds. If the Institution’s obligations under the Agreement are assumed in full by some other entity, such person shall be responsible for compliance with this Disclosure Agreement in the same manner as if it were the Institution and the original Institution shall have no further responsibility hereunder

SECTION 8. Alternative Methods for Reporting. The Institution may satisfy its obligation to make a filing with each Repository hereunder by transmitting the same to a Transmission Agent if and to the extent such Transmission Agent has received an interpretive advice from the Securities and Exchange Commission, which has not been withdrawn, to the effect that an undertaking to transmit a filing to such Transmission Agent for submission to each Repository is an undertaking described in the Rule.

SECTION 9. Dissemination Agent. The Institution may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. The initial Dissemination Agent shall be the Institution.

SECTION 10. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Institution and the Trustee may amend this Disclosure Agreement

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(and the Trustee shall agree to any amendment so requested by the Institution) and any provision of this Disclosure Agreement may be waived if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law, which may also include bond counsel to the Issuer, to the effect that such amendment or waiver would not cause the Disclosure Agreement to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Agreement shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.

If the amendment pertains to the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall include a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Institution to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to each Repository.

SECTION 11. Default. In the event of a failure of the Institution or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the request of the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall), or any Owner of Bonds may seek a court order for specific performance by the Institution or Trustee of its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Agreement or the Bonds, and the sole remedy under this Disclosure Agreement in the event of any failure of the Institution or Trustee to comply with this Disclosure Agreement shall be an action for specific performance of the defaulting party’s obligations hereunder and not for money damages in any amount.

SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent.Section 702 of the Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Agreement. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Institution agrees (if the Institution is not the Dissemination Agent), to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the Bonds under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Institution, the Trustee, the Dissemination Agent, and the Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

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SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

SECTION 15. Notices. Unless otherwise expressly provided, all notices to the Issuer, the Institution, the Trustee, and the Dissemination Agent shall be in writing and shall be deemed sufficiently given if sent by registered or certified mail, postage prepaid, or delivered during a Business Day to such parties at the address specified in Section 1103 of the Agreement and with respect to the Dissemination Agent, at Berklee College of Music, Inc., 1140 Boylston Street, Boston, MA 02215, attention of Vice President of Administration and Finance or, as to all of the foregoing, to such other address as the addressee shall have indicated by prior written notice to the one giving notice,

SECTION 16. Governing Law. This instrument shall be governed by the laws of The Commonwealth of Massachusetts.

IN WITNESS WHEREOF, the parties have caused this Disclosure Agreement to be duly executed under seal all as of the date first above written.

Date: August __, 2007 BERKLEE COLLEGE OF MUSIC, INC.

By Vice President of Administration and Finance

US BANK NATIONAL ASSOCIATION, as Trustee

By Authorized Officer

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EXHIBIT A

NRMSIRS

Bloomberg Municipal Repositories 100 Business Park Drive

Skillman, NJ 08558 Phone: (609) 279-3225

Fax: (609) 279-5962 http://www.bloomberg.com/markets/rates/municontacts.html

E-mail: Munis@Bloomberg.com

DPC Data Inc. One Executive Drive Fort Lee, NJ 07024

Phone: (201) 346-0701 Fax: (201) 947-0107

http://www.dpcdata.comE-mail: nrmsir@dpcdata.com

FT Interactive Data Attn: NRMSIR

100 William Street, 15th Floor New York, NY 10038

Phone: 212-771-6999; 800-689-8466 Fax: 212-771-7390 http://www.ftid.com

Email: NRMSIR@interactivedata.com

Standard & Poor's Securities Evaluations, Inc. 55 Water Street

45th Floor New York, NY 10041 Phone: (212) 438-4595

Fax: (212) 438-3975 www.jjkenny.com/jjkenny/pser_descrip_data_rep.html

Email: nrmsir_repository@sandp.com

MSRB

Municipal Securities Rulemaking Board CDINet, 1900 Duke St., Suite 600

Alexandria, VA 22314 Phone: (703) 797-6600 Fax: (703) 683-1930

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TRANSMISSION AGENTS

Disclosure USA P.O. Box 684667

Austin, Texas 78768-4667 www.DisclosureUSA.org

Digital Assurance Certification, LLC 390 North Orange Avenue, Suite 1750

Orlando, Florida 32801 Phone: (407) 515-1100

Fax: (407) 515-6513 www.dacbond.com

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EXHIBIT B

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Massachusetts Health and Educational Facilities Authority

Name of Issue: Revenue Bonds, Berklee College of Music Issue, Series 2007A

Date of Issuance: August ___, 2007

NOTICE IS HEREBY GIVEN that the Institution has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated August __, 2007 between the Institution and the Trustee. [The Institution anticipates that the Annual Report will be filed by _______________________.]

Dated: ____________________________

U.S. BANK, NATIONAL ASSOCIATION, as Trustee on behalf of Berklee College of Music, Inc.

cc: Berklee College of Music, Inc.

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