Certain statements contained in this annual report on Form 10-K, including those that affect DeVry’s expectations or plans, may constitute forward-looking statements subject to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as DeVry Inc. or its management “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Actual results may differ materially from those projected or implied by these forward-looking statements. Potential risks and uncertainties that could affect DeVry’s results are described more fully in Item 1A, “Risk Factors” and in the subsections of “Item 1 — Business” entitled “Competition,” “Student Recruiting and Admission,” “Accreditation,” “Approval and Licensing,” “Tuition and Fees,” “Financial Aid and Financing Student Education,” “Student Loan Defaults,” “Career Services,” “Seasonality,” and “Employees.”

DeVry Inc. (“DeVry”) is incorporated under the laws of the State of Delaware. DeVry’s executive offices are located at One Tower Lane, Suite 1000, Oakbrook Terrace, Illinois, 60181, and the telephone number is (630) 571-7700.

DeVry, through its wholly-owned subsidiaries, owns and operates DeVry University, Ross University, Chamberlain College of Nursing, and Becker CPA Review (d/b/a Becker Professional Review).

DeVry University, founded by Dr. Herman DeVry in 1931, includes undergraduate degree programs in technology, business, and healthcare technology, and graduate degree programs in management offered through Keller Graduate School of Management. DeVry University is one of the largest private, degree-granting, regionally accredited, higher education systems in North America. Undergraduate and graduate degree programs are offered at 81 locations in the United States and Canada and online.

Ross University, which was founded in 1978, is one of the world’s largest providers of medical and veterinary medical education. Ross University comprises Ross University School of Medicine, located in the Caribbean country of Dominica, and Ross University School of Veterinary Medicine, located in St. Kitts/Nevis. DeVry acquired Ross University in May 2003.

Chamberlain College of Nursing, formerly Deaconess College of Nursing, which was founded in 1889 and acquired by DeVry in March 2005, is located in St. Louis, Missouri. Chamberlain offers several degree and degree completion programs for nurses and aspiring nurses. With Ross University, Chamberlain makes up DeVry’s Medical and Healthcare segment.

Becker Professional Review prepares candidates for the Certified Public Accountant (“CPA”) and Chartered Financial Analyst (“CFA”) professional certification examinations, and offers continuing professional education programs and seminars in accounting and finance. These classes are taught in more than 300 locations, including sites in 30 foreign countries and some DeVry University teaching sites. Since acquiring Becker in 1996, DeVry has completed several acquisitions, discussed below under the heading “Professional and Training,” to broaden its program offerings.

Financial and descriptive information about DeVry’s operating segments is presented in Note 14, “Segment Information,” to the Consolidated Financial Statements.

Unless indicated, or the context requires otherwise, references to years refer to DeVry’s fiscal years then ended.

DeVry University provides career-oriented, business and technology-based education to high school graduates in the United States and Canada. DeVry University’s undergraduate programs accounted for approximately 65% of total revenues in fiscal 2006.

The first DeVry Institute was opened in Chicago in 1931 as an electronics school. After offering only undergraduate programs in electronics for almost five decades, DeVry spent several years expanding and diversifying its course offerings. Today, DeVry University offers the following undergraduate degree programs:

Some of our more significant developments from the past several years are summarized below.

Laboratory courses throughout each curriculum prepare students for the workplace by integrating classroom learning with a practical, hands-on experience and applied learning activities that enhance technical skills. For some courses, laboratory activities are delivered in a specialized facility featuring advanced equipment and software. In addition, some laboratory activities take place in a lecture-lab classroom, using PCs and various software.

DeVry University also invests in resources for libraries and academic support services that can assist students in any phase of their educational program. DeVry University offers undergraduate students an array of social and professional activities and supports student organizations closely linked to students’ professional aspirations. Campuses regularly invite technology and business leaders into the classroom. Faculty members serve as mentors for student chapters of professional associations and sponsor a wide range of student co-curricular projects. Students are required to complete a course that teaches practical strategies and methods for realizing success so they will be prepared to assume responsibility for their own learning and growth.

As we have developed new programs and course offerings and enhanced those already offered, we have continued to expand the reach of DeVry’s undergraduate program by offering weekend classes, compressed and accelerated course schedules, technology-assisted delivery options for classroom-based courses, and courses offered completely online. In 2001, DeVry announced the creation of DeVry University Centers, which are smaller than our campus facilities and are more conveniently located for working adults. DeVry University Centers may offer both graduate and undergraduate programs. Our online initiatives and the DeVry University Centers are discussed in more detail below.

Keller Graduate School of Management was founded in Chicago in 1973. Keller emphasizes excellence in teaching, student mastery of practical management skills, and service to working adults. The curricula, like the undergraduate curricula, are subject to regular review for relevance to both students and employers.

Keller students can work toward master’s degrees in the following fields:

To broaden the scope and appeal of these programs, Keller has developed concentrations and graduate certificates. In addition, Keller offers all seven of its degree programs in an online format, and enables students to complete their degrees using whatever combination of online and onsite coursework suits their needs.

The Master of Accounting and Financial Management program offers students a choice of three professional certification exam-preparation emphases: Certified Public Accountant, Certified Fraud Examiner, or Chartered Financial Analyst. The Certified Public Accountant and Chartered Financial Analyst concentrations were developed in conjunction with Becker Professional Review. The Master of Public Administration program offers students a choice of three tracks: government management, nonprofit management, and health management.

Keller offers classes in the evening and on weekends. Faculty members are practicing professionals who bring their expertise to the classroom, emphasizing theory and practices that will best serve students in their work as managers. Critical competencies in areas such as business communications, electronic commerce, technology, ethics, quality, and international matters are woven throughout the curricula.

In fall 2003, DeVry University adopted a uniform academic calendar for both the undergraduate and graduate degree programs across all methods of educational delivery — onsite and online. The calendar consists of three academic periods of 16 weeks each, comprising either a 15-week semester or two 8-week sessions. All online courses and Keller Graduate School programs are offered in 8-week sessions.

DeVry University has offered online graduate programs since September 1998, and online undergraduate programs since 2001. Our online course offerings have increased every year, and we expect to continue to add online programs and concentrations in the future. By offering courses online, we can better serve students whose schedules or personal circumstances prevent them from attending classes in person and optimize use of faculty and classroom space.

The majority of DeVry University’s online students are adults attracted by the quality, inherent flexibility and convenience of the program. We also have many students who “mix and match” onsite and online courses to best meet their individual needs and schedules.

All of the Keller master’s degree programs are offered online. DeVry University offers the following undergraduate degree programs in an online format:

In 2006, DeVry University began offering a new online finance concentration within its bachelor of business administration program (BSBA) and a new online health information management (HIM) technical specialty within its bachelor of science in technical management (BSTM). The online associate degree program in accounting technology was first offered in May 2006.

In addition to our online degree programs, many undergraduate and graduate school courses are taught using an integrated learning system, or “hybrid model,” that incorporates both onsite and instructor-guided online activities. This model enables students to receive ongoing feedback from faculty and fellow students.

In spring 2005, DeVry University began to offer a limited number of graduate and undergraduate onsite and online courses using electronic textbook materials (“eBooks”) in place of conventional text materials. eBooks are available to students at the start of the course and eliminate the occasional risk that a printed textbook will be out of stock. eBooks also afford a good deal of flexibility: students can do text searches, highlight key materials, annotate text with notes and comments, and print only pages they want in paper format. During 2006, we expanded the use of eBooks to more than 200 courses with further expansion planned during the coming years.

DeVry University opened the first DeVry University Center in 2001 within an existing graduate teaching site near downtown Chicago. At the end of fiscal 2006, we offered undergraduate programs at 50 DeVry University Center locations, and graduate programs at 58 DeVry University center locations. We plan to open six to eight additional DeVry University Centers during fiscal 2007.

As we expand programs and enhance course delivery methods, DeVry University also is engaged in a program of facility improvement and expansion. In the past several years, we have renovated facilities and expanded our DeVry University Center locations.

DeVry is implementing a strategy for improving results within its large campus delivery system by making its facility usage more efficient. As part of this strategy, in November 2005 we sold an under-utilized facility in Denver. In December 2005, DeVry announced that it offered its West Hills, California facility for sale. On September 7, 2006, DeVry sold the West Hills facility for $36 million. In connection with the sale, DeVry expects to record a pre-tax gain of approximately $19.8 million during the first quarter of fiscal 2007. DeVry is leasing back the building to serve its existing student population until a planned relocation facility in nearby Sharman Oaks, California is operational.

In July 2005, we opened a dormitory facility adjacent to the Fremont, California campus. This market area has very little convenient and affordable housing. DeVry believes the availability of student housing will enhance recruiting of recent high school graduates as full-time students and contribute to increased campus enrollment. At our other locations, we help undergraduate students secure local living arrangements. Some campuses maintain or contract with a provider of college student housing to offer furnished apartments for shared rental by students. With DeVry University or a student housing company as the landlord, students are assured of a fixed rental charge per month, similar to more traditional dormitory or apartment arrangements at other colleges.

For complete information on DeVry’s properties, please refer to Item 2-Properties, which begins on page 32.

In spring 2006, 38,523 full and part-time students were enrolled in DeVry University’s undergraduate day, evening, and online programs. There were 13,148 coursetakers in Keller graduate programs for the term that began in May 2006.

Total undergraduate enrollment in summer 2006 was 37,132, an increase of 2.5% compared to 36,220 in the previous summer. At Keller Graduate School, there were 12,617 coursetakers in the July term, an increase of 10.3% from the same term of last year. Coursetaker enrollment at DeVry University Online in summer was 28,580, an increase of 35.7% over the prior year.

DeVry undergraduate enrollments historically have been concentrated in the areas of computer, electronics, and telecommunications technology, but we believe that interest in careers in these fields waned during the technology and telecommunications downturn. With many technology-oriented firms implementing employee layoffs and sustaining financial difficulty, enrollment in our technology degree programs declined. However, today we are beginning to see renewed student interest in technology fields and we believe that a recovery in technology employment and positive overall technology employment trends can benefit DeVry over the next several years.

The following table provides historical enrollment data for DeVry University’s undergraduate operation.

The following table provides historical enrollment for Keller Graduate School of Management coursetakers. The term “coursetaker” refers to the number of courses taken by a student. Thus, one student taking two courses is counted as two coursetakers.

The total postsecondary student population can be thought of as two categories of students: career-launchers, who are mostly traditional college-age students; and career-enhancers, who are mostly working adults.

After a period of nearly two decades during which the number of graduating high school seniors declined by 25% to approximately 2.5 million, 1995 marked a turnaround point from which the number of high school graduates began to increase. The U.S. Department of Education expects the number of graduating high school seniors to slowly but steadily increase until it peaks at about 3.2 million in 2013. DeVry University has campuses in six of the ten states projected to have the largest percentage increase in high school graduates from 2001 to 2017, and in nine of the ten states projected to have the largest absolute increase in the number of high school graduates during that period.

As their numbers increase, it is expected that a greater percentage of high school graduates will choose to continue their education. Since bottoming out at 46.6% in 1973, the percentage of U.S. high school graduates entering college increased, peaking at approximately 67% in 1997 before declining to 61.7% in 2001. By 2004 the percentage had increased again to 66.7%, and is expected to flatten in the 64-65% range.

Students in the 18-to 24-year-old age group represent a substantial portion of DeVry University’s full-time undergraduate day school enrollments. Our student body is increasingly more diverse than past generations: students include minorities, women, and recent immigrants, and they come from lower income families. Some DeVry undergraduate campuses rank at or near the top of the list of institutions with degrees granted to minority students in the fields of computer and information science, business, and all academic disciplines combined. Often these students are the first in their families to attend college.

In addition to the projected growing number of traditional-age students, more adults — primarily working adult career-enhancers — are returning to college. Many external forces have combined to inspire older students to attend college today: the development of the knowledge-based economy; the rapid pace of technological change in the workplace; the emergence of e-learning tools that make continuing education more feasible; and growing recognition of the importance of lifelong learning.

The National Center for Education Statistics estimates that in 2005 as many as 40% of all college students were at least 25 years old, up from about 28% in 1970 and 39% in 2000. DeVry believes that more than half of our undergraduate students are at least 25 years old. More significantly, at DeVry University Online and DeVry University Centers, which are designed for the adult student and have been the fastest growing parts of our operations, we estimate that at least 80% of the students are age 25 or older. Projections indicate that the percentage of this age group attending college will remain constant at approximately 40% until 2014. The Bureau of Labor Statistics projects that through 2010, job categories requiring at least some postsecondary education (primarily bachelor’s and associate degrees) will grow nearly twice as fast as those not requiring such education.

Another strong motivation for students considering a postsecondary education is the prospective income premium. In 2000, the median income of U.S. employees with a bachelor’s degree was approximately $50,000, more than 60% higher than the median for those with only a high school education. The wage gap is even larger for those with graduate degrees.

Ross University operates two schools: Ross University School of Medicine offers a Doctor of Medicine (M.D.) degree, and Ross University School of Veterinary Medicine offers a Doctor of Veterinary Medicine (D.V.M.) degree. Ross had over 3,400 students enrolled in the May 2006 semester. Nearly 5,000 graduates have received Ross M.D. degrees since 1978; these individuals are practicing in all 50 states. More than 1,700 students have received Ross D.V.M. degrees.

Ross medical students complete a four-semester (approximately 16 months) basic science and pre-clinical curriculum in modern classrooms and laboratories on a campus located in Dominica, followed by a one-semester course entitled Advanced Introduction to Clinical Medicine at a campus in Miami. After students successfully complete Step 1 of the U.S. Medical Licensing Examination^tm, which assesses whether medical school students or graduates understand and can apply scientific concepts that are basic to the practice of medicine, they can finish the remainder of the ten-semester program by participating in clinical rotations under Ross University direction, but conducted at more than 40 affiliated teaching hospitals in the United States.

Ross’ educational program is modeled after the educational program of U.S. medical schools, but Ross offers three academic semesters per year — beginning in May, September, and January — so students can complete their basic science and pre-clinical curriculum in less time than they would at a U.S. medical school. The program prepares students for general medical practice and provides the foundation for postgraduate specialty training in the United States.

Ross veterinary students complete a seven-semester pre-clinical curriculum (basic sciences plus medicine and surgery) in a large modern facility on St. Kitts. This program is structured to provide a veterinary education that is comparable to that offered at U.S. veterinary schools. After completing their pre-clinical curriculum, Ross veterinary students enter a clinical clerkship lasting approximately 48 weeks under Ross University direction but at one of 23 affiliated U.S. Colleges of Veterinary Medicine.

The following table provides historical enrollment data for Ross University.

The average Ross medical student is 26 years old — two years older than the U.S. medical school average — and the student population is almost 60% male. The average Ross veterinary student also is 26 years old — one year older than the U.S. veterinary school average — and the student population is over 70% female. Most Ross students are either citizens or permanent residents of the United States.

DeVry acquired Chamberlain College of Nursing in March 2005. Founded as Deaconess College of Nursing more than a century ago, Chamberlain offers programs in nursing education leading to one of two degrees: a Bachelor of Science in Nursing (“BSN”), or an Associate of Science in Nursing (“ASN”). Chamberlain had approximately 600 students enrolled in the May 2006 semester.

Chamberlain’s BSN program accommodates students in a traditional on-campus baccalaureate program, and also offers an onsite or online option for students who already have achieved Registered Nurse (“RN”) certification and wish to complete their BSN degree. The ASN program also offers two options. The ASN option offers students the opportunity to receive their ASN degree online. In addition, Licensed Practical Nurses (“LPNs”) can work toward an ASN degree through either the onsite or online programs.

Both degree programs provide nursing skill training and general education. Students who have not previously completed clinical training and the associated licensing are required to do so at hospitals or other healthcare facilities. Chamberlain has developed numerous partnerships with hospitals for this purpose.

The typical Chamberlain student is female. Students in the on-campus BSN program tend to be recent high school graduates whereas those in the ASN program tend to be non-traditional adult learners who are changing careers.

Becker Professional Review is a global leader in professional education and training serving the accounting and finance professions. Its primary product lines are review courses preparing students to take the national Certified Public Accountant and global Chartered Financial Analyst examinations. Through its CPA and CFA review courses, Becker served more than 43,000 students in 2006.

DeVry has expanded the Becker Professional Review franchise in the past decade:

To reach students who cannot attend class because of location or schedule conflicts, Becker CPA Review offers complete review courses in more flexible formats, including CD-ROM or online. Make-up classes also are available online for students who miss the on-site class. Becker’s CD-ROM and online products are interactive, and offer the same instructor-led lessons and materials available in the classroom course. The online course also provides each student an online instructor who offers individualized attention and assistance as needed. CD-ROM and online review course enrollments have grown steadily over the past several years, equaling approximately 50% of total enrollment.

Becker CPA Review students pass at twice the rate of all CPA exam candidates who did not take a Becker review course, based on averages of American Institute of Certified Public Accountants published exam pass rates. Becker CPA exam review course graduates represent nearly one-half of all students passing the CPA exam. At the request of the CFA Institute, the non-profit professional association that administers the CFA exam, Stalla does not disclose pass rate performance.

The November 2003 CPA exam was the last to be offered in the traditional paper and pencil, fixed date and place format. Since April 2004, the exam has been offered only in a computer-based, on-demand format for eight months of the year. In anticipation of the change in exam format and schedule, Becker enrollments increased for the review course leading up to the November 2003 exam, and then declined significantly. For the first twelve months following the new exam offering, the overall number of exam candidates and examination parts taken declined significantly. In 2005 and through June 2006, the number of candidates and examination parts taken has increased, although still not to 2004 levels.

The CFA exam review is a graduate level curriculum and examination program intended to expand a candidate’s working knowledge and skills relating to the investment decision-making process. The program curriculum is broken into three “levels,” each of which builds upon another and concludes with an examination. The CFA designation is often referred to in practice as the “gold standard” for investment professionals, serving as a standard for measuring practitioner-oriented competence and integrity in field areas ranging among corporate finance, portfolio management, securities analysis and ethical and professional standards. Stalla’s approach to CFA Exam preparation — The “Stalla System” — combines expert, comprehensive instruction, an integrated suite of learning tools and the support of a Personal Tutor in a program personalized to fit candidates’ unique learning styles and scheduling requirements.

Becker began offering a CFA review course for the Level 1 examination in 2000. The 2001 acquisition of Stalla Seminars (predecessor of Stalla Review for the CFA^® Exam) enhanced that program. Stalla also offers CFA exam study materials in print, and its course offerings are also available in more flexible online and self study formats.

More than 84,000 candidates from over 145 countries or territories enrolled in the most recent June 2006 exam, bringing total enrollments for fiscal year 2006 to 116,190 — an increase of almost 5% over 2005. Of the total enrollments for fiscal year 2006, 36% of candidates were from the United States, 33% were from Asia-Pacific, 15% were from Europe and 9% were from Canada. The majority of the remaining candidates were from Africa and the Middle East. The strongest recent candidate enrollment growth has come from outside of North America — particularly within the Asia/Pacific area. Stalla has demonstrated positive enrollment and revenue growth even in key North American markets where candidate growth over the past several years has been relatively flat.

Becker offers customized educational and training programs in the fields of accounting and finance to help organizations achieve superior performance through work force development. Since instruction can be conducted at the organization’s site, Becker provides a unique and cost effective continuing education model.

The postsecondary education market is highly fragmented and competitive; no single institution has a significant market share. There are more than 4,000 degree-granting postsecondary education institutions in the United States, including more than 1,000 public and private community colleges. According to the U.S. Department of Education, in the fall of 2003 approximately 16.9 million students were attending degree-granting institutions that participate in the various financial aid programs under Title IV of the Higher Education Act. Approximately 85%, or 14.4 million students, were enrolled in undergraduate programs, with another 2.1 million in graduate programs.

In every market in which DeVry University operates, there are numerous state institutions, community colleges, and private not-for-profit universities. In particular, there is growing competitive pressure from community colleges, traditional universities, and technical colleges that offer industry-specific certification programs, particularly in the computer information field. These short-term certificate programs offer a pathway to the job market for students who do not want the longer and more expensive, but more comprehensive, career preparation that DeVry offers. In addition, there is growing competition from online programs (both by for-profit and traditional institutions) and site-based for-profit school programs. In 2005, a freshman study by the Higher Education Research Institute at UCLA found that 26.1% of students applied to six or more schools, up from 17.7% in 1995 and just 11.8% in 1985 as competition in student recruiting increased. Our undergraduate programs also compete with alternatives to higher education, such as employment and military service. Finally, some large corporations offer their employees accredited college courses that may be applied toward degrees.

Tuition at independent not-for-profit institutions is, on average, higher than the tuition at DeVry University. Publicly supported colleges may offer similar programs at a lower tuition level due to government subsidies, tax-deductible contributions, and other financial sources not available to for-profit schools. In fact, many local community colleges offer programs similar in content to DeVry University’s associate degree programs, but at a much lower tuition. While community college enrollments have grown significantly in recent years and these institutions may be viewed as competitors, they also provide DeVry an opportunity to serve their graduates: we have a number of articulation and transfer agreements in place with community colleges that make it easier for their graduates to continue their education at DeVry.

For more information on DeVry University tuition, please read the section entitled “Tuition and Fees.”

With DeVry University campuses and teaching centers in a growing number of states and multiple locations within many states, we offer a national system of educational offerings to adults who may be transferred or choose

To ensure that students can readily transfer from one DeVry facility to another without disrupting their studies, our graduate and undergraduate curricula generally are consistent at all locations (with some content variations to meet local employment market or regulatory requirements).

DeVry University’s competitive strengths in the market for undergraduate programs include:

In recent years, DeVry has increased its competitiveness by enhancing several of the undergraduate programs, expanding DeVry University Online, and adding DeVry University Centers. As a result, we offer more locations, and more flexible class schedules and learning formats, than many other educational institutions. Undergraduate classes at DeVry University campuses generally are offered in morning, afternoon, or evening sessions, which help students maintain part-time jobs. Undergraduate classes at DeVry University Centers generally are offered in the evening for the convenience of the predominantly working adult students, but daytime classes are offered at centers in markets where there is a demand.

DeVry University’s competitive strengths in the market for graduate programs include:

Graduate programs, both onsite and online, are offered in six 8-week terms each year. Classroom-based courses generally meet once a week, either in the evening or on Saturday, for the convenience of students with heavy travel or other demands on their time. In most markets, DeVry University offers a greater choice of elective courses than its competitors.

As the market for adult education programs has expanded in recent years, other schools have implemented multi-location evening and weekend programs. However, enrollments in DeVry University’s graduate programs

In the medical education market, Ross University competes with the 125 U.S.-based schools of medicine, 20 U.S. colleges of osteopathic medicine, and approximately 20 Caribbean-based, U.S.-modeled medical schools with U.S.-based clinical rotations. In the veterinary education market, Ross competes with 28 U.S.-based schools of veterinary medicine and two other offshore schools.

Ross University attracts potential students for several reasons. For some, Ross is their first or only choice of schools because of our commitment to and focus on teaching instead of the research focus of many other schools. A portion of our students applied to U.S.-based medical or veterinary schools but were not admitted. Others elected not to apply to U.S.-based schools because of self-perceived shortcomings in their academic record.

For 2005, it is estimated that applications to U.S. medical and veterinary medical schools aggregated over 37,000 and 5,000, respectively. From these applicant pools, approximately 17,000 and 2,500 students, respectively, were accepted. An additional estimated 3,500 students are accepted to U.S. osteopathic medical schools. Acceptance levels have remained largely unchanged for more than two decades.

Medical and veterinary school applicants who were denied admission to U.S. schools constitute a large segment of prospective students for Ross University. However, based upon the number of Medical College Admission Test (“MCAT”) takers, which increased to approximately 65,000 in 2005 (up from approximately 62,000 in 2004), management believes the potential market for medical school students is much larger than the denied applicant pool alone.

According to the Association of American Medical Colleges, the demand for medical education is expected to increase over the next decade by approximately 30%, spurred by a physician supply/demand imbalance that is projected to grow. But the capacity of U.S. medical schools has not changed materially in over two decades, and significant expansion is unlikely in the future because of budget pressures. Management believes the veterinary medical education market is subject to many of the same forces.

Compared to its for-profit competitors, Ross University enjoys several competitive advantages, including a large alumni base and strong reputation, federal financial aid eligibility for its students, and the large network of diverse geographical opportunities for clinical rotations.

In the last year for which there is published data, more Ross University School of Medicine graduates obtained first year residency positions at U.S. teaching hospitals than graduates from any other medical school in the world, including those schools in the United States. Those residency appointments have been in virtually every medical specialty and subspecialty.

Nursing constitutes the largest occupation in healthcare, with over 2.3 million nursing jobs in the United States alone. It is estimated that more new nursing jobs will be created in the United States during the next decade than in any other healthcare profession. The strong job market for nurses has spurred applications to nursing schools, but has not yet produced an increase in educational capacity.

Nationally, Chamberlain competes in the nursing education market with more than 700 programs leading to RN licensure. In the St. Louis area, where Chamberlain is based, there are 19 other schools offering nursing programs. These include both 4-year educational institutions and 2-year community colleges. However, Chamberlain has an advantage over many of its competitors because it offers both BSN and ASN programs as well as an online degree program. In addition, Chamberlain is exploring the possibility of offering campus-based programs in other markets.

Becker competes with other methods of CPA and CFA exam preparation, including self-study courses sponsored by the CFA Institute and affiliate societies, courses offered by colleges and universities, and courses offered by other private training companies. Becker typically charges more for exam preparation than colleges and private competitors.

Becker differentiates itself from competitors by providing:

With the introduction of the new computerized exam format, Becker added practice simulations, similar to those used in the actual exam. Becker’s CD-ROM and online courses offer a wider range of study alternatives than other course providers. Becker students have a high success rate on the exam; some of our students enroll after taking other review courses or studying independently without success.

Stalla differentiates itself from competitors by employing an expert-led, comprehensive approach to preparation focused on helping candidates master and apply CFA curriculum topics. Other advantages over competing programs include:

CPA and CFA exam candidates can take advantage of the Becker review course content and methodology in conjunction with their DeVry University MBA or Master of Accounting and Financial Management programs in several states, earning full academic credit. These credits also may be used to fulfill the 150-hour educational requirement that most states have made a prerequisite to sitting for the CPA exam. Extending the marketing and administrative benefits of joint operation, Becker offers classes at some DeVry University undergraduate campuses and DeVry University Centers.

The Stalla CFA review course is taught live in a classroom setting in selected large financial markets around the world and in an online format and self-study CD format to reach potential exam takers not able to attend the classroom course. In the CFA exam preparation market, much like the CPA exam preparation market, Stalla competes with courses offered by local CFA Society chapters, other training companies, and student self-study.

DeVry University employs approximately 800 undergraduate admissions advisors and graduate field recruiters, not including managers and other administrative staff who support the recruiting process, throughout the United States and Canada. Admissions advisors and field student recruiters are salaried, full-time DeVry employees. There are admissions advisors at each campus and at each DeVry University Center to work with potential applicants.

Undergraduate students applying to DeVry University to take courses online are recruited primarily by admissions advisors, either on a campus or at a DeVry University Center if the applicant lives or works in the area, or by a central staff of admissions advisors who are dedicated to serving online applicants. Some applicants to online programs, who are in areas remote from a DeVry University location, including active military personnel on military bases, are recruited by field recruiters.

All graduate school students are recruited by admissions advisors. Undergraduate students are recruited by admissions advisors and by field student recruiters. Field student recruiters are important to the undergraduate recruiting process because a significant number of potential students live a distance from any DeVry University campus. The percentage of undergraduate enrollment that comes from each recruiting source varies by market, depending largely on the school’s location and the size of the local area, but overall, admissions advisors generate more than 75% of undergraduate enrollments.

Certain states and Canadian provinces require advisors and student recruiters to be licensed or authorized by a particular regulatory agency. Regulations governing student participation in U.S. federal financial assistance programs prohibit schools from paying commissions, bonuses, or incentives to student recruiters based directly or indirectly on the number of students they enroll. DeVry believes that its compensation practices comply with current regulations.

Many of our applicants are older working adults who want to attend class in the evening or on weekends, recently unemployed adults seeking to improve their job skills, and students transferring to a DeVry University undergraduate program from nearby community colleges. DeVry University has entered into articulation agreements with community colleges to facilitate the enrollment of their students seeking to transfer course credits to DeVry. A growing number of new students enrolling in our undergraduate programs have some prior college experience. In addition, military veterans with military-specific technical training are attracted to DeVry’s practical career-oriented education and extensive geographic reach.

Student recruiters visited over 5,000 high schools, community colleges, military bases, and other locations in North America last year, making presentations on career choices — particularly in business and technology-related fields — and on the importance of a college education. Participating students complete career surveys, which provide a large and important source of recruiting leads. Field recruiters also receive student inquiries generated by DeVry’s Internet Website and Internet, direct mail, and television advertising. Follow-up interview sessions with prospective students generally take place in the student’s home with the student and his or her parents.

To enhance the productivity of our admissions advisors and field recruiters, DeVry University recently increased its emphasis on local marketing and outreach, recognizing that potential applicants in different market areas can be better recruited by targeted means and messages. We also have increased efficiency by creating specialized staff positions to generate inquiries and schedule interviews.

DeVry University advertises on television and radio, in magazines and newspapers, and on various Internet sites, and utilizes telemarketing and direct mail to reach prospective students. Last year, we strengthened our marketing programs in order to better communicate the quality of our degree programs and the value of a DeVry education. As part of this effort, we have initiated new relationships with several marketing and advertising agencies — some with particular expertise in the areas of Web site design and web-based search engine marketing — and have revamped DeVry University’s own Internet site. Another new agency relationship was established to focus on marketing our graduate programs. Prospective students also are frequently referred by high school counselors, employers, alumni, or currently enrolled students. DeVry personnel actively cultivate these referral sources.

DeVry has undertaken a number of marketing initiatives to expand enrollment. For example, since July 2004, we have worked with the Chicago Public School system to create the DeVry Advantage Academy. This program allows high school students with an aptitude for mathematics and technology to complete their junior and senior year coursework at DeVry’s Chicago campus while also taking college-level courses taught by DeVry University faculty. After completing Advantage Academy, students will graduate with both a high school diploma and an

DeVry University replicated this model program in conjunction with the Columbus, Ohio School District in July 2006, and efforts are underway to launch similar programs in Denver and Philadelphia.

DeVry University markets to technology-minded students in several unique ways. Each year we sponsor local FIRST Robotics high school teams and provide sponsorship, mentors and judges for local competitions. The purpose of the competition is to stimulate the next generation of scientists and inventors by challenging high school students to design and build a robot that can complete a pre-determined task. Similarly, in 2006, in conjunction with Banco Popular, DeVry University initiated two new scholarship opportunities, offering partial-tuition scholarships to qualifying students.

Other outreach and recruitment initiatives include weekend SAT preparatory classes for high school seniors, Career Reality workshops to teach students and educators about trends in business and industry, free summer classes for high school students seeking a head start on business and technology college credits, and fellowships for high school and community college faculty and administrators.

To be admitted to a DeVry University undergraduate program in the United States, an applicant must be either a high school graduate, have a General Education Development (“GED”) certificate, or have a degree from a DeVry University-approved postsecondary institution. Applicants for admission must be at least 17 years old and complete an interview with an admissions advisor. In Canada, an applicant must meet either the same criteria as in the United States, or meet alternative “mature student” criteria.

All applicants must meet prescribed admission qualifications and attain minimum placement examination scores, which vary depending on the program. Students can elect to take the Computerized Placement Tests, which were designed in collaboration with The College Board and Educational Testing Service, to assess applicants’ achievement levels and developmental needs during the admission process. ACT or SAT examination scores deemed appropriate for the desired program, or acceptable grades in qualifying college-level work completed at an approved postsecondary institution, also can be used to meet undergraduate admission requirements.

After prospective students complete an application, our admissions representatives and field recruiters contact them through phone calls, mailings, and invitations to site-based workshops or other events to improve the rate at which such applicants begin their program of study.

To be admitted to a graduate program, applicants must hold a bachelor’s degree from a U.S. institution that is accredited by or is in candidacy status with a regional accrediting agency. International applicants must hold a degree recognized to be equivalent to a U.S. bachelor’s degree. Applicants whose undergraduate cumulative grade point average is 2.70 or higher are eligible for admission. Applicants with a cumulative grade point average below 2.70 must achieve acceptable scores on either the Graduate Management Admission Test (“GMAT”), the Graduate Record Examination (“GRE”) or an alternative admission test, designed and validated by Educational Testing Service. Admissions decisions are based on evaluation of a candidate’s academic credentials, entrance test scores, and a personal interview.

The Ross University medical and veterinary schools focus their marketing efforts on attracting highly qualified U.S. applicants with the motivation and ability to complete their educational programs and to pass applicable licensure examinations. Ross’ marketing program includes a national poster campaign at U.S. undergraduate

Ross employs regional admissions representatives who pursue expressions of interest by arranging for interviews and campus tours and assist prospective students in the application process. Admission requirements include 90 undergraduate credit hours with courses in biology, chemistry, and math as appropriate to the curriculum. Interviews for the medical school are conducted principally at facilities in New Jersey and Miami, but may take place at other locations when appropriate. Interviews for the veterinary school are conducted principally in Florida, California, and New Jersey. All admission decisions are made by a faculty admissions committee.

Chamberlain utilizes varied marketing approaches to generate interest from potential students. Chamberlain recruiters visit Missouri and Southern Illinois high schools, employ targeted direct mail campaigns, cultivate alumni referrals, and participate in information seminars and career fairs. Chamberlain holds open house events to attract local prospective students, and advertises in healthcare career publications, in newspapers, and on television and radio. Our extensive informational Web site generates nearly one-third of all potential applicant leads.

Chamberlain employs regional admissions representatives who arrange for student interviews and campus tours. Admission requirements include a high school diploma or GED; minimum cumulative grade point average requirements vary depending upon the program. Applicants must pass the Chamberlain standard pre-admission exam or obtain a prescribed minimum score on the ACT exam, depending upon the program in which the applicant is interested. Admissions decisions are made by a faculty admissions committee.

Becker markets its courses directly to potential students and to selected employers, primarily the large national and regional accounting and financial services firms. Alumni referrals, direct mail, print advertising, and a network of on-campus recruiters at colleges and universities across the country also generate new students for Becker’s CPA and CFA review courses. The Becker Web site is another source of information for interested applicants.

Becker runs the CPA review program on about 70 college campuses, recruiting students attending that college. Becker also is the preferred provider of CPA review for several of the country’s largest CPA firms.

With the acquisition of Stalla Seminars, the CFA exam review course is now offered in an expanded number of classroom locations and online. Several investment analyst societies, including those in Toronto, Washington D.C., Chicago, and Hong Kong, have adopted Stalla as their preferred provider of CFA test preparation courses. Also, several prominent investment firms are on the Stalla client roster, further expanding the reach and prominence of the Stalla brand.

Educational institutions and their individual programs can earn “accreditation” by achieving a level of quality that entitles them to the confidence of the educational community and the public they serve. In the United States, this recognition is extended primarily through a variety of nongovernmental accrediting associations. There are six regional collegiate accrediting agencies recognized by the U.S. Department of Education. Accreditation also can be granted by specialized organizations, such as ABET, Inc. (“ABET”), an accreditation board for applied science, computing, engineering and technical educations, and the Council on Accreditation of the American Health Information Management Association (AHIMA). Accredited institutions are subject to periodic review by accrediting bodies to ensure continued high performance and institutional and program improvement and integrity, and to confirm that accreditation requirements have been satisfied.

Although regional accreditation in the United States is a voluntary process designed to promote educational quality and improvement, accreditation is an important strength for DeVry University. Management believes

Keller Graduate School was first awarded its NCA accreditation in 1977, and DeVry Institutes was first awarded NCA accreditation in 1981. Each school was separately accredited until February 2002, when the NCA approved the merger of DeVry Institutes and Keller Graduate School into a single institution with the name DeVry University. After a comprehensive evaluation visit in August 2002, the NCA approved a 10 year re-accreditation for DeVry University. NCA further affirmed that DeVry University can offer, without restriction, any of its programs onsite, online, or through any combination of the two.

In addition to the NCA accreditation, the baccalaureate electronics engineering technology programs at most of DeVry University’s U.S. locations are accredited by ABET, as are the baccalaureate computer engineering technology programs at several U.S. locations. The associate level electronics engineering technology programs in North Brunswick, New Jersey also are ABET accredited.

DeVry campuses will apply for TAC of ABET accreditation for the biomedical engineering technology program, and additional campuses will apply for accreditation of the computer engineering technology program, when their first classes graduate from these programs. Similarly, newer DeVry campus locations will apply for ABET accreditation for their eligible programs when their first classes graduate.

The Dallas and Atlanta DeVry undergraduate campuses have received initial accreditation for their health information technology program from AHIMA. Additional DeVry campuses are in the process of applying for this accreditation for their programs.

Until 2001, under Canadian law, DeVry’s Calgary undergraduate campus was not permitted to grant degrees, but students could transfer to campuses in the United States to complete their degree requirements. In 2001, the province of Alberta granted accreditation to DeVry Calgary to offer bachelor of science degree programs in electronics engineering technology and computer information systems, as well as a bachelor of business operations degree program. DeVry Calgary was the first private, for-profit institution in Canada to be provincially accredited to grant bachelor’s degrees. Through an arrangement with the Alberta Department of Advanced Education, the State of Arizona, and the NCA, the computer engineering technology and information technology curricula offered at DeVry Calgary fall under the accreditation of DeVry Phoenix as an off-site instructional location. The electronics engineering technology program is accredited by the Canadian Technology Board (CTAB).

The Commonwealth of Dominica authorizes Ross University School of Medicine to confer the Doctor of Medicine degree. The medical school has been recognized and accredited as a University and School of Medicine by the Dominican Medical Board (“DMB”). The National Committee on Foreign Medical Education of the U.S. Department of Education has affirmed that the DMB has established and enforces standards of educational accreditation that are comparable to those promulgated by the U.S. Liaison Committee on Medical Education.

In addition, the states of New York, New Jersey, California, and Florida — the only four states to require separate approval for medical schools — have approved or found the Ross program of study to be acceptable.

The Veterinary School has been recognized as a University and School of Veterinary Medicine by the government of the Federation of St. Christopher and Nevis (“St. Kitts”) and is chartered to confer the Doctor of Veterinary Medicine degree. The Veterinary School is American Veterinary Medical Association (“AVMA”) listed and has affiliations with 23 AVMA-accredited U.S. colleges of veterinary medicine so that Ross students can

Chamberlain College of Nursing is NCA accredited. Both the ASN and BSN programs are approved by the Missouri State Board of Nursing and accredited by the National League for Nursing Accrediting Commission. The BSN program is accredited by the Commission on Collegiate Nursing Education.

DeVry needs authorizations from many state or Canadian provincial licensing agencies or ministries to recruit students, operate schools, conduct exam preparation courses, and grant degrees. Generally, the addition of any new program of study or new operating location also requires approval by the appropriate licensing and regulatory agencies. In the United States, each DeVry University location is approved to grant associate, bachelor’s and/or master’s degrees by the respective state in which it is located.

Many states and Canadian provinces require for-profit postsecondary education institutions to post surety bonds for licensure. In the United States, DeVry has posted approximately $9.1 million of surety bonds with regulatory authorities on behalf of DeVry University, and an additional $0.8 million on behalf of Becker Professional Review. We have posted CDN $0.3 million of surety bonds with regulatory agencies in Canada.

Certain states have set standards of financial responsibility that differ from those prescribed by federal regulation. DeVry believes it is in material compliance with state and Canadian provincial regulations. If DeVry were unable to meet the tests of financial responsibility for a specific state, and could not otherwise demonstrate financial responsibility, we could be required to cease operations in that state. To date, DeVry has successfully demonstrated its financial responsibility where required.

Effective with the summer 2006 term, tuition at DeVry’s U.S. undergraduate campuses and University Centers for two semesters (one academic year) ranges from $12,340 to $13,700. Variations in tuition depend on location. Current tuition is approximately 5% higher than it was last year.

Based upon current tuition rates, a student enrolling in the five-term undergraduate network systems administration program will pay total tuition ranging from $30,900 to $34,300. A student enrolled in the eight-term undergraduate business administration program will pay total tuition ranging from $49,410 to $54,850. Students enrolled in an online program generally pay a higher tuition rate. Students attending school part-time are charged a lower tuition that varies with the number of credit hours taken each semester, but the total tuition cost for a program taken on a part-time basis will be higher than if taken on a full-time basis.

Undergraduate tuition rates at DeVry University are below the average tuition at four-year independent institutions, but generally are higher than the average at four-year publicly supported institutions. For the academic year 2005-2006, the average annual tuition and fees at four-year private schools was reported by the College Board to be $21,235, an increase of 5.9% from last year. The average annual tuition and fees at four-year publicly supported institutions increased 7.1% from last year to $5,491, and two-year publicly supported institutions reportedly increased their tuition by 5.4% to $2,191 per year. While these increases were significantly lower than the double-digit increases in the recent past, they continue to increase faster than the rate of inflation.

Effective with the September 2006 term, Keller graduate program tuition per classroom course (four quarter credit hours) ranges from $1,635 to $2,015, depending on location. This is an increase of approximately 5%. The price for a graduate course taken online is $2,015, compared to $1,835 previously.

If a student leaves school before completing a term, federal, state, and Canadian provincial regulations and accreditation criteria permit schools to retain only a set percentage of the total tuition received. This amount varies

In addition to the tuition amounts described above, undergraduate students at DeVry University may incur a technology fee depending upon their program of study. For example, some DeVry programs, including the computer information systems and electronics and computer technology programs, require students to purchase a laptop computer at some locations. Students also must purchase their own textbooks and supplies.

Current tuition and fees for the beginning basic sciences portion of the programs at the medical and veterinary schools is $12,125 per semester. This tuition rate became effective in September 2006, and represents an increase from January 2006 tuition rates of approximately 5%. Tuition and fees for the final clinical portion of the programs are $13,250 per semester for the medical school, and $15,300 per semester for the veterinary school. These amounts do not include the cost of books, supplies, or living expenses.

DeVry believes that Ross University’s tuition is at the low end of the range among private medical and veterinary schools, but approximately equal to or higher than tuition in publicly supported medical and veterinary schools. Tuition rates at most medical and veterinary schools, including Ross University, have increased every year, and management believes rates will continue to increase.

Tuition for the 2005-06 academic year for on-campus and online programs was $455 and $465 per credit hour, respectively. Students enrolled on a full-time basis (between 12 and 17 credit hours) were charged a flat tuition amount of $5,915 per semester. For the 2006-07 academic year, tuition will increase to $478 per credit hour for the on-campus program, and $488 per credit hour for the online program. Full-time enrollment tuition will increase to $6,214 per semester.

DeVry believes that Chamberlain’s tuition is at the low end of the range among private nursing schools, but equal to or higher than tuition in publicly supported schools. Tuition rates at most nursing schools have increased every year, and management believes they will continue to increase.

The price of the complete classroom Becker CPA review course is $2,570. The complete CPA review course on CD-ROM and the complete online review course are the same price. Exam candidates may elect to enroll for individual sections of the exam review course at a price of $825 per section. We offer discounts from these tuition rates under various enrollment promotions at college campuses and for students employed by participating accounting firms.

The current list price for the basic onsite CFA exam course is $1,390, but we offer various promotional program discounts.

Students attending DeVry University finance their education through a combination of family contributions, individual savings, financial aid (including university-provided financial aid), and tuition reimbursement from their employers.

DeVry believes that more than 80% of our U.S. undergraduate students receive some government-sponsored financial aid, and that a similar percentage of the students at the Calgary, Canada campus receive some government-sponsored financial assistance. These estimates are consistent with recent studies by the U.S. Education Department’s National Center for Education Statistics. Nationally, the percentage of students receiving financial aid varies

DeVry University assists its undergraduate students in locating part-time employment to supplement their incomes and help finance their education. Data from the National Center for Education Statistics indicates that almost half of all full-time college students between the ages of 16 and 24 are employed, but we believe the employment rate among DeVry full-time undergraduate students is higher.

At Keller Graduate School, student reliance on government-sponsored financial aid in the form of student loans has been increasing for the past several years, providing almost 75% of revenues in 2005. Additionally, we believe that more than half of Keller graduate students receive some tuition reimbursement assistance from their employers.

Government-provided financial aid and assistance programs are subject to political and governmental budgetary considerations. In the United States, the Higher Education Act (“HEA”) guides the federal government’s support of postsecondary education. The HEA was most recently reauthorized in the fall of 1998 to redefine and extend the numerous financial aid programs then in existence. Typically, the HEA is reviewed and amended every five years, but other political agenda items have delayed this process. Even if reauthorization continues to be delayed, management expects current financial aid programs would be extended as they have been in the past. As reauthorization moves forward, there may be proposals for change that could adversely affect the amount of student financial aid available to students. There is no assurance that federal funding will be continued at its present level or in its present form. A reduction in financial aid funding levels could result in lower enrollments or require us to increase the amount of financial aid we offer our students.

Extensive and complex regulations in the United States and Canada govern all of the government grant, loan, and work study programs in which DeVry University, Ross University and Chamberlain College of Nursing and their respective students participate. Accordingly, DeVry must comply with many rules and standards, including maximum student loan default rates, limits on the proportion of its revenue that can be derived from federal aid programs, prohibitions on certain types of incentive payments to student recruiters, standards of financial responsibility, and administrative capability requirements.

The financial responsibility test for continued participation by an institution’s students in federal financial assistance programs is based upon a composite score of three ratios: an equity ratio that measures the institution’s capital resources; a primary reserve ratio that measures an institution’s ability to fund its operations from current resources; and a net income ratio that measures an institution’s ability to operate profitably. A minimum score of 1.5 is necessary to meet the Department of Education’s financial standards. In 2004, DeVry received notice from the Department of Education that its financial responsibility ratios yielded a composite score of 1.4 for the year ended June 30, 2003. Because of this deficiency, certain restrictions were imposed on DeVry University’s procedures for submitting requests for financial aid funds for its students. These restrictions did not require DeVry to significantly alter its existing practices.

DeVry’s composite score has exceeded the required minimum of 1.5 every year beginning June 2004, so all restrictions on its operations have been lifted. Management believes we will continue to demonstrate the required level of financial stability. If DeVry cannot meet requisite financial responsibility standards or otherwise demonstrate, within the regulations, its ability to continue to provide educational services, DeVry may be required to post a letter of credit to enable its students to continue to participate in federal financial assistance programs.

Institutions that participate in U.S. federal financial aid programs must disclose information about undergraduate student “completion rates” to current and prospective students. The federal Student-Right-To-Know Act defines the cohort of students on which the institution must report as “first-time, full-time, degree-seeking” students. Completion rates calculated in accordance with the statute at each of DeVry’s U.S. undergraduate campuses generally fall within the range of completion rates at selected four-year urban public colleges in the areas in which its campuses are located. However, its overall completion rate actually is higher than reported in these

Specialized staff at DeVry’s Oakbrook Terrace headquarters reviews, interprets, and establishes procedures for compliance with regulations governing financial assistance programs and processes financial aid applications. Because financial assistance programs are required to be administered in accordance with the standard of care and diligence of a fiduciary, any regulatory violation could be the basis for disciplinary action, including the initiation of a suspension, limitation, or termination proceeding.

In the United States, DeVry University has completed and submitted all required audits of compliance with federal financial assistance programs for fiscal 2005. DeVry’s independent public accountants are currently conducting the required audits of the one-year period ending June 30, 2006. In conjunction with previously filed financial aid audit reports, DeVry University has been required to post letters of credit. Currently, there are approximately $0.5 million in letters of credit outstanding. This compares to $3.1 million in letters of credit outstanding last year. Most of the letters of credit expire in one year or less. No amount has ever been drawn under these letters of credit issued on behalf of DeVry.

As a part of its effort to monitor the administration of student financial assistance programs, the Department of Education may conduct site visits and program reviews at any educational institution at any time. Reviews at several DeVry University campuses have not resulted in any adverse material findings or adjustments. Although management has no reason to believe that any proceeding against DeVry is presently contemplated, if such a proceeding were initiated and caused the Department of Education to substantially curtail DeVry University’s participation in government grant or loan programs, DeVry’s enrollments, revenues and accounts receivable could be all adversely affected.

In the spring of 2004, an Alpharetta, Georgia undergraduate student complained that an admissions advisor had entered incorrect financial information into the student’s application for financial aid. Upon review, DeVry determined that financial information entered for this student and for several other students was incorrect. We promptly notified the U.S. Department of Education of these findings as required by federal regulation, and terminated several employees for violation of company policies. Our internal controls prevented any student from receiving an incorrect disbursement. After conducting follow-up internal reviews, DeVry has determined that no further action is necessary.

In addition to the requirements that educational institutions must meet, student recipients of financial aid must maintain satisfactory academic progress toward completion of their program of study and an appropriate grade point average.

DeVry University students participate in many U.S. and Canadian financial aid programs. Each of these programs is briefly described below.

DeVry University students in the United States rely on four types of U.S. Department of Education financial aid programs under Title IV of the Higher Education Act.

A U.S. Department of Education regulation known as the “90/10 Rule” affects only for-profit postsecondary institutions, such as DeVry University, Ross University and Chamberlain. Under this regulation, students attending a for-profit institution that derives more than 90% of its revenues from federal financial assistance programs in any year may not participate in these programs for the following year. Final data for fiscal 2006 are not yet complete, but in fiscal 2005, the DeVry University U.S. undergraduate system derived approximately 70% of its revenues from federal financial assistance programs, and its graduate programs derived approximately 75% of revenues from federal financial assistance.

Several states, including California, Colorado, Florida, Georgia, Illinois, Minnesota, New Jersey, New York, Ohio and Pennsylvania, offer state grant and loan assistance to eligible undergraduate students.

The United States has a number of tax-favored programs aimed at promoting savings for future college expenses. These include state-sponsored “529” college savings plans, state-sponsored prepaid tuition plans, education savings accounts (formerly known as education IRAs), custodial accounts for minors, Hope and Lifetime Learning credits, and tax deductions for interest on student loans.

A new study released by the Educational Policy Institute asserts that non-repayable grant aid works better than loans as a way of getting students from low-income families to enroll in college and complete a degree. According to the Chronicle for Higher Education, the paper states grant programs should concentrate on low-income students, as do the Pell Grants, which it describes as keeping “a laser like focus on need.” Traditional grant packages like tax credits, tuition subsidies, and loan remissions can result in substantial waste and windfalls to wealthier students, the report says.

Undergraduate students who are Canadian citizens or permanent residents of Canada (other than students from Quebec) are eligible for loans under the Canada Student Loan Plan, which is financed by the Canadian government but administered at the provincial level. The loans are interest-free while the student is in school, and repayment begins six months after the student leaves school. Qualified students also may benefit from Canada Study Grants (designed for students whose financial needs and special circumstances cannot otherwise be met), tax-free withdrawals from retirement savings plans, tax-free education savings plans, loan repayment extensions, and interest relief on loans.

DeVry University’s EDUCARD Plan is available to its U.S.-based undergraduate students; a similar option is available at the Calgary, Canada campus. The EDUCARD Plan is an installment loan program designed to assist students who are unable to completely cover educational costs by other means. EDUCARD installment loans may be used only for tuition, books, and fees, and are available only after all other student financial assistance has been applied toward those purposes. Repayment of EDUCARD Plan balances is negotiated to address the financial circumstances of the particular student. Typically, a student will have a monthly repayment plan with all balances due within 12-24 months after the student leaves school. Amounts owed are subject to a monthly interest charge of one percent of the average outstanding balance.

The remaining gross receivable balance under DeVry University’s EDUCARD Plan for current and former U.S. undergraduate students at June 30, 2006, was approximately $51.7 million, compared to approximately $44.5 million last year. DeVry believes that the principal factors leading to the increase in accounts receivable are increased enrollment, higher tuition rates with no commensurate increase in government financial aid, extended monthly payment plans to better serve DeVry’s growing population of military and adult students, and an increased population of part-time students, who have fewer financial aid options than full-time students. Also, the shorter eight-week sessions at DeVry University Centers and DeVry University Online have produced a slower collection of receivables, as administrative systems and staff adjust to the new and shorter collection cycle.

Since September 2000, DeVry has been offering a loan program with funding from private lenders for students whose federal- and state-funded financial aid is not sufficient to cover all their educational expenses. DeVry University has assumed limited risk-sharing for defaults under this loan program. The program offers longer repayment periods, lower monthly payments, and generally lower interest rates on borrowings than loans under the EDUCARD Plan.

DeVry University undergraduate students also are eligible for numerous scholarships. Scholarship programs generally are designed to attract recent high school graduates and students enrolled at community colleges, with awards that range from $1,000 per term up to the amount of full tuition. DeVry University also has provided funds in the form of institutional grants to help those students most in need of financial assistance.

Keller graduate students may choose from several deferred tuition payment plans. Students eligible for tuition reimbursement plans may have their tuition billed directly to their employers. Educational expenses paid by an

Approximately 85% of Ross University students receive some form of federal financial aid, all of which is in the form of student loans. Loan limits are $18,500 per academic year, with a $138,500 aggregate borrowing limit that includes Stafford Loan amounts borrowed as an undergraduate. Of the $18,500 in academic year borrowings, no more than $8,500 may be in subsidized loans. Final data for fiscal 2006 are not yet complete, but in fiscal 2005, Ross University derived approximately 70% of its revenues from federal assistance programs.

Many Ross students also borrow under private loan programs to pay the portion of their tuition that exceeds federal loan limits, as well as to meet living expenses while they are in school. Ross University offers a limited number of full tuition scholarships to eligible students.

Approximately 70% of students attending Chamberlain College of Nursing receive some form of financial assistance. Chamberlain students are eligible for most of the same financial aid programs available to undergraduate students attending DeVry University.

Students attending the Becker CPA or Stalla CFA review courses are not eligible for federal or state financial aid, but many receive partial or full tuition reimbursement from their employers.

The U.S. Department of Education has instituted strict regulations that penalize institutions whose students have high default rates on federal student loans. For a variety of reasons, high default rates are most often found in proprietary institutions, institutions with large minority student populations, and community colleges — all of which tend to have a higher percentage of low income students enrolled than do four-year publicly supported and independent colleges and universities.

Educational institutions are penalized to varying degrees under the Federal Family Education Loan Program or the William D. Ford Federal Direct Student Loan Program, depending on the default rate for the “cohort” defined in the statute. An institution with a cohort default rate that exceeds 20% for the year is required to develop a plan to reduce defaults, but the institution’s operations and its students’ ability to utilize student loans are not restricted. An institution with a cohort default rate of 25% or more for three consecutive years is ineligible to participate in these loan programs and cannot offer student loans administered by the U.S. Department of Education for the fiscal year in which the ineligibility determination is made and for the next two fiscal years. Students attending an institution whose cohort default rate has exceeded 25% for three consecutive years also are ineligible for Pell grants. Any institution with a cohort default rate of 40% or more in any year is subject to immediate limitation, suspension, or termination proceedings from all federal aid programs.

DeVry University carefully monitors students’ loan default rate, and has never had a cohort default rate of 25% or more for three consecutive years, or of 40% or more in any one year. We are not subject to any restriction or termination under any student loan program.

According to the U.S. Department of Education, the default rate for all colleges and universities eligible for federal financial aid has been in the 4-6% range in the past several years. DeVry University had a Federal Family Education Loan Program student loan cohort default rate for 2003 of approximately 5.7%. This compares to a weighted system average of 7.3% for 2002 and 7.6% for the year 2001. The reported rates for 2003 reflect the

Under the Federal Perkins loan program, the institution is responsible for collecting outstanding loans. Any institution with a Perkins loan cohort default rate exceeding 15% must establish a default reduction plan.

For fiscal 2004 (the latest year for which data is available), DeVry’s Perkins loan cohort default rate was approximately 8.5%, compared to 11.7% for 2003, and 13.8% for 2002. DeVry has worked to reduce the default rate by implementing student counseling and additional collection efforts and retaining outside loan service agencies.

Default rates under Title IV loans for 2003 were 0.1% for the medical school and 0.0% for the veterinary school. For 2002 the default rates were 1.3% for the medical school and 0.7% for the veterinary school. Default rates for 2004 have not yet been released.

Default rates under Title IV loans for 2003 and 2002 were 0.0% and 2.2%, respectively. Default rates for 2004 have not yet been released.

DeVry University believes that the employment of its graduates is essential to its ability to attract and retain students. Career services professionals located at DeVry undergraduate campuses work with students to choose careers, craft resumes, and prepare for job interviews. The staff also maintains contact with local and national employers to proactively identify job opportunities and arrange interviews. In many cases, company hiring representatives conduct interviews on DeVry University campuses.

The need for skilled employees has placed an increased premium on educated workers in our economy, as evidenced by the widening gap in wages for college and high school graduates. In 2000, the median income of U.S. employees with a bachelor’s degree was approximately $50,000, more than 60% higher than the median income for those with only a high school education. It is estimated that 85% of all jobs in the United States currently require education or training beyond high school, up from only 65% as recently as 1991.

DeVry University attempts to gather accurate data to determine how many of its undergraduates are employed in positions related to their program of study within six months following graduation. To a large extent, the reliability of such data depends on the quality of information that graduates self-report.

In the ten-year period ending October 2005, our U.S. campuses graduated more than 62,000 students who were eligible for career services assistance. (This number excludes graduates who continued their education, students from foreign countries not legally eligible to work in the United States, and other categories of students who were not available for employment.). More than 53,000 graduates during this ten-year period actively pursued employment or were already employed; 90% of those held positions related to their program of study within six months of graduation.

For the three undergraduate classes that ended in calendar year 2005, there were 7,521 graduates from DeVry’s U.S. undergraduate degree and diploma programs eligible for career service assistance, excluding the one-year post-baccalaureate information technology program. (Again, this total excludes students continuing their education, students from foreign countries legally ineligible to work in the United States, and others ineligible for employment.) From that pool of graduates, 6,295 actively pursued employment or were already employed. Within six months of graduation, 5,548, or 88.1% of those graduates were employed in positions related to their program of study. This compares to 84.7% who were employed in positions related to their program of study for the three classes that ended in calendar year 2004, and 83.4% who were employed in positions related to their program of study for the three classes that ended in calendar year 2003.

DeVry believes that a significant number of graduating students currently employed in positions not directly related to their program of study have chosen to not actively seek other employment opportunities. For the three graduating classes in calendar year 2005, there were 819 graduates who were employed but not in positions related to their program of study. Of these individuals, 74% did not conduct an active employment search through DeVry University’s career services office.

DeVry University’s 2005 graduates achieved average annual starting compensation ranging from $29,980 to $45,055. Individual compensation levels vary depending upon the graduate’s previous employment experience, program of study, and geographic area of employment.

DeVry University’s Calgary campus graduated more than 3,000 students over the past decade who were eligible for career services assistance. For the ten-year period ending October 2005, nearly 87% of those graduates who actively pursued employment or who were already employed when they graduated held positions related to their program of study within six months of graduation. For the three classes that ended in calendar year 2005, over 91% of the Calgary graduates who actively pursued employment secured jobs or were already employed in positions related to their program of study within six months of graduation. This includes students who received diplomas, those who received bachelor’s degrees through the DeVry University Phoenix degree completion program in Calgary or bachelor’s degrees awarded under the authority of the Government of Alberta, and those students who completed their degree requirements at a U.S. DeVry campus, but does not include graduates of the one-year information technology program.

DeVry believes that no single employer has hired more than 5% of our graduates in recent years. Major employers of DeVry undergraduates include Abbott Laboratories, Accenture, Cingular Wireless, Federal Express, Fifth Third Bank, Hewlett-Packard, IBM, Intel, MCI, Motorola, Northrop Grumman, Schlumberger, Siemens and Xerox.

Management considers its career services commitment an important element of its service to students. Based upon suggestions and recommendations from students, alumni, and staff, the career services function was restructured last year so that all career services, whether for a current or former undergraduate or graduate student, are delivered through the campus career services offices. Additionally, DeVry University’s new national job database allows graduates and alumni to seamlessly, from one URL, view, apply for, and learn more about job leads appropriate to their experience and education level.

DeVry University’s enrollment is somewhat seasonal. The schools’ highest enrollment and revenues typically occur in the fall, which corresponds to the second and third quarters of DeVry’s fiscal year. Enrollment is slightly lower in the spring, and the lowest enrollment generally occurs during the summer months. At Ross University, the September term typically has larger enrollments, with the May term having a somewhat smaller total student population. In contrast, Becker historically experienced higher enrollments for its courses beginning in July (the period leading to the fall CPA exam) than for its classes beginning in January (the period leading to the spring CPA exam). With the introduction of the new on-demand exam format, Becker’s seasonal pattern is somewhat less pronounced.

Results of operations reflect both this seasonal enrollment pattern and the pattern of student recruiting activity costs that precede the start of every term. Revenue, income before interest and taxes, and net income by quarter for each of the past two fiscal years are included in Note 16 to the Consolidated Financial Statements, “Quarterly Financial Data.”

DeVry has approximately 4,800 regular full- and part-time employees. Approximately 500 of these individuals work at the corporate headquarters in Oakbrook Terrace, Illinois, and a nearby office that serves online students. In addition to its regular employees, DeVry employs nearly 600 students at campuses during peak periods as faculty assistants and in other part-time positions.

Staff at DeVry’s Oakbrook Terrace, Illinois headquarters supports the faculty and staff at each DeVry University location by providing a broad range of services. Among the centrally-provided support services are curriculum development, academic management, licensing and accreditation, marketing and recruiting management, computer services, financial aid processing, regulatory compliance, legal, tax, payroll, and finance and accounting.

The only employees represented by a union are approximately 170 administrative and support employees of Ross University’s medical school on Dominica. These employees are covered by a collective bargaining agreement with a local union.

DeVry believes that its relationship with its employees is satisfactory.

Each DeVry University undergraduate campus is managed by a president or campus dean and has a staff of academic deans, faculty and academic support staff, career service and student service personnel, and other professionals. Each campus also has an admissions director, who reports to a central organization responsible for new student recruiting. Each DeVry University Center is managed by a center director and has admissions representatives and appropriate academic and administrative support staff. Group vice presidents of operations oversee the campuses and centers in geographically defined areas.

The Ross University School of Medicine and School of Veterinary Medicine are managed by deans with appropriate department chairs to oversee the educational operations. In addition, each campus has student services staff to assist with financial aid, housing, and other student-related matters. The campuses are supported by Dominica Management, Inc., a central administrative staff, located in Edison, New Jersey.

Chamberlain College of Nursing is organized like a DeVry University campus: the school president is supported by program chairs, who oversee educational operations and programs. Student services staff is available to assist campus and online students with admissions, financial aid, housing, and other aspects of student life. Administration of the Chamberlain online program offerings is supported, in part, by staff at DeVry University Online.

Becker Professional Review is managed by a staff headquartered in Oakbrook Terrace that supports its operations. Certain regional operations, as well as some other functions such as curriculum development, are managed and located throughout the United States and Canada.

Each DeVry University undergraduate campus president hires academic deans and faculty members in accordance with internal criteria, accrediting standards, and applicable state law. There are approximately 1,000 full and part-time faculty member employees among all of the DeVry University undergraduate teaching locations. More than 85% of our full-time undergraduate faculty members hold advanced academic degrees, and most faculty members teaching in technical areas have related industry experience. DeVry University offers sabbatical and other leave programs to allow faculty to engage in developmental projects or consulting opportunities so they can maintain and enhance their currency and teaching skills.

In addition to its regular faculty, DeVry University engages adjunct and visiting faculty — mostly in the evening programs and at DeVry University Online — who teach on a part-time basis while continuing to work in their technical field or specialty.

Graduate program faculty members are practicing business professionals who are engaged to teach on a course-by-course basis. We offer a multi-session course to train and develop new faculty throughout Keller’s national system. Over the past several years, graduate school courses have been taught selectively by full-time faculty to respond to student demand in areas of rapidly growing enrollment and to meet licensing approval requirements in certain states. Less than 10% of our graduate instructors, excluding non-faculty employees who teach courses on an occasional basis, are employed on a full-time basis.

DeVry University faculty members have teaching schedules that may include both day and evening classes. Some faculty may teach both graduate and undergraduate courses, depending upon their qualifications and the demand at specific locations or for specific courses.

Faculty members are evaluated periodically based on student comments and observations by an academic dean. DeVry University does not offer tenure.

Ross University has approximately 400 employees. An additional 100 individuals are employed by Dominica Management, Inc., Ross University’s administrative services provider, and work in Edison, New Jersey. The medical school employs approximately 65 full-time faculty members, who teach the basic science program. Each of these individuals has a Ph.D. or an M.D. degree. The full-time faculty is supplemented by visiting or part-time instructors who are engaged to lecture on very specialized or emerging subjects.

The veterinary school employs approximately 50 full-time faculty members, who teach the basic science pre-clinical portion of the program. Each of these individuals has either a Ph.D. or D.V.M. degree.

Faculty members are not tenured, but each faculty member generally has an employment agreement of one to three years in length.

Chamberlain College of Nursing has approximately 35 employees. Included in this total are 11 full-time faculty members. In addition, there are more than 15 part-time faculty members, who are employed on a per course basis. Most faculty members have a Master of Science in Nursing, and several have a Ph.D. Those faculty without a master’s degree are enrolled in a graduate program in nursing. Some general education courses in the St. Louis nursing program are taught by faculty at a nearby university. Chamberlain faculty members are not tenured.

Becker’s faculty consists primarily of practicing professionals and university professors who teach the review courses on a part-time, course-by-course basis.

DeVry owns and uses numerous trademarks and service marks, such as “DeVry,” “DeVry University,” “Becker Professional Review,” “Ross University,” “Chamberlain,” and variants thereof. All trademarks, service marks, and copyright registrations associated with its businesses are registered in the name of DeVry Inc. or one of its subsidiaries. Copyright registrations expire over various periods of time. DeVry vigorously defends against infringements of its trademarks, service marks, and copyrights.

DeVry’s Web site is at http://www.devryinc.com.

Through its Web site, DeVry offers (free of charge) the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act (15 U.S.C. 78m(a) or 78o(d)) as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the SEC.

The Web site also includes copies of the following:

Information contained on the Web site is not incorporated by reference into this report.

Copies of the DeVry’s filings with the SEC and the above-listed policies and charters also may be obtained by written request to the Director of Investor Relations at DeVry’s executive offices.

DeVry’s business operations are subject to numerous risks and uncertainties. Some of these are described below. Because of their very nature, management cannot predict all the possible risks and uncertainties that may arise. Risks and uncertainties that may affect DeVry’s business include, but are not limited to:

There are no unresolved SEC staff comments.

DeVry University undergraduate campuses are large and modern buildings located in suburban communities or urban neighborhoods. They are easily accessible to major thoroughfares, have available parking areas, and many are served by public transportation. Each campus includes teaching facilities, admissions and administrative offices. Teaching facilities include classrooms, laboratories, libraries, bookstores and student lounges. Laboratories include computers and various telecommunications, electronic and biomedical equipment necessary to provide an appropriate environment for students’ development of the required technical skills for their programs of study. Computer laboratories include both stand-alone and networked PC-compatible workstations that support all curricular areas with numerous software packages offering a variety of business, engineering and scientific applications. Connections to the Internet and World Wide Web are included through the computer laboratories as a part of the program curriculum.

No campus that is owned by DeVry is subject to a mortgage or other indebtedness.

In March 2002, DeVry announced that it signed a lease for the construction of a 72,000 square-foot campus in Westminster (Denver), Colorado. Classes were offered in this facility for the first time in March 2003. This facility replaces the smaller facility acquired in 1999 with DeVry’s acquisition of Denver Technical College. Because the original facility located at 925 South Niagara Street, in Denver, Colorado was no longer essential to its operations in this market, it was sold in 2006.

In the Toronto area, DeVry’s teach out agreement with RCC College of Technology is completed, and DeVry surrendered its lease, effective June 30, 2005, to its landlord of the Mississauga, Ontario campus.

In Fremont, California, DeVry completed construction of an 84,000 square foot dormitory adjacent to its campus. This dormitory began housing students in July 2005, the start of the summer semester. Capacity of this dormitory is approximately 300 students.

In 2006, DeVry offered for sale the building and land located at 22801 Roscoe Boulevard in West Hills, California. DeVry sold this facility in September 2006 for $36 million. To service its existing student population, DeVry is leasing back the building and parking spaces for approximately $123,000 per month for the initial lease term, ending on December 31, 2006. DeVry will have the option to extent the term for additional periods at the same base rent, if necessary. DeVry plans to relocate to the Sherman Oaks area in surburban Los Angeles in the coming months in a leased facility.

The following table sets forth certain information regarding the 23 large campus properties at which DeVry University undergraduate programs were conducted at June 30, 2006:

In addition to the undergraduate programs that are taught at these campuses, Keller graduate degree programs and Becker CPA Review programs are also available at some sites.

In July 2006, there were 58 DeVry University Centers throughout the United States either in operation or planned to be opened in the coming months. Undergraduate degree programs are offered at 50 of these centers. DeVry plans to open six to eight new DeVry University Center locations in fiscal 2007.

DeVry University Centers are established in convenient metropolitan locations in modern buildings. These teaching centers, which mostly range in size from approximately 5,000 to 20,000 square feet, include classrooms, computer labs with Internet access, reference materials, admissions and administrative offices. Teaching centers have an information center designed to enhance students’ success and support coursework requiring data and information beyond that provided in course texts and packets. The information centers include personal computers; all software required in courses; Internet access; alternate texts; popular business periodicals; videos of selected courses; and access to numerous electronic data-bases.

Examples of smaller DeVry University Centers include those in Scottsdale, Arizona (4,000 square feet); Waukesha, Wisconsin (4,800 square feet); and Kansas City, Missouri (5,200 square feet). Larger DeVry University Centers include Chicago, Illinois (16,050 square feet); Columbus, Ohio (16,200 square feet); Colorado Springs, Colorado (17,500 square feet); and Las Vegas, Nevada (18,500 square feet).

The medical school’s basic science instructional facilities are located on an approximately 27 acre campus on the Caribbean island of Dominica. Approximately 16 acres are occupied under lease. An additional 11 acres were purchased in fiscal 2004 to facilitate expansion of instructional facilities and student housing.

In addition to classrooms and auditoriums, educational facilities include a gross anatomy lab, a multi-purpose lab, library and learning resource center, offices, bookstore, cafeteria and recreational space. Classrooms and laboratories are furnished with state of the art audio-visual equipment. During fiscal 2004, a new 33,000 square foot multi-purpose building that includes a 308 seat auditorium, problem-based learning labs and faculty offices was completed and put into service. A new 21,000 square foot facility with a 300 seat classroom, patient simulator labs and a patient exam center was also completed and put into service. During fiscal 2005, the medical school refurbished 78 housing units that occupied part of the land acquired in the previous fiscal year. The refurbished housing units are being used for students and visiting faculty. During fiscal 2006 a new 408 seat auditorium was constructed in a leased facility to be utilized in September 2006.

The veterinary school’s pre-clinical instructional facilities are located on a 50 acre site in St. Kitts. Ross University owns 27 acres including a five acre parcel of land acquired in fiscal 2004 to facilitate campus expansion. The remaining 23 acres are pasture land leased from the government under a long-term lease. Educational facilities include an anatomy/clinical building, pathology building, classroom buildings, administration building, bookstore, cafeteria and a library/learning resource center. The library/learning resource center is believed to be the largest electronic learning lab in veterinary medical education. Animal care facilities include kennels, an aviary, livestock barns and a paddock. In 2005, additional emergency backup electrical generating capacity was added, and construction began on a 150 bed housing facility for first semester students. Estimated completion of the housing units is mid-2007. Plans are being finalized for the construction of a new 150-seat classroom building to further increase student capacity.

Dominica Management, Inc., Ross University’s administrative services provider, is located in approximately 18,000 square feet of leased office space in Edison, New Jersey.

Chamberlain leases approximately 55,000 square feet of space in a hospital facility located in St. Louis, Missouri. The Chamberlain facilities include classrooms, dormitory space and administrative offices.

Becker Professional Review is headquartered at the DeVry’s corporate headquarters in Oakbrook Terrace, Illinois. In addition to this main administrative center, Becker leases approximately 8,300 square feet of space in Southern California for staff devoted to curriculum and other development efforts. Becker also leases approximately 3,500 square feet of space in Melville, New York for its eastern regional sales and administrative staff.

CPA and CFA review classes are conducted in leased facilities, fewer than ten of which are leased on a full-time basis. The remaining classes are conducted in facilities which are leased on an as-needed basis, allowing classes to be added, expanded, relocated or closed as current enrollments require. Becker classes are also offered on several DeVry University undergraduate campuses and at DeVry University Centers where the location and facility availability are appropriate.

DeVry’s administrative offices are located in approximately 123,000 square feet of leased space in an office tower in Oakbrook Terrace, Illinois, a suburb of Chicago. In addition, it leases more than 50,000 square feet in an adjacent building for a data center, additional office space and storage.

In fiscal 2005, DeVry purchased a 108,000 square foot building in Naperville, Illinois, a nearby suburban location, to house its expanding online operations. With the relocation of staff associated with the online operations to the Naperville facility and the relocation of some administrative functions to a nearby underutilized campus, space requirements in the Oakbrook Terrace headquarters were reduced in 2006.

DeVry’s leased facilities are occupied under leases whose remaining terms range from one to 15 years. A majority of these leases contain provisions giving DeVry the right to renew its lease for additional periods at various rental rates, though generally at rates higher than are currently being paid.

DeVry is subject to occasional lawsuits, administrative proceedings, regulatory reviews associated with financial assistance programs and other claims arising in the normal conduct of its business. The following is a description of pending litigation that may be considered other than ordinary and routine litigation that is incidental to the business.

In January 2002, Royal Gardner, a graduate of one of DeVry University’s Los Angeles-area campuses, filed a class-action complaint against DeVry Inc. and DeVry University, Inc. in the Superior Court of the State of California, County of Los Angeles, on behalf of all students enrolled in the post-baccalaureate degree program in Information Technology. The suit alleges that the program offered by DeVry did not conform to the program as it was presented in the advertising and other marketing materials. In March 2003, the complaint was dismissed by the court with limited right to amend and re-file. The complaint was subsequently amended and re-filed. During the first quarter of DeVry’s fiscal year 2004, a new complaint was filed in the same court by Gavino Teanio with the same general allegations and by the same plaintiffs’ attorneys. This subsequent action was stayed pending the outcome of the Gardner matter. The parties have now reached a settlement which is in the process of being implemented as former students elect whether to participate in the settlement. The total amount to be paid out will depend on how many former students elect to participate in the settlement.. The settlement amount is within the amount previously reserved for this matter.

In November 2000, Afshin Zarinebaf, Ali Mousavi and another graduate of one of DeVry University’s Chicago-area campuses filed a class-action complaint in the Circuit Court for Cook County, Illinois, that alleges DeVry graduates do not have appropriate skills for employment in the computer information systems field. The complaint was subsequently dismissed by the court, but was amended and re-filed to include as a plaintiff Mark Macenas, a then-current student in another curriculum from a second Chicago-area campus. In September 2005, the court denied the plaintiff’s motion for class action certification in its entirety and the case was dismissed by the court. The remaining pending claims by each of the named defendants were resolved by payment of less than $25,000 in June 2006.

Brigette Dean Hines, a former student of Ross University Veterinary School of Medicine was dismissed from the school and denied re-enrollment. This former student claims that the dismissal was based upon her handicap and she is seeking compensatory damages for economic and non-economic harm, punitive damages, cost of the suit, attorney’s fees and other relief deemed appropriate by the Court. Ross University filed a motion to dismiss the suit which was denied and discovery will proceed.

Sierra Bay Contractors, the contractor that built the student dormitory building on the DeVry University Fremont, California campus has placed a lien on the site and filed a counterclaim to DeVry’s claim for contract breach, alleging that DeVry has failed to pay for extra work done in building the dormitory. In addition, some of the sub-contractors have also filed liens on the site, seeking additional payments owed to them by the general contractor. The total amount claimed for the extra work is approximately $3.0 million. Discussions are underway to try and resolve these claims. Additional costs of construction, if any, arising from the settlement of these claims would be capitalized as a part of the cost of the building construction and would not result in any immediate additional expense. Accordingly, no accrual has been made for this claim.

Saro Daghlian, a former student at a California DeVry University campus, brought a putative class action suit in the California state district court for the County of Los Angeles alleging that DeVry’s materials distributed to students did not comply with California state statutes including a California Education Code requirement to provide a specified statement to prospective students concerning the transferability of credits. The case was removed to federal court, and a motion to dismiss was filed. The motion to dismiss was denied, and discovery is proceeding.

The total accrual for the resolution of all pending legal claims and for final payment on claims previously resolved was approximately $1.6 million at the end of fiscal 2006.

While the ultimate outcome of pending contingencies is difficult to estimate at this time, DeVry does intend to vigorously defend itself with respect to the pending claims. At this time, DeVry does not believe that the outcome of current claims, administrative proceedings, regulatory reviews and lawsuits will have a material effect on its cash flows, results of operations or financial position.

There were no matters submitted to a vote of DeVry’s security holders during the fourth quarter of the fiscal year.

The name, age and current position of each executive officer of DeVry are:

DeVry’s common stock is listed on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “DV.”

The following table sets forth the high and low sales price information by quarter for the past two years as reported in the consolidated transaction reporting system.

There were 622 holders of record of DeVry’s common stock as of August 15, 2006. The number of holders of record does not include beneficial owners of its securities whose shares are held by various brokerage firms, other financial institutions, DeVry’s 401(k) and profit sharing plan and its employee stock purchase plan. DeVry believes that there are more than 10,000 beneficial holders of its common stock including employees who own stock through the exercise of stock options, who own stock through participation in the employee stock purchase plan or who own stock through their investment election in DeVry’s 401(k) and profit sharing plan.

DeVry is a holding company and, as such, is dependent on the earnings of its subsidiaries for funds to pay cash dividends. Cash flow from DeVry’s subsidiaries may be restricted by law and is subject to some restrictions by covenants in the subsidiaries’ debt agreements, including maintaining consolidated net worth, fixed charge coverage and leverage at or above specified levels. DeVry generated sufficient cash flow in fiscal 2006 to fund its current operations, reinvest in capital equipment as appropriate, reduce outstanding debt and remain in full

Selected financial data for DeVry for the last five years are included in the exhibit, “Five-Year Summary — Operating, Financial and Other Data”, on page 93 of this report.

The following discussion of DeVry’s results of operations and financial condition should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this report.

DeVry ended fiscal year 2006 with a continuation of the improving trends seen throughout the past year. Revenues increased by 7.9% and operating profits more than doubled in fiscal 2006 with all three of DeVry’s business segments contributing to these gains. Revenue growth combined with cost control produced net income for fiscal 2006 of $43.1 million. Earnings per share of $0.61 was a significant increase compared to $0.26 per share in fiscal 2005.

Both financially and operationally, DeVry made progress in executing its strategic growth plan. Such accomplishments include:

The following table presents information with respect to the relative size to revenue of each item in the Consolidated Statements of Income for both the current and two previous fiscal years. Percents may not add due to rounding.

DeVry’s financial performance in fiscal 2006 improved from the results of the previous fiscal year. Fiscal year 2005 and 2004 results have been restated for the adoption of Statement of Financial Accounting Standard No. 123 (revised 2004), Share-based Payments (“SFAS 123(R)”), using the modified retrospective approach as discussed in Note 3 to the Consolidated Financial Statements.

Total consolidated revenue for fiscal 2006 of $843.3 million increased $62.0 million, or 7.9%, as compared to last year. Revenues are reported net of tuition refunds applicable to students who withdraw from the academic term for which they are enrolled during the period specified by the refund policy. Revenue increased at all three of DeVry’s business segments primarily due to new student enrollment growth and tuition and price increases as compared to the year ago period. In addition, revenue increased due in part to higher sales of Becker CPA review materials, the expanding sale of eBooks and higher interest revenue on investments and on undergraduate accounts receivable under DeVry’s student financing program.

In the DeVry University segment, revenues of $677.2 million increased by $31.6 million, or 4.9%, as compared to fiscal 2005. Tuition revenues are the largest component of total revenues in the DeVry University Segment. The two principal factors that influence revenues are enrollment and tuition rates. Key trends in these two components are set forth below.

Total undergraduate enrollment by term:

New undergraduate enrollment by term:

Graduate coursetaker enrollment:

Tuition rates:

DeVry believes that the increasing undergraduate new student enrollments in fiscal 2006 were the result of better integration of marketing and recruiting functions, an improved overall marketing communication plan and better management of lead flow. Also, management believes that demand for technology graduates continues to improve, positively influencing career decisions of new students towards this field of study. Further diversification of programs has offered another avenue for enrollment growth. DeVry University announced a new online specialty within its bachelor of science in technical management degree program, called Health Information Management (“HIT”). This new specialty provides an opportunity for those who hold an associate degree in health information, such as graduates of DeVry’s HIT program, to move seamlessly to a bachelor’s degree and advance within this field.

DeVry believes that efforts at Keller to create new brand awareness through improved messaging have produced positive results and will continue to focus on further improvements in the future.

Also contributing to higher total revenues in the DeVry University segment was an increase in Other Education Revenue partly from sales of electronic textbook materials (“eBooks”).

In the first quarter of fiscal 2005, DeVry completed an agreement with Follett Higher Education Group (“Follett”) to manage the nine remaining U.S. DeVry University campus bookstores not already managed by Follett. As a result, reported bookstore sales revenue was lower than it had been in previous periods. However, DeVry University sales of eBooks in selected graduate and undergraduate online and on-site courses beginning in the latter part of fiscal 2005 has more than offset the reduction in revenues from the bookstores previously managed by DeVry University. DeVry reports the sale of eBooks at their full selling price which is a higher unit price sale than the commission income it reports on book and supply sales by Follett.

Further contributing to the increase in Other Educational Revenue were higher interest charges on undergraduate student accounts receivable which were generally higher in fiscal 2006 than they were in the prior year. These receivables are generally subject to a monthly interest charge of one percent under DeVry University’s EDUCARD revolving charge plan for financing students’ education. These charges generated approximately $2.4 million more in student financing charges in fiscal 2006 than in the prior year.

Partly offsetting the increases in revenue from improved enrollments and higher tuition rates is a growing proportion of working adult undergraduate students who typically enroll for less than a full-time academic load. These students are primarily enrolled in online programs and at programs offered at DeVry University Centers. These part-time students pay a lesser total average tuition amount each term than do full-time students at the undergraduate campus locations. Therefore, the higher revenue per student resulting from tuition increases has been partially offset by a greater proportion of part-time students.

In the Professional and Training segment, revenues reached a record high of $54.0 million, increasing by $9.6 million, or 21.6% from fiscal 2005. The primary reason for the increase was increased enrollment in the Becker Professional Review’s CPA review courses and from increased sales of CPA review courses on CD-ROM. Management believes that these increases are being driven by the continued demand for CPAs by accounting

To further strengthen Becker Professional Review results in future periods, Becker hired a new director of international operations and two directors of business operations responsible for sales and marketing of all Becker products in Canada and in the heavily populated east coast market.

In July 2005, DeVry completed the acquisition of Gearty CPE. Gearty CPE is a provider of continuing professional education programs and seminars in accounting and finance, predominantly serving customers in the New York/New Jersey metro area. The acquisition complements the Becker Professional Review CPA exam review business. The acquisition is being integrated into the Becker operations in other appropriate markets across the country but has not yet contributed significantly to the revenues or operating income of the Professional and Training segment.

In the Medical and Healthcare segment, revenues of $112.1 million increased by approximately $20.8 million, or 22.7%, in fiscal 2006 as compared to last year. Included in this segment are $5.3 million in revenues for fiscal 2006 at Chamberlain as compared to $1.1 million for fiscal 2005. DeVry acquired Chamberlain in March 2005.

Ross University revenues increased by approximately $16.6 million, or 18.4%, as compared to the prior year. The revenue gain is attributable to a 13.2% increase in total student enrollments with the May 2006 semester and a tuition price increase of approximately 5% effective with the September 2005 semester, and a price increase of slightly less than 8% in January 2005. New and total student enrollments at Ross University increased in both the January and May 2006 semesters, reversing a decline in enrollment in the September 2005 semester. To prepare for future enrollment growth, medical school student capacity is being expanded with the leasing of additional space adjacent to the campus to be used as another auditorium for approximately 400 students.

During fiscal 2006, Other Educational Revenue increased by $14.2 million, or 32.6%, to $57.7 million as compared to the prior year. This line item consists of the sale of books and supplies in connection with DeVry’s educational programs, including the commission income earned from Follett; the sale of Becker CPA Review course materials on CD-ROM; and the sale of other CPA and CFA review study materials. Other components of Other Educational Revenue are application and other non-refundable student fees; and interest or payment deferral charges on students’ outstanding accounts receivable balances as discussed above.

Interest Income on DeVry’s short-term investments of cash balances increased by $3.1 million. The increase is due to generally higher levels of short-term investments and higher short-term interest rates for these investments as compared to the prior year.

DeVry adopted SFAS 123(R) effective with the start of the first quarter of fiscal 2006. Financial results for fiscal years 2005 and 2004 have been restated to reflect the modified retrospective approach of adoption. Accordingly, expenses relating to stock-based awards have been included in the various expense categories for both years as appropriate.

SFAS 123(R) establishes the accounting for stock-based awards issued in exchange for employee services. To-date, all of DeVry’s stock-based awards have been granted in the form of stock options. Stock based compensation is measured at the grant date of the option, based on the fair value of the award. The fair value is recognized as expense over the employee’s requisite service period which is the period over which these options vest.

From the beginning of fiscal 2005, DeVry’s stock-based awards were valued using a binomial model. Previously, these awards were valued using the Black-Scholes model for purposes of pro forma disclosure pursuant

DeVry’s Cost of Educational Services increased by $11.1 million, or 2.5%, from fiscal 2005. The largest component of Cost of Educational Services is the cost of faculty and the staff that supports educational operations. This expense category also includes the costs of facilities, supplies, bookstore and other educational materials, student education-related support activities, and the provision for uncollectible student accounts.

During fiscal 2006, cost increases were incurred in support of the higher number of DeVry University Centers and expanding online program enrollments. For the spring 2006 term, courses were being offered at eight new DeVry University locations compared to a year-ago, and the number of online coursetakers increased by approximately 46% from last year to 28,912. Also contributing to the higher cost of educational services was an increase in the provision for doubtful accounts, primarily in the DeVry University undergraduate operations, as student receivables increased from last year through the summer and fall semesters. However, at the start of the spring semester in March 2006, the timeliness of receivable collections improved from prior periods as the result of internal process improvements which partially offset the increase in accounts receivable and the provision for doubtful accounts during the first part of the year.

Partially offsetting these increases were the wage savings from workforce reductions implemented last year and continued spending restraint in operations during fiscal 2006. Included in fiscal 2005 Cost of Educational Services was a $6.7 million workforce reduction charge, principally at DeVry University and $0.4 million of severance related costs associated with DeVry’s agreement with RCC College of Technology for the final phases of the teach out of the Toronto-area campus programs. There are no corresponding charges for workforce reductions in fiscal 2006. Further savings in Cost of Educational Services were generated by $2.8 million of lower expense attributed to stock-based awards as fewer new option grants have been issued this year compared to last year.

Also, lower capital spending during each of the past several years has resulted in $37.6 million of depreciation expense for fiscal 2006 compared to $42.4 million last year. Most depreciation expense is included in the Cost of Educational Services. Included in fiscal 2005 Cost of Educational Services was a $1.5 million impairment loss related to a DeVry owned building in the Denver, Colorado area which was sold in the current year.

Student Services and Administrative Expense increased by $14.0 million, or 4.5%, from fiscal 2005. This expense category includes recruiting costs, general and administrative costs, expenses associated with curriculum development, and the amortization expense of finite-lived intangible assets related to acquisitions of businesses. The increased cost primarily reflects efforts to generate higher new student enrollments in all of DeVry’s educational programs through improved and more efficient advertising and student recruiting. Admissions advisors have been added to support the growing online program enrollments and newly opened DeVry University Centers and at Ross University to offset the previous declines in new student enrollments. Increased new student enrollments, as described above, at DeVry University, Becker Professional Review and Ross University are believed to be, in part, attributable to the higher level and effectiveness of this spending. All new student recruitment expenditures are charged to expense as incurred.

Largely offsetting these increases in student recruiting expense was lower amortization of finite-lived intangible assets related to acquisitions of businesses including, most recently, Ross University and Chamberlain

The DeVry University segment generated operating income of $20.1 million in fiscal 2006 as compared to a $0.6 million operating loss in fiscal 2005. As discussed above, the improvement in operating income was the result of improving enrollments, higher tuition rates and controlled spending. DeVry realized additional savings from the consolidation of its online operations into a building in Naperville, Illinois, a nearby suburb to DeVry’s headquarters location. The acquisition of this building in fiscal 2005 permitted DeVry to relinquish some of its higher cost office space at the headquarters site. In addition, DeVry University’s Canadian operation, which included the teach out cost for the former undergraduate Toronto-area campuses in fiscal 2005, is no longer incurring further charges for the teach out activity. In fiscal 2005, DeVry University incurred operating losses of approximately $3.3 million at its Canadian operation. In the current year, the Canadian operations had a reduced operating loss of approximately $0.2 million.

In the Professional and Training segment, operating income of $18.5 million was another record high, increasing $4.5 million from fiscal 2005. The increase in operating income is primarily due to increased revenue growth in fiscal 2006 as discussed above.

Operating income of $39.8 million for the Medical and Healthcare segment increased by approximately $7.3 million from fiscal 2005. At Ross University, which is the dominant portion of this segment, an increase in student enrollments in January and May 2006 and tuition increases combined to produce the higher revenues and operating income for fiscal 2006 compared to last year even as faculty, staff and facilities are being added to accommodate future enrollment growth.

Interest expense on DeVry’s borrowings was $10.2 million, an increase of $1.1 million from fiscal 2005. The increase in interest expense is due to increases in short-term interest rates partially offset by lower average borrowings during fiscal 2005. At June 30, 2006, the interest rate on DeVry’s Senior Notes was 6.38%, compared to 4.44% one year earlier.

Taxes on income were 25.1% of pretax income for fiscal 2006, compared to 25.5% for fiscal 2005. The lower rate is primarily affected by the impact from stock-based compensation expense deductibility partially offset by the relative proportions of U.S. sourced income to income generated by Ross University as compared to the prior year. Earnings of Ross University’s offshore operations are not subject to U.S. federal or state taxes and also are exempt from income taxes in the jurisdictions in which the schools operate. We intend to indefinitely reinvest Ross University earnings and cash flow to eliminate the outstanding debt as of June 30, 2006, improve and expand facilities and operations at the medical and veterinary schools, and pursue other business opportunities outside the United States. Accordingly, DeVry has not recorded a current provision for the payment of U.S. income taxes on these earnings.

Total consolidated revenue for fiscal 2005 of $781.3 million declined from 2004 by $3.6 million, or 0.5%. Revenues are reported net of tuition refunds applicable to students who withdraw from the academic term for which they are enrolled during the period specified by the refund policy. Fiscal 2005 revenues increased in the Professional and Training segment, the Medical and Healthcare segment, and in the Keller Graduate School of Management operations of DeVry University. However, undergraduate enrollments at DeVry University were lower for each of the three semesters that began during fiscal year 2005, which had an adverse effect on overall financial results. The primary cause of decreased total enrollment was the continued decline in full-time technology students, principally at the large campus locations. Revenue also declined during fiscal 2005 because DeVry University outsourced campus bookstore operations, as discussed more fully below.

In the DeVry University segment, revenues of $645.6 million declined from fiscal 2004 by $20.1 million, or 3.0%. Tuition revenues are the largest component of total revenues in the DeVry University Segment. The two principal factors that influence revenues are enrollment and tuition rates. Key trends in these two components are set forth below.

Total undergraduate enrollment by term:

New undergraduate enrollment by term:

Graduate coursetaker enrollment:

Tuition rates:

Total undergraduate enrollments were down during fiscal 2005 for two reasons. First, new student enrollments declined during fiscal 2003 and the latter part of fiscal 2002, leaving a smaller pool of existing students as we entered fiscal 2005. Second, a greater proportion of undergraduate students are working adults who typically enroll for less than a full academic load. Working adults contributed to the increased undergraduate enrollments at DeVry University Centers and in DeVry University Online, but those increases were insufficient to offset declining total undergraduate enrollments — primarily due to the shrinking field of recent high school graduates pursuing technology-based programs. To reverse the pattern of declining technology and full-time student enrollments, we initiated additional marketing efforts, which reduced the year-to-year decline from 30% to 3.5% over the course of three semesters.

The increase in part-time students (and concurrent decline in full-time students) had a direct effect on fiscal 2005 revenues. Part-time campus-based undergraduate students pay a lower tuition amount each term than full-time

Another reason for the decline in DeVry University revenues in fiscal 2005 was that we outsourced management of campus bookstore and educational supply sales to Follett Higher Education Group, with Follett taking over sales on 14 DeVry campuses. During fiscal 2005, we completed an amended agreement calling for Follett to assume responsibility for bookstores at the remaining nine campus locations and at DeVry University Centers, and also to serve DeVry’s online student population. As a result of this transition, DeVry no longer reports sales revenue from our previously owned bookstores. Instead, we report the commission income DeVry receives on the sales Follett makes to DeVry University students. For fiscal 2005, revenues from the sale of books and educational supplies at DeVry University declined by approximately $8.6 million from fiscal 2004, reflecting both lower student enrollments and the outsourcing arrangement. Despite this decline in reported revenues, there has been no significant effect on income since the commissions DeVry earns from Follett approximate the profits the bookstores generated when DeVry managed them.

In the Professional and Training segment, revenues of $44.4 million reached a record high, increasing by $8.1 million, or 22.5% from fiscal 2004. However, the primary reason for the increase was that revenues declined sharply during the third quarter of fiscal 2004 at Becker Professional’s CPA exam operations because of a change in the CPA exam schedule and format. In fiscal 2005, with the new format exam offered on a regular schedule in each calendar quarter, the number of exam takers (and enrollment in the Becker review course) rebounded sharply.

Effective July 1, 2004, Becker’s fiscal year was realigned from its previous April year-end to a June year-end to make it consistent with the fiscal year for the rest of DeVry.

Revenues of $91.4 million for the Medical and Healthcare segment include results of the Chamberlain College of Nursing from the acquisition date in March 2005. With approximately 450 students enrolled at the time of acquisition, Chamberlain revenues for the final three months of the fiscal year 2005 were approximately $1.1 million.

During fiscal 2005, Ross University revenues increased by approximately $7.2 million, or 8.7%, largely as a result of a tuition increase of slightly less than eight percent implemented in January 2005. However, revenues for the May semester, which are recognized partly in fiscal 2005 and partly in fiscal 2006, declined due to declining enrollment. Specifically, total enrollments at the medical and veterinary schools for the May 2005 semester declined by 8.5% from fiscal 2004 because of changes to admissions standards and stricter academic progress policies for continuing students.

Other Educational Revenue declined by $3.6 million, or 7.7%, from fiscal 2004. These revenues consist primarily of the sale of books and supplies in connection with DeVry’s educational programs, including the commission income earned from Follett. Other components of Other Educational Revenue are the sale of Becker CPA Review course materials on CD-ROM; the sale of other CPA and CFA review study materials; application and other non-refundable student fees; and interest or payment deferral charges on students’ outstanding accounts receivable balances. Revenue declined because, as described above, Follett took over the operations of the DeVry University bookstores.

Interest Income on DeVry’s short-term investments of cash balances increased by $0.5 million during fiscal 2005. The increase is due to generally higher short-term interest rates for these investments and the fact that, unlike in fiscal 2004, DeVry used cash balances for investment earnings rather than to offset bank service fees.

DeVry’s Cost of Educational Services increased by $19.2 million, or 4.6%, from fiscal 2004. The largest component of Cost of Educational Services is the cost of faculty and the staff that supports educational operations. This expense category also includes the costs of facilities, supplies, bookstore and other educational materials, student education-related support activities, and the provision for uncollectible student accounts.

Throughout fiscal 2005, DeVry maintained spending restraint and implemented cost reductions in areas that management believes did not affect the quality of student services. However, there have been cost increases to support the expanding number of DeVry University Centers and growth in DeVry University Online enrollments. Comparing spring 2005 to spring 2004, courses were being taught at eight more DeVry University Centers, and the number of online course takers increased by 79% to 19,759.

Fiscal 2005 Cost of Educational Services also includes approximately $6.7 million of expense related to workforce reductions, principally at DeVry University, that were initiated during the year. In addition, DeVry incurred workforce reduction costs of approximately $0.4 million under our agreement with RCC College of Technology for the final phases of the teach-out of the Toronto-area campus programs, which is described in Note 8 of the Notes to Consolidated Financial Statements.

Cost of Educational Services increased by $2.0 million in fiscal 2005 as compared to fiscal 2004 due to higher expense attributed to stock-based awards as the amount of new options granted during fiscal 2005 increased in comparison to fiscal 2004.

Additions to land, buildings, and equipment during fiscal 2005 were $42.9 million, as we continued to invest in new and improved laboratory and computer equipment, improve facilities for students and staff, and expand operations. As a result, depreciation expense — most of which is included in Cost of Educational Services — increased to $40.9 million. In addition, DeVry recognized a $1.5 million pre-tax impairment loss related to a building in the Denver, Colorado area that we acquired in 1999 as part of Denver Technical College. Although it is still used partly as classrooms and offices, this facility was offered for sale as it is no longer essential to DeVry’s operations, having largely been replaced by a new and larger campus serving the Denver market.

Student Services and Administrative Expense increased by $28.8 million, or 10.3% from last year. Included in this expense category are the costs of new student recruiting, general and administrative costs, expenses associated with curriculum development and the amortization expense of finite-lived intangible assets related to acquisitions of businesses including, most recently, Ross University and Chamberlain College of Nursing. Amortization expense during fiscal 2005 included in this expense category was $14.1 million compared to $13.7 million last year.

The higher Student Services and Administrative expense also reflects greater efforts to generate more new student enrollments through increased advertising and student recruiting for all of DeVry’s educational programs, particularly the DeVry University undergraduate programs. Additional admissions advisors were added during the year at both DeVry University in support of its growing online operations and at Ross University’s medical and veterinary schools. All new student recruitment expenditures are charged to expense as incurred.

Management believes that reductions in technology field employment during the past several years has lessened applicant interest in these fields. Therefore, DeVry increased the level of recruitment activity to increase student enrollments, particularly at DeVry University. DeVry believes that increased and more effective expenditures for new student recruitment were largely responsible for the increase in new undergraduate student enrollment for the spring semester of fiscal 2005, which increased by 6.4% from the previous year. Costs of student recruitment efforts for the summer of fiscal 2006 are included in fiscal 2005.

Also contributing to the increase in Student Services and Administrative Expense is approximately $1.7 million related to workforce reductions that were initiated during fiscal 2005 affecting employees whose wages were included in this expense category.

Student Services and Administrative Expense increased by $4.2 million in fiscal 2005 as compared to fiscal 2004 due to higher expense attributed to stock-based awards as the amount of new options granted during fiscal 2005 increased in comparison to fiscal 2004.

During fiscal 2005 initial development work on the DeVry University new student information system was completed and the system was functionally deployed. This new student information system provides better support for the educational processes and related student services. In accordance with accounting principles for internal software development costs, certain wage and outside consulting costs were capitalized. Indirect expenses, such as training and employee communications, were charged directly to expense as incurred. During fiscal 2005, approximately $0.5 million was capitalized for this project. Since initial development work was substantially completed by fiscal 2005, no further amounts have been capitalized. Costs associated with further development and improvements to the system are being charged to expense as incurred. Cumulatively, a total of $20.6 million was capitalized for this project. All of the initial elements of the system have been placed into service and the capitalized costs are being amortized to expense over their estimated useful lives, not exceeding five years. For fiscal 2005, a total of $4.3 million of previously capitalized costs were amortized to expense. These amounts compare to $5.3 million that was capitalized during fiscal 2004 and $2.3 million of previously capitalized costs that were amortized to expense.

In addition to the new student information system, DeVry implemented a new budgeting and forecasting system in fiscal 2005 to better manage the costs associated with the growing size and complexity of our operations. Approximately $0.6 million of development costs were capitalized for this project during fiscal 2005.

One of DeVry’s directors is an investor in, and a director of, a consulting firm that we engaged to assist with system development projects, including the new student information system. Fees paid to this consulting firm were approximately $1.1 million during fiscal 2005 and $4.8 million during fiscal 2004.

The DeVry University segment recorded an operating loss of $0.6 million in fiscal 2005 as compared to $58.9 million of operating income in fiscal 2004. As discussed above, the primary cause of these lower earnings was a $20.1 million reduction in revenue resulting, in part, from reduced total undergraduate student enrollments and a higher proportion of part-time students. Higher enrollments and increased tuition at the Keller Graduate School partially offset the reductions at the undergraduate level. However, as discussed above, Cost of Educational Services and Student Services and Administrative Expense both increased.

Although we curtailed spending on undergraduate campuses as enrollments declined, significant fixed costs of operation, such as facility-related costs, cannot be reduced. Operating losses of approximately $3.3 million in DeVry University’s Canadian operations, which include the operating losses associated with the final shutdown of the Toronto-area campus and the teach-out agreement with RCC, were approximately $0.7 million higher than in fiscal 2004. Management believes that almost all costs associated with this shutdown have been recognized and operating results in Canada should improve in the future.

In the Professional and Training segment, operating income of $13.9 million was a then-record high, more than doubling from fiscal 2004. In fiscal 2004, the CPA exam format and schedule of exam offerings was changed. Fewer candidates took the test, and thus, fewer candidates enrolled in the Becker CPA Review course. With the new CPA exam format and schedule effective for the entire 2005 fiscal year, enrollments and revenues rebounded.

Effective with the beginning of fiscal year 2005, the Becker business cycle and fiscal year, which had previously ended in April to match the old CPA exam period, was changed to align with the June 30 year-end of DeVry Inc. With the new, nearly continuous, exam administration schedule, management concluded that the historical Becker operating year is no longer appropriate. This shift was implemented and reported in the first quarter of fiscal 2005 as a Cumulative Effect of Change in Accounting equal to $1.8 million of after-tax income, or approximately $0.02 per share. Revenues and operating income for the Professional and Training segment in fiscal

Operating income for the Medical and Healthcare segment increased by approximately $0.1 million from fiscal 2004. Chamberlain College of Nursing, which DeVry acquired at the end of the third quarter of fiscal 2005, contributed approximately $1.1 million of revenue during the fourth quarter, but had no significant effect on operating income.

Although revenues increased, operating margins at Ross University declined from 39.3% in fiscal 2004 to approximately 37.1% in fiscal 2005. There were three changes that, together, caused this decline. First, faculty wages increased and Ross had more faculty members. Second, additions and improvements to facilities at both the medical and veterinary schools resulted in an increase to depreciation expense of almost $1.3 million in fiscal 2005. Finally, Ross increased its marketing support and added several admissions counselors in response to the reduced enrollments in the last two terms of fiscal 2005, which increased student recruitment expense.

Interest expense on DeVry’s borrowings was $9.0 million, an increase of $1.2 million from fiscal 2004. Fiscal 2005 borrowing levels were generally lower, but the interest rate on DeVry’s borrowings is based upon short-term interest rates, which increased significantly during the year. At June 30, 2005, the interest rate on DeVry’s Senior Notes was 4.44%, compared to 2.42% one year earlier.

Taxes on income were 25.5% of pretax income for fiscal 2005, compared to 29.8% for fiscal 2004. The effective tax rate declined because Ross University’s earnings made up a greater proportion of DeVry’s total earnings. Earnings of Ross University’s offshore operations are not subject to U.S. federal or state taxes and also are exempt from income taxes in the jurisdictions in which the schools operate. We intend to indefinitely reinvest Ross University earnings and cash flow to reduce outstanding debt, improve and expand facilities and operations at the medical and veterinary schools, and pursue other business opportunities outside the United States. Accordingly, DeVry has not recorded a current provision for the payment of U.S. income taxes on these earnings.

Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements for the fiscal year ended June 30, 2006, describes in more detail the method of application of significant accounting policies and should be read in conjunction with the discussion below.

DeVry University tuition and technology fees, Ross University tuition for the basic science semesters, and Chamberlain College of Nursing tuition all are billed at the start of each academic term. The revenue is recognized ratably on a straight-line basis over that academic term. Revenue from Ross University clinical terms is recognized based upon the student’s weekly schedule of actual attendance. Refunds of tuition and other charges are reported as a reduction of revenues. Textbook and other educational supply sales, and commissions we receive on such sales by Follett, are recognized when the sale occurs.

Tuition revenue from Becker Professional Review is recognized ratably on a straight-line basis over the course term. Becker Professional Review self-study CD ROM and textbook and other educational product revenues are recognized when the sale occurs. Revenue from training services, which are generally short-term in duration, is recognized when the training service is provided.

Advertising costs are charged to expense in the period in which materials are purchased or services are rendered. Similarly, start-up expenses related to new operating locations and new curriculum development costs are charged directly to expense as incurred.

The allowance for uncollectible accounts is determined by analyzing the current level of accounts receivable and loss rates on collections of accounts receivable. In addition, management considers projections of future receivable levels and collection loss rates. We perform this analysis periodically throughout the year. Provisions required to maintain the allowance at appropriate levels are charged to expense in each period as required.

Selected costs associated with developing DeVry’s information technology systems have been capitalized in accordance with the rules on accounting for costs of computer software developed for internal use.

Fixed asset acquisitions are recorded at cost. Depreciation, including depreciation on capitalized software development costs, is computed on a straight-line basis over the estimated useful life of the asset.

Effective with the start of fiscal 2006, stock-based compensation is recorded as compensation expense in accordance with SFAS 123(R). Financial results for fiscal years 2005 and 2004 have been restated to reflect the modified retrospective adoption. Accordingly, expenses relating to stock-based awards have been included in the various expense categories, as appropriate.

If factors change and different assumptions are employed in the application of SFAS 123(R) in future periods, the stock-based compensation expense that DeVry records may differ significantly from what was recorded in the prior period.

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), management regularly compares the fair value of DeVry’s reporting units to their carrying value to identify potential impairment of goodwill. Similarly, management compares the fair value to the carrying value of intangible assets arising from business combinations. This assessment is performed annually, or more frequently if circumstances require, with the assistance of an independent professional valuation specialist. The valuation is based upon several factors, including estimates of future revenues and earnings and a discounted cash flow analysis for several future years, and includes other assumptions, such as future income tax and interest discount rates. Such estimates require significant judgment, and over future periods, actual results may differ from these estimates. Although management believes its estimates are appropriate, if earnings and/or cash flow are less than our projections indicate, or other assumptions underlying the analysis change significantly, DeVry could incur impairment charges in future periods.

At June 30, 2006, intangible assets from business combinations totaled $63.8 million, and goodwill totaled $291.1 million. Together these assets equal approximately 41% of total assets, and any impairment could significantly affect future results of operations.

DeVry evaluates the carrying amount of its major long-lived assets whenever changes in circumstances or events indicate that the value of such assets may not be fully recoverable in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”

DeVry recognizes income tax expense based upon income earned. However, some expenses, such as depreciation, may be recorded in one period for financial statement reporting but in the tax return for another period. These timing differences create deferred tax assets and liabilities that are recorded on the balance sheet to reflect the subsequent payment of these amounts. DeVry’s deferred tax items are regularly analyzed and valuation reserves are established as required when the realization of a deferred tax asset is in doubt.

DeVry’s financial statements include estimates and assumptions about the reported amounts of assets, liabilities, revenues, and expenses whose exact amounts will not be known until future periods. Management and DeVry’s independent registered public accountants have discussed with the Audit Committee of the Board of Directors the critical accounting policies discussed above and the significant estimates included in the financial statements in this report. Although management believes its assumptions and estimates are reasonable, actual amounts may differ from the estimates included in the financial statements and could produce materially different results in the future.

DeVry’s financial statements reflect the following significant estimates and assumptions:

The methodology management used to derive each of the above estimates for fiscal 2006 is consistent with the manner in which such estimates were made in prior years, although management regularly analyzes the parameters used in setting the value of these estimates and may change those parameters as conditions warrant. Actual results could differ from those estimates.

DeVry is subject to occasional lawsuits, administrative proceedings, regulatory reviews associated with financial assistance programs and other claims arising in the normal conduct of its business. The following is a description of pending litigation that may be considered other than ordinary and routine litigation that is incidental to the business.

In January 2002, Royal Gardner, a graduate of one of DeVry University’s Los Angeles-area campuses, filed a class-action complaint against DeVry Inc. and DeVry University, Inc. in the Superior Court of the State of California, County of Los Angeles, on behalf of all students enrolled in the post-baccalaureate degree program in Information Technology. The suit alleges that the program offered by DeVry did not conform to the program as it was presented in the advertising and other marketing materials. In March 2003, the complaint was dismissed by the court with limited right to amend and re-file. The complaint was subsequently amended and re-filed. During the first quarter of DeVry’s fiscal year 2004, a new complaint was filed in the same court by Gavino Teanio with the same general allegations and by the same plaintiffs’ attorneys. This subsequent action was stayed pending the outcome of the Gardner matter. The parties have now reached a settlement which is in the process of being implemented as

In November 2000, Afshin Zarinebaf, Ali Mousavi and another graduate of one of DeVry University’s Chicago-area campuses filed a class-action complaint in the Circuit Court for Cook County, Illinois, that alleges DeVry graduates do not have appropriate skills for employment in the computer information systems field. The complaint was subsequently dismissed by the court, but was amended and re-filed to include as a plaintiff Mark Macenas, a then-current student in another curriculum from a second Chicago-area campus. In September 2005, the court denied the plaintiff’s motion for class action certification in its entirety and the case was dismissed by the court. The remaining pending claims by each of the named defendants were resolved by payment of less than $25,000 in June 2006.

Brigette Dean Hines, a former student of Ross University Veterinary School of Medicine was dismissed from the school and denied re-enrollment. This former student claims that the dismissal was based upon her handicap and she is seeking compensatory damages for economic and non-economic harm, punitive damages, cost of the suit, attorney’s fees and other relief deemed appropriate by the Court. Ross University filed a motion to dismiss the suit which was denied and discovery will proceed.

Sierra Bay Contractors, the contractor that built the student dormitory building on the DeVry University Fremont, California, campus has placed a lien on the site and filed a counterclaim to DeVry’s claim for contract breach, alleging that DeVry has failed to pay for extra work done in building the dormitory. In addition, some of the sub-contractors have also filed liens on the site, seeking additional payments owed to them by the general contractor. The total amount claimed for the extra work is approximately $3.0 million. Discussions are underway to try and resolve these claims. Additional costs of construction, if any, arising from the settlement of these claims would be capitalized as a part of the cost of the building construction and would not result in any immediate additional expense. Accordingly, no accrual has been made for this claim.

Saro Daghlian, a former student at a California DeVry University campus, brought a putative class action suit in the California state district court for the County of Los Angeles alleging that DeVry’s materials distributed to students did not comply with California state statutes including a California Education Code requirement to provide a specified statement to prospective students concerning the transferability of credits. The case was removed to federal court, and a motion to dismiss was filed. The motion to dismiss was denied, and discovery is proceeding.

The total accrual for the resolution of all pending legal claims and for final payment on claims previously resolved was approximately $1.6 million at the end of fiscal 2006.

While the ultimate outcome of pending contingencies is difficult to estimate at this time, DeVry does intend to vigorously defend itself with respect to the pending claims. At this time, DeVry does not believe that the outcome of current claims, administrative proceedings, regulatory reviews and lawsuits will have a material effect on its cash flows, results of operations or financial position.

DeVry’s primary source of liquidity is the cash received from payments for student tuition, books, educational supplies and fees. These payments include funds originating as student and family educational loans; other financial aid from various federal, state and provincial loan and grant programs; and student and family financial resources.

The pattern of cash receipts during the year is somewhat cyclical. DeVry’s accounts receivable peak immediately after bills are issued each semester. At DeVry University, the principal undergraduate semesters begin in July, November and March, but we offer shorter eight-week session courses that begin in September, January and May. These shorter sessions have the effect of somewhat smoothing the cash flow peaks throughout the year as they represent a new revenue billing and collection cycle within the longer semester cycle.

Collections of student receivables generally peak during the first half of each academic period, reaching seventy to eighty percent of collections for that entire period. These early collections exceed operating expenses for

Accounts receivable reach their lowest level at the end of the semester, dropping to their lowest point during the year at the end of June. This is when DeVry University undergraduate spring semester, the Keller Graduate School May term, and the student financial aid year all come to an end and substantially all financial aid for the previous 12 months has been disbursed. Ross University experiences a similar operating pattern, but its semesters begin in May, September and January, thus smoothing the cyclical pattern of cash flows from DeVry University. The Becker CPA Review operation historically had two major term starts per year, but the change to an on-demand CPA exam format beginning in April 2004 produced a new and somewhat smoother enrollment and cash flow pattern throughout the year.

At June 30, 2006, total accounts receivable, net of related reserves, were $46.6 million, compared to $39.2 million last year. Some of the higher receivables can be attributed to the revenue growth across our business segments. The largest receivables increase occurred at Becker, with a $4.0 million increase in net receivables driven by Becker’s strong 32% fourth quarter revenue gain versus last year and the impact of additional large public accounting firms with direct billing arrangements with inherently longer collection cycles. DeVry University and Keller Graduate School net receivables increased by $1.4 and $2.2 million, respectively. These increases are due to higher tuition rates, extended payment plans for the growing number of adult and military students at DeVry, and an increased proportion of part-time students whose financial aid eligibility is less than that of full-time students. Reserves for uncollectible accounts for both undergraduate and graduate student receivables were increased throughout the year to reflect DeVry’s collection experience on balances owed.

To reduce the level of interim student financing under the DeVry University undergraduate EDUCARD^® program, many students participate in supplementary loan programs funded by private lenders. The supplementary loans are aimed at students whose federal and state funded financial aid is not sufficient to cover all their costs of education. DeVry has entered into a limited default risk sharing arrangement for some of these loans. At June 30, 2006, DeVry had reserved for and recognized as expense the full amount of DeVry’s share of the default risk.

DeVry is highly dependent upon the timely receipt of financial aid funds at DeVry University, Ross University and Chamberlain College of Nursing. Management estimates that approximately 70% of its DeVry University undergraduate students’ tuition, book and fee revenues have been financed by government-provided financial aid to students. Keller Graduate School collections from student participation in federal loan programs have increased during the past several years and are now approximately 75% of revenues. Ross University collections from student participation in federal loan programs are approximately 70% of revenues at both the medical and veterinary schools.

All financial aid and assistance programs are subject to political and governmental budgetary considerations. There is no assurance that such funding will be maintained in the future. In addition, government-funded financial assistance programs are governed by extensive and complex regulations in both the United States and Canada. Like any other educational institution, DeVry’s administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for disciplinary action, including initiation of a suspension, limitation or termination proceeding. Previous Department of Education and state regulatory agency program reviews have not resulted in material findings or adjustments against DeVry.

Under the terms of DeVry’s participation in financial aid programs, certain cash received from state governments and the U.S. Department of Education is maintained in restricted bank accounts. DeVry receives these funds either after the financial aid authorization and disbursement process for the benefit of the student is completed, or just prior to that authorization. Once the authorization and disbursement process for a particular student is completed, the funds may be transferred to unrestricted accounts and become available for DeVry to use in current operations. This process generally occurs during the academic term for which such funds were authorized. At June 30, 2006, cash in the amount of $20.6 million was held in restricted bank accounts, compared to $13.9 million at June 30, 2005.

As described in more detail in “Item 1. Description of Business,” institutions must meet a financial responsibility test if their students participate in federal financial assistance programs. The Department of Education relies on a test that considers equity, primary reserve, and net income ratios, with a minimum required score of 1.5. In 2004, DeVry received notice from the Department of Education that its financial responsibility ratios yielded a composite score of 1.4 for the year ended June 30, 2003. The primary reason for this deficient score was that the Department of Education calculation included intangible assets from the Ross University acquisition. Because of this deficiency, certain restrictions were imposed on DeVry University’s procedures for submitting requests for financial aid funds for its students. These restrictions did not require DeVry to significantly alter its existing practices.

DeVry’s composite score has exceeded the required minimum 1.5 since June 2004, so all restrictions on our operations have been lifted. Management has calculated DeVry’s composite score at June 30, 2006, and determined that it exceeds 1.5. Management believes DeVry can continue to demonstrate the required level of financial stability.

Cash generated from operations in fiscal 2006 was $90.8 million, compared to $87.0 million in fiscal 2005. While net income increased by $25.0 million compared to last year, cash generated from operations was only up $3.2 million. Higher cash flows from an increase in net income and deferred tuition revenue was partially offset by lower non-cash charges (such as depreciation, amortization, and the stock-based compensation charge). Also, partially offsetting some of the higher cash flow was a $17.8 million lesser source of cash compared to the prior year for changes in levels of prepaid expenses, accounts payable and accrued expenses. Variations in the levels of accrued expenses and accounts payable from period to period are caused, in part, by the timing of the year-end relative to DeVry’s payroll and bill payment cycles.

Capital spending on improvements, including instructional technology and expansion, is an integral component of DeVry’s operating strategy. Capital expenditures in fiscal 2006 were $25.3 million compared to $42.9 million in fiscal 2005 driven by lower spending at DeVry University. Over the past four years, DeVry has invested over $154 million for expansion, facility improvement, and the replacement and improvement of teaching and administrative equipment along with school laboratories for its educational program offerings.

For fiscal 2007, management expects capital expenditures to increase to a level more in line with prior years which is needed to support future growth. Although there are no new large DeVry University campus sites planned or under construction, there are further facility expansion plans at both the Ross University medical and veterinary schools. Other new or expanded operating locations are expected to be in leased facilities, thus requiring less capital spending.

On September 7, 2006, DeVry sold its West Hills campus for $36 million. Proceeds from the sale will be used to pay income taxes attributed to the gain on the sale, closing costs, reduce debt and for general corporate purposes.

In May 2003, in conjunction with its acquisition of Ross University, DeVry terminated its existing revolving loan agreement and entered into two new loan agreements: a revolving credit agreement with a group of banks, and senior notes held by a group of insurance company lenders. These vehicles provided funding for the Ross acquisition and now support DeVry’s ongoing working capital needs. All borrowings and letters of credit issued under the new agreements are through DeVry and Global Education International (“GEI”), an international subsidiary.

The following table summarizes the terms of the two agreements and their status as of June 30, 2006:

Based upon DeVry’s total borrowing at June 30, 2006, a 1.0% increase in short-term interest rates would result in $1.25 million of additional annual interest expense.

Approximately $0.5 million of letters of credit issued under the revolving credit agreement support participation by DeVry University, Chamberlain School of Nursing, and Ross University in student financial aid programs. Most of the letters of credit expire in one year or less. No amount has ever been drawn under the letter of credit issued on behalf of DeVry.

DeVry and GEI are not required to repay any borrowings under the revolving credit agreement or under the senior note agreements until their respective maturity dates, but we can make prepayments without penalty at any time.

In July 2006, DeVry prepaid the $40.0 million GEI senior notes without penalty.

In the first quarter of fiscal 2004, DeVry entered into several interest rate cap agreements to protect approximately $100,000,000 of its current borrowings from sharp increases in the prevailing short-term interest rates. These agreements expired during the first quarter of fiscal 2006. DeVry intends to periodically evaluate the need for future interest rate protection in light of projected changes in interest rates and borrowing levels.

DeVry’s only long-term contractual obligations consist of its revolving line of credit, the senior notes, operating leases on facilities and equipment, and agreements for various services. At June 30, 2006, there were no required payments under DeVry’s borrowing agreements prior to their maturity. However, in the first quarter of fiscal 2007, DeVry prepaid $40 million of its long-term debt, and it may make additional prepayments during the remainder of fiscal 2007, but is under no contractual obligation to do so. Required payments under non-cancelable operating leases with a term in excess of one year are $40.6 million for fiscal 2007 and $39.4 million for fiscal 2008.

DeVry is not a party to any off-balance sheet financing or contingent payment arrangements, nor are there any unconsolidated subsidiaries. DeVry has not extended any loans to any officer, director or other affiliated person. DeVry has not entered into any synthetic leases, and there are no residual purchase or value commitments related to any facility lease. DeVry has not entered into any derivative, swap, futures contract, put, call, hedge or non-exchange traded contract except for the now-expired interest rate cap agreements noted above. Under the terms of those interest rate cap agreements, DeVry did not incur any further payment liability beyond their original purchase price.

As of the end of the fiscal year, DeVry had posted more than $9.9 million of surety bonds to various governmental jurisdictions on behalf of DeVry University and Becker Professional Review in the United States, and approximately CDN $0.3 million in Canada. The surety bonds are related primarily to student recruiting and educational operations. If DeVry were to fail to meet its obligations in these jurisdictions, it could be responsible for payment up to the amount of the related bond. To date, no surety bond has ever been paid because DeVry failed to meet its obligations.

A summary of DeVry’s contractual obligations at June 30, 2006, is presented below:

DeVry’s consolidated cash balances of $130.6 million at June 30, 2006, include approximately $69.0 million of cash attributable to the Ross University offshore operations. DeVry intends to indefinitely reinvest this cash and subsequent earnings and cash flow to eliminate GEI’s remaining outstanding debt, improve and expand facilities and operations of the Ross University, and pursue future business opportunities outside the United States. In accordance with this plan, cash held by Ross University will not be available for general corporate purposes.

Management believes that current balances of unrestricted cash, cash generated from operations and, if necessary, the revolving loan facility, will be sufficient to fund both DeVry’s current operations and current growth plans for the foreseeable future unless future significant investment opportunities, similar to the acquisition of Ross University, should arise.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections,” (“SFAS 154”). This statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. For DeVry, SFAS 154 is effective for accounting changes and corrections of errors made beginning in fiscal year 2007.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for DeVry beginning in fiscal year 2008. DeVry is currently evaluating the impact of FIN 48.

DeVry is not dependent upon the price levels, or affected by fluctuations in pricing, of any particular commodity or group of commodities. However, more than 50% of DeVry’s costs are in the form of employee wages and benefits. Changes in employment market conditions could cause DeVry to experience cost increases at levels beyond what it has historically experienced.

The financial position and results of operations of Ross University’s Caribbean operations are measured using the U.S. dollar as the functional currency. Substantially all Ross University financial transactions are denominated in the U.S. dollar.

The financial position and results of operations of DeVry’s Canadian educational programs are measured using the Canadian dollar as the functional currency. The Canadian operations have not entered into any material long-term contracts to purchase or sell goods and services, other than the lease agreement on a teaching facility. DeVry does not have any foreign exchange contracts or derivative financial instruments designed to mitigate changes in the value of the Canadian dollar. Because Canada-based assets constitute less than 2.5% of our overall assets, and our Canadian liabilities constitute a similarly small percentage of our overall liabilities, changes in the value of Canada’s currency at rates experienced during the past several years are unlikely to have a material effect on DeVry’s results of operations or financial position. Based upon the current value of the net assets in the Canadian operations, a change of $0.01 in the value of the Canadian dollar relative to the U.S. dollar would result in a translation adjustment of less than $100,000.

DeVry’s customers are principally individual students enrolled in our various educational programs. Accordingly, concentration of accounts receivable credit risk is small relative to total revenues or accounts receivable.

DeVry’s cash is held in accounts at various large, financially secure depository institutions. Although the amount on deposit at a given institution typically will exceed amounts subject to guarantee, DeVry has not experienced any deposit losses to date, nor do we expect to incur such losses in the future.

The interest rate on DeVry’s debt is based upon LIBOR interest rates for periods typically ranging from one to three months. Based upon our borrowings at fiscal year-end, a 1.0% increase in short-term interest rates would result in $1.25 million of additional annual interest expense. However, future investment opportunities and cash flow generated from operations may affect the level of outstanding borrowings and the effect of a change in interest rates.

In the first quarter of fiscal 2004, DeVry entered into several interest rate cap agreements to protect approximately $100,000,000 of current borrowings from sharp increases in the prevailing short-term interest rates. These agreements expired during the first quarter of fiscal 2006. DeVry intends to periodically review further debt repayment and evaluate the need for future interest rate protection in light of projected changes in interest rates, borrowing levels, working capital, and investment requirements.

The following financial statements and supplemental schedules of DeVry and its subsidiaries are included below on pages 60 through 90 of this report:

Schedules other than the one listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown on the financial statements or notes thereto.

None.

The required compliance certificates signed by DeVry’s CEO and CFO are included as Exhibits 31 and 32 of this Annual Report on Form 10-K.

Disclosure controls and procedures are designed to help ensure that all the information required to be disclosed in DeVry’s reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified by the applicable rules.

DeVry has a Senior Vice President and Chief Compliance Officer to oversee all of its regulatory affairs, internal controls and compliance efforts, including those related to disclosure controls and procedures and those relating to internal control over financial reporting. In addition, DeVry has a Corporate Compliance Officer, reporting to this Senior Vice President to further enhance DeVry’s efforts in these important areas. DeVry has also engaged Deloitte & Touche LLP to work in conjunction with its own internal audit resources to conduct the testing and review that leads to management’s assessment of internal controls.

Evaluations required by Rule 13a — 15 of the Securities Exchange Act of 1934 of the effectiveness of DeVry’s disclosure controls and procedures as of the end of the period covered by this Report have been carried out under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer. Based upon these evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that DeVry’s disclosure controls and procedures were effective as required, and have attested to this in Exhibit 31 of this Report.

The management of DeVry is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by Rule 13a — 15(f) of the Securities Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of June 30, 2006, DeVry’s management has assessed the effectiveness of its internal control over financial reporting, using the criteria embodied by the Committee of Sponsoring Organizations of the Treadway Commission’s 1992 report Internal Control — Integrated Framework. Based upon this assessment, DeVry concluded that as of June 30, 2006, its internal control over financial reporting was effective based upon these criteria.

Management’s assessment of the effectiveness of DeVry’s internal control over financial reporting as of June 30, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

There were no changes in internal control over financial reporting identified in connection with the evaluation referred to above that occurred during the fourth quarter of fiscal year 2006 that materially affected, or are reasonably likely to materially affect, DeVry’s internal control over financial reporting.

None.