3I EXPERIMENTTEXAS A&M ENGINEERINGSTATION

NUCLEAR SCIENCE CENTER

February 3, 2014 2014-0002

Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

Subject: Response to USNRC Requests for Additional Information RAI 1-4, Chapter 15- Financial Qualifications, from the Texas A&M University System, Texas Engineering Experiment Station, Nuclear Science Center Reactor (NSCR, License No. R-83, Docket 50-128)

To Whom It May Concern:

The Texas A&M University System, Texas Engineering Experiment Station (TEES), Nuclear Science Center (NSC, License No. R-83) operates a LEU, 1MW, TRIGA reactor under timely renewal. In December, 2003 the NSC submitted a Safety Analysis Report (SAR) as part of the license renewal process. In December, 2005 a conversion SAR (Chapter 18) was submitted resulting in an order to convert from the USNRC. In July 2009, the NSC submitted an updated SAR, dated June 2009, to the Nuclear Regulatory Commission (USNRC). This updated 2009 version of our SAR incorporated the information from the conversion SAR and the startup of the new LEU reactor core. On November 13, 2009 the USNRC submitted a Request for Additional Information (RAI) as a part of the review process. This request included four questions related to Chapter 15 - Financial Qualifications, of the NSC's SAR submittal. On August 30 and December 9, 2010 the NSC submitted responses to these four financial questions. On December 5, 2013 the USNRC submitted a RAI asking that the information in the answers to the four financial questions be updated. Attached is our reply to these four financial questions.

If you have any questions, please contact Jerry Newhouse at 979-845-7551.

I declare under penalty of perjuy that the foregoing is true and correct. Executed on February 3, 2014.

Jerry Newhouse NSC, Assistant Director

Xc: 2.1 I/Central File Duane Hardesy, USNRC Project Manager

TEL. 979.845.7551 I FAX 979.862.2667 nsc.tamu.edu 1095 Nuclear Science Rd. I 3575 TAMU I College Station, TX 77843-3575 Texas A&M University System Texas Engineering Experiment Station Nuclear Science Center License No. R-83 Docket No. 50-128

Responses to Request for Additional Information Chapter 15 - Financial Qualifications

As required by Title 10 of the Code of FederalRegulations (10 CFR) Section 40.33 (f)(2), "[aipplicantsto renew or extend the term of an operatinglicense for a nonpower reactor shall include the financial information that is required in an applicationfor an 'initiallicense. " To comply with this requirement,please provide an update to the supplemental information provided by your letters dated August 30 and December 9,2010.for the proposed renewal of the facility operationlicense for the Texas EngineeringExperiment Station/ Texas A&M University System (TEES/TAMUS), Nuclear Science Center (NSC), TRIGA-type research reactor (NSCR). In some cases, the responsesprovided in the August 30, and December 9, 2010, letters may not have changed (e.g.. RAIs 4. (b), 4. (c) and 4. (d)). In that case, please indicationin your response "no change, no additionalinformation is necessary, "and the NRC staff will consider your response provided in the August 30, and December 9, 2010, submittals to remain current.

1. The US. Nuclear Regulatory Commission (NRC) staff will analyze the financialstatements for the currentyear, which are requiredunder 10 CFR 50.71(b), to determine if the appliiant is financially qualified to operate the NSCR. Since TEES/TA MU's financial statements are now out of date, please provide a copy of the latestfinancial statements.

Attached are three documents that we believe satisfies this information request. They are titled: "State of Texas CAFR - 2012", "TAMU.AFR - FY2012" and "TEES - FY2012". UNAUDITED

TEXAS A&M ENGINEERU4GEXPERIMENT STATION UNAUDITED

THIS PAGE LEFT BLANK INTENTIONALLY

FINANCIAL REPORT

OF

TEXAS A&M ENGINEERING EXPERIMENT STATION

FOR THE YEAR ENDED AUGUST 31, 2012

WITH COMPARATIVE TOTALS FOR THE YEAR ENDED AUGUST 31.2011

DR.M. KATHERINEBANKS, DIRECTOR. VICECHANCELLOR AND DEANOF ENGINEERING CAROLHUFF. CPA, ASSOCIATE AGENCY Dl•ECTOR AND CHIEF FINANCIAL OFFICER ANDYB. HINTON,CPA, CONTROLLER

COLLEGE STATION, TEXAS

712-i UNAUDITED

EXHIBIT III UNAUDITED TEXAS A&M ENGINEERING EXPERIMENT STATION BALANCE SHEET FOR THE YEAR ENDED AUGUST 31,2012 TEXAS A&M ENGINEERING EXPERIMENT STATION CURRENT PRIOR INDEX YEAR YEAR TOTAL TOTAL AMU andDeferren OutfSos CannotAsasola: aets(chdleTm PACE Cash & Cash Equisests (SshedtleThen] (16.712,495.14) (13,119.264.68) SecuritinsLending Colattaena II BolnoenShee 712-1-1 lenaitine ltotnsonits NndgingDi•'tivlve Insil~sno WtnansdGutlow of Rneamonn Reosiclwt: IV Stmarta of Revenues.ERpasns. and Changesin Net Assets 712-2-1 Cash & Cash Equiaismts[Schednle Timre] 20,338,282.19 12.617,511.85 Investrents Logitotis~eIssiatiseeaAwomfiatotit 2,601,4 60 1,607,319.78 FenIvals, Nit IV. I Scheduleof NACUBOFondcton to Natural Classification Matrix 712-3-1 Fewnrad 7,977,310.42 7.015.929.26 [n~n~Dividends Gifts,Pledges .0 Donations Sd f-lostnseHealth and Dentsl V StatineiantofCshFlows 712-4-1 lsonvsses'aTrades Accounts 3,137,399.50 50:335.06 14,568,818.80 DueFtos OtherAgettil s 75,t617.99 1,557.032.19 I~•Fn-Oth.•M-bo-t 619,76T.00 1702.I81.21 SDnFroi Othe Fands I - A Scheduleof Exapndituresof Fderal Awards 712-8-1 Oloonoohinlo~nmesatn Macandlsc [Isnvtor..a DSfaeidCharges Loans,ad Contracts I- B Scheduleof State (leantPass ThrnaghasIronnTo StateAgencies 712-9-I hstonimdREcnisatt© 1.210.00 1,21000 Tool CurrentM S 28.6.432.51 S 25,950,745.41 THREE Schedule oftCash& Cash Eqi•iients 712-16.1 Non-Cuant MnetAand DnfnedOtalows: Rest•cted: Cash& CashEqaleno [SaheiuieThnen] S S N4-2 Note 2 -Capital Assas 712-17-1 A. res ed By Sylm OM ~es 5,014,879.16 4,971.093.21 hern, CoUcsadOh p eC.R.W..dbth.

AsMnsHBld By SystemOffices 105,932,799.67 94,289,564.81 Derivav,Cssin sardtes Hedg8Drvte Ins ta• InasrsadDued Outflow Casscolsaf Resoun •3¢ [No[. 2) CapitalAssts.NoasadHd Ba nrG lpans 1337,462.54 1337,462.54 ConstructionIn Pmg=.•" 3,193,334,61 4,257,80434 Land01h. UseTawgible Rights Capital Asset 76,279.00 76,279.00 Other Instable Capitl Asse CapitalAasUts. D n ahble[Note2] Buildingsand! Building Ilarpovencits 9,166,350.61 9,166,350.61 Fadfi adand Other ImPsmnts FCrio tireos EqILapoal 104,795.40 104,795.40 veaiceIs Boats,Ld Aircraft 79,091,23337 74,655,726.05 OlherCapital As n 9215.58551 805,194.93 CntangitbleCMpial Assets, Amotsied [2ola 21 269.151.10 269.151.10 ClasPnLandUse Rights soft.- othir Inod= ils IsaitAssuts Acmuslaad Weqrianoantic A-1ii HeldIn Trust (55,185,371.50) (49.241,R40.08) OtherN.Cop AM•M TotalNootC•t Assets.andand HOutnso2 S 149,9260499.47$ 140,691.581.91 Total Assetoand Def nadO nfowsd S 175,694,931.9R $ 166,642,327.32

712-6i 712- I-I UNAUDrMD UNAUDIE

EXHIBIT IV EXHIBIT TH TEXAS A&M ENGINEERING EXPERIMENT STATION TEXAS A&M ENGINEERING EXPERIMENT STATION CHANGES IN NET ASSETS BALANCE SHEET STATEMENT OF REVENUES, EXPENSES, AND FOR THE YEAR ENDED AUGUST 31,2012 FOR THE YEAR ENDED AUGUST 31, 2012

CURRENT PRIOR CURRENT PRIOR YEAR YEAR YEAR TOTAL TOTAL YEAR TOTAL TOTAL Liaeiities andDelfaend Inflows CoumtLiabilities: OperatingRenc Payabls: Salesof Good andSesni 1 $ 5,319,524.00 4230.177.02 Tuitionand Feca-Pledged Payrol 7,372,2A4.71 9.326.471.41 InnesnmentTrades Dis•a•Lnsand Allowances Saif-InsondHLealth and Dental NetTuold andFees- Non-Pledged 0dm- NetPinfesaional Pa, Iniet=fLndPssvbin NfrAuxiliary Enpnis. nAgesi 35,33326 70.16.47 D.eDunDon IntosnOthe GOan¢Other FuadsF. ,le NetOth= Saks uf G.odsand Setuces 1l1,954,712.311 13,061212.44 and Allwannro-Sales Dlo to fiber Membei 206987.34 547.653.33 Discounnts FundsHeld for Inavetmenn HedgingDmivativ• Instrmenls TnlalSal.s nfGondsand Siices S 11,954,782.38 S 13,0612312.44 DeferredInflow of lRestmsea Unearnld R2-n 14,662Z945.92 1.7T77.037.42 PetemomR.-nene 367.834.00 292.717.00 Empoyes' Consycinb LeanI lno etIRtvene C andlotsJudgmenta Nnmeand Loans Payable NetI-n[nas [ - Is. PalsValue BondsPayable FederalReveune - Opsattins 66,195,892.08 74,223203.87 CapilalLeaseOblitsionsm FederalPasS Tbmeugh Revenue 2,069,333.72 4,213,35337 Fu isPeHdclnmOther A Slan GSrnmRevenuoe 33,770.90 69,131.98 StainPass Through R-eene 1,203,792.24 884.577.75 Oblispdionn•u idenLendin g andCounmcits - Operating 41.364.009.35 31263534.00 Other CnrreetLiabilities 20,000.00 45,01M.00 OthesGiants Oli Opensbs R.e-ue 48.799.47 68,799.40 TotalCament LiAbilitim $ 27,984,9D9.13 I 26,317,942.65 TotalOperating Revsnuns S 122.890,380.14 I 123,783.912.31 Noe,-CiorntLiabilities end Defeied Infns IntlenrndPayable $ $ 3.7973200.00 3,732,981.S1 OperaensiFnpess Finp•fy-e' CosmpensableIann $ OtherPont Ev oynenetBe.neits Ins.trcion 1 128,432.240.13 125.674.078.93 Nnles andLoans payable flondsPayable PubicsS-ute Hospitalsand Clini Hedging -betavebsannmeun A.nd ienSuppno Deferrd InflownfRe-n.e AssenaHeld 1n Trost StodentSrvioes LiabilitiesPayalde From ResaniuedAssns InstitutionalSupport 7,993.933.61 Foar Heldf fo Others Operatio & Maininnne uf pias 4.832,136.09 CapitalL O•]igau•nIann Sflbhrisb. & Fellowhips O0h0"Nna-Cureal Linliltiw 766.076.42 679,957.12 Auxiliaiy 7.243,074.37 6.690.073.78 Total Nons-CournlLiabiides and Defem•el Inflows S 4.563.276.42 1 4,411.839.12 Dep•eslatonm/Arnoilonati ToenlLialbities andDeferred Inflows 1 32.148I185.55 I 30.729,780.77 TonllOperaning Rupenss [Schedule IV I] I 135.6753214.32 S 145,390,922.41

NeeAssets TntalOpensting IncsomejL-1n I (12,794.934.38) $ (21.607,009.60) InnelteaIn Ca& ual Assde. Netof Det S 3U.212744.22 S 40.752,066.77 ResaltendPus, Debt Scoice Nouopermtngnvenuen [Enp-ns) Capita Pmjea Legilafiw REneo £ 18,111,159.37 $ 17.041.402.83 Edunation 17,045,39430 l0.955,74827 FederalReveasfi NorOpennls Esal ot and PssnmnantFunds, FedmalPass Thouogh Nn-Ope g 2,909A682.78 N . send~anble 5,014,E79.16 4,971.093.21 Stal PassThrugb Non-Operannsif 677,085.91 791.953.35 ,8n73,.75 79,233.638.30 Gills LandIncome TotalNet Asst n(ExhibitIV] S 146.146,746.43 S 135,912,546.51 Intnnenit Income 1U711,53.71 1,823,83922 LoanPe•znieuvmF On Secrities Lending TotalLiabilits & DefAerrdInlefwa aud N. Assets 3 179.694.931.98 S 166,642.327.32 InvestingActlstie Expense (223.693.64) (216.129.04) InmmersEupen andFinal Chmoges Boetwen Rebatesand AgentFens Gain[Loou] On Sale om Disposal onfCpial Assets 33,114.03 NetIne- [De ] Is FairValue 4,697,813.19 6,5251275.79 Seidanselof Claims OtSerNump-.n Revenues 9,495.00 23,85830 OibenNomrpseraftiog[Ropn (285,002.02) (1,087,091.41) Total NonopensbsgRevcnul [Expenseel S 24,998,5-55 S 27,742,794.22

Income[Loss] Befor OtherRevesm andTnsfems $ 12,21,3571.17 6,1353.7840.62

712- 1-2 712- 2-I UNAUDITED UNAUDITED

EXHIBIT IV SCHEDULEIV-I TEXAS A&M ENGINEERING EXPERIMENT STATION TEXAS A&M ENGINEERING EXPERIMENTSTATION STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS NACUBO FUNCTION TO NATURAL CLASSIFICATION MATRIX FOR THE YEAR ENDED AUGUST 31, 2012 FOR THE YEAR ENDED AUGUST 31.2012

CURRENT PRIOR YEAR YEAR TOTAL TOTAL HOSPITALS& ACADEMIC INSTRUCTION RESEARCH PUBLICSERVICE CLINICS SUPPORT rOihrRevenor andTrnsere Capitl ConDwrhautio $ S 238,170.00 NaturalClasificastior $ $$ $ 5 CapitalAppmpiaotiwns [Higher Education FPod) Cost ofGoodsSold Additionsto Pe-1anet and TIer ERdownete R.aties& Woait 63,572,423.24 SpecislIts PayrollRelattd Costs 10,70.658.64 ProfesaiominlITmns & Snrvico 14,311,766.56 EnrasothosyIteas Travel Trasofe In 5.399,9i1.14 TranahanFroe Ottar State Agerina 425,012.69 V29,351.29 Manrials& Supplir 8.136.336.05 MandatoryT-asofete Frtm OtherMethe Communination& Utilitian 979.139.86 NoomodawtoyTrseofernProm Othea nethe 1254,793.86 I.150,007.13 Repairs& Mi.nlera.e 2,291,385.29 NonmandattyTramnfer From Membee/Ageicrca-CapAsrats 108,015.54 33,351.42 Reto.s & Lno-n 1.3R4,928.81 T-15-fe Out Prioting& Reroduction 456,717.01 T-afoas to OlheeSoaro Ase-ris FederalPs-TIn.ough .5178,54.1 Mods.try Trnsfete to Olam Memnbs (361,44814) (356,494.77) Stae Pas-Thrrugl Naontmdst•otTenfsf to Od9=Merbea (39,892.53) DSercaiatios& Amortization No.ie WaedltyTmaers to MeanhetAgetnci -Cap Asdns (3,365,852.61) (404.947.98) BadDabt Eupeens Interesr LegistsdveTransfers - 1o 1,:69.07 Legislatve Tritsft- Out Schotnhsips 9464.133.16 LegislativeApptptiadioa Lepaed Claims& Im NieChange IG. OPE Obtigation Tota Oth. Re-e andTreastn S (I,979,371.29) S 1,889,437.09 OtaerOperating npmtms 10646,903.91

ChangeIn Nat Assets S 10,234,19988 £ 8.025,221.71 Total OperatingExpermn s S 128.432,240.15S S S

BegismngNoet n.rrn.Sepaeahe 1,2011 and2010 g 135,912,546.55 S 111,931,314.84 15,956,010.00

BRgianingNc Ascts, Stbmhr 1, 2011 Mod2010 Rwald S1351,912,546.55 3 127,R87,324.84

NdeAsrrn. Augu1 31,2112 Wad2011 O 146,146,746.43 S 135,912,546.11

712- 2-2 712- 3 -1 L.AUDITED

EXHIBIT V TEXAS A&M ENGINEERJNGEXPERIMENT STATION STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2012

NACUBOFUNCTION CURRENT PRIOR OPERATIUN& YEAR YEAR STUDENT INSTITUTIONAL MAINTENANCE SCHOLARSHIPS& DEPRECIATION& TOTAL TOTAL SERVICES SUPPORT OFPLANT FELLOWSHIPS AUXIUARY AMORTIZATION TOTAL PRIORTEAR Casll, PIm OperratngA16,686 $ S S S SI I S PencedsReceived F- 33.16.. d I-. FPomesd R-.ivd Pmo Ctam.. 13.610.103."3 15,11,710.62 63.5T2,42324 64,417,93314 FrocedsPro. SponrsoredFrolps.. 113,530.308.62 114.564,470.26 Promi. F- AuxilissyE.lrowm 10,308,608.6 121,163,032-36 PR.o-d.FI-. t.. Programs 14,311:768.56 22,591,112.06 PsomshFrm 0186.Revemor 48,799.47 68,799.40 .3.99.971.14 5.45..866.50 Pasr- om1S~qppi froG6oodsar-d S...86 (4.6•46.329.74) (4.992,497.41) 8,136.336.05 7,894,512.5: Payment tIEmployees -Salaries (65,526.609.94) (62,586,.247.0) 879,139.86 774,783.96 Paymensto E,.ployce; - Beeitsl (10,594,272.64) (11,529.776.36) 2,291.585.29 1,6386340.97 Fay~mI forIso.. Provi.de 1,384.928.81 832,424.66 Fay.m r.86 b6.Enp-m (10.776.76827) (I2,311.474.38) 456,71".51 435.658.33 I1M78.084-51 2.296,.38.18 NeI Cah Provide [Use.d]By Op-ting Actwifies S (2•34.768.53) S (11,275,015.67) 224,244.11 7,243,074.37 6,890.073.78 Cull Flo-. Frm NompiIWFinancing Activitie 7,243,074.30 Proceed,F- SlIOA~ppopritomO S 17.117,474.35 $ 8.630,2O3.72 Proceed,Pro. Gifs. 672,399.00 736,130.0s 1.869.07 1,496.86 ProccedsPIo EO..doment 9.464.133.56 9,953,863.98 Proceeds- Truth" From0ther Food. 425,012.69 129,351-29 ProceedsPro. OtherGoat Ems,. 2.909.612-78 ProceedsFm ConOOSibdCayilsI 10.646,903.91 10.819,736.34 PI-o.d, FromOther Emm- Fay.memof InerstI S £ $S 7,243,074.37 1 135,675.314.52$ 145,390,922.41 FoymoIs Trnsfersto OtherFoods Fryro, orS860 . Did-.um.I IE-biSl IV] Foy...I r601560.. Other.Nooriapilal Trosf-n F.o.fTo Systemn 214,901.33 258,007.13 Tm86. BensmnrFood G-ps1

NetCult Provided[Used] By Noncapiul Fiesucing Actinities $ 18,429,787.57 5 23,363,424.92 CublPlor.. Fm Capialand Edolod Froiog Aaoivitic ProceedFm aleof CspiWssets0. $ 135.811.32 S ProceedsF... CsptadDebt Issmamc Plocad. Fou SumP0,... andCOO.nOI ProceedFrm FoudaGom. sordCooruc Promod.F- Sift. ProceedFr.. 10100015.1Loans PromedsIF. OtherFinancin Ao.tivd. Paymentsl86e Addition.s mCapilal AnOti (8,339,793.20) (8,813,671.96) PaymentIf'PrniPal OnOnbI Foyrnnt~sInCapitsi Lonus. Pnynmefm Interest0. CapitaBclERO Debts Paymentfor [60986 i-. PaynmtanofOLl,..ConstsOn Soloeb 1m Tm6fa fCapitalDeb ProceedsPrm Sysmo(No oandslry] 2Z101,957.51 1.02.428.16 1mTOIO.. for1.8Capital DeitPsor[tla ernry] (361,448-241 (356.494.77) lot,.Y.,s Trint... forComooto,, ProFeeds[NooMand] (249,639.30)

NetCo.It Provided (Siaro) By Capi tol andRelated Financig Acl. S (6.713.111.61) (8,087,73.8.371 Cut, FlwI Fmnvesting= Activitie ProcedsI=Fm de and.4Mattriicsn of lovontooanc $ S S,.,. Zo Fonoha..ntlnofa~eumtn 11.1 By Sysom (6.989.207.62) (14,967,324.97) ProceedsF.-. I0nteessad Investmnt I.m. 1,754.40.07 1,237.710.18 Paysasadtn AongstInvestments

NetCosh Provided [Used) By Ionvsting Activities S (5,234.367.55) S (13,429,614.79)

Immne[Onarease In Cashand CanE Etsnleraee S 4,127,539.88 S (9,428,944.Il) Cranl dsodeEquivalcu. Septemnber.12011 sod 2010 $ (501,7S2.83) $ 8,927.1911-

Resm~dBqgmng Caslh.54 CashEqsinalems. (501,7526 83) S 0.927.19123

Call an~dCublEqnio.860a. AOSOII 31. 2017 OO4 2011 (SoltIDooe] $ 3,625.717.05 S (501,752.83)

712- 3-2 712. 4-I UNAUDITED

EXHIBITV TEXAS A&McENGINEERING EXPERIMENT STATION STATEMENTOF CASHFLOWS UNSAUDITED FOR THE YEAR ENDED AUGUST31.2012

6C~DUILEI - A CURRENT PRIOR TEXASA&M ENGINEERINA EOENRIMENT STATION YEAR YEAR SCI(EDULEOFEXPENDITURES OFFEDERAL AWARDS TOTAL TOTAL F-,t Y. E-dIdAugce 31. 2012 ReeooedbndeofOpmitinI Incm.e[Lass] to Net Cah Providad[Used] By Opelieg At.icifies NSFFS wN A&n AUcedcoc Nl-SAIl O ei Income[Lons] (12,784,934.38) (21,607,009.60) Fdeiotlc0p1/r.Amo9uAhGO CFDA Ideccti.. DcIM, Scicc-ic E..,I,. N A Adjio.tutet lo EoRecoileOpetndng In... [Lass] to Net Cash Poeeided[Usedj By Opeooi. Activities 10.2L6 50:h CaI Smt 4n.919.59 Depmeiotis ad Amreil"oR 7.243,074.37 6,89t0073.71 BadDebtEpense 94,831.12 228.18537 Ur&,. Agr Opro•tig Iccomesod Expense Clnsei&cstioe Dilffrnc 4,686.91 38,867-29 t 9O t0001 l0 Chtog. lo Aaae nd Liaiblitie: 1.o 7 SIIE Ac-o3a Reeitoble, Nel 324,871.96 (1,519,004.96) Don FromOtherAS mcyieiFtodn 8Sl,414.31 (22,929.68) OarFrom SymomMe~bee s (19.S37.30) 169.386.7 P1lodel 31AeJ D-, Pe CotrolI.-d AnjealC Ientoy 16.958.06 Defetd Chooes 556 315.38%25 PrepaidEapecec Lon-s nd Conthet Agd.nilosad F-Id c.-6oc blejioi 10310 00. A-~EI Psyhbtrs (909,839.72) 1.896,736.25 T., A&d.Ago, 3f, R9hcO 556 80,32075 DuontOther Agmncies/FPod (43.553.21) (24,377.71) TotIl -UIS. Dp uf AsMl11. Duetow Syeht Mmct (91,026.99) (19,149.80) 335,70900 4t.DIkSt Unerned Rmcnwe 2,885.908.40 3,043.991-86 U.Sl,-,t. D foccc...-All Dey•ni It'.61 SicncPreico. Icij O,•-MD CompeoatedAbtence LIobilily 139,336.00 (366,744.00) A,,tooct,.,'No123-I OtherPFmt Eeployment Bentfts Liability COn.rcsty-tdcnfifled PrPcon Self lou.ed Ac.rued Li-bility Mcosoccnboloendtcn.i.rcgR-n -c1andSwldd OttroLiabilitits htco nci hl-sad Eno7- cednc archnod SAodontA Por-TAr.,gATo: To) AdjisM-rt S 10,430,165.85 S 10.331,99393 I 1.•05

Net CashPmided fUsed By Opertin Attiviiti S (2.354.769.53) I (11,275.015.67) NntiodlFcdboiJoI S,3,oeaiccodico,[ 11.419 CooatT-cý-17e .S.' IoD,,-,c-,-toc scegelddmiai;tclim Amords Noe-CnchTr-ost Noenetsy Gils, InduddngCapitl Am•e S 4,656.91 1 293.99535 31 2P4D5 Net t s (De,-s•e][e F" VnlcsofltnccIn 1,937,44182 6.525.275.79 GsieLasnOn Sdem Dios l oIfOCapiWal.asem 33,114.03 I..0 26.691.,7 Refildiog oLoog Tem Debt AmeeetieionofBmd Fm=oomsnd Di.•tn, UP DPo.t- n MFo,, O1a (3,257,837.07) 371,59-56) 1'.tt4 ('ocmoAch,moc•,lcJ 3S.3•36.3 333-It.3.4 CA41

Basi an AMIhlMSd-tfil I4-h 1.300 AdvancedC.•lde Too•mzo;eo.Iced7 ,O~t000' B-,,c eý AppWRdSd~lik R,ý- doCcecN..1,0-A7 2.4-ý7

Basiccc8-I ý AplodSApplied SolelAftS~mlfi Re•dl cceRth ADATreact , I-cJ X.VI1•122S Basin - A-U.S. So li..cRc.ch ecins Compseyl 19A70306

Ný• clUuhiý Dic sodApplied Sk..flifD RDech 38.550.07

C.reeIDTýsaD 2V63.01 InASAad• kcSiIc ('•rW A-o IDIý4U

casicnod Applied Scctnfik Rocc 21..aVII1 03.34.34

Daoic l A,pp]int Sdmec03 Rac6 P.,AiyLIEY 10.933.26 4 PNacRa Earc Isoic o Apt., Sdifcci,Desasac MATSt67

712-8- 1 712- 4-2 UNAUDITED

SCIIEDULEI. A SCHEDULI - TEXASA&M ENGINEERING EXPERDIENT STATION TEXASA&M ENGINEERIN -EXPERDIENTSTATION SCHEDULEOF EXPENDITURES OF FEDERAL AWARDS SCIIEDUIE OF EXPENDI3URES OF FEDERALAWARDS FE, Y., 0- A^u4u31. 2012 F, N. VY. En10 Aug4 31 2012

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712-8-2 712-8-3 SCHEDULEI -A SCIIEDULEI -A TEXASSAM ENGISEERONI IXPERIMENT STATION TEXAS"YoM ENGINEERINO EPER[ IllN STATION SCIIEDI LE OF E XPENDITURITES OFFEDER AL A WARITDS SCHEDULE.OFEXPENDITURES OFFEDERAL AWARDS F., Y-¢ E4Uý A.,,- 31. !DtI2 Fo Yl¥a Etd'4 August31. 2012

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712-8-4 712-8-5 UNAUDITED UNAUDITED

SCIIEDULEI - A SCNEDUX I -At TEXASA&M ENGINEERING EXPERIMENT STATION TEXAS -4, ENGINEERINGEXPERIMENT STATION SCHEDULEOF EXPENDITURES OF FEDERAL AWARDS SCIIEDULEOF EXPENDITURESOFFEDERAL AWARDS F, R-e" Bnd• .',ot 7t31.2012 F., X Y-e F3d1 A.S., 31.2t,12

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712-8-6 712-8-7 UNAUDITEDI-

SCHEDULEI -A TEXASA&M ENGINEERIANG EPERIMEUT STATION .XAS6"MSGINEERING 0-XPER IM2 STATIIN SCHEDULEOF EXPENDITURES OFFEDERAL AWARDS SC.HEDULE OF EýPE NDITUR ES OF FEDER AL A WA RDS F11the Y- r d Au,0,,3 l,.012 Fr tee Y., En&dAugu•. 1.I 2012

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712-8-8 712- 8- 9 SCHEDULEI -A SCHEDULEI•A TEXAS046M ENGINEERING EXPERIMENT STATION TEXASA&M EIGRINEERING EXPERIMENT STATION SCHEDULEUF E-PENDITEIRES OFFEDERAL AWARDS IIEDUE OUEENDITURESb OF FEDERA1 L AWARDS or.lb, Yý F.ý- Amg.l 11.2")12 F, 0h,sYr En&ddA.g.S9 31.2002

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712-8- 10 712-8- 11 SCHEDULEI - ý SCIIFDULEI.- A TEXASA&M ENGILEFRINA EXPERIMENT STATION TMXASA&&M ENGINEERING EXPERIMENT STATION 5CHEDULEEFEAPENDITURES GFFEDERAL AWARDS SAIILDUI.EOF EXPENDITURES OFAFEDERAL AWARDS For ENAc - E-d Augcst 1.]2012 For lScYecr E.d"l AguO 371, 7012

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712--8- 712- 8. 13 12 UNAUEDITED UNAUDITED

SCHEDULEI. A MISCEDULEI - A TEXASA&M ENGINEERING EXPERIMENT STATION TEXASA&M I•NOINEERING EXPIERMIENT STATION SCUEDULEOF EXPENDITURES OFFEDERAL AWARDS SMIEDULEOF EXPENDITURES (OFFEDERAL AWARDS F, YmT E444 Au33 3SI.. 02 F.WhY. U"EndedA.uU Al 2.D2

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713 .235.7

10.171.72 10,171.72 ID.171.72 Offi. ofSA,.-a F.,.n.I A-iae Program Ne 3( 2/44 33,05014 736 10.171.72

375.95R.03 375.9A6.83 33,LAR9 375.56 83 Office3or FfS- l AMis~neProgram 51,37668 Ba.teeo.Ac/ c 75.•5.2. 51 -. 15 57.7244S 03,44e,..4. Ue0 57,724.45 57,724.43 C-rNý. C010721 19,3W6M 20.023.53 22W.A23.55 209.23.55 20..01353 Offi. Mi- I't-6.1Fi As i- ft 2.755.723.33 2.735.723.73 41.0W733 2,?14,717.4 2.755.723.73 29,00W.90 oI0DA)S•lc FciRWlOA.OLWO ProogOm 83.4444 43,444.06 1,3.09.E 031,44406 CAlf',E107219o I-h•lw' 019 721 40,34330 C-reINo 00410234 5.002.76 7.3.293-N2•24.4•4i 005 100.595S 8 n.0231 2j162"Y1707 •_24.41.65 06O443.43 ('001 A)S~ac= F~oniol Aoisalee Proegrm 52.197.% 52.197.. 32,1.01% C- N.6&W2)3314 54.653R9 O~om•lrsc-A., FioA.I AoA0o,• Poogoom OM,. foýe.o F'a lIAsais- P0gn1. C-lm.I0 401203.5 149."82.11

193,10.17 .4,5&2.05 14,510.05 /4,.52.05 W121.14 Ofo. elSe... Fioae AWt-iODPW8r0. 33.4664M

Offi•RfSli-I FoiAAsuilA.u 0 Pl, 12.062..3 67.3M4.61 63.N49..0 3.684.61 67.334 1 AOeýoeIA'w 20' Ag,.A , C1o2.W0

ýaIwJ 195.24705 134.1146 6.M9SO 10.4.4.02 4i.,ii 02

712-8- 14 712 -8 - 15 SCHEDULE- SCUEDULE I - A TEXASA&M ENGINEERING EMU5E6t6 2Tr STATION TEXASA.Ml ENGINEERING MLPERIM ENT STATION SCHEDULEOFEXPENDITURESAF FEDERAL AWARDS SCUlEDULEOFEXPENDITURLS OFFEDERAL AWARDS F03Ibo Yo• Eado4August 3I, 2012 F. 1h•Y. Ead Aug,, 31I,2012

p ýs.0-roT. PNs. -hnuSbF.. Duo TtA P. AIy Agencieo Non-S.a T-I Pa1 NSEN..A 030/ AAny/ N.-S.. Pio'oL ThIogh Fro 01i6 EnLAi EnfiLi.3 Tht4,h To.22 Feds. 0l 0003Pmo-IRA,46 Dor0n CFDA Id2ni3fyis Uni, Un6ARltlo En0i6i Amo6nt DirS Poom No. A.-L 0 E6oIo E.PAIA P-Im~ Title Number Numbe No A Il

ADI ofOSoOR Fi.nodosls P6040g0 0401II1 2AI202,.-1 •4,365.20 4.323.OA 4I.323.SN

E-ID1103 26,36.30

ADADlIM, OISOWA•o i Fin-iaP0620l hts6IAAW s l+Pm;Poo .o 31R.07354 36,073.54 306.07134 20,033.54 0 Amc.d.VoM1s 023K3.22 3.301322 92,333.22 SAISS22 BSauc1do 147.674186

45,145.52 45,145.532 45.145.52 Offi ofSm.. Fica 6. Progra

OEIDofSom. Fio.An.lAoiAno FP6Aorm ýA,2L 23.4, 37

...... 4.0,6..71.i 7 '.. 4WSS.--2.338(4A +...... ; . • • 4• . o 4W0.3360DS• BAu2l6/I,62A.26 +g,,• N. o•1511. 0•,,O~oA60N¢06631 133076.04 3.276.6 1337646

92.5.132 02.5KI32 W1,58132 (IffDA FoSo- FiRemd52 A A Progra, 1.13Il 67.20 51 0260recplmoAgrcoo.O

2.L260 22.6M01 n.826M OfAiDoIflSi FiAe.l A.is•-. PARISa OOAA~qpDO.4AOOO6 6610316',NoCl0aW171 322.6450.% 18.,179 1)18.479.D 18.47910 ofiOARf SRAR Fi000al Ass3is0RPnognom NA C2A-W.M0 Off' If S-• F,-I ftgn 211.635.73 233635.73 211.613.73

offi If SAdia Fi-lo Assis60AProgram C66~,o12 6OOOOOO

33.055614 33.058.14 53.06.32 OMAof SoI, FnndA A -AOPArAA 0003240SDD6ifi0. LLd 136332.36 NVot !-0702 Ho•Ao 02d0 /6.53g, ]6.2.4 51.37366 51.376.66 51.37368 OEII.of S00 FiooCodAs-isw Pr 0n 40 RobornchCC .KR/3A 75,525.26 7%5,R.29 75,262.06

19.30 4 19,300.4 ,30.030 DoAst0Ad,aooed 30200.36

23.0030 21003.00 2Ž.003.90 Souo.olo/N,2•032 2-31 2,324 33 263764.3 2647.417 OADofSfS. F,, malA.-56306 Program 3I66l332 66.66n003i/ 261.3353

5.M276 5.02.7 5.00236 Law, S-if.,eLe 19,c32.39 000.44L.43 3...1343 300.2143

R-36000060.- LW 6436 33.228434.4.246 5,1.653119 54,0556V OD6 ofSomn Fir- mlaA4S- program A&-,oa X. ETDTIPl L.Ooo ,,ory 149.982.11 .49.9.2.11 149,262.11

193,10.111 33.9323 103.911087 oAD ofSfS,-o F-n.d1 A Ali Program 3.62rooD 0266636y 3.520.00 3353.63 Saoonli3.aDA00o53r• 23.40654 33.42645 EfiDA f05o-6 Fio.oA.A6,o-o6PAoo

12.%163 12.0025 L.a0666 Broodoly 201.003037 NH'al2 aboDmy3

195-247.05 395524305 355243.25 ADAEAOsAA FoAI 001600 Poooo

712-8-- 16 712 - 8- 17 UNAUD)ITED UNAUDITED

SCHEDULEIA SCHEDULEI - A TEXAS0A9M E46INEERING EXPERIMENT STATION TEXA44SA060 EUG]3NER8G EX.I'E8RItENT STAT7ON SCHEDULEOF EXPENDITURES OFFEDERAL AW3 RDS SCIIEDULE OF EXPFNDIIURESOFFEIDERAL AWARDS Fo, s Toot'I " Aogoo3I .2II2 For Yo,To EIdo AU~o 31.2012

Pooo.tsoooooTo Poo..-loooohFtot ToL P-o NSEM47 An'/ Apooo 4 Programt ThooghFrom0 Utlo Uti•toifibo Eooloo No-4o Touh To.w FPt a G-,1 h.oough GId CFDA ldolifyitg Uni, Unorilo, EUooo, penolhoo EtFoodooust PN,-•Title Aoo1,oI DietoPtuo~. No A.-um Amouo N6041- Not.bo NoM. loloi Amt 202.44S818 202,445.L8 202,448.18 6ý'h'6+313

Off..o fSmnI Ftaol Ast Pt L.07o7 EloSoNoy 51,60.17 263M 39 26.3M39 M3630.39 Took0Order 0 0301023. 77o4.So.3 Lpwzace .[ •107,197.78 147.6748M 147.17416 147,674.M0 OffloofSd-cooFi,,.... l~oi- Poc.9g-o .lgt L.--oToOt Lito8737300 10.271l.T3 om(t ofsitno Fitoncil Aoitoo Ptogo 264.601.37 NoliooolT-Agwr~rB3&-y. 733LELCI 264,01.37 26..0137

LU-.0 Lioeoý. 0S6040.8 20.471Y1 N.liotl 4I&,ty.LLO Off'.offi oISo6..If $•,. Fi-Ii.Fit...o.1ol Alitiolto Pto,,-Progra ToA Or, Zo B492302,

L ^l,•onlIo amlo 32213038 672Q0.51 67,240.51 67.20.31 Sobootoom 33400

13.119M6 13.711064 13.738o8 o0FIoof S-io FijatnialA-Js1 PIoIo Lo. A N.ol6.1 1 752.92

144369.96 1443569.%6 OFF.If S-i FLA.-l A•sn PTm~nlI 1,4 Alý No.l 76337.06 Sooouiy.,LLD C,4S6.46 22.45848 OffooIFS-,ol FiooohAss1.o.1 Ptg., Off If Smin. FinancilA-.$- PIý OffooIfs4t, FinancilAoI o PP L. AI, Noliool 36,14130 DOOOO Ntooy. LLS

L1-All- Nario~l 19.332.36 19.332.38 19,332-8 Offia ofS-t Fi-noal AMoin7 Ptott 33,668.14 slý- IV/.o8115S& 28.51.IS 28516."4 2351.54 Offo..oIS•, hi loAolol Protgot Co 4dgoNjtiool 102,653I4

73.70.38 703(0.38 703(038 Eobo~too.& Efommors oio. EjooioblAooioooo Flog•o

PacificNorth000401,0093 70,602002 LoHro.v6o'0 7oi 26.415.31 26.91531 26,915.31 ramricNooht- Na-oIl31.€0 Off- fSm-o F,ooaolAlo,sioo Pognot P04i 4040lln 415.35N2 66.616 Lomo60o5- D1looff-Stt. Fio.IAoAl-.bo Pto sadftNina 311.856Naio03 34.472.48 34.472.8 34,472.48 P.g•5• vo 71541

ollooff-If- F i tsb o Prog 3.5W6( 3.500 336V0.40 Iooc,I-tctySt0100

oDffioofSoonoo FItnCoe Aooitstoot Prsoos S,66.oýc~ 70322T. Ij

203.W7.97 2.03.07.97 205,047.47 040041,P-lotbip To 10.62.8,16

14,59840 19449.4A0 017,oofSioo P•.60V40 Aooorw Fsvo 19868.60 0 So~ooo,trIN 032

AS -Aoto.t783233

712-8-- 18 712- 8. 19 UJNAUDITED

SCHEDUFLEI -A SCHEDULEI. A TEXASMM ENGINEERLNGEXPERIMENT STATION TEXAS"M ENINLERINAGEXPERTMENT STATION SCHEDULEOF EUPENDITURES OFFEDERAL AWARDS SCHEDULEOFEiXSPEN T 'o'oEAOF ODEAL A.A1DS For Y1yoo,. d AugustA1, 2312 ForI E¢YF"~I A-1u 31.,2012

PD..TRD- FO To RoD ToolP-s 0671 A 100i08 NAT.ARD 0 TRI P.o NSENhmo AVl A -AAco0 Noo-SO.R Progra0 TihAogSFromA Uni0 LUoiOA,riu Iioif ,uII To.nd Fý..~l G-lor P-h.lhgh G-,nd CFD0 IdnnAy1is U.., U,,,ooifi. Enlii Nubr Nu.-, N. A--.m Amount ...... Ex.. . I . ... Pooo.-,,T211,

SoN..N.R-ool 8.171IN

51.66 17 5TI669.17 51.609.17 M. 1~•77 S..d, N., I 253.W65.74

To•10222D, Rto7oio o.ao 157.1117.19 15.197.7. 157.107.78 Offi. fSI Fi~ml As lgm CI, off cO.,. Fo-no.l AMik- Poogram SLOdi.Noi.oool 40.77207

160271.71 160.271.71 Offi0 f Sdmt, F0.oa-l Alsi-RooProgram S~oAndNRion.I 05.360.2

loI2E2821. R-4 20.371.9i 20.471.01 20.471.01 lOfiýof Soioo FORadAIAiotano Prognor S8021aNaliooI 125620 ato- ofSc-n• FIIIIdIIlAs~k- program

05.ooffir S-08 o R-.160,00A.- Pýo•, U. 0440067.0R7 32,21428 32-214NI 3221428 L~ihonoI,1E• ifi. d70006 Fi.o6.l A.- Pý.o SIIILI N~io.ol 17.5.6155 75s2.92 ,V m-Z.R-+ 7 5404 -,52s.. N -tiol 103,722.31

120.32.40 169522.40 1690.53.0 oW, o -SoioaoFinMIal A*iRn PD Sho. Foar 19.I6A.19

TvoCll.E,-4 lDITE,I`Soo, FIa.ml Ali-0 Prgram ShEoF-o 10,`OI.28 36.241.30 36,241.30 36,241.30 S00.1,0f6I 6., OT. ofOSSAn OFinn T0O AIOOR86Frogram Imoof yRo. InlOrao0, 52,18729

33.60.14 33.604.14 22,606.14

AM oFf MI•,•o 13.474.27

167.653.46 167.65346 167.653.46 Off-, ofSSiFA Fionml Ali0 Pnpg Umo-coqyfN0,2da. 6I0.A14.71 R- 'atoFofSSkAooo FAnooI 0881i40 PFo..., 0 S06 X.d00,00R-2-32. 2A,602.06 20,602.06 L0nooo.yoorwinsooooo2,069,0 40,504.905m0%

A-, N,. 182K112, 43.5W026 45750026 45.50*26 Etomof SOioa6 F-.n1l A816496g64* Uni,6y.0Iof *,ixe* . 29,86 32

32'.605.03 321.65 03 A,.-ooo J5366381.

UnoooiiyofAWis,. -. 62.40.84 IS5.95

1471,k".RAo8Om 01 -1..6101 91.36501 91,.30.01 DID. ofS 0 Fi FORaAsI-0 AaDl Pgn UT-W-I, LLI 8.30M

ARRIAoffif..Mm RicnFid,.60R 4l.-aloP A111.600',01 253.165296 146,627.64 1464.27M

ARR - Off' Mfsi- F-Wm A.M- IhM. 060.oý. SR,=L6i6.it5/ 97.518.31 a 5. 17. 628.51.11 6".51.11 8107 Batclkl 17646.78

712-8-20 712-8-21 UNAUDITED

SCIIEDULEI - A SCHEDULEI - A TIý.SAMENGINEERING F-PE REM ENT STAlTON TEXASAIM ENGINE9EKINGEXPERIMENT STATION .CI1EDULEOF EXPENDI'6URESOFFEDERAL AWARDS SCHEDULEOF EXPENDITURESOFFEDERAL AWARDS I'M1s YM E64dA64444 31.O 202 F. tLIYToo Eom Aug 31.2012

tIsI.00004To P-o.lh O 6- NSENo/ A0633 O,.do . N0o-Sial€ Di-d TORIP- AOgyl A- - Nos-o TS1 Ps P-/eos.lhSh Osonsd CFDA Id&ol0fyig v-0, UOnioooi.ik Enlobos PToorom ThogOFr-o Uob Unboooojiio, Esioco ThooughTo -ns FoojolGOl Aoooool RDoire Plsooom No OAooo A00o5 EooondRooo Er,oo.jjodio Footos-Tid1 Number N=l' N. A.-t mo

8.17104 8.17104N 171L.4

Roooslo Eo R305" d4 sod [Rooolopoool 253.665.74 573,3 73 253.66W.74 R-0 W,1 3 R8se0rc0sd Rooolopooat Co,,ýu4 NRECI 11.275.98

40.77203 40,77207 40.77207 R.-W.l F.,,, R-rh andD-Ilp-n Pacfi,No,- - tl~ 162.o77.22

35j2006 9523134 90.)8u.0 RoocIo Ene03, R-r6o sod-1 oo Agw No Coo070o Ro'oo40Eo" Rorso sod-1ool 00 ShawE.,uuro W M.1lc 57662 1356.20 1,3762 1,15120 0 Xo.n .4,10, Roooblo Enot.ýR804 e"43 e20e0o5140 46.347.02 63.337.92 46,347.92 3440inMoCR8,l40303214

AlSaRodoo o W, .IooJ 4.143.56 sd 173,538.5 173353355 173.53855 ARRA• Rooooobk,203Do Roh Dooolopmoo ARRA- Roahhok EUorooRoss so N0013I'¢004 "IlatS 103.722.31 103.72231 103.72231 j 0.034 Iokip To 142,67&91 F-il Eneg R-6rc -ndD-.1II h R 19,66.1 1066u.19 19.,SII31

846300841, IoJ 32.4 R-6 PWtm hipTo 9.4240o8 Emit Enrg R-~h aJI-vco•• 10.9252, 10,o25228 10W.922

54,371.00 5190.2n 34.847.29 R• Esoi T. 1o461407.73 3

13,474.27 13.474.27 13.47427 Fil Eon ssosRobsodDo olopoosss R33.08PR hipTo 277,39 So Feon f10A.o-

193,14.'73 IK.014.71 166,014.71 ,V.ý,,rA8251 Foil Eor3 Rooh sodWooolopmol Unh•rsq If AWLk.- 32.939•.52 SDOosýo 5oUAF o. 40,084,80 48,504.80 40.3480 Foil EnergyRo h sodD-1olpooo URo E-,, M 42.09.A5 8 b, , 33L33 .34

29,8M.32 27.08.32 29,484.32 DFol NEooogrNRoOsbs lid RDo-o.os NosoosNa-na &..4.~ioI.A66s.3203.3 LL.V &,booto,,0No4B71;26 6,4720 6,472.04 6,472.08 Oofo NuoLoNwMopool' Croiis Rsh UR.- Li-0 2737.0669 R 403co 08,21TI•0Order ,04 ,, sod4.2135.J7336a 633•3.66 63395.66 6833950 ,11-, 1 15 Dorsc Noloo Noopolortioo Roso

253.165% 253,165.%4 233.165.%4

Un-00-it0Rota- fnssloooucsod W0U-0 Spport 81.114 Mw-I~Uni- A,lof 26.22102 SoII•O.AI 17.51331 97.519.31 97.31321 S1.1 d1AIAts-oJ 31140iE

376,46.73 176,30.78 176,646.38 .do Energy60003R 00. roooopmoosd 00o6o-s0-D.

712-8-22 712-8-23 UNAUDITED

SIZHEDILE I - A SCHEDU.EI. A TEXASA&M ENGINEERINGEXPERIM3ENTSTATION TEXASAAM EG2INEERKINO E.NPFTR2RER 2 STATION SCHEDULEOF EXPENDITURES OF FEDERAL AWARDS WHEIFDULEOFEXPENDITURESOF FEDERAL AWARDS FýYt02 03 ,EA Au80s3 I.2o012 Fo,AV 9= Fcl- 000 3), 211

P444640o30Foo3 D,.DI T pA AAl AgFn46I4640 ! 9043. TORIP.., NSEN5me Agyl 093i2.(4 n.L9036 P6046, TR.gh Frot. UEi6 L..UnIArl En6,e•.. 7h6oghTo -od FdWl G-1.' P-,..0ougNAranrd CFDA ld(noAing 0n, U"6V6646i6, Eýi,6j- A6660 D -l36lpog,.m No, A604 A-,oU Ejr6pei6 E'r6Wlijuo, P-0 TitLe Number Number No A6t60036 93644663

N943 E..ogyRr6,0Dev06p366t1.4d [3,o946400,4 6,)43t3 3,122.24

NoolwE.eraj 864,040h62erlu446.3t oAd D[o~,n,.io4 - Bau3(3t 47.6798o I 2,876.(9 112,176.19 112.87619 N,.1- 02 00(236M

11.275.9 11275BR I1-2753R N-4- EU , R,•,I, DcvAio3L4MD260u0lki0R 433tk67 140.47479

NuoI, Enorl R6636d4,136375op.l5816 06013,l064"/ ...... 37341 112.677.22 162,677.22 12,077.22 Nud. E-ey R•ro•,6 1an-Deelop3entDDwo6,r03i.n B60teWw MD211

1,44396 IR,46..REI 19.489%6 N4I406 6R4ch. R044Iop,4W i0. - Li-41, 3,706.06 57662 576A2 37662 N.T.lNOk , LLB5

(1R06.80 12.9086so 196.8 N-1- 00 R3446, DEwlR6 I.0F an D4 -4i04 L4wn4 Li-6,.. 13,12445 44163361Scor(ty, 1.1.0! T.,k0•0r N' B22.(62

Nud- EýrWItNk,•vcommadDc•zin•l cil Univ-ily of q 4.141% 4.143.5, 3(4.7.56 So-JibC-lfnal (332.14) (332.14) (33214)

Nu0.64E3 6,l64R,41.336l4 -144n,D6-ni36014664•A 61U6 yf 23.110 0 142.676.98 142,576.08 142,676.48 24.oolý A0(EX(2- 1 Nulear E.•6 "R-4,6, lR66mIID,46 4d00m--lwR0 OAR0d.4 9460l44 303.43063 93.424o3 93.424OR 93.4240

Nu464 F4n4'r6R6t4r:,40, R4• 4© 4o46.ind R44n2,46,46i06 (04R.dge 6at044 27.16376 14.407.73 14,407.73 14.,407.73

[40010M281 N.,•t- Eu~gyR-. , ~lp•madIkmn-rc io Rids,N.,i..] 20.792.04 27.,76.39 271,16.39 271.87639

NUo14nF(4,0yR I 10p. 014opdadD6lm06t03 P.0fi 6647-J036366,Nat.kna 52.00551 32.M39.52 32.939.52 32.93952 346064364-2

446464346r4y R6t40, D646)6l666,492i [2646o60,uu6 SanMaNatIo~aI 33390347 12,119.45 42,19345 4.6,1943 No (2 &2•33T 0 1 N~oE,E366 6144,.6 4fk 6446W40424660 S-.64946(06 3.404(4 6

3s7,63343 3&7.E3343 387.63343 6 EI602606TDohIe, 344To, Re4 6Iimy.o,R646h. [R0v6op4nl3,) Analy)is R83.22 ABR1.03 210..7.- 647 SVo06E04,9E02OO47 6 EIlIaOy DoivoyM E..r4d Rdbilily, IR460 . 66040o46t66d A3.yl$) OFGl264 Rsdol 00.4.006 274.0060 274.00669 274.1A039 7364430,0067,3,0)

394062444066,4,, Aoademic Al02.46 P46L6.46 81 124 UE42y460666P663AWf% 353.261.31

(0.34 1o54) 0343 246,063666 ARRA F.1gyEffi36y m30003R4nBo,660)Pr096amEE0B66 4l.12E A00t0nE6r.1 120.875.61 40'7rT16r 206 9,Alol~ 26.221.02 20.72 36.221.02 ARRA- Enemy M6-E73 y and C.o044o6 -- B" G.106P-rm (EECBDO City of".g604 195,4224 ,VoC/ W1•5;36 ARRA.- E4 464,E76304y a Fdlk446 0 G.t Pogram(TECEBGi City66fS-A-... & 253.45373 14.215.23 I 4,215.79 14,231.9 064C453

712-9-24 712-8-25 UNAUDITED UNAUDI0 T ED

SCHEDULEI -A SCHEDULEI0 A TEXASO M ENGINEERINGEXPE RIMET STATION TEXASAl. EX-GINTEREIOEXPERIMENT STATION SCHEDULEUF EXPENDITURES OFFEDERAL AWARDS SCIIEDULEOF EXPENDITURES OFFEDERAL AWARDS FoolhoTor E,-od Aogust31. 2U12 F I1TY. EaoedAgu. 31.2012

P~o.-Arn0eTo Do T-Il Par Aly/ A RiZ ' N-SmLe Toll Pa. NSENoorJ 0gy1 Aoeodra NrShAt Prog"r.. ThroghFr-n UL.6 Erireeiliro Emirl. ThrgA T.O Fed,.l 0-rl Pa-Io.ugh. raerl CFDA IderllFrrg nie Ueinioi Enaimio Aeooo DORAIFroero.• No. Asooro AmOm•o EOROnhLuor EoeeroEJr P-iO TAO1 Noter Noolbe No. ooo Arooo

3.12 24 3.122.24 3.12124 Coo~lyl 47.,39M 41,.EI.1, 47.63186 ARDA.-AAdo-dRrmee h dProjRs Agency.TenrFiroo.IAooro=rne 61.110ADMSAPro4ucLIneJ 06.62615

14.434.7" 140.474NA 140,474.79 ARRA- Sol EnergyPPl 6I,041 37.50531 373503.. 37.50581 to'IE of Sc;rer Foool AF-i6.1,4e Forgra 41000

(o21l (0.21) (D21) ReA' il Ere Rererrohard Ilopn s-1l 1 007 PF.•-Thes,RhTo 3.7WI MX6 6 3,706.0 T.rAA&.fAgrL,,jsO&-h

Soo•IErOls'RX ororoe-t OH Dereloorrsee 41.06I0 13,524.65 13.124.45 13.114.65 S•r•ohip Sdce..Gr-oc Progron 6:1.112 Bo.06 Defen.Nuolear N.poolif-dr Red RI,113 EoeryEIlrooqaor Roeebl Eoeg Iooar'. DirtriorLoordo ,6.A1I5 TroiinmgO-er T©rhn.o AorIsiVAIo-Lt ARRA.-Eergy Eoledr -1 R lobkEe IIý ioI 40orelioR. .1.117 E•ireorO,Toininr aed Teinl Arolyoi-Aoioono P-.--,•-r A To. 2".j060 11.0 02.1o St- Fae,, rs Fere,- .lssg jr Nucl. E-ery R-drI•Lveunn aJ•-D-1 ntto S .12I 3013410.63 32.430 63 301430.63 NIH Onor PmragmrTedlPoer 1.•11 Adduce Rý•lu' Ncrj- Agmý - Er-y Fýýnca A~km- Pý~., RIMS.1 27,163.76 27,163.76 27,163.76

%oT 4.754R3 20,M w4 20.72(04 AERRA • C-.lien RAEre e s IMe . a1.086 P-. T.3rý,hFr'-

716 06,331.33 52.0053M 5700551 52lo..51 •3,3N7.So Rmwal, EnI' R-6oc LdD•co~ 61.067 PI. T~rgh . 5359754 13.397.56 U.eoees,-5Teroe. El P-es 714 37,997.74

R eeooleEnerýy Re cr OHDorrloprenl Pse.T4_ghAFs" 3,46547 3,48547 3.485.47 Tec-e.d l -,r0Dr.Cassres 761 4,045.55

Foil EoergyR-6•caeh OH Dereloprs 6M09 7,601.34 210,%T,69 210.-7 69 Po-reT q'erTo. 2NM%.056 R-rsN Pnrsotip To Scm EsregyUfrs Ansn MVo.A3111

353.2 1.31I 353,161.31 753,261.31 ikDenNu-u ool ronoilce Re-6

R4'-T- I&dAlfUrs.-,,, 757 %S."1.7. 10,405.61 120.75.61 10,67561 PeedioeeNsr AradericAo1ma, ferera 4 1.124

1"5.&12.24 145.42.24 195.4224 L'-,-ro T- SlA... 7211 77,U00.70 "Tools.o.6. DepooalorrrEE~ey 255,4%1.73 255.451,73 233,431.73 315.,21.65 9,6250M4re 0.5.D-pirOmeet of Rq e.ufEm

712-8-26 712- 9-27 SNAUDITEDI- S • i -A SCIEDLE I - A TEXASA&M ENGINEERING EAPEAIMEAT STATION "D.AS A024ENGAEEFAND EXPERIMENT STATION SCHEDULEOF EXPENDITURES OF FEDERAL AWARDS SCIIEDULEOFEXPENDITURES OFFEDERAL AWARDS Fm1h Ym,Ea40d WAuIA 33-. 2012 F.1 AIIYT• Fo&4AugA 313 2012

P=.mAmA 8 To Dimol TAi1P A"8' A--am ., NAn-SSA 1.403P•m FhDE ýDA u4yn An*.A, Enm.5A2 Ftd-l Gm.3APw .sI•uh m anA Oim Pmug3' Th6~g6From _ U.i Uni•jtmhiA Enji6i 4 CFDA ldomilymg u-, Dm.m.iIim Amo.4 Dim Pr3. .. N. A-.ml A- F4RA08ilu. E 7A..1582 P-t Tide. 6.003 omm NA AmAA A-Am 38L16882 3R.1A882 78.1, 82 FindC., ý hApm61oAIPO.AA.Id.y EduRtion M4.116 P... . A- f N.1-1 N" M.,626.I5 62,626.15 M,626.15 OalJ•emim.nd S.Om•mP8..m40.o, ".3a6

70.0.IA33 30,.0 33 23.EAD.AA 4,10.31 70.I0I33 Too E-.6.oloAgm3.', 7.1 424,031.40 371.03334 771.013.34 771,033.34 771.03334 ...... 424M -9.4 I.24A.31R 34 1.24A.31.34 27300.0 1.2121,l,34. 1.240.,31834 7-l, - U.S. D0pan30 of DI.mlImo 140302TA 140.302.26 140.302.26 140.30226 1M6.RAW33 13A,•0.65 176,•0.65 U., DMp.r-. f elh n lma t E-A -.A1enalIlealih 93.113 "•, EMMESCrpm1o-m. 67.4483 355. 176.&NAS DiommmyW2A AppUed Rmsmr f., To, iý00lInlolm 1 1u12o.ff-A .103286 Y..ao00Ir0 (01333 179327531 178,275.31 178-7531 17.8733.31 10,.1. 3.m.dAo 4000 13.103" 15,10".6 3.105AR. 15,13•.FR C mT-mAr Rmc4T4 93363 A1e S- URiA•ity/ 11,73048 A.OR4Z 0 4,A3440 94.AR4.4 0.4,0I40 37.995,•2 24"S8.37 34,63837 2-773.59 148R4.38 234.0837 C-m T ..0.I3 RrD UnoimEimmODfPimb~o3h' I1R$3.34.3D 1683,3436 1653.4.3R IRSOAR36 C. Coa-I 93300 W.hiný Un0 .8y-58. 26.342.8 I 32.S 32..4 3204 .bO.od4V.117-12-833

319.97 714 32N ARRA.T,.,-N318 R.MvM3 00 R•omýSp3A7 63.721 3.u0u030i1iy1 403304. Ko..CM 320.173.40 320.173.40 30.461.95 12.711.45 320173.40 671T.3062 671.307.62 33.363..9 631,937.63 731303.62 CI.•AlO~a•uomD mm Rmhs 93833.17Uni'J-i00 f M .- 21,46730 .0.485.3 66"4835.8 14.418.22 52.,67.63 6238.,85 C3....b)2 19.771.A3 19.771.23 11,171.23 19.771.D

42T.0S2.79 426.M52.79 183381.O4 26S.231.75 4231.85279 DAb¢o,Dig-wi.o. 2.3 Kidy.3 Di,- Em.=.3oouRI-dh 93.847 Po'.,,. 1-,J .NoB36Wo 4754 63 4,334.63 4.74.63 F-nm.1 R.•m Png4 in.1ft8 Nemim . ita D9,80344 93.853 UEn31.omyo3f81higpE 136,635.61

BAm.edim3R8 ..h d Ro-0,h T3m6.Ig 93.859 Pr.yl3ab S001 118.73243 04333.33 3.333.33 3,0333.33 "8.112%

37,",•774 373"7.74 030,8334 PAod D0Mg Adm0iAi-im_R-ea 63.103 R8 I Re3ted. D ...0fniWC-A.--A Dimd.-. 03137 MeIWIIkoa R8-4h 0.1 03242 44.83555 44.K551 44,8M55 MI.sr an03App33l Remh fm IA01 A 1.,-loolomlo.Imp 1m. `132.0

Na.173mCR30L- f.r Rm.6 R6 3.380 C.3m D3330-2u800nd44i001,83.0303 33.398

7.802.54 7.802... AR"A- T=,NII RommyAA Rmmh Su.po0 93.70l CIrdMo,4 ar Di . Ro rch 93.837 42hr314.MuOiml~mloA .0008,4a Doomos Rempa0 03.840 72N 3..2.34 D D.0640,Digm'. n Kid.D- [-mI T E-.m.I Rm..,W3 0843 Bm I.R.0.0II ad R84.4.4 miomg 03 839 T340l8- U S.D,,,Imm, of3 I 1, h4" - S-.= 495.032.24 34.843,30 33.843,30

HohdsyAd,.-c R-ý P,,,-I Agenc q7ý5 Ab. Eý,•yC ll 6.144.72 30,003.30 u•, Departm3l34r.3.o00lnCl 3.0212. 1L. 6,3846.33 31.6104.30 37.104TA

Homo.3JkS.mly Ad,o4.m RN a Poject A,-o• Syo.8o,T320A2IiO. 31J 30,640.83 Mýocl•-l /I• 43848•69.5 1433.403-24 184.715.23 132II.48.95 1E01 1.957.10 14.533.681.24 A04.A yR T-& E4l..,o.nd0.moli..90FUofEI-pd..m.6T V0g. nflTgi 7 . f T.. - Relted. N-a13 M-.0•n3gn,31illd7

712-8-28 712-8-29 UNAUDAITED

SCHEDULEI - A SCHEDULEI -A TEXASA&MENGINEERING EXPERIMEJNTSTATION TEXASA&M ENGINCERING EXPERIMENT STATION SCHEDULE OF EXPENDITURES OFFEDERAl. AWARDS SCHEDULEOF EXPENDITURES OFFEDERAL AWARDS For OhYs Eadd A.upD3 I.21,2 Fr 6TY. Ele AgaAS31. 2012

Pars-ArorssFn? u DASA ToaDP-s A0"3£ AR.AAes. NA-SýaA TEAl1Ps NSEN-AI A AFR a-Sum 3 Program Thrb-j Fr UEiv U-,Ai. EnD-, Thrgb TA3u2 F=7r=lGIOADR PS.I301 u1 ORADA IOr4,g n Ur~s~i-'. Er4AA. PrDArTille 8 HAmoA D-rer P-rsrr NA. A-out AnA FEspndrdRmn E"-p1di- HAN..E' MOAA A-AR

I9.9OA0 4 241.M1.46 75,18R72 22CR38.27 2.86..0 11. AO. AIA)s~q 1,401.91 A A1.93 1,461.93 II.¢ A7RDAASAAAlyResearch Torolht, E03l~IoA iA,sd DRADADl.AD-iIf+,wtgnAE'TRAOA£•ogIA3 A7D?)97 O 424.01.46 424,0I.40 A~borssS~sA-SIAOSiIAA716.IAR.EARasrAR."M.ItsrrDoIIID 07.104 STEMNII C. 1AI•Ap.Al-6- Ai.493.AA2 455.AA.A i.-.72 . 47.'"i m' 4.5.5.0.03 I lI-r IiIp5 GZI 97 039 P,,.-Th-q+ghFr" 405 11,4090 67.443..- 67.44-83 67..4.39 C . lIadIor SAAAA5 97.614 0.13,7 10.13) 10111+ f(1710,3 556 73,•.444 11.7394A 11,7397.3 11.739.41 TlAsOU.S. DArD' REl hIDO Sary 05.741.52 7IA22.40 37,g95.A2 37,995.g,2 Elrr3D-narlSI.'I Cl,,r, 29.142.41 29.142.41 29.142.41 U.S.D~paD li .I o I f.r FA44-R4d001ti41ti4 ErmploymrrAarrLp.ipIWWll.psr-P, r 17.207 Por+.Th~r.ghFrso: -1.97 3197 318097 320 90.458.04 .... ,41304 2147 A01 21,40701 21.407.01 71100-1RpAsAAF4.

US.5.D-R-.,rs o

l(N,(,967 104,030Dl -04.70A. T1-r. ,gOFrA: 17.2W

13.075.43 110,141.31 13.,1•5.3 120 351.33647 P-.-TA-gh To T.A,A&IIfEg,ArAAUAOArOAI 1S,772.A4A 18,752.43 L0.752.43 Toah -U.S DS 1AFL.abo

a,112.50 63,I12.56 60,11.256 TlASSE,,,-41.ua .. IF"erl3 Aw.ars $ 2.0P32312.7S 3,f495,7453

12.OM,14 12,WDA.14 12ý,5.14 12,65.14 377.04.63 37.07463 37,074.63 17,074.63 20,401.5 •36.491.55 3.,AI.,5 36.491.55 1.2K1,01343 1.23.0I3.43 1i5.110.03 1I,3MR 49 1.215903143

173,167.U6 17.1671M 173,167.16 173.167.M4 261,10.3S 261.71063 261,7L0.34 261.71086 "1.48 D7 31,648.67 31,63.67 31.43067 372,N.71 072.63171 .72,-0.71 072,30.7I1 102.464.4' 102.46448 102,444.49 102.46484 241.396'1 241.3965 241,39S.65 241,9506 • lý1M.4" ...... 2381•431• 141,A0A•.5 14,307.0 0.13,724.71I 33.61731 0...3641,. 1.1.7MM,040.19 ...... 06,- M.6 .. . 2.39.••4.31

6,149.72 6,149.72 6,149.72

lQ,314.RA lAAO433 19.00.93 7,6101 W7.9,1 3.,0TAI

712-8-30 712-8-31 UNAUDITED

SCHEDULEI- ý S•ClIEDULEI - A TEXASAR M ENGINEERING-XPEKJET STA`HON TEXASARM ENGINEERING EXPERIkIENT STATION SCHEDULEOF EXPENDITURES OF FEDERALAWARDS SCHEDUI.EOFEXPEDITURFS OF FEDERALAWARDD F Y-T EY A..l. 31. .l12 FoedAc eo E646AUXA SI.20XIS

DTA T-a1 P- A,'y Aoise Non-SiLe TtI PF NOTE1: NLTNNMONFTARVASSISTANCE Pnor., Th,,h F;. U.i. UnimcliT Enjic ThEoq4To'.. XoaAA~ De FTe04 NM Au1 X^ouX nEee1uFop,'J:,,re1 NI AeplURble

NOTE2 RECONCILIATIONOr REVENUES AND RECEIPTS TOl E-XPENAITRES AXD ISBDJRSEMENTS(PASS THROIJXGIS) FEDERALDCTLIUJES: 1I.AOUA.S0 1,402.649.. s "O.INI602A. 68.758.77 U•,758•.77 6M.75877 6M5T8TI PF4,6tPeo-nTleogD DGS (Sole Ag•eeu UnE'eAie.-.64 an TAMlRU4,~bE4,U- n p4,.9in 2.M96.333.72 FedeWP- .Th-oghG0 nS mil, -,,.:S IS FA D*4,elMiIA I 1,54009 1L U49.08 11.509.11

I•cESlApprope'ofio 2.(A89.333S.7T2

73.9-4. 73,1.4.1 73,716-I TWAFr4ee.I RFOTIIt- E-NlA IV 6 DAT6S.ŽT.60

ADD:

1,471,40.65 I.57.914.63 1 S.4S.7463 1..58.974.0 No.-Mo'X A.Ai-, [NOTEI]: DoG-• l`ý.F-lSrpl.u Pryens Ne L- = (NOTE31: FPeA.lFPty EXu•on,Loo PF4,1.Pe L,,. P-kuPe . Fýd ._. Sdl I.. 9.,45664

66.458.4 96.456.64 F lGs -from AAMRF I3S5.1 1.961 Fý.IelGT-- toTAMRF (2M .W.1 COBROA65,•' S.Ey ICFDAN.uiba ""I.43U.54 17.1511 ToWP.,. TAhouhS -1 E.,e-Iesý,p41P6,6 SýoA

81.11103 161,3"70 35I.536-1

6IU..30.24

.3 . 1.336.7 1WI,•3.24 I1,U..03 H,0•95.70 351,336.97

712-8-32 712-8-35 UNAUDITED UNAUDITED

SCHEDULEI-A TEXASA&M ENAINEERING EXPERIMENT STATION SCHEDULEI-B SCHEDULEOF EXPENITURES OF FEDERALAWARDS TEXAS A&M ENGINEERINGEXPERIMENT STATION Fothe YoEIDcAuw3I.12012 SCHEDULEOF STATE GRANT PASS.THROUGHSFRONIrTO STATE AGENCIES ForFh Year Ended August 3I, 2012

NOTE3:STUDENT LEOANS PROCESSED AND ADMINISTRATIVETCOSTS RECOVERED Pass.thrSogh FSrm: No Arlimbic

ProgramNam e NOTE; D0:OSIToR8 LIDOAMRIES FOR -OVENSSMEIPLIBLICA'IONS ARcFFNNo..e Giran ID Asx# Amoont NocAppldiý RP120429- A LeRth•rFs-Mediatled Dual Ibmrary, DuBRSelection Approach S42.0291 for te Iedentificationof Surfae BlomarkeSr and Antibodies Specific to NOTE5: UNEMPLOYMENTINSURANCE FUNDS Cancer Cells Cancer Prevention andResearch InstituteofTexas 542 0 NoSA.Fi.bW 76,55.95 ANALYSIS OF WATER USE AND WATER 556.0013 KOTE6: REBATESFROM MHE SPECESL SUPPLEEMENTAL FOOD PROGRAM FOR WEONEN. INFANT AND CTL DREN IWIC) TeORsA&M A gril.ie RercOOES 556 89,543.39

Computation of Creditable Emissions Reductions 52.,0004 Texas Commissionon EnvirSomnntolQualily 582 419,920.61 NOTES7:FEDERAL DEFERRED REVENUE BEGONNING ENDING Monthly Sreasm Flow DIhaggregalIRo 542.0019 CFDA BALANCE NrET BALANCE Texas CoOmissionon EnvironmentalQuality PROGRAMNAME SUIOSS 901I011 CESANGE w312012 582 1,074.62

BaDicS.cOliC kmooch- Contcoba,W'pER 12.351 S 90.2.24.31 $ (W.22431) $ % nceFQuality Peml"lIng 582.8078 .EMan Dc-koc TRxEsCommission on EnvironmentalQuality 582 133.419.26 BaicSc,olEnc RRd0 12.431 7T2.691.9R (64E..S%) 177,J..60 AirF. BREIocoResartcat c S-' p s" 12.xSu .1..624.OI 1,617,424371 9.9.1WT.71 R-h sod TOsIcMh-oodopuxxt 12.910 126.11 026.10 TEEXIICAT Support Agreemenl 716.0002 C-no DNEBoSRnd Disarris Res,-h 93oB.3 1.370.51 1i 7.77U - Texas A&M Engineering Extension Service 716 83.933 85

TAMU-UTSW Dokrfod14- E5FDxpaa Partnership For Cancer Imaging & SpestrosRopy 729.0003 Universityof TexRsSouthwestern Medical Center or Dallas 729 131.337.45 Fc'oaLrlyspot-rcd psijsIs, Sorusa. ro.-weooiA oi.Ifoxxskj IDR~FOeSOjEAuObNcO. Discovery Investigation of Advanced Reduction Proocesses 734.0019 Lam-r University 734 2.995.35 NOTER: SPFFLEESENTAL NUTRITION ASSISTANCE PROGDAM

NoO~pElroobl Biodegradation aR 1,2.3-Trichloropropane 734.0020 Lamar Ulnlivrsity 734 I.064.93

An Advanced Reduction Process Using Sulflte and Ultraviolet Lighl 734.0021 Lamar University 734 20,428.18

A 3D Eulerian Modeling Study of Ozone and Secondary Organic Aerosol 734.0023 Formation In Texas Using the Matter Chemical Mechanism Lomar UniBerSity 734 9,631.30

Texas Analog Research SuperForiFyProgram 734.0001 UniversityofTexas at Dallas 738 142.818.95

Advanced Research Program 781.001 Texas Higher EducationCoordinaliog Board 781 80,000.00

State Enetfe Plan (SEP) 907.0001 Comptroller - State Energy Conservtion Office 907 10.76840

Total Pass-Through From StaIe Agencies S 11203,792.24 (Exhibit IV,

712-8-36 712-9-1I UNAUDrrhD

SCHEDULETHREE TEXAS A&M ENGINEERING EXPERIMENT STATION UNAUDITED SCHEDULE OF CASH & CASH EQUIVALENTS FOR THE YEAR ENDED AUGUST 31,2012

SCHEDULEI-B TEXASA&M ENGINEERINCGEXPERIMENT STATION CURRENT SCHEDULEOF STATEGRANT PASS.THROUGGHSFROEGTO STATE AGENCIES YEAR For the Year Ended August 31, 2U12 TOTAL Cash & CashEquinalter Curast Assets Pass-throagh To: Cash OnHand: S 100.00 PettyCash Deptaient WorklngFund PrarantNeme TeseparatyWatling Fund 3,255.04 GranytI AsxA Amount ToedCash On IRad 1 3,350.00

Cash In Bank S (20,405.01S.57)

Total Pass.TheoaghTo State Agencies Cash I. State Treasuy: (Schedule IV-I ) R6i.btt-et ts DueFeat StateTerey-" 412.230.14 MeetsHeld By Sy•t OGaic-Cstartet 3,276.937-9

ToealCteent CaLt and CashEquiandlens [Esdoih 1I S (I6,712.495.J4)

Cash a Hand:

CashIn Bank I 20.33V,2.19

Total RestictedCash andCash Equivalatr MAsNhiit1IM I 20,339.29119

ToaleCash & CashEguiedeats [Eahuihi V) I 3,625.787.05

71'-9-2 712-16-I UNAUDITED

SCHEDULE N-2 TEXAS A&M ENGINEERING EXPERIMENT STATION NOTE 2 - CAPITALASSETS FOR THE YEAR ENDED AUGUST 3 1, 2012

BALANCE INC.FNTERAGENCYDEC-.NTERAOENCY BALANCE 9.1.11 ADIJUSTMENTS COMPLETEDOIP TRANSACTIONS TRANSACTIONS ADDITIONS DELETIONS 8.31-12

Non-DepredabkIllaon-AmoonizabiAmtsl Landand Land 66ovmou S U,37,462.54 S S S S S 1,337,462.54 Consos0ctonInProgvss 4,257,804.34 (3,110.435.90) 2,045.966.17 3.193.334.61 OulOoTaugbkýCapitl.Assus 76,279.00 ______76,279.00

TotalNonl),piuciall/oo.Amonoizable Assuss S 1.671.14S.88 S S S$ (3,110,435.90) $ 2,045,966.17 $ $ 4,6070706.15

L'q--W. AOO Buildings S 9,166.350.61 S S B $ S $ S 9.166.350.61 PO~ilititad D~Od66proOONON 104,795.40 104,795.40 P100614Wl REip.-~I 74,655.726.05 163,316.92 (367,520.76) 6,114,972.17 (1,455,261.01) 79,091,233.37 Vohklo, BO.3 and 6t10.0 905,194.93 (50,092.71) 1898,349.66 (17,867.00) 925,585.51 01h. Capial 61.00 269,151.1olO ______269,]5r.10

ToNIDep-aible Aaus, at HlotoololCost S 85.00ul,2.09 S S $ 163,316.92 S (437,613.04) S 6,303,322.03 $ (1,473.128.01) B 99,557,115.99

100 Amnlme01004120ooisdOO For. Buildings 8 (2,062,910.91)S B S S S (426,636.72) S S (2,489,447.53) Fadliluoand 0000loup 00010 (4W,26.95) (6,690.30) (47,947.15) P-tomo .od Eqq..Ioo (46.507,188.75) (55,301-38) 151,229.84 (6.733,144.03) 1,14,781.00 (51.919.8.3.32) Vehijolo,Boats aod Ailonft (626,600.20) 30.966.49 (31,201.68) 17.867.00 (608,968.39) OfluxCapital Aool (3.783.47) ______(45,401.64) (49,185.11)

TotalAcoooolw~d Dqo-aool.o 8 (49.241.940.08)S B $ 155301.38) $ 182,196-33 B (7.243,074.371)S 1,172.648.00 8 (55,158,371.50)

Sopm,,iabtoA-%lo N. S 35,759,378.01 S S S 108,015.54 B (255,416.71) $ (939,752.34) $ (30D.480.01) S 34.371,744.49

Capta AoooRsNd S 41411973.9SS S 108,015-4 B (3365,852.61) S 1,106,213.83 B (300,480.01) B 38,978,820.64

712-17-1 712-17-2 THE TEXAS A&M UNIVERSITY SYSTEM

Office of Budgets and Accounting BOARD OF REGENTS

Richard A. Box Term Expires February 1,2013 November 20, 2012 Morris E. Foster Term Expires February 1,2013

James P. Wilson Term Expires February 1,2013 John Sharp Chancellor Phil Adams Term Expires February 1,2015 The Texas A&M University System 200 Technology Way Jim Schwertner Term Expires February 1,2015 College Station, Texas 77845 John D. White Term Expires February 1,2015 Dear Mr. Sharp: Elaine Mendoza Term Expires February 1, 2017 We are submitting herewith the Annual Financial Report of The Texas A&M University System for the fiscal year ended August 31, 2012. Judy Morgan Term Expires February 1,2017 This report has been prepared in conformity with the TEX. GOV'T CODE ANN Cliff Thomas Term Expires February 1, 2017 §2101.011 and in accordance with the Annual Financial Reporting Requirements of the Texas Comptroller of Public Accounts. John "Quinten" Womack (Student Regent) Term Expires May 31, 2013 The accompanying Annual Financial Report will be considered for audit by the State Auditor as part of the audit of the State of Texas Comprehensive Annual Financial Report; therefore, an opinion has not been expressed on the financial statements and related OFFICERS OF THE BOARD information contained in this report.

Respectfully submitted, Richard A. Box Chairman

Phil Adams Vice Chairman

resa Bass, CPA Comptroller ADMINISTRATIVE OFFICERS

ut reo,CoA John Sharp Chancellor Executive Director. Budgets & Accounting Gregory R. Anderson Chief Financial Officer and Treasurer

Joseph Duron Executive Director, Budgets & Accounting

Teresa L. Bass Comptroller

301 Tarrow Street, 3rd Floor • College Station, Texas 77840-7896 979.458.6100 • 979.458.6101 fax - www.tamus.edu THE TEXAS A&M IUNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM CHIEF EXECUTIVE OFFICERS

TABLE OF CONTENTS System Offices John Sharp, Chancellor

PAGE Prairie View A&M University George C. Wright, President REFERENCE NID&A ManagementfsDiscussion and Analysis 798-i Tarleton State University F. Dominic Dottavio, President

Ill Combined BalanceSheet 798-I-I Texas A&M University - Central Texas Marc Nigliazzo, President

Texas A&M International University Ray M. Keck Ill, President IV Combined Statement of Reenuee, Espeoes, and Changes in NetAssets 798-2-1

Texas A&M University R. Bowen Loflin, President IV -I Combined Scheduleof NACUBO Foction soNoatral Clossifcution SMlths 798-3-1

Texas A&M University at Galveston Robert Smith I11,President and CEO V' Combined Statement of Cash Flows 7984-1 Texas A&M University - Commerce Dan R. Jones, President

NOFES Notes sothe Com-bieedFinonciol Statements Texas A&M University - Corpus Christi Flavius Killebrew, President 79s.5

Texas A&M University - Kingsville Steven H. Tallant, President VI Combintng BalanceSheet - DiscretelyPresented Component Units 798-a

Texas A&M University - San Antonio Maria Hernandez Ferrier, President V5 Combining Statementof Revenues. Expenses,and Changes in Net Assets 79K-b Discretely PresentedComponent Units Texas A&M University - Texarkana Keith McFarland, Interim President 2-A Combined Scheduleof Miscellaneous BSndInfon•ation 798.10-1

West Texas A&M University J. Patrick O'Brien, President and CEO 2-B Combined Scheduleof Changes in Bonded Ilndebledness 798-11i-1 Texas A&M AgriLife Research Craig Nessler, Director

2-C Combined Scheduleof MinbSernice Requiements 799-12d-1 Texas A&M AgriLife Extension Douglas L. Steele, Director M. Katherine Banks, Director, Vice 2-0 Combined Scheduleof Analysisof FundsAvailable for Debt Senice 798-13-1 Texas A&M Engineering Experiment Station Chancellor and Dean of Engineering

Texas A&M Engineering Extension Service Gary Sera, Director 2- E Combined Scheduleof Defeased BondsOutstanding 795-14-1

Texas A&M Forest Service Tom G. Boggus, Director 2 -F Combined Scheduleof Early Etingoishment and Refunding 798-15-1 Texas A&M Transportation Institute Dennis L. Christiansen, Director TnILEE Combined ScheduleofCash & Cmh Equivalents 798-16-1 Texas A&M Veterinary Medical Diagnostic Laboratory Tammy Beckham, Director E. J. Pederson, Acting President and Texas A&M University System Health Science Center Vice Chancellor for Health Affairs The Texas A&M University System The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

The Texas A&M University System presents its financial statements for fiscal year 2012, with Net assets are divided into three major categories. The first category, Invested in Capital Assets, comparative data to fiscal year 2011. The emphasis of discussion will be on the current year. Net of Debt, provides the system's equity in property, plant and equipment owned by the system There are three financial statements presented: the Balance Sheet, the Statement of Revenues, less the related debt. The second category is restricted net assets which are divided into two Expenses and Changes in Net Assets, and the Statement of Cash Flows. categories, expendable and non-expendable. Expendable restricted net assets are available for use by the A&M System, but must be spent for purposes as determined by donors and/or external The statements as presented are for the combined Texas A&M University System (A&M entities that have placed time or purpose restrictions on the use of the assets. The corpus of the System). The A&M System is composed of twelve institutions of higher education, seven non-expendable restricted resources is available for investment purposes and the earnings are agencies, a health science center, and the System administrative offices. The report also includes used to support the institutions or agencies. The non-expendable restricted net assets consist of a blended component unit, the Texas A&M Research Foundation, and four discretely presented the system's endowment funds. The third category is unrestricted net assets. Unrestricted net component units. assets are available for any lawful purpose. Although unrestricted net assets are not subject to externally imposed stipulations, the unrestricted net assets have been internally designated for The member institutions of higher education offer a broad range of undergraduate and graduate various academic and research programs and initiatives. degrees. With locations in Canyon, Stephenville, Commerce, Texarkana, College Station, Prairie View, Galveston, Corpus Christi, Kingsville, Killeen, San Antonio, and Laredo, the Balance Sheet A&M System strives to meet the education needs of Texas. (in millions of dollars) The agencies of the A&M System include both engineering and agricultural research and 201• 20t1 201t extension agencies. The agencies provide educational, research, service, and instntction to Ass•ls benefit the state. Current Assets $ 1,809 S 1,524 S 1.724

The A&M Health Science Center continues to grow and expand. It includes a college of Capital Assets, Net 3,618 3,476 3,084 medicine, a college of dentistry, a school of rnral public health, a school of nursing, a pharmacy Other Asset 3,326 3,005 2.731 school and research divisions. S 8,005 S 7,539 The A&M System educates approximately 126,000 students and reaches another 24.2 million Total Assets S 8,753 people through service each year. With nearly 27,000 faculty and staff, the A&M System has a Liabilities physical presence in 250 of the state's 254 counties and a programmatic presence in every Texas Current Liabilities $ 1,299 S 1.216 S 1,093 county. Non-Current Liabilities 3,221 2,811 2.671 Overview of the FinancialStatements and FinancialAnalysis Total Liabilities S 4,520 $ 4.027 $ 3,764 The A&M System presents its financial statements for fiscal year 2012. The statements are prepared in accordance with Governmental Accounting Standards Board pronouncements, the Net Assets in Capitol Assets. Net of Debt S 1,284 S 1,287 S 1,164 the National Itvested requirements of the Texas Comptroller of Public Accounts, and the guidelines from Restricted Association of College and University Business Officers. Espendable 481 476 388 Balance Sheet Non-Expendable 405 394 359 net The Balance Sheet presents a snapshot of current and non-current assets and liabilities and Unresricted 2.063 1.821 .864 assets (assets minus liabilities) for the A&M System as of the end of the fiscal year. Current and non-current presentation is discussed in the notes to the financial statements. Total Net Assets S 4.233 $ 3,978 S 3.775

Readers ofthe Balance Sheet are able to determine the assets available to continue the operations Total Liabilities & Net Assets $ 8.753 $8.005 $ 7,539 ofthe system. They are also able to determine the amount the system owes to vendors, investors, and lending institutions. The statement also provides a picture of net assets (assets minuis liabilities) and their availability by the A&M System.

798-i 798-ii The Texas A&M University System . The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

The Balance Sheet indicates an increase in total assets of 9.3%. The most significant increase in Statenent of Revenues, Evpenses and Changes in Net Assets assets is the $231.6 million in Cash & Cash Equivalents (Unrestricted & Restricted) and $96 million increase in non-current Investments. The net capital assets in 2012 are $3.618 billion, an The Statement of Revenues, Expenses and Changes in Net Assets presents the revenues earned increase of $142 million from the 2011 balance of $3.476 billion. and the expenses incurred during the year. Activities are reported as operating or non-operating. The Governisental Accounting Standards Board requires that stale appropriations and federal Liabilities increased 12% from the 2011 amount of $4.0 billion to $4.5 billion in 2012. The Pell Grants be reported as non-operating revenue. This will generally result in an operating largest factor was an increase in Note Payables of $92 million and Bond Payables of $125 deficit for most public institutions. The utilization of long-lived assets, referred to as Capital million. The second largest factor was a $127.0 million increase in Other Postemployment Assets, is reflected in the financial statements as depreciation or amortization, which amortizes Benefits recognized by the A&M System, which increased the total recognized liability to the cost ofan asset over its expected useful life. $603.8 million. This accrued liability is being amortized over 30 years. The purpose of this statement is to present the revenues received by the A&M System, and the The final section of the statement presents the net assets of the system. Net assets increased 6% expenses paid by the A&M System, both operating and non-operating, and any other revenues, from the 2011 amount of $3.9 billion to $4.2 billion in 2012. Restricted for Capital Projects expenses, gains and losses received or spent by the system. The change in total net assets as increase 34% from the 2011 amount of $62.9 million to $84.3 million in 2012 provided the presented on the Balance Sheet is a result of these activities. largest increase. Unrestricted Net Assets increased by 13% from $1.8 billion to $2.1 billion. Even though these balances are defined as unrestricted they do contain internal restrictions, as Generally, operating revenues are received for providing goods and services to the various defined in the table below. customers and constituencies of the A&M System. Operating expenses are those expenses paid to acquire goods and services provided in return for the operating reventes. Non-operating Unrestricted Net Assets revenues are derived from sources that are not considered primary operations for an institution of as or August 31, 2012 higher education or state agency. State capital appropriations and capital grants and gifts are (in millions of dollars) considered neither operating nor non-operating revenues and are reported after "Income before other revenues, expenses, gains or losses." Reserved For: Accounts Receivable 906 The condensed Statement of Revenues, Expenses and Changes in Net Assets reflects an increase Encumbrances 102 in Net Assets of $255 million. The $255 million increase is primarily due to an increase in Capital Projects 148 transfers from other state agencies of $112 million as well as tuition and fee revenue of $74.2 Retirement of Indebtedness 148 million due to enrollment growth and rate increases and an overall decrease in operating Inventories 25 expenses of $76.6 million. There was also a decrease in federal revenue of $32 million which is Higher Education Fund 24 attributable to a reduction in ARRA Stimulus funding. Available University Fund 19 Selr-tinsured Plans 60 During the 2012 fiscal year, operating expenses decreased $76 million. The most significant Prepaid Expenses and Other Reserves 41 changes are listed below. 118 Other State Funds > Depreciation and Amortization increased by $28.5 million or 13.8%, totaling $235 Unreserved million. Allocated 325 Funds Functioning as Endowments 147 > Other Operating expenses decreased by $81 million mostly attributable to reduction in the Texas Forest Service wildfire related costs. Total Unrestricted Net Assets $ 2,063 > Salaries, wages and benefits decreased by $29 million or 4.9%. Non-operating Revenues and Expenses for 2012 is $1.4 billion, a decrease of 11%, or $164 million, from the 2011 amount of $1.5 billion. Legislative revenue totaled $1 billion for 2012, an increase of 6% or $58 million, from the 2011 amount of $966 million. This increase was primarily attributable to Texas Forest Service receiving a $121 million supplemental appropriation to cover fire bills for the 2011 wildfires. The decrease in markets and unrealized gains/losses on investments resulted in an $87 million decrease in investment income due to a decrease in unrealized gains from the 2011 amount of$182 million to $95 million. 798-iii 798-iv The Texas A&M University System The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

Other Revenues, and Transfers increased 39% to $366 million. The transfers from other state The following graph presents total revenues for 2012. Revenues are presented as operating and agencies increased by $112 million which is primarily due to $78.5 million Available University non-operating in the Statement of Revenues, Expenses and Changes in Net Assets. Operating Fund distribution and the issuance of $283.6 million Permanent University (PUF) Bonds. When revenues totaled $2 billion and non-operating revenues plus transfers in totaled $1.9 billion for a PUF bonds are issued an offsetting interfund receivable and transfer in are recorded to accrue the total of $3.9 billion. funds from the University of Texas.

Statement of Revenues, Expenses and Changes in Net Assets (in millions of dollars) 2012 Revenues

211111 2010 $3. 9 Billion

Non-Governmental Operating Revenues S 2,062 $ 2,028 $ 1,918 Sponsored Other, 1.5% Operating Expenses (3523) (35991 (3,368) Programs, 5.7% _....,, I

Operating Itcome (Loss) (1.461) (I,571) (1.450) Federal,State and_ Nontperating Revenues and Expenses 1,348 ItI (,360 Local Grants, 13.3% State Appropriations, Income (Loss) Before Other Revenues, 26.6% and Transfers (113) (60) (M0 Auxiliary Federal Enterprises, 6.9%... Other Revenues, and Transfers 366 262 273 Appropriations & Net Other Sales and Grants, 5.1% Change in Net Assets 253 202 183 Services, S.3% - Gifts, 3.0% Investment Income. Net Assets at Beginning of Year S 3.978 $ 3,775 S 3,605 Professional Fees, 3.7% Resutatenent of Prier Year Balance 2 1 (13) 0.1% AUF Inc& AUF Transfer from UT Net Assets at Beginning of Year-As Student Tuition and., System, 7.9% Restated S 3.980 $ 3,776 S 3,592 Fees, 19.5% Other 1.4%

Net Assets at End of Year S 4,233 s 3.978 S 3,775

Certain internal activities embedded in the Statement of Revenues, Expenses and Changes in Net Assets provide goods and services to internal customers and to other A&M System members. These activities include self-insured programs (health, dental, etc.), repairs & maintenance, utilities, computer services, and other interdepartmental activities. The net operating revenues for these internal activities were eliminated to the extent of operating expenses which was approximately $445.4 million. The majority of this activity relates to the self-insured programs which reported operating expenses of approximately $194.4 million. Of the remaining $251 million in operating expenses eliminated, $64.4 million represented salaries and wages and $16 million represented other payroll related costs.

798-v 798-vi The Texas A&M University System The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

The following two graphs present operating expenses of $3.5 billion. The first graph presents the operating expenses in the National Association of College and University Business Officer Natural Classification (NACUBO) functional classification and the second graph presents operating expenses in the natural classification. 2012 Operating Expenses $3.5 Billion NACUBO Function

2012 Operating Expenses Salaries,Wages, & $3.5 Billion Payroll Costs, 52.3% Other Operating Instruction, 26.9% 1 Expense, 10.4%.-.,

Net Change In OPES, Depreciation, 6.7% " 3.6%

18.6% Scholarships & Auxiliary, 8.8%. /_Research, FellowshIps, 5.4% Professional Fees & Depreciation, 6.7% Scholarships & Services, 6.6% Fellowships, 4.6% Repairs & Maintenance, 2.8% Travel, 2.1% Communication KMaterials & Operation & & Utilities, 3.7% Supplies, 6.4% Maintenance of Service, 7.9% Plant, 6.2% iPublicHospltals and Clinics, 0.3% Institutional - Support, 9.5% Student Service, AcademicSupport 6.7% 3.8% Operating expenses totaled $3.5 billion, as depicted in the graph, and non-operating expenses plus transfers equaled an additional $174 million. The depreciation and amortization expenses increased by $28.5 million, or 14% which is attributable to the completion of new facilities.

Statement of Cash Flows The final statement presented is the Statement of Cash Flows. This statement presents detailed information on the cash activity during the year. The first section presents operating cash flows and the net cash used by operating activities. The next section presents the results of non-capital financing activities. This section includes the cash flows from state appropriations and other non-operating activities. The capital and related financing activities section includes cash used for acquisition and construction of capital assets. The investing activities section reports purchases, proceeds, and earnings from investments. The final section is a reconciliation of net cash from operations to operating income.

798-viii The Texas A& M University System The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

Life Sciences/ETED-Finish Shell Space 2013 10,000,000 Energy Consumption Reduction Project 2013 10,000,000 Statement of Cash Flows Northside Residence Hall 2014 68,000,000 (in millions of dollars) Welbom Road Grade Separations 2014 34,000,000 2012 2011 2010 Physical Education Activity Program Facility 2014 23,079,665 Cash Flows From Kyle Field District Plan Phase 2 2014 16,000,000 Operating Activities $ (1,002) $(I,009) S(1,163) Corps Dorm Renovation-Leonard/LLC 2014 15,2100,000 Non-Capital Financing Activities 1,605 1,560 1,541 CVM & BioMed Science New Education Building 2015 120,000,000 Capital and Related Financing Activities (302) (616) (220) NCTM Core Retrofit Project 2015 30,542,496 Investing Activities (70) 605 01281 Sub-total 386,572.161 Increase in Cash & Cash Equivalents 231 540 30

Cash & Cash Equivalents, Beginning of Year 862 322 292 Prairie View A&M University Capital Renewal 2013 11,067,000 Cash& Cash Equivalents, End of Year $ 1,093 $ 862 $ 322 Agriculture & Business Multipurpose Classroom Building 2015 37,800,000 Student Recreation Center 2015 31,290,000 CapitalAsset and Debt Admninistralion Sub-total 80,157,000 The A&M System is committed to continuous improvements in the quality of its academic, research, and service programs through the development and renewal of its capital assets. The Tarleton State University System continues to implement its long-range plan to modernize its older teaching and research OA Grant Humanities Building Rehab & Expansion 2014 12,000,000 facilities along with plans for new construction. Capitalized expenses for construction in progress during 2012 totaled $477 million as compared Texas A&M University to $331 million in 2011. This represents projects that have been substantially completed and West 2013 moved to the appropriate capital asset categories. Jack B. Kelly Student Center Expansion 10,900,000 Underclassmen Residence Hall-Phase It 2014 35,000,000 The A&M System had significant capital asset additions for facilities in 2012. There are many Sub-total 45,900,000 construction projects in various stages of completion including major projects managed by the System Offices and minor projects managed by the members. These projects represent $343 Texas A&M University-Commerce million in payments for construction in progress during 2012. New Student Housing-Phase II 2014 26,900,000 Sam Rayburn Student Center Expansion 2015 10,300.000 The major construction projects listed below are in progress or scheduled to be completed over Sub-total 37,200,000 the next two years. Projected Texas A&M University-Texarkana Fiscal Year Projected Bringle Lake Village Housing Phase It & Dining Facility 2015 15,750,000 Camntps/ProiectName $10 Million and Greater Comnletion Bud, et Texas A&M University

Liberal Arts and Arts & Humanities Building 2013 $ 46,000,000 Texas A&M University-Central Texas Corps Dorm Renovation 2013 13.750.000 Multipurpose & Library Building 2016 50,000,000

798-ix 798-x The Texas A&M University System The Texas A&M University System Management's Discussion and Analysis Management's Discussion and Analysis For the year ended August 31, 2012 For the year ended August 31, 2012 Unaudited Unaudited

Texas A&M University-San Antonio Significant Events Central Academic Building & Patriot's Casa 2015 75,000,000 Several leadership changes occurred in the A&M System during fiscal year 2012. Those appointments included the following:

TOTAL 702,579,161 > Mr. John Sharp appointed Chancellor of the Texas A&M University System by the Board of Regents on September 6, 2011 The A&M System understands its role of financial stewardship and works to manage its > Dr. Keith McFarland appointed acting President for Texas A&M University - Texarkana resources effectively, including the prudent use of debt to finance capital projects. > Dr. Margaret Banks appointed Vice Chancellor and Dean of Engineering, Texas A&M Engineering During fiscal year 2012, the A&M System issued taxable and tax-exempt bonds under the > Dr. Frank B. Ashley II named Vice Chancellor of Recruitment and Diversity. Texas Permanent University Fund debt program to refund a portion of previously outstanding. bonds A&M University System and commercial paper notes. The Permanent University Fund Bonds, Series 2011 had a par > Dr. James Hallmark appointed Vice Chancellor for Academic Affairs of the Texas A&M amount of $87,145,000 with a true interest cost of 3.53%. Refundings associated with this bond University System issue resulted in approximately $51,000 of total savings or approximately $50,000 of net present > Mr. Guy K. Diedrich confirmed by the Board of Regents as Vice Chancellor for Federal value savings equating to a net present value benefit of 4.96%. The Permanent University Fund and State Relations, Texas A&M University System Bonds, Series 2012A had a par amount of $70,680,000 with a true interest cost of 2.25%. > Dr. Douglas Steele named Director of Texas A&M AgriLife Extension Refundings associated with this bond issue resulted in approximately S13,640,000 of total > Mr. Gregory R. Anderson's role expanded to Chief Financial Officer and Treasurer, savings or approximately $10,974,000 of net present value savings equating to a net present Texas A&M University System value benefit of 13.77%. The Permanent University Fund Bonds, Taxable Series 2012B had a > Mr. Tye Minkler named Vice President for Finance & Administration for Tarlelon par amount of $125,750,000 with a true interest cost of 2.98%. Revenue Financing System > Dr. Terisa Riley named Interim Senior VP for Fiscal and Student Affairs for Texas A&M Commercial Paper in the amount of $204.7 million and Permanent University Fund Comntercial University - Kingsville Paper in the amount ofS155 million were issued to fund eligible projects. The A&M System has > Mrs. Debra Cummings named Assistant Director for Fiscal Affairs, the Texas A&M sufficient debt capacity to finance planned facilities and other capital improvements. In addition, AgriLife Research the State appropriated amounts are sufficient for the reimbtursement of debt service on all > Mr. Daniel Gray named Chief Financial Officer and Associate Agency Director, the outstanding and planned Tuition Revenue Bond debt for the FY2012-13 biennium. For Texas A&M Engineering Extension Service additional information concerning Capital Assets and Debt Administration, see the Notes to the Financial Statements. In addition to the changes during the year, the following leadership changes occurred after the reporting period ended August 31, 2012: Economic Outlook > Dr. Jon Mogford appointed Chief Research Officer for the Texas A&M University Markets continue to be volatile on uncertainties for the U.S. economy and the potential risks System associated with the "fiscal cliff' as well as the outcome of the European sovereign debt crisis. > Mr. E.J. "Jere" Pederson was appointed as acting President of the Texas A&M University Confidence and optimism continue to fluctuate and unemployment remains elevated. Continued System Health Science Center on October 9, 2012 volatility is expected for the foreseeable future. The Texas A&M University System has been awarded a contract to develop one of three U.S. The A&M System's investment portfolios are well diversified across asset classes and have department of Health and Human Services National centers for Innovation. The $285.6 million participated in the increases and decreases in the market. Uncertainties in the market will affect contract includes an initial investment of $176.6 million from the U.S. government, with the the performance of the investment pools as the volatility in the markets continues. Market remainder cost-shared by commercial and academic proposal partners. dislocations may see declines in the portfolios, but will also provide opportunities to acquire assets at substantial discounts that will benefit performance over longer-term investment periods. The Texas A&M University System established The Office of Sponsored Research Services to consolidate the sponsored research administration activities for the Texas A&M University System members to create efficiencies and consistency in the area of research administration. This new administration unit functions as a new agency beginning September 1, 2012.

798-xi 798-xii UNAUDITED The Texas A&M University System EXHIBIT In Management's Discussion and Analysis THE TEXAS A&M UNIVERSITY SYSTEM For the year ended August 31, 2012 COMBINED BALANCESHEET Unaudited FOR TIIE YEAR ENDED AUGUST31.2012

CURRENT PRIOR YEAR YEAR On August 25, 2011, Texas A&M University notified the Big 12 Conference of its intention to TOTAL TOTAL explore other conference affiliation possibilities. On September 25, 2011, The Southeastern ASSETS AND DEFERRED OUTFLOWS Cur-, A.-ts Conference Presidents and Chancellors accepted Texas A&M University's application for C.sh & Cash Equtiahrntr[Schedule Three] 5 753,736.064.46 S 613.926.438.36 membership effective July 1, 2012, with competition to begin in all sports for the 2012-13 Inventmtents 20.933.41 academic years. DerivativeInstruments (995,8Y6.09) (33,058.12) DcthendOutfllnw of Reeore . 2,244,I01I01K) 4,739,Hi.0o0 R-timed On August 15, 2012 Texas A&M University System Chancellor John Sharp and Texas A&M Cash & Cash Eqoi.alcntt [SchadulsThrn . 339.663,917.6h 247,867.909.35 University President R. Bowen Loftin formalized a contract with Compass Group USA to KLegislative Appropriations 103,056.733.91 75,650,839.15: _. Resnivables,Net: ...... manage and operate dinning services, building maintenance, landscaping services and custodial Federal 9t,481.012.10 123.746.696.79 services located in the Brazos County. The personnel transition involved approximately 1,600 Other Intergoeemental 5.586.243.95 5.120.167.23 employees. Ituereaand Dividend, .6,559,836.40 6,892,035.50 Gifts, PlIdg. andO nation ...... 27,241,475.10...... 29,695,886.06 SclfIinsuted Health and Dental 18.667.261.66 17.945.575.55 In June 2012, a letter of intent was signed between Texas A&M and Texas Wesleyan University Studcnr 21.648,990.25 26.300.773.11 ...... in Fort Worth for Texas A&M to purchase the Texas Wesleyan Law School. In e t t T .. "160.396.351.24 19.474.668.98 SAccOunts .-. 106.710.853.67 .... 3,360,504.80. Other 4,143,233.36 96,458,746.56 The Board of Regents also approved a motion at the August 2012 Board meeting to authorize the Due FromOther Agenciei 20.162.752.06 1h,603.934.33 Chancellor and Texas A&M University President to take any and all action necessary to C•umable Invetaeics 18,630.776.29 17,759,731.71 effectuate an administrative change bringing the Health Science Center under the administration . 6,276,55 78. 6,405,757.35, Loansand Contracts 25,996,78..04 25.843,033.07 of the university. Intrfund Receivable 22.390.000.00 I 15.215.000.00 • OttherC.nt Asets. . . 75,218,606.78 68,918,140.46 The record breaking 2011 Texas wildfire season ended in November 2011. As a result of the Total Current Assets S 1,8095,37,006.05 S 1,524,122,721.27 continued fire response in fiscal year 2012, an additional $34.1 million of estimated costs for Non-CurrentAssts and DeferredOuDtloa . out-of-state resources were accrued in fiscal year 2012. Net unfunded emergency response Restticted expenses, without estimated FEMA reimbursements, is approximately $198 million. Texas tonnvstatenta $ 758,816,631.91 5 722,193.263.98 Loons. Contracts and Other 4,137.180.21 4,435.582.84 Forest Service expects to receive some FEMA reimbursements, which will take 2-3 years. Pledges Reeisable 60,512,651.12 74,594,431.89 Lataanand Contract. 21,959,475.52 21,344,114.97 The Texas A&M System continues to focus on its mission to serve the needs of the state of Inrmesents I,744.975,258.76 1.649,214.951.61 of sponsored project DetacredOntflow of R-eournes 2.244.010.00 Texas. The continued enrollment growth, quality education, expansion Interfund Receivable 734,•.85940.87 529.21u.000.00 activity, and the successful capital improvements are an integral part of the future of the A&M * Capit[ As•€it Non.fDep-emibe . . System. Land and Land Imprvemrents 134,634.879.95 136.97I,988.97 Construction In Progress 506.946,414.05 828,280.993.91 Other Tangible Capital Asais 42,428,450.03 41,167,793.72 d n.l•e.ish ...... 47,17.00 .Li 47,817.00 Capitol As-Is, rxprcciabtc Buikiings and Building Imprpvenents 3,949.512.073.07 3.462.349.580.71 Inttasnuctra• 523,102,666.26. 408,607.496.24 E...Ftcilittis and Other tntpnmscntoaets 3I11,893,075.59...... 283.011,547.15 Fumiture and Equipment 6577569,662.56 645,049h,517.22 Vehiclea.Bsort, and Aircrft. t112,34q.943.66 105.135.476.76 Other Capital A.ett 198.693,812.40 195,093,096.1to IntangibleCapital A ts, Aorized ...... Land Us Rightt 255,45571.0 25S5,47.001 Computer Soft-re -522.570.60 52.840:240.28 AccumnulatesD preciaion/Amortianion (2.894,164,269.I15(2.687,252,147.59) AssetaI lcd1. Trst _362,100.00 ___ 52,100.00ý Other Non-CurrmnlAssets 32,07K.33 1,270.5144.37 Total Non-Current A.-ts and Deferred OGtflows S 6,944,071,772.90 S 6.481,429,997.09

TOTAL ASSETS AND DEFERRED OUTFLOWS S 8.752.985,77B.BO5 S ,0,52683

798. I - I UNAUDITED LUNAUDITED

EXHIBIT III EXHIBIT IV SYSTEM THE TEXAS A&M UNIVERSITY A&M UNIVERSITY SYSTEM COMBINEDBALANCE SHEET THE TEXAS FOR TIlE YEAR ENDED AUGUST31, 2012 COMBINED STATEMENT OF REVENUES. EXPENSES. AND CHANGES IN NET ASSETS FOR TIIE YEAR ENDED AUGUST 31. 2012 CURRENT PRIOR YEAR YEAR CURRENT PRIOR TOTAL TOTAL YEAR YEAR TOTAL TOTAL LIABILITIES Current Liabildtlir OPERATING REVENUES Payables Sales of Goods and Services Accounts S 339.156.,83.84 B 281,130.179.51 Tuition and Fees-Pledged S 998,027,301.01 S 923,746.898.32 Payroll 110,950,744.67 115.427,527.10 Discounts and Allowances (228,1145.342.17) (233.855,156.63) InvestmenlTrades 57,349,602.36 29,043,035.19 Net Professional Fees . 1,376.299.32 R,348,466.17 23.564.888.32 18,317.472.35 - SelON.suredHealth and Dentala . . . 271,51,043.30 . . 264,605,046.74 14.143.177.13 19.798.922.20 Net Ausiliery Enteeprise . . Oilier Net Other Sales ofGoods and Services 238,190.823.00 242,770.861.10 620.263.36 . 84,040.31 Lmerfund Payable 2,574.114.20 .,505,487.34 Discounts and Allowanoca-Sules (28,888.029 07) (30,080.823.701 Due 1. Other Agencias ofGood, and Servioes $ 1,252,212,095.39 $ I11 7S,736,194.00i I [edging Dcrivetise Istnnmvnl . 2.244,010,60 4,739,941.00 Total Sales Unearned Revenue 505.828.551.57 452,054.649.98 Employees Cetpepsasble Leame 9.220,406.15 7,595,819.36 itlersrl Revenue $ 1.880.713.36 R 1,831,908.43 2.31 I1R0W.00 Claims and Judgments Federal Revenue - Operating 413,849.337.37 446.800.464.13 R.008.M33.34 101568 333 34• Notes and IoPan yable .... Federal Pass Through Revenue 33,978.781).21 37.562,827.10 Bonds Payable I 19.748.150.81 103.324.370.77 StateGram Revenueo . . 1,165.804.44 . . 961,025Q.2 Capital Ieae Obligations - 637,004.01 361.133.96 Stale Pass Through Resenue 75,288,158.15 83,755,428.35 LiabilitiesPayable FrPemReorieled Assets MB.837.497.88 30,119.179.03 Other Gramts and Contracts - Operating 225,912,718.38 218,175.583.98 Pa•FndaHleld rOthe 34,369,030.35 . 35,042,529.53. OthberOperatingRovenue . . . 58,164,151.78 63,187,901.44 Other Current Liabilities 16.28.102.55 15.286.456.86 TOTAL OPERATING REVENUES S 2,062,451,759.08 B 2,028,011,333.15 Total Currant LIabilitIes B I,298,591,460.54 S 1,216,199l077.gB OPERATING EXPENSES Nan-Cur-nt LIhblilra InSlmuectin S 947,502,577.61 S 993,885,265.95 Interfund Payable $ 4.091.173.62 S 2,371.917.34 Reseaceh 656,362.679.21 629,222,658.80 EmployeesCompensable Le.te 93.258.726.50 93.616,113.94 Public Service 276,868,332.4I 361,783,874.97 Ohelr Pam Emplyteen Beneefitl 603,R78R029.00 476,g09,4b9.00 Hospitals and Clinics 9,829,101.66 9,640,062.19 . Claims ed Judgments. . - 4,257.000I.0 . 5,244,262.00 Noits andLeans Payable 195.324.999.98 9.923.333.32 Academic Suppotr 237,061,070.10 211,297,116.13 Bonds Payable 2.222.470.027.95 2.114.248.337.R9 Student Services 133,571,131.93 127,352,084.10 HedgsingDerivative esmnenmnts 2,244,010.00 Institutional Support 334,511,861.67 361,772,550.8B AssetmI leld In Trust 362.100.00 362.100.00., Operation & .Maintenanee ef Plant .2...... 219,464,737.35 . 237,669,055.42 LiabilitiesPayable From RestrictedAssets 2,376,072.07 14.050.403.05 Scholarships & Fellomuhips 161,335,011.93 160,314,202.90 Funds Ieldfor Others 71,170,762.30 68.723.051.37 Auxiliary 311,493.348.21 300.148.648.22 Capital Lease Obligations 2.733.129.30 2.062.393 64 On.peoiutinlnAmortieatiun . . 235.011,570.11 206,547,337.51 - 21,769,510.55 Other Non-Cumeat Liabilities_ 21,408.709.75 . TOTAL OPERATING EXPENSES B 3523,iL502,19 $ 3,599,635,657.07 Total Noa-Carrant Liablitle. S 3,221,330,730.47 S 2,811,424,9ZZ.40 TOTAL OPERATING INCOME (LOSS) B (1,460,559,743.11) B (I,571,624,323.92) TOTAL LIABILITIES S 4,519,922,191.01R 4,027,624,000.20 NONOPERATING REVENUES (EXPENSES) NET ASSETS Legislative Revenue S 1,024,337.136.0l S 966,047,105.19 Isested In Capital Assets, Netof Debt $ 1.284.223,421.32 S 1,287,275.736.53 Federal Revenue Non-Operating 199,778.086.81 208,923,944 60 Restricted fru: Federal Pass ThroibghNon-Operating :' 8,604.62 22,914,837.48 Capital Nojca" 84.372.806.48 62,947.448.00 Educatfins 263.085,114.96...... 278,840,189.04 Gifts I 19,697,952.Ig 155,348,369.54 8,396,063.55 Endowmentand Permanent Funds Land Intome 6,398,330.40 464,634.119.24 394,215,398.22 Investment Income 51,664,251.45 56,618,523.14 .Nnexperduble 133.894•137.14 133.743,486"36 Ropeadabl.... Investing•ActivitiesElxpense . .. : ':." : ':::: .3 (3,924,652.22) (5,532,166.25) Unrestrieted 2.062,776,988R65 • 1,820,J06,360Il Interest Expenseand Fiscal Charges ...... (06,368.190.58) . . (R9,154.240.69). Borrmoer Rebates andAgent Fees (2,185.240 661 (1.019,933.321 S 4,232,986,•37.84 B 3,977,928,61t.16 542,650.82 (475.071.83) TOTAL NET ASSETS (EXHIBIT IVI Gain [Loss] On Saleor Disposal of Capital Assets 3 ,12 729...... 6 )7 ,4063• 78Net i etegmincrease a [Decrease]~a In. Fair Value. '.. !i+i: .iii+: :..(6..... 93,034,117.88 i82.161,140.63i TOTAL LIABILITIES AND NET ASSETS B 8,752,908,778.85 S 2 00A`5S2,618,36 Seelneanetafclaint . (167,207.21) (72,827.86). Other Nonoperating Revenues 15,012.659.92 49,659,027.47 Other Nonoperuting (Expenses) (52,617.317.51) (34,661,796.54) TOTAL NONOPERATING REVENUES (EXPENSES) B 1,347,291,192.47 B I -51 1,352,975.32

INCOME (LOSS) BEFORE OTHER REVENUES AND TRANSFERS 5 (113.268,550.64) S 160.27138B.60)

The AccempanuingSummary ofSignificauntAccounting PoliciesandNotseto FinancialStatements -manineegral pao this statement.

710-2 - I 798- I -2 UNAUDIrTED UNAUDITED SCIIEDULEIV.I EXHIBIT IV THE TEXAS A&NMUNIVERSITY SYSTEM COMBINEDNACUSOFUNCIttN TO NATURALCLASSIFICATION MATRIX THE TEXAS A&M UNIVERSITY SYSTEM FOeRTHE YEAR ENDED AUGUSf31, 2012 COMO1INEDSTATEMENT OF REVENUES, EXPENSES. AND CHANGES IN NET ASSETS FOR TIlE YEAR ENDED AUGUST 31,2012 IIOSPITALS& ACADEMIC STUDENT CURRENT PRIOR ]TsRa' 5ON RSLatCIt PUBIaICSERasC C1J1-CS 5t1PutmRI 56E1R85C8 YEAR YEAR NATURAL CLASSIFICATION TOTAL TOTAL Cost ofGDoodaSold $ 175.896.26 S 1.14t.445.94 5 1t.48.356.34 S 19,335.1tt 107.414.7t $ 45.693.28 Salakies& Wages sus.733,261.17 313.511215.46 72.4a.780 26 5,270.28..50.. .. e,42rI,t4,: 70.71e.035.67 OTHER REVENUES AND TRANSFERS PayrollSated Costs .14.i497,977.6 ::.56 62.246,571.00 2t,,-M.46135811. .1t,s .. 2.Ott9.gtI.44.i .. Lt,217.624.571 Capital Contributions S 2,109.254.53 $ 11,873.297.82 Pn..asionad Feet& Scrvices" 3G.759.99.7.2 96.5e3,3(0.2).4 P,021Is21 2N70,245).82 16367.884.54a. , 7689,527.96 .CapitalAppopriattiom(Higher Fducatton Food) ...... 27.136.522.00 27.136,522.00 Travel 22.202.45049 23.970,430.49 4.655,03095 52,77a03 5.91s, 154.5S 3.015,728.01 Additiors to Pe.•r..rmannend Tenn Endo'noent 5.399.926.86 . . 5.998.49.01 • Materials& Supplies 43.474.995.78 M6.3.4.715.48 15.176.185.35 771,406.20 38.332.,44.a . I 1,021,6 730 Trefs I. . . . . atnom iatic•& Utitities 6.214.47166 i .247,2tt.29 4.4t .534 27 .60S.5t 5t7.70.$3.36 " 2 .•3227: Tr-aseers From Other Staoe Agencies 340,515,416.25 228,386.478.12 Repairs& Main...aaue. r , .. 6,584,91461 12i1t,913.07 3951.4.25 _- 6O.3126. . 7,273,414.65,.: 4.437,646. .NomwetadatoeyTransfes From MetmberslAgencies-Cap Assets 139,057.31 2,645.52 Rentals& Leasas 12.633.698.41 7.711.363.90 4.99.295.25 M9.194.81 3.020.a75.87 2,796.308.26 Transters Otir Psinting& Reprdction 5,767,.toe ,7,277.48 1.558,!8607 1,591.49 1,470,725.95 1,316,2209 ... Tronsf'ors to Other sotot Agoenies, .7'"...... "..-:. FedoralPss-Throagh . . t-oo 0.1oi t.070,402.75 Ni7.185.32 (8,698,013.53) :, (...18,783,381.05) St.aePa-Though ...... 5752.96 305.50008 "4 766.39,1.. .: . Nonmandatory Transsfes to Meobors/Agentios - Cap Assets (97.2-12.42) (69,068.68) Deeciation & Amoni.ation Lgilalioe Appropriations Lapsed (535,732.73) (2.455.720.73) fledDlebt Enpeee !7160.960 993.088672 S TOTAL OTHER REVENUES AND TRANSFERS S 365,969.218.27 262,089,262.01 Intenret 4,487.44 10.09•44 6.167.W0 541.16 3.750.64 1.534.104 Schobr Ops -. 4.298.00.55 . 234444258.53 177786.735 ... 06 08 ,689.254.70 CHANCE IN NET ASSETS S 252.700.667.63 S 201,817,913.41 Cluims& Losses NetChmge In OPEBObligation Beginning Net Assets. Sepitmbee 1,2011 and 2010 S 3,977,926,618.16 S 3,775,265.636.10 OtherOperting Epenas. " 28.508.573.29 34,037q873-3 137.595.43.69 1.94,022.2'" t .277.895.49 it1.9n80.28 1 Restatemenct 2,357,302.05 845.068.65 TOTALOPERATINGEXPENSES 941.52.57.5t I5 6-0&.362.619,21S 276.S-&33-41 $ 959 1 27,0107,1 $13381,,711 8351,9 Beginning Net Assets, September 1.2011. and 2010 Restated S 3,9Ei0,285,920.21 $ 3.776,110,704.75

NET ASSETS, AUGUST 31,2012 AND 2011 S 4.232,986,87.84 S 3,977,928,618.16

The Accompanying Sumenary of Significant Accounting Policies and Notes to Financial Statemenis am an integral part of this statement.

710-2-2 798-•3.1 UNAUDITED

EXHIBIT V TIHE TEXAS A&M UNIVERSITY SYSTEM COMBINED STATEMENT OF CASh FLOWS OPERATION& FOR THE YEAR ENDED AUGUST 31,2012 INSTrit5TIONAL %LUINTENNACE 6CIlOL9RSIIIPS& DEPRECLATION& SIuPPOaW OFrIANTr rEI.ao'IIsfs ASIXSUARY AWtsatlluTITIt 5

CURRENT PRIOR $ 7.25000 $ 835.86 S 17.605.124.35 $ 20.25%.351.85 S 16,962.689.68 YEAR YEAR 105.811095.93 59.1N.759.10 D .799.913.49 104.648.129.73 I.5M.544.719.60 1.521.691.69826 TOTAL TOTAL 32382.513.15 15.762.37149 362.637.33 't.933.467.19 -37.181,04.72D. 351.196.039.37 .336541'109. 8,294.41341 324.787.77 38.3N.623.74...... 232•.50352:.50 24.6412,869.4. CASH FLOWS FROM OPERATING ACTIVITIES 2.20.677.54 309252.70 255030.53 10.654.62821 74.050,67u.14 72.103.22H23 Proceeds Received From Tuition and Fees S 757,833,901.17 $ 747.686.036.8I 9.778.405.09 12.667.175.96 345,016.38 26,667.219.48 224.659.332..5 219.769.65145 Proceeds Received From Customers 235.479.942.58 240,355,888.89 4.944,608.75 69.858.823.35 2.97563 27,7-2.871.65 532.675.58 141.722,895.25 Proceeds From Sponsored Programs 902.568.570.70 920.617,992.953 2,701.02538 40.576,475.55. 19,42D67 -. 58,M,507.63 . 960737,69732 15,135,606.02 roced A iayEns ises...... 2... 7...... 6...... ! 2,648.732.70 4.640.26521 211.612.05 1.943.834.94 51.3828640 435.95.5•3.50 Proceeds From Loan Programs...... 8,199,059.55 6.293,957.18 5.352.372.00 276,873u60 10.469.84 1.563,703.72 12264.83426 17,333,93157 :.... s~ ~ i~s .:.:•:,...... 2 .io.• .• i:!•:. • ". ... .i•. "...... , t .s ...... 33.951 57•:•i Proceeds From Other Revenues . 68.850,277.23 ' 357,179,447.96 89004 .. . 2.105,.96.77 2'.2.5986,4 59.519 2:388.715.19. • ,...... 4 1 ...... :...... "" '"4 . 3 4"...... 4 0 52 Paymentsa o Supptiers fqr.Goods ant Services ...... (,122,728,023.28). :" 1,081,144,026.21) 23,498.2Q.: 424.965.24 340,552.83. Paymenls to Employees - Salaries (1,51 1,059,615.581 (1,520,524.308.18) 235,011.570.11 235,011,570.11 206.547.337.51 Payments to Employees - Benefits ...... (336.271.509.34) (348.286,252.88) 505511•047.56 173,178.92 Paymnts for Loans Provided 19.049,992.I0) (5,238,073.83) I 1.496.49 7.810.97 .05 7.256.38 55,545.21 482.16.03 Payments for Other Expenses ...... (228,729,203.78) ...... (263,158.857.64) 215,153.40i. . 89.800•0 150011528357 9.65.,50525 1.2,(18636.. 193.8396.65. 5.29%.176.84 5.2%.176.84 1.502.42874 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES S (I.002,206,197.37) S (I,009,660.018.54) 127.064.54000 127.062.54o.00 134.429.90200 16.678.205,65. . 7.824.878.58: .:.:. 55627.29 2.•1.96.476.53 .. 271.743,536.42 353.025.691.45 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES S 334,511.161,67 S 21946"737.35 I61.334Oil.931 $ 3115..93,3421 8 2350.3,5790 $ 523,011,s02.19 S 3.599.635,657.07 proceeds From State Appropriatisns S 999,386.089.26 S 979.544.478.85 Proceeds From Gilts 135.516,551.27 113,679,139.10 Proceeds From Endowmennts 5,399,926.86 5.998,489.01 Proceneds- Transfers From Other Funds .. 227.532,268.29 195.498.766.33. ProeceesoFrom Olherf lant Revenoe 210,854,290.13 262.406,495.35 Proceeds From Other Revenues 99.976.723.70 69.526.477.82 Payments - Transfers to Other Funds (9,011,102.81) (8,791,615.171: Payments for Other Uses ...... (64,473,256.15 (..57,667,581.95)! NET CASH PROVIDED (USED) BY NON-CAPITAL FINANCING ACT. S 1,6V0,181.490.55 S 1,560,194,649.34

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds From Sale ofCapital Assets $ 1,573.898.85 $ 965,213.14 Proceeds From Capital Debt Issuance 691.494.027.75 231.449.711.00 ProceedsFrom State Grmats and Contracts 24.175,941.26 39,905.605.34.. Proeeodsp oFrmInnsetrfunF es. r. .. . . eu...... n ons...... 4,7115436.98n ...... oa...... :i i:. . :...... 4 . .9...... Proceeds From Other Financing Activities 39,961.89 131,250.00 Payments for Additions to Capital Assets (436.507,676.96t (604.841.472.51) Payments of Pincipal On Debt ...... (475,006.890.99. (192,188.333.34) Payments for Capital Loases (416,572.12) Payments for tntemslOn Capital Related Debt (1(16,367.114.09) (89.079.021.86t Payments for Interfund Loans (3.255.957.72) (1,114.907.88)

r.mt.of COtho sts On Debt Isteae .. ...(2,12,54.136) . (L,003,770.30) NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FIN. ACT. S (301,741,486.51) S (615,775,726.41)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds From Sales and Maturities of Invstmtents S 1.603.3395079.52 S 3,631.650,757.23 Proeerds From Interest and Investment Income 47,682,127.91 51,054,754.40 ?Paymentsto Acquire neestnmens ...... (....1,720,648,879.701 . (3,077,521,095.01t. NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES S (69,627,672.27) S 6[0,184,416.62

INCREASE (DECREASEi IN CASH AND CASH EQUIVALENTS S 231,606.134.40 S 539,943,321.01

Beginning Cash and Cash Equivalents, September 1, 2011 and 2010 $ 861.794.347.74 S 321.851.026.73

CASH AND CASH EQUIVALENTS, AUGUST 31,2012 AND 2011 (SCH THREE) S 1093,400,482.14 S 861,794,347.74

798-3-2 798-4 - UNAUDITED UNAUDITED

EXHIBIT V THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS COMBINED STATEMENT OF CAS) IFLOWS August 31. 2012 FOR THE YEAR ENDED AUGUST 31.2012 General Introduction CURRENT PRIOR YEAR YEAR This report covers all financial operations of The Texas A&M University System (A&M System) for the fiscal year TOTAL TOTAL ended August 31, 2012. The A&M System is an agency of the State of Texas providing education, research, and RECONCILIATION OF OPERATING INCOME (LOSS) TO extension work in the broad fields of Agriculture and Engineering, as well as in Geosciences, Science, the Arts, NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Architecture, Medicine, Veterinary Medicine, Dentistry, Business, Education, Marine Engineering and Operating Income (Loss) S (1,460,559,743.1 i) $ (1.571.624.323.92) Transportation. The financial records of the A&M System reflect compliance with applicable State statutes and Adjustments to Reconcile Operating Income (Loss) to regulations. Net Cash Provided (Used) by Operating Activitiet Depreciation and Antorrivoion" 235,0W 1,570.1) 2o6,54737.5) The significant accounting policies followed by all members of the A&M System in maintaining accounts and in the i-BadfDebtEeseote...... -- -. 2,218.006.59 2,988,198.07_ preparation of the preceding statements are materially in accordance with the Texas Comptroller of Public Accounts' Operating Income and Expense Classificotion Differences 4,686.91 38,867.29 Financial Reporting Requirements for Anmtal Financial Reports of State Agencies and Universities. The Changes in Assets and Liabilities requirements are also in substantial conformity with the Financial Accouttting aond Reporting Afanual for Higher Accounts Receivable, Net ... "18143,667.06 12,243,070.89 Education, as revised by GASB No. 34 and No. 35, published by the National Association of College and University Due From Other Agenciestunds."...... (1,316,098.10) . 2,729,589.20.ý Business Officers (NACUBO). Invento3•y (741.849.01) 306.510.53 Prepaid Expenses (6,812,915.380 (2,428,817.78) Loans and Contracts (951,462.94) (46,468.38) The financial statement presentation provides a comprehensive, entity-wide perspective of the A&M System's assets, . O ther/ s e s:: ...... :i.: .. . .. W56,455:10 . 1.656,87.0.93t liabilities, net assets, revenues, expenses, changes in net assets, and cash flows. The A&M System includes within PayabIes 52,175.9(04.45 176,160,058.64 this report one blended and four discrete component units. The A&M System has the option to apply all Financial Due to Other Agencies/funds ...... 1.068.626.86 (401.528.11) Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with Unearned Revenue 21t.79.427.73 31,077,946.20 GASB. The A&M System has elected not to apply FASB pronouncements issued after the applicable date. ..Depresits...... 744.913.60 ...... ,751.617.80,...... Compensated Absence Liability 1,267.199.35 (3,329.570.58) Other Post Employment Benefits Liability 127.068.540.00 134.409.902.00 Due to the statewide requirements embedded in GASH Statement No. 34, Basic Financial Statentettes-and Self Insured Accrued Liability 6,571,153.97. ,305,84.35" AIanagenteeo's Disucssion and Analysis -for State anti Local Govertments, the Comptroller of Public Accounts does Other Liabilities (564,280.56) 268,711.68 not require the accompanying annual financial report to comply with all the requirements in this statement. The Total Adjuitments S 458,353-.t45.74 S 561,964,305.38 financial report will be considered for audit by the state auditor as pan of the audit of the state of Texas NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES S.. t..0022t06.197.37) $ (t.009.66B.01R.54) Comprehet•sive Antntal Fitatcial Report, therefore, an opinion has not been expressed on the financial statements and the related information contained in this report.

NON-CASH TRANSACTIONS NornmonetaryGifts, Including Capital Assets $ 2,082,821.84 S 3.868,862.06 Net Increase [Decrease] In Fair Value of Investments 35,425,882.91 137,527,013.00 Gain/LossOn Saeor, Disposal of Capital Assets (606.429.73) (1,295.478.17) Irehioding of Long Term Debt_t ...... 301 ,730.00.100. 42,9•5,0151).J Antorization of Bond Premiumn and Discounts 6,718,087.55 6,250,289.00 Other (942,934.04) (66.423.16)

The Accompanying Summary orfSignificaut Accounting Policies and Notes to Financial Statements are an integral pan of this statement.

798-5-I 798-4-2 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31. 2012

Note 1: Summary of Significant Accounting Policies Receivable balances are presented net of an allowance for uncollectible accounts. The allowance is based on management's judgment of potential uncollectible amounts, which includes such factors as historical experience and Basis of Accounting type of receivable. Refer to Note 24, Disaggregation of Receivable and Payable Balances, for additional details.

For financial reporting purposes, the A&M System is considered a special-purpose government engaged in business- Voluntary Nonerchange Transaction type activities. Accordingly, the A&M System's financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when Voluntary nonexchange transactions (primarily private donations and pledges) are recognized in accordance with earned, and expenses are recorded when an obligation is incurred. Operating items are distinguished from non- GASB No. 33, adopted by the A&M System on September 1, 2000. operating items. Operating revenues and expenses result from providing services or producing and delivering goods in connection with ongoing operations. Operating expenses include the cost of sales and services, administrative Capital Assets and depreciation and amortization on capital assets. expenses, Capital assets are recorded at cost at the date of acquisition or fair value at the date of donation in the case of gifts. Livestock held for educational purposes is recorded at estimated fair value. The capitalization threshold for personal Cash and Cash Equivalents property is $5,000. The capitalization threshold is $100,000 for buildings/building improvements, facilities and other improvements, software purchased, land use rights with terms, and leasehold improvements. Infrastructure has a All highly liquid investments with a maturity of three months or less at the time of purchase are considered cash and cash equivalents according to GASB No. 9. With the exception of residual cash which results from the management capitalization threshold of $500,000. Internally developed software has a capitalization threshold of $1,000,000. All of investment portfolios, the A&M System maintains cash and cash equivalents for the purpose of meeting short-term land, land improvements, permanent land use rights, library books/materials, museums/collections, and works of disbursement requirements. art/historical treasures are capitalized. According to GASB No. 34, No. 35, and No. 51, the A&M System is required to depreciate and amortize capital Investments assets. Depreciation is computed using the straight-line method over the estimated useful lives of the assets; generally, 10 to 30 years for buildings, 10 to 45 years for infrastructure, 4 to 15 years for equipment, and 15 years for library In accordance with GASB No. 31, the A&M System reports investments at fair value on the Balance Sheet. Fair value is defined as the amount at which an investment could be exchanged in a current transaction between parties, books. other than in a forced or liquidation sale. GASB No. 51, Accounting and Financial Reporting for Intangible Assets, requires all intangible assets not specifically excluded by scope provisions to be classified as capital assets. Accordingly, existing authoritative GASB No. 40, implemented in fiscal year 2005, requires the disclosure of comumondeposit and investment risks guidance related to the accounting and financial reporting for capital assets should be applied to these intangible related to credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. Under GASB 40, disclosure of carrying value of investments is no longer required. assets, as applicable. Payables GASB No. 53, Accounting and FinancialReportingfior Derivative Instrumenss, is effective for periods beginning in fiscal year 2010. This statement addresses the recognition, measurement and disclosure of information pertaining to Payable balances are grouped into several payable categories. Accounts payable represents the liability for the value derivative instruments. Most derivative instruments are required to be measured at fair value on the Balance Sheet. of assets or services received at the balance sheet date for which payment is pending. Payroll payable includes The statement also makes consideration of hedge accounting necessary. The disclosures required by GASB No. 40 accrued salary, wages, and benefits. The investment trades category reports pending security purchases traded and have been incorporated into GASB No. 53. not settled as of the end of the reporting period. Self-insured health and dental represents claims owed for the self- insured group health and dental plan insurance coverage. Other payables include a variety items, including payables Current Assets for purchasing card activity, manager fees, sales taxes, student liabilities.

On the Balance Sheet, items classified as current are defined as resources expected to be realized or consumed within Unearned Revenue one year. The A&M System members record receivables when revenue is earned but not collected. Unearned revenue is Receivables recognized when cash is received prior to revenue recognition, and is considered a liability.

Receivable balances are grouped into several receivable categories. Accounts receivable reflects amounts owed for Other Postemployment Benefits (OPEB) goods and services provided. Self-insured health and dental represents August premiums for the A&M System's self- insured arrangement for group health and dental plan insurance coverage. The investment trades category reports The liability and associated expenses for the A&M System's single-employer postemployment health care and life pending security sales that have been traded and not settled as of the end of the reporting period. Other receivables insurance benefit plan is recorded by the A&M System Offices. In accordance with GASB 45, the OPEB liability is include items such as travel advances, returned checks, and various items accrued and not yet invoiced. classified as noncurrent. Additionally, the net change in OPEB obligation is recorded as a natural classification of expense, which was formerly included in the payroll related costs classification.

798.5-2 798.5-3 UNAUDITED UNAUD)ITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Restricted Net Assets Note 2: Capital Assets

Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, A summary of changes in Capital Assets for the year ended August 31,2012, is presented below: grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. When both restricted and unrestricted net assets are available for use, restricted resources are used first, then unrestricted PrimsaryGouvemnment resources are used as needed.

Other Significant Accounting Policies 1.,..5.6D,6463 1-3.- The combined financial statements for the A&M System include the primary financial statements of each member of the A&M System, including the A&M System Offices, as well as the Texas A&M Research Foundation (Research Foundation). Transfers, federal and state pass throughs between A&M System members have been eliminated. Certain operations provide goods and services to internal customers. These operations include activities such as self insured programs, repairs & maintenance, utilities, computer services, and other services with interdepartmental activities. The revenues were eliminated to the extent of expenses for these internal transactions in the Statement of L3. T 50 -765 Revenues, Expenses, and Changes in Net Assets to avoid inflating revenues and expenses. Receivables and payables 3 between A&M System members were eliminated except those arising from service department operations and e~66241-- -- auxiliary enterprises, which are considered to be exchange in nature. 3\666NO66 5353626.6633633533356613- 666366 1631.636 . 14. 16.3366 1 ...7. 6363

An Appreciation Reserve was created in fiscal year 1997 for the purpose of providing a consistent and predictable 66..~ ~ 6223.3.7.471~ ~ 6335,5 ~ 3636~ .1~ 2 L.66 2..111663306371.61 6636 income stream for the System Endowment Fund. The Appreciation Reserve is administered by the A&M System Offices and distributions occur when current income is insufficient to meet the distribution of income in accordance with the System Endowment Fund spending policy. 36303.6,36666633.66,6336663366 31036336.6, 3662036363 .. 4.503330 333636036. 064-36

666.6,5s6333..3606,633 .,336 312603 66.66 34366636,3736

3.6666.6366,047303,666665666.663336.660.63-6 .4 4. 3,61.066. ..1363 363,.,

798-5.4 798-5-5 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 Note 3: Deposits, Investments and Repurchase Agreements Capital Asset Activity The Texas Education Code, Title II, Chapter 5 1.0031 grants authority for a governing board to invest funds under Discrete Component Units prudent person standards "if a governing board has under its control at least $25 million in book value of endowment Dng5..tn=6*' A~lj....,2 59.yh5,.d,,dr Adian.. 29*2k... 3.4tg .9. funds." The A&M System's investment policy authorizes the following types of investments: U.S. Government obligations, U.S. Government Agency obligations, other government obligations, corporate obligations, corporate asset and TAklAl1e N., DýpWi 'Abnmi4l4 mortgage backed securities, equity, international obligations, international equity, certificates of deposit, banker's $ 3.93422' $ S 12735 S $ 4.W157 acceptances, negotiable certificates of deposit, money market mutual funds, mutual funds, repurchase agreements, 3.14.22 127.35 43.- .57 venture capital, private equity, hedge funds, Real Estate Investment Trusts (REITs), securities lending, derivatives, 13.,4n42.4lw2022 timber, bank loans, energy and real estate. 2.,2,ing,&BuiUd;ng I'ro02"'n'4 474- 3.421. 15.346.-I -4.941-5.9 C ACex. 2A 0222922 17,25.29 3. .74 - 23.3. Deposits of Cash in Bank T-ipA Mr.• AI ue F.-nesed Eq,4pw2 393575.12 20,277.74 424.452M V2.26367 3..97 22 ..4,127- As of August 31, 2012, the carrying amount of deposits was $34,022,411.78 as presented below: 951,065.57 47.-12592 . 93911.49 Cashin Runk - Carrying Amount Lna AcA.micd 9'p0iaxn ( 7-.342 . 1.522 1 . (314.622.59, Primary Government (241.t.3 - (503.122V)3.245 423 Cash in Bank per AFR $ 34,022.411.78 Foo -u-1~&t2.2d.24Equip•e 2ý.yorm4 23174,5642'7 (52.3,242 -o 2t222,452"9) 0.,.WcA. . A~D2. 32.,222.12 - . 33.292623 . 2.4443d' Discrete Component Inlits 3322,26922 -1(72.4S 72.74 . (223,218W4 Mexico CihyCenter Cash in Bank - Carrying Value (December 31, 2011t 37,471.00 772231673S (24.-2A12 S 747.6926,9 Cssa Verde Center Cash in Bank - Carrying Value (September30. 2012) 1.251.47 C1.n3o Un...oI•,i•pý Texas 4-11Int . 16.430.33 C.apIA ,. Ne $ 272.2532 $SJ $ $ (224,4.47) $ $ 742.25426 Total Discrete Component Units $ 55.152.80

These amounts consist ofall cash in local banks. These amounts are included on the Combined Balance Sheet as part of the "Cash and Cash Equivalents" line items. As of August 31, 2012, the total hank balances were as follows:

Bank Balances

Primary Gowrnment S 14.892.436.98

Discrete Component Units Mexico City Center (December 31. 2010) s 37,374.00 Casa VerdeCenter (September 30. 2011) 3,102.05 Texas 4-11Inc. 16.430.33 Total Discrete Component Units 0 36.90630

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the agency will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The A&M System's policy requires collateral of 102% pledged against all deposits and limits the amounts of funds which may be deposited with any bank to the lesser of $ 100,000.000 or 10% of total deposits. The policy also requires that deposits in federally insured savings and loan associations, building and loan associations,

798-5-6 798-5-7 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 and state and national banks not exceed the amount insured by the Federal Savings and Loan Insurance Corporation, Foreign currency risk for deposits is the risk that changes in exchange rates will adversely affect the deposits. The Federal Deposits Insurance Corporation (FDIC), or (heir successors. The A&M System regulation applicable to A&M System does not have a deposit policy for foreign currency risk. working fund bank accounts requires the Chancellor, or designee, to approve a working fund in any bank with which the System Member does not have a depository agreement. As peraitted by the Texas Education Code, Title III, The exposure to foreign currency risk for deposits as ofAugust 31, 2012 is as follows: Chapter 51.003, the A&M System has accounts with two foreign banks to accommodate operational needs for educational programs in foreign countries. As of August 31, 2012, the A&M System had bank accounts held in Doha, Bank Balances Expmsedao Foreitn Qatar for the operation of Texas A&M University at Qatar. The daily average exposure during fiscal year 2012 was Currency Risk $811,442.09. As of August 31, 2012, the A&M System also had a working fund bank account in Italy to facilitate Texas A&M University's Santa Chiara Study Center in Arezzo, Italy. The daily average exposure during fiscal year Primacy Gvernment 2012 was $853.43. No appropriated or tuition funds other than those collected from students enrolled in the affected Currensy Balance programs are deposited with the foreign banks. The funds held in Qatar and Italy are not insured or collateralized. Canadian Dollar $ 0.01 turo 412.69 Incidental amounts of various foreign currencies are held through Bank of New York Mellon, their foreign branches JapaneseYen 0.05 and/or foreign sub-custodian banks. These amounts represent interest and/or dividend payments received in foreign NewZealand Dollar 0.01 currencies that are not yet converned to U.S. dollars. Such deposits of foreign currency are not insured or Pound Sterling 1.691.40 collateralized and are subject to custodial risk and the risk of fluctuations in exchange rates. The average exposure to QatarRiyal 804,530.93 these deposits during fiscal year 2012 was $39,093.79. Discrete Component Units Incoming wire deposits are sometimes received by the A&M System's custodian after the cut-off time for investment MlexicoCily Center in the money market fund. When this occurs, the funds are credited to a "late" money account and invested the Curneny Batance following day in the money market fund. The first $250,000.00 in the late money fund is insured by the FDIC and the MtexicanPeso (12/31/1 I) 37.374.00 remaining balance is uninsured, but collateralized with securities held by the pledging financial institution (BNY Mellon). During fiscal year 2012, the balance in the late money account exceeded the FDIC insurance on 26 Cas Verde Center occasions and the average amount collateralized with securities held by the pledging financial institution was Curete' Balance $628,798.27. CostsRica Colon (t930112) S 3.102.05 The bank balances exposed to custodial credit risk as of August 31, 2012 are us follows: Investments Bank Balances Exposed to Custodial Credit Risk The A&M System invests in certain private investments including private equity, venture capital, natural resources, Primary Government energy, and real estate. Fair value of private investment funds is estimated based on capital account balances for the Uninsured and tmcaolateraltied $ 843,972.45 most recent reporting period provided by the investment manager and adjusted for capital calls and distributions. Hedge fund investments are reported at net asset value as of August 31, 2012 based on information provided by the Uninsured and eotlateratlized with securities heldby the pledging financial instirtutln $ 583,944.03 investment managers and their third party administrators. Mineral rights are held for the purpose of gencrating income and are carried on a cost basis. Mineral rights do not have an open market and GASB No. 31, Accounting and Uninsured and eollaleratlied with securities held by the pledging financial itsstitution's $ - FinancialReporting for CertainJnvestments andfor ErternalInvestment Pools. states that if there is no market, cost mrst department an agent but not it the state's name should be used. The value reported for mineral rights as of August 31, 2012 is $ 19,283.57. The A&M System has invested in private equity technology partnerships through its Office of Technology Commercialization. These Discrete Component Units investments, totaling $8,541,234.57 are also reported at cost or par. Mexico City Center (December 31, 201 ) Uninsured and ntcollateralized S 37,374.00

Casa Verde Center (September 30, 2012) Uninsured and mcolttlseratierd $ 3,102.05

798-5-8 799-5-9 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 Attgust 31, 2012

As of August 31, 2012, the fair value of investments is presented below: Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, the agency will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Investment Fair Value The A&M System's policy requires that direct repurchase agreements and security lending transactions be fully U.S. Treasury Securities S 72,641,925.05 collateralized by obligations authorized under the A&M System investment policy and such collateral be held by a U.S. Osunonenel Agency Obligations 164,788,534.71 third party. As of August 31, 2012, there was no custodial credit risk related to securities lending or Corporate Obligations 249,175,131.27 repurchase agreements. The A&M System did not participate in a securities lending program during fiscal Corporate Asset and Mortgage Backed Securities 69,808.263.11 Equity 339.3 13.066.43 year 2012 and the only repurchase agreement was held through Texas Treasury Safekeeping Trust Fixed Incote Money Market and Bold MutatlFund 725,457,972.44 Company. Internationol Obligations 96,403.869.93 International Equily 219,315,414.02 Mutual Funds - US. 149,611,875.21 Foreign investments are administered in book entry form by the A&M System's custodian, Bank of New York Mutual Funds.-- lnterational 292,727,866.95 Mellon, through a network of international sub-custodians and securities depositories. Sub-custodians are evaluated Repurchase Agreements - TISTC 399,993.68 by the custodian prior to selection and are monitored on an ongoing basis after selection to help ensure safeguarding Other Commingled Funds of clients' assets. Sub-custodians are monitored according to four categories of risk: operations, financial, Bank Loam3 133.651.133.36 Equity 23,197,166.0t) legal/regulatory and reputational. To reduce risk, the custodian has a standing policy not to process free of payment Real Estate 119.283.07 transactions unless that transaction is consistent with standard settlement practice for that instrument and market or tDerisntiss-9.9.9 (995.896.09) unless written indemnification is received from the client. On a daily basis, the sub-custodians send a confirmation of Externally Managed investments I ledge Funds 45 1,1)00.952.32 settlement to the custodian which is reconciled to the custody system. Limited Partnerships - PNisate Eqoity 101,025,551.79 Limited partnerships - International Private Equity 16.534,298.52 Foreign currency risk for investments is the risk that changes in exchange rates will adversely affect the investments. Limited Partnerships - Real Estate 12,605,266.17 The A&M System's policy authorizes the utilization of derivatives for the purpose of hedging currency risk, but does Limited Partnarships- Inlternational Real Estate 3,074,420.83 Limited Partnerships - Natural Resources 65,862,877.92 not otherwise address foreign currency risk. The exposure to foreign currency risk as of August 31, 2012 is as follows: Total [nsetments S 3,186,620.956.68 Investments Expased to Foreign Currency Risk

International Internatioal International Internatioal Equtity Mutual Etlernally Obligalion Equity Funds Managed luestmtnts pr API Foreign Currency U.S. Dollar Deonminated Foreign CurrentCash Fquivaknts S 360,331,350.89 Securities $ 66,451,031.28 5 80,826,866.56 $ 292,727,866.95 $ 12.481,535.83 Current Invesstnts 20,933.41 Australian Dollar 14,208,413.34 3,188,432.47 CurrentShau-Tern Derivative Instmrenls (995.896.09) Btazillian Real Pound Sterling 19,421,268.74 Orrent RestrictedCash Eluivalenls 323,470,57M80 Canadian Dollar 0,024,817.19 13,898,289.82 Non-CurrentRestricted Investments 758,816,631.91 Rem 34,481,660.63 7,127,183.52 Non-rrent UnrestrictedInvestments 1,744,977,258.76 Ilong Kong Dollar 2285,519.37 Japanese Yen 32279.560.92 Malaysian Ringgit 957,445.96 S 3,186,62,856.68 Totallnvesnents perAFR New Turkish Lima 2,963.317.84 Norwegian Krone 1.943.478.5% New Zealand Dollar 7,719,608.12 South A frican Rand 3,802-944.76 Siagapore Dollar 931,814.38 Swedish Krona 3,565,422.51 Swiss Franc 18,769,391.56

Total $ 96,4853,869.93 $ 219,315,414.02 $ 292,727,866.95 $ 19,608.719.35

798 .5 - 10 748-5. 11I UNAUDITED UNAUDITED

THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The A&M Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. System's investment policy requires that securities have a long-term rating of B or better and the fixed income Through its investment policy, the A&M System manages its exposure to.fair value losses arising from changing portfolio have an overall credit rating of A or better. Securities using short-term credit ratings must be rated at interest rates by requiring fixed income managers to maintain duration of +/- 20% of the effective duration of the least A-2, P-2, F-2 or equivalent. As of August 31, 2012, the A&M System's credit quality distribution for appropriate index, In addition, the A&M System's policy limits the duration of its short term investment portfolio securities with credit risk exposure is as follows: to a maximum of one year. The A&M System's exposure to interest rate risk is presented using the effective duration method as follows: Investments Exposed to Credit Risk - Standard & Poor's it. tohsudot Investments Exposed to Interest Rate Risk

Investment Type AAA AA A BBB BB B CCC Unraled Investment Type Effective Duration Market Value U.S. Treasury Securities 6.554 $ 72,641,825.05 Corporate Obligations 540 9,765 60.592 117,165 38,495 12,631 9,988 U.S. Government Agency Obligations Agencies and Other U.S. Government Obligations 4.723 9,873,961.55 Corporate Asset and U.S. Government Mortgages 2.065 154,914,573.16 Mortgage Backed 6.251 18,220 6,013 1,751 3,910 5,610 15,943 Corporate Obligations Securities 12,11 I Corporates and Other Credits 5.189 203,559,755.22 U.S. Private Placemcnts 3.969 48,441,472.05 International 13,038 Corporate Asset and Mortgage Backed Securities 18.678 26,590 17.485 1,885 943 17,785 Obligations CM4BS 4.949 26,495,765.69 Repurchase CMO Corporate 0.167 23,196,926.96 Agreements (Texas Asset Backed Securities 1.787 17,099,474.46 400 Treasury Safekeeping International Obligations 3.78 96,403.869.93 Trust Co.) Repurchase Agreements "rSTC 0.011 399.983.69 Fixed Income Money Market and Bond Mutual Funds 3.958 90,978.66 Fixed Income Money Market Total Fair Value S 653.298.586.41 and Bond Mutual 725,458 Fund Securities Lending

The A&M System did not participate in a securities lending program during fiscal year 2012. Concentration of credit risk is the risk of loss attributable to the magnitude of investment in a single issuer. As of August 31, 2012, no more than 5% of the A&M System's total investments are represented by a single issuer. The Derivative Investing A&M System's investment policy states that no more than 4.9% of the voting stock of any one corporation be owned by the A&M System at any given time. The A&M System Investment Policy allows investment in certain derivative securities. A derivative security is a financial instrument which derives its value from another security, currency, commodity or index.

The A&M System entered into forward currency contracts for the purpose of hedging international currency risk on its non-U.S. dollar denominated investment securities and to facilitate trading strategies primarily as a tool to increase or decrease market exposure to various foreign currencies. When entering into a forward currency contract, the A&M System agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. These contracts are valued daily and the A&M System's net equity in the contracts, representing unrealized gain or loss on the contracts as measured by the differences between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is reported on the Balance Sheet as derivative instruments.

798 -5 -12 798- 5- 13 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

These instruments involve market and/or credit risk in excess of the amount recognized in the consolidated currencies. Risks are consistent with those described in an above paragraph regarding direct currency hedging. The Balance Sheet. Risks arise from the possibility counterparties will be unable to meet the terms of their contracts contracts are valued at the prevailing forward exchange rate of the underlying currencies and the unrealized gain and from movement in currency, securities values and interest rates. The table below summarizes the pending (loss) is recorded daily. Unrealized gains and losses that represent the difference between the value of the forvard foreign exchange contracts as of August 31, 2012. contract to buy and the forward contract to sell are included in the net unrealized gain (loss) front the forward contracts. Foreign Exchange Contracts Hedge fund pools are invested in private placements with external managers who invest in equity and fixed income Unrealized Coin on Unrealized Loss on securities of both domestic and international issuers. These investment managers may invest both long and short Foreign E-xhange Foreign Exchange in securities and may utilize leverage in their portfolios. They may also utilize credit default swaps and total return Currency Sell Buy Contract Contract swaps as part of their investment strategies. The funds invested may be subject to a lock-up restriction of one or years before the investment may be withdrawn from the manager without significant penalty. There are Australian Dollar $ 30.527,019.25 S 15.702.027.70 S 67,599.03 S (1.056,86.78t more Canadian Dott1r 1,41 1.9Qt.15 115,957.81 368.23 (7,871.541 certain risks associated with these private placements, some of which include investment manager risk. market risk FEm 3,287.808.92 352767.29 1.292.09 (15,945.001 and liquidity risk, as well as the risk of utilizing leverage in the portfolios. When credit default swaps or total Japanese Yen 2.851,438.60 298.791.80 (17,055.29) return swaps are used, there is additional risk of counterparty non-performance and unanticipated movements in Malaysian Ringgit 190,403.51 (517.981 the fair value of the underlying securities. As of August 31, 2012, the A&M System's investment in hedge funds Ne- Turrkish Lire 247,641.12 (483.56) 0 was $451,900,952.32. New Zealand Dollar 9.679,307.29 930,495.56 70,056.27 (7,720.4 t Nor.egian Krone 170,818.71 (1,993.50) Pound Sterling 1,666,834.41 (11,251.69t Private investment pools are invested in limited partnerships with external investment managers or general partners Singapore (tteer 79,713.70 (415.38t who invest primarily in private equity transactions. These investments, both domestic and international, are South African Rand 320,051.89 (2,394.12t illiquid and may not be realized for a period of several years after the investments are made. There are certain Swedish Kons 601,412.91 (6,825.521 risks associated with these investments, some of which are liquidity risk, market risk, event risk and investment Swiss Franc 1,546,683.68 610.229.12 2,370.20 (8.321.15t manager risk. Certain funds may utilize credit default swaps which have additional risk, including the risk of S 52.581.044.14 S 18.010O.269.28 5 141,6145.82 $ tt 137581.91) counterparty non-performance. Collateral in the form of cash or securities may be required to be held in segregated accounts with the fund's custodian. Bi-lateral agreements and daily settlement with counterparties The fair value of open foreign currency exchange contracts as of August 31, 2012 was ($995,896.09), which is reduce the risk of counterparty non-performance. As of August 31, 2012, the A&M System has committed included in the net increase (decrease) in fair value of investments on the consolidated statement of revenues, $396,483,022.00 to various private investments, of which $242,028,002.00 has been funded. The fair value of the expenses and changes in net assets. investments as of August 31, 2012 was $190,561,180.65. In addition, the A&M System has invested directly in companies and partnerships to promote research technology. As of August 31, 2012, the cost of the investments in The A&M System had gross counter party exposure as of August 31. 2012 as follows: research technology was $8,541,234.57. Associated risks include those applicable to other private investments as well as the risk of enterprise failure. to Counterparty Risk Foreign Exchange Contract Exposure Hedge funds, private investment and public market funds include investments in private placement vehicles that are subject to risks, which could include the loss of invested capital. The risks include the following: Assets Liabilities Liabilities Fair Value as of Fair Value as of Counterparty * Non-regulation risk -The A&M System's general partners and investment managers are registered with the Assets Notional Notional August 31,2012 August 31.2012 Rating Securities and Exchange Commission with the exception of four general partners that are exempt reporting advisers and are not required to comply with most rules that apply to registered advisers. S 52,581,044.14 S 18,010,269.28 $ 141,685.82 $ (1,137.581.91) AA- * Key personnel risk - The success of certain funds is substantially dependent upon key investment managers and the loss of those individuals may adversely impact the fund's performance. The A&M System has invested in U.S. Treasury futures contracts for the purpose of managing the duration of its * Liquidity risk - Many of the A&M System's investment funds may impose lock-up periods, which would liquidity portfolio. These instruments are subject to market, credit risk and counterparty risk. The portfolio cause the A&M System to incur penalties to redeem its investment or prevent the System from redeeming its manager includes derivatives in the portfolio that would not create additional risk as compared to cash instruments. shares until a certain period of time has elapsed. Futures contracts are used as a way to gain the same risk exposure in a more efficient manner. The manager * Limited transparency - As private placement vehicles, these funds may not fully disclose the holdings of their ensures that counterparty risk is well diversified and meets the credit quality criteria established in the account. portfolios. Futures contracts are marked to market daily and the daily gain or loss difference is settled in cash with the broker. * Investment strategy risk - These funds often employ sophisticated investment strategies and the use of There were no open contracts as of August 31, 2012. leverage, which could result in the loss of invested capital. Several limited partnerships in which the A&M System invests may employ the use of forward currency exchange contracts as a hedge in connection with portfolio purchases and sales of securities denominated in foreign

798-5 - 14 798-5 - 15 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 permanent University Fund Note 4: Short-Term Debt The Permanent University Fund (PUF) is administered by the University of Texas System and is not reflected in During the year ended August 31, 2012, there was no reportable activity for short-term debt. the financial statements of the A&M System. Prior to changes in the arbitrage laws, plant funds were appropriated from bond proceeds only after the bonds had been sold and cash was on hand. Currently, receipt of cash may or may not precede appropriations of bond or note proceeds.

The total carrying value of the PUF assets at August 31, 2012, was $11,781,743,874.78 excluding PUF land grants. By acts of the Legislature and provisions of the State Constitution, the net income of the PUF is divided one-third to the A&M System and two-thirds to the University of Texas System. The A&M System's one-third share of the net revenues was S199,829,438.08 for the fiscal year ended August 31, 2012, and was credited to the A&M System Available University Fund as reported in Unrmstricted Funds.

798 -5 - 16 798 -5 - 17 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 Note 5: Summary of Long-Term Liabilities Notes and Loans Payable

During the year ended August 31, 2012, the following changes occurred in liabilities: Notes payable consists of amounts used to make permanent improvements at various institutions in the A&M System, to refund and retire the Board's Permanent University Fund Commercial Paper Notes and Flexible Rate Long-Term Liabilities Activity-Primary Government Amounts Due Amounts Duo Notes, to provide interim financing for capital improvements and acquisition ofequipment and land, to pay interest Balouso9/I/I I Additions Reductions Balance8/31/12 Within One ct Thesoaflte on the notes, to refund outstanding notes as they mature and to pay the costs of issuing the notes. The Revenue Financing System Note (2007 TIPS Project) was issued on July 12, 2007 to fund $4 million ofcosts Eoptoyees, CswpensabteLeLe $ 101,211,933.30 S 4.416.306.07 $ (3.149.106.721 $ 102,479,132.65 $ 9.220,406.15 S 93.258.726.50 for the Texas Institute for Preclinical Studies (TIPS) within Texas A&M University. The note is structured as a Other Post loan with the Office of the Governor, Economic Development and Tourism Division through the Texas Economic Eccp/oynnentBenec/s 476,809,489.00. 27.068.540.0 "$ 60378,029.00 ... - 603.878.029.00. Development Bank; all authorized debt has been issued. The outstanding balance at August 31, 2012 was Claims & Jud•snocns 23.561.734.35 2,311/06L W (19.304.734.35) S 6.568.000.00 2.31114M0.00 4,257.000.00 Notes nodtLoans •• .:: $3,333,333.32

Psyabo...... 11491,666.66 359,700, 00. .(267.858.333.34) . .203,33.333.32 .. ... 808.333.34 19•.324,99.918 Notes and Loans Payatle-Debt Service Requirements Bonds Payable 2,217,572,708.66 304.325.470.10 (179.680.000.001. $ 2,342,218.178.76 1t9.748.15081 2.222.470.027.95 .• dci~ins~gs ru~t .... . 3 2 1 0 (I ...... :...... $ 3 .[ 00 .: .:....:...... 3 2 1 0 0 As.es3Held lit Trust. . 6.10D.00 - S 362.100.00 . ... 362.100.00 Balances Balances September 1,2011 Increases Decreases August 31,2012 LiabilitiesPayable from Restrieid Assets 44,169.582.08 6.531,010.41 (27.487.022.54t $ 23,213.569.95 20,837.497.88 2.376,072.07 Fundslleld fo Othaers 103,765,580.90 66,522,0S80.00 (64.748,0•81S2) $ 105,539.792.65 34.369,10.35 . 71,170.762.30 Permanent University Fund CommnercialPaper Notes S 10/],6(/0,WIt.00( $ 155600.0(6o./0 S 256,(o3.(ot0.00 $ Capital Lease Obligaions 2.423,527.60 1,237,262.03 (290,656.321 $ 3,370,133.31 637,0(9.01 2,733.129.30 Revenue Financicg Systesr•mCsosrcial Paper Notes, Series B 6,825,000.00 204,700,(00.00 t 1,5253M.0).00 200,0W0.(0.00 Otbec.e//ccin Revenue Financing SystemNote (21007TIPS Project)- 3,666,666.66r r - 333.333.34 3.333.333.32[ r Renmdiation" Ob/li ticns... - - . . - Other Non-Curenel Total $ 11S1491r66666 S 359.7W.0017.00/ $ 267.858.333.34 $ 203.333,333.32 Liabilities 37,055.967.71 4.822.280 07 (3.641.435.48) $ 38.236.812.30 16.N28.102.55 21.408.70Q.75 Principal Interest- Total Total $ 3.118,424.290.26 0 876,934,748.68 $S(566.19957.001 $ 3,429,199.081.94 S 211.959.525.09 S 3.2t7.239.556.85 2013 8,000,333.34 5,465,916.66 S 13.474.250.00 2014 8.213,333.34 5,251,932.41 13,465,265.75 SStarting in fiscal year 2012, Claimsand Judgments Ltng-tecm Liability no longer includes Self-tnsurcd Accrued Liability which is no longer 2015 8,428,333.34 5.032.413.15 13,460.746.49 included in Claimsa& Judgments. 2016 8.643,333.34 4.907209.26 13,450,542.60 2017 8,868,333.34 4,575.959.62 13,444.292.906 2019-2022 47,926.666.62 19,194.610.56 67,121.277.18 2023-2027 52,855,00(0.00 12.509,910.00 65.364.910.00 Long-Term Liabilities Aetisity-Discrete Component Wbits 49076999• 06 Aes-ais Due Amounts Due 2028-2032 Btiedcinn Balance Additions Reduct ions Ending Balance Within One Year Thereafter TOTAL $ 203.333.333.32 $ 61,816,346.66 S 265.149.679.98 OtherNon-Carrent Liabilities $ 1,058,596.33 S - S (405,287.24)S 653,309.09 S $ 653,309.09 * Private Placenurrt cutewit/h I/he 0 icnofl/c Govenor. Economic Developmpnteand Tourism Division through the Texas EsonomioDevelop merpt Bank. For fiscal yaes 2013 - 2022. .1 -1atprincipal and interest paymunts nrIthis note are included in the debt service schedule above.

Total 0500.33 $S S $ 6533309.09 $ $ 633.309.09 Fore this schedule, assuwphion is ihat Revenue Financing SystemsCommercial pane Notes and Pereanest Univmsity Fund Commercial Papea Notes will be refunded intsolongteur bonds. For estimateddebt seice on this exhibit. the mnt of 2.70% cerresponds to the municipal market data published on August 31, 2012. Noies ar tesakreeod in contmemial paper mode at carrent market rates with/ mcaurities betwe•n I and 270 days.

718-5- 7798-5-1I) 3 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Compensated Absences Note 6: Bonded Indebtedness

Full-time State employees earn eight to twenty-one hours per month annual leave depending on years of State A. Financial Reporting employment. Under the State's policy, an employee with 35 or more years of State service may carry up to 520 hours accrued leave forward from one fiscal year to another. The A&M System has established a financing program known as the Revenue Financing System. Members of the A&M System may use the Revenue Financing System as a long-term debt program to finance new facilities or as a Employees with at least six months of State service who terminate employment are entitled to payment for all short-term debt program to finance equipment or to intetit finance construction projects. Members' financing accumulated annual leave up to the maximum allowed. The A&M System has accrued the dollar value of annual requests are evaluated for adequate revenue streams and bonding capacity. leave benefits which are payable upon retirement, termination, or death of its employees. This liability (current and noncurrent) for A&M System members is projected to be $102,479,132.65 as of August 31, 2012. This Assets created as a result of the expenditures of Permanent University Fund and Revenue Financing System Bonds liability is based on calculations from the A&M System centralized leave tracking system and employer estimates. and Notes (see Note 5t proceeds, which are subsequently capitalized, are reported on the applicable members' The accrued liability for the unpaid annual leave has been recognized as a current and non-current liability. The Balance Sheet in the Capital Assets category. The associated bond liability is reported in total by the A&M A&M System made lump sum payments of$ 12,766,634.46 for accrued vacation to employees who separated from System Offices. State service during the fiscal year ended August 31, 2012. As of August 31, 2012, $73,520,822.35 of Revenue Financing System debt proceeds had been appropriated prior Sick leave accumulation is not limited. Sick leave is earned at the rate of eight hours per month and is paid only to the receipt of the proceeds. As of August 31, 2012, $41,57.2,287.37 of Permanent University Fund debt when an employee is absent due to illness or to the estate of an employee in the event of his/her death. The proceeds had been appropriated prior to the receipt of the proceeds. maximum sick leave payment to an employee's estate is the lesser of one-half of the employee's accumulated entitlement or 336 hours. The A&M System policy is to recognize the cost of sick leave when paid. The liability B. General Information is not shown in the financial statements since historical use of sick leave has been minimal. At August 31, 2012, the A&M System had outstanding bonds payable of $2,241,200,000.00 as detailed in below, Claims and Judgments which does not include unamortized premium of $101,018,178.76.

Claims and judgments related to the A&M System self-insured worker's compensation plan include a current Bonds payable are due in annual installments varying from $85,000.00 to $18,135,000.00 with interest rates portion of $2,311,000.00 and and a non-current portion totaling $4,257,000.00, for a total worker's compensation ranging from 0.579% to 5.50%, with the final installment due in 2041. The debt service requirements table liability of $6,568,000.00. This liability represents the current and non-current portion of the incurred but not summarizes the principal and interest expense for the next five years and beyond for bonds issued and outstanding. reported (IBNR) liability based on actuarial analysis of the plan. The IBNR represents claims that will be paid out over future fiscal years. A current portion has been estimated based on actual claims paid out over the last five Revenue for debt service on the Permanent University Fund Bonds and Notes is derived from liens on and pledges fiscal years. of payout distributions frons the Permanent University Fund allocable to the A&M System.

In prior fiscal years, all self-insured liabilities, including the worker's compensation plan, were reported on the Sources of revenue for debt service on the Revenue Financing System Bonds and Notes are pledged revenue from financial statements as a current self insured liability. In fiscal year 2012, the self-insured worker's compensation any or all of the revenues, funds, and balances now or hereafter lawfully available to the Board and derived from or is reported as a Claim and Judgment while other current self-insured liabilities were reported as a current Self- attributable to any participant of the Revenue Financing System which are lawfully available to the Board for the Insured Liability. payment of Parity Obligations, including unrestricted funds and reserve balances.

Liabilities Payable from Restricted Assets All bonds are for the benefit of business-type activities. General information related to bonds payable is summarized in the following tables. Liabilities payable from restricted assets represent payables at year-end from assets with external restrictions such as federal and state grants, and bond proceeds. Bonds Payable Interest Rates taturity Dates Outstanding Principal Permanet University Fund Bonds 0.579-5.50% 2013-2036 $ 730,295,000.00 Revenu FinancingSystem Bonds 2.2a-5.a09,1 20t13-2041t t510,905 500.550

s 2,24t1,2t00,005.00

798 -5-20 798-5-21 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Debt Service Requirements * $79,715,000.00 authorized; all authorized bonds have been issued. $79,715,000.00 was refunded by Permanent University Fund Bonds, Series 2012A. Outstanding balance at August 31, 2012, was $0.00. FiscalVear Prindpal Interest Total 2013 $ II 1,210,000.00 S 106,031,356.24 S 217,241,356.24 Permanent University Fund Bonds, Series 2006 2014 115,745.000.00 101,158,757.24 216,903,757.24 2015 117,490,000.00 95,869,432.70 213,359,432.70 * Issued July 6, 2006, to current refund $29,340,000.00 of the Board's previously issued and outstanding 2016 120,025.000.00 90,386,385.96 210,411,385.96 Permanent University Fund Bonds, Series 1996A; to advance refund $12,335,000.00 of the Board's previously 2017 109,150,000.00 84.908.287.18 194,058,287.18 issued and outstanding Permanent University Fund Bonds, Series 1998; to provide funds for construction and 2018-2022 545,675.000.00 350,505.132.76 896.180,132.76 other capital improvements; arid to pay for the costs of issuing the bonds. 2023-2027 518,055,000.00 223,115,612.78 741,170,612.78 * $165,940,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, 2028-2032 405,575,000.00 102,085,777.98 507,660.777.98 2033-2037 160.165.000.00 29,526,575.00 189,691,575.00 was $1 17,100,000.00. 2038-2041 38,110,000.00 3.832,500.00 41,942.500.00 Permanent University Fund Bonds, Series 2009AB Total 5 2.241.200,000.00 $ 1,187,419.817.84 $ 3,428,619.817.84 * Issued April 7, 2009, to refund $100,000,000.00 of the Board's previously issued and outstanding Permanent University Fund Commercial Paper Notes; to currently refund $9,735,000.00 of Permanent University Fund Permanent University Fund Bonds, Series 1998 Bonds, Series 1998; to provide funding for project costs of approximately $113,700,000.00; and to pay the costs of issuing the bonds. " Issued September 9, 1998, to refund $65,000,000.00 of the Board's previously issued and outstanding Permanent University Fund Variable Rate Notes, Series B, and $27,860,000.00 of Permanent University Fund * $218,895,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, Bonds, Series 1992B then outstanding in the aggregate principal amount of $36,360,000.00: and to pay the was $212,945,000.00. costs of issuing the bonds. Permanent University Fund Bonds, Series 2011 * $92,520,000.00 authorized; all authorized bonds have been issued. $12,335,000.00 was refunded by Permanent University Fund Bonds, Series 2006. $9,735,000.00 was refunded by Permanent University Fund Bonds, Series * Issued October 18, 2011, to refund $96,000,000.00 of the Board's previously issued and outstanding 2009AB. $1,015,000.00 was refunded by Permanent University Fund Bonds, Series 2011. Outstanding Permanent University Fund Commercial Paper Notes; to refund $1,015,000.00 of Permanent University Fund balance at August 31, 2012, was $28,795,000.00. Bonds, Series 1998; and to pay the cost of issuing the bonds. Permanent University Fund Bonds, Series 2003 * $87,145,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012 * Issued April 3, 2003, to current refund $28,210,000.00 of the Board's previously issued and outstanding was $84,890,000.00. Permanent University Fund Bonds, Series 1992A; to current refund $35,590,000.00 of the Board's previously issued and outstanding Permanent University Fund Bonds, Series 1993; to advance refund $31,080,000.00 of Permanent University Fund Bonds, Series 2012A the Board's previously issued and outstanding Permanent University Fund Bonds, Series 1996; to advance refund $12,500,000.00 of the Board's previously issued and outstanding Permanent University Fund Bonds, * Issued July 18,2012, to refund $79,715,000.00 of the Board's previously issued and outstanding Permanent Series 1996A; and to pay the costs of issuing the bonds. University Fund Bonds, Series 2004; and to pay the cost of issuing the bonds. * $102,645,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, * $70,680,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012 was $90,135,000.00. was $70,680,000.00. Permanent University Fund Bonds, Series 2004 Permanent University Fund Bonds, Taxable Series 2012B * Issued September I, 2004, to current refund $73,978,393.00 of the Board's previously issued and outstandinsg Permanent University Fund Flexible Rate Notes; to provide funds for construction and other capital * Issued July 18. 2012, to refund $125,000,000.00 of the Board's previously issued and outstanding Permanent improvements; and to pay the costs of issuing the bonds. University Fund Commercial Paper Notes; and to pay the cost of issuing the bonds.

728-5 -22 798 - 5 - 23 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

* $125,750,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012 Revenue Financing System Bonds, Series 2005B was $125,750,000.00. " Issued June 30, 2005, to advance refund $40,740,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series 2002 Revenue Financing System Bonds, Series 1996; to advance refund $15,730,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series 1997; to advance refund $98,395,000.00 of * Issued October 10, 2002, to refund $40,000,000.00 of the Board's previously issued and outstanding Revenue the Board's previously issued and outstanding Revenue Financing System Bonds, Series 1999; to advance Financing System Commercial Paper Notes, Series B; to provide for construction of certain improvements; and refund $31,605,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, to pay the costs of issuing the bonds. Series 2001B; to provide funds for construction and capital improvements; and to pay the costs of issuing the bonds. * $93.835,000.00 authorized; all authorized bonds have been issued. $40,355,000.00 was refunded by Revenue Financing System Bonds, Series 2010AB. Outstanding balance at August 31, 2012, was $8,680,000.00. " $275,755,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, was $191,045,000.00. Revenue Financing System Bonds, Series 2003A Revenue Financing System Bonds, Series 2008 * Issued May 20, 2003, to provide funds for certain improvements in the A&M System. " Issued February 7, 2008, to refund approximately $127,912,303.00 of the Board's previously issued and " $117,135,000.00 authorized; all authorized bonds have been issued. $28,560,000.00 was refunded by Revenue outstanding Revenue Financing System Commercial Paper Notes, Series B; to provide funding for project costs Financing System Bonds, Series 2010A. Outstanding balance at August 31, 2012, was $51,865,000.00. of approximately $55,000,000.00; and to pay the costs of issuing the bonds.

Revenue Financing System Bonds, Series 2003B * $169,515,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, was $133,845,000.00. " Issued May 20, 2003, to current refund $34,705,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series 1993; to current refund $3,925,000.00 of the Board's previously Revenue Financing System Bonds, Series 2009A issued and outstanding Revenue Financing System Bonds, Series 1993A; to current refund $9,470,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series 1993B; to advance refund " Issued March 1I, 2009, to refund approximately $40,819,793.00 of the Board's previously issued and $72,775,000.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series outstanding Revenue Financing System Commercial Paper Notes, Series B; to provide funding for project costs 1996; and to pay the costs of issuing the bonds. of approximately $221,400,000.00; and to pay the costs of issuing the bonds. * $117,140,000.00 authorized; all authorized bonds have been issued. $13,210,000.00 was refunded by Revenue * $251,735,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, Financing System Bonds, Series 2010B. Outstanding balance at August 31, 2012, was $40,005,000.00. was $214,630,000.00.

Revenue Financing System Bonds, Series 2005A Revenue Financing System Bonds, Series 2009B

* Issued June 30, 2005, to advance refund $6,820,000.00 of the Board's previously issued and outstanding " Issued March 11, 2009, to refund approximately $14,070,207.00 of the Board's previously issued and Revenue Financing System Bonds, Series 1997; to advance refund $32,755,000.00 of the Board's previously outstanding Revenue Financing System Commercial Paper Notes, Series B; to currently refund $2,050,000.00 issued and outstanding Revenue Financing System Bonds, Series 1999; to advance refund $11,105,000.00 of of Revenue Financing System Bonds, Series 1997; to provide funding for project costs of approximately the Board's previously issued and outstanding Revenue Financing System Bonds, Series 2001 A; to provide $64,700,000.00; and to pay the cost of issuing the bonds. funds for certain improvements in the A&M System; and to pay the costs of issuing the bonds. * $78,085,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, * $148,895,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, was $71,255,000.00. was $105,020,000.00. Revenue Financing System Bonds, Series 2009C

" Issued November 10, 2009, to provide funding for project costs of approximately $57,300,000.00; and to pay the cost of issuing the bonds. " $54,240,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012,

was $40,305,000.00.

798 .5 - 24 798 -5-25 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Revenue Financing System Bonds, Series 2009D C. Advance Refunding Bonds

" Issued November 10, 2009, to provide funding for project costs of approximately $344,600,000.00; and to pay The A&M System has defeased certain revenue bond issues by placing the proceeds of new bonds issues in the cost of issuing the bonds. irrevocable trusts to provide for all future debt service payments on the issues. Accordingly, the liability for the the principal balance outstanding for the " $320,760,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, bonds is not included in the financial statements. At August 31, 2012, defeased bonds is $121,560,000.00. was $301,485,000.00. Permanent University Fund Bonds, Series 2011 Revenue Financing System Bonds, Series 2010A " Current refunding of $1,015,000.00 of Permanent University Fund Bonds, Series 1998 to allow the Board of " Issued June 3, 2010, to advance refund $1,418,558.00 of the Board's previously issued and outstanding Regents of the Texas A&M University System to restmcture its debt service requirements and realize a present Revenue Financing System Bonds, Series 2002; to advance refund $28,560,000.00 of Revenue Financing value debt service savings. System Bonds, Series 2003A; to provide funding for project costs of approximately $71,000,000.00; and to pay the cost of issuing the bonds. " Refunded by Permanent University Fund Bonds, Series 2011 issued October 18, 2011. " S95,065,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31. 2012, " Net proceeds from refunding bonds of $0.00 after payment of $655,962.10 which represents issuance costs and was $86,880,000.00. underwriter's discount.

Revenue Financing System Bonds. Series 2010B " Current refunding of the bonds reduced The Texas A&M University System's debt service payments over the next two years by approximately $50,748.61. " Issued June 3, 2010, to advance refund $38,936,442.00 of the Board's previously issued and outstanding Revenue Financing System Bonds, Series 2002; to advance refund $13,210,000.00 of Revenue Financing • Economic gain was $50,385.28, the difference between the net present value of the old and new debt service System Bonds, Series 2003B; to provide funding for project costs of approximately $105,200,000.00; and to payments. pay the cost of issuing the bonds. " Current refunding resulted in the removal of S1,015,000.00 of bond liability from the balance sheet and the " $146.120,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, addition of $1,015,000.00 of bond liability, the net of which is neither an accounting gain or loss. was $143,085,000.00. Permanent University Fund Bonds, Series 2012A Revenue Financing System Bonds, Series 201 IA " Advance refunding of $79,715,000.00 of Permanent University Fund Bonds, Series 2004 to allow Ihe Board of " Issued March 10, 2011, to currently refund $5,980,000.00 of the Board's previously issued and outstanding Regents of the Texas A&M University System to restructure its debt service requirements and realize a present Revenue Financing System Bonds, Series 2001A; to currently refund $16,975,0(t0.00 of Revenue Financing value debt service savings. System Bonds, Series 2001 B; and to pay the cost of issuing the bonds. " $22,335,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, " Refunded by Permanent University Fund Bonds, Series 2012A issued July 18, 2012. was $19,320,000.00. " Net proceeds from refunding bonds of $0.00 after payment of $481,883.15 which represents issuance costs and underwriter's discount. Revenue Financing System Bonds, Series 2011 B " Advance refunding of the bonds reduced The Texas A&M University System's debt service payments over the " Issued March 10, 2011, to refund $20,000,000.00 of the Board's previously issued and outstanding Revenue next 12 years by approximately $13,639,670.84. Financing System Commercial Paper Notes, Series B; to provide funding for project costs of approximately $87,771,000.00: and to pay the cost of issuing the bonds. " Economic gain was $10,973,646.61, the difference between the net present value of the old and new debt service payments. " S105,365,000.00 authorized; all authorized bonds have been issued. Outstanding balance at August 31, 2012, was $103,485,000.00. " Advance refunding resulted in the removal of $79,715,000.00 of bond liability from the balance sheet and the addition of $70,680,000.00 of bond liability, the net of which is an accounting gain of $9,035,000.00.

798 .5-26 798 - 5-27 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

D. Pledged Future Revenues Note 7: Derivative Instruments

Sources of pledged revenues include tuition and fees, auxiliary enterprises, sales of goods and services, and other The A&M System Investment Policy allows investment in certain derivative securities. A derivative security is a non-operating activities. The following table provides the pledged future revenue information for the Texas A&M financial instrument which derives its value from another security, currency, commodity or index. Commodity University System Permanent University and Revenue Financing System bonds: forward contracts are entered into to meet the objective of hedging the risk that changes in the market price of natural gas will adversely affect the cash flows of the expected purchase of natural gas. Investment derivatives are Pledged Future Revenue entered into with the inlenliou of tanagingtransaction or currency exchange risk in purchasing, selling or holding investments. Detailed information about investment derivatives is disclosed in Note 3.

Pledged revenue required for future principal and interest on The fair values and notional amounts of derivative instruments outstanding as of August 31, 2012, are reported in existing revenue bonds S 3,428.619.817.84 the financial statements as follows:

Term of commitment year ending8,31 2041 Charnpsin Fair Value Fair Valueat August31, 2012 percentage of revenue pledged 54.6% Classification Amount Ctassifieation Asmount Notional

Current year ptledgd revenue S 1,872,634,029.32 Cash Flo. Hedges Delerred Derivative Current year principal and interest paid $ 206.018.477.83 Commodity Forward Ousflow $ (2.244,010.00) Instruments $ (2,244,010.00) 960,000tMMBTUs

Invesotent Deruvawveu tnvestment Forwards Revenue s (995,896.091 Investments S (995.896.09) $ 34.570,774.86

Hedging Derivatives

The fair value of the hedging instruments is determined by comparing the term price, which represents the contract price for the commodity, to the NYMEX price.

The outstanding commodity forward contracts as of August 31, 2012, include contracts with future expiration dates extending from September 2012 through August 2013. Contracts will be cash-settled on the expiration date based on NYMEX market price. The totals are summarized below by fiscal year:

Hedging Forward Contracts: Significant Terms and Credit Ratings

Notional Fiscal Nussblref Amount Effetive Date Tmination Teras: Pay Term: Countupanty Year Contracss (MMTUs) Range DateRarae (Avusser Receive CradisRating

2013 Forward 02/061009- 091011012- NYMEX Conoracts 24 960,000 02112o2o09 0810112013 S7.444M8BTU marketprice AA

798-5-28 798.-5 -29 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 20 12

As of August 31, 2012, the A&M System is not exposed to credit risk on its outstanding forward contracts because Note 8: Leases the contracts have negative fair values. No exposure to interest rate risk exists for commodity forward contracts. Capital Leases The A&M System is exposed to basis risk on its commodity forward contract because the expected commodity purchase being hedged will price based on a pricing point of Waha Natural Gas Hub, different than the NYNIEX Certain leases to finance the purchase of property are capitalized at the present value of future minimum lease pricing point at which the forward contract is expected to settle. As of August 31, 2012, the Waha price is $2.65 payments. At August 31, 2012, the A&M System had various capital lease obligations relating to the acquisition of per MMBTU and the NYMEX price is $2.74 per MMBTU. capital assets. The original capitalized cost of the capital assets under capital lease as of August 31, 2012. is $5,678,430.90. The following is a schedule of the future minimum lease payments for leased property and the The A&M System may terminate a forward contract if the other party fails to perform under the terms of the present value of the net minimum lease payments: contract. Ifat the time of termination a contract is in a liability position, the A&M System would be liable to the counterparty for a payment equal to the liability, subject to netting arrangements. If on any date amounts would Assets UnderCapital Leases otherwise be payable by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise Aecumultted have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the Assets under Depreciation/ other party, replaced by an obligation upon the pany by whom the larger aggregate amount would have been Class of Pmroertv Capital Lease Amortizatien Tolat payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. Building; S 2,372,049.29 $ (625,957.14) $ 1,746,092.15 Investment Derivatives Furniture and Equipment 2,425.903.61 (598.218.42) 1,827,685.19 Vehicles 223,408.00 (22,4H2.26t 200.925.74 Investment derivatives expose the A&M System to certain investment related risks. More detail about investment Computer Software 657,070.00 t99.378.27) 557.691.73 derivatives is disclosed in Note 3. Total 5.678430.90 6 $ 4.33a.394.ut

Future Capital Lease Payments

Mtinimum Future Fiscal Year Principal Payments interest Payments Lease Paymeets 2013 $ 637,004.01 $ 189,724.53 $ 826,728.54 2014 620,618.16 161,945.40 782,563.56 2015 621,222.37 114,481.19 735,703.56 2016 576,443.20 67,332.43 643,775.63 21117 103.504.35 43.067.55 146.571.90 2018-2022 327,254.62 164.287.95 491,542.57 2023-2027 419,781.31 71,602.49 491,383.80 2028-2032 64.305.29 1.211.56 65,516.85 $ 3,370,133.31 $ 813.653.10 $ 4,183,786.41

Summary:

Total: M,sinraum Lease Payments $ 4,183.786.41

Less: Interest at Various Rates (813,653.10t

Present Valueof Net Minimum Lease Payments $ 3.370,133.31

798 -5-30 798-5-31 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Operating Leases The A&M System has also leased portions of buildings and land to outside parties under various operating leases. Operaling lease income in the amount of $4,789,081.30 has been recorded for the primary government for the year The A&M System has included operating expenses for rent paid under operating leases for space and equipment in ended August 31. 2012. Of this amount, $686,522.34 represents contingent rentals. the amount of $15,918,458.19 for the primary government for the year ended August 31, 2012. Of this amount, $4,905.00 represents contingent rentals. Future minimum lease rentals under non-cancelable operating leases having an initial term in excess of one year as of August 31, 2012, are as follows: Future minimum lease rental payments under non-cancelable operating leases having an initial term in excess of one year as of August 31, 2012, are as follows: Operating Lease Rentals

Operating Lease Obligations M inimum Future Fical Year Renstas Mstinimum Future 2013 $ 4,133.347.57 Fisalu Year Lease Payments 2014 2,736.220.72 2013 S 12,tit3,340.99 2015 1.498.282.73 2014 9,098,753.10 2016 1,182,015.01 2015 7,373,543.42 2017 961,361.24 2016 5,839,673.25 2018-2022 4.381,780.23 2017 3,235,778.32 2023-2027 4,362,875.00 2018-2022 7,817,332.78 2028-2032 4.362.875.00 2033-2027 1,915,989.40 2033-2037 4,083,870.00 2028-2032 ,915.989.40 2038-2042 1,812,693.00 2043-2047 298.575.00 2048-2052 238.860.00

Total: Minimum Future L-ae Payments 49,210.4066 Total: M inimurmFuture Rentals $ 30.052,755.50

Carrying Value of Leased Assets

Accunulated Deprecitnion/ Class of Proerty Leased Assets Amortinalion Tolal

Land $ 1.077,882.93 $ - S 1,077,882.93 Buildingi 86.029.714.72 (32.268,466.78) 53,761L247.94

9 3 0 Total $ 87,107,597.65 $ (32,268,466.78l S 54.83 ,1 .87

798-5-32 798 -5 -33 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31,2012

Note 9: Employee Retirement Plans Note 10: Deferred Compensation

The State of Texas has joint contributory retirement plans for substantially all its employees. The contribution State employees may elect to defer a portion of their earnings for income tax and investment purposes pursuant to amounts for both the employee and the A&M System are set by the Texas Legislature and can change over time. authority granted in Texas Government Code, Section 609.001. All payroll deductions have been invested in One of the primary plans in which the A&M System participates is administered by the Teacher Retirement approved plans during the fiscal year. Two deferred compensation plans are available for A&M System System of Texas (TRS). The contributory percentages of participant salaries provided by the State and by each employees. participant during the fiscal year were 6.0% and 6.4%, respectively, of annual compensation. The State's 457 Plan complies with IRC Section 457. This plan is referred to as the TexaSaver Deferred The Teacher Retirement System of Texas does not separately account for each of its component government Compensation Plan (DCP) and is available to all employees. The DCP is an employer-sponsored plan agencies, since the Retirement System bears sole responsibility for retirement commitments beyond contributions administered by the Employees Retirement System of Texas (ERS). A&M System employees are permitted to fixed by the State Legislature. participate in the plan as an agency of the State. The deductions, purchased investments and earnings attributed to the 457 Plan are held in trust and belong to the participants. The State has no liability under the 457 Plan beyond The retirement expense to the State for the A&M System TRS retirement program was $17,800,589.07 for the year the administrative requirements outlined in the corresponding provisions of the IRC. ended August 31, 2012. This amount represents the portion of expended appropriations made by the State Legislature on behalf of the A&M System. Further information regarding actuarial assumptions and conclusions, The A&M System also administers a Tax-Deferred Account (TDA) Program, created in accordance with IRC together with audited financial statements, is included in the Teacher Retirement System's annual financial report. Section 403(b). All employees are eligible to participate. The TDA is an employer-sponsored plan. The deductions, purchased investments, and earnings attributed to each employee's 403(bl plan are held by vendors The State has also established an Optional Retirement Program (ORP) for institutions of higher education. chosen by the employee from an approved vendor list provided by the A&M System. The funds held in the Participation in the Optional Retirement Program is in lieu of participation in the Teacher Retirement System. The accounts belong to the individual participants. The vendors may be insurance companies, banks, or approved non- Optional Retirement Program provides for the purchase of annuity contracts and mutual funds. The contributory bank trustees such as mutual fund companies. The assets of this plan do not belong to the A&M System or the percentages of participant salaries during the fiscal year provided by the Stale and by each participant who was State and thus do not have a liability related to this plan beyond the administrative requirements outlined in the enrolled in the plan on or before August 31, 1995 were 8.5% and 6.65%, respectively. The 8.5% is composed of corresponding provisions of the IRC. 6.0% contributed by the State and an additional 2.50% contributed by the A&M System. For participants who enrolled on or after September 1, 1995, the State and participant contributions were 6.4% and 6.65%, respectively. The 457(f) Deferred Compensation Plan allows the A&M System to defer income for eligible participants without The 6.4% is composed of 6.0% contributed by the state and 0.4% contributed by the A&M System. regard to the amount deferred or an adverse impact on other retirement plans in which the participant is enrolled. The plan is structured under Section 457(0) of the Internal Revenue Code of 1986, as amended. It is authorized for The contributions for the A&M System ORP retirement program were as follows: use by Texas institutions of higher education in Title 109, Article 6228a-5, Section 3 of Vernon's Texas Civil Statutes. All employees of the A&M System are eligible to participate in this plan subject to the approval of the Optional Retirement Program Board of Regents, the Chancellor, or any Chancellor-designated A&M System member Chief Executive Officer.

Amount

Employer Cantributions $ 40,627,092.00 Employee Conmibulions 36,894.582.00

Toait $ 77.521.674.00

Effective January I, 1999, the A&M System implemented an excess benefit arrangement under Section 415(m) of the Internal Revenue Code (IRC).

Since the A&M System bears no responsibility for retirement commitments beyond contributions, GASB No. 25, FinancialReporting for Defined Benefit Pension Plans and Note DisclosuresJbr Defined ContributionPlans, and No. 26, FinancialReporting for Postesnplcvment Healthcare Plans Administered by Defined Benefit Pension Plans, do not apply to these financial statements or disclosures.

798-5-34 748 -.5-35 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES.TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Note 11: Postemployment Health Care and Life Insurance Benefits For the year ended August 31, 2012, the contributions for the self-funded plan by the state per full-time retired employee are shown in the following table. The retiree contributes any premium over and above state Plan Description and Funding Policy contributions.

In addition to providing pension benefits, the State provides certain health care and life insurance benefits for retired employees in accordance with State statutes. Substantially all of the employees may become eligible for Three-Year Schedule of Employer Contributions those benefits if they reach normal retirement age while working for the State. Those and similar benefits for active employees are provided through the group insurance program, and premiums are based on benefits paid during the FiUealYear Endaoyer Annual Perceatae ufAnnual Net OPEBObligation previous year. The Slate recognizes the cost of providing these benefits by expensing the annual premiums. For Ending Conibuiont -- OPEB Cost OPIB Cos Contributed At Endof Fseat Year the year ending August 3 I, 2012, the employer contributions are presented below. O,3tr2012 $ 63,t01.287 $ tO.1995827 33% 5 603,878,029 8/3t1011t S 40.489,312 $ 174.919,214 23% $ 476,809,489 Employer Contribution Rates /3t12015 S 46,173,687 S 162,680,000 25% $ 342,379,587

Levelof Coaveru Antouni The OPEB expense reflected in the Statement of Revenues, Expenses and Changes in Net Assets is net of the

Full-TimeEnployee/Refiree Only S 366.71 Employer Contributions, as these costs are included as a portion of Payroll Related Costs expense. Full-TimeEmployeRetireeeand Spouse S 551.60 Annual OPEB Cost and Net OPEB Obligation Full-Ti•eEmpilayes'ltiree andChildren S 482.27 Full-TimneEpmluyeelteirex and Eamily S 644.04 The annual OPEB cost of the plan is calculated and based on the annual required contribution (ARC). The ARC is the amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and For the year ended August 31, 2012, benefit plan expenses totaled $157,228,099.91. The cost of providing benefits amortize any unfunded actuarial liabilities over a period of years, not to exceed 30 years. The following table for 7,415 retirees was $39,855,107.52; and for 22,149 active employees the cost was $117,372,992.39. shows the components of the annual OPEB cost for the year for the plan:

Other Postemployment Benefits (OPEB) are benefits provided to the A&M System's retirees under the A&M System group insurance program. The authority under which the obligations of the plan members and the A&M Annual OPEB Cost and Net-OPEB Obligation System are established, and may be amended, is Chapter 1601, Texas Insurance Code. Retiree eligibility for insurance continuation is determined by the Legislature and is subject to change. Annual Required Contribution (ARC) $ 180,940 The A&M System and member contribution rates are determined annually by the A&M System based on the Interest on Net OPEB Obligation 34,807 recommendations of the A&M System Office of Benefits Administration. The plan rates are based on the plan costs that are expected to be incurred, the funds appropriated for the plans, and the funding policy established by Adjustment to ARC (25,547) the Texas Legislature in connection with benefits provided through the plan. The A&M System revises benefits Annual OPEB Cost 190,200 plans and rates as necessary to match expected costs with available revenue. The plan is operated on a pay-as-you- Employer Contributions Made (63,131) go basis and is unfunded. Increase Net OPEB Obligation 127,069 Because the OPEB plan described herein is not administered through a trust as defined under Paragraph No. 4 of Net OPEB Obligation 9/1/2011 476,809 GASB Statement No. 43, FinancialReporting for Posteniployment Benefit Plans Other Than Pension Plats, 603,878 GASB Statement No. 43 accounting is not applicable to the A&M System. NetOPEB Obligation 8/31/2012 $

798-5 -36 798 -5 -37 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Schedule of Funding Progress of the Plan Note 12: Interfund Activity and Transactions

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about As of August 31, 2012, amounts to be received or paid between flnds and agencies are to be reported as interfund the probability of events far into the future. The amounts determined for the funded status of the plan and the receivable or interfund payable. Legislative Transfers In and Legislative Transfers Out between A&M System Annual Required Contribution of the employer are subject to continual revision as actual results are compared with members have been eliminated. past expectations and new estimates are made about the future. The multiyear schedule of funding progress is presented in the following table: Individual balances and activity at August 31, 2012, were as follows: Schedule of Funding Progress Ilerfund Receivasles/Payaoles Current Interfund Current Interfund Actuarial Etcess of Ratio of Current Portion Receisalte Payable Purpose Artuartal Acerued Assets Oser Annual UAALto ENTERPRISE FUND (051 Actutatal Valueof IoJhilty AAL Funded Co.ered Coaered Agy# 710, Appd Fund 0047, D23 Fund (X97 $ 22.390,tl00t $ PUF Valuatlon Asets (AALW (Unfunded AALI Ratio Payront Payroll frontAgy# 720, D23 Fund 0011 Date Ia (b) l(.-(b) 1.)/Ih) (e (la-h/Jcet Agy# 715.Appd Fund 0515. D23Fund 0047 620263.36 SECO LonoSTAIR Prgram 813112-010 s $ 1.996.798.639 S (1.996.798.639) 0.0% S 1,359,512.304 146.9. faromAgy# 907, D23 Fund 0515 9/1/20010 t - 18.54.690.001 S (1,854,690,001l 0.0t% $ 1,313,538.458 1412% 9/1/2009 s - 1,864,320.0M0S (,864,320,000) 0.W0A 1,315.291,687 141.7% Total Current Interfund Receivable/Payahle $ 22,390,000.00 $ 620,263.36

Actuarial Methods and Assumptions Non-Current Interfund Non-Current Interfund Non-Current Portion Receivalde Payable Purpose

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the ENTERPRISE FUND (05) employer and plan members) and include the types of benefits provided at the time of each valuation and the historical AgyO 710. Appd Fund 0047, D23 Fund 0047 $ 734,789,840.87 $ - PUF pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and from Agy# 720, D23Fund 0011 assumptions used in the plan valuation include techniques that are designed to reduce short-term volatility in actuarial Agy# 711.Appd Fund 0001,D23 Fund 0001 2,340,088.30 SECO LoanSTAR Program accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. firomAgy# 907, D23Fund 0515 Additional detail about the actuarial assumptions used in the plan valuation is outlined in the following table: Agy# 715. Appd Fund 0047, D23 Fund 0047 1,751.085.32 SFCO L.oanSTAR Programn front Agys 907.023 Fund 0515 Summary of Actuarial Methods and Assumptions

Actuarial Valuation Date September1.2011 Actuarial Cost Mcthod Entry Age Normal Total Non-Current Interfund Recein.ae/Payable $ 734.789.840.87 $ 4.091.173.62 Amortization Method Open RemsainingAmonirtlion Period of Unfunded Liability 30 years Actuarial Assuomptions: Investment Rate of Return 7.3-% Inflation 3.0% Health Care Trend Rales 9.5% in 2012 Decreasing to 5.0% in 2021

Medicare Part D

In fiscal year 2012 the plan received payments from the federal government pursuant to the retiree drug subsidy pmvisions of Medicare Part D. GASB Statement No. 24, Accounting aend FinancialReporlingfifr CertainGrants aund (ther Financial Assistance, requires that these on-behalf payments be recorded as revenues and expenses of each plan. In fiscal year 2012 the system received $3,834,331.80 of Medicare Part D payments from the federal government.

798 -5- 38 708.1-5-31) UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 Note 13: Continuance Subject to Review Note 14: Restatement of Net Assets

This note does not apply to the A&M System. Beginning balance of net assets has been restated as presented below: Restatements of Net Assets-Primary Government Aency System Memnber Namber Amount Descrietion

system Offices Prior year airplane renovations and $ 1.259,327.24 •.:. :...... :: 710 corespyonding dePeeialion Far reeosations Reclassified btiilding oonrtnt ConCarrected Prairie View A&M University:.. 715 3,212,348.13 dtereciattiona... . Depreciation on CIP closingt with prior year Tarleton State University 713 (58.500.82) efltý:tive dates DDepreiation on CIP closings with prior year Teea A&M International University 761 (59.913.98): •cttecie date , • Depreciation on CIP closingt with prior year Texaa A&M Univenity 711 (1.324,497.93) effret ice dates Depreciation on CIP closings with prior yeaw Texas A&/tt Un..eisity at Galveaton 718 (247,673.70) lteft ie dates Depreciation on CIP closings with prior year Te-m A&M University-Coanmerce 751 (48.547.86) effective dates Depreciation on CIP closings with prior year Teem A&M Ltniversity-Corps Christi 760 (31.590.42) efoteise dates Software ageetnent amortized over a 3 year Texas A&M University-San Antonio 749 178,123.11 .., ...... ?...... period. t.epreeiation on CIP closings with priet year Teem A&M Ageilfe Reseorth 556 (7,220.61) , ...... effective dates Returned prior year asset toa ndor; Interest not Texas A&M Engineering Extension Service 716 (05.394.36) .apitalied

Texas A&M Transportation Institaute 727 (409.156.751 Cortection of priot year billin .

Total $ 2.357.302.05

Discrete Component Units

Net assets for the Mexico City Center at December 31,2011, were restated by S14.135.83 to recognize the exchange rate difference when converting the financial statements to U.S. currency. Net assets for the Casa Verde Center at September 30, 2012, were restated by $415,118.69 to restate fiscal year 2011 activity.

798.5-40 798- 5-41 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Note 15: Commitments and Contingencies Note 16: Subsequent Events

At August 31, 2012, various lawsuits and claims involving the A&M System and its members had arisen The A&M System is authorized to issue up to $460 million of Revenue Financing System Bonds during in the course of conducting A&M System business. While the ultimate liability with respect to litigation fiscal year 2013 to provide funding for project costs, refund previously issued bonds, refund commercial and other claims cannot be reasonably estimated at this time, management is of the opinion that the paper and pay the costs of issuing the bonds. The A&M System is authorized to issue up to $410 million liability not provided for by insurance or otherwise, if any, for these legal actions will not have a material of Permanent University Fund Bonds during fiscal year 2013 to provide funding for eligible projects, adverse effect on the A&M System's financial position. refund previously issued bonds, refund commercial paper and pay the costs of issuing the bonds. In addition, the A&M System expects to issue Revenue Financing System Commercial Paper and/or Private investment pools are invested in limited partnerships with external investment managers or Permanent University Fund Commercial Paper for interim financing of projects, as needed. general partners who invest primarily in private equity transactions. These investments, both domestic and international, are illiquid and may not be realized for a period of several years after the investments are made. There are certain risks associated with these investments, some of which are liquidity risk, market risk, event risk and investment manager risk. Certain funds may utilize credit default swaps which have additional risk, including the risk of counterparty nonperformance. Collateral in the form of cash or securities may be required to be held in segregated accounts with the fund's custodian. Bi-lateral agreements and daily settlement with counterparties reduce the risk of counterparty nonperformance. As of August 31, 2012, the A&M System has committed S396,483.022 to various private investments, of which $155,204,349 is unfunded. The fair value of the investments as of August 31, 2012 was $190,561.181.

7985-542 798 -5 -43 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Note 17: Risk Management The Texas A&M University System Health Science Center College of Medicine has established a medical student liability self-insurance plan (the Plan) to provide eligible medical students of the Texas A&M The A&M System is exposed to various risks of loss related to property - fire, windstorm or other loss of University System Health Science Center College of Medicine with medical malpractice liability capital assets; general and employer liability - resulting from alleged wrongdoings by employees and indemnity from and against medical malpractice claims. Limits of liability are $25,000 per claim, others; net income - due to fraud, theft, administrative errors or omissions, and business interruptions; $75,000 aggregate per participant, and $100,000 annual aggregate. The Plan is funded through a student and personnel - unexpected expense associated with employee health, termination or death. As an participation fee. At August 31, 2012, the Plan had a balance of $311,423.52 with no accrued liabilities. agency of the State of Texas, the A&M System and its employees are covered by various immunities and defenses which limit some of these risks of loss, particularly in liability actions brought against the A&M System or its employees. Remaining exposures are managed by self-insurance arrangements, contractuial IBNR Liability risk transfers, the purchase of commercial insurance, or a combination of these risk financing techniques. Plan WCCI Hlealth & Dental All commercial insurance policies include retention amounts (deductibles) for which the A&M System is IBNR Liability 9/I/11 $ 7,349,000.00 $ 10,218,000.00 responsible and for which A&M System members maintain funding reserve pools. Ongoing analysis of CY Claims Plus Change in Estimates 2,723,000.00 178,306,499.00 the risks facing the A&M System results in the continual evaluation of insurance policies purchased. Claims Payments (3,041,000.00) (174,433,499.00) The A&M System has self-insured arrangements for coverage in the areas of workers' compensation, Other Items (changes in estimates) (463,000.00) group health and dental insurance and certain areas of medical malpractice. Based on the requirements of GASB No. 10, liabilities for claims have been reported where information prior to issuance of the IBNR Liability 8/31/12 $ 6,568,000.00 $ 14,091,000.00 financial statements indicated that it was probable that a liability had been incurred and the amount of the loss could be reasonably estimated.

The workers' compensation plan is considered a funded employer liability pool. The workers' compensation incurred but not reported liability is based on actuarial analysis of all historical claims data. The plan provides claims servicing and claims payments by charging a "cost allocation" assessment to each A&M System member based on a percentage of payroll.

The A&M System implemented a self-insured health and dental plan on September I, 1994, which is also considered a funded pool. Premiums are determined through an actuarial pricing process that takes place each spring. The A&M System maintains an experience stabilization fund of $51.188,287.56 that is comprised of excess premiutms from previous years and is used to offset losses in a given year. Dental benefits under the plan are limited to $1,500 per individual per year, so the potential for catastrophic loss is not a significant risk.

798-5-44 798-5-45 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012

Note 18: Management Discussion and Analysis (MD&A) Note 19: The Financial Reporting Entity

This note is not used by the Texas A&M University System. The A&M System's Management The A&M System is composed of a series of distinct members, each of which was created to render a Discussion and Analysis is included as a separate section of the report. specific service for the State within the limits of the A&M System's objectives, and all of which are under the control and direction of the Board of Regents of the A&M System.

Blended Component Unit

The Texas A&M Research Foundation (Research Foundation) has been included as a blended component unit in the combined financial statements of the A&M System since fiscal year 1990, at the direction of the State Auditor's Office. This determination is based on the close relationship and joint agreements in effect between the Research Foundation and the A&M System in regard to research grant/contract administration, as well as the fact that various officials of the A&M System serve as ex- officio voting and non-voting trustees, and members of the executive committee of the Research Foundation. The Research Foundation has a fiscal year end of Augtst 31, 2012 and is Fund Type 05, Appd Fund 9999. Complete financial statements of the Research Foundation may be obtained from their administrative offices at 400 Harvey Mitchell Parkway South, Suite 100, College Station, Texas, 77845.

A new agency Texas A&M University System- Office of Sponsored Research Services now manages a number of the relationships and agreements that the Texas A&M Research Foundation has previously managed beginning in 2012. The intent is to move the majority of fiscal activity to each System member's financial statenients. We will begin to see a reduction in the balances and activities reported by the Texas A&M Research Foundation.

Discrete Component Units

The Mexico City Center (Representacion de Texas A&M University en la Republica Mexicana, A.C.) has been included in the combined financial statements of the A&M System as a discretely presented component unit. The audited financial statements of the Mexico City Center for the year ended December 31, 2011 are prepared in accordance with the financial accounting standards in Mexico.

The Casa Verde Research Center, Sociedad Anonimo, has also been included in the combined financial statements of the A&M System. The financial statements for the Casa Verde Research Center for the year ended September 30, 2012 are prepared in accordance with the financial accounting standards in Costa Rica.

Texas A&M University can appoint a voting majority of the boards of The Mexico City Center and the Casa Verde Research Center. Complete financial statements for the Mexico City Center and the Casa Verde Research Center may be obtained from Texas A&M University, External Reporting at 750 Agronomy Road, Suite 3101 GSC, 6000 TAMU, College Station, Texas, 77843-6000.

The National Biosecurity Foundation has been included in the combined financial statements of the A&M System beginning in fiscal year 2011 and was dissolved at the end of fiscal year 2012 . The A&M System can appoint a voting majority of the board of the foundation. The foundation's financial statements for the fiscal year ended August 31, 2012 may be obtained from The Texas A&M University System, Office of Budgets and Accounting at 301 Tarrow, Suite 350, College Station, Texas, 77840- 7896.

798-5-46 798 - 5 -47 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 The Texas 4-H Incorporated has been included in the combined financial statements of the A&M Note 20: Stewardship, Compliance and Accountability System beginning in fiscal year 2012. Texas A&M Agrilife Research is in control of the board. Texas 4- H's financial statements for the fiscal year ended August 31, 2012 may be obtained from The Texas Changes to the financial reports of the A&M System are discussed in Note 1. The A&M System has no A&M University System, Office of Budgets and Accounting at 301 Tarrow, Suite 350, College Station, material violations of finance related legal and contract provisions. Per the laws of the State of Texas, the Texas, 77840-7896. A&M System cannot spend amounts in excess of appropriations granted by the Texas Legislature and there are no deficits reported in net assets or retained earnings.

798 .-5 --48 798 - 5 -49 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 Note 21: Tobacco Settlement Note 22: Donor Restricted Endowments

This note is reserved for State Comptroller of Public Accounts' use. The purpose of The Texas A&M University System Endowment Fund (the Fund) is to provide for the collective investment of all endowment and trust funds held by the A&M System or by (he Board of Regents of the A&M System in a fiduciary capacity. The Fund is used to provide funding for scholarships, fellowships, professorships, academic chairs and other uses as specified by donors.

Distribution is made quarterly after the last calendar day of November, February, May, and August of each fiscal year to the endowment and trust funds participating in the Fund during the respective quarter. Income consists of interest earnings, dividends and realized capital gains. The income distribution per unit for each fiscal year will be to distribute, excluding fees, 5% of the 20-quarter average market value per unit as of the end of the previous February.

The amount of net appreciation for donor restricted true endowments presented in the table below is available for authorization and expenditure by the A&M System.

Net Appreciation of Donor-Restricted Endowments

Donor-Restricted Amount of Reported in Frduowments Net Appreciation* Net Assets True Endowments S 65,655,987.30 Restricted for Expendable

The total ftscal year 2012 fair value adjustment to the Fund was $39,832,113.02

798-5-50 798-5- 51 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31, 2012 August 31, 2012 Note 23: Extraordinary and Special Items Note 24: Disaggregation of Receivable and Payable Balances

The A&M System does not have any special or extraordinary items to report for the year ended August A summary of accounts receivable and associated allowances for doubtful accounts balances for the year 31, 2012. ended August 31. 2012, is presented below for the primary government:

Accounts Receivable-Primary Government Allowance for Gross Doubtful Accounts Net Current Accounts Receivable: Federal Receivables S 91.481,012.10 S 91,481,012.10 Other Interivernrrncntal 5,586,243.95 5,586,243.95 Interest and Dividends 6,559,836.40 6,559,836.40 Gilt, Pledges, Donations 27,323,465.67 (81,990.57) 27,241,475.10 Student Receivables 31,391,309.12 (9.742.318.87) 21,648.990.25 tnvesttment Trade Receivables 160,396,351.24 160,396,351.24 Self Insured Receivables 1l,667.261.66 18,667,261.66 Accounts Receivables 109,095,312.77 (2,384,459. 10) 106,710,853.67 Other Receivables 4,408,472.25 1265,238.89) 4,143.233.36

Total Current Accounts Receivable: $ 454.909.265.16 S 12.474.007.43) $ 442,435,257.73

Non-Current Accounts Receivable: Pledges Receivable S 60,512,651.12 $S 60,512,651.12

Total Non-Current Accounts Receivable: $ 60.512,651.12 $ . $ 60,512,651.12

Starting in fiscal year 2012, Customer Receivables are recorded in Accounts Receivables rather than Other Receivables. Customer Receivables accounted for $42,029,900.24 of total Other Receivables in fiscal year 2011.

Payable balances are presented on the Balance Sheet.

798-5-52 798 - 5 -53 UNAUDITED UNAUDITED THE TEXAS A&M UNIVERSITY SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTES TO THE COMBINED FINANCIAL STATEMENTS August 31,2012 August 31, 2012

Note 25: Termination Benefits Note 26: Segment Information

As of August 31, 2012, the A&M System has not incurred obligations to pay voluntary or involtntary The A&M System does not have any reportable segments. termination benefits in fiscal year 2013.

For the fully-insured HMO health plans, dental plan, and vision plan, the carrier is responsible for the billing and collection from all COBRA participants. The carrier retains all premiums and is liable for all claims and expenses. Enrollment information for these plans is included below; however, the A&M System does not have premium and expense information related to these plans.

For the self-insured health and dental plans, the carrier performs the billing and collections process for COBRA participants. The carrier then forwards the premium to the A&M System, net of the 2% administrative fee, which is intended to cover costs related to the billing and collection functions. However, since the plan is self-insured, the A&M System is responsible for any claims or administrative costs associated with COBRA participants, and these amounts are included below.

As part of t(le stimulus funding front the federal government, some terminated employees were eligible for the 65% subsidy for COBRA coverage. The Federal Department of Labor agreed to reimburse employers the 65% COBRA reimbursement up to 15 months. This applies to employees who were involuntarily terminated between September 1, 2008 and May 31, 2010. The maximum end of the 15 month payment period was August 31, 2011. The remaining balances received in fiscal year 2012 totaled $1,805.18.

COBRA benefits for the Texas A&M University System for the year ended August 31, 2012 are as follows:

Termination Benefits - COBRA

Enrollment Fully-insured Fully- Self-Insured Self-Insurcd Medicat IIMO Fully-insured Insured Medical Plan Dental Plas Plans Dental Plan Visiun Plan

Number ofParticipants 208 115 16 27 137

Self-Insumtd Activity Premium Revenue $ 940,024 $ 69,165 2 Percent Administrative Fee Revenue 8,800 1,383 Total COBRA Revenue 958,824 70.548

Claims Paid 1,985,079 154,429 Administrative Expenses 27,680 6,694 Total COBRA Expenses 2,0121759 161J23

Total Cost Io State S 1,053,935 $ 90,575

798- 5- 54 798- 5-55 Exhibit VI ExhibitVII Texas A. M Universlty System Texas A&M Usinentiy System Combintig Balance Sheet for Combinaig Statement of Renues.Expene andChanges in Nel A-ts for Discretely Presented Component Units Di.nrolttyPresented ComponentUnits For the Fiscal Year Ended August 31, 2012 For the Fiscal Year Ended August31. 2012 National Cain Verde Mltico City Biomcurily Texas 4-H National Center Center Foundation Inc Totlh Ca.n Verde MexicoCit" Biosecurity Texas 4-H OPERATINGREVENUES Center Center Foundation Inc. Toal. SaleosfGw& ad Serices - Nan-Pledged S 0 105,508.00 0 $ 80,010.00 0 105.50900 ASSETS Co.eet aed Grans 171.028.00 171,02800 Current Asset. OtherOperating Ree...e 24.051.0O -. 24,051.00 Cash and Cash Equqivalets TOTAL OPERATINGREVENUES S3W,547.0o s - 5 ,000.00 0 380,507.00 Cash on oland S 1,000.00 $ 110.00 S S - S 1,510.00 OPERATINGEXPENSES Cashin Baek 1251 47 37,471.00 16,430.33 55.152.80 Cost afGrod. Sold $ 126,848.00 S 0 126.840.01 Accounts Receivable 12,101.23 33,898.00 45,999.23 Salatiec redWages 173,515.50 173.51S50 Prepaid Expenses 1,955.48 1,955.48 Payta[IRooted Coset 49.501.88 - - 49.50t.08 Total Current Asselt S 1630&.18 S 7179*00 S - $16,43033 0 104,617.51 Proferxia Feessad Seric 20,920.39 32.924.55 650.00 54,694.94 Traonl 55.998.32 1.6445.24 - 57.843.5S Non-Current Asset. Materialsad Supplie 51.739.10 2558.54 35.94 52,033.58 Capital Assets Cntaicatiaotad Utilitie 20.275.32 - - 720-75.32 Non-Depreciable or Non-Amorticoble $ 4.061.57 $ - $ 4.061.57 Repairssad tainrn•ece 13,162.6b 13.162.6o Depreciableor Amortizable,Net 649,334.69 94,358.00 $ 743,692.69 Re-tnit and tease 6,704.71 6,7M4.71 Other Non-Currelt Asseto 35,809.96 202.00 s 36,011.96 Priting and Reproductioe Total Non-Current Assets S 6089-06.22 S 94,611.00 S 793,766.22 Depettic adomniion 45,783.27 26,669.47 S - 72,452.74 s Other O er-iing Enpecses 6,175.47 198,352.53 62,683.73 267,211.73 1 TOTAL ASSETS S75,514.40 S 166,439.00 S 16,430.33 S 888,303.73 TOTAL OPERATINGEXPENSES S 443,776.62 S 351870.00 S 39.8: S230 63,569.67 S 894,344.62

OPERATINGINCOME (LOSS) O 1443,776.62) S (35,028.33 S S1,23.0810 16,43033 S (513.657.62) LIABILITIES Carrent Liabilities NONOPERATINGREVENUES (EXPENSES) Payabhle Unopertieg Reaenu 5 450,307.06 S 450,307.06 Payroll S 16,150.05 S $S £ - S 16,150.05 Nooperating (Expensets 19,412.421 (14.02900p_ (2,4g002) (25,921.44, Other 704.50 5373.00 6,379.50 TOTAL NONOPERATINGREVENUES S Total Current Liabilities S 16,054.59 S 5,67s.00 $ $ S 22,529.55. (EXPENSES) O 440.894.64 s (2.480.02) O 424.305.62

Non-Current Liabililies CHANGE INNET ASSETS S (2,991.99) O (6"212.800 S (37.508.35) S 161430.33 0 (89.272.001 Other Nen-Conurn Liabilities O 603,148.0•9 . S 50,161.00 S 653,309.09 05 Total Non-C-rrent IWabtlitlle S 603,148.09 S V0,161.00 0 - S$ 653,309.09 NetAssetas, Spterer 1, 2011 0 (326.724.95) $ 161.779.17 S 37,508.35 0 (127.437.43) Reteatsnt'es 415,118.69 S17.35.83 429,'54.52 $ 175.91500 0$ TOTAL LIABILITIES S 620,002.64 S 5036.00 $ S S 67S530.64 NetAst•ta Septeaber 1.2011, m Raestated O 80093.74 S 37,508035 S 301,817.09

NET ASSETS NET ASSETS.AUGUST 31, 2012 S 85,511.76 0 110,603.00 S 0 16,430.33 S 212,45.09 Unresticted S 85,511.76 S 110,600300 $ $ 16,430.33 S 212.545.09 TOTAL NET ASSETS S 6•,511.76 S 110,603.00 S S 16.43023 S 212,545.09

TOTAL LIABILITIES AND NET ASSETS S 705,51440 £ 166,439.00 0 - $16,430.33 S S80,33.73

798-a 798-b9. UNAUDITED UNAUIDITED

SCHIEDULE2A WcITEDULE2B SYSTEMAIDMINISTRATIVE ANDGENERAL OFFICES SYSTEMADMIN-STATIT' AND GENERAL OFFICES SCIIEDULEOF MISCELLANEOUS BOND I-FURARATIEN SCIIEDUI.EOFCIIANGES I N//IDEDINS/BTEDNESS F AR US. ERREdA,.u, M1.2012

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SCIFEM•JE2. 2E TEXAS-& UNIVERSITYSYSTEM OFIRCES SCHEDULE ANFALYSISOFFUNDS AVAILALE FOR DEBT SERVICE SYSTEM ADMINISTRATIVE AND GENERAL OFFICES SCHEDULE OF DEFEASED BONDS OUTSTANDING For the Year Ended August 31, 2012

NES RESTRICTED ACCOY1NTBALINCES C-rITAL AVAIL•ELEFIR DEBT SERVICE REFI1FTDEDYOR-NTISERsYSSIYIK HNDSIa BONDSSRERVE TID CALENDAR PAR VALUE VID~Y TETSDDEEYICEpRINCIPAL INTEREST EE.IITINTISIEI REQIIED ADCTSAL REQUITED -CATIIL YEAR OUTSTANDING DESCRIPTION OF ISSUES REFUNDED AUGUST 31.2012

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710-13-2 710-14-1 UNAUDITED UNAUDITED SCHEDULE THREE SCHEDULE2F SYSTEMADMINISTRATIVE AND GENERALOFFICES THE TEXAS A&M UNIVERSITV SYSTEM SCHEDULEOF EARLYEXTINGUISHMENT AND REFUNDING COMI9ENEDSCIIEDULE OF CASII & CASll EQUIVALENTS For Ihe YVarEnded August 31,2012 FOR THE YEAR ENDED AUGUST 31, 2012

CURRENT REFUNDING AMOUNT CASH FLOW ECONOMIC YEAR ISSUE EXTINGUISHED INCREASE GAIN/ TOTAL DESCRIPTION CATEGORY PARVALUE OR REFUNDED (DECREASE) -I.oSs) CASH & CASH EQUIVALENTS Revenue Bond, - Self Supporting Unrestricted Cash On Hand PermauentUni-•rty FundBonds, Series 1948 CashicesAccount $ 109.217.59 Revene Bonds CounenRefunding $ 1,0S5,000.00 $ Is.R.15,00.00 S 50,748.61 s 50.385.28 PettyCash Department Working Fund 411,451.04 Temporay Working Fund .... - 11,94s.81 Pe neneUniveiry FundBonds. Series 2004 Revenue Bonds Advance Refunding 70,680,000.0M 79,715,000 13,639.675.R4 I0,973,646.6I Total Cash On Hand S 532,617.44

Total. Early Extinguishnmentand Refunding $ 71.6515,O01.(t _$ 0U,73.0,"00R 13,6.410.45 $ I 11,04,01.8 Cash In Bank S 18R097,971.90 Cash In State Treasury Fund0047 . S 105,722M906.83 Fund0230 12,286,519.52 ".... J~u ciii2.. .. i ...... "...... 5 7 3 . .2... Fund0231 6.557.360.28 Fumld0232 5,644,033.46 Fund 0242 57,766,533.69 Fund 0..43" _ . .. - 7,655,661.90j Fund 0245 47,309,255.14 Fund 0254 10,611,436.58 Fund 0257 . ",338,365.01 8 ...... :..Furd.0 2 63Fund: ...... 0263: ...... " ....• ...... "739,777.7676 . Fund 0275 5,745,276.59 Fund (1289 8,698,453.12 Fund 0290 5,667,607.16 Fundd0291 4,135,830.83 Fund 0 18 3,165,086.83 Fund 0990 53,798.81 Fund 5029 7,436,159.26 Fuod 5056 31,102.86 Fund 5064 65,508,059.41 '""':.'i•:"FFundn~l 506613 ...... :-' " i :...... :'" "!: 3,660,366.77. 7 , 0 . 1 • KFundSO5130~ 7,701.31 : lFund513 1 . ....l...... 7,751.13 . Fund 5132 1,178.79 Fund 5133 5,675.06 Total Cash In State Treasury $ 366,755,980.80 Reimbursements Due From State Treasury S 8,018,643.43 Cash Equivalents 360,331,350.89 Total Unrestricted Cash and Cash Equivalents lExhibit II] S 753,736,564.46

Restricted Cash On Hand Petty Cash Department Working Fund $ 268,900.00

Cash In Bank $ 15,924,439.88 Cash Equivalents 323,470,577.80 Total Restricted Cash and Cads Equivalents [Exhibit 1111 S 339,663,917.68

TOTAL CASH & CASH EQUIVALENTS [EXHIBIT VI S 1,093.400.482.14

710-15-1 798- 16-I Susa Co sea oprlero ulcAcut G S - - ~ .. LX. JvztzI2teoc.,2 rcaZt5t... ,fl

Acknowledgments

The Comprehensive Annual Financial Report was prepared by the Financial Reporting section of the Texas Comptroller of Public Accounts with assistance from other sections within the Fiscal Management and Data Services Divisions.

Peggy Wagman, CPA, Financial Reporting Supervisor

Shelly Arnold, CPA Thanh Quach, CPA Bill Holland, CPA Michelle Roland, CPA Al Kcuzel Wiley Thedford Wallace Lankford, CPA Julia Weng, CPA Kamal Malik, CPA Lori Williams, CPA Laurel Mulkey Brittany Wisdom. CPA Stacy Parker, SPA Team Lead Tom Zapata, CPA Shirley Perry

Other Sections: Gary Bryant Selena Meyers Armando Cantu Kim Novak, CPA Francine Fowler, CPA Aurora Ramirez David Hefflngton Terri Whaley Susan Combs Texas Comptroller of Public Accounts Bruce Holmstrom

Comprehensive Annual Financial Report Phillip Ashley, CPA, Fiscal Management Division Director For the State of Texasfor the FiscalYear Ended August 31,2012 Rob Coleman, Fiscal Management Assistant Director Daniel Benjamin, CPA, Fiscal Integriry Manager

Data Services Graphics Tram: Brad Wright, Publication Layout Dan Lynch, Cover Design

Special appreciation to: All accounting and budget personnel of state agencies and institutions of higher education whose extra time and effort made this report possible.

The State Auditor, John Keel, CPA, and his auditing staff.

2012 - Comprehensive Annual Financial Report ! re. VIC2w,ýnl Tc,,;,s State of Texas 2: FINANCIAL SECTION (continued) Other Supplementary Information - Combining FinancialStatements and Schedules Comprehensive Annual Financial Report Governmental Funds For the Fiscal Year Ended Aucjutst 31, 2012 Nonmajor Governmental Funds Com bining Balance Sheet ...... 159 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 160 Table of Contents Nonmajor Special Revenue Funds Com bining Balance Sheet ...... 162 1: INTRODUCTORY SECTION Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 163 Letter of Transmittal ...... 3 Budgetary Com parison Schedule ...... 164 Certificate of Achievem ent ...... 12 Nonmajor Debt Service Funds Elected State O fficials ...... 13 Com bining Balance Sheet ...... 168 Government Structure of Texas ...... 14 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 169 Nonmajor Capital Projects Funds 2: FINANCIAL SECTION Com bining Balance Sheet ...... 172 19 Independent Auditor's Report Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 174 Nonmajor Permanent Funds Management's Discussion and Analysis Com bining Balance Sheet ...... 178 Management's Discussion and Analysis ...... 23 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 179 Enterprise Funds Basic FinancialStatements Nonmajor Enterprise Funds Government-wide Financial Statements Combining Statement of Net Position ...... 184 Statem ent of N et Position ...... 38 Combining Statement of Revenues, Expenses and Changes in Net Position ...... 188 Statement of Activities ...... 40 Combining Statement of Cash Flows ...... 192 Fund Financial Statements Colleges and Universities - Major Enterprise Fund Governmental Fund Financial Statements Schedule of N et Position ...... 198 Balance Sheet ...... 42 Schedule of Revenues, Expenses and Changes in Net Position ...... 202 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ...... 43 Schedule of Cash Flows ...... 206 Statement of Revenues, Expenditures and Changes in Fund Balances ...... 44 Fiduciary Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures Pension and Other Employee Benefit Trust Funds and Changes in Fund Balances to the Statement of Activities ...... 45 Combining Statement of Fiduciary Net Position ...... 214 Proprietary Fund Financial Statements Combining Statement of Changes in Fiduciary Net Position ...... 216 Statem ent of Net Position ...... 46 Private-Purpose Trust Funds Statement of Revenues, Expenses and Changes in Net Position ...... 48 Combining Statement of Fiduciary Net Position ...... 220 Statem ent of Cash Flows ...... 50 Combining Statement of Changes in Fiduciary Net Position ...... 221 Fiduciary Fund Financial Statements Agency Funds Statement of Fiduciary Net Position ...... 52 Combining Statement of Fiduciary Net Position ...... 225 Statement of Changes in Fiduciary Net Position ...... 53 Combining Statement of Changes in Assets and Liabilities ...... 226 Notes to Financial Statensents ...... 55 Discretely Presented Component Units Com bining Statement of Net Position ...... 232 Required Supplementary Information Other Than MD&A Com bining Statem ent of Activities ...... 240 Budgetary Comparison Schedule ...... 148 Modified Approach to Reporting Infrastructure Assets ...... 151 Schedules of Funding Progress ...... 153 k"- - I I- : 1, ý t-ýý2012 - ComprehenslveA6nual FmrindalýRiportý ý-ýor-,IýieStat44Ueqs , z' -_ ý1-14 corripf hlý"Ive ý4oual FlrianýW Aeportý 3: STATISTICAL SECTION Financial Trends Information Net Position by Com ponent ...... 249 Changes in Net Position ...... 250 Fund Balances - Gonvernmental Funds ...... 254 Changes in Fund Balance - Governmental Funds ...... 255 Revenue Capacity Information Taxable Sales by Industry...... 256 State Tax Collections and Retail Sales ...... 257 Total Retail Sales ...... 257 Texas Gross State Product by Industry ...... 258 Debt Capacity Information Legal Debt Margin Inform ation ...... 259 Ratio of O utstanding Debt by Type ...... 260 Ratio of General Bonded Debt Outstanding ...... 261 Pledged Revenue Bond Coverage...... 262 Demographic and Economic Information Texas Nonfarm Employment Detail: Number of Jobs ...... 264 Texas and U.S. Selected Statistics ...... 266 Texas and U.S. Employment and Unemployment Rates ...... 266 Operating Information Full-Time Equivalent Employees byFunction ...... 267 Capital Asset Statistics by Function ...... 268 O perating Indicators by Function ...... 269 Section One Introductory Section

I I ZQQ - Comprehensive Annual Financial Report - 1 ý2 M2 ! Comprelýenslve Annual Finantial Report • ,•.• ::•_ •-. - ', _ts. ,"z'zc• At. ..

All activities generally considered part of the state Economic Outlook of Texas are included in this report. These activities Texas' relative job growth advantage over the provide a range of services in the areas of education; national economy continues today, as it did before and health and human services; public safety and correc- during the most recent recession. Texas added 278,800 tions; transportation; natural resources and recreation; jobs over the 12 months ended in November 2012, regulation; general government; employee benefits; and and total nonfarm employment reached 10.9 million. teacher retirement state contributions. The 2.6 percent job growth rate for Texas included The management discussion and analysis (IclD&A) increases that spanned all she major industries except in the financial section provides an overview of the information. This was the fastest rate of growth among February 22, 2013 state's financial activities, addressing both governmental the nation's largest states and was faster than all but two and business-type activities reported in the government- (North Dakota and Oklahoma) of the nation's 50 states. wide financial statements. The comparable national job growth rate was 1.4 per- cent over the past year. To the Citizens of Texas, Governor Perry Accounting System and The average annual unemployment rate in Texas and Members of the 83rd Texas Legislature: Budgetary Controls has remained more than one percentage point lower The state's internal accounting controls provide than the nation's unemployment rate in each year reasonable assurance regarding the safeguarding of assets The Comprehensive Annual Financial Report The state auditor contracted with KPMG to per- from 2009 to 2012. After three years of little improve- against loss from unauthorized use or disposal and the ment. the Texas unemployment rate has eased in recent (CAFR) of the state of Texas for the fiscal year ended form portions of the federal audit procedures necessary reliability of financial records for preparing financial months from 7.4 percent a year ago to 6.2 percent in Aug. 31, 2012, is submitted herewith. Responsibility for to meet the requirements of the federal Single Audit Act statements. The concept of reasonable assurance recog- November 2012, its lowest level since 2008. The rate of both the accuracy of the data presented, as well as the Amendments of 1996 and related Office of Manage- nizes that the cost of a control should not exceed the job growth, despite an expanding labor force, should be completeness and fairness of the presentation, rests with ment and Budget (OMB) Circular A-133. The federal resulting benefit. sufficient to allow continued mild improvement in the the office of the Texas Comptroller of Public Accounts. portion of the Statewide Single Audit Report for the Budgetary control is exercised through expenditure unemployment rate. To the best of soyknowledge, the information present- fiscal year ended Aug. 31, 2012, with the opinion budgets for each agency. These budgets are entered After a decline of 5.7 percent in 2009, Texas' total ed is accurate in all material respects, and all disclosures expressed by KPMG, will be issued separately• into the statewide accounting system after the Gen- necessary for a reasonable understanding of the state's personal income rebounded substantially for three years, eral Appropriations Act becomes law. The General with average annual growth of 6 percent, boosted by financial activities are included. Profile of the Government Appropriations Act becomes law after passage by the hiring in the oil and natural gas exploration and pro- The reporting approach established by the Gov- This report includes financial statements for the legislature, certification by my office that the amounts duction sectors. During these three years, the state's ernmental Accounting Standards Board (GASB) was state of Texas reporting entity. Criteria for determin- appropriated are within the estimated collections, and income growth rate was faster than the nation's by an utilized. The state also voluntarily follows the recom- ing the reporting entity and presentation of the related the signing of the bill by the governor. Controls are mendations of the Government Finance Officers Associa- financial data are established by GASB. The criteria average of 1.8 percentage points annually. maintained first at the agency level, with additional Underlying this personal income growth is a tion (GFOA) of the United States and Canada for the include legal standing and financial accountability. control at the fund and appropriation level to ensure population that has been, and will continue to be, contents of government financial reports and participates Other organizations that would cause the financial expenditures do not exceed authorized limits. Further fueled by net migration and a relatively high birth in the GFOAs review program for the Certificate of statements to be misleading or incomplete if they were derail on budgetary accounting for the state is found rate. Recent estimates by the U.S. Bureau of the Cen- Achievement for Excellence in Financial Reporting. The excluded are also included in the reporting entity. in the required supplementary information other than state auditor performed an audit, in accordance with gen- Note I of the notes to financial statements provides sus show that eight of the nation's 15 most rapidly MD&A section. growing large incorporated cities are in Texas. The erally accepted auditing standards, of the states general- derail on the financial reporting entity. Note 19 pro- state's comparatively positive economic picture in purpose financial statements. His opinion is presented in vides a brie summary of the nature of significant com- the face of a weak national recovery has encouraged this report preceding the financial statements. ponent units and their relationship to the state of Texas. interstate migration to Texas. The state population

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grew by an estimated 379,000 in calendar 2012, with sion, as employers hire temporary employees before fill- ties and warehouses) put in place in 2012 increased table goods sectors that are affected by outsourcing and 202,000 due to net migration. According to the Cen- ing full-time positions. Leisure and hospitality services by 5.6 percent over the amount built in 2011, to 83.2 technological changes, with ongoing erosion in print- sus Bureau, Texas accounted for nearly 16 percent of account for one-tenth of Texas' total nonfarm employ- million square feet. ing, paper and food processing employment. Nondu- the nation's total population growth during the past ment but provided 18 percent of the state's job growth A positive sign for Texas construction is that the rable manufacturing sectors lost 4,400 jobs (down 1.5 decade, nearly twice the share that would be expected over the past year, with a gain of 49,900 jobs. total number of single-family and multi-family residen- percent) during the year. Manufacturing employment from its population size. Mining and logging employment was propelled tial building permits - although remaining well behind was 847,000 in November 2012. Texas passed its 2008 pre-recession employment by the effects of firmer market prices and improved oil historical trends - was up by 41 percent in 2012, Texas' service-providing industries, which account peak in December 2011. As of November 2012, Texas and natural gas exploration technology., especially the increasing from 90,000 units in the previous twelve for more than 84 percent of the state's total nonfarm employment has increased by 685,000 from the low extensive application of horizontal drilling and fractur- months to nearly 127,000 units in the twelve months employment, had job growth of 2.6 percent from point in December 2009, resulting in 258,000 more ing techniques. The number of Texas operating oil and ended in November 2012. According to Multiple List- November 2011 to November 2012, following increases jobs than those lost in the recession. Nationally, the natural gas drilling rigs in Texas averaged 899 rigs in ing Service data from the Texas A&M Real Estate of 1.1 and 1.9 percent in 2010 and 2011. Services again employment rebound from the recessionts low point has 2012, eclipsing the recent low of 329 rigs in June 2009. Center, the median sale price for an existing Texas underperformed the goods-producing industries in the been 4.6 million, about half of the 8.8 million jobs lost. Mining and logging, predominantly comprised ofoil single-family home rose 8.3 percent, from $146,900 rate of job growth, but still accounted for 82 percent of and natural gas activity in Texas, added 8,900 jobs over in November 2011 to $159,100 in November 2012. the jobs added during the year. The Job Picture by Industry the past year. a 3.6 percent rate of growth. In November Without Texas' construction job growth in 2012, the Employment expanded in the trade, transporta- Of the eleven major industries of the Texas econo- 2012, the state's mining and logging industry job count national construction industry would have seen another tion and utilities industry by 69,600 jobs; leisure and my, all except information had net employment growth stood at 257,500 jobs. year of job declines, as the national increase of 14,000 hospitality services by 49,900 jobs; education and from November 2011 to November 2012. Goods- The broader oil and natural gas industry - mining, jobs was far less than Texas' gain of 37,400 jobs (a health services by 45,700 jobs; and professional and producing industries - mining, manufacturing and con- petrochemicals, petroleum refining, and oil/natural gas- solid 6.7 percent growth rate). Total Texas construction business services by 37,400 jobs. Government gained struction - expanded by 3 percent, exceeding growth in related manufacturing - accounted for an estimated 16 employment was 594,400 in November 2012. 12,400 jobs and financial activities tacked on 9,300 service-providing industries (2.6 percent) for the second percent of Texas' gross state product (GSP) in 2012. It The value of Texas exports set a new record in jobs. With the delayed recovery of personal income year. Goods-producing industries' growth was spurred serves as a buttress for the overall state economy when 2012, increasing by 5.9 percent to reach $266 billion, growth, consumers have been wringing more years on by the strength of oil and natural gas exploration increasing oil and natural gas prices hinder the business according to the World Institute for Strategic Economic out of goods before replacing them, benefiting the and the manufacturing of energy-related machinery and and household consumers of those energy sources. Research (WISER) and Comptroller estimates for the repair sector, leading to job growth in other services of drilling rigs during the first half of the year. After losing employment for three years, shed- last quarter. Texas is the nation's leading exporting state, 9,000 jobs. Information, the smallest service-providing In the 12 months ended in November 2012, the ding 124,000 jobs frons the pre-recession employment as it has been since 2002, and exports represent more industry in Texas, has not added jobs in any year since industry that added the most jobs was trade, transporta- peak to the subsequent trough, the Texas construction than 19 percent of the state's GSP. The value of Texas the "dot.com" bust in 2000, losing another 3,400 jobs tion and utilities, at 69,600 jobs. The industry that had industry substantially recovered in 2012 to become exports, which are predominately to non-European over the past year. the fastest growth rate, at 6.7 percent, was construc- the state's fastest-growing industry. Construction countries, has grown more quickly than the nation's, so Texas consumer expenditures, based on sales tax tion. As in much of the nation, information was by far employment bottomed out in December 2011 and has that Texas exports now account for 17 percent of the collections in calendar year 2012, experienced solid the weakest major private industry in the state, with a gained 39,700 jobs since then. Although residential total U.S. value. growth, even in light of the nation's general economic decline of 1.7 percent (3,400 jobs), primarily owing to construction remained muted in 2012. the industry With lexas economic activity swelled by the uncertainty. The growth in sales tax receipts reached cuts in the telecommunications sector, but also from benefited from heavy and civil engineering construc- demand for the products and services of the energy a six-year high in calendar 2012, up 12 percent, with another year of job declines among businesses engaged tion projects, which accounted for nearly half of the industry, the economic value of Texas manufacturing much of the growth rooted in business spending related in printing and publishing. Professional and business new construction jobs and was the fastest growing increased in 2012 to an estimated $201 billion, from to oil and natural gas exploration. With more robust services advanced because of robust hiring in admin- industrial subsector, at 19 percent job growth, over the $192 billion in 2011. Productivity improvements and automobile and light truck sales, motor vehicle sales tax istrative and support services, including employment past year. According to McGraw-Hill Construction employment growth contributed to this increase. Dura- collections soared by a 19 percent increase during the services. This is a sector that often adds temporary and and the Comptroller's econometric model, Texas' total ble goods manufacturing employment grew by 7,000 calendar year. Texas consumer spending should con- part-time jobs when the economy emerges from a reces- nonresidential building area (offices, fabrication facili- jobs (1.3 percent), but weakness still grips the nondu- tinue expanding in 2013 and 2014.

U 2012 - Comprehensive Annual FinancialReport - Fotlfi,ý$rsýeotlrwaý 5 FE-2012 i Comprehensive Annual FinancialReport - FottCý2awc4TC14P, 1.: -W

Financial Policies on Aug. 31, 2012 was $6.1 billion. The ESF is also dis- An accompanying web-based tool (www.lstsesas.org) of thousands ofTexas jobs. The Comptroller's Octo- Fiscal soundness is an unwavering principle that cussed in Note 13. allows users to compare school districts and campuses on ber 2012 Endangered Economny: A Case Study ofthe guides the financial. policies of the state. The Texas a multitude of academic and financial indicators. This Dunes Sagebrush Lizard and the West Texas Oil and Gas Constitution supports responsible governance by man- Major Initiatives first-of-its-kind tool is available to users free of charge. Industy report discusses this case, which was resolved dating several limitations on the budgeting process. In In recent years, Texas' budget-wriring process has The third annual edition of FAST, issued in 2012, via a communiry-led, market-based program of vol- addition to the certification process requiring passage focused largely on short-term measures needed to close gave 45 charter and school districts the highest rating of untary conservation steps, without the severe land-use of a balanced budget in Article I11, Section 49a, budget each successive budget gap. In recognition of this par- five stars. Of the 45 five-star districts, 27 held that rank restrictions that follow listing under the Endangered growth and indebtedness are also limited. According to tern, the Comptroller's office has inaugurated a series in 2011 and 15 did so for three consecutive years. Species Act. Article VIII, Section 22, appropriations from state tax of programs designed to provide state policymakers The Comptroller spearheaded that effort as part of revenue not dedicated by the Texas Constitution can- with the information they need for effective, long-term The Cost of Federal Regulation her role as the presiding officer of the state's Interagency not grew faster than state economic growth estimated financial planning. Excessive and poorly considered federal regulations Task Force on Economic Growth and Endangered Spe- by the Legislative Budget Board. Payments required for can have a serious impact on Texas' economic health. cies. In January 2013, the task force released a report, debt cannot exceed 5 percent of the previous three-year FinancialAllocation Study for Texas The Comptroller's office has issued several recent Update 2013: Task Force Activities in Response to Endan- average of non-dedicated general revenue as provided in For the 2012-13 biennium, the Texas Legislature reports addressing regulatory costs on our state. gered Species Act Costs and Challenges, detailing its work Article IIl, Section 49j. appropriated about 42 percent of the state's non-dedi- In April 2012, the Texas Business Attitudes Toward to head off onerous federal regulation while preserving The Economic Stabilization Fund (ESF), authorized cated general revenue for public education. Total spend- Federal Health Care Reforrit report documented consid- the state's natural resources. in 1988 by the Texas Constitution, Article III, Section ing by Texas school districts rose by nearly 64 percent erable opposition to federal health care reform among 4 9g, is yet another example of prudent governance. The from the 2000-01 through 2010-11 school years. Over Texas businesses. Only 3.4 percent of the employers Tracking the Texas Economy Comptroller may transfer ESFamounts to the general the same period, enrollment rose by just 21 percent, surveyed for the study believed the legislation will be In February 2012, the Comptroller's office revenue fund to prevent or eliminate temporary cash roughly a third as fast as spending. good for their businesses. launched The Texas Economy websire (www.thetex- deficiencies. Any amounts transferred to general revenue In response to a legislative directive to "identify Another area prone to federal regulatory overreach aseconomy.org) - a comprehensive guide to the Texas shall he returned to the ESF as soon as practicable, but school districts and campuses that use resource alloca- is environmental protection. More than 100 species economy and the industries, people and other factors no later than Aug. 31 of each odd-numbered year. The tion practices that contribute to high academic achieve- found in Texas have received or are slated for federal that drive it - to help policymakers, businesses and Legislature may appropriate, by a three-fiflhs vote of the ment and cost-effective operations," the Comptroller's endangered species review within the next five years, taxpayers understand the complex forces shaping Texas. members present in each house, amounts in the ESF for office created the Financial Allocation Study for Texas with potential consequences that could involve signifi- The regularly updated site provides a wide variety of spending that does not exceed the amount of any unan- (FAST) to examine district and campus resource alloca- cant economic impacts on the state's landowners, busi- data and analysis in an easy-to-understand and useful ticipated deficit or revenue decline during a biennium. tion - and the relationship between these allocations nesses and communities. format, including information on: The Legislature may also appropriate any amount from and student achievement. FAST allows school districts To help policymakers stay abreast of rapidly evolv- Key economic indicators the ESF for any purpose only if approved by at least two- to identify ways to operate more efficiendy without sac- ing environmental regulation, in September 2011 the Government revenue and spending thirds of the members present in each house. The ESF rificing student academic performance. Comptroller's office debuted Keeping Texas First (www. * Demographics shall receive a transfer, not later than the 90th day of The FAST project was developed with the assis- keepingtexasfirst.com), a websirc that tracks proposed Major industries each biennium, from the general revenue fund for one- tance of researchers at some of the state's top higher endangered species listings as well as air and water regu- Workforce trends half of any unencumbered positive balance remaining in education institutions, Texas school superintendents, lation, explains the federal rule-making process and pro- Public education the general revenue fund on the last day of the preceding national experts and other stakeholders such as Texas vides detailed case studies outlining the financial impact * Career training biennium. The ESF also receives transfers, not later than school board members, professional education associa- of such regulation on the state economy. Health care the 90th day of each fiscal year, from the general revenue tions, education policy groups and business leaders. One species found in the Permian Basin, for The Texas Economy site also spotlights in-depth fund for 75 percent of the prior fiscal year oil or natural FAST ratings are provided to Texas school districts and instance, was proposed for listing as an endangered Comptroller research reports examining issues directly gas production tax revenue that exceeds the amounr of campuses to identify those responsible for strong aca- species despite a lack of scientific data - in a region affecting state finances, such as reports on local govern- these collections in fiscal 1987. The balance in the fund demic growth and cost-effective operations. that provides 14 percent of the nation's oil and tens ment spending and bond debt.

ýQIZ , Comprehensly"Annual Financial Report ý Rgtlieý,taleofTexa5 77-777ý01Z,*t Comprehensive Annual Financial Report Transparency Circle award for financial transparency, including 265 as well, costing Texas businesses $9.5 billion annually. to enter into an agreement with the school district to The Comptroller's office promotes openness in at the Gold level, 49 at the Silver level and six at the The 82nd Legislature asked the Comptroller to build a create a specific number of high-wage jobs and build state and local governments and financial transparency Bronze level. comprehensive collection of resources and information or install specified types of real and personal property at all levels. The agency's Texas Transparency websice to help Texans address this problem. worth a certain amount. (www.rexastransparency.org) incorporates an Open Data Spotlighting Government In response to this charge, the Comptroller's office To qualiFy, the property must be in a reinvest- Center that offers public access to machine-readable, Spending and Debt launched an online platform, Reshaping Texas (www. menr zone and must be devoted to manufacturing, platform-independent datasets on statewide contracts Another major project springing from the Comp- ReshapingTexas.ore), in December 2012, to offer news research and development, renewable energy genera- and bidders' lists, crude oil and natural gas industry troller's transparency initiative is the Texas, Itr }nur and information about the obesity epidemic. Key topic tion, nuclear power generation, advanced clean energy data, tax receipts and more. A Texas EDGE Data Cen- Mone" series of reports released from August through areas include costs, Texas initiatives, success stories, projects or electric power generation using integrated ter provides data of interest to economic development December 2012. This series is intended to give Texans research and maps. The site's features also include: gasification combined cycle technology. The amount of officials, including population, employment, income, the tools they need to understand and hold accountable Fisnessgram - aggregates fitness data collected investment and the minimum amount of the value limi- poverty, property values, sales activity and education those responsible for government spending and debt. It by the Texas Education Agency to create tation varies according to whether the school district is information. Another feature, Where the Money Goes, also makes recommendations to improve the transpar- geographic information system (GIS) maps considered a rural or non-rural district and according allows the public to search the state check register and ency of government finances and helps taxpayers exer- showing where in Texas students are most at to the amount of taxable property value in the school track state agency spending in detail. cise their fundamental right to control them. risk for obesity. These maps will help identify district. A new feature added in November 2011, the The report series examines: obesity "hot spots" in need of targeted inter- As of August 2012, a total of 84 school districts Monthly State Revenue Watch (www.window.srare. * The various local entities that add to Texans' ventions. were parties to 128 value limitation agreements, with tx.us/finances/reveuueWatch), presents detail on net tax bills - including cities, counties, special- * Grants database - a regularly updated pool the bulk of projects involving manufacturing facilities state revenue collections by month of collection and purpose districts and transit authorities - and of funding opportunities for local nonprof- and wind fairms. type of revenue source, and allows its users to make identifies trends in local taxation, including the its, schools and other organizations seeking side-by-side comparisons to prior year collections and proliferation of special taxing districts resources to help fight obesity. Awards and Acknowledgments the Comptroller's revenue estimate. T'rends in the issuance of bond debt, which * Involvement information - step-by-step guide- The Comptroller also encourages Texas local gov- local governments use for purposes such as lines on how to get involved in the fight against Certificate of Achievement ernments to open their books to the public by posting hospital construction, water infrastructure and obesity at the local level, including how to The Government Finance Officers Association their budgets, annual financial reports and check reg- vehicle and technology purchases work with PTAs and School Health Advisory (GFOA) of the United States and Canada awarded a isters online. Texas Transparency displays the progrcss Bond indebtedness of public schools and higher Councils. Certificate of Achievement for Excellence in Financial local governments are making toward this goal, and education institutions, which supports the con- Users are encouraged to share success stories and Reporting to the state of Texas for its Comprehensive gives users direct access to local government websites struction or renovation ofeducational facilities submit other relevant content. Annual Financial Report for the fiscal year ended Aug. and their key financial documents. * Public pension obligations in Texas 31, 201 I. The Certificate of Achievement is a presti- As of Jan. 8, 2013, the Texas Transparency website The Texas, Jr'sYour Money series was accompanied Property Tax Value Limitations gious national award that recognizes conformance with listed all 254 Tens counties, 470 cities, 1,033 school by a stite of Web tools that will help Texans keep a In 2001, the 77th Legislature enacted House Bill the highest standards for preparation of state and local districts and 32 special districts (including municipal closer eye on government finances, including interactive 1200, creating the Texas Economic Development Act government financial reports. utility districts, water districts, river authorities, toll maps that provide a close-up view of the entities that (Act). The Act allows school districts to attract new In order to be awarded a Certificate of Achieve- road authorities and transit districts). More than 80 assess property tax, collect sales tax revenues and issue taxable property and assist in new job creation by offer- ment, a government unit must publish an easily read- percent of these are posting at least one of the three public debt in each Texas county. ing a tax credit and an eight-year limitation on the able and efficiently organized Comprehensive Annual recommended documents, giving taxpayers access to appraised value of real and personal tangible property Financial Report whose contents conform to program the data they need to see how their tax dollars are Protecting Texans' Health for the maintenance and operations portion of a school standards. Such reports must satisfy both generally being spent. In calendar 2012, a total of 320 of these Texas has been hard-hit by the national obesity district's tax rate. In exchange for the appraised value accepted accounting principles and applicable legal local governments earned the Comptroller's Leadership epidemic, and this vital health issue is an economic risk limitation and tax credit, a property owner is required requirements.

1 2012 - Comprehensive Annual Financial Report - For pie Srat,ýQf Texa5 9 110 0Q - Comprehensive Annual Finantial Report . Fojj,ý_IteOTNaý A Certificate of Acbievement is valid for a period Acknowledgments of one year only. The state of Texas has received a Cer- The preparation of this report requires the collec- tificate of Achievement for the last 22 years (fiscal years tive efforts of literally hundreds of financial personnel ended August 1990 through 2011). We believe our throughout state government, including the dedicated Certificate of current report continues to conform to the Certificate management and staff of the Comptroller's Financial of Achievement Program requirements and we arc sub- Reporting section and Fiscal Management Division; the Achievement mitting it to the GFOA to determine its eligibility for chief financial ofticers, chief accountants and staff at for Excellence another certificate. each agency; and the management and staff of the State I will continue to maintain a highly qualified and Auditor's Office. I sincerely appreciate the dedicated in Financial professional staff to make this certification possible. efforts of all these individuals who continue to strive for improvements that will make Trsas a national leader in Reporting quality financial reporting. Presented to

Sincerely, State of Texas

/Sus an Combs For its Comprehensive Annual Financial Report for the Fiscal Year Ended August 31, 2011 A Certificate of Achievement for Excellence in Financial Repirting is presented by the Governient Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting.

S 6L EItoeSutieDrector MINI President

riteciscive Dtrector

m3m epsiveAnnuail Financial Report - 71-2012 - ComprehenSIVeArmilalfiriancial Report State of Texas Government Structure of Texas Comprehensive Annual Financial Report The Electorate State of Texas Elected State Officials

Executive Rick Perry Legislative Executive Governor

David Dewhurst Lieutenant Governor L. nd Office ~ A°C:nn• Generar Gu.... tr Susan Combs Comptroller of Public Accounts

Greg Abbott Attorney General tegisltve Offic,.e<+,,+,+FA,of th"e:,""" c -. I...oCommiss"I" Lefislativ Jerry Patterson Land Commissioner L...... { BudousBetds oardls B...tomBardsssonandi Todd Staples of Agriculture Commissioner Copactsand Advisory Christi Craddick .eneral ,fomean Emmloyee David J. Porter Tenus Government Benefits GoSeu BarryT. Smitherman Legislative ..... --...... Railroad Commissioners

Legislative Lieutenant Governor David Dewhurst President of the Senate .aft . Agn ciesrn Retirement State

Joe Straus S Referencee !.. Speaker of the House of Representatives Commcilso

Judicial Wallace B. Jefferson SunsetB Chief Justice of the Supreme Court * ElectedOffice Adisor I t.I.... ?.Of ces... Sharon Keller Presiding Judge, Court of Criminal Appeals

1 2012 - Comprehensive Annual Financial Report - ;;CýtMwý $taie r,4Tem, F-42VU t Comprehensive Annual Financial Report - Fo, ftStaleofTC,,aý Judicial ------•o-7

Board oState Th Court * SecretaryCommissioner Texasof Education ThSurm ofrioa of otae Ariritre omisson TexasEducation IfrofeaApea .io

Appeals*

Courts*o

EdacationResomresand

Municipal Jusilceofthe .Tasp.rta.i... Courts* PeaceCourts*

I I " 201ý - Comprehensive Annual Financial Report - Foi the $rare of Texas 16 2WI t CoMprehensWe Annual Finafl6al Report Section Two Financial Section

I X Q - Comprehensive Annual Financial Report -` Rýr aw statýýcf rexas I., I 1ý 17 1 16 IU12 - ComprehensIve Annual Financial Re port - RxzhtSwicafT(ýnlý a- finat Independent Auditor's Report As discussed in Nire 6, the Stare of Veuxasrep•ted conduit bond debt for rwescomneptnt units as a liability in the financial statements and disclosed crnduit bond debt for two other compnent units in 1 he I Itnorabl Rick Perry, ( inemor Note 6 as allowed by the Grvcnmental AccaouningStandards Board. Theitonorahbl Susan Combs, (omptrnller of Public Accounts Thu Ilonorablte tvid D[ bhurst,Licutenant Gioveror In accordance with GatmerrrtcntArtifiirg Stanawrds.we swill issue a separaterelater on our consideration the ltonorablc Joc Straus, Speaker of the inuse of Representatives of the State's internal control rver financial reporting arid on our tests of the Slate's coaipliarrce with and sertai.rpro visioirsof lass, rgctari ns, contrarcts.arid grantagreenic s and other matters.tlh purp "rse' rf Mlernbars oflthe Ilegislatr. State of Icos tCht report is ao describe the scopeof oatr restingof ircrnal contoul over tfiarwial rcpnoring and cuomplianceand tim results ofthat testing. and rrrrtto provide an opinion on internal control over financial We bave audited the accormpanying financial tutrtnronts of ihe goocernental antivitics, thc business- reportingor on erompliance. that reulortis an integralpart of aniaudit pcforated is accordance with type activities. each major fetd, and tre .aggegate discretely presented con.pneont unil and riesaining tGoir'rtonentAudisirrg Siar•u-ofs and should be considereditt assesing the rIsults of our audit. fund infoeration of the State of "ucas, as of and for ite )-aeorated Augut 3t1. 2012, which collectively comprise the Stale's basic financial statemmeos as listed in the table of contents. 1 lase Accounting principles generally accpted in1the tnifed States of America reqiire that the monagemeot's filancial slatencents ate ith rsproucibiiity oF ite State Cuniptruller of Public Accounts. Our discussionmid analysis, the budgetary comparisonschedule, the modified approach to reporting responsibility is to expressopinions on thiese financial statements based on our audit. inrfeattnrrcieu asseo. and tie schedules ofl" Inding progress, as listed in the table of contents, he presented to supplement the basic financial slaltemens. Such information. alhoaugh not a part orifrc basicfinancial We did not audit the financial statements of the fatlooing entities and fund: statenrents, is required by the Governmental Accounling Standards Boardwho considers it to be on essential pan of financial reporting ior placing tie basic financial rtatementsin an pptopriatne * The University of' texas System, which constitutes 70 pcnrent of the assets of ('ullegcs and operational. economic. Or historical contest. We hase applied certain limitedprc•cdures sotire required Utniversities, a ntajor enterprise tind. The I lniversity of lesas System also constitutes 54 percent stupplementary information in accordance with audiring standardsgenerally accepted in tire tlnited States of the assetsof the bosino.s-tyIp activitis. of Arerica, which consisted of inquiries oa managrnrent about the methods of preparing the informatior * The Texas totlery Fund. a erajor enterprise fund, which eonrstitutes16 percent of the operating and comparing the infurraratinafor cansistency with anragemcrl's responsý to our inquiries, the basic revenuesof the bosiness-type activitin. financial statements, and other knowledge we obtained during our audit otlhn basic firanicialsatements. * The Tesas Laia Gosnnnrent Investniret trol (ffnPrre). a blended eomponent unit, which We do not espressan opinion or provide artyassurance tin the infusritaion becausethe limited procedsres constitutes 7 persent of the assets of the aggregate discretely presented t.erponeut unit and do not provide sisa ith sufficient evidenceto espressan opinion or provideany assurance. renaining ftud intabnation, stiich pniriarily consists of fiduciat, funds. Our audit stas conductedcre the purpose of forming opinisms on the financial statements hintcollectively The financial statementslisted abase %ere audited by otirer auditors %hobs reports thereon have ben eomprise the Stare's financial statemeont. [he other snppleemonturyinrifarartion - corbining Financial Furnished to us, and our opiniin, insofar as it relates to tie amounrts included far these entities and vste•rivnoand schedules, as listedin the table ofeuaniris, is presented forpurposes of additional analysis | ePoul. is bas•d solely on the reptes of trhohcr auditors. and is not a required part of the financial stunteents. Such isifurriation is the responsibility of management and was derived frrm and relates directly to rite underlying acsrunting und oienr rcerrd, Wcornducrted our audit inraccordance ovith arditirgs•andards generally accepted in the tiniled States used ti prepare the financial statements. Ithe information has herns•bjected to the aiditiog prowedures of America and Ire standards applicable to fiomncial audits contained in Urrr'crnroro Arsditing applied by ris in the audit of the fnancial stateisers and cecruinadditional procedorns,including Standards,issued by the Comptrollcr Genrtoal of the United States. [hbse standards rcquire liar on comparing and reconciling such iniofraatisn directly lathe underlying accounting and other records umod plot ard perfnna tlireaudit to obtain reasomablt assurance abOut whether the financial statements are to prepare the linancial statemcnorsa to ft financial statements themselves. and other additional free of naterial irtissatlrneret. 'Ihe financial staterents of 'esftoel wcer not uudited in accordatee prniedures in accurdance with audiuingstandards generally accepted in LtheUnited States of America. fit with fGoerrneat Auditing S.urdurtL. An audit includes rxamining. on a lest basis, evidente our opinion. the other supplementary informatiun - cousbining financial s•atalrnerisarid schedules is fairly supponing Imi aniounts and disclosures in tire tinancial statemrents. An audit also includes assessing statedin all material respects in rehlaionao the financialsLatneorenis as a whole. the accounting principles used arid tie sigrificam estinrates made by management, as well au evaluating the overall tinuttcial statement presentation. We believe tbat our audit and dir reports of Our audit was conduced farthe purpose of forming opinions on thefinancial sIatemente fiarculleetivnly other auditors previde a reasonable basis tire .rit epinions. uoarpeisuthe State's basic finrrriat oralerlnesrs.tIhe ir•todasory section midthe statistical section are presented for purposes of additionaluInalysis and are not a required paotof the basic tinaiciol statements. In our opinion, based on our aidit and the reports of other auditors, the financial statements refereed Such informatioa has not beensubjected to the andiuingproecdsros applied in rte audit of itebasic to previously pircsent fairly, in all material respects, tho ispective frinariat ptrsiion of the firancial statreents. and uccordingly. or do not expressan opinion or provide onyassurance on thean. governmentaf activitics. the bnisincs.-typo activition, each naionr fund, and the aggregate discretely presented cornponent unit and remaning fund information of the State of Tesas, as of August 31. 2012, and the respective changes in financial pesition and, where applicable, cash flows thereof fir the year then ended in cannomrity with accounting principles generally accepted in the UInited Stales of America

Fcbnar). 21, 2013 SAO Report No. 13-323

Un iuaIFintCnrjS1Reponýr$, VC)r1J4Wt*QNRA5 20 riftoliciAl Biloort"T-o' ForthwokdTC-4ýý Section Two (continued) Management's Discussion and Analysis

1 2012 - Comprehensive Annual Financial Report - 2 22 ,012 - Comprehensive Annual Financial Report Management's Discussion be conduit debt. This amount represents the net dif- surement focus and the accrual basis of accounting. This it provides are reported as business-rype activities. The and Analysis ference between net issuances, payments and refund- means that all the current yeas's revenues and expenses state's institutions of higher education are included as The following is a discussion and analysis of the ings of outstanding bond debt. During fiscal 2012, the are included, regardless of when cash is received or paid, business-type activities. state of Texas' financial performance for the fiscal year state issued bonds totaling $2.2 billion. More detailed producing a view of financial position similar to that pre- ended Aug. 31, 2012. Use this section in conjunction information regarding the government-wide, fund level srented by most private sector companies. Component Units with the state's hasic financial statements. Comparative and long-term debt activities can be found in the debt The statement of net position combines and con- Component units are legally separate organizations data is available and presented for this 2012 report. administration section of this managementrs discussion solidates the government's current financial resources for which the stare is either financially accountable or and analysis (MD&A). with capital assets and long-term obligations. This state- the nature and significance of their relationship with Highlights ment includes all of the government's assets, deferred the stare is such that exclusion would cause the state's Overview of the Financial outflows, liabilities and deferred inflows. financial statements to be misleading or incomplete. Government-wide Statements Net position represents one measure of the state's The state has 26 discretely presented component units. Net Position The focus of this report is on reporting for the financial health. Financial information for these entities is presented The assets of the state of Texas exceeded its liabili- state as a whole and on the major individual funds. The Other indicators of the state's financial health separately in the supplemental statements and in the ties by $148.6 billion as ofAug. 31, 2012, an increase report presents a more comprehensive view of the state's include the condition of its roads and highways (infra- notes. of $9.2 billion or 6.6 percent from fiscal 2011. The financial activities and makes it easier to compare the structure) and economic trends affecting the state's majority of the increase is primarily due to an increase performance of Texas state government to that of other future tax revenues. Reporting on the State's Most of $3.6 billion in nonexpendable funds. The net posi- governments. The statement of activities focuses on both the Significant Funds tion is comprised of $73.2 billion in capital assets, The Financial Section of this annual report presents gross and net cost of various activities (governmental, Fund financial statements provide additional detail net of related debt, $61.3 billion in restricted, and the states financial position and activities in four parts: business-rype and component units). These costs are about the state's financial position and activities. Some $14.1 billion in unrestricted. MD&A (this part) paid by the state's general tax and other revenues. This information presented in the firnd financial statements The basic financial statements statement summarizes the cost of providing (or the differs from the government-wide financial statements Fund Level Required supplementary information other subsidy provided by) specific government services and due to the perspective and basis of accounting used. GovernmentalFunds than MD&A includes all current year revenues and expenses. Funds are presented on the fund-level statements as As of Aug. 31, 2012, the state's governmental funds Other supplementary information presenting The government-wide statement of net position major or nonmajor based on criteria set by the Govern- reported a combined ending fund balance of $44.2 bil- combining statements and schedules and the statement of activities divide the stare's activities mental Accounting Standards Board (GASB). lion, an increase of $2.1 billion or 5 percent from fiscal The report also includes statistical and economic into the following three types. A fund is a separate accounting entity with a self- 2011, primarily due to an increase in tax revenues. The data. balancing set of accounts. The state uses funds to keep state reported a positive unassigned fund balance of The basic financial statements include government- GovernmentalActivities track ofsources of funding and spending related to spe- $583.6 million in fiscal 2012. wide financial statements, fund financial statements The state's basic services are reported here, includ- cific activities. and notes to financial statements, which provide more ing general government: education; employee benefits; ProprietaryFunds detailed information to supplement the basic financial teacher retirement state contributions; health and Governmental Funds The proprietary funds reported a net position of statements. human services; public safety and corrections; transpor- A majority of the state's activity is reported in gov- $46.8 billion as of Aug. 31, 2012, an increase of $4.7 tation; natural resources and recreation; and regulatory ernmental funds. Reporting of these finds focuses on the billion or 11.1 percent from fiscal 2011, primarily due Reporting on the State as a Whole services. Taxes, fees and federal grants finance most of Flow of money into and out of the funds and amounts to an increase in the valuation of investments. The government-wide financial statements are these activities. remaining at foscalyear-end for future spending. designed to present an overall picture of the financial Governmental funds are accounted for using the Long-Term Debt position of the state. These statements consist of the Business-Type Activities modified accrual basis of accounting, which measures The state's total bonds outstanding decreased by statement of net position and the statement of activities, Activities for which the state charges a fee to cus- cash and other assets that can be readily converted $843.3 million or 2.2 percent during foscal2012, pri- which are prepared using the economic resources mma- tomers to pay muostor all of the costs of certain services to cash. The governmental fund financial statements marily due to a restatement for bonds determined to

I 20Q - Comprehensive Annual Financial Report - 23 24 20Q - ComprehensiveArinuai Finantiai Report - .2c...,. :23227 - provide a detailed short-term view of the state's gen- and changes in fiduciary net position. The activities Statement of Net Position eral governmental operations and the basic services it are reported separately from other financial activities August31, 2012 and 2011(Amounts in Thousands) provides. This information helps determine the level because the state cannot use the assets to finance its available for the state's programs. The rec- operations. The state's fiduciary responsibilities include Buuisin-3TnAmdtFor Total lauryotunawna of resources 2012 02M 2012 2011 2M2.n. . 2011 onciliations following the fund financial statements ensuring that the assets reported in these funds are used ASSOETS explain the differences between the governmental activi- for their intended purposes. Amstsctttnr'ThanCavol AusIs 67.569392 0 56993.1St S61 D25.689 856D82389 $128595B81 $1131075,740 Capiul Asmuts 78,448.792 75,667.494 24,343.466 23,189142 102,792248 90857336 ties column reported on the government-wide statement Financial Analysis of the Totl Auma 146D18,174 132 60,645 85-369.155 79272.431 231.387329 211973376 of net position and the government-wide statement of DEFERREDOUTFLOWS 773JDI0 575.740 773010 575.740 activities, and the governmental funds reported on the State as a Whole LIABILTES fund financial statements. The general fund, state high- Net Position Cu-nt Liubititins 24,369.928 15,466022 9..50.778 %B69.570 34.320.706 " 25.335592 way fund and permanent school fund are reported as Nomunuenltuiabitics 19,8760170 199411936 293866652 27A0.44373 49262.722 47,786•39 Total assets of the state as of Aug. 31, 2012, were T-al I.iubiliries 44245.998 3.407,95 39.3371430 7,7.13•943 8].583.428 73.121.901 major governnmental funds. $231.4 billion, an increase of $19.5 billion or 9.2 per- NE"TPOSITION tascurd in Cupiut Aune, cent. Total liabilities as of Aug. 31, 2012, were $83.6 Not or Rela DeNb 63.453493 61917432 9312.946 9J42352 73.171.439 71.159984 Proprietary Funds billion, an increase of $10.5 billion or 14.3 percent. Net Renstred 33.748.497 326D3,561 27539.111 24376,167 61,287,608 563899228 When the state charges customers for services it Ulsnestrited 4%65.196 3321594 9352678 8515309 14.117S64 11037.103 position was affected by a number of factors. Cash and Toall Nat PiWon 0101,772,176 T 97352987 546204335 $42,134228 S 14835765911 S 139386.915 provides, these activities are generally reported in pro- cash equivalents increased by $10.1 billion from fiscal prietary funds. Services provided to outside (non-gov- 2011 and noncurrent investments increased by $5.2 ernmental) customers are reported in enterprise funds, billion. Net capital assets increased by $3.9 billion. The a component of proprietary funds, and are accounted major components of this increase were additions to Changes in Net Position fluctuations in governmental activities are largely artrib- for using the economic resources measurement focus the state's highway system, and college and university The stare's net position as of Aug. 31, 2012, urable to education and to health and human services. and the accrual basis of accounting. These are the same building and building improvement projects. Current increased by $9.2 billion. The state earned program Education had a decrease of $2.5 billion, primarily due business-type activities reported in the government-wide liabilities increased by $9 billion, primarily due to the revenues of $82.1 billion and general revenues of $47.9 to reduced distribution to local school districts. In busi- financial statements, but are reported here to provide issuance of $9.8 billion in tax and revenue anticipa- total revenues of $130 billion, a decrease of ness-rype activities there was a $938.1 million decrease information at the fund level. billion, for don notes in the latter part of fiscal 2012. There was $1.6 billion or 1.2 percent from fiscal 201 I. The major in the health and human services function, primarily The employees life, accident and health insurance an increase in net pension obligation of $1.2 billion as components of this decrease were operating grants and due to reduced unemployment benefit payments. benefits fund is reported as an internal service fund and well. The state's bonded indebtedness was $37.9 billion, contributions, which had a decrease of $6 billion, and Further discussion of results for changes in the provides services on a cost reimbursement basis to other which included new issuances of $2.2 billion in state capital grants and contributions, with a decrease of $2.5 state's financial condition follows in the analysis of the agencies of the financial reporting entity. bonds to finance new construction, housing, water con- billion. Federal revenues decreased $7.6 billion and state's funds. Operating and capital grants and contribu- Colleges and universities, the unemployment trust servation and other projects. Approximately $2 billion interest and investment income decreased $1.4 billion. rions decreased while tax collections increased, mostly fund and the lottery fund are reported as major propri- in bonded debt was retired or refunded. Net position These decreases offier $4.7 billion gains in tax revenues. due to sales tax collections. Education expenses for local etary funds. was $148.6 billion as ofAug. 31, 2012, an increase of The expenses of the state were $120.5 billion, a school districts and unemployment benefit payments $9.2 billion or 6.6 percent. Of the state's net position, Reporting on the State's Fiduciary decrease of $4.1 billion or 3.3 percent. The expense also decreased. $73.2 billion was invested in capital assets, net of relat- Responsibilities ed debt, while $61.3 billion was restricted by the Texas The state is the trustee or fiduciary for six defined Constitution or other legal requirements and was not benefit plans and one defined contribution plan. It is available to finance day-to-day operations of the state. also responsible for other assets that can be used only Unrestricted net position was $14.1 billion. The major- for trust beneficiaries. All state fiduciary activities are ity of the net position increase is primarily due to an reported in separate statements of fiduciary net position increase of $3.6 billion in nonexpendable funds.

26 2012 - Comprehensiv;Ann.al Fmanc,M[Report - For tnýýState ot leYA5 25 ý012 - Comprehensive Annual Finafl6al Report - r,ý th., 24kiý d y0Aý ___J Expenses and Program Revenues: Governmental Activities Changes In Net Position For the Fiscal Year Ended August 31, 2012 (in Millions) For the FiscalYears Ended August 31, 2012 and 2011 (AmsountsIn Thousandt)

0,W0 A0051k •fr O A dmOe Ti.saeeFd-, e 0 21112 21 2 2091 2112 2011

Popeos~ Gransand $ 7,403M1 $ 7,337.1I9 $19j37,312 $17,682.51 S 26.442,400 $ 253019937 Heft14and H-oneSeno.oes $44.737 $31,301 Chepon Seonoos Education 20.724 8.376 42,796231 47220,463 12.5,42912 14J03243 55339,143 61-323,706 PublicSdety and Conections S1195 US6 47-70 2338.949 259.750 291.741 V07328 2$20930 50.249.97 57096,.31 31S39.974 32067.502 80198371 Totlt PloneenRenono GeneralGotenerne 3,117 21059 TeacherRelr•,fen State ontributions Z390 GlneeldRoooe-: FloEpense, Natual Resouresaind Recreatlon 1.635 1,760 44,33•353 39A61.587 4433,3353 39.661t37 SPeogecenIteo.nrsu Interes on G~el Long-TermDehe 715 Ueneoeinlntnnenon Earninqx 645$13 334.621 133060 060295 779,493 420,916 Ontemenonof Claiom 620.91 5040.0 379 1215 621,276 505,3)20 Regulatory.ed•e, 411 716 O£ielonSak fCep.eA-e 7,163 99 543 7.706 Id00 EmployeeB..nts 423 Otlhertlenned Re--ee 9080,352 1.5,3A27 240.723 222 40 2,129D77 1,756D67 0 88,9002 170,049 47A92.779 42.114939 383,326 310.J51 473876.105 42,4243190 ToedRononera -e 97.741,676 99210,370 32223,300 32,377933 129,964.976 131,388223 num 3.116,737 4D37303 149.663 15400 3,266,4001 4.1$80211 23.724,127 280643203 224067292 2222609 49,391,419 509M0.973 ICnfoe o-seor 423,492 324.477 423,492 324.477 TebeohnRetljeenen Slte, Coolesitelio 2390.178 2-62.638 2,390.178 2062.630 Hedlhaod Hlore Sneko 44,737A47 44712750W 5.1179I29 6050958 49033206 50.931a43 PohhecSolel endtne..i 5.241.7* 53V9.13 91,313 86262 5386),013 5k253417 4,014.662 4,377,794 215,945 209JI90 4.700,367 4.579674 H9ealth Edutonooe Nisb16 Ocee.. Geesel reach.e Naualoe lenteel on Regulatory 8Ensplye Natoral Rceeoenend Renreafroo 1.6349 1,474)&75 346.150 423,140 9I00409 I 9j9719 andf S. poelollee G -neee Retiremento R-ene.e Geeee S-eeooe 9 ..ft. 410.724 408.115 410.724 40.115 10onan and state end Leeeq.Teen liotl~otoooySoenro Services coenectisne Contrdboolon Recreato~n Debt toleeneon Geone EoogTeonOnhI 715.148 797050 715.148 797030 ... ______3 077.943 2.783.798 3027"043 2,793,9 80931914 92.74023.7 31.616.0395 31936,134 120.547N49 124676,391 llE.- snn Revenue by Source: Governmental Activities Spnoio I.e- ndTnroofne 8 $09.762 6,470,313 607265 441,519 9,417P27 6,911,832 For the Fiscal Year Ended August 31, 2012 (in Bilions)* 930 1080119 30}45 930 111,164 CointrelConoi ; own~e",a 136500 126971 1364011 126.971 13.944.71 ) (4.179,191) 3.q44.81 - 4.179.998 ______7,149.967 Operating Grants and 2,390544 4900946 4371423 9554.57 7,149367 CheegeIn MN.Position Contributions 97.-523697 94.900088 42,134220 37,371.790 139,36.915 132276978 $42.8 or 43.8% Net Nako., BeintesoegBateo asne ( So I.9451 (11339) 11DI5 13S.4.761) (39930) 132250900 alted 9.906203 94.54.143 42.115089 37,30240 19.09D22.194 MNoPond-, EndfiajBotuo .L)01772,176 197,252617 340t90.733 142.134=22 $ 14L76.911 1139-3A.913

Taxes $44.3 or 45.4% - K •Charges for Services $7.4 or 7.6% rCapital Grants and Contributions $0.1 or 0.0% Other Revenues $3.2 or 3.2% Total = $97.7 Billion ITotals may not add due to rounding

I ',,III . Comprehensive Annual Financial Report - 27 28 Comprehensive Annual Financial Report Expenses and Program Revenues: Business-Type Activities Governmental Activities Governmental activities expenses were $88.9 bil- For the Fiscal Year Ended August 31, 2012 (In Millions) Governmental activities program revenue was $50.2 lion. All functions of governmental activities in the billion, including charges for services of $7.4 billion, government-wide statement of activities have a net cost, operating grants and contributions of $42.8 billion and except the transportation, natural resources and recre- capital grants and contributions of $47.6 million. The ation, and regulatory services functions, which report largest change, a $4.4 billion decrease, was for operat- slight surpluses. The education function and the health ing grants and contributions, which includes revenues and human services function account for 79.2 percent of Ednotion S$22,667 $21,034 from federai fctandand interest and investment income. govern.mental activities expenses and 79.6 percent of the Hvflt anadoanaetaS-a 5.110 SA"2 Lottey 3,028 4,192 However, taxes had increases of $4.7 billion from gen- net cost. The tax collections of the state provide the pri- a" * nailNatualfinnobtrceand Rerea~tion 346 026 eral revenue sources, with the largest increase in sales mary source of funding, which when added to program aNgransHeenue, Transportation 216 86 GeneraliGasanat 150o 171 tax revenue. revenues, support payment for governmental services. P1)3kSafety and Cooanealna 91 i03 $31,616. S 31,841 Business-Type Activities Net Cost (income) of the State's Business-type activities generated program revenue Governmental Activities of $31.8 billion, including charges for services of $19 Foa cheFsralYearEnded AuguSt 31,2012 (Amnounts InThousands) billion, operating grants and contributions of $12.5

TO Cd -aaa billion and capital grants and contributions of $259.8 mwwb -mm million. The total expenses for business-type activities LotteygIm Natural Traalspoatuatn General Public r-nau oaaolsan $ 3,116,737 S 13358097 were $31.6 billion. The largest changes occurred in edu- Raoea 6 - taeln Salasy urand 25.724.127 17.347912 .W and 423.492 423358 cation, with a $440.8 million increase for colleges and Honksal Recreation Corrections FElnployeaBoasetits Tlack,rdanean SlainContnixalion. 2,390.178 2390,178 universities, and in the health and human services func- Ileotiband Hnn X= co ' 44,737,457 133A36,627 Eshle Safely Wa~Conallua 5-29,730 4408.321 tion, where there was a decrease of $938.1 million in Traesp Wnala 4.404.662 (666J21) N.1unalR -slo andRealalnon 1k34,659 (125.210) unemployment benefit payments as the unemployment Revenue by Source: Business-Type Activities R.B.alosoy5nvinn 410.724 (304993) Forthe FiscalYear Ended August 31,2012 (in Billions)* Ininu ono(ksonral tonoTnes Gel 715.149 715.148 rate dropped to 7.3 percent. There was a total gain from 71"i $880,931914 $ 38)383517 the government's business-type activities of $4.7 billion in comparison to the prior year's gain of $4.8 billion. Operating Grants and Contributions $12.5 or 38.9% Net Cost (income) of the State's Financial Analysis of Business-Type Activities the State's Funds Charges for Services For the FiscalYear Ended August31,2012 (Amnountsin Thousands) $19.0 or 59.1% Governmental Funds tair-C . ailaNdCod As of Aug. 31, 2012, governmental funds reported fund balances of $44.2 billion. The general fund report-

149A63 $ (2 A89) ed a positive $8.9 billion fund balance. Generalkus 22n367292 IA33.197 Capital Grants I kail asd H-nns Serviceas 5,117.829 (i1ilSl) Nths Safety andCar-eetose 91313 (11 goo) General Fund - and Contributions Tnamnw-oeau 215,945 130t11 $0.3 or 0.8% NauoralP -~onnad RosaMan 346,150 (279547) The fund balance for the general fund as of Aug. Wtahry 3027,943 11,163) 31, 2012, was $8.9 billion, an increase of $1.7 billion Other Revenues 791* $31k6j1335 $ (223P939) from fiscal 2011, mostly due to an increase in tax rev- Total = $32.2 Billion SO.4 or 1.2% Totalsmay not add due to rounding

I ýý; - ComprehensiveAnnual Financial Report - -i ýtii: ý, 30 ýýi ; . Comprehenilve Annual Financial Repurt :4:-fl

enues. The Texas Constitution, state statute, and federal Colleges and Universities 2011. Distributions to state agencies totaled $1.1 bil- total net position of $13.5 billion as of Aug. 31, 2012, rule or bond covenants constrains $7.1 billion. The Colleges and universities' net position as of Aug. lion for fiscal 2012 compared to $970.5 million for a decrease of $421.2 million from fiscal 2011. The unassigned fund balance was $1.1 billion. Contributing 31, 2012, totaled $42.6 billion, an increase of $3.5 2011, an increase of 13.8 percent. decrease in net position is due to withdrawals by local to the higher balance were decreases of $2.4 billion in billion from Aug. 31, 2011. There were increases of The lottery fund's short-term and long-term invest- government entities, leaving a lower base from which to spending for education and decreases of $6.5 billion in $637.4 million and $470.9 million for both operating ments approximated $1.1 billion. The ]otter'y fund's lia- invest. federal revenues. Decreases in supplemental nutrition revenues and operating expenses, respectively, with an bilities include amounts owed to the state's foundation assistance programs (SNAP), child nutrition programs overall increase of $166.4 million in operating income. school fund for Auguit accrued sales for fiscal 2012, Private-PurposeTrust Funds and Medicare programs accounted for $2.8 billion of There was $4.5 billion in nonoperating investment and and for investment purchases, vendor payables and prize Total net position for private-purpose trust funds the federal revenue decrease. interest income in fiscal 2012, accounting for most of payment obligations. was $2.9 billion as of Aug. 31, 2012, an increase of the $4.8 billion in total nonoperating revenues over $82.2 million from fiscal 2011. Additions from all State Highway Fund expenses. Stable market conditions produced positive Fiduciary Funds sources of $525.9 million exceeded total deductions of The fund balance for the state highway fund as investrent returns. The permanent university fund Fiduciary funds reported $151.6 billion in net $443.6 million. ofAug. 31, 2012, was $852.9 million, an increase of increased net position by $782.4 million. Mineral position as ofAug. 31, 2012, an increase of $4.2 bil- $101.4 million from $751.5 million as of Aug. 31, income from the fund's land possessions increased to lion front $147.4 billion in fiscal 201 , a 2.9 percent Budgetary Highlights 2011. Cash and cash equivalents decreased $514.7 mil- $954.5 million. This endowment fund contributes to increase. Variances for the General Fund lion as highway reconstruction and maintenance costs the support of 24 institutions in the University ofTexas The differences from original and final revenue increased by $154.6 million. System and the Texas A&M University System. Pension and Other Employee Benefit Trust Funds budgets are due to both economic and legislative rea- Total net position for pension and other employee sons. PermanentSchool Fund Unemployment Trust Fund benefit trust funds was $135.1 billion, an increase of Budget mechanisms allow budget revisions for The fund balance for the permanent school fund The unemployment trust fund reports activity $4.5 billion from the $130.6 billion reported in fiscal certain revenues when collections exceed the original (PSF) as of Aug. 31, 2012, totaled $28.8 billion, an related to the administration of statewide unemploy- 2011. The majority of plan assets are held as invest- budget. Accordingly, maior revisions were made to both increase of $1.9 billion since Aug. 31, 2011. This ment benefits in proprietary funds. The funds reported ments for the pension funds. Additions from all sources total revenues and expenditures for a net change of $2.7 increase was primarily attributable to an increase in val- a net position of $29.3 million as of Aug. 31. 2012, decreased $8.1 billion from fiscal 2011, while benefit billion. uation of investments of $1.7 billion. Value in the fiund an increase of $842.2 million from $(812.9) million as payments increased $870.2 million. Decreases in addi- There was a positive $139.8 million variance provided $1 billion in transfers to provide funding for of Aug. 31, 2011. During fiscal 2012, unemployment dons are due primarily to less favorable conditions in between she actual to final budget revenues. The most public education. The PSF also supports the state's pub- taxes collected increased $218.7 million from $2.7 bil- the financial markets and legislative decreases to state positive revenue variance occurred for tax revenues, lic school system through a bond guarantee program, lion in 2011 while federal revenues decreased $734.6 contributions. The return for investments for the state's which reported a $2.8 billion difference with actual where the PSF is pledged to guarantee bonds issued by million from $3.5 billion in 201 I. Benefit payments two-largest pension systems, the Teacher Retirement exceeding final budget. The positive tax revenues vari- Tens school districts, enhancing their credit rating. As decreased $949.9 million as the unemployment rate System of Texas and the Employees Retirement System ance was offjet by a negative revenue variance occurring of Aug. 31, 2012, a total of $53.6 billion in school dis- dropped to 7.3 percent from 8.2 percent in 2011. of Texas, was 7.6 percent and 8.2 percent, respectively, with federal revenues and sales of goods and services, trict bond issues were guaranteed. compared to the previous year's returns of 15.5 and where actual was below final budget. Lottery Fund 12.6 percent, respectively. The largest negative expenditure variances related Proprietary Funds The Texas Lottery Commission operates on-line to the education function and the health and human Proprietary funds reported a net position of $46.8 and instant ticket lottery games to generate revenue for External Investment Trust Fund services function. billion as of Aug. 31, 2012, an increase of $4.7 billion the state's foundation school fund. The lottery fund had The Treasury Safekeeping Trust Company (Trust from fiscal 2011. The srate's public colleges and univer- a net position of$149.1 million as of Aug. 31, 2012, Company) is the only external investmenr trust fund. sities hold 91.1 percent of the reported net position in compared to $118 million at the end of fiscal 201 I. It administers and invests funds belonging to state and proprietary funds. Lottery sales for the year ended Aug. 31, 2012, totaled local entities as well as provides direct access to services $4.2 billion, an increase of $379.6 million from fiscal of the Federal Reserve System. The Trust reported a

I : 2012 - Comprehensive Annual Financial Report - forthe$TateofTems. F3-24i2 - ComprehensWe Annual Financial Report - Turnpike System. Actual expenditures were $346.3 as of Aug. 31, 2012, were $23.3 billion, which is a Capital Assets - Net of Depreciation and Amortization million for the interstate system, $1.6 billion for the decrease of $912.1 million or 3.8 percent from fiscal August 3l, 2012 and 2011 (Amounts InTomoandgl non-interstate system and $10.6 million for the Central 2011. The net decrease of $912.1 million for revenue IIUSInM-V ACUlf, _ Texas Turnpike System. Additional information on the bonds is mostly due to a restatement of conduit debt by 2T12 2011 2012 2ant 20112 . 2011 state's road and highway infrastructure is presented in TxDOT. Note 5 discloses the details on the state's long- 0 S 1524C203 $ 11090.345 $103A39"142 Land and Land Impmncninns 93193723 $ 0.915P39 S 1.370922 the financial section's required supplementary informa- term liabilities and Note 6 provides detailed informa- Infastrumtune 59.314,678 3354931 2.539.629 1,416,197 61354 30l7 60,T71.128 Con•u- tion in Pnngtxsa 6.178225 5103330 2.128095 2,633144 80106303 7,W60174 tion other than MD&A. tion on the state's bonded indebtedness. Buildings undBuilding Ilpsuun-nnn 2,380,577 2327370 14.296422 12.939,434 16.676.9W 152663904 1atilika andO•,r Itnprnacurun 70-273 70P75 032074 822293 902047 uui use Fnmin. and Equipment 231023 242373 1,09.776 133,699 1.7s050M 1,679 72 Vehicles,Boats andAir-naft 429389 41033 75,279 653513 504mg 483,752 Debt Administration Economic Condition 931P91 941,b99 1.103,735 PIn16J0 Other Capital Ann 1721)44 174310 The state of Texas issues both general obligation Texas' economic growth, as evidenced by employ- I nangible CapitalAssets. Nt 132,248 131.327 399315 408.91 5313563 -40.218 TotalCapital As-t' 578,148.782 S375.67.494 0 24,343,366 S23,189$42 S102.792,248 S980357336 bonds and revenue bonds. Each series of revenue bonds ment and gross domestic product, matched its long- is backed by the pledged revenue source and restricted term average rates in 2012. During the period from funds specified in the bond resolution. Most revenue December 2011 to December 2012, Texas' nonfarm Capital Assets and Debt Infrastructure Assets bonds are designed to be self-supporting from a primary employment increased by 260,800 jobs, a 2.5 percent Administration The value of the state's infrastructure assets is revenue source related to the program financed. year-to-year growth rate. The unemployment rate included in the governmental activities column of the The state's general obligation bond issues were rated dropped markedly in recent months, from 7.4 percent Capital Assets government-wide statement of net position. An by Moody's Investors Service, AA+ by Standard & in December 2011 to 6.1 percent in December 2012, As of Aug. 31, 2012, the state had $102.8 billion The state accounts for its system of roads and high- Poor's and AAA by Fitch Ratings as of August 2012. outperforming the nation's improvement from 8.5 per- in net capital assets. This total represents a net increase ways using the modified approach. TxDOT developed During fiscal 2012, Texas state agencies and institutions cent to 7.8 percent. of $3.9 billion in total capital assets or 4 percent from a system of management, the Texas Maintenance Assess- of higher education issued $2.2 billion in state bonds Texas' real gross state product (GSP) increased by fiscal 2011. Included in this amount are additions to ment Program (TxMAP), designed to maintain the ser- to finance new construction, transportation, housing, 3.2 percent in 2012, more than a percent faster than the state's highway system of $1.1 billion by the Texas vice delivery potential of the state's roads and highways water conservation and treatment, and other projects. the nation's 2.1 percent. New oil and gas drilling tech- Department of Transportation (TxDOT). Institutions to near perpetuity. General obligation debt accounted for $603 million of nologies, a relatively healthier housing market, and of higher education also added $1.3 billion to buildings The state's policy is to maintain its interstate high- state bonds issued in fiscal 2012. This debt, which can robust export performance coalesced to continue a pat- and building improvements. ways at a condition level of 80 percent, its non-inter- only be authorized by a constitutional amendment, car- tern of growth. On the downside, this rate of economic To ensure future availability of essential services state highways (farm-to-market and other road systems) ries the full faith and credit of the state. The remaining expansion was slower than that of 2010 and 2011, as and to finance highway capital improvements, TxDOT at a condition level of75 percent and its Central Texas $1.6 billion is due to new issuances of revenue bonds, the oil and gas exploration stabilized after three years of made commitments for construction contracts, compre- Turnpike System at a condition level of 80 percent. The which are serviced by the revenue flows of individual solid growth. Consumer confidence in the West South hensive development agreements and pass-through toll condition assessment results for fiscal 2012 reflect con- entity projects. Bonds retired during the year were com- Central states still reached its highest level since 2008, agreements totaling an estimated $14.4 billion. These dition levels of 82 percent (83 percent in fiscal 2011) posed of $448.1 million in general obligation bonds as consumers reported less anxiety about the stability of commitments extend beyond the end of the fiscal year for the interstate system, 77.7 percent (78.5 percent for and $808.3 million in revenue bonds. Also, $86.7 mil- national and global economies. and represent future costs to the state. This amount is fiscal 2011) for the non-interstare system and 86.2 per- lion in general obligation bonds and $702.8 million in All but one of the state's I I major industries added not recognized as a liability because the terms of the cent (89.9 percent for fiscal 2011) for the Central Texas revenue bonds were refunded. The total outstanding jobs in 2012. Afrer four yearsof net job losses, the fast- contracts or agreements were not met and benefits were Turnpike System. general obligation debt of the state after new issuances, est job growth rate was in the construction industry, at not received as of the end of fiscal 2012. In fiscal 2012, the estimated maintenance expen- retirements and refondings as of Aug. 31, 2012, was 6.6 percent, although trade, transportation, and utilities Note 2 provides detail about the state's capital assets ditures required to maintain the highway system at $14.5 billion. This represents an increase of $68.7 mil- added the largest number of jobs (56,000). Three other and Note 15 details the state's significant commitments or above the adopted condition levels for interstate lion or 0.5 percent from fiscal 2011. An additional $18 service-providing industries added more than 45,000 related to future capital expenditures. highways were $191.4 million, $2.2 billion for the non- billion of general obligation bonds were authorized jobs and experienced growth rates exceeding 3 percent interstate system and $10 million for the Central Texas bua are unissued. Total revenue bonds outstanding for the year, with these being professional and business

1 2012 - Comprehensive Annual Financial Report - Fort1wStateofTexas 13 ý 34 ',t)12 - Comprehensive Annual Financial Report - F,,Athc,13IdteaTc,,as Outstanding Bonded Debt August 31,2012 and 2011 (ArnountsIn Thousands)

6 n laloo Actiitif ButIam-I Ativitius TotalPraban Go-eetnot 2012 2011 2012 2011 2012 2011

tGeneralObligation BondPayable i113141,325 SIi3t1,59.544 $ 32293$49 $ 2,955,S.1 S143543.74 3J14.475.195 Raevea Bonds Payable 4276398 5,453.67 19033,469 10.766.62 23310367 24Z22A69 Tona BondsPayable S6153591223 $16,975,151 $22;2613,010 $21.722513 $373954;241 $3836971,64

services, education and health services, and leisure and regions, an experienced workforce, comparatively strong hospitality services. Information, which includes the real estate markets and relatively low costs for business broadcast media, telecommunications and internet- operations. based services, was the only major industry to lose jobs, sacrificing 1.7 percent of its worktforce or 3,300 jobs. Contacting the State's The state's export sales reached another record Financial Management high during the year and now account for 19.3 percent This fgnancial report is designed to provide the state's of the state's gross domestic product. lexascontinues citizens, taxpayers, customers, investors and creditors to lead all other states in the value of its export trade, with a general overview of the stares finances and to which totaled $266 billion in 2012. demonstrate the state's accountability for the money it Texas' recovery will continue to outpace that of the receives. If you have questions about this report or need nation for the same reasons as in the past. These include additional financial information, contact the Financial continued net migration to the state, an export-condu- Reporting section of the Texas Comptroller of Public cive location in one of the nation's healthiest economic Accounts at I ll E. 17th Street, Austin, Texas 78774.

3012 , comprehensive Annual Financial Repon a fý.ýrlne State of'TeKaý 36 2012 - Comprehensive Annual Financial Report STATEOF TEXAS Statement of Net Position August 31,2012 (Amounts in Thousands)

Cunneentanl B.fl Typa Unit Acfvt A.M Totaw ASSETS C.urn Assets: Cash and CashFquisuklnts S 25691,472 S 4,919,379 5 30.610.851 S 776929 Shon-Tun Inruernents 618U88 1228,931 1,847,019 876,624 SecuntcsLnding Col.t1erul 389323 693.110 P82.4330 Receiuoblr.o: 209e4,065 T..eu (Notc-4) 2597.115 Fedorti 6833313 32280.438 36.420 Other Inteoverotnnol 891A27 69,646 961,473 2.761 Accounts 773J615 1.797957 2,571,572 174963 233.965 81619 Inte-restand Disidends 95012 138.953 Gifts• 185,627 18'627 lenestmenrt Trades 9D49 474,347 483,396 Ot[her 63 88.123 302.144 390267 From Ftduciuy Funds 139565 4 139,58 Due FromCorpouent Units (Note 12) 89 89 3256"0 153.107 4783797 3955 FepaidItems 3.697 123.169 126A66 35327 Luoasand Contecret 79004 290.1895 369.189 1.6k0 Other CurrentAsetis 84 376.199 376838 1925 R stricted: Cash und Cush tEquivasents 103,07 3))72,144 3082.651 30,908 Sho-Term Irserenens 3568398 350.898 stunssnd Conracts 165J!71 1012 TotlaCurrnt Assels 34X87943 14.948.671 49.186,614 I•450.912

No.-ummntAssetu: InternalBalances (Nose 12) 29.046 (29W46) Loses endConrscts 1.865,615 4202.189 6,147M04 18760 In•Atcninu 2"921$33 5.640391 343562324 3233

T.s. (Not 24) 136,452 136,452 Federd 30,16 30.1,56 GiNt 228698 2269286 Other 248060 450 248.510 1,653 Resnicrod: Section Two Cushsd Cash Equisueess 17.112 17,112 Shor-Tner Intesmronts 1,453 1.453 Invetments 32.346,619 32.346.619 249.753 (continued) Aeoocirables 181601hIo 1( L•osn and Coet,-cs 1.3272945 3.1061040 49433385 9,339 Other 88008 4350 92.556 AssetsHeld in Thus) 2980 2.98W DeterredCharges 34,432 1(0.472 134904 Basic OfihcrNoncurnt Assets 4 195,461 195,465 1,211 Capitsl Assets:(Neo 2) Non-Depneciabteor Non-Amortioobhe b6,4857.705 5,751,566t 72209-685 5,602 Depreciableor Areorizable Net 1(.991P77 18.591,906 30302983 58352 Financial Total Noncare- AsSets I 1.1302.31 710.41•84 1815%0.715 354,730

Totla Arts 146018,174 85-369,155 231,3879 2305.642 Statements DEFERREDOUTFLOWS lIotrend Octllot of Resources (Note7) 7731018 773010 Tot Deferr.d O 1tflouof Reseurros 0 77301I0 7730I0 0

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VZ - Comprehensive Annual Financial Report - Pa 1 201, - Comprehensive Annual Financial Report - 37 138 STATEOF TEXAS STATEOF TEXAS Statement of Net Position (concluded) Statement of Activities August 31, 2012 (Amounts in Thousands) -ratr S-orer For the setalYear Ended August 31, 2012 (Amounts in Thousands) Gonemntasenal Sualsa-Tp.t Ussli LIABILITIES A.Mo.ts Actatksf butal ProgratBalnmnus Curtent Liabiliies: capitad Payables: Geaotsand Grartaand Chaag.caSgeefartoe Accousts $ 5,1061.10 $ 1,37,W40 S 64.44,190 S 3291D70 Fo WttsaPstoaass Carrietbons Cortlibutor; Paynol 634.772 715368 1I350.w40 759 Other :ntergauettettad 330.0. 18,432 348.440 PRIMARYC-OVRNMENT Federal 125 31365 31,49Y0 30146 CtoeeetetaLheAcuvities: I;-esumtol Triats 22,864 5331173 3555.907 GeneralGovernment S 3.116.737 S 11530382 $ I D22.258 3713-1W 61,14g 432356 3059 Edutcation 253724.127 4900475 7 A95.740 Toe Refunds INoe 24) 7293477 725.477 FanployeeBeefits 423392 134 12,292 Aeauitlit 12$92 Teaher Retinernt State Conributions 2'30.178 To Fidaciary Puads 2247 2247 Healthand Human Seesians 441737,457 1910.599 29e390231 eternalBulaneas (Note 12) 865,668 (865,6681 Poblia Safety andCoaeclions 5294,730 742,782 743227 D.e . PrioatryG.aovmecta (Note 121 89 Transpotaetian 4.4840662 2 2244635 2.892.143 343705 249406 Uneaoed Resente 4.471290 2S90.408 73.1.690 Na.tal Re-oureet andRecteattas 1h34 h59 699072 1047.124 12,873 ObligationsRieoeeseRepoteesase Agreement M0.293 66.293 Reglattory Sesises 410,724 710.209 5.508 ObtigusiensdSeuritie[.tending 481975 693.110 1.1821185 Inoterstes Geoeral Long-Teon Debt 715.148 9.8001000 Shoo-Tete Debt (Note4) 9 28080000 Tutal GosemmontalActisities 88931.914 73051D80 7296.231 47578 Claimsand Judgesents(Note 5t 50.183 16.708 66S891 Capital LeaseObligations (Note 5. 8) 53365 3514 8279 54 Business-TypeActisities: 8041120 Employee.sCoerpeesable Leave(Note 5) 439,322 364.698 3,701 General Goveunment 149,663 50996 120,156 9570 Nates and Leans Payable(Note 5) 170.932 673538 044.470 Education 22b67292 1671,987 9.102.105 259,723 GelnettObligation Bonds Payable(Note 5.6) 383,782 129075 512'257 Healh and Hosan Ses•sis 5,117229 2,194246 2.7N4.963 25 D53 Reaenae Bonds Payable (Note 5.6) 178.378 2.165,794 2.344.172 PubhltSafety andConotoions 91,313 102393 Pollt io. RetsediaioneObligasion (Nota 5) 51276 51$76 Tninsponulion 215.845 85,819 15 LiabilittesPayuble eFromResticted AsetseNete t5 541,137 541.137 Natural Rasou.uesand Reauon 46.1351 40084 585,601 12 Funds Held forOthers 142,843 1422943 267 31127943 4.191387 7 ItedgingDediative Liability(Note 7) 2244 2244 Total Busineasa-'lpeAetisities 31.616035 19377312 12.3472912 7 Other CurrentLiabiifies 2032923 283567 487390 254.160 Tend Currann .iabilities 24.369.928 9950,778 34.320,706 903314 Tatal-Primary esen nt $17024709 $ 26,442,100 $ 55339.143 S 507328

Neaunrent Liabilias: COMPONETBUNITS Claim sandJudgements (Note 5) 03042 -14,40 127.390 Comp-sm, Laiss $ 22(0.197 $ 23642920 $ 314,814 $ Capital LeaseObligations I Note 5. 8) 6,338 18,124 24.462 56 Eaopleyas" CompensableLeawe (Note 5) 293574 340545 634.119 2.184 Total Cotpesne Units S 2.816.197 S 2.464.820 0 314.14 L 0 Notes ad LoansPayable (Note 5) 120902870 1 01.431 2.611.3Ol 44.512 enoetalObligation Bonds Payable(Noet 5,6) to930.543 3,100,474 140311D17 RneentmBonds Payable(Note 5.6) 4W8,520 167067.875 20.966.195 253,866 GeneralReenues Ptllution RomsdiationObligation Noate5) 195'sct 195-.508 fuses: Liabilhict Payable FrmmRestirated Asetsi (Notw5) 2,959;350 2959350 S5lcsand Use A-es Held feeOthers 851.724 8513724 MoassVehicle and Mnuu fetared Housing Net Peosinn Obligaiao (Noe4) 3P58.675 30150.75 Motes Fuels Net fOEB Obligation(Not Il1) 2,867,745 2.867.745 Fnohis. HedgingDerivatis Liability(Nowe 7) 770,766 70.7066 Oil and Natural Gas Potdueioan Other Neonurees Liabilities 164.470 164.471t 246f63 Insurante Locsutpton TotalNosenuos Liabilities 192 -76P00 29386.052 49262.722 547293 Cigarere sodTobaaao Other .Tota Liabilities 44 245,998 39-137430 833833,428 1,452.797 Unnstricteld Invetment Eamings Scttlementof Claims NETPOSITION Gali an Sale of Capital hase Inoestcd in Capital Assets.Net of RelatedDebt 63 345093 9.712.946 73,171,439 63250 Other General Reovenes Resieted for CapitalContributions Education 779,724 2,531JS12 3311336 149047 Contributionsto Pcoemaetaed Term Endoetaints tHighbays 139.441 139.441 Tra.Ifers -blesot A-tisities (Note 121) NN:bS-ric'e I 3892875 40937.4 1.799,0"9 Total General R nuoes,Coatrtbtiont CapitalDebtaNeesia Projeets 241,974 5353500 777324 andTransfers VetesansLand Boaod I lousing PrSgeems 693,050 093.050 Unmpltymet Tints Fund 1.481.132 1.481,132 Chaogein Net Position Funds Held wsPeanenst Insestmnta: Pitien. Saptember 1, 2011 Nonespendable 12.7860206 15926.936 28.713222 Net peynedable 16.770,300 5,945302 22.723962 Restatemegns(Nate 14) Othe, I.6322867 15'565 1.648,432 74,169 NetPosition, September ,2011.ss Beutated Unrestticted 43565.186 9ý521170 14.117,1564 574399 Net PutitionAugust 31.2t112 Thea•ototeeyilgsae©otseb rhsaooiatstaaeants aseaat nog~ at alraeortbatesnst TotalNot Position Sl0t,772.176 S 462047335 S 148376.9tI 0 8522845

I -ý,, 2012 - Comprehen5ive Annual Financial Report - roflneStatýýofTexds " - ý; 39 40 201ý - Comprehensive Annual FinanciAll ReWt - Rx the 2dtlý Of TOIXý STATEOF TEXAS Balance Sheet - Governmental Funds August 31, 2012 (Amounts in Thousands)

Nat(Expi.ae) Risanua and Chanlns In Nat Patone Stab6 Pmnatn

PilmaryGovnermont Gensan Fusd Fund Funs. TOl G natal Budma-Tnp Cospnd ASSETS Au1"t~tat, Auttottta Total sthb Cosh and Cash Equioalens $17366.123 $3.571-83 S (A70216 $3228.406 $25.6361720 Shon-Tens tonvsomnts 69217 37360 117082 224660 Secodolis LendingCellatonu 370A98 3703498 Reeeivabis: $ (It580,97) S (10p58097) $ Aecoorto 146,399 004 3,13.- ,56,755 (17.347912) (1(7,347912) 427214 218317 73.135 5230.(52 (423.350) (423,!581 Tua.s (No. 24) 2.938060 Fcdgml 333359 22728 2 627,281 (2,39',178) (2,390,178) 227(3•-4 ((3.436.27) (13.4369627) Inoestmnt Trocds 2.568 548 5571 96"7 (4.408,721) Othlertnsesgovesaseooo( (408.721). 831289 60538 891,527 tnerestsnod Osvidendsl 666X2) 0666821 3950 8.189 68,390 12511 93P40 Other 125210 ]25210 336.183 336.183 (DunFrom doerFunds(Not0 712 304J03 7M04,93 1323957 2527515 73.450 458.822 (715314) 0715J48) Due Fmo. Cempannt Units (N90 12) 89 89 (380830I7) (38483P17) 0 Ineefuod ROcsioubhw(Noon 12) 38.498 457 38955 Inventooies 199.562 125971 157 325,690 Prepaid Items 1389 2D97 6 5 3/697 23189 21,489 3290638 273465805 737.749 280633.192 (.133-397) (1(633;397) Lsas andConnuono 5(17A2 392,325 3.305 I31.177 (9"44h19 511s3o 5113 0 89 88 I;I11 11290 ther Asseis 13001) ( 30.01I)1 Reslrktwd: Cash and Cash Fq.uuisulern 5332 4325 103507 279547 279-S47 -Loansa Catcts tr 620394 789f)64 1.409,458 1.1603h561 1.163.651 OtherAssess 3 __88m_1 080M30

T-tu) Ass $5.(11 $93 5 29.396,681 $6,186.744 $66307942 (3,68.63I7) 223939 (30.459078) 0 $262929624

LIABIUTIESAND FUND BALANCES I.iobiliins: (26.563) Payables: Accounts S 3367.799 S 603.449 $ 79580 840676 $ 4043912 0 0 (25636 InvestmentTnraes 361 (8034 633 19N48 (ihenI(nteegooemntal 330J08 330008 T.a Refoads(No10 24) 725.477 725.477 P.a nll 526,384 101316 2434 4238 634.772 24-3496j6 24 .54966 Federal 123 125 3,50,663 35800663 3.195,332 3,105,332 In"te.. (,692 18,692 43574,1(4 4374.184 Due To OtherFur&ls(Noma(21 1,138D33 4.109 451 67974 12(10,$67 3,727.498 3.7277490 Interfund Payable(Note 12) 33872 2933 6,810 1.528,111 1(328,111 Defterd Reenues (.0573M 3_3h1582 94,600 304305 4,778095) ,420.413 1,420.413 OhbligaonudaeneýssRepottehals Ageeements 66293 663293 (9U54352 1(954,752 OblhgationIVSeottieslondiog 470.169 470.19 645A13 133680 779,493 (6,61l) Other Liabilities 194215 0.135 (3473 203323 620,890 370 621276 Shon-Teon lDoN(Note 4) 9ON10 _ qs1w0.5036J6O0 7.163 543 7.706 735 lats ,iauhlilies 173429063 4258394 593.756 526337 22.808.647 1300.352 248,725 2,129,77 144 930 530 Fund Oalasoes/(Deai-" 1365(10 136,600 NenspandobleINooN 13) 6773,1 120068 Q2(410)0 745,373 13,592-302 (3944.780) 3944.701 Resiticted INote 13) 1.7633735 ( D33985 16.761(43 4.101274 23A60939 Ctntonittald(Note 13) 52833125 201.935 811(52 6296.312 (4,462) 43 44.928 4.464,907 480D3.935 Assigned (N-ae 13) 44076 2,200 46204 Unassigned(Now 13) (044 b (J11IM6)5(11 3833550 9554.757 (31 625) 498659(1 4608846 Tots) PondBaanes 80863561 852.907 200.92382 509.907 44.179295 97252,687 42,134228 139386915 888310 Total .iabihitiesand Fund Balance, 1263292724 $ 5.11153 $29.96A81 $6.186,744 S66987942 (346A22) (18339) (364.711) (4,440) 967216365 43.(500,75 $422764 0038870

S (0)1.772.i176 S 46304335 S114037631) $ 8523845 Tt ass e tae .- tha O ao ssnas a as.- s-tl s t ltýht

ZQ12 , Comprehensive Anntial Financial Report - kir Ii ie Sta t e of TEKý F42 Mi, zýý'Cionniorehensive Annual FinanijaCpi port - Ft)fthe M

Reconciliation of the Governmental Funds Balance Sheet STATEOF TEXAS to the Statement of Net Position Statement of Revenues, Expenditures and August 31, 2012 (Amounts inThousands) Changes in Fund Balances - Governmental Funds For the FiscalYear Ended August31, 2012 (Amounts in Thousands)

Total Fund Balance - Governmental Funds $ 44,179,295 High" Sottus tounalor Amounts reported for governmental activities in the statement of net position Gastsm Food Fond Fsulds Total are different because: REVENUES $38326.0t $22366,406 $ $ 3,477.100 $44,170587 Federal 353.07.134 2053.866 50353 38.219.353 Capital assets less accumulated depreciation and amortization ore included Lienses. Foes od Permits 2.775037 .44-83I3 1[817 753542 505,731 in the statement of net position. (Note 2) In(soe andOther Itoestroen loone 534)n4 37347 2,13t49 tt838t 3004.561 Landtlev 32042 9,650 390.499 15 432206 Capital Assets - Non-Depreciable or Non-Amortizable $66, 457.705 Snlemensof Chtime 586,76.5 24,429 611.194 Capital Assets - Depreciable or Amortizable. Net I I 991.077 Salos orfGodts and Servies 1k08.370 ( 7,949 46,762 186.560 05859i641 78,448,782 Other 3830.393 t 053 43 55 0o0 3087074 Totu,Revenues 83.001.426 6.95005 29521670 4k50.156 97,461,t47 Some of the state's resources ire not currently available and are not reported in the funds. EXPENDITURES Corrent: Deferred charges for unamortized bond issuance cost 34,432 (LcneratlGoursemu 2,702056 17,164 264.740 3A64500 Edu-afiun Derivative Instrnments (Note 7) 25.121 24.409.972 760175 t tI39S16 253:5.115- 59,553 EmployeeBenesti 1.728 1.73t 3A01 Techer RetirementS-ess Coobutdion 10j0M392 .0,5092 Healthoud Human Servi-i 44.705.422 3270 44.708 92 Some of the state's revenues will be collected after year-end but are not available soon ProskSarety and Coectiaon 4.404.410 629,13S tS129 53.14374 enough to pay current year's expenditures and therefore are deferred in the funds. 961.817 3tA77 3,753230 4.773 3788,410 Nturalmssoutico R ti 1359.236 59614 tt618710 Deferred revenues were recorded as an offset to capital assets recognized related to service RegulatoryServies 342$807 2360 67074 412,441 concession arrangements (SCA). The SCAs are not reported in the governmental funds. (653-561) CapitalOutlay 205362 2469323 41 653253 3.528,479 Dtbt Ser.ire: Principil 24133 58.713 496420 579,766 - The tdeuro reoenues nil hererlassified us der'ffed inels upon svplermenoationof(.ASt 60 in fisca 2013. Ioetrest 43753 601686 725.439 OtherFinuocing Fres 456 5,132 2£00 7,90 Long-term liabilities applicable to the state's governmental activities are not due and ThsutExpenditures 800ŽA42504 7,tS14257 76,116 3,464$t14 90,91881 payable in the current period and accordingly are not reported in the funds. These liabilities, however, are included in the statement of net position. (Note 5 and Note 9) Excess (Deficiency)of Renenas Oust ([lnder) E6psnotnus 2.7583522 (277.302) 2876354 1t185352 65434066 Claims and Judgments (133225) OTiHERFINANCING SOURlCES (USES) Capital Lease Obligations (11,703) Transfer o (Noute12) 4.891.199 433,409 1.9533305 7277,913 Employees' Compensable Leave (732.896) TransferOut (Net 12" (5.779.918) (453,6&.0 (1.020.897) (3.994.4822 (t1.240.972t Notes and Loans Payable (1,380,802) Btnds andNoes Issued 99,700 238617 338317 OenetsdObligation Bonds Payable (11,314325) Bonds Issuedfor Retuding 37,940 379410 Premiumson Bonds Isuaed 14,3812 14,381 Revenue Bonds Payable (4,276,8981 Paysns to Es for Refunding (6 ,08n) (62.096t Pollution Remedialion Obligation (247.384) Salr of CspitalAssets 18016 12318 31,134 Net Pension Obligation (3.058,675) It-rea in ObligationsUnder Capital Leases 08 2779 20067 tosuta- Recoreries 1.467 !59 1,626 (21,155.908) 7 -cmrrentportion =-12790350 and nocuent potion = $19,876070 ToausOther Finacing Sout-s (tUses) I768.te(O3 t5.020( 3t,v2.80 tV tt.8(2.325t t3,h60.880t NOtChun&, in Fund Malinceo 1.909.874 (28273823 1,85507 (626!973) 2.930,t8h Interest payable applicable to the state's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. Fund alunsces,September 1,2011t 7.1843566 7313539 26,947258 7.183.357 42.06,720 Theseliabilities, however, are included in the statementof net position. (352,616) ROsootmnts (Nse 14) . 310.079) 383t745 18%.477) .titt3 FundBaluccs. September1.(Ot1, as Rnsuated 6073037 1t.135204 26.947258 62860880 41t243.t09 The internal service fund is used by management to charge the costs of FundButanccnAuguus31.2012 0 5863,561 5 852.902 8208 2925 03059507 t44.179.295 employees life, accident and health insurance benefits fund to individual funds. Since governmental activities are the predominant activities of internal service funds, the assets and liabilities of the internal service funds Ih n,e-nuss, seuorb-g Itouid -. n--s .. or ieusg~utPore Inn;5 umn are included in governmental activities in the statement of net position. 284,814

Net Position of Governmental Activities $101,772,176

JAVW 2012ý Comprehensive Anmi4l"fj4kial Report - FQTANýStattýof.TQ Wý 43 1 44 p Tiýb Itn give A", ...... 3~zz~oc2 2 ~ 1

STATEOF TEXAS Reconciliation of the Governmental Funds Statement of Revenues, Expenditures Statement of Net Position - Proprietary Funds and Changes in Fund Balances to the Statement of Activities August 31,2012 (Amountsin Thousands) in Thousands) For the FiscalYear Ended August 31, 2012 (Amounts BotustrssTieAcudntt,-hEataqitfaf Gvrneu -MUM. - al nnoussu~mno Loamo -ae"s taandOS-o. tlslenlfcs ThusrL Fndul Ftuslo Ttlds Fiod. Net Change in Fund Balances S2,936,186 AssEsS CuaeonAssets: Amounts reported for governmental activities in the statement of activities Cash red CashEqtiovalens S 4572,196 $ 736 S 137572 S 208575 $'4,919379 $ 35.444 are different because: Shon-TeowInrestents 336.789 892.142 1228,031 394080 SecoritiesLending Ct,IlosrIol 511.401 101.709 693.110 18.825 Governmental funds report capital outlays as expenditures. In the statement Re-ticted: Cash andCast F.tulvolrsts 916,722 1389012 766.410 3 072.144 of activities, however, the cost of those assets is allocated over their ShortsTermIsruameots 98957 176625 81-316 356,891 estimated useful lives and reported as depreciation expense. The amount L-os andCo.-ta 17 83.541 83558 by which capital outlay exceeds depreciation in the current period is: Reteiuvable Federal 670014 7.429 5.870 683313 $3.528A479 Other Intergoeormental 69.446 200 690646 Capital Outlay Account, 1,A36.460 302284 27.613 31 06o 1,797957 116A60 Depreciation Expense (Note 2) (969,324) Intrwss .nd Diridends 655106 6338 66,811 1371953 1.972 Awortization Expense (Note 2) (36,766) Gifts 185.627 195,27 25•22,389 tnoorontrnoTratdes 348,253 126094 474,47 362 Other 299.159 7985 302.144 The effect of various miscellaneous transactions involving capital assets Du From OtherFunds (Note 12) 148. 73 12.712 378 41t67 02.730 21-332 (i.e., sales and trade-ins) is to decrease net position. (23.971) nrrtoud Receivable(Note 12) 22 .90 394 22.784 trnvlnOries 129325 13.154 10.428 153.107 PrepoidItems 119,749 19R04 1544 272 123,169 Revenues in the statement of activities that do not provide current financial Lomsuaid Contours It8.111 172074 290.18t resosurces are not reported as revenues in the funds. (1,62051 1) Othf.Curent A..se 375.933 5 261 376,199 TotalCurrent Assets t I t24.726 1702.120 337086 70722449 155.874.101 608,573 The internal service fund is used by management to charge the costs of the employees life, accident and health insurance benefits fund to Wditidual NoncurrentAsrsts: Restricted: funds. The adjustments for the internal service fund "close" the fund by Cash oudCash Eqttuialets 1717251 14.137 17.112 allocating these amounts to participating governmental activities. 56.830 Shmn-Tre In....t..erts 1.453 1.433 uunoistots 28.146.152 997.131 32303236 32346.619 Bond proceeds provide caretnt financial resources to governmental funds, 31.782 149519 181.601 Loomsand Co.-mos 105.597 31700,053 3.106-140 but increase long-term liabilities in the statement of net position. Other 43.50 4,550 Repayment of long-term debt consumes current financial resources and Lons. andConocss 76.876 42-5313 4282.189 is an expenditure in the governmental funds, but reduces long-term liabilities Investments 5.640.778 (387) 5-402391 263,520 toleorfd Receioable(N.in 12) 734.790 2271$ 7373,51) in the statement of net position. Gifts Reoeivable 226526 2269S26 Other ReceivbIes 450 450 Bonds and Notes Issued (376-757) Capital As=se: (Note 21 Premiums on Bond Proceeds (14381) Ns-IEporeiable or Non-Aeortizaab6 3 4702182 2281278 5.751560 Increase in Obligations Under Capital Leases (2.867) Dpreciable or Amwouirble,Net 18.190233 482 401.191 13591,906 641.852 AsottoHeld m Toust 362 2.538 29,t0 Repayment of Bond and Capital Lease Principal l.•ocreodCharges 49.350 4,517 469605 100,472 248,347 othe No--rrmnu AsSets 195.120 341 195.461 Some expenses reported in the statement of activities do not require the Totla No.c.m.s As.t. 56302046 4.317 8979613 13.482234 71.187930 263,520 use of current financial resources and therefore are not reported as Total Assen 67927292 1.7249637 1254dk99 16.154.483 87161211 $722395 expenditures in governmental funds. 746,600 DEFERREDOUTFLOWS Transfers of capital assets are not reported in the governmental funds. 1"OrfeerdOctfluo of Rensourv (Note7) 33622$ 4369682 773010 Total GufeusodOulolOW r esourcse 336,328 5 0 43)b82 773D10 0 In addition, resource flowtsbetween fiduciary funds and governmental funds are converted to revenues or expenses on the statement of activities. LIABIUTIES Curnr Liabilities: Capital Asset Transfers 41 Payables: 228 Arcouns, 1414,213 61.146 24067 37.514 1537.40 562.728 Increase in Revenues 2 Payroll 709,927 1.916 33525 715368 Increase in Expenses ( 6A465) Other Intergooemmenral 18.432 10.432 Net Change in Transfers 26.237 Federl 31 3165 31.365 41 Isres iest tirdes 387,154 145.619 533073 3A16 bslusst 4953 11858 44,337 61.148 Annuities 12,892 12,892 Change In Net Position of Governmental Activities $ 4,865,911 Cotclmedon thefolltoWingpase

146 , 1 2012 - CgrnprehensiveAntival Financial Report ? 1;111'1 45 1 412 ý, Comprehensive Annual Finantiod Aeport ! foý t[tý ýtttoa TC1,01_ IJ n~o.Z721251i.272 '~ ... 22212'~7.2 72 2 72122220., .72122221? 2220 7

STATEOF TEXAS STATEOF TEXAS Statement of Net Position - Proprietary Funds (concluded) Statement of Revenues, Expenses and Changes in Net Position - August 31, 2012 (Amounts insmousands) Proprietary Funds tiBeak.Tyw668AWa.-Ent8rapd HaSf Susr 1rieli -WMN"Mra aZ.- Forthe FiscalYear Ended August 31, 2012 (Amounts In Thousands) anid Unautptuytnit tantaty Ersitnrape IntannaS.M. Uslnariban Trot P.Mi Fend Fisid Ttarts FpRCe Badena-T'l•t.8thedltit-Ent1aisi Frid. g 1 LIABIUTIES(conduded) CReuges NsInajue Activitis- CorestILiubiluins oun'luded): and Unemploymnte Lattay Entarpimt InternalSe.Mie ;). To Other Fund. (Nut 12) S 26.699 S S 4805 S 3,165 S 33,959 $ 1,636 tnhtuautl ThinlFund Fund Funds Totals Fund' Inte'fundPayable (Nots 12) 25.7Wn 89 25983 OPERATINGREVENUES Useamed Reunrue 2'763,882 54.173 72-I45 2.890.400 595 Lntry Cotlotuns S 5 $4,191,176 $ 4.191,176 S Obligaiion/secturillesLending 5114l01 181709 693.110 Ig806 Tutiion Revenue 60279 60.279 Claims andJudgmenia (Note 5) 16,708 16.708 TuitionReenue - Pledged 4952077 4,952U177 Capiut1Lease Obligations(Nuew 5.8) 3.514 3214 Disc-oassand Allowances (1,155399) (t ,155299) Employees'Compensable Leave (Note5) 361,498 1 241 1957 364h98 HonpitalReerue - Pledged 9,050,488 90j50,468 Notesand Loans Payable NNoSt5 673538 673238 Di..o.nts and Alloanous (4912 2.91 (4912239) Genere Obtigaiuu Bonds Pyable (Nuo 1.6) 9)900 IMAM/S5 129075 Proae.sionalFont 4A 11333 4A11333 Reo.nue Bonds Payable(Now 5.6) IA948293 175.110 141291 2.1652794 6,335 LiubilitiesPayable From Tetteictud Profesiowal Fnes- Pledged 6335 Assets(Nowa 51 289.166 151971 541.137 Diseounwand Allowances 2.883.53I) (2983.531) Futn Held for 0O56ss 142,RA3 142.843 AuniisryEuoerprises 3.836 3.856 HedgingDeivastive Liabilty (Noe 7) 2244 2244 Ausiliary Eterpdies - Pledged 1.188294 102.342 1280036 OtherCurrent Liubilitiei 2810A22 01.53 892 283,567 Fli.ou.nts and Allowances (61518) ,615181 TotalCurrent Liabilities 92.34560 312287 335D32 81104.409 109876288 587281 UnemploymetTaesa 2.894245 2$94245 OtherSales uosFGodsend Seruiaes 25751 72,762 98213 NoncufntulLiabilities: Otbee Sales loGoods and Seniors - Pledged 721.832 104571 826'433 Intedund Parable iNoni 12) 766346 766546 Discoaunand Alluwan-s (202) 1202) 44246 Claims and udgtnni INane5t 44381 Internand lIoutlwnn homai 1.881 285368 287254 Cnpitl l•ean Obligations(Note 5.8) 18.124 18.124 Iner.- and Innvsttent Inconur- Pledged 104 60268 80372 Employees'Cutienslu Leuno (Nub 5) 333201 915 1429 340545 Notes and Lu-ns Payable Nout5t Federal Reenuen 2065240 2.7.4963 31992 4Z32.195 28 318354 1 6827977 1,401,431 StlateGrna Reoame 27369 27,369 General ObligationBonds Payable(Note 5,6) 20836 3079,638 3.100474 PremiunmReveue 1.878.972 10.731.8987 Revena- Bond. Payable(Nont 5. b) 1393.012 4,742,776 16,867.675 OtherOpeutmg Grant Revennu 747)607 747.6O7 LiabilitiesPayable FromnRestrited OtherOperuatng Grant Revenue - Pledged 699,420 699.420 ASaetS(Note 5) 769.627 2,189,723 2959350 Other Reunn.,s 46.35 2471)82 982 59977 354,576 835 Assets lIlld leeOthers 849.186 2538 851.724 OtherRe-ne - Pledged 142,07 142,107 Net OPEB Obligation(Nout Il l 2,967.745 2.867.745 HedgingDedlu'ie nliability (Note7) 334.184 436.82 770.7ob Total OperatingRevenues 15,137919 5076290 4,192.165 737200 259432552 9A79735 Other NoncurrentLiabilities 92A77 71393 164470 OPERATINGEXPENSES TotalNureurroen Liabilities 16-182368 1,39312 7701542 11t07256 .16.153.198 0 Cot oflGods Sold 1473107 7448 2711355 Total Uitbilitta 25.616.948 I 45 2"9 1,105574 1206110665 41 D29,486 587581 Salaries andWagea IO043,144 17,425 42291 10O312X60 4,448 Pa),nll RelatedCons 2263339 4.402 10292 2278233 1,148 NETPOSITON PuofeuaionalFees and Se,'i, 800167 4416 83201 888,464 1,910 Invested in Capital Asset,Net of RelatedDebt 9,133 022 482 579,442 9,712946 Traoel 2810820 278 566 282,464 51 Rea•testedfor. Materniisand Supplies 1906236 1726 9,832 1917.794 404 Ed.autiwn 2,31I12 25231.612 Cornmunio•vtinand Utilities 716632 64A 1,839 7190)75 250 DebtRutierntel 100362 100.141 2IN231 409.734 Repairsand Mhatnenanoe 4362563 423 16319 453,305 321 CapitalPFojeetn 535328 535,50 Rentals and Leases 241915 4A52 1962 248229 330 VeteransLand Board HumasagPsogrutnt 693050 693)050 Printingand Reproduction 653350 113gO 224 77,154 12 UnemploymentTrust Funds 1.481.1131 1,481.132 Depreoiaotinand Amonioation 10k26.945 216 22969 1.650,030 FundsHeld as Penn•n Insesteonts: 15926936 Unerploymrnn Benefit Paynents 5AM064 5 3064.664 Nonsxpendable 15926936 Bad DebtEapense 9,744 435 2,414 123593 Eupendable 5.945.282 5,945282 IntrernaBpente 2039 2745)M7 276,106 Othter 10%65 5D60 9111.678 $24.1114 S-holarshipa 977,905 977,90 8,473,758 (1.562DO0) 143.643 2497277 Lettery Feesand Other Costa 313581 313,581 totteryPrtm Payinnts 20532024 Total NetPoltion $ 42 046.772 $ 29338 £ 149,125 $3979256 $~.W•$4335 S 264.914 20632.624 EtployeePasrdtipont Benefil Paymenta 160013 60J063 11A26,996 Claimssnd Sadgnnts 19.g08 196.0g Net ChangeiPensio.tlOPEB Obligntions(Nooe I I 624284 624284 Theseoangws n -gtosscaS.asasial atwau.s inspatWu us- thi -ton 35980 Osher Enpen-se 1358283 60927 1.455.t90 527 EelneId'. aeodko, -,1 beaubinorasn tran eIad inie oa!ty o, se.s-ia Ia... beemaenaaa-pian TototOperating Fopesses 21.731281 3D6404 3J027-942 761914 30-585.801 19.36397

Operatng Inoome Los-) 16593.462) 811.626 1.164221 1740341 W4642249) 43,438 Conotuled on theafolouirmgpage

ýQlZ,,',.Con)prehensive Annual Financia! Oilign - F,ýr.llje Tdýt 48 ý ':JAk' ýQjýrý CoMprehispi Y* Annual FIpallclat STATEOF TEXAS STATEOF TEXAS Statement of Revenues, Expenses and Changes in Net Position - Statement of Cash Flows - Proprietary Funds Proprietary Funds (concluded) For the Fical Year Ended August31, 2012 (Amounts in Thousands) For the FiscalYear Ended August 31,2012 (Amounts InThousands) Baralr.-•Tpi Acivtesm- Ea~dvapeFiade

ream-m.re Actiles- Entad.eft sad Unessamt Lattr -a Int srvsenal Calasrd Adtheifi - Univesltl" TrustFond Fond fre TerImf Freet and UnLaoeaevn Lot"y Enttrtols iternal serice CASHFLOWS FROM OPERATING AOIVITIES hfe ToCaals Funul ltLosestTrostFund Fund Pmcnndt from Custmenr O 5956,312 02093ff0 $4,180.179 S 2013425 $13,11522 S 440357 NONOPERATINGREVENUES IEEXPENSES) -Ptcondsfrhm TitiOnand Fees 3009683 3099083 Faenl Rtesenue S 8870300 S S $ 307-192 $ 1.194592 $ Procend from Ren h Gnans sodContrects 3,731.700 2.763302 60495303 Gifts 541,702 879 5423181 Pmo-ds fh.m Gitl 35 35 Gifts - Pledged 130,952 130952 Proeds fre Loe Prorams 307947 573D78 880325 Land I-come 6.525 13 6538 PMcendsfrom Ausiliati•e 1.119,246 673 1,119.921 tneestLand t[nsmtont lncome 3.427h03 22;552 22.442 IMM104 3930.01 13,100 Proceedsfrom Other OperatingRevenues 601.800 232.187 90154 9251)41 1.304,928 sntero unt tnoooonootIneame - Pledged 4g17,745 407,745 Paymentsto Suppliers for Goodsand Sentiets (6-.45.783) (377.969) (370323) 47094-.575) (3.71) Loan Premium and Feeuon Secmritis Leading 343 343 36 Paymeatsto Employe.s (120•04.895) (219.10) (52.129) (125780854) 16Ž83) tosostiogAetivttieo ENfent (76.255) (892) 177,147) Payments forLoans Mroided (3469j60) (63,261) (709921) Interest Expense 1521.419) (50.119t 1143.949) (715487) Payment,for Lttetr, PMres (2.595246) (2,195246) Betoemr Rebates andAgent Fýs 12.185) (257) (2,442) (14) h'ymetls for ltntmpnlynet. Benefits (5.123336) (5.123336) Gain (Losu)on Sale of Ctpial Aouetu (21 D35) (463) (21.498) Paymonts for Other OperatingExpenors (854$03) 18.4241 (863,227) (1.7390369) Settlenentof Claims 378 378 204 NetCash Pmrided (U.Id) by Operating Activitiet (44459665) 765,759 1,1853,14 150h30 (233,1(42) 25415 Claims sndJudguntst (686) (686) Other Reonnom 20230 -0230 CASHFLOWS FROM NONCAPfTAL Gats, Revenues - Pledged 05A71 85471 FINANC1NGACTIOVITES Other Expenses (134.407) 130747) (74977) (212.431 Proenedsfrom Dnht I.a-ce 1,995 557.,40 559501 TM4.1irenopelming Rsanues (Erptmnseo 4.753 5%7 (30,614) 22,442 2460371 4.989,766 13.392 Proceedsfrom Gifts 656.40t) 656.400 Proceedsfrom Endoaoments 131.671 131A71 Itn-tme (uss') Btfer Capital Ce.ntelatiens. Procnedsfrom Tranfer frm Other Ponds 5P11 431 7,40,574 273,763 12975,773 Endeomonts and Trnsfers (1.84108951 781D12 1.1086063 221.737 347.517 56030 Pacaeds from Loan Pedgnrtr 20P87 20087 Praed from Greot Raleipts 539.049 307340 04709 CAPITALCONTRIBUTIONS, ENDOWMENTS Maoceedsfrom Intrfuad Payables 71.415 419762 113443 ANDTRANSFERS Pr- ds FromOdter NoesapitalFinancing Activities 511244 26,144 222 5379610 CapitalCuntributions - FPtteaal 15089 15289 Paymentsof Pritipa 0n DebtIssuarace (36.450) (314,3351 (299335) (650520) CapitalConuibutinor - Other 244391 27 244.418 Paymentsof toterrt (37,145) (80922) t27"954) (396321) C-otributiom to P-tateetI and Paymentsof Other Costson Debl Iss-anc (1221 (2) (2.148) (2272) Too Endomnems 136.00 1363.00 Paymentsfor Transfersto Other F"nds (319072) (7,461$66) (1,15335191l)(3025031 (9-237101) Trustfer In (Note 12) 5ý582453 073.30 68,356 5,738.159 Paymentsfar GrantDibrhbarrmas (560) 176.163t (76,723) TrensferOut (NMe 12) (37604261 026,102) (1355.5231 (35-186) (1.79935371 Paymentsfor Inter und Receivables Ou1.$73t (0l1073) TomaCapital Contriutions. Endowments Paymentsfer Onter NecapiLal b1ts (104.946) 1191601) (29%.47) andTnsfers 5.402507 61,240 331D97 4341329 0 NutCath PrMoidd (t1•ird by Ntuapital Financing Actisittes 6,4953097 !316251) 11.319173 1509.388 5020017 0 Chegp in Net Position 33-6012 042260 313140 254034 4•$9046 56030 CASHFLOWS FROM CAPITAL AND RELATED Net Position,September 1,2011 39.104.13b (812922) 117985 3.725029 42.134.228 227,Q4 FINANCINGACTIVITIES (363) RnstutommcotsMNe 14) 117'976) (18339) PrMcds from Saueof CapiL Assets S.711 303 3916 NeilPesition, Soeptember 1. 2011 as Restated 390086.160 1712922) 1179085 3324966 42 .115.089 227984 PMro-ds from Debt Issue.. 2.341.991 2.341991 Proeds fromState Grantsand Cntracts 32,602 32,162 NutPesilion .ugust 31.2012 $424647672 $ 29338 S 149.125 $3979.-5W 0460N",735 2840414 Proceed.from Federal Orant andConu.-.s 1I 960 979 pMeods fhomGifts 3.86 3.868 PMouds from Other Capitaland gulatad Finemaig Autivilies 167.478 13 167.491 .netoanaa-b der niat stoa-ot .. t icants'en a th -,-.iron PMaroedsfrom Capital Coesibulions 350k04 3.117 353.721 Em,"atit.Itst .Wdandtt tt kasnt.nifvatotutt-3atnaoaa~l-.Ntstýaotiag- a-M esaatapeonand acnodsfrom Iterfund Payable, 7 234 72134 Paymentsfor Additionstu CapitalAsosts (20224371 (202) (2.179) (2.024,118) Paynt-.s of Principalon Debt Issuaea (I190911 )(26325) (0 0453636) Payents for CapitalLearos ( 1)27) (16) (1D43) Paymentsof latoororno Debt tssuance (5C09162) (7206.6 (5082629) PaymentstfOthetCtutoonDnbt Ituaeanen (058,5)9" (321 (158041) Paymentsfor IntcefundRe-eiablns (3236) (3256) NutCash Used byCapied and Related Finacing Acliitmin (2320403) 0 (202) (97.415) (22302220) 0

Cenelod -e ihefoill.ing page

1 2011 - Comprehensive Annual Financial Report - 491 I so 2011 - Comprehensive Annual Financial Report - Fct-ftSIst*rJTC,ýA,, STATEOF TEXAS STATEOF TEXAS Statement of Cash Flows - Proprietary Funds (concluded) Statement of Fiduciary Net Position For the FiscalYear Ended August 31,2012 (Amountsin Thousands) August 31, 2012 (Amounts in Thousands)

RasineustTynaiAaottestf - Estesnstsa Funds - Permanruld Othe Eaodfrea C-11-a N-eA- Actuvities- BenesilTrust Fueds TestlFundt Tlest Funds ran Unaraapiaorseil La"tr Bit'virsts hInessealSgatirst heeds Uin•rsierltl faustFund Fusd FuPnds Totals Funi ASSETS S I CASHFLOWS FROM INVESTING ACTIVITIES Cath and Cash Euaioenn S 20)80.766 $ 486908 $ 1 570,334 steaiciedCash and Cash EquiValents 14 Pioceeds fom Sale of tonvttenes $12.783.4fn0 S S 191t601 S4 31t399 $Sf7,1560 S 720 Lending CoillatIal Proceedsfrom [n.rest and ostren lctInconur [.5114,364 21.360 t 263.124 1,788A49 548 Sec.riies 22.955321 Inuestenots: Proceedsfrom Pronipae Paymentsno Loan 387246 397246 U-S. Ovre nt 20335•005 20.179 Payteots to Acquire snvests ()13f743116) (19,473) (4$750"4i (18.5M.793) 2150,14 Crqpeo Equity 267.439 177289 Payuetos for Nropmgram Loass Prouided (815.779) (815.779) 20.742583 Curpsrae Oblh•uiino 895307 3711)92 2388 10 NetCaub Providedby InvestingActisilien 613.448 21.360 !72.t29 (658.14) 148t123 7.748 ReprchasueAgreements 7929L00 32313 ForeignSecuritins 31.413.919 Not Itearse (Deeci in Cash MhangedIaInesis 35 90.346 and CauhEquivsleots 4590)77 470$68 38084 (4402 1) 527,778 33,163 Extentaly Other 9349 k69 2.154A81 592170 Cash sndCash Equinamlnis,September 1.2011 5012S16 918080 99328 1.449.732 7,48n856 22281 Reveivabls: 1 1 Cash and Cuh Equialents. SRptetber1 .2011 asRestated 51112916 918280 99328 t349t.33 7.4002157 22181 Initrestand Dividends 331.729 9092 87 1.236 255021 212 7979 Other taorgovermental Cash and Cash Ea3uiosteots.Augus31.2012 S 547t219 $1t39,748 $ 137372 $1009A22 S 8008635 S 55.444 2358 In mennnnTrades 1,383,919 15.745 4,463 RECONCIUATITNOFOPERATING INCOME (LOSS) DO From OtherrFund (Noe 12) I1.737 6 9W1 TONET CASH PROVIDED (USED) BY OPERATING ACTIVImTES PrnpaidIcems 3,772 Properties.at Cost. Net of Accumulaied Operatingtncani (L-ss) $ ,5393,462) S t110626 SI ,164221 $ (24,634) $(4,t42249) S 43438 Depreciationor Amreiealion 40540 943 OoterAssets 91292 1.42.153 Adjustmentsto RUrsoncile Operating Iont (l0 ss) toNet Cash Prooided(Used) by Operaing Actiities: 10p091210 15351.765 1044,197 3310J046 Dep eciuion and Amoartiiation 10626945 216 221369 1050030 Bad DabsnErpens 255.184 435 2414 258033 LABILITIES OperasingIncioe (Loss) and Cash Flo, Categories Payablts: 463056 19397) Classifiction Dirlencs (55k053) (115) Accounts $ 299.382 S 1(706 $ 202.857 S 205 Changesin As..s and Liabilitirs: InvestmentTrades 668356 4.500 2366 (Iro•;reN)Deareten Nloroiabhles (3080969) (144221 (11,985) (795) (336,171, 12517 Payr[It 3,134 (ncrase) Decreasein Due PromOther Funds )378) 135 (243) (20731) Other Intergorremmental 791322 (4555) (86-) (14388) roas Dereas- in Ine(ntories (896M0 14 (118) Ientes Z-creaa) De-rese in Notra Recisahbe (118) 691-237 f(ocras:) D-rse in Leans andContro (4,906) 773545 720637 Due To OtherFuPoo (Nor 121) 122.128 8 27229 (1248) (69.857) (lncnasr) Deoesne in OrtlroA-ss (600)9) Una.resd Revne 31.442 391 ()1344) 145 (84521 itrean) Decreisein PrepaidE spens (7053) Emptoyees"CoarpenshbleLea e 7,702 (75,114) (34352) 38.046 5219 (606,101) 36027 Increase(Decrease) in Paysbles ObligutionoscusrliiesLending 229533034 315•3) 5.043) Inseease(Decrease) in Deposits FondsHeld for Others 91292 2391279 38 Inra (Dcosel) ia Due To Other FP.ds 2.454 24q2 (46389) Other Liabilities 108063 567 19 II Inrr-ase Decrease) in Unearned Reaeuae 139965 3.07 (1.423) 1410649 68 Increase(Decrese in Employees' Total Liabilities 24,9652898 6,773 115t)47 3310046 Compensabsl Laos 21 028 106 21,134 Inarease(Denreasel in Bsenfits Payable 624.440 27.583 6521023 NETPOSITION trease (Decn-s) in Other Linbilitis 4394 3285 7,879 Held in Drustfor; TotalAdjostronns (10264 (18023.) 2,147,797 (45.8671 20.913 2.04,107 finsion Benefitsand Other fErpon 135.135,312 Individuals,Orpaninainn andOther Gvemmenta 2929.150 NetCash Provided(Used) byOpe.ning AAtiities $)4.445665) $ 765329 $ 1,185,134 $ 150,30 $)2238.142) S 25,41 PoolPanicipae" 13544.992

NONCOSHTRANSACTIONS Tola) NetPosition S 135,135,312 $13 5".992 $2929.150 £ 0 Donato afCapital Asaets S 76457 $ S $ S 76457 S Net Changein Pair Valueof trosrlmnnia S 1,703477 $3 22.441 $ 113b59 S 1.839377 S 5395 Banoring Under Capita) Leas Parhase $ 2545 $ $ S $ 2345 $ Other S 282399 $ $ 1 1415) S 281(94 S anesnoaen! ,r .- steai--osn tosO. Canthiniensasonne., not -olgcar.

Thý .otrao-cutes-sova uaa aamrs. ..an as . &aagaat -a - .rs -r$.nrah1hsei,,1&U snd1h i-,os fiatsebrnasd-somnr- aag-noru rua

2012 - comprehensive Annual Financial Report - Fortlie$ýýgjQfTexaý 51 1 $2, - Comprehensive Annual Finantial Report - Fai -~ :z2&ro7zn.n.. tt. U.

STATEOF TEXAS Statement of Changes in Fiduciary Net Position For the Fiscal YearEnded August 31, 2012 (Amounts in Thousands)

Pnb Wd Extndra PtlatFý CthrEneptth Invesubes t'urpou, Bsns1TetstFfunds TontFure To It Ft - ADDmONS Contributions: Menber Canributions $ 3JD20250 S State Ctontbuiunt 2.475562 Preriun Contributions 363,348 FTdaud Cotoributtoot, 14R.970 7209 Otter Cennittthtioou 976,194 • • 121.453 total C.nteiboajons 6984 324 - 0 128,752

From Insting Activities: NdtAptri"atiom in Fair Valueof tnstmenta 7.M,714 60.621 notornu•end Inuestneot Ittote 2.26.133 26.766 272611 Total Investing Itooe 066.847 26766 88232 Laý te•sutingAcritirit, E.pen.r 211.61 8.2m 1 2o *NCItlltoone frn InveslingAcliiries 9,54.986 3560( 860812

Front Seunri esLending Aetivities: Seourities Ieding Ineuon 170.899 Lte Snortiries LandingExpense: BoSnowerRbates 24372 MttnagementFinn 35988 Nd tr- f-rooSecurilies Leading 110,539 0 "1.

TotalNet tnoutlmoo Ieuco 9356525 18.560 86112

Cupiln Sharesod Individrul A -uooosn iuus: NedDeorae- in Pautaiiprel Insaeeutus 0 (439714) 0

Other Addontts: Sottloonodt Claimts 4.96-1 Other EReenue 3306 305335 TranuferIn (Note 12) 114A21 Total Other Additions 118J127 0 3102W9

Total Additions 16j667976 4421.154) 525063

DEDUCTIONS cnnts 11.492269 95.737 Refundsof Cuntribs~uno 470.698 Transfrr Out (Note 121 8396 188 Inrorgoormronl•[ Payrneots 58W69 Adrnhtiuetio EtUep 56255 6.773 1Dopreialiootad Antortlation Expense 2,628 39 Settlementof Claios 9364 eetu s Expense 12 4 OtherEperus 3.6-20 188550

Tossl Deductions 12.113978 0 443.624

INCREASE(DECREASE) INNET POSITION 4 554 P98 (421,15At 82239

NETPOSMITON Ned Position,September1.201t 10.5380910 13966.146 2646911 Rentasen..nre 304 Not PoWitn, September l. 2011,I,•Rstar.d 1.050381-14 133214 2 41-146

Net Posilion, ASurt,31.2012 $135,135.312 $13544,992 $0229,150

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54 romprehensive Annual Financial Report -~ ~ ~~~ ...... r .ts ~

State of Texas Notes to Financial Statements

Page NOTE I - Summary of Significant Accounting Policies ...... 57

NOTE 2 - Capital Assets ...... 66

NOTE 3 - Deposits, Investments and Repurchase Agreements ...... 70

NOTE 4 - Short-Term Debt ...... 84

NOTE 5 - Long-Term Liabilities ...... 85

NOTE 6 - Bonded Indebtedness ...... 88

NOTE 7 - Derivative Instruments ...... 99

N OTE 8 - Leases ...... 107

NOTE 9 - Retirement Plans ...... 109

NOTE 10 - Deferred Compensation ...... 118

NOTE 11 - Postemploymene Health Care and Life Insurance Benefits .. 118

NOTE 12 - Interfiund Activity and Transactions ...... 123

NOTE 13- Classification of Fund Balances/Net Position ...... 126

NOTE 14 - Restatement of Beginning Balances ...... 128

NOTE 15 - Commitments and Contingencies ...... 129

NOTE 16 - Subsequent Events ...... 132

NOTE 17 - Risk Management ...... 134

NOTE 18 - Contested Taxes ...... 135

NOTE 19 - Component Units and Related Organizations ...... 135

NOTE 20- Deficit Fund Balances/Net Position ...... 143

NOTE 21 -Tobacco Settlement ...... 143

NOTE 22 - Donor-Restricted Endowments ...... 143

NOTE 23 - Extraordinary and Special Items ...... 144

NOTE 24 - Taxes Receivable and Tax Refunds Payable ...... 144

NOTE 25 -Termination Benefits ...... 145

NOTE 26 - Segment Information ...... 145

2012 ýýCrrrprehensiveM6441 financial sr. usssLss2rrt~t.2: z2. rrzst2s- zt,.~.. ,,t ~a2Z..LLZ..- ~ttt.... ~.5ZZ..Z§ At

FINANCIAL REPORTING ENTITY financial statements and major individual funds in the specific and discretionary (either operating or capital) For financial reporting purposes, the state of Texas fund financial statements. grants while capital grants reflect capital-specific grants. Summary of Significant includes all funds, agencies, boards, commissions, author- Multipurpose grants that provide financing for more Accounting Policies ities, instirtuions of higher education and other organiza- Government-wide FinancialStatements than one program are reported as program revenue if tions that comprise its legal entity. The reporting entity The government-wide financial statements (state- the amounts restricted to each program are specifically BASIS OF PRESENTATION also includes legally separate organizations for which the ment of net position and statement of activities) display identifiable. Multipurpose grants that do not provide The accompanying financial statements of the state state is financially accountable and any other organiza- information about the state as a whole and the change for specific identification of the programs and amounts of Texas were prepared in conformance with generally tions that would cause the financial statements to be mis- in aggregate financial position resulting from the activi- are reported as general revenues. accepted accounting principles (GAAP) as prescribed leading or incomplete if they were excluded. All activities ties of the fiscal period, except for its fiduciary activi- Fiduciary funds are presented in she fund financial by the Governmental Accounting Standards Board considered pat of the state are included. These activities ties. These statements include separate columns for the statements by type (pension and other employee benefit (GASB). Financial reporting for the state is based on all provide a range of services in the areas oF. governmental and business-type activities of the state trust, external investment trust, private-purpose trust GASB pronouncements, as well as Financial Accounting * General government (including its blended component units), and its dis- and agency). The assets of fiduciary funds are held for Standards Board (FASB) statements and interpretations, Education cretely presented component unics. In the statement of the benefit oforhers and cannot be used to address Accounting Principles Board opinions and Accounting Employee benefits net position, both the governmental and business-type activities or obligations of the government. They are Research Bulletins issued on or before Nov. 30, 1989, Teacher retirement state contributions activities columns are presented on a consolidated basis therefore not incorporated into the government-wide which do not conflict with or contradict GASB pm- Health and human services by column using an economic resources measurement financial statements. nouncements. FASB pronouncements issued after Nov. Public safety and corrections focus and an accrual basis of accounting, which incor- 30, 1989. are not followed in the preparation of the Transportation porates noncurrent investments, capital assets, and long- FundFinancial Statements accompanying financial statements. Natural resources and recreation term debt and obligations. The fund financial statements are presented after the GASB Statement No. 64, Derivative Instruments: The statement of activities reflects both the gross government-wide financial statements. They display infor- Regulatory services Application of Hedge Accounting Ternsination Provisions and net cost per functional category (public safety and The reporting entity for the state is in accordance mation about major funds individually and in the aggre- was implemented in fiscal 2012. This statement amends corrections, transportation, etc.), which is supported with the criteria established by GASB. Note 19 provides gate for governmental and proprietary funds. In govern- the requirements in GASB Statement No. 53, Account- by general government revenues (sales and use taxes, a listing and brief summary of the component units and mental and fiduciary funds, assets and liabilities are pre- ing and FinancialReporting for Derivative Imtruments, franchise taxes, etc.). In the statement of activities, sented in order of relative liquidity. In proprietary their relationship to the state of Texas. These financial funds, to clarify whether an effective hedging relationship con- statements present the balances and activities of the state of program revenues are netted against program expenses, assets and liabilities ate presented in a classified format that tinues after the replacement of a swap counterparry or a including depreciation and amortization, to present the Texas (the primary govemment) and its component units. distinguishes between all current and noncurrent assets swap counterparry's credit support provider. It sets forth net cost of each program. Program revenues are directly The state's public school districts and junior and and liabilities. Current assets in the classified format are criteria establishing when the effective hedging relation- community colleges are excluded from the reporting associated with the function or with a business-type those considered available for appmpriation and expendi- ship continues and when to continue applying hedge entity. The state is not financially accountable for these activity. Internally dedicated resources are reported as ture. Examnplesof expendable financial resources include accounting. entities. They are legally separate entities that are fiscally general revenues rather than program revenues. Certain cash, various receivables and short-term investments not GASB Statement No. 57, OPEB Measurements by independent of the state. This independence warrants general government administrative overhead expenses restricted fur specific purposes. All other assets are consid- Agent Employers andAgent Multiple Employer Plans, their exclusion from the financial statements. are charged to the various functions of the state. These ered noncurrent. Current liabilities are obligations to be which was effective for fiscal 2012, addresses issues charges are paid from applicable funding sources and paid within the next fiscal year. Examples include payables related to the me of the alternative measurement meth- FINANCIAL REPORTING STRUCTURE are reflected as direct expenses. and the current portion of long-term liabilities. od and the frequency of timing of measurements by The basic financial statements include government- Program revenues include charges for services; The major governmental funds in the fund finan- employers that participate in agent multiple-employcer wide financial statements and fund financial statements. operating grants and contributions; and capital grants cial statements are presented on a current financial other postemploymenr benefit (OPEB) plans. The and contributions. Charges for services include special The reporting model based on GASB Statement No. resources measurement focus and modified accrual state of Texas is not an employer in an agent multiple- 34, Basic FinancialStatemenos - and Managensentf Dis- assessments and payments made by parties outside of basis of accounting. This presentation is deemed most employer OPEB plan and therefore this statement does the state's citizenry if that money is restricted to a par- cussion and Analysis -for State and Local Governnetus, appropriate to demonstrate compliance with legal and not apply to the state. focuses on the state as a whole in the government-wide ticular program. Operating grants include operating- covenant requirements, the source and use of financial

iensive Annual Financial Report - 57 158 ýt"Z - Comprehensive Annual Financial Report - I _ -.w-.ý1rA9

resources, and how the state's actual results of activi- to report resources legally restricted to the extent that The pricing policies of the activity establish organizations, other governmental units and/or other ties conform to the budget. A reconciliation between only earnings, and not principal, may be used for pur- fees and charges designed to recover its costs, funds. When assets are held under the terms of a for- the governmental fund financial statements and the poses that support the state's programs. including capital costs. mal trust agreement, either a pension trust fund or a governmental activities column of the government-wide The state's major governmental funds are listed Internal service funds are used to report any activity private-purpose trust fund is used. financial statements is presented since a different mea- below. that provides goods or services, on a cost reimburse- Pension and other employee benefit trust funds surement focus and basis of accounting is used. The rec- The General Fund is the primary operating fund menutbasis, to other funds, departments or agencies of report resources held in trust for the members and ben- onciliation explains the adjustments required to convert for the state and includes transactions for general gov- the reporting entity or other governments. The employ- eficiaries of defined benefit pension plans. the fund-based financial statemetnts. nrnment, education, employee benefits, teacher retire- ees life, accident and health insurance benefits fund External investment trust funds report the external The state uses funds to report its financial posi- ment state contributions, health and human services, accounts for the services provided to state of Texas agen- portions of investment pools reported by the sponsoring tion and the results of its operations. Fund accounting public safety and corrections, transportation, natural cies and institutions of higher education that participate government. is designed to demonstrate legal compliance and to aid resources and recreation, and regulatory services. in the Texas Employees Group Benefits Program. Private-purpose trust funds report all other trust financial management by segregating transactions relat- The State Highway Fund receives funds allocated by The state's major enterprise funds are listed below. arrangements whose principal and interest benefit indi- ed to certain government functions or activities. A fund law for public mad construction, maintenance, monitor- The Colleges and Universities include: viduals, private organizations or other governments. is a separate accounting entity with a self-balancing set ing and law enforcement of the state's highway system. * University of Texas System These trusts include tobacco settlement money, reserve of accounts. State transactions are recorded in the fund The Permanent School Fund is an investment Texas A&M University System for insurance company liquidations, relief of catastroph- types described below. fund consisting of land and proceeds from the sale of Texas Tech University System ic insurance losses, contributions of prison inmates, land that establishes a perpetual provision for the sup- University of Houston System educational savings plans and others. GovernmentalFund Types port of the public schools of Texas. All dividends and Texas State University System Agency funds report assets the state holds on behalf Governmental funds focus on the sources and uses other income are allocated to the credit of the available University of North Texas System of others in a purely custodial capacity. Agency funds of fitds. Included in the governmental fund financial school fund. Texas Woman's University involve only the receipt and remittance of fiduciary statements are general, special revenue, debt service, Stephen E Austin State University resources to individuals, private organizations or other capital projects and permanent funds. The general fund ProprietaryFund Types Texas Southern University governments. Agency funds include those funds estab- is the principal operating fund used to account for most Proprietary funds focus on determining operating Midwestern State University lished to account for the collection of sales and use sax of the state's general activities. It accounts for all finan- income, changes in financial position and cash flows. Texas State Technical College for distribution to localities, bond escrow funds, depos- carriers, child support collections and cial resources except those accounted for in other funds. Generally accepted accounting principles similar to These institutions of higher education are rep- its of insurance Special revenue funds account for and report the pro- those used by private sector businesses are applied in resented as a single column in the proprietary fund other miscellaneous accounts. ceeds of specific revenue sources that are restricted or accounting for these funds. Included in proprietary financial statements and individually in the schedules committed to expenditure for specified purposes other fund financial statements are enterprise funds and an of colleges and universities in the other supplementary Component Units units of the state of Texas are than debt service or capital projects. Debt service funds internal service fund. information section of this report. All component are used to account for and report financial resources Enterprise funds are used to report any activity for The Unemployment Trust Fund contains the reported as nonmajor component units. The combining that are restricted, committed or assigned to expendi- which a fee is charged to external users for goods or ser- activity of the state related to the administration of state statement of net position - component units and the ture for principal and interest. Capital projects funds are vices. Activities must be reported as enterprise funds if and federally financed unemployment benefits. combining statement of activities - component units are for all discrete component units. used to account for and report financial resources that any one of the following criteria is met: The Lortery Fund receives fees from external users presented are restricted, committed or assigned to expenditure for * The activity is financed with debt secured solely that are used to operate the state lottery, finance debt Additional information about blended and discrete- capital outlays, including the acquisition or construc- by a pledge of the net revenues from fees and and make investments to meet future installment obli- ly presented component units can be found in Note 19. information of the individual component tion of capital facilities and other capital assets. Capital charges of the activity. gations to prize winners. More detailed projects funds exclude those types of capital-related Laws or regulations require the activity's costs units is available from the component units' separately outflows financed by proprietary funds or for assets that of providing services, including capital costs FiduciaryFund Types issued financial statements. will he held in trust for individuals, private organiza- (such as depreciation, amortization or debt ser- Fiduciary funds account for assets held in either a tions or other governments. Permanent funds are used vice), be recovered with fees and charges. trustee capacity or as an agent for individuals, private

2012 - Comprehensive Annual Financial Report - For P-0717 - Comprehensive Annual FinanciAl Report - Fa, the SlalodTexa,, BASIS OF ACCOUNTING, MEASUREMENT revenue. Deferred revenue also includes unearned ary basis to the GAAP basis are presented as required market investments may be reported at amortized cost FOCUS AND FINANCIAL STATEMENT revenue when cash or other assets are received prior to supplementary information with explanations of the provided the investment has a remaining maturity of PRESENTATION being earned. reconciling items. Budgetary information for nonmajor one year or less at date of purchase. All investment Government-wide financial statements are pre- Under the accrual basis of accounting, as used in governmental funds is presented as other supplemen- income, including changes in the fair value of invest- sented using the economic resources measurement focus the government-wide financial statements, proprietary tary information. The governmental funds with legally ments, is recognized as revenue in the operating state- and the accrual basis of accounting. Under the econom- fund financial statements and fiduciary fund financial adopted annual budgets are the general fund, the state ment or statement of activities. ic resources measurement focus, all economic resources statements, unearned revenue is recorded when cash or highway fund and the other nonmajor special revenue and obligations of the reporting entity, both current other assets are collected in advance before the revenue funds listed in other supplementary information. Receivables and Payables and noncurrent, are reported. Under the accrual basis recognition criteria are met. Revenues are recognized The major receivables for governmental activities of accounting, revenues, expenses, gains, losses, assets when earned and expenses are recognized at the time Cash and Cash Equivalents are federal and taxes receivables. The major receivables and liabilities resulting from exchange and exchange- liabilities are incurred. Amounts paid to acquire capital For reporting purposes, this account includes cash for business-type activities are federal, patient and like transactions are recognized when the exchange assets are capitalized as assets rather than reported as on hand, cash in transit, cash in local banks, cash in tuition receivables. Receivables represent amounts due takes place. Revenues, expenses, gains, losses, assets and expenditures. Proceeds of long-term debt are recorded the federal and state treasuries, and cash equivalents. to the state as of Aug. 31, 2012, from private persons or liabilities resulting from non-exchange transactions are as liabilities rather than other financing sources. Cash in local banks is primarily held by agency funds, organizations. Amounts expected to be collected within recognized in accordance with GASB Statement No. Amounts paid to reduce long-term indebtedness of the employee benefit trust funds, enterprise funds and the next fiscal year are classified as current and amounts 33, Accounting and FinancialReporting for Non-exchange state are reported as reductions of the related liabilities component units. Cash balances of most state funds expected to be collected beyond the next fiscal year are Transacrions. rather than expenditures. are pooled and invested by the Treasury Operations classified as noncurrent. All receivables are recorded net The accounting and financial reporting treatment Proprietary funds distinguish operating from non- Division of the Comptroller's office. Interest earned of allowances for uncollectible accounts. applied to a fisnd is determined by its measurement operating items. Operating revenues and expenses result is deposited in the general revenue fund and specified Taxes receivable represent amounts earned in fis- focus. Governmental funds use the flow of current from providing services or producing and delivering funds designated by law. cal 2012 that will be collected sometime in the future. financial resources measurement focus and the modi- goods in connection with the proprietary funds' princi- The statement of cash flois for proprietary funds In the government-wide financial statements, a cor- fied accrual basis of accounting. With this measurement pal ongoing operations. Operating expenses for enter- presents the change in cash and cash equivalents during responding amount is recorded as revenue. In the focus, generally only current assets and current liabilities prise and internal service funds include the cost of sales the fiscal yeas.Cash equivalents are defined as short- governmental fund financial statements, the portion are included on the balance sheet. Operating statements and services, administrative expenses, and capital asset term, highly liquid investments that are both readily considered available is recorded as revenue; the remain- of these funds present increases (i.e., revenues and other depreciation and amortization. Revenues and expenses convertible to known amounts of cash and so near der is recorded as deferred revenue. Taxes receivable are financing sources) and decreases (i.e., expenditures and not meeting this definition are reported as nonoperating maturity they present insignificant risk of a decrease in estimated based on collection experience. Tax refunds other financing uses) in net current assets. revenues and expenses. value due to changes in interest rates. Investments with payable represent amounts owed to taxpayers for over- Under the modified accrual basis of accounting, Although agency funds use the accrual basis of an original maturity of three months or less and used payments or amended tax returns. See Note 24 for revenues are recognized in the period in which they accounting, they do not have a measurement focus for cash management rather than investing activities are details on taxes receivable and tax refunds payable. become both measurable and available to finance opera- because they do not recognize revenues and expenses. considered cash equivalents. Restricted securities held as Other receivables in the general fund consist pri- tions of the fiscal year or liquidate liabilities existing at collateral for securities lending are not included as cash marily of program receivables for health care assistance fiscal year-end. The state of Texas considers all major Budgetary Information equivalents on the statement of cash flows. and temporary assistance for needy families. Other revenue (i.e., operating grants and contributions and The budgetary comparison schedule and the receivables in the colleges and universities fund con- taxes) reported in the governmental hinds to be avail- notes to the budgetary comparison schedule are in Investments sist primarily of public university fund land income able if the revenues are due at fiscal year-end and col- the required supplementary information other than Investments are reported at fair value in the balance and private sponsored programs. Activities between lected within 60 days thereafter. management discussion and analysis (MD&A) sec- sheet or other statements of net financial position. Fair funds that represent lending/borrowing arrangements In the governmental fund financial statements, rev- tion. The budgetary comparison schedule presents the value is the amount at which an investment could be outstanding at the end of the fiscal year are interfund enues that are earned but not expected to be collected original budget, the final budget and the actual activity exchanged in a current transaction between willing par- loans. All other outstanding balances between funds are within 60 days are not available to liquidate the liabili- of the major governmental funds. Reconciliations for ties other than in a forced or liquidation sale or through reported as due from or due to other funds. Any resid- ties of the current period and are reported as deferred the general fund and the state highway fund budget- consultation with industry advisors. Certain money ual balances between governmental and business-type

"Wlý t. Comprehensive Annual Financial Reporff4,Pbr . .... Annual Financial Pip6rt, activities are reported in the government-wide financial capitalization threshold and the estimated useful life by mium or discount. Deferred issuance costs are reported as Compensatory leave is allowed for exempt employ- statements as "internal balances." asset type. It also provides information on the state's deferred charges and amortized over the term of the debt. ees not eligible for overtime pay. This leave is accu- Noncurrent interfund receivables in the general depreciation/amortization policy and other detailed In the governmental fund financial statements, mulated on an hour-for-hour basis and must be taken fund, as shown in Note 12, are reported as nonspend- information. bond premiums, discounts and bond issuance costs are within one year from date earned or it lapses. There is able fund balance. Noncurrent interfund receivables in The state adopted the modified approach for recognized during the current period. The face amount no death or termination benefit for compensatory leave other governmental funds are reported as committed, reporting its highway system. This approach reflects a of the debt issued is reported as other financing sources and it is nontransferable. Compensatory leave is report- restricted or assigned fund balance, reasonable value of the asset and cost required to main- while discounts on debt issuances are reported as other ed as a current liability. Investment trade receivables are reported for sales of tain the service potential at established minimum stan- financing uses. Issuance costs, whether or not withheld Sick leave is accrued at a rate of eight hours per investments pending settlement. Investment trade pay- dards in lieu of depreciation. The state developed and from the actual debt proceeds received, are reported as month with no limit on the amount that can be carried ables are purchases of investments pending settlement, implemented an asset management system that estab- debt service expenditures, forward to the next fiscal year. Accumulated sick leave is lishes minimum standards and makes a yearly determi- not paid at employee termination, although an employ- Inventories and PrepaidItems nation whether the minimum standards are being met. Employees' CompensableLeave Balances ee's estate may be paid for one-half of the accumulated Inventories include both merchandise inventories Disclosures of the minimum standards and the current Annual leave, commonly referred to as vacation sick leave to a maximum of 336 hours. In 2009, the on hand for sale and consumable inventories. Inven- status of the state's system of highways are included in leave, and other compensated absences with similar 81st Legislature passed House Bill 2559, which does tories are valued at cost generally utilizing the last-in, the required supplementary information other than characteristics are accrued as a liability as the benefits not allow employees hired on or after Sept. 1, 2009, first-ort method. MD&A section of this report. are earned by the employee. Benefits are earned when to apply unused sick or annual leave as service credit The consumption method of accounting is used to the employee's right to receive compensation is attribut- to meet retirement eligibility. State employees hired account for inventories and prepaid items that appear Long-Term Liabilities able to services already rendered and it is probable the before Sept. 1, 2009, are entitled to service credit in the in both governmental and proprietary fund types. The Reporting long-term liabilities in the statement of employer will compensate the employee for the benefits retirement system for unused sick leave on the last day costs of inventories are expensed when they are con- net position requires two components - the amount through paid time off or some other means, such as of employment. The maximum amount of the state's sumed. Prepaid items reflect payments for costs appli- due within one year (current) and the amount due in cash payments at termination or retirement. Employees contingent obligation for sick leave was not determined. cable to future accounting periods and are recorded in more than one year (noncurrent). accrue vacation time at a rate of eight to 21 hours per The probability of a material impact on state operations both government-wide financial statements and fund General long-term liabilities consist of claims and month depending on years of employment. The maxi- in any given fiscal year is considered remote. financial statements, judgments, capital lease obligations, employees' com- mum number of hours that can be carried forward to pensable leave and other noncurrent liabilities. General the next fiscal year ranges from 180 hours to 532 hours CapitalLease Obligations RestrictedAssets long-term liabilities are not reported as liabilities in based on years of service. Capital lease contracts payable, which are not fund- Restricted assets include monies or other resources governmental funds but are reported in the governmen- Overtime under the federal Fair Labor Standards ed by current resources, represent the liability for future restricted by legal or contractual requirements. These tal activities column in the government-wide statement Act and state laws can be accumulated in lieu of imme- lease payments under capital lease contracts. Note 8 assets include certain proceeds of enterprise fund gen- of net position. The state reports rebatable arbitrage in diare payment as compensatory leave (at one-and-one- provides details for capital lease obligations. eral obligation and revenue bonds, as well as certain claims and judgments. General long-term debt is not half hours for each overtime hour worked) for nonex- revenues, set aside for statutory or contractual require- limited to liabilities arising front debt issuances, but enspt, nonemergency employees to a maximum of 240 Condtuit Debt Obligations ments. Assets held in reserve for guaranteed student may also include noncurrent liabilities on lease-purchase hours. All overtime exceeding 240 hours must be paid Conduit debt issued by the state in the form of loan defaults am also included, agreements and other commitments that are not current with the next regular payroll. At termination or death, bonds is for the express purpose of providing capital liabilities. all overtime balances must be paid in full. For emer- financing for a specific third partrythat is not part CapitalAssets In the government-wide financial statements and gency personnel (firefighters, law enforcement, prison of the state's financial reporting entity. The bonds Capital assets are reported in proprietary funds, proprietary fund financial statements, bond premiums, officers, etc.), overtime can be accumulated to a maxi- are secured by the property financed and are payable fiduciary funds and on the government-wide financial discounts and issuance costs are deferred and amortized mum of 480 hours. Unused overtime is included in the solely fronn payments received from the third party on statements. The capitalization threshold and the esti- over the life of the bonds using the straight-line, bonds calculation of current and noncurrent liabilities because the underlying loans. The state has no obligations for mated usefid life of the assets vary depending upon outstanding or effective interest method. Bonds payable each employee may be paid for the overtime or use it as the debt beyond the resources provided by the loan the asset type. Note 2 includes a table identifying the are reported net of the applicable bond accretion, pre- compensatory time. with the third party on whose behalf the bonds were - 20-Zr. ..UZZZ.2raZ5~ .. .. ~ - - --

issued. The state has chosen to continue reporting Invested in capital assets, net of related debt, have not been restricted, committed or assigned to spe- Liabilities are reported when it is probable that a conduit debt obligations as long-term liabilities on the consists of capital assets - including restricted capital cific purposes. The general fund is the only fund that loss has occurred and the amount of that loss can be balance sheet for debt issued prior to GASB Interpre- assets - net of accumulated depreciation/anmortization can report a positive unassigned fund balance. Note 13 reasonably estimated. Liabilities include an amount for tation No. 2, Disclosure of Conduit Debt Obligationt, and reduced by the outstanding balances of bonds, presents disaggregated fund balances. claims incurred but not reported. See Note 17 for addi- an Amendment of NCGA Statenent I, as well as subse- mortgages, notes or other debt attributable to the acqui- When both restricted and unrestricted resources are tional information. quent debt obligations that are substantially the same sition, construction or improvement of such assets. Sig- available for use, it is the state's policy to use restricted as those already reported. Interpretation 2, which was nificant unspent related debt proceeds are not included resources first and then unrestricted resources as they effective for Texas beginning Sept. 1, 1996, requires in the calculation of invested in capital assets, net of arc neded. 'When only unrestricted resources are avail- only note disclosure for issuance of all other conduit related debt. The unspent portion of the debt is includ- able for use, it is the state's policy to use committed debt. Note 6 provides details on conduit debt obliga- ed in restricted for capital projects. resources first, then assigned resources, and lastly unas- Capital Assets tions. Fund balances for governmental funds are classi- signed resources. Capital assets, which include land, infrastructure, fied as nonspendable, restricted, committed, assigned buildings, equipment and intangible assets, of govern- DeferredInflows and Deferred Outflows or unassigned. Nonspendable fund balances include InterfundActivity and Transactions- mental funds are recorded as expenditures at the time Changes in fair values of hedging derivative assets amounts that cannot be spent became they are either Government-wide FinancialStatements of purchase and capitalized in the governmental activi- and liabilities are reported as deferred inflows and not in a spendable form or they are legally or contractu- Inrerfund activity is eliminated from the govern- ties column of the government-wide statement of net deferred outflows. Note 7 presents additional informa- ally required to be maintained intact. Fund balances are ment-wide financial statements with the exception of position. Capital assets of other funds and component tion about derivative instruments. reported as restricted when constraints placed upon the activities between governmental activities and business- units are capitalized in the fund in which they are uti- use of resources are either: type activities. Interfund activity with fiduciary funds is lized. Capital assets are assets with a cost above a set Net Positionand Fund Balances Externally imposed by creditors (such as debt reclassified and reported as external activity. minimum capitalization threshold that, when acquired, The state reports restricted net position when con- covenants), grantors, contributors, laws or regu- Inrerfund payables and receivables are eliminated have an estimated useful life of more than one year. The straints placed on resources are either: lations of other governments from the statement of net position except for amounts capitalization thresholds and useful lives of the state's * Externally imposed by creditors (such as debt Imposed by law through constitutional provi- due between governmental and business-type activities. various categories of capital assets are as follows: covenants), grantors, contributors, laws or regu- sions or enabling legislation These amounts are reported as internal balances on the lations of other governments Committed fund balances are amounts that can statement of net position. Inrerfund activities between Capitalization of Assets * Imposed by law through constitutional provi- only be usedfor specific purposes pursuant to con- the primary government and component units with a sions or enabling legislation straints imposed through legislation passed into law by different fiscal year-end are limited and imnmaterial. gamdtuatloo Estsm•tl Thini U.s uit Enabling legislation authorizes the government formal action of the TlexasLegislature, the state's highest Inrerfund transactions with discretely presented component units are reclassified and reported as exter- Land mndLand Improvements to assess, levy, charge or otherwise mandate payment level of decision-making authority. These committed nmi-rarcurn Non"oepreciabis No, ppli.bWo 100E NotNo, appli"cbl,appfia.bk of resources (from external resource providers) and amounts cannot be med for any other purpose unless nal activity. Note 12 provides details of interfund activi- Csn~uclioia i. Progress and BuildingImtpovesnm s 5-30years Buildings 50rOP includes a legally enforceable requirement that those the Legislature removes or changes the specified use by ties and transactions. nrasitisetxx, De-prtxiabnxo 10-50 years Failintes sd Otear Iproeen 10600years resources be used only for the specific purposes stipu- raking the same type of action it employed to previously F-u ure WanEquiptAnt 3-15 y-ens W hOý¢. ii-t alwdAimrirft 5-d0years lated in the legislation. Restricted net position is desig- commit those amounts. Fund balances are reported as Risk Financing COitroCapitl As...r sarou, nated as either expendable or nonexpendable. Expend- assigned when the state intends for resources to be used The state maintains a combination of commercial i (LibraxyBrks. Leaseoel tImptsexnts undrirestrck) sore- able restricted resources are those that may be expended for specific purposes, yet the constraints do nor meet insurance and self-insurance programs. The stare is self- OmDprexisbtr 3-22 years insured for workers' compensation and unemployment Noappliyears for either a stated purpose or for a general purpose sub- the requirements to be reported as restricted or commit- taimlty C.oxaxtd compensation claims. The liabilities are funded on a ii Copute Softwaret ject to externally imposed stipulations. Nonexpendable ted. Intent is expressed by either the Texas Legislature or SOthffrCO MPUMe So ftware 3-10 yeart restricted resources are those required to be retained in a body (for example, a budget or finance committee) or pay-as-you-go basis. The group insurance programs are I Land Ut. Rights- Pen-1n Not applicable LundUOs Rights - Term 10-60 y-ar contracts, t 1001 3ts15y-555 perpetuity. Restricted resources include the state's per- official to which the governing body has delegated the provided through a combination of insurance iOtics ntaungibleCapi al Assets [...... '...... manent endowment funds subject to externally imposed authority to assign amounts to be used for specific pur- self-funded health plans and health maintenance organi- restrictions governing their use. poses. Unassigned fund balances represent amounts that zation contracts.

2012 Comprehensive Ann tial Financial Report - $brW, $tale of Texas r66_ 21)T2 - CorniorvheriSive Annual Financial Report - F0, Lr, ,,.~ Zn

The table below presents the composition of the accounting errors and other changes. The reclassifica- construction in progress. The additions column includes All capital assets are capitalized at cost Or esti- state's capital assets, adjustments, reclassifications, tions column includes amounts for transfers of capital current year purchases, depreciation and amortization. mated historical cost if actual historical cost is not additions and deletions during fiscal 2012. The adjust- assets bersveen agencies and reclassifies amounts for The deletions column presents assets removed during available. Depreciation or amortization is reported on ment column includes assets not previously reported, completed construction projects previously reported as the current fiscal year. all "exhaustible" assets. "Inexhaustihle assets," such as

Capital Asset Activity Capital Asset Activity (continued) For the FiscalYear Ended August 31,2012 (Amounts in Thousands) i For the FiscalYear Ended August 31,2012 (AmountsIn Thousands) i PRIMARYGOVERNMitT PRUMAR(NIVERNUENT Omn1 Adbaatn Rtdasafltain Additis, Dointls 881112 911(15 GOVERNMENTALACTIVITIES ljusasihants R.slaslnaflann Addifie. D_• es.•_ 8/31112 !BUSINESS-TYP EACTIVITIES Non-DoprKianle &Non-Amortblehla Assets Laundusi Land Impmevens 8 89t1tD39 B 42.466 B 438 $ 565388 $ 13008) B 9519723 tNut-Depedable& Non-Amorfzable Assets teleint scun 499723503 (25SP78) 579JO47 514936 (6741 50,661t734 Lund sndLnd Ioprnomenono $ 1524203 S (3.488) S 12 96 $ 38933 $ (1I£72) S 1,570922 Cousrutionn a Progrets 31133.530 (268472) (I1497.115) 2910.482 6.178225 mrInfastrua 1.629.344 21 14 1,629379 OtherCapi.to A-1t. 20599 1 ,097 13 298 (441 289663 COt•srwi in Pwgeus 29335344 (1929623) (2297.951) 1985228 (1.4321 2.187.658 Ind Us Rights- Pemrnnest 67.573 I0905 tatg) 69,360 SOther Capital Asses 396.815 34 166 10,22 (4'1.501) 4030t87 66.457.7059 'ntl.l Nn DOpneinble& Non-AnnoirableAenu 63A8s9t44 t479n87) 1917,6171 3.993S89 144441 Lund U.e Rights- Pnr nent 19.14 19.914 Otru ]angibei, CapiltaA-sets - Permunent 7213 (72131 hpeletualn Assets Total Non.Depreoisble& Non-Amnnieable As 6212,33 (2032691 2285,639) 2D34589 (6A54) 53213560 5 A12.312 Buildints and BuildingImprovementn 13975776 (3`0741 i291651 8.158 (7,318) 5)839.729 sfmn,trust tem 28,147 642.495 68954 (19341) 20516`031 DepreciableAssets Ftuilittes andOther Itnpnoaenus 213.323 3974 3J589 220986 Buildingstnd BuildingInprouentnts 22M198255 89,449 19g00999 240,4)2 (50.158) 24,3583 47 Furnituneand Equipment 968tD17 (2397) 7592 77,648 (60.679) 9vk1281 Infratetuse 1t346316 92.490 70.368 17,573 (5.4951 1521.452 Vethicles.Boas and Ainrruft I155,743 27A15 635 (55,£71) 1.A90,7302 Fenilitiesand O0er Improements 1.446910 53833 1604995 1198 9191 1.615.926 Otter Capt.l Asets 146,654 2990 (891g2) 140.732 Furnitureand Equipnent 4.139$78 (19,084t 2520 437,742 (1629115 4,448241 Toal Opreiadn AsMenuat Ilisritul Cout 27.791£25 22366 911f67 224j674 01526210 28,798.461 Vehiolte.Bouts and Airaft 232.108 1.100 719 28587 (9.,061 253.408 Othar Capilal A-12 1.440.965 830 8633734) 69302 1199t1 1427445 I-n Aro.ululed Isepreeiuiat for: Total IkpneniAuleAs•ss as HistodeulCost 30.204JI32 170-18 22021167 8052U4 (256902) 339525.319 Buildingsand Building Inpromneents (13284.942) 3,938 1183h(12) 3554 13.59,152) tnftastrsuetre (111264348) 12946 1627303) 151g18 U 1.863P87) LessAotuulated , Depeiatioup toe FPilittics ed Outer Iniprournunis (143248) (7.465) (1538131 Buiildisgatd 8iding Imprnnmnrns (9,158,821) 885 (921.bb1) 17,172 110062,4251 Funhtumtend Equipment (725.144 1983 95 (73318) 575428 (739.2561 I* unfsuotue (539,463) 1745) (50994) 1611t 0281 Whicles,Boa's andAirraft (637-W48) (681 36 (70.7463 46.969 (661,513) FPililira endOther Imp menos (623.747) (68) (432201) (632514) 7.558 (7232782) OtlerCapita Asset 166,3161 (6.890) 7D1953 66,1118) Furniture andEquipne.r (2.714,179) (108) 476 (361.119) 126.463 52.938,465) TotalAccumulsted Oepneoidan 016,121.502) 18.499 131 (969-5241 132564 816.939.632) hVehilest.Boa andAimraft (11663951 (37) (321 (21091) 89626 (178,1-9) DopeCoitbltASuetsNes 119670523 40965 911748 (7449638) 119,457) 11.858J29 Other Capittl Assess 5 (915.8961 U 432102 (63.890) 17275 (Q19 8231 Total Antunulatod Deprecintioe* (14.12801tI (19) 447 (114815.493 177044 t15332,728) Intangible capital Atets - Amortiable *kpreviuble As•e, Net 16.575,431 170.99 2202;514 (076.349 (79A018) 18,192591 Lund Usr Rights-Ten 2129 2.189 (070) 23,487 ComputesSofwame 134952 (821) 5910 82.696 (129633) 340.107 Intangible CapitalAssets - Aarnabtleht Other IntangibleCapital Asse - Term 31.967 61971 48938 Lad Ud Rights-Ter- 255 2.5 Total IntangibleAssets we Historiost Cost 388.987 (8811 5918 31.856 (133•1) 412,532 Computer Soiwau 1,937,782 (821 873184 76434 (12,358) t .185260 Other I[-ntibtle Capital Assets- Tens 2559 7283 9572 LuauACoutulated Atanireti.on foro TTotalIstanglble Assets at Hisancal Co-s I$A483196 7,131 83D84 76.834 213591 1,193587 LundUsa Rights -T.m (63112) (3.183) 678 (8.8151 ComputesSoftware (249,4748 8&9 s30245) 12563 8266,347) LessAecumulsted Amoniuaton for: Other IntangibleCapisal Assets- Term 31.784L (3338) 15.1221 Lund ULeRights -Tens (38) (261 (64) TnotaAesumuteled Aorditinaion 12757961 809 0 (36.766) 13233 (2802941 Computed Sohfsu (6389621) 102 (166876) 10912 (794,484) AnourtiubleAsets, Net 131,127 8121 5910 (4910) (67) 132248 Other Int3gible Capital Asss - Ter (59) (2100) (955) ( 1(224) Gonessnantal ActuvitiesCapital Asse, NNt 8L75867594 L (438234) 41 8 3243.449 $ (239681 $ 78,448282 To.Wta.cIhcuutdArsonision*- 163818) 1(1099 0 _167,9571 10912 8799.772) Assrnizable Asset,. Nut 401.678 7D22 831884 1"910'23) (1.446) 3996315 Busism-.TypaAicitlesa apital A-,,,bNet 8 23,1899842 $ (25.448, $ (411 $,1s7221 5 (1,.10H8 S24.343,466

nussnona.daOaasnnst -9274 - - $ S531866 •d~don9.774 Erwyu Bsfits 3 enWi.nu 81.626.949 H~alt sl Hanust5 s 45,392 Tr_'asenoen 17,266 Publi Stutyoseeti•nlie 179,174 L..•,y 216 T~sseaeunu 46925349 Octhtouser* setTt~.slnsat 4.975 Neo e s se R .un 32.478 i~al 81,649,406 Con.uIded on the folowingpage Racetaoa,Sness 1.834 SI P16890 Cuntie.sdun theflloaiagpage

168 'ý*" ýVZ t Comprehensive Annual Financial Reportý I 201ý - Comprehensive Annual Financial Report , ":" 67 1 an and historical treasures not required to be capitalized requirements throughout fiscal 2012. The Trust Com- Capital Asset Activity (concluded) are those: pany safekccps U.S. Government securities in book-entry FOrthe FiscalYear Ended August 31, 2012 (Amornts in Thousands) Held for pub!ic exhibition, education or form for the major investment funds, safekeeps collateral PRIMARYGOVERNMENT research in furtherance of public service, rather pledged to secure deposits of the Treasury in financial Balie APian Walla 0131/12 than for financial gain institutions, and acts as trutstee for other public bodies to COMPONENTUNITS Protected, kept unencumbered, cared for and hold and manage funds on their behalf Na-ODep•niable &Noe-Amrnetluhle Assets Land and Land Impmoneoenis $ 3,705 S B S B S 3.705 preserved Certain state agencies, component units, public Cunansstiun in Progress 1,213 ______694 1____.097 T ialNon-tipirrciable & Non-AsnnuniabmeAtS- 491H 0 0 Mu4 0 5,602 * Subject to an organizational policy that requires employee retirement systems and institutions of higher the proceeds from sales ofcollection items to education are authorized to invest funds not deposited Depreiable Assets Buildings endBuilding Itproeenions 42.159 28 47,187 be used to acquire other items for the collection with the Treasury. As of Aug. 31, 2012, the Teacher Intrusinscis 17 4 21 rFzilidtieand Other Irnspeeieei 449 449 Assets of this nature include the historical archives Retirement System of Texas (TRS), the permanent 176 1358 t477) 44,161 Fumuim and Equip-eni 43.104 school fund (PSF), the Employees Retirement System of Vehicles,BRoas and Al-raft 11,94 910 (1.456) I 1.456 of the Texas General Land Office. This vast collection 4 6 Other CapitalAssets 60 includes approximately 35 million records dating back Texas (ERS) and the University of Texas System (LIT) TOti tlepreoiableAnse as HilstoicalCast 97,783 176 0 2312 (1.933) 9533" to 1720, including approximately 80 thousand maps, reported over 85 percent of the total investment fair Lass AccunmulatndDepr-intion Ior Buildings and Building Improveenuts (52J80) (910) (1299() sketches and plat maps. value. TRS, PSF, ERS and UT make investments fol- Infrastructure (I) (II (2) lowing the "prudent investor rule." Authorized invest- Failins asd Other Itpronenenta (410) (17) (427) Fniunn and Eqaipment (24947) (195) (4,140) 301 (28K91) ments include equities, fixed income obligations, cash VWhisesBRota and Aisnisf (95361 (4641 1285 (8715) Other Capital Ates (33) _ 9) equivalents and other investments. Total AnoumuluindDcpnr-iation (46980) (195) 0 (51535) 1586 (51,124) DepteniableAssets. N1e 503(03 (19s 0 (3223) (347) 47214

Intangible CapitalAssat - Anra•ftable Deposits, Investments and Collateralization Compute Software 1R802 301 3"!99 (160) 22232 Agreements State law requires all Treasury funds deposited in TotaIluangible Asters utIlistarical Cost l825rt 1011 O 3280 (160) 22232 Repurchase Authority for Investments financial institutions above the amounts insured by Len AnnumulatndAmooieatint fo- Canmpul-rSonttwuru (10.4711 0I00)11WO) (2.783) 160 (13J194) All monies in funds established in the Comptroller the Federal Deposit Insurance Corporation be fully Totil Ac-umulaiedAnmorizraion (10.4711 (2,783) 160 (13.154) AmnortisblrA-s.. No 6331 201 0 506 0 95D38 of Public Accounts Treasury Operations Division (Trea- collateralized by pledging, to the Treasury, securities Conpo-net ulOts CapitalAsts. Net B64052 B 182 B 5 $ (2133) n (347)1 6185)4 sury) by the Texas Constitution or by an act of the Leg- valued at market excluding accrued interest. Generally, islature are pooled for investmenr purposes. State stat- the list of eligible securities includes all U.S. Treasury ures authorize the Treasury to invest state funds in fully obligations, most federal agency obligations, and secu- tary information other than MD&A section of this works of art and historical treasures, are not depreci- collateralized time deposits: direct security repurchase riies issued by state agencies and political subdivisions Professional, academic and research library books report provides further detail on the state's highway ated. agreements; reverse repurchase agreements; obligations within the state. All securities pledged to the Treasury infrastructure. and materials are considered "exhaustible" assets and of the United States and its agencies and instrumentali- must be held by a third-party bank doing business in depreciated. Intangible assets with determinable Capitalization of interest incurred during the are ties; bankers' acceptances; commercial paper: and con- the state through a main office or one or more branch- construction ofcapital assets is not applicable for gov- useful lives are amortized. Donated assets are reported tracts written by the Comptroller, which are commonly es, any Federal Reserve Bank, the Trust Company, any activities. For proprietary fund types and at fair value on the acquisition date. Assets are depreci- ernmental known as covered call options. Federal Home Loan Bank or in the vault of the Trea- with measurement focus on income ated or amortized over their estimated useful life using fiduciary funds The Treasury obtains direct access to the services of sury. During fiscal 2012 no depository holding state determination or capital maintenance, the net amount the straight-line method. the Federal Reserve System through the Texas Treasury funds failed. for qualifying assets is capitalized. Most land improvements (infrastructure), includ- of interest cost Safekeeping Trutst Company (Trtost Company). The State agencies and institutions of higher educa- The state's capitalization policy regarding works ing clubs, sidewalks, fences, bridges and lighting sys- Federal Reserve Bank requires that the Trust Company tion with deposits of public funds not managed by the of art and historical treasures is that capitalization is tems, are capitalized. The states highway infrastructure, maintain a positive cash balance in the account during Treasury are required to secure deposits through collat- encouraged, but not required, for works of art and his- expected to be maintained in perpetuity, is reported and at the end of the day. The Trust Company met those eral pledged by depository banks and savings and loan using the modiRed approach. The required supplemen- torical treasures that meet certain conditions. Works of

1 2012 - Comprehensive Annual Financial Report - 170 20'Z - Comprehensive Annual Financial Report - Fa,,Jhefýla:cCfTW,, ____1 L-• ...•'•E•.'=•" •.•.•X

institutions. Eligible collateral securities are prescribed portion of short-teren investments. These amounts are Foreign Currency Risgh Foreign currency risk for pending international investment trades. The table at by state law; however, retirement systems are exempt by included on the combined statement of net position as bank balances is the risk that changes in exchange rates the left presents the bank balances exposed to foreign statute from this requirement. part of the "Cash and Cash Equivalents," "Securities will adversely affect the deposit. There is no formal currency risk as of Aug. 31. 2012. ILending Collateral" and "Investments" line items. As of deposit policy for managing foreign currency risk. For- External Investment Pool Aug. 31, 2012, the total bank balance for governmental eign currency deposits are intended for settlement of Investments The activities of the Texas local government invest- and business-type activities, fiduciary funds and discretely The fair value of investments is determined from ment pool (TexPool) and the Texas local government presented component units was $1.1 billion, $273.6 mil- Bank Balances Exposed to published market prices, quotations from major invest- investment pool prime (TexPool Prime) are reported lion and $222 million, respectively. Foreign Currency Risk ment brokers or independent pricing services. In gen- as an external investment trust fund. Separate audited Custodial Credit Risk- Custodial credit risk for August3t,2012 lAmounslnllhousands) eral, the fair value of fixed income securities is based on financial statements may be obtained from the Trust deposits is the risk that, in the event of the failure of a yields currently available on comparable securities of tnarnroebtsssd Company. depository financial institution, deposits or collateral Butsa-Tmn- Rdttryd Otonni" issuers with similar credit ratings, on prices from fixed Aet1,01. Fants Units securities in the possession of an outside parry will not income pricing services or on external broker quotes. Austrlion Dollar $ 346 $ 1.03 $ Deposits be recovered. There is no formal deposit policy for man- B.s-ewa Puta 79 The changes in the fair value of investments are report- As of Aug. 31, 2012, the carrying amount of depos- aging custodial credit risk. The state's securities lending BrasilionReal 48 22.58 ed as revenue in the operating statements. Briish Pound 132 11-107 its for governmental and business-type activities, fiduciary programs are subject to custodial credit risk. This type CanadwinDOlt.r 36 1,049 Where no readily ascertainable market value exists C mLaPeso 916 funds and discretely presented component units was $1.2 of risk is inherent to the securities lending programs. As ColombianPewo 2206 (including private equity), fair values can be determined Costa RicaColoans 3 billion, $275.6 million and $220.9 million, respectively. of Aug. 31, 2012, the bank balances exposed to custo- Cruatan Kuln 19 in consultation with investment advisors and Master 192 These amounts consist of all cash in local banks and a dial credit risk were as follows: Trust Custodians. Fair values can also be determined Dwnishtonve 1.952 Egyptis Pound 3.193I based on the capital account balance at the closest avail- E..o 213 58,185 7 Ghesiani Cesti 93 able reporting period, as communicated by the general Bank Balances Exposed to Hong KongDolltr 53,135 aetgarian'stint 12a partner, and adjusted for subsequent contributions, dis- Custodial Credit Risk Indian Rupm 474 tributions, management fees and reserves. Innesis, Rupiah 992 August3t,t2012 Amounts inumousasnds) Japans Yen 10.445 Money market investments are reported at amor- tersdoianDinar 62 ttnasondand s•nyasShilling 23 riced cost, which approximates market value. Parricipar- Ctlattratalid vwtih LishnanianUses 17 MalaysianRinggit 5.1 4S4 ing interest-earning investment contracts that have a tktismuoedand bynthn Pledging MauritiusRupes 09 httnnatamltlsd Rnanlal tinaton MeninanPewo 1t 190 37 remaining maturity at the time of purchase of one year GOVERNMENTALACTIVITIES WroccanDirham 67 or less may also be reported at amortized cost, provided Pen-n1 School Pond S 3.170 $ esstIsreli Shekel 269 Other r sNosjorFunds N-w 7halaid 1ol3ar 97 the fair value of those investments is not significantly Totl GovernmetlalACtivnils 3a170 0 Nigc-ianNaira 72 oneion Kronem 1.814 affected by the impairment of the credit standing of the BUSINESSTYPEACTIVITIES 17 PakistaniRopeo 41 issuer or by other factors. Collges andUisisitiraso 8o 93,734 Peruvian Nuaes Sol Other Noujot Psnds 103 Philippi.. Peso 177 Total Bminrst-tl\/pcAceisidis 969 93,734 PotishStony 488 QatarRilal 005 t0 Totalru.enmmrtusl assd] Romanias Lcn 184 Bsiniet-Typc Acltvitihs $ 4.139 S93.734 Russian Rtble 36 Singporo Dosllr 8,148 FIDUCIARYFUNDS $174073 $ 0 SauthAfrican Rand 976 SonuihKnr-an Won 747 Sendish Krona 717 COMPONrNTUNITS S 466 $ O swistsF-ran ID42 1234 T-iann Dollar 504 4.546 T1naBah, 403 TurkishLiU 951 Uited AmrbEnids-e Dirs t141 Totl $3,7S1 $1722H6 $ 40

I_ 21)12 - ComprehensiveAnnual Financial Report - Fý,rUi,ý State Qt fexaý 1ý ý 7-11 72 2012 - Comprehensive Annual FinarltW Report rz. === z , " _ý. %1_1_1;1

CustodialCredit Risks Custodial credit risk for for managing custodial credit risk. Consistent with the The fair value of investments as of Aug. 31, 2012, are presented in the table below. investments is the risk that, in the event of the failure of securities lending program, underlying securities on the counterparry, the value of its investments or collat- loans are subject to custodial credit risk. Investment Fair Value eral securities in the possession of an outside party will As of Aug. 31, 2012, the investments exposed to August 31, 2012 (Amounts InThousands) not be recovered. There is no formal investment policy custodial credit risk were as follows: bGsoUieaiaand ftma FiducTiaryR- Acities Foundt ni

Ol2.T..ur~y S 15.511,171 S 19,154083 S 399,100 Investments Exposed to Custodial Credit Risk I 1A.{T-rauaS Strip, 315.111 00.500t August31,2012 (Amounts InThouoands) U.S. Treason TIPS 92D0859 5.761401 F.1,11.1.ethat1, U A. Government Agency 0.329-144 7,176276 534.491 Urinted and ComoutsmeObligetions 4D59.750 1.965.267 27,314 FaiValu. Itas k Uragisend with Cot.uatm Asect andMoflgsgo Backed 2.50D05 905.903 263.743 Uninsuredatdwit tefnts Haldby ana Coeporot Eqsiy 17.320,22 283083053 UnnegishatoMwire rlespmainstn lnleeralioemaObligations 2A47372 796390 2532 SenattisaHlB by DetinmentorAgea badi tntranaiooalEquity 2943396 31255.750 viaCaunterpeaiy int Blts StatbaKata Intleralional OtherCommingled Funds 350017 35244.409 GOVERNMENTALACtIVITIES Rcp.mhaooAgreements 6,417,492 9bb4,190 55,134 PermanentSchool Fund FisredIcon. andBond MotoalFund 4.926519 436.104 18584 CmporasteAs-t andMortgage Backed S 6047 8 Other Maloal Funds 212707 71527 6 RepurchaseAgrce tnls 364451 Other CommingledFunds 55141327 5430040 29.189 OdheoG.,oewooal Funds Coommrcial PFpe 1173.21t0 562071 14318I OtherConuninguld Funds lvsesledCollateral 997.376 22,955,320 Total Goommeoal Activities 370.498 5g('5 SesurhllsaLeading Collatreal Ineatonl Pool 05056 Rest Eusso 3.120(575 443.174 BUSINESS-TYPEACT1VITES tDntiadoeo 501)95 86,110 College. andtloivehsi OF',mnllyManaged Investments 202470081 36.800320 U1S.G.osernna Agency 10.149 3.9222-71 3598565 375544 Corpoate Fquity 2.313 8715 Tot- Ine• utns $11A.tS875751,147 $5I720.766j Coplo.- As.t nd Monaogo Backed 2,191 Fouldtncome and Bond Mutual Fund 6,437 [oelnauional OtherComoingclcd Funds 13.841 Miallncous 9.103 ERS, TRS, PSF and UT participate in individual securities lending programs. Cash collateral received by the Other Poprietary Funds OtherCommingind Funds 306.580 lending agent on behalf of each entity is invested in a non-commingled pool exclusively for the benefit of the indi- Repuanchs, Agreenotse 1149%9 FiRedIncome and Bond Mutual Fund 27 , 1O vidual entity. Additional information about securities lending activity is disclosed in the "Securities Lending" section Total Bousneie-i\pe Activities 413843 459,795 of this note. As of Aug. 31, 2012. the investment type balances for the invested securities lending cash collateral were ThoalGovernmental and Busineso-Type Acnivities $412341 3405j6W as follows: FIDUCIARYFUNDS Invested Securities Lending OonerFiduciary Fatds U.S. Treasury Collateral Fair Value S 18,947 s August 31,2012 (Amounts In Thousands) Total Fiduciary

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US.Treury S 20298 S 356217 US. GoosmmconlAgency 72.390 Fo•eign Curreacy Risk- Foreign currency risk for cy for managing foreign currency risk. UT's investment Cnrroa¢ Oblisilons 15.525 87.421 Corporate As-ol andMortigt Backed 6f)47 investments is the risk that changes in exchange rates policy has no limitation on investments in non-U.S. Equity 25,115 867.159 will adversely affect the investment. TRS, PSF, ERS and denominated bonds or common stocks. sloeraslinonlObligations 81-569 130.01 Itlernaion.l Eqily 731.06 UT are exposed to investment foreign currency risk. The investments exposed to foreign currency risk as RepurchaseAgreements 614.746 OtherCommingled Funds 21557057 ERS, TRS and the PSF do not have an investment poli- of Aug. 31, 2012, are presented on the following page. Cosmrncinl Foper 110,174 Other lne•aeels 51,13 Total Itosestuntm $99 7 872.955320

I ý012 - Comprehensive Annual Financial Report - 73 Credit Risk- Credit risk is the risk that an issuer or PSF's investment policy requires investments to Investments Exposed to Foreign Currency Risk other couterparry to an investment will not fulfill its adhere to specific Standard & Poor's rating guidelines. August 31,2012 (Amounts InThousands) obligations. Credit risk ratings are assigned by a nation- Fixed income securities must be rated at least BBB- and Ranerneted Ra*n-TypeAtltMu RdLai Funds ally recognieed statistical rating organination (NRSRO). short-term money market instruments must be rated at Itmeanatinatl internatuioal TRS' investment policy states that for over-the- least A-1. hemoianna tsstaenatainal aingilgd athd. atiannat ntnatt ional Comsngled otte I cttlladxn. tsadft Fonda bsmtssassnt.gbldlga Etnaty Funds teanatneetn counter derivatives, the minimum credit rating, based ERS' general investment policy requires that non- on a NRSRO, must be at least A- or better at the Argenn PNso s 302 5 1,130 $ " 8 S 3 $ cash interest paying securities in the high yield bond AustralianIalla1 I10$(58 620 3ý529 263,623 I$137 I D5273.49 985 inception of the contract. The net market value of all portfolios not exceed 15 percent of the market value Btts.nia Pula 4,196 anuilianReal 260940 72-4.321 21213 131.766 1D91636 898 over-the-counter derivative positions, less collateral of the portfolio and that investments in money market Brish Pound 213.343 236,028 111;587 7'0917 4,58.460 4934 211,656 Crandian Dollar 46327 70479 3353 37356 13210 1601350 246 posted, may not exceed $500 million and all over-the- funds represent no more than 5 percent of each indi- Coynan IslandDollan 70 358.195 Chile. Peso 995 5.108 1,444 18.728 136.875 2 counter derivative positions without collateral may not vidual fund. MtoneseYu 88 6,391 Cilombian Peao 8,797 78 12.102 56.313 exceed 5 percent of the total market value of the fund. UTfs investment policy has no requirements or CroatianKuna 511" CoedhKonana 2.614 947 3N848 31.96 Repurchase agreements may not exceed 5 percent of the limitations for investment ratings. 5300 DanishK..n" 6X92 392 35 170209 131 market value of the total investment portfolio. A securi- As of Aug. 31, 2012, the credit quality distribution Egnplan Pnand 2064 632 3657 42061 Eu. 497386 155,737 53234 1,178.193 75,733 4,60057 5043 2h96.372 ties lending agent must be an organization rated A- or for securities with credit risk exposure was as follows: GhanaianCedi 2.231 Hong KongtoNllar 1.445 289.122 6D70 260.187 2,364.774 739 better by a NRSRO. HuanoMeaFonl.i 29650 2P162 8 2.7117 63646 Indian Rupae 357jW3 9.323 556 1 561306 417 Indonesian Rupiah 1.452 29.117 2225 260536 453909 41 Japane.s Yea 166,673 109.794 1033$ 595.892 3.203209 981 JondanianDim 7022 Investments Exposed to Credit Risk Kenyan Shilling 471 8W77 ilinannia las August 31,2012 (Amounts in Thousands) talnysianRinggil 31,464 41 P32 680 36,986 289256 72 5.857/ MauritiusRupee Govenmentalaad .t adnn-TnseaiAd~isa 1enicanPe- 303855 6.636 48h63 4790A9 320 1K4.420 U.S. Cannesu. Fliod MoroccanDirhiani 1435.14 8o1 12 1.161 Gsnateseat Corporate Aaaattlrlaetage itrnatbal RnpuAshaa hiosesana.alr anmenrdal NHwIsraeli Shekel 8,136 359 10.765 57.568 28 Aoner Obglloatim Reeked Obliations Agsraadets MutualFund Fapa Ineemeneta taoalo Neo ZaLand Dollar 100-263 (e57) 3.919 16.376 Nignean Nairs 9.019 Neoregian Kronee 4.152 526 29.494 243,409 AAA S 13237D39 217,570 $1.4993.91 S 583.991 40.105 $ $ 8390934 $ 4255728 Pakisuai Rupee 1,418 19M42 AA 8381t341 718,961 70,126 245.5()2 53596,96 169J36 15,31'162 Panananian Baoloa 97 177 A 2199 1 692,539 109.654 421,937 114999 77,188 13S18,436 PanuussnNae Sol 269 10 990 286 5935 45 BBB 1,161,890 49306 156,74 16,991 1385,163t toilippinePoe 21.422 896 26 9,752 1117375 BB 140280 3.639 45.121 25362 214.402 PolishZloty 80,350 12,64 (1) 13.887 131310 B 68,102 5,876 4.334 3.170 81.482 Q..ar Riyat 360 19379 CCC 3,545 373528 1552 427625 RomanianLeu 4,836 Cc 23577 2577 RussianRuble " 181 . . 1297 45D52 12,402 151 D 1.814 1U14 Singapree Dollar 6,466 34J61t 2216 55953 251294 131 AAAf 2.196,731 2$96,731 South AfricanRand 41 AA1 4651 5,884 79.55S 821t33 306 AAA. 497353 497.353 Smr Koran Won 33265 1193222 27,687 153.409 16957.481 513 Swedish Kona Atf 40.334 40334 32902 2t510 94.438 23957 481935 414 A-1 1,516.1361 1.516,61 Saiss Fraec 40,767 5A3t1 252,286 1A51,648 1414 Nol Ratled 228.351 559A71 860460 990.898 695903 1,414.730 1913.60 135529 50985222 Taiwn Dollar 73037 6997 108639 971,381 370 Thai BRle 3 40,146 3,198 22.194 358,488 Trial $ 100 $59623483.34 $2648922 82.449309 6,747.103 449.14 $ 1,708.421 881410 $319190 Turkish Lire 26"261 1.42 16,700 314238 76 UnitedArab Emirate. Diira 50 2g0o 359 3355 Csuiiliiiedeso6e thellownig poge VaaurealaoBalivar 2,127 ______Tota $1I318.194 $1.754602 $301369 S4,634532 580938 827.318,661 18706 $2.08.376

MMMýý n"1'•iiiOFinanciall Report 76 1OR - Comprehensive Annual. Financial Report ______- - ... ,.sz~ctcsz - -- -

Cocmentration of Credit Riak Concentration of and changes in prepayments for mortgage backed securi- Investments Exposed to Credit Risk (conduded) credit risk is the risk of loss attributed to the magnitude ties. Modified duration estimates the sensitivity of the August312012 (Amounts InThousands) of the investment in a single issuer. As of Aug. 31, 2012, fund's investments to changes in interest rates. RamadyFundo governmental and business-type activities did not hold The investment policy of PSF mandates the average more than 5 percent of investments in any one issuer. duration of the fixed income portfolio to be comistent Bpioast O~lNatloo Baod Obiltlontun Agesmut MM fttoaPn P.P. knasntisontst Total Interest Rate Risk- Interest rate risk is the risk with the Barclay Aggregate Bond Index's duration and AAA $ 5,125.11 S 58D73 S 2W9.974 S 23604] $8.365.174 $ $ S 42499 $14'037472 that changes in interest rates of debt investments will the duration of the real return portfolio to be consistent AA 5A57273 222,111 63.121 152.808 630055 I 625.1 19 A 653 776347 25,796 2040?17 37286 1D04499 adversely affect the fair value of an investment. TRS with the Barclay's Capital U.S. Treasury Inflation Pro- BBB 631434 16,334 151.994 25 799.707 BB 894633 22995 40.612 153-240 and PSF use the effective weighted duration method to tected Securities (TIPS) Index. As of Aug. 31, 2012, the 94,524 70,838 6.335 4 171,701 identify and manage interest rate risk. ERS and UT use Barclay Aggregate Inde" duration was 5.02 years and the ccCCC 10,323 14.623 114 150,720 3D92 51629 54.731 D 3 .221 . . 3,21 the modified duration method. Barclay's TIPS Index was 5.7 years. The maximum matu- AAAF 50,736 50,736 Duration is a measure of the price sensitivity of a rity for invested securities lending collateral is 397 days Ast 16927 16927 A- t 532,497 532,497 debt investment to changes arising from movements in except for bank time deposits, which is 60 days, bankers' NotRated 31.7_9 77341 293,723 61950 528757 _ 5076 I .D.O545 interest rates. Duration is the weighted average maturity acceptances, which is 45 days, reverse repurchase agree- 101015.185 $1962,78 0 905914 S 854,171 58995329 S 5969420 S 533797 0 3091 747 155 of an instrument's cash flows, where the present value ments, which is 180 days, and floating rate securities, of the cash flows serves as the weights. The duration of which is three years. The maximum weighted average Comr.tet UniOt IS., Cptals Rd an instrument can be calculated by multiplying the time maturity of the entire collateral portfolio must be 180 Gtrot-r. C AasuultRgPuaPp Rita m tiaBoco t od Co t. ABOuy OollgOot BOia OblgilOn Ageut-stB MutualFund P&sM brimrmitts Totals until receipt of cash flow by the ratio of the present value days or less. The maximum weighted average interest rate of that cash flow to the instrument's total present value. exposure of the entire collateral portfolio must be 60 days I AAA S 915.719 0 18,722 S 257,647 $ 2245 S 2 0 0 39026 0 1.233959 AA 839437 39 2447 429-43 130.433 The sum of these weighted time periods is the duration or less. TRS, ERS and UT do not have a formal invest- A 1,751 278 2029 of the instrument. Effective duration extends this analysis ment policy for managing interest rate risk. AAAM 3296 3296% AAAm 10262 1042625 14018 to incorporate an option-adjusted measure of an instru- As of Aug. 31, 2012, PSFs investments by invest- Nor tated $ 2,933 397 2 1418 ment's sensitivity to changes in interest rates. It incorpo- ment type, fair value and the effective weighted dura- Tdod IIA25.824 S 27315 S'2n17431 5 .2 1 514 1 3 831AI 1.2 rates the effect of embedded options for corporate bonds tion rate were as follows:

Investments Exposed to Interest Rate Risk August 31, 2012

fiBiriits Wakhted PSFhi-ainetm To fluTtmsaa l nuretatotRitaI

Aoset Baked Securities $ 87399 1.49 Commerial otastuogeBocked Securitien 289,W47 358 Corpnr~c Obhgawions 1.337.418 696 Yantee - Corpote ObNigatios 39,729 10.78 Non Agency M6tpgagnBacked Swcunitin 39,109 3.14 So..reign Govsnment Debt 16,514 825 UJS.Oocnnsest AgencyCcnsWsciat MougngeBacked S8caoins 131,759 13.8i US.. llonemrn Agency Mortgag Backed Securities 19420634 2.06 UtS. Govrnment AgencyObligaticns 458,313 438 US.. TanobleMunicipal Bonds 109.766 10.93 US. Trusay Secuelifc 1-196077 6.73 US. Tre-uayTIPS 913.399 7.97 Total L6 ,138984 5.62

1 2012 - Comprehensive Annual Financial Report. 77 78 ýI)Q - Comprehensive Annual Financial Report - I 1--- - .- -~

The following table provides information about PSF's interest rate risks and maturities As ofAug. 31, 2012, UT's investments by invest- rates could reduce or eliminate the stream of income associated with its invested securities lending collateral by investment type as of Aug. 31, 2012. ment type, fair value and the modified duration rate that would have been received. As ofAug. 31, 2012, the were as follows: fair value of investments in asset and mortgage backed Invested Securities Lending Collateral obligations highly sensitive to interest rate changes Exposed to Interest Rate Risk for TRS, PSP, ERS and UT was $3.2 billion. August 31, 2012 (Amounts InThousands) Investments Exposed to Interest Rate Risk August3a,2012 IsInvttnt Intstnntnt Reverse Repurchase Agreements Matonits MatlUess Nifl•lafTit BfreateTmn. Fairt eM Modtlid 0n Thuua• OrantonB. ta •, Investments in reverse repurchase agreements Fssnr smtTM Fa•rltV o.neat et a mYeur by the Treasury and the Trust Company are per- INVESTMENTSIN SECURmES Asses BauLedFloating Rate Nots S 6047 B S 6D47 US. GoncnunvOGOaanted: mitred by statute. A reverse repurchase agreement Repahase Agwesents 364.451 364,451 U.S. Trasary Bonds andNotes .S 2921324 7.81 U.S. Treasry Strips 558 1.73 Tout $370.498 $364,451 $ 60P47 consists of a sale of securities with a simultaneous U S. Treasy Bills 65354 054 ...... U.s.'rennury InflationPFeteod 2.703 6.48 agreement to repurchase them in the future at the U.S Asenty Asslt Backed 5.940 436 same price plus a contract rate of interest. Sale The following table presents TRS' investments by investment type, fair value and the TotaIUS. GO- -mnr uasratend 366379 6.45 proceeds are invested in securities or repurchase effective weighted duration rate as ofAug. 31, 2012. U.S. C-osu•no Non-tau-ar-tod; U.S Auency 5,756 3.82 agreements that mature at or almost at the same U.S AgencyA-nt Banked 237710 2.99 Total U.S. 'ovnamnn Non-,Guaanteoed 243.466 .01 time as the reverse repurchase agreement. Proceeds Investments Exposed to Interest Rate Risk Total US5.Conereren 610D45 5.07 August3t.2012 from the matured securities are used to liquidate Corprate Obligations: the agreement resulting in a matched position. '4&2'4 633 FairVats. WalrgrWs Foreign 368.27 3.47 With a matched position there is minimal market 'InThousands) CurarolRBati Tota Copora.e Obligations 916231 5.99 risk because the seller-borrower will hold the secu- S 13.536.791 Foreigntonremen•t r PaoninciatObtigationn 1550.769 6.32 U.S. Go.mne Obligations 16.16 rities to maturity and liquidate them at face value. U5S.Govereosen STBIPS andTIPS "51,985 606 Other Dels Seun.eis. 47356 12.86 U.S. 8'•mw rLnt Agency Obtigariors 70215 4.18 TotalDebt Seuiries 3.1244r1b5 608 In the event of default on a reverse repurchase As.., and MortgageBaked Obligation, 525.103 2.67 CorporateObligtltone 53,463 929 OthrerInestrens Funds- Debt 23A)19 6.90 agreement, the Treasury would potentially suffer a Intneranatl Goereenet Obligations 80.536 2.14 Coneniblr Stauk 1 D21 29.03 tntemaclonalCospoerte Obligrior.s I 1069 .78 FixedIncor MoblneFyaiarke Funds 2A92,434 6.04 loss. The loss occurs if the cash received does nor Touta S 2075,?992 12.77 Tout $ii1 275 3.44 exceed the fair value of the securities underlying the reverse repurchase agreements. The amount As of Aug. 31, 2012, ERS' investments by investment type, fair value and the modi- of the loss would equal the difference between the fair fied duration rate were as follows: investments with Fair Values Highly Sensitive value plus accrued interese of the underlying securities to Interest Rote Changes and the agreement price plus accrued interest. To mini- Investments Exposed to Interest Rate Risk In accordance with the applicable investment poli- mize the risk of default, all securities backing reverse August31. 2012 cies, TRS, PSF, ERS and UT may invest in asset backed repurchase agreements are held by the Federal Reserve FallValues and mortgage backed obligations. Mortgage backed Bank in the state's name. (irTh ..W-) Modh~edCOitlin Ba•t Rldscar, hPeurieta"Y obligations are subject to early principal payment in a As of Aug. 31, 2012, the Treasury's aggregate BERSInelsnin Bdunftr Fundat Ftinat hsad period ofdeclining interest rates. The resultant reduc- amount of reverse repurchase agreement obligations U.S. Tre-asuySedncautv $3,10.480 $380 D52 4.64 2.51 tion in expected cash flows will affect the fair value of was $66.3 million, including accrued interest. The 1IS.S,C-svernsnl AgencyObligations 1.337.784 49471 2.79 2.79 CorpoenorObligations 1.758.551 58012 6.42 636 these securities. Asset backed obligations are backed by aggregate fair value of the securities underlying those Cerposra.Asset and Mortgsge Backed Seenriries 162579 6012 3.06 3.01 Insenutionalobligations 7233.27 25951 3.43 338 home equity loans, auto loans, equipment loans and agreements, including accrued interest, was $66.4 Money Maroteand Bond Fund 185206 135300 0.08 n0O8 credit card receivables. Prepayments by the obligee of million. During fiscal 2012, the credit exposure was MunivipalFonds 2.229 1308 13.08 $80680•0 Tout S6975277 434 2.46 the underlying assets in periods of declining interest $60 thousand.

Annual Financial Report 1 201, - Comprehensive Annual Financial Report 79 I so 1 -4)'Z - Compreheng1vo Securities Lending collateral of 102 percent of the value of domestic secu- Investment Derivative Instruments or decrease of market exposure to various asset classes. ERS, TRS, PSF, UT the Veterans Land Board rities lent plus accrued interest and 105 percent plus Derivatives are financial instruments (securities or Upon entering into a futures contract, an initial margin (VLB) and the Texas Prepaid Higher Education Tuition accrued interest for foreign securities. There is a simul- contracts) whose value is linked to or "derived" from deposit is pledged to the broker equal to a percentage of Board (TPHETB) participate in securities lending pro- taneous agreement te return the collateral for the same changes in interest rates, currency rates and stock and the contract amount. Contracts are marked-to-market, grams as authorized by state statute. ERS, TRS, PSF securities in the future. commodity prices. These securities or contracts serve as settled in cash with the broker and recorded as an unre- and UT established their own separately managed secu- The custodians of the securities are the security lend- components of the investment strategies of certain state alized gain or loss daily. The daily gain or loss difference rities lending programs. VLB participates in collateral ing agents. The securities lending contracts do not allow agencies, public employee retirement systems and insti- is referred to as the daily variation margin. Realized investment pools that commingle the cash collateral the governmenral entities rn pledge or •ell coiiateral seen- tutions of higher education. Those investment strategies gain or loss is recorded at the closing of the conrracr. of several entities. Under these programs, the govern- ritles unless the borrower defaults. The lending agents are utilized to manage and reduce the risk of the overall Holders of futures contracts look to the exchange for mental entities transfer securities to an independent are required to indemnify ERS, TRS, PSE UT, VLB and investment portfolio. Investment derivative levels and performance under the contract and not to the entity broker or dealer in exchange for collateral in the form TPHETB if the borrowers fail to return the securities. types are monitored to ensure that portfolio derivatives holding the offsetting futures. Accordingly, the amount of cash, governmental securities or bank letters of credit. TRS, VLB, PSF and TPHETB loans are terminable are consistent with the intended purpose and at the of risk posed by the nonperformance of counterparties In addition. PSI may receive collateral in the form of at will. There were no significant violations of legal or appropriate level. to futures contracts is minimal. Risks due to movements other assets that it specifically agrees to with its lend- contractual provisions, no borrower or lending agent All investment derivative instruments are reported at in the value of the futures contracts and the inability to ing agent. ELS, TRS, UITand VLB receive collateral default losses and no recoveries of prior period losses fair value on the statement of net position and the state- close out futures contracts due to a non-liquid second- equal to 102 percent of the value of domestic securities during the year. ment of fiduciary net position. The changes in the fair ary market remain. lent and 105 percent for international securities. PSF Differences between the fair value of the invested value of investment derivative instruments are reported Options are used to alter market (systematic) expo- receives collateral in an amount of 102 percent of the cash collateral and the cash collateral liability are recorded as investment revenue in the operating statements. As sure without trading the underlying cash market securi- fit value plus accrued income for domestic corporate as part of the net increase/(decrease) in fair value of of Aug. 31, 2012, TRS, PSI', UT, Texas A&M Univer- ties and to hedge and control risks so the actual risk/ securities and 105 percent of the fair value plus accrued investments. There is no credit risk exposure to the lend- sity System (A&M), VLB and the TexasDepartment of return profile is more closely aligned with the target income for foreign securities. However, the required er when the fair value of the security on loan is less than Transportation (TxDOT) held investment derivatives risk/return profile. Option contracts provide the option percentage is 102 percent for foreign securities denomi- the cash collateral liability. The overall securities lending (forwards, futures, options and swaps). purchaser with the right, but not the obligation, to nated and payable in U.S. dollars. TPHETB receives activity as of Aug. 31, 2012, is summarized below. Forward foreign currency exchange contracts are buy or sell the underlying security at a set price during used for the purchase or sale of a specific foreign currency a period or a specified date. The option writer is obli- at a fixed quantity and price on a future date as a hedge gated to buy or sell the underlying security if the option Securities Lending Activity Summary against either specific transactions or portfolio positions. purchaser chouses to exercise the option. With written August31, 2012 (Amounts In Thousands) The contracts are in the currency native to the security options, market risk arises from an unfavorable change F~rttnoalo transactions for settlement date and are marked-to-mar- in the price of the derivative instrument, security or h-ld t.0 Fanir oran ket daily with the change in market value recorded as an currency underlying the written option. Etwst wt ronator taitiflaw ls.. flu. Louig InF&ui Ion unrealized gain or loss. Realized gain or loss is recorded Swaps represent contracts that obligate two coun- dosing terparties to exchange a series of cash flows at specified TRS $22a287014 $ 1,130,387 521.535,W3 $215357057 $ 21.520 at the of the contract. Risks associated with such ERS 1,379.139 1.416,923 1.417"088 165 contracts include the potential inability of the counter- intervals. The ultimate gain or loss depends upon the PSF 1,588P75 1,163P)39 470,169 370,498 i99,671) 663bU57 5t1t.401 511.401 parties to meet the terms of their contracts and unantici- price or rate at which the underlying financial instru- VLB** 83A5S 850)6 950t56 TPHLETB** 945.85 90 961)53 96o553 _.(____ pated movements in currency exchange rates. ment of the swap is valued at the settlement dare. Swaps Tota $26096,574 $24D37,753 $=79896) Futures contracts are standardized, exchange- are used to manage risk and enhance returns. As of Aug. traded contracts to purchase or sell a specific financial 31, 2012, swap investments were interest rate, credit * Noo-~n5oo5.oniwoioiSoc .oooSio. loodiog oziiuos 1, so ,r.vkd a,soot. boo,,.oSo ooded,,,rioesoaroooiuo.to,,5c00000I0tOcsoo,,o,,.rorioibc00cc, ottoSoit instrument at a predetermined price and date. Futures default, commodity, equity and total return swaps. Ur.vtu.aTPstvtooktotcciooioio.oloahbcoc6bIc.hotoo.tooo.oottwl5oIptoS contracts are used to facilitate various trading strate- UT VLB and TxDOT invested in pay-variable, Sospotkira.d toveto ,viooi66o5 .ooocioJoi .. ot5ot. Si.2011. gies, primarily as a tool to hedge against the increase receive-variable and pay-fixed, receive-variable interest

201ý - Comprehensive Annual Financial Report - Fý,rlhe5tateofTexas 81 E82 412 - Comprehensive Annual Financial Report - ý,), of Tca,. rare swap agreements that are reported as investment eral posted, to an amount not exceeding $500 million (SIF•AvI) and receipt of 67 to 103 percent of one month I NOEA derivatives because they are ineffective hedges. for any individual counterparty. to 10-year London Inrerbank Offered Rate (LIBOR). Foreign Currreney Risk. TRS, UT and A&M UT requires collateral to be posted on a daily basis Investments in pay-variable, receive-fixed interest rate Short-Term Debt have exposure to investment foreign currency risk in by the counterparty to cover exposure to a counrerparty swaps paid a fixed rate of 0.25 percent and received the On Aug. 23, 2011 (with an issue date of Sept. 1, forwards, futures, options and swaps derivative invest- above the limits set in place by the master netting agree- 6-month LIBOR at the foreign currency rate. Invest- 2011), $9.8 billion of the state of Texas Tax and Revenue ments. As of Aug. 31, 2012, derivative investments ment. Collateral posted by counterparties is held by UT ments in pay-fixed, receive-variable interest rate swaps Anticipation Notes, Series 21011,were sold to coordinate exposed to foreign currency risk were as follows: in one of its accounts at their custodian bank. ranged from receipt of various foreign currency rates and the cash flow of the state for fiscal 2012. Issuance of these TxDOT's basis swap agreements contain payment of 0.3 to 6.96 percent. As of Aug. 31, 2012, notes enhanced the scate's ability to make timely payment provisions for collateral posting by counterpar- the investment maturities for the state's swap contracts Derivative Investments Exposed to of expenditures payable from the general revenue fund. ties in the event of a credit rating downgrade. exposed to interest rate risk were as follows: Foreign Currency Risk The Series 2011 notes were repaid during fiscal 2012, Acceptable forms of collateral include cash in August 31, 20a2 (AmountsIn Thousands) boreinterest at 2.5 percent and were priced RbCWV the form of U.S. dollars, negotiable debt obliga- Seenxexehttend RBnteen'1-psA Will. PoNt Derivative Investments Exposed to to yield 0.273 percent. by the U.S. Treasury Department Swaps Optlon Purint FMoards Swep t Fions issued Interest Rate Risk On Aug. 21, 2012. the Comptroller's Austalia. 1ol.ar S 104 $ (4.1t0) $ (139) and agency securities. Agency securities include $ {4,594) August 31,a2012aAments inThousands) office sold approximately $9.8 billion of Bratilian Real (2,504) (2,559) negotiable debt obligations fully guaranteed as -, t Eltsh Pound (476) m63 tstie P Maturtitiemns,It0V-t) the state of'l'exas'fax and Revenue Antici- CaandiarDolt, (21) 157 43 to both principal and interest U- ft. 1-5 by the Federal pation Notes, Series 2012, with an zChi[-~ peso 857 issue Chinese Yua. (1 507) National Mortgage Association, the Govern- bIonnestRine Swaps $54,82 $21534 S(401) 8276 $792 ! ...... $32281 date of Aug. 30, 2012, and a maturity date Colermbia.Peso 78 ment National Mortgage Association or the Fed- Danis Krune 31 of Aug. 30, 2013. The notes bear interest lum I 20 1322S51 4.095 eral Home Loan Mortgage Corporation. Investment Funds Hong Kong Dollar 29 at 2.5 percent and were priced to yield 0.225 percent. Indian Rupee 3058 The aggregate fair value of investment Investrment funds include hedge fund pools, pri- They are not subject to redemption prior to maturity. JatpaneseYen (2,457) 35 (3%68) (55) derivative instruments in asset positions as of vate investment pools, public marker funds Malaysian Riggil 52 and other On Aug. 21, 2012, good faith funds in the amount of Mexican Peso 1554 (7608 Aug. 31, 2012, was $193.2 million. The invest- alternative investments managed by external invest- New Zecland Doller (5'84 $98 million were received. The balance of the $9.8 bil- 8 Nirwegian keener ment derivative instruments were executed with ment nmanagers.Risks associated with these investments PolishZoty (194) lion was received on Aug. 30, 2012. SingaporeDOeWc 6 counterparties that had a credit rating of no less include investment manager risk, liquidity risk, market The state also sold $500 SouahArican Rand (271 million in commercial rating scale. risk and leverage risk. Investment manager risk is sub- Smthl KoreanWon (16960) 1.149 (631 than A using the Standard & Poor's paper for the purpose of coordinating the cash flow of Sdilh K..rone 214 468 This represents the maximum amount of loss stantially dependent upon key investment managers; Swis. Fran It 093) the state for fiscal 2012. Issuance of the commercial Tiwnc Dollar 48721 that would have been recognized as of Aug. 31, therefore, the loss of those individuals may adversely Thai Relc 16 paper also enhanced the state's ability to make timely TurkishLiro 2012, if all counterparties failed to perform as impact the return on investment. Also, some investment payments of expenditures payable from the general rev- (112741 _j21.1401 $1204) $Oll2.710) $5593 contracted. This maximum exposure is reduced funds axe not subject to regulatory controls. Liquidity enue fund. by $43.1 million of collateral held and by $81.8 may be limited due to imposed lock-up periods, with Short-term debt activity for the fiscal year ended Credit Risk- TRS and UT instituted policies to million in liabilities included in netting arrangements penalties to redeem units or restricting redemption of Aug. 31, 2012, is presented below. mitigare counterparty credit risk for investment deriva- with those counterparties, resulting in a $68.3 million shares until a certain period of time has elapsed. tires by having master netting agreements and collateral net exposure of investment derivative instruments to Investment Fbnds may employ sophisticated posting arrangements. TRS and UT negotiated thresh- credit risk. investment strategies using leverage, which could Sh ort-Term Debt Fort• e FiscalYear Ended August 31, 2012 (Amounts InThousands) olds or limits for each counteparry above which collat- Interest Rate Risk- TRS, UT. VLB and TxDOT result in the loss of invested capital. As of Aug, 31, Bales Balance eral must be posted. are exposed to interest rate risk on swap transactions. 2012, the fair value of various investment funds /11111 Issued Rdtnewi 813t`12 TRS' investment policy limits the net market value Investments in pay-variable, receive-variable interest rate was $57 billion. "a ad R-aene. of all over-the-counter derivative positions, less collar- swaps ranged from payment of 100 to 131.25 percent AeticipaoisnNaixs $ S19k000/X08 90•10155 £9306010 CammercialPaper 5(01001 5001100 of Securities Industry and Financial Markets Association S 0 $2)10.,R $100e01(i500 $9301*15

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Notes and loans payable consist of amounts used i Notes and Loans Payable to purchase capital equipment. Other uses include the Debt Service Requirements Long-Term Liabilities Governmental Activities acquisition, construction and renovation of other capital assets,including the interim financing of higher educa- Long-term liabilities activity for the fiscal year ended Aug. 31, 2012, is presented in the table below. (Amounts Il Thousands) tion projects; software/database acquisition and devel- Y_ Principal Intsea ." Ttal opment; refinancing of existing debt; and the funding Long-Term Liabilities Activity 1 2013 S 170,932 $ 12.469 S 183.401 of agency specific missions such as economic develop- For the FiscalYear Ended August 31, 2012 (Amounts InThousands) I 2014 173315 I 1,495 . 104910 2015 19743j "1U27 2(84U2 ment projects and pest eradication programs. The Texas F 201b 205217 11336 216,553 Amount Department of Transportation (TxDOT) entered into ,ibuttn Baohmt Ine W'Bas Due 2017 202.173 10324 21A497 Ws/sti Omtableastin Alklitkoo RetJUcnh 8ts12BMW e0ie 20118-.2022 784'492 38,184 822k76 1 2023-2027 14.1911 19.930 163931 pass-thomugh toll agreements with local entities as a GOVERNMENTALACT3VITIES 20282-2032 472845 5.991 499836 I Claims andJudgments S 147973 $ $ 480(79 S 62927 $ 1332.5 $ 50.193 0 830.2 means of financing state highway capital improvements I ToalRoequlisrents 1921850 120.156 2042'90A C.pit Lease Obligations 14,177 2.867 5341 11.703 5365 6538 7 3 8 1 Ijenawnizd Accreions 54154Nil(541,,1) TxDOT recognized Employees'Covpensabl Lease 718$42 " ,S 759.4--7 " 732896 439322 2935.74 and maintenance. In fiscal 2012, Nusesand L-as Pay"ble 1,149.953 302515 * 71,666 1380002 170.932 13209870 ToaluReqi-iments 51500902 2 120.15b $ 1500,958 for pass-through 11519`544 $125.4 million as a long-term liability (eseral ONli utieo Bonds Payable 188956 * 394.175 113514.325 383582 1039502543 Retenue Bonds Payable 5,455.607 (1 04.165) O3W)4 170650 4,276Z98 1785378 40198520 toll payables related to highway projects constructed PollntionRem-diasieu Obligation 263A•66 53,111 69533 247:04 51 T97 1955108 tGoernmesnalActivities lae-Turtm i Notes and Loans Payable under pass-through financing agreements. See Note 15 Linbilities S 19269902 $(I M54.165) $1065,115 51`5333h19 018.097233 $1279238 516017.M5 Debt Service Requirements for additional details. Debt service requirements for BeUSnttE$S-nTpEACvsTOVllES Business-Type Activities notes and loans payable in the long-term liabilities are Claies and Jsndgmmes S 60030 $ $ 211569 0 19,743 S 61,056 £ 16,700 $ 44.J48 CapitndLease 04bligatdns 2.0.484 3.946 2.792 216738 35,14 18,124 (Amountsin Thousnds) presented in the tables to the left. Employees'Coopeensabte L.eave 604.427 224.523 203.767 705,243 364608 3402545 General obligation bonds and revenue bonds are No.es andLos Pyablde 2PO5,719 980.772. * 911;522 2074,9 6732538 1.401,431 SYear Pd6ll4 Intr Total (OunndObligatien Bonds Paysble 29553651 414A60 * 140562 3229_"49 129075 3.100,474 described in detail in Note 6. Certain revenue bonds Reveue Bo.ds6Payable 18.766.962 IfO7DI02 13340.405 19J033.469 2.165,794 16067JS75 -.2013 S 6737538 0 42,326 $ 71594 Pollstie Rtm edianionObligution 20 20 2014 14.110 42925 57,035 related to pass-through activities amounting to $1 bil- LiabilitiesPayable From Resticted Assets 73561533 270.552 331.598 35.10.487 541,137 2.9593-20 2015 13.134 43997 57,131 Busimnss-TypoActivities Lung-Tne- 2016 295127 50.413 79740 lion recorded in prior years were determined to meet Liabilities $0203t54'920 5 0 032,21934 02.950549 $5206J2641 $079.•l 94,464 0l24,7131,47 2017 12.70D 51,512 " 64212 201I-2022 96,268 292.112 388008 the definition of conduit debt, which should nor be 2023---027 119.461 349.157 469,118 COMPONENTUNITS recorded on the balance sheet and instead be disclosed 8-2032 228,726 326.966 555692 Capitol Ics- Obligatians $ 143 S $ 0 33 $ 110 $ 54 $ 56 2033-2037 320.770 262278 591(154 Empleyes' Comperbale Lave 5.685 2.650 2,450) 59885 3.701 2,194 in the notes. A restatement was recorded to remove the 2038 - NMI 740233 137526 877.759 Notes andLtos Payable . 73,216W23 * 21,127 340)82 9570 44.512 FToutRequir.mnts 2560773 1599.212 3957985 amount from the financial statements. Revenue BondsPyable 336.09 W1459 5 890.49 278,919 2570(3 2-37S6 UnansotizedAccreono4e (1IS... 118.0)44 LiabilitiesPayable From RestrictedAsot 5010808 5_ 0 _ Claims and judgments are payments on behalf of Composent units Lu.g-Teem TeolReqnirei nls 02.74.9 0 .9212 $36,74.181 asbiities $ 465,627 0 $ 36.112 162,739 S 330996 5 3878 0 300,618 the state, its agencies and employees for various legal proceedings, self-insurance and workers' compensation .. lsi.. y. e.oo..ll.o.0. o. s, ...... I p rnau.nlrm e v.nd Notes and Loans Payable claims. Tort claims are covered under the Texas Tort Debt Service Requirements Claims Act. Numerous miscellaneous claims are covered Component Units under the Miscellaneous Claims Act for legal liabilities (AmountsIn Thousands) against the state for which no appropriation otherwise YS PtInrIr Mnotrsi Total exists. Individual claims above $50 thousand or numer-

2033 5 9ý70 $S 26 9956 ous separate claims from the same individual or entity 2034 31143 355 3398 that in total exceed $50 thousand must be approved by 2015 2.927 309 3236 12016 4,531 418 4,949 the Legislature before being paid. Claims are paid from 2017 6(158 371 6,429 2018-2022 2693 974 27,667 one or more of approximately 50 governmental funds. 201235-2027 1260 120 1.300 Workers' compensation claims are usually paid from the i Total Requirimoents L 54(0.2 0 2935 0 56915

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same funding source(s) from which the employee's sal- nonexchange transactions and do not reduce the liabil- ary or wage compensation was paid. ity measurement, but are recognized separately as rev- Employees' compensable leave is the state's liability enues when realizable. As of Aug. 31, 2012, the amount Bonded Indebtedness for all unused vacation and unpaid overtime accrued expected to offset state remediation costs could not rea- DESCRIPTION OF BOND ISSUES by employees, payable as severance pay under specified sonably be estimated. conditions. This obligation is paid only at the time of FederalRegulatory Cleanup Requirements.Pollu- The state of Texas had 473 bond issues outstanding as of Aug. 31, 2012. During fiscal 2012 termination, usually from the same funding source(s) tion remediarion obligations are associated with projects the state paid $467.7 million from the general revenue fund for debt service. from which the employee's salary or wage compensation initiated under federal regulatory requirements. Appli- was paid. cable federal laws and regulations include the Compre- Information on Bond Issuances Note 8 provides details on capital lease obligations. hensive Environmental Response, Compensation and August 31, 2012 Rangeof Long-term liabilities associated with the acquisition Liability Act (also known as Superfund), the National Band I- us tstana•ng Itense t Raten CallRod of restricted assets or long-term liabilities that will be Emissions Standards for Hazardous Air Pollutants and Data Desrtptlionof Issa Number (.nThnoulands) t•M HIfheat Sear Year liquidated with restricted assets are classified as liabilities U.S. Environmental Protection Agency Class V Wells GOVERNMENTALACTIVITES payable from restricted assets. regulations. Genestl ttblistliee Bonds 71 $ 13-564.472 025 6?7 1998 2045 07/01,03 ReIte... Bon&• The Superfund obligation estimates are based on 21 5.174,213 2.50 7.25 1991 2010V 02/Otl GoVemewiealActivities TNat 92 18.73E.685 budgeted projects to cover necessary activities for the Pollution RenrediationObligntions BUSINESS-TYPEAcTrvrIEs Pollution remediasion obligations are recognized in upcoming fiscal year, along with estimated costs for Iearial Obligtion Bonds 89 4299.860 1.37 00D6 1995 2047 02J24/94 Reene Bnds 276 24,809839 03O 15aO 198t 2047 05/04/95 365 20.09.0599 the financial statements for existing pollution sites after future years and phases, plus direct salaries and benefits. Busins.n-TypeAcrisiies Tntal the occurrence of one or more of the following events: Other obligations are calculated based on contractor COMPONENTUNITS Re-ene Bonds 16 397.417 530 7.10 1980 2042 10/08/6 The pollution creates an imminent endanger- estimates or historical costs as applicable. otal 473 $48043$7Ot ment to public health or the environment. Federal reimbursements are expected to offset * The state is in violation of a pollution preven- a portion of these expected costs. The potential for tion-related permit or license. changes due to price increases or reductions, technology Changes in Bonds Payable * The state is named as a potentially responsible or applicable laws or regulations was incorporated into For the FiscalYear rded Augu st3.2012 (An ounts inThousands) parry by a regulator. these estimates. Bonds Bonds Rends Dusa The state is named in a lawsuit that compels it State Regulatry Cleanup Requiremenrta Other RBsnd. Madn's' Baons Outtandlin WgIfid RflVtt Restatertsnt tsnaet WRaw~t Retarded 1t31112 0s Year to participate in remediation. pollution remediarion obligations are associated with GOVERNMENTALACTtvmTtES S11ý314.325 $ 113,782 required under state of Texas law. The Texas :Gerau ObligationRotds S I 119t544 5 188,956 S 332.110 B 62it The suate has commenced, or legally obligated cleanups StResesuBonds 5.4557(17 (It l04.165) (3.894) 1701650 4276.898 17837B itself to commence, cleanup activities. Commission on Environmental Quality operates as 3Gvsennsnta/Aetieities Total 16-975,51 ( I 04,165) 18500D2 502.760 62065 15591t223 562.160 Under applicable accounting standards, estimated a regulatory agency to ensure cleanups are conducted BUSINESS-TYPEACTIITIE.S OGrentObligation Bonds 2955,651 414t460 116/t17 248545 3229.549 129075 expected recoveries from insurance policies and other within applicable state laws and regulations contained siReveBen1, 11.766.1162 1.b07012 6377.20 702,777 19033,469 2,1.5.794 Busiess-'TypeActitici s Total 21.722-513 0 2D21.472 753.545 727322 22.263)18 2294069 responsible parties that are nor yet realizable in the in the Texas Administrative Code, Title 30: Texas Water :OMPONENTUNITS financial statements reduce the measurement of the Code; Texas Health and Safety Code; Texas Occupa- Revene Bonds 336,509 31,t59 290$49 59200 278919 250D53 pollution remediadon obligation liability. A realized tions Code; and Texas Natural Resources Code. anI L$39034,173 A F1t04,t165 _L237,993 B1.206254 $948,507 -35,133,t1160 A220702 or realizable recovery involves the acknowledgment Other PollutionRemediation Activity A remedia- or recognition by the third party of its responsibility. tion activities estimate for land owned by Texas Tech Is slsvenY.sea-ieee et -adw. recesse -n1i~em Realized or realizable recoveries are recognized as assets. University in Carson County, Texas, remains pending as Recoveries from the federal government are considered of Aug. 31, 2012.

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Generol ObligationBonds - General Comments The Veterans Land Board issues bonds to provide Debt.Service Requirements The Texas Constitution authorizes the state to issue funds to loan to eligible Texas veterans for the purchase (Amounts InThousands) several types of general obligation bonds. Each issue of of land, housing or home improvements. Principal and GOVERNMENTALACTIVITIES Gent" lgokxsBOnS mienatiBon- t general obligation bonds is designed to be self-support- interest payments on loans, plus investment earnings, T.er Pdrincpal o Total pd."tua t .tmsTat ing from a primary revenue: source related to the pro- are the primary source of repayment for bonds. 3580115 $ 503.449' $ 861,464 S 172DI5 $ 203.458 S 375.473 2013 $ financed, except for the general obligation The Texas Department of Transportation, 2014 365,923 490906 8563.1 174925 19598 370A25 gram being 2013 394.755 477.111 872M66 162.130 188.155 350285 bonds of the Texas Public Finance Authority, the Water through the Texas mobility fund, issucs general obliga- 2016 3785325 460!,38 838963 165075 180.432 345.107 2017 319N55 44467 74522 167_305 172996 339914 Development Board, the Constitutional Appropriation tion bonds to pay or reimburse the state highway fund 2018 -022 1.736,260 1,989.122 3,725.382 083105 737,704 1.120.709 '023 -027 1914.7350 653.792 3.480,542 1'450.740 470223 1921,563 Bonds and the Texas Transportation Commission high- for the payment of part of the costs of constructing, 3.134$36 1))13.145 106,121 1,11 3Z6 2028 2032 2)16,490 10)88-146 reconstructing, acquiring and expanding state highways. 2033 -2037 221708$ 6033121 2820406 way improvement bonds. 2038 -2042 1,167.695 90376 1261D71 The purpose and primary pledged revenue sources In addition, the bond proceeds provide funds for partic- 7243 '047 45,)0 260 458260 10c964.155 7,717.108 10081343 4,1886340 * 223502 6,443342 of each type of general obligation bond are summarized ipation by the state in the payment of part of the costs Arosnliso ( 15)981 11598) (11952) (1952) Prmsiu 363,793 36.1793 1io310 9.0610 below, of constructing and providing certain publicly owned Discount 0525) (525) The Texas Higher Education Coordinating Board toll roads and other public transportation projects. Tofu) 8I1314,325 N 7717,188 019031513 5 4276898 8 2355202 S 6_532.100 issues bonds for educational loans to eligible Texas col- Sources of pledged revenue for the Texas mobility fund BUSINESS-TYPEaCTnVmYEs oiwtmral ouaaos Bad Rsraun Road lege students. Payments received on the loan contracts include the United We Stand license plate fees, invest- San PrhndDa istni Ttd PdnaIPM Inteneot t.ota are applied to debt service on the bonds. ment income, motor vehicle inspection fees, driver 2013 $ 126.937 S 63976 S 190.613 $ 2,102493 $ 7S7.972 $ 2960.465 The Texas Parks and Wildlife Department issues record information fees, driver license fees and certifi- 2014 142,35 61303 2041138 716970 7280OI 1.444,761 1493744 50351 208P75 786032 695,016 1.481.048 bonds to finance the acquisition and development of care of title fees. Debt service for highway improvement 2016 148A82 55,479 204361 829,022 658-122 14873250 .017 162,710 32.770 215.480 8533532 619A44 1,473.196 state park sites. Park entrance fees, sporting goods sales bonds is provided by the state's general revenue. '018 - 2022 783560 215.780 999,348 3983375 2323f,32 6.507327 '023 -207 6W,320 130C40 820960 3.1650809 1.762,799 4927.887 tax revenue and investment earnings are applied to debt Constitutional Appropriation Bonds arc issued 2028 - 2032 575375 64943 645,518 2607$51 1.1679802 3,775,733 service on the bonds, in support of the construction programs of institutions 2033 - 2037 3.04.120 34,156 338376 2,370,348 712P)20 30821368 203 -2042 10170D 7.415 109,115 1985,124 295984 23181308 The Texas Public Finance Authority issues general of higher education not benefiting from the permanent 2043 -2047 7.84 1053 8137 222A97 26,435 249.132 3,193$67 * 750454 39441321 19.622,752 * 9947323 29,370475 obligation bonds to finance the acquisition, construc- university fund, which is dedicated to the University of (593) (593) (1-102,156) =I02,136) PmAcciion 36-75 36275 606881 686881 tion or renovation of buildings for the use of state agen- Texas System and Texas A&M University System. Debt 116,1501 (16.150) ties and institutions of higher education and to fund service payments on bonds issued are limited to the Losson Refunding (57.858) (57.8581 Toad S 33229549 S 750494 S 3,980023 S19J033,469 0 9.947,723 $28981.192 cancer research. The Texas Public Finance Authority $131.3 million in general revenue funds available for is also authorized to issue general obligation bonds to debt service each year. COMPONENTUNITS Roses. Ban-d Yoar pssn~al Isanu Ttel assist local government economic development projects The Economic Development and Tourism Office, to enhance the value of military facilities. The bonds are a division within the Office of the Governor, issues gen- 2013 S 24.176 S 8324 S 3230 2014 3.909 10.867 14376 payable from state appropriations. era] obligation bonds to provide financial assistance to 2015 4,134 109690 149124 2016 4202 10,498 14.730 The Texas Water Development Board issues bonds export businesses, promote domestic business develop- 2017 4397 10,580 14.597 2018 -2022 26,335 47,944 74279 to provide financial assistance to political subdivisions ment, provide loans to finance the commercialization of 2023 - 2027 53,505 40J107 93.512 for water conservation and development, water quality new and improved products and processes, and provide 202 - 2032 49.737 29.190 78927 2033 -2037 69588 15.198 64386 enhancement projects and flood control projects. Debt loans to defense-related communities for economic 2039 - 2D42 27974 2269 30243 269957 0 185287 455.144 service payments are funded by principal and interest development projects. Debt service payments are fund- Pnoraium 91,62 9J062 received on loans to political subdivisions, repayments ed from revenues of the Economic Development and Total 278919 0 1852"7 5 464206 of purchased water storage contracts and earnings on Tourism Office, primarily from the repayment of loans Outods -siio W.a -~o~c.o ý dosi ,6 nio.iosisdi n 6u, NWosln. temporary investments, and the disposition of debt instruments......

1 2012 - Comprehensive Annual Financial Report - General Obligation Bonds - The Texas Department of Housing and Com- Miscellaneous College and University Revenue the greater city of Austin metropolitan area in Travis AuthorizedBttt Unissued munity Affairs issues bonds to assist in financing the Bonds are issued to provide funds to acquire, construct, and Williamson counties. The bond obligations are The Texas Constitution limits the amount of bonds purchase of homes by, or the construction of rental improve, enlarge and equip property, buildings, struc- payable from and secured solely by a first lien on and that can be issued in any of the general obligation car- housing for, families with very low to moderate incomes tures or facilities. The revenue bonds issued by each pledge of the trust estate. eggories. As of Aug. 31, 2012, the amounts of general and persons with special needs. Loan payments provide institution's governing board are secured by the pledged The Texas Workforce Commission issued revenue ol bligation bonds, other than Constitutional Appropria- the revenues for debt service payments. The agency revenue of the respective institutions and are not an bonds to fund the workers' compensation insurance Iion Bonds, authorized but unissued, are presented in also issued taxable bonds for investment in collateral- obligation of the state of Texas. fund. The bond obligations are secured by a special thhetable below. ized mortgage obligations of federal agencies, to finance The Office of the Governor is the oversight agency obligation assessment imposed on Texas employers...... mortgage loans, and to carry out financial assistance for the Texas Small Business Industrial Development General Obligation Bonds programs. Corporation, a discretely presented component unit of Non Self-Supporting Authorized But Unissued The Texas Water Development Board issues bonds the state. The Texas Small Business Industrial Develop- The following revenue bonds are supported by (AmountslnThousands) . for the Texas water resources fund and the state water ment Corporation bond program provides financing to pledged lease or rental revenue derived from contracts SELF-SUPPORTING pollution control revolving fund. The proceeds are used state and local governments and to businesses and non- with other state agencies, which in turn comes from leg- TF.-ssgnitutnd R iaahneAsthisty 4onds to provide financial assistance to political subdivisions Famnssod Rach L45,nBinds 4755D00 profit corporations for the purchase of land, facilities islative appropriations. Vernso Landand Housing Bonds t1273.372 for water quality enhancement purposes. Principal and and equipment for economic development. The bonds The Adjutant General's Department assumed the WaersDevelapent Bands 6,99ý-20 Collge StudcntIan Bonds I310390 interest repayments from political subdivision loans are are not an obligation of the state and are payable from Texas Military Facilities Commission's responsibilities Tetas tiliuay Vitae BReolvingLots Fsnd 2M0.405 Tout 10.404987 pledged for debt service requirements of the bonds. the repayment of loans and investment earnings on the on Sept. 1, 2007. The Texas Military Facilities Com- NOTSELF-SUPPORTING University of Texas System and Texas A&M Uni- bond proceeds. mission's title to facilities, rental and other income AgrinultanlWatr Cons ation Bfsds 1M,40 versity System issue Permanent University Fund bonds The Texas Water Resources Finance Authority, a pledged to the bonds was transferred to the Texas Trio Public Fiance AuthonilyBonds 3))84.517 TransonadoimmCimuion Transpuration Bonds 4P.00,709 to build, equip or buy buildings or other permanent discretely presented component unit of the state, issues Public Finance Authority. Title will pass to the Adju- W-e tsnirpnsnn Bonds.- ae lopntBilyDisteAsse-dArna Prog,- sayct36 improvements. The Texas Constitution limits each sys- bonds to purchase the majority of existing political tant General's Department Upon final discharge of all WaersIntsstnacture Fand Pmrnsn, 12.13 tem's permanent university fund debt to an amount not subdivision bonds including those held by the Texas bond obligations. Bonds are issued for the construc- Total 7,588,236 to exceed 20 percent and 10 percent, respectively, of the Water Development Board. Principal and interest from tion, expansion and renovation of armories. The bonds Tout Generl ObligationBonds $17993223 cost value of permanent university fund assets, exclud- political subdivision bonds are pledged for debt service are payable from certain pledged revenues, primarily ing real estate. Revenue from investments of the perma- requirements of the bonds. rentals from the Adjutant General's Department. As Revenue Bonds - Generol Comments nent university fund is pledged to secure the payment The Texas Department of Transportation of Aug. 31, 2012, the bond obligations were still out- Each series of revenue bonds is backed by the of principal and interest. The cost value of permanent (TxDOT) issues revenue bonds to finance state high- standing. P]edged revenue sources and restricted funds speci- university fund assets as of Aug. 31, 2012, excluding way improvement projects. Pledged revenues include The Texas Public Finance Authority issues bonds fied in the bond resolution. The purpose and primary real estate, was $11.8 billion. A comparison between the all revenues deposited to the credit of the state highway to finance the acquisition of real property and to con- Pledged revenue sources of each type of revenue bond legal debt limits and the actual bonds outstanding at fund, including dedicated registration fees, dedicated struct, equip or renovate buildings for the use of state re summarized below, that date is presented below. taxes, dedicated federal revenues, amounts collected or agencies and institutions of higher education. The received pursuant to other state highway fund revenue bonds are payable from specified pledged revenues, col- Self-Supporting Permanent University Fund Bonds laws and any interest or earnings from the investment lected primarily from occupant-agency rentals. The Veterans Land Board issues bonds to assist (Amounts in Thousands) of these funds. The Texas Parks and Wildlife Department issues in the construction of skilled nursing care facilities for The Texas Department of Transportation Turn- bonds for infrastructure repairs and construction. The legt Atuat Bd.n BAuthoriz veterans and to make land and home mortgage loans to Wnsbsttst. Psya"ti tut Untssut pike Authority, a division within TxDOT, issued bonds are payable from rent payments, funded by state veterans. The bonds are limited and special revenue obli- Uniesity of T.. System $2.356,149 S 1.431tDt30 $ 9253.t9 bonds to pay a portion of the costs of planning, design- appropriations, made by the Texas Parks and Wildlife TenosA&M Uniserity Syspn- 1.t7S.174 730295 4470879 gations payable solely from the income, revenues, receipts ing, engineering, developing and constructing the initial Department to the Texas Public Finance Authority. Tt. l $343.tS323 $2.161325 $1373.198 and collateral pledged tinder the related trust indentures. phase of the Central Texas Turnpike System located in

ý012 - Comprehepsive Annual Financial Report t Comprehensive Annual Financial Report Pledged Future Revenues The Texas Department of Transportation, the Demand Bonds Any bonds so tendered will be purchased either by the Pledged revenues are those specific revenues that are University ofTexas System, the Texas Public Finance The Office of the Governor, the Veterans Land proceeds of the remarketing of such bonds or, if not formally committed to directly secure revenue bonds. Authority and the University of Houston System had Board, the Texas Department of Housing and Commu- successfutlly remarketed, from amounts drawn under a The table below provides information on pledged rev- $3.5 billion, $1.7 billion, $181.8 million and $80 mil- niy Affairs, the Texas Department of Transportation, letter of credit, liquidity agreement or standby purchase enue and pledged future revenue for the state's revenue lion of Direct Payment BABs outstanding, respectively, the University of Houston System and the University of agreement of the respective agency until such time as bonds. as of Aug. 31, 2012. Texas System had outstanding demand bonds as of Aug. the remarketing is finalized. As of Aug. 31, 2012, there 31,2012. were no purchased bonds held by liquidity providers Build America Bonds Variable Rate Bonds A hbnd holder may render any of these bonds for under the terms of the varinsr agreements. Details are The American Recovery and Reinvestment Act Nine state agencies had a total of 108 variable rate repurchase prior to maturity, usually every seven days. presented in the tables below and on the following page. (ARRA) of 2009 was implemented in February 2009. bond issues with outstanding balances as of Aug. 31, As part of this federal legislation, a new bond pro- 2012. Most of the issues' interest rates reset every seven gram called Build America Bonds (BABs) was created. days. The remaining issues' interest rates reset daily or Demand Bonds August31, 2012 Authority to issue BABs expired on Dec. 31, 2010. monthly. The potential volatility for related debt service umbasof PriscirtO staefly Relate, increases with these interest rate reset provisions. tersost Psenrt Latsenof WISuidntefrt BatdIs.- Apsaseet OWN ad.e Ptnlterssd) GOVERNMENTALACTITItES Ckrnet. Oblitas-, Bonds Oftftr of the GJoernor I Pledged Future Revenue Tseas paometostntfTranspornation 2 3 ( - 229,130 S(Amountsin Thousands) 4 .3 2 0 7,1

(IBiglposG-1a~tlBoost Gv~ma Rsi:ne.1p Baste Rtueoen Bonds Texas Depoemermurtoronpneetion art ac10 ati. Bat.s TrOd Plteded Revenue Requiredfor Future Prinoipat adItetresotroEn xierin Bondxs $11393$70 $16.443.542 S29.570.476 S455,145 Governetsl ArtiririreTolu 5 4 2 5 S 374t130 CurrentYe-r Pledged Rternue 395.566 6A69,706 13.595958 42 X5 Comrl Yr Pricipal and hnrestpaeid 337.642 381.344 1,464,461 40.529 BUSINESS-TYPEACTIVITES ,orrel ObligatioeBouds Tern of Cominlt Yesr EndingAoSuo 3 1. 2039 2030 2047 2012 VeteransI.and Board 45 45 tet 1.771425 Tota 45 - 0- T ,771t425 Preonugageor Reenue Plrdged 9O I%100% co0 loto tRerenorBoeds Unitersity ufTe-as Systen 4 4 (bt I 344.315 Teets- unrtrst uSHosing nd Cuernity Attoin 7 7 () 294,440 Unitersity of I Ioustau Sys-t i i tb) 8390 Too i 2n 7 0 5 1 M47.ta

Bostors5T~N AnritirusTuot 57 52 (1 5 S 3 4_1".70

COMPONENTUNITS RevenueBonds Oft iof thr Goernor Courpoent UnitsTOut I( 0 I s 2012(5

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2012 - Comprehensive Annual Financial Report - Rnfow$ýareofTex45 974-2012 ! ConiprehensiveAiiriua[FinaiiclaI Report - I ...... Z......

Early Extinguishment of Debt Demand Bond - Standby Purchase Agreements The following table presents early debt extinguishments in fiscal 2012. The source of funds used August 31, 2012 for the extinguishments included loan repayments and other available funds. Seated Annual An- 11 Bandita Liquidiy Teenaltadla Catuateinflrea Agrtutnenta F. Date Early Extinguished Debt Issues Banu Bilbao VaayaAggenatria,S A. I 0o0875% 11/07/16 (AmountsIn Thousands) BankofaTkyo-Mi-ubiuhi UFJ 2 0.5600% 08/22/14 BankofToIkyo-Milubihhl LUFt 3 0.5250% 07131115 BUSINESS-YPBACInVITIES CaliforniaPblic EmployeesRetirement System I 0.0500% 12/13i13 General ObligationBonds Comptrller of Public Account's I0 0.1200% 0831/13 TexasWater lsielopmenel Board $ 23P05 JI. tNnoSanCia Bank I 0.n5010% ~3117/4 Vetenan LandBoard 1.530 I.p.Mqngs Cha- Bank 9 05600% 07103/14 I P. MorganChase Bank 3 0.5600% 09119114 RevenueBonds amndeabankBnesu-Thufingen Oiroeeneale 5 0.5500% 06/30113 Texas WnrkfkteCommission 169095 LandesbankHe a-Thuriugentlaireunanle 4 035010% 127511I5 Texas Deparementof Housingand Community Affain 99.247 By)aiBank u Ca ..a 1 0.3"0% 030)B).5 Tesx WaterDenelnponm Board 32.975 Statn Sirent Bankand Truat Company I OllfiO% 12/13113 VueteansLand Board 21,795 State Suet Bard,and Tnst Company 4 0.2950% 11117/14 Utnineity nfTexasgSitm 3,4(0 State SteentBank and Trust Company 4 02950% 04,03115 tUnivnnIiaynfHctoantn Syttere 800 StaueStreet Bank andTrust Company I 03750% 0522;S15 SumitomontKiiui Banking Corp 0.6000% 0520/I 3 Bajnirns-• p Anti/fties To.al $349937 Suamsitat MitsuiBmaklng Corp 1 06000% 10t/)1)13 SumitomoMitsui Banking Corp 2 03000%1 COMPONENTBNITS 081121)5 BavnnuaBends Walln'araBank, NA I 0.4900% 08r,5114 WZI aFargoBankNA I 0,1900% 12/14/14 Offiee at hn Gove.rnor S 40. O0 Total 56 Ceompartn,Units Total $ 401501 2 Cunlptalkroaf Fsb/n¢A• aTeaasnyOenrationsniesiar•.. L.. Refunding The table below summaaizes bonds refunded during fiscal 2012 to lower interest rates or to Takeout agreements are used by the Texas Department ofTransportation to provide an alternative debt instru- restructure debt service requirements for cash management purposes. ment to replace any repurchased bonds that were not remarketed within the prescribed time constraints. The table below provides the estimated impact of such an event. Refunding Issues (Amounts in Thousands) PanWa.I. Demand Bonds - Takeout Agreement Provisions at Par Cah Roar Anguat31,2012 ltpesaaf Refun VdLaBets Dff FetsuatEd Rd-Ntt0t hast Beteardedintrasen BDieraten) tarn BebtSwtaim GOVERNMENTALACISVITES (In Thuands)t f ate Bad. Genaral Obtliation Bonds GOVERNMENTALACTIVmES Texas WatereDevelopmentBoard CurrentRefunding $ 37940 $ 51.565 521,899 $100611 GenaeralObligation Bonds GovernmentalAati'iies Toat 37940 51565 21 399 10.611 Tenx. Deparamentof Tranporation Te.as Mobility Fund Bonde BBSINESS-TYPEACTIVITIES Series2003B S 90998 lal 10440% 2% the.greaanraof Reenae Bands BankPrime r t 1W% Unies'itly of H.-au System CeTent Refunding 75 t 87,450 12 93 11.418 Daily PedFPi Rate+ 2% Tea•asiAM Uie.ity System Adia-n Refunding 70A00 79.715 135040 10974 TnxaasA&MUaivaersitysyaenm CuenntRefuniati g tots tot,15 t1 5 or 8% Series700lB 15s90 M, 425% t%+dhegetatanaf: Uittersily fTexas System AdtanaeRefunding 47,465 53090 12030 03% . Daily PadFds Rate Texas Tech UniversitySyttere Aditne Reafunding 49395 52,460 9265 OOB or Bankprime atse TexasTach Ili-ieesity System Cuent Refunding 31,645 31925 I1.1142 7.926 Resenae Bonds tlnntmaltyof North TexanSystem Ad-anar Rnfunding 27,785 29,520 (5.443) .,796 TunxaDepartetnl oa rianapoatiann TeasTexas StaleSlate UninetsityUniverity SytemSystem CtutrentAdvnneRefunding Refunding 109702330 12,5353200 0(1974) 050) 13558619 staoe HighwayFund Be.e.e Bnads Serien2006B 108350 1') 525% 2% t.te greater o:- Tnt StaieT•aniuaatCaoege Ad-vane Refunding 5,990 8355 412 544 05% + Daily FtdFds Raon Texas Wanr'stUnii enity Adv-ce Refueding 6,339 4D65 10047 906 or Rankprins rlte Tea Woman'sUniaersily CtrrentnRefunding 11,576 14,795 !912 1 955 Total S 358248 Bix s.TtypeAcivilies To-l 541030 377385 53.715 56.,700

Total $378970 0423050 $75,614 067211 -1tnatsllae :6nra) tpat,.. l&baaaais aub.11a a... y -teaa.natt y..era m., theaaitnadaittufea, arda Oarnnftd•ntdlali o alneiareilli.$2,apt f.euseitllnd.dcf-satni/nl bonds.

lii aylcenadei.- CopreentasaiveAnnual FaaninanOeueaia~epo te ania n eiattln/d 95 1E 120222. ,..~ - ..220Z .rtaol... -

Defeased Bonds Government Code, Section 2306.555. The 501(c)(3) opment Corporation, a discrete component unit of the detailed in this note. See Note 7 for additional informa- Texas defeased various bond issues by placing funds tax-exempt mulsifamily mortgage revenue bond pro- state, predates the implementation of note disclosure tion on derivatives. in irrevocable trusts in the Texas Treasury Safekeep- gram provides long-term variable or fixed rate financing requirements and is reported in the financial statements. Debt Service of Swap Payments ing Trust Company (Trust Company) and external to nonprofit borrower/developers of new or existing Estimated INTEREST RATE SWAPS financial institutions to provide for all future debt ser- multifamily rental properties in order to generate and/ Using rates as of Aug. 31, 2012, the debt service ind fixed-rate vice payments on the old bonds. Funds placed in the or preserve affordable rental housing. TSAHC may Effective interest rate swap agreements are consid- requirements of the state's variable-rate payments were estimated Trust Company to defease $209.3 million in bonds are finance single developments or pools of properties ered hedging derivatives. The aggregate debt service bonds and associated net swap included in the state's financial statements in an agency located throughout the state of Texas. Borrowers must requirements and associated net swap payments are and arc presented in the following tables. fund. The trust account assets and the liability for all agree to set aside a prescribed percentage of a property's other defeased bonds are not included in the state's units for rent to persons and families of low income. Pay-Fixed, Receive-Variable Interest Rate Swaps: financial statements. The Texas Water Development TSAHC finances properties under the program primar- Estimated Debt Service Requirements of Variable- housing Board defeased $10.5 million of governmental activity ily through the sale of tax-exempt multifamily Rate Debt Outstanding and Net Swap Payments revenue bonds. general obligation bonds this year. As of Aug. 31, 2012, (Amounts in Thousands) the following amounts of defensed bonds, at par, remain The bonds are secured by the property financed and latrind Rail outstanding for all bond issuers. are payable solely from payments received on the under- yeaw PtInlait Ibstmt Ih"i-.sAnt otal i...... lying mortgage loam. TSAHC, the state and any political 2013 $ 1061,45 $ 5,708 $ 118,990 $ 230,743 subdivision thereof ar not obligated in any manner for 2014 110300 5,517 114$942 230,759 Defeased Bonds Outstanding 2015 123.595 5321 110t38 239554 (AmountslnThousands) repayment of the bonds. Accordingly, the bonds are not 2010 131,675 5J093 106040 242810 2017 132D)90 4A52 800.940 237,08 reported as liabilities in the accompanying statements. 2018- 2022 642A45 20.669 430950 t 094A472 * GOVERNMENTALACTIVmE there were 14 series of mod- 2073-2027 701.80 14,508 3050026 it21.494 Gmenel obligaltno Bonds As ofAug. 31, 2012, 2028-2032 647.60 0597 179.936 8360163 Toss Public FienacesAuthority $ 2•1.61f 10-.IM tifamily housing revenue bonds outstanding with an 2033-2037 543.360 3,745 79.134 626244 Texas WaoerOepetnnatae Board 2638- 2042 166095 369 50897 172.321 Re-eeo nueos aggregate $183 million principal amount payable. No 2043-2n47 195 t 196 TexasPublic Finaoo,Authoreay 29395 Total $3305.470 S 74.459 $1.5523723 $4932052 Comsission 80625 bonds were issued in fiscal 2012. Texas NationalResearch tLabomamy . i G-sermeneal Actvities Total 249.180 ...... The Private Activity Bond Surface Transportation BUSINESS-TYPEACTIVITIES Corporation, a blended component unit of the state, Genernt ObligationBonds Pay-Variable, Receive-Variable Interest Rate Swaps: Tosm Waser1setopmem Boeard 37.995 issued two series of bonds in the aggregate amount of Vetens Itand eoard 25300 Estimated Debt Service Requirements of Variable- RneenouBonds $1 billion that remains outstanding as of Aug. 31, 2012. Swap Payments tUnimersityof Tee• Sys.m 1,496.163 Rate Debt Outstanding and Net Texes Water OrsetopmentBoard 1739845 The proceeds were loaned to LBJ Infrastructure Group 121.5Wi (Amounts InThousondsl Texas A&M U onveySys-m I.LC and NTE Mobility Partners LLC to finance the T... Toch ttSonvesieySystem 52,460 Voalw Boaos 29.880 buixas Rat.* U(innisty of NorthTress System development and expansion of public transportation Y, Princpal. ntBert Te Texas SBaeUntiersity System 29.175 TesamWemos, UoMrsily 4/D65 projects. Debt service is funded from loan and interest IDI6 2013 B 890 $ 76 $ (756) B 210 StephonF AustinState University 2014 950 74 (755) 269 -T971,659 repayments from the borrowers. These bonds, previously Businct-atype Aoinilies Total 2015 s01o 72 (7541 328 $2220930 recorded as a long-rerm liability, were determined to be 2016 1070 70 (7531 386 2017 1,135 67 (7541 448 conduit debt. The financial statements were restated in 201S.2022 6830 292 (3,7711 3-151 2023-2027 9250 201 (3,7671 5.684 the current year and the conduit debt is only disclosed in 50i4,131 Conduit Debt 2028 -20 2 I09t9 80 these notes. 2633 -.2057 1,170 (1,5831 The Texas State Affordable Housing Corporation 2035- 2042 Conduit bond debt for the Texas Department of Toal $ 33300 B 934 $ (15a5ot B 103576 (TSAHC). a discrete component unit of the state, is Homing and Community Affairs (multifamily housing authorized to issue statewide 501(c)(3) tax-exempt bonds) and the TexasSmall Business Industrial Devel- Ise,Ieen." M mette.eeebeIk,-dy ew. eyýd,nssi- e.eaeae p. netee Sta multifamily mortgage revenue bonds under Texas e'islM. - - oeonlsthea.Ceaana-,iweateo.m -neeexeik-Pt~

1 2012 - Comprehensive Annual Financial Report - Fcýrni-ý State of Texas 97 .~s3033~.2.~ ~ JTZZ. 232*~.2 ..2~. Z~...

Pay-Variable, Receive-Variable Interest Rate Swaps: Summary of Derivative Activity Derivative Instruments Estimated Debt Service Requirements of Fixed- (Amountsin Thousands) by Entity and Type Rate Debt Outstanding and Net Swap Payments to Fair umuo .it. V.3I. Armotrs Entitilyntl05f Dedsaine10000000. (Amounts in Thousands) GOVERNMENTALACTIVITIES Vetoe.ns LandBoard (VIL) Itoea3,nv,4Der,,s~i''s tired-51.tBoosn~ InterstRate Hedginguod inestment deritives BsuisSwaps S 33.131) S 25.121 S 4(03400 Year pdwipde Is~noter S.rp.0sNet Total Fulurs 7 ,352 34.872 Teas Department of Housing andCommunity Affeis (TDHCA) 2013 S 4,185 $ 65.095 BUSINESS-TYPEACTIVIES 2014 5,115 65828 0 Hedgingdcsvativos (5g00)(5,067) 64065076 C1s Flow-Hedge 2015 b045 65b23 66012a• Pay.FixedReeiv-Variable Inlate- Rate Swaps S 202J0303 S(770.766) $3.345,785 UniversityofTexas System (UT) 2016 6955 6.,379 CommodityFt anrds (2 2441 322443 960 I ledgingand intestm0ent dCrivaives 20337 $85 65,101 (540366 68,330 .28,316) 463,962 20 -2S•022 181040 311 338 I,'ertme-u erni,'v~n- Texas A&MUtnlenslIy Systeme (&Ml 20123- 2027 31050 245-3133 022,902) 53361 Psy-Fi.ed RNe¢oMn.Vrlble1n.1-1 Rae Swaps S 539 $ 990 S 135,140 Illdging sod derivatioes.noessn.nt 2028- 2032 485,245 151,159 (053 636,3319 Pay-VauableReeoioe-Fised Inter Ra Swaps 32 32 20,25 2033 - 2037 340145 32.472 asuisSoups 374 7.729 914.975 Texas DeparttmentofTransportallon CTKDOT) To-1 $ 1-3480,85 $ 3 068009 S (79.8703 2,336.813 CsodtsD'faut Swaps 3681) 152 137.273 Inesttment I•ennosoes Equily Swups 554 1,354 596.856 Cu-rsy Swaps 3503 150) 5D54 permanentStmool Fund (PSF)( Cootvdity Swaps (214) (214) 12,161 Innstmerndtrienoitet Forwards (122,710) (32.710) . 2.451.,93 The tables were prepared assuming current interest ftoes and swap EmployeesRetirement System of Texas(ERS) .543) 1,336.2bl Integaent derinattes index relationships remain the same for their terms. As rates and index rela- Oplioss 3,9 42,476 24,321,722 tionships vary in the future, so will the resulting actual interest payments Teacser RetlrementSystem of Texs (TRS) FIDUCIARYACTIVmES Incstmem derinaties and net swap payments. tnoe-,n, D'Oerlooles Pay- ed Rec-ie-Va-,ible InterestRa8 Swaps S (3.415) $ (699) S 60,532 Py.Variahle keeitn-Fi-ed InlerestRaue Soups 2,561 777 41.192 *n1t1nuoeot.utootOf~d istnj~ointly mnagd b TotalReumt Swups 197 21,316 leeTexas Edooo Agency t Tess 0000,lende 1.131.603 ,ladI o susepeoly'm rdoood..0a Cndie DefauhlSoup, 247 . 0.0..0...... Investment derivatives are entered into with the Fo-v&s (42 21.320 b.124,786 p s...... utre-s (635,424. 90t38ý82 intention of managing transaction risk, reducing inter- W -rat 6.427 32.921 10.445 Opltsns 4'910 4.830 est cost, or reducing currency exchange risk in purchas- 38.134 Derivative Instruments ing, selling or holding investments. Ineffective hedges ..u,05,.e.nsnoods0,000 Derivatives are financial instruments whose values are also reported as investment derivatives. klbdfltu'.H 0•- 00 1 ,IMBiI 33uh -, tz•t•doIUOhe ofttheoor,,od,o do.b mol 5 toslsoSL~ 50.3 tOnI~o5d are derived, in whole or part, from the value of any ...... one or more underlying assers or index of asset values. Sumnmary of Derivative Activity Derivatives include swap contracts, futures contracts, The fair value of effective hedging derivatives is FairValue swap associated with Vet Land Tou Ref Bds Set '2000, options, options on futures contracts, and forward con- recorded as derivative instrument assets (positive fair Derivative instruments are recorded at fair value. the knock-out is permanent once the option is taken at tracts. value) and derivative instrument liabilities (negative fair The fair values of the interest rate swaps weeredeter- the discretion of the counterparry. In the remainder of Hedging derivatives arc entered into to reduce the value). The cumulative change in fair value of effec- mined using a combination of methods as outlined the swaps with knock-out provisions, the knock-out is overall cost of borrowing long-term capital and pro- tive hedging derivatives is reported as deferred inflows below. mandatory and is periodic in nature, with the knock- tect against the risk of rising interest rates. The hedg- and deferred outflows. The state's cumulative deriva- VLB and UT used the zero-coupon method in out period corresponding only to the period during ing derivatives primarily consist of interest rate swap tive activity as of Aug. 31, 2012, is summarized on the determining the fair values of their effective interest which the respective barrier is breached. The knock-out agreements entered into in connection with long-term following page. The notional amounts are presented rate swaps. Several of VLB's effective interest rate swaps provisions are an integral part of the associated swaps, bonds. The derivative contracts enable the state to issue in U.S. dollar equivalents, with the exception of com- contain a provision for the state to be "knocked out" and the fair values of the swaps include the effects of bonds at a cost less than what the state would have paid modity forwards, wvhichare presented in million British of the swaps by the respective counterparties upon the the knock-outs. to issue conventional fixed rate debt. themnal units (MMBTU). breach of certain predetermined barriers. In each of TDHCA based the fair value of its swaps on market these cases, VI.B was paid an up-front option premium conditions as of Aug. 31, 2012. Fair values were directly by the respective counterparries. With regard to the obtained by the counterparoies to the transactions and

I 201z . Compreheinsive Annual Financial'Reptort "W 'ýý99 1 100'ýý" , 'Aw ý 4iz Annual Furvantlal Report ""ý'1or - .z'S7hs/s10)/00I~ -

rate swaps determined to be hedging derivatives are separately verified by an independent third parry. Valu- Hedging Interest Rate Swaps: ations are based on mid-market levels and may not designated as cash flow hedges. The state also entered Significant Terms and Credit Ratings reflect the amount a counterparry would have required into commodity forward contracts to hedge against the (AreountssnThousandtl in the event of ar early termination of the swap trans- future purchase of natural gas. The specific objectives NMoralrt ttctltr* Misaluy action on that date. For swaps with no pre-defined for each category of effective hedges are summarized AslniodatedBnrd hissa A-ost Data Data Ter

notional amortization schedule, a valuation was per- below. VETERANSLAND BOARD - PAY.FIXED,RECEIVE-VARIABRL INTEREST RATE SWAPS formed based on an assumed notional amortization. Pay-fixed Intemst Rate Swapr.The combination vetLT.g WtBds See '95 $ 37,540 10/9/1995 1210t/2016 Pay5.52%; necrei AetuadBond Rate Futures contracts are marked-to-market daily and of these swaps and variable rate bonds creates synthetic VetLand Ret BdaSee '99A 202945 06115/1999 12D/512018 Pey 5.112%;eeive 68%0 f 6M UIBOR VetLand Tax Ref AdsSec 2(O0 36$35 12/•0O(250 12/O1/2020 Pay6.106%; re-eie I0T% r 61, LIBOR valued at closing market prices on the valuation date. fixed-rate debt. The use of synthetic fixed-rate debt has VecHsg Fund ti AdsSer 2001A-2 20M) O3/22rWI2a 12-O1/2029 Pay4 99%;rneive 68% of I ML BOR VetHsg uPndI Bds Ser 201(C-2 25010 12/1502301 12/01/2013 Pay4.365%; eenise68% of I M LIBOR A daily variation margin (the gain or loss) between historically lowered the state's borrowing costs, as com- WelLand B&s Sex V02 Vett•e Fund TEd, Ser 2002A-2 16.480 02/21/2002 12,II/2032 Pay4.14%; r- i e 68% oftM I LSBOR the daily value of the contracts and the value on the pared to the borrowing costs associated with the issu- 2305O 07110/21002 Oa61O/2033 Pay 3.8?25%;esive 6t%of I M LtBOR WetLand Ta. Raf bds Sce 2002 27,685 12f5/21"002 112021 Psy 4.935%; m/rI.10% ofO6MLIBOR previous day is recorded and settled in cash with the ance of traditional fixed-rate bonds. Vet Isg Fund I Tax Ref Bds Snr2/02B 19.780 17101/2002 0PNOl/2023 Pay4.91/%; ereive 100%ofa6M LIEBO VetHf FundI BAdsSer 2003A 32,130 03/04/2003 On/S01/2034 Pay 3 t304%;neaie 6e% of IM LIBOR broker the following morning. Options and swaps are Commodity Foerward The state enters into com- Wt Hsg Pund ITBds Ser 2003B 33,603 1W12212003 t/O0112034 Pay3.403%; r-eee 64 %af EMLI BOR Vettand Tax Ret AdsSee 2003 21.165 12/01/21103 12/01/2023 Pay 5.123%; rceae 100%of InMLIBOR valued using broker quotes, proprietary pricing agents modiry forward contracts to meet the objective of VelHeS Fund I Tax Ref Bds Set 2003 47$65 12.01I/2103 Oee112021 Pay 5.19%;eraseri IOtI f6M LIBOR or appropriate pricing models with primarily externally hedging the risk that changes in the market price of VetHsg Fund 1Tax Ref Rds Ser 2a/4 16,935 0M/0/I/204 12101/2024 Pay 3.45%; -eiren I100%ef6M LIBOR Vett Isg Fund 11Bds Ser 2004A 36,475 09/15/200d4 /2/[112034 Pay 3.68%:ne/ene 68%ofnM LIBOR Vcr~ndVI Taxef [1~dsSec~re2 ' verifiable model inputs. natural gas will adversely affect the cash flows of the 210D95 12J01/t-00.4 12,0t/2024 Pay 5,455%;necer 100* of 6M LIBOR V/erHat Peedtt las Ret Ads Seer2fl(4C J) 32,305 12/01r2004 0601I/2n02) Pay 5-348%;er•r l/O%0f IMLIBOR Vet teg PeedS] Ads See 2tO5IA The fair value of forward currency contracts is expected purchase of natural gas. As of Aug. 31, 2012, VetLard Tar cftBds See2O05 3606)0 112/2402505 0(/MI/21(35 Pay 3.279%;r-iv. e 68% f IM LI BOR 59,585 12/01/2005 12101/2026 Pay 6.517%;r../iv. 100/ of 6M LIBOR estimated by adding the forward points to the corre- the outstanding commodity forward contracts include etHst Peedtstl Tar Ret AdsSee 2/0OSCD 23-,90 12/0112005 09/O1/2.[26 Pay 5.145%; -enesse100% of InMUBOR sponding spot rate. These rates are then applied to the contracts with fiture expiration dates extending from VetHel euedITar Ret Bdt See2005(7 outstanding currency exchange to derive a change in September 2012 through August 2013. Contracts will 14,525 12M)1/2005 12/01/2023 Pay 4.929%;ericv, UJO of I M LIBOR valuation. be cash-settled on the expiration date based on the New Vet1st Peedtt Bed/Se 2000A VetLand Tie Ret AdsScr 20066 37,715 004/1/006 12/91/21036 Pay 3.517%; enee 68% of IM LIBOR York Mercantile Exchange (NYMEX) market price. Vetig Fund 111etTahRef BdrSi, 2O0OB 26335 06mi1230 12,01/2027 Pay 6.5414, rereive 00% of 6MLIBOR VetHsg Fund ItTar Ret AdaSee 2/060C 38.570 06tD1/2OD6 12/I1/2026 Pay 5.83%; -W/e 100%of IM LIBOR HEDGING DERIVATIVES 19J)30 06/01rZOM 12./12027 Pay 5.79%;eree/ve 100% of 6M LIBOR V LandTar lref dc Sec 20/OR 20.745 069/1/200 120(12026 Pay4.61%0;rnneiIxe103%of 6MLIBER The state entered into interest rate swap agreements Significant Terms and Credit Ratings Vet tsg Feed StAds Ser 2006A Vet LandTas Rtf Ads Ser 20DhA 3u,.130 092 X'20 312/2a0.16 P'yt.689%;elve68%,nf*M.OLtOR with various counterparties, all of which are highly The significant terms and credit ratings of the VetHIg Fundtt Tax Refttds Ser 2006B 343115 12/01112006 IM12/12122 Pay 6.13%; re/c, ((00%of IM LIBOR 39,560 12M(112006 1201/202n Pay 5A61%;rsealv• /09%of IM LIBOR rated financial institutions, to manage various risks asso- state's hedging derivatives as of Aug. 31, 2012, are VerHat FPed 11Tae At BAdsSee 2(07C ciated with the state's debt programs. Each of the state's shown in the following Tables.The variable rates are 33360 12101f.007 06101]r029 Pay 4.656%; re/esie I0U%ot InMLABOR Vs taHgPeed A1 Ad Snr 2/017A interest rate swaps is a contractual agreement entered quoted in terms of a percentage of the London Inter- VHgLand T I Ada See2007B 393810 02/22/2007 06/01/2037 Pay 3.645%;r-ea/en 68% of I11 LIBOR 42,005 06/26/2007 0D/O1/2038 Pay 3.712%;erasive 68% of I M LIBOR into between the state and a counterparry under which bank Offered Rate (LIBOR) or Securities Industry and V, tHsgFund 1s Ser 2006A Vet leg PendST Rtds See 200HS 420D95 03/26/20[1 12/OtI2018 Pay 3.189r%:re/ee 6B% of IM LItBOR each parry agrees to exchange periodic fixed or variable Financial Markets Association (SIFMA) municipal swap WHag FundIS Tax RefAds See2/ 43,400 09/1 /2008 12/01/2038 Pay 322.M; teeni/e68% of I M LIBOR Vet Her Fund 1Tax Ret B&dSea 2079C (5.395 12/0(IP20)9 12/01/2021 Pay 622%:ncerv 100% of 6M LIBOR payments, based upon a stated notional amount, over index rates as noted. Standard & Poor's and Moody's Vet IMg FundIT REd dse e2020 633.50 12,01/0)9 "0)U/2031 Pay 3.45230;neee 10011of 6M L BOR 6321 06R/101/ 0 " 2/l. oMt Pay 3A5.4%;raine lOatof M LIBOR the stated life of the agreement. The net differential Investor service credit ratings are disclosed for each VA F Bds20t0 Scr 8 paid or received is recognized over the life of the agree- swap and forward contract. The notional amount for VetTis ReFundsBSr 200811 73.935 08/20/2Ot0 (2O1/2040 Pay 2-3095%; eeiae 6e% of I M LIBOR 160120 12101/2010 12/01/2030 Pay 5.209%;teni/ 100%eofIMIABOR ment as an adjustment to interest expense. Interest the commodity forward is expressed as MMIBTUs. Vet Taf ReFAds See 20 r10E 47,1W! 1201/2010 00/0(12032 Pay 2.79%;nenei 1(10%0of0I VMEBOR Vet BdaSur 20I I(A 73,215 Vel AdsSee 2009C 03/09/2011 0NO1/M041 Pay2,675%; rnea 60%00 oa ISMUABOR 74,140 0W253/20(1 12/0(/2641 Pay 2-367%;ne/ 6r % of I M LIBOR Vrt Tattds e 2)11( 2 74,993 1215/20I1I /0601/2042 Pay 1.91/7%;-r 68% of 3M LUBOR Vrt AdsOre 20/12C 74995 V.r B&dSer 2012A 05/23/20(2 I2/M1/2042 Pay 1.692%; -/re 62%00 or 3M LItBO V B&eer S.d 2 2HSee1 4 II(//I)2112 12/01/2042 Pay 1.447%; ec/ne 8% of 3M lIBOR V., Tax Rxf Bd&,Sr 1994A-2 21,795 0/0(1/20(7 (20(12033 Pay 3.76%;n•en/ 008%oa I M LIEGR (7-onresadnt- fo/,n/aosingpe

201ý - Comprehensive Annual Financial Report - For The $tataof Tcxa5ý 7 1011 11 . . : . . IMUCIOMM Hedging Interest Rate Swaps: Hedging Interest Rate Swaps: Significant Terms and Credit Ratings (continued) Significant Terms and Credit Ratings (contlnued) (Amounts in Thousands) (0Amountsinthousands) OpF1 taoentcmt Knock-Ot PomsAuto Cradit Naiomnal Elfflou. Mase/ny AssociatedBond boss Bassos Rosa/od RLungn Atuon/atedBond blose Anutnm oata Dats Tas,

VETERANSLAND BOARD - TEXASDEPARTMENT OFHOUS/RG AND COMMUNITY •AFFAIRS- PAY-FIXED,RECErIE-VARIABLE IBTEREST RATE SWAPS PAY-FIXED,RECEIVE-VARIABLE INTEREST RATE SWAt PS VetHtg Ref ttdsSee "95 N/A S A- / Boot 201>B Siogle Fumily B Ve Land Ref Bds Sr 'WA N/A A- /Boa 53/AX) 09/01/25004 09)01/2034 Pay3.84%; reeive 63%1,fLIBOR . -10% 2()4D Single Family 355/A0 0110/005 03/10/2035 Pay 3.64:nreeiuve Luosseef It/lu gnoautrof (al V, I/uandiT Rf B&dSne2000 tIoXLABOR >= 7.0•% 237/Q). AAA/Aa2 65%of /LBORundb)/ 56% of LbBORV .5%) Wt Hsg FundIt BdsSne 2Nat:A-2 N/A A- / B.2 and LIBOR Wt:Ig Fund t Bis Su 20DIC-2 NIA AAA /An2 2WSA Sing/nFamily 67,475 00m1/2005 //091/2V036 Pay 4 01%:nucen/u L-.ss of (the gnater of a0 VeiLand Hd/ Se, 2002 N/A AIA2 65%of LIBOOand (b) 56%of LbBOR + .A5%) Ve HNgFund 11Bds See 2002A.2 N/A A/ / A.l and LIBOR W LandToo Rdf BidsSn 2002 6M LIBOR -= 7.00% 2.085 A/A2 2006H Sitgle Family 36^ 1[/15/2006 09t011OS25 PFy3.86%; nnive63% of LIBOR +30% W/:T6 Fund Tau RefR d Slt 2002B 6MLIBOR > 7)07O 2.165 AAA / An2 2007A Si/gle Family 94.820 06/05/D07 /Fd///203A PaFy4J1%D I euiv, Less of lthI grnn, ofuto W gllFuuI Bd SeB J"A NIA Au/Aol 65% of LIBOR and (b)56% of LnBOO+ 4AS%) and I.BOB Vet RsgFunud`dl[B& s 23B NIA AAA / A.2 VnTLand To Ref Bis See2/03 I M .IBOR>= 7 D% /A96 A+/AsAt UNIVERSITY OF TEXAS SYSTEM - t FundtteRef,sg Bds Ser 2•03 6M .IBOR> 7.0u% 4.470 AAA6/As2 PAY-FIXED,RECEIVE-VARIABLE INTEREST RATE SWAPS' rogad' . aTfaeRefBd.SeOt4 6M LIMBOR>= 7% 1/442 A I As3 RFS BRods2007B 16650 /72/20/2027 00/ti1/2034 Pay3.•05%; oiný' SIFNMA V/ Itg Fuod I[ Bds See,A04 B N/A A+ / A.3 RFS Bonds 20M7B 166.50 12/20/62/07 0B/01/2034 Pay3.805%; noueie SIRtIA I tVLand Ta. Ref B&uSer2304 6M LIBOR >= 7.M% 20)75 AI32 PUF RBonds20/A 195,690 1143/1008 07/10203B8 Pay3.6960; nou/ei SIFMA VetHsg Fuod 11Tha ROtlds Sen2104CJ) IM LIBOR >= 7f"% 2-594 A+ fAa3 PLF Bonds2tOA 195p"0 [/03/20•8o 07101/2038 Pay3.6575%: eene/t SIFMIA AAA/Ao2 et I IsgFund 1 Bds Ser 2005A N/A • RFS Bonds 20/0B 141,725 03/1820/a 08113112036 Pay3.99: -e.e SIFMA VetLand Tau BefB&s Sen 21•)5 6M bBOR >n 71/X)% A, / A.1 : 542 RFS Bonds 2008B 141,725 O3/1/20V 009f/2.0J06 Pay3.99(; ree/ve SIF/BA Wt Hsg Fund 1I/ITa Ref Bdi Sen2005CJ) I M LIBOR>= 7M0/%; /367 A/ I A.3 RFS Bun/s 20.16B 332,120 0311//2[x00 0/01/2039 Pay3.614%: neon/onSIPMA 6M LIBOR > 4,00% and 567 SIFM/ALIBORRatio > 74% VetHsg Fund I Tax RefEd; See 2B05C I DMO .1 70%; 494 A+ /A3 p•aaaPU tn$[r•m•vr[rdaada RFl'sl ga 1.or -1. fi..iz9 q)"a1 onhdld.on hef.lowing Falg, 6MLIBOR > 4D00%and 267 ...... SltFlA/LIBOR Ratin, 74% V5 Hsg Fund 11Bit See 2R/6AA N/A A+ / Ao3 VetLund Tua Ruf Bds See 2/06A 6M/LIBOR >700% 1931 A+ /A3 VI /ugFund I/ To Ref Bid Se 2006B h L/BOO no 7[M0% //.992 A+ (As3 VAHg F.d/I ToBeRe ds Sne 200/C 6N 1./BO >n 7f1l%• /,493 A+ / AsS : Land Tot Ref Bd S,,e 2006B 6M LIBOR n71X)% 86 AAA/Au2 Hedging Forward Contracts: Significant Terms and Credit Ratings lHSg Fund/ Bds Sue2/B/6D N/A A/ 2 I Land Tat Ref Bds Se,2gC I M .IBOR>=7.Ms% 2.725 AnI A.3 ERsa/ sn/ Baminallo T Count"Parl V0 Hag Fund It Tao Ref Bds Ss 2•0ORB I M LIBOR n 7,00%: 29(2 A+I Ao3 Ntumber Naioa Whats garre 'rentacPay Bums Credit 6M LIBOR > 4 00%and IDI/A Coa/nictaa Junsento RW Rmg /oasMo) Rosa/so ttgo 1 S/FkIA/LIBORRatio > 74% WI H g Fund [I/To Rcf Bds See 200I7M IB /1.IOR - 7.,D%; 935 A+ Al.o 201Forwrd 4ont 9000/ 02962009 - 091/2012 - $7.441 NYMEX S IFMAJ5//ISDA CMS > 71% 11/20 Cnote.t0A164t* MM/TUs 02/12J/20/ 001DI/213 MMBT// mulrt p0no Ve/1tnp Fund B Bis Seo2007A N/A AAA / Ao2 Ve HsgFund I1Bde Ser 2W/97B N/A A+ / A.3 W, ft FunBd I ds S- 2008A N/A A+ I Al * *unimnun'di/onotesn& U¢J•alounnu~uone ty ouonsoo.T•hioooluoooeonmmeariotnsh Itsp Fund.U BdsSeer2/OBB N/A AAA/ Aa2 * sd by bldhinOgi, aalni/oneduofou utaikd ondluliun/no1 nIua. Fundtd /ITanZ BefoitosSet 9 6M /IBOR >o7 0/2 Au/AAsS 0 HgFundtF ITReftB SIer2009C 6M LIBOR>. 7.00% 2.740 A. / Au3 Wt I/osSFund 1 Tau RefBds S/r 20IOB IM LIBOR> 7 M0%; 2.955 A+/Ao3 6M LIBOR > 4010%and 1,427 SIF6IA/LIBORRauito 74% Vet BdsSet 2/OlC N/A A 2 WeTax Ref Bds Ser 2010D /IM /I.BOOR- 7.(•; 466 A+ / Ao3 6M LIBOR>4.00% asd 208 S/FMA/LIBORRatio > 74% V, TautRef Ed. Sen 2010E N/A AAA6/As2 VBtB See2S/lA N/A A A2u Vet RdsSer2{SIlB N/A A+IA2 t Bd Su20/11C• NIA AAA/ A.2 W; BdisSee 20/2A N/A AAA I Au2 VWtBdsrSer012B N/A AA6/Al2 V .,T -Rof B &,Ser 1994A-2 IM LIBOR > 70 X0% 579 A+ A `3

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104 2612 Co m P 6e h kn's Iv e An 6 u a I Pi Isa irel'iI A0 P 0 r I tk.swý of T(ra 77,ýý*l a~ ~r -w~rassxrx~nz~rt - -

ing she tax-exempt market that do not have a similar ing bonds. However, in the case of the swap associated Hedging Interest Rate Swaps: effect on the taxable market. with the Vet Land Tax Ref Bds Ser '2000, the state will Significant Terms and Credit Ratings (concluded) The state is exposed to basis risk on its commodity be subject to rollover risk if the counterparry exercises (Amiuntsin Thousands) forward contracts became the expected commodity pur- the option to terminate the swap contract. K.sA-&A Prisstto Coost chase will be priced based on a pricing point of Waha Afarket-access Risb. Each swap associated with Ass-utsflBond tNAm Betfs Attstk S~n Natural Gas Hub, while the hedging forward contract is underlying variable-rate debt subject to tender at the TEXASDEPARTMENT OFHOUSING AND COMMUNITY AFFAIRS - PAY-FIXED,RECEIVE-VARIABLE INTEREST RATE SWAPS expected to settle on the NYMEX pricing point. As of option of the bondholder is subject to market-access 21"5B Single I'm/ty N/A S A/A2 Aug. 31, 2012, the Waha price was $2.65 per MMBTU risk. In the event the state is unable to remarker its Z004DSingle Facsily N/A A/A2 and the NYMEX price was $2.74 per MMBTU. variable-rate bonds, the state may choose to refund the 205A Single Family N/A A+ I Aa3 Termination Risbk Termination risk is the risk variable-rate bonds with fixed-rate bonds and option- that the swap may be terminated prior to its scheduled ally terminate the related interest rate swap agreements. 2DO6HSingle Family NIA A/A2 200A Single,Fmily N/A A. Aa3 maturity date as a result of certain specified events. If an early termination event occurs, the state could be The swap associated with the Vet Land Tax Ref Bds Set required to pay or to receive a substantial termination UNIVERSITYOF TEXAS SYSTEM - '2000 provides the counterparty with the option to ter- payment. PAY-FIXED,RECEIE-VARIABLE INTEREST RATE SWAPS RFSBonds 201175 N/A A+I/An minate the swap under certain conditions. RFSBonds 7B N/A AA PUFBonds 2008A N/A A-I/Ba The state or the counrerparties may terminate any Swap Payments and Associated Debt PUFBonds 20O8A NIA AA-IA.3 of the swaps if the other parry fails to perform under Aggregate debt service requirements of the state's US Bonds2lJ0SB N/A Au/ A.3 RFSBonds 2111S NIA A-I/Bat the terms of the respective swap agreements. If any of variable-rate debt and net receipts/payments on associ- RFSBonds 2058B N/A A. IA.3 the swaps are terminated, the associated variable-rate ated hedging derivative instruments are disclosed in bonds would no longer have a synthetic fixed-rate and Note 6. the state would be subject to interest rare risk to the Risks rate debt, as LIBOR or the SIFMA municipal swap extent that the variable-rate bonds were not hedged ContingentFeatures Credit Rb/c The state is exposed to credit risk if index decrease the state's interest payments on the with another swap or with variable-rate assets. Unless Some of the state's derivative instruments include the counterparty to an interest rate swap fails to meet bonds decrease. The value of interest rate swap agree- there is a termination option exercised by the counter- provisions that require the posting of collateral in the the terms and obligations of its contracts. The state ments with a longer weighted average maturity tend to party, the state would owe the counterparty a termina- event that the contracting agency's credit rating falls mitigates the credit risk associated with its swaps by be mow sensitive to changing interest rates, and there- tion payment equal to the swap's negative fair value. below a specified level as issued by Moody's Investor entering into transactions with a diversified group of fore, more volatile than those with shorter maturities. Several swap agreements include optional early ter- Service and Standard & Poor's. If the contracting agen- highly-rated counterparties. The interest rate swap Basis R/as: The state is exposed to basis risk to the mination provisions granting the state the right, but not cy fails to post eligible collateral, the derivative instru- agreements also contain varying collateral agreements extent that the interest payments on its variable rate an obligation, to terminate the interest rate swaps at par ment may be terminated by the cocnterparty. Note and insurance policies with the counterparties. Posted bonds do not match the variable rate payments received without a termination paymett after an effective date or 15 discloses detail about derivatives with contingent collateral may be held either by the state itself or by a on the associated swaps. The state mitigates this risk by after the breach of certain counterparty credit ratings. features. quality third parry custodian. Swap contracts with a matching the notional amount and amortization sched- RolloverRb/ac Rollover risk is the risk caused by negative fair value do not expose the state to credit risk. ule of each swap to the principal amount and amortiza- a mismatch between the amortization of a derivative INVESTMENT DERIVATIVES As of Aug. 31, 2012, the state was not exposed to credit tion schedule of each associated variable rate bond issue contract and the underlying hedged bonds. The masu- Investment derivatives expose the state to certain risk because the swap recorded in the positive position and by selecting an index for the variable rate leg of rity dates of the state's effective interest rare swaps were investment related risks. Note 3 discloses decad about was offset by other swaps with negative fair values. each swap that is reasonably expected to closely match designed to extend to the maturity dates of the underly- the state's investment derivatives. Interest Rate Risbk On the pay-fixed, receive- the interest rate resets on the associated variable rate variable interest rate swaps, as LIBOR or the SIFMA bonds over the life of each bond issue. Additionally, tax- municipal swap index decrease, the state's net payment exempt interest rates can change without a correspond- on the swap increases. For the related hedged variable ing change in taxable interest rates due to factors affect-

1 2012 - Comprehensive Annual Financial Report ý 105 1106 ý01Z - Comprehensive Annual Financial Report - I Additionally, the permanent school fund (PSF), the A&M reported contingent rental revenues of $686 CapitalLeases University of Texas System (UP, the Texas A&M Uni- thousand. Leases that are purchases in substance are reported Leases versity System (A&M) and the Texas Tech University The historical cost of Tech's leased building space as capital lease obligations. The capital assets are record- The state leases office buildings, computer and System (Toch) have leased buildings, equipment and land is $17.9 million. As of Aug. 31, 2012, the carrying ed at the present value of the future minimum lease office equipment and other assets under a variety of to outside parties under various operating leases. The value of Tech's leased building space was $7.8 million payments at the inception of the lease plus any cash agreements. Although lease terms vary, most leases are following table presents estimated furtre lease rentals on and the related accumulated depreciation was $10.1 paid or trade-in value received. subject to biennial appropriations from the Legislature noncancelable operating leases as of Aug. 31, 2012. million. The historical cost, accumulated deprecia- For governmental and business-type activities, the to continue the lease obligations. tion and carrying value of the leased building space assets and liabilities are recorded in the government- Noncancelable Operating Lease represents 7.5 percent of the full carrying value of the wide financial statements. leased buildings. Tech did not report any contingent OperatingLeases Rentals The Table below is a summary of the future mini- Operating lease payments are recorded as expen- August3t, 2012(Amounts In thoumsands) rental revenues. mum lease payments for capital leases. dirures or expenses during the life of the lease. Rental MhdmumFutue Lease Rentals Prcasy Cenponent expenditures or expenses related to operating leases for Year vement Untu Future Capital Lease Payments fiscal 2012 were $297 million for the primary govern- -013 S 24.967 3230`0 August31, 2032 (Amountsin Thousands) ment and $2.7 million for discrete component units. 2014 1t,479 2015 16,468 Otuttety Resented The following table presents minimum future rental 201a 13,928 tmttutttsAintsi ComponentUnits fhTotaluaterc obligations on noncancelable operating leases as of Aug. 2017 122062 TotlI rca Fcstucs, beyond MnimumLem 2018end 85,313 linlinwcnate M8atel Ir nntents 31,2012. To.al $172.617 323.00 Year Pcbtttne kitus Psttt Mhtkssli-aPyntslard

2013 $ 5.165 $ 1237 S 68(i02 $ 3.514 $ 896 S 4410 $ 54 $ 7 $ 61 2.014 4.102 904 4..816 2,982 737 3,719 56 6 62 Noncancelable Operating Lease The historical cost of PSF's leased assets is $341 2015 1.717 385 2. 102 2903 597 3,400 519 million. Depreciation is not recorded because the assets 2016 66 685 2099 469 2768 Obligations 2017 1.493 386 1.879 August 31,2012 (Amounts in Thousands) are held for investment purposes in a permanent fund. 2018-2022 4.,93 11-14 6;217 2023- 2027 2X37 455 3292 MunermFr•usre Lease Pynru•ts Real estate investments are re-appraised periodically 2028-2032 917 33 950. Ptrla Coerenant Total $11.703 S 2,492 $14. 195 $219636 $ 4.797 $20,35 $ I10 S 13 $ 123 Year G-,emaear Ud' and the carrying ansounts are adjusted when permanent impairments occur. In fiscal 2012, PSF reported contin- 213 $ 256941 $1.592 2014 206,613 11388 gent rental revenues in the amount of $227 thousand. The following table presents as analysis of the property recorded under capital leases by asset category as of Aug. 31, 2012. 201t 15,6t17 883 The historical cost of UT's leased buildings and 2016 128,739 735 2017 99,720 571 leased land is $84 million and $3.3 million, respectively. 2018- 2022 190M90 1,422 2023 -2027 12964 As of Aug. 31, 2012, the carrying value of UT's leased Assets Under Capital Leases 2028 -2032 60288 August31, 2012 (Amounts InThousands) 2U33-037 2.454 assets was $59.5 million and the related accumulated 2038 -2042 1,155 DismallyPretnset depreciation was $27.8 million. UT did not report any ItlesO, Bush~lsoi-Typezvuuempon Units Tout $170.589 $6291 uunsteareentalkA contingent rental revenues. AndleUnerc olontturko~ltncitsdin CptaslUsesn-tsAtnnmund AUneujatod Asa~t under Aniulsaated It" CapntoLees D•,rec•ation CapitalLeass Deredideun The historical cost of A&M's leased buildings and leased land is $86 million and $1.1 million, respectively. L. .Loud...... $ $ 894 $ 4(188 $ $ Buildings 1"04 14098 20.234 As of Aug. 31, 2012, the carrying value ofA&M's IFucuoarrtod liqoipsse 6.774 1,398 14,157 23800 238 107 vehieko, ou.BAj~ruft 223 21 leased assets was $54.9 million and the related accumu- 99 s 7ji85 lated depreciation was $32.2 million. In fiscal 2012, Total $ 340f23 $16540 $36.165 $ 238 $ (07

I ". 201, - Comprehensive Annual Fiiii7rIcial Hepcijý%; rlo-r-777 -"CWAiiprehorw`s'IWAnnuaI Financial Report Teacher Retirement System of Texas the Judicial Retirement System of Texas (JRS) Plan service credit. The monthly standard annuity equals the 1000 Red River Street One (JRSI) and Plan Two OJRS2) are considered single- statutory percentage of 2.3 percent of the current state Retirement Plans Austin, Texas 78701-2698 employer defined benefit pension plans. salary of a district judge multiplied by the number of The state of Texas contributes to six defined ben- Contribution requirements are not actuarially deter- years of service credit. Retirement benefits are automati- efit pension plans and one defined contribution plan Fire Fighters' Pension Commissioner mined, but are set by legislation, except for the JRS2, cally adjusted as state judicial salaries change. The maxi- that provide financial benefits to retired employees, as PO. Box 12577 under which the state contribution rate is actuarially mum standard annuity is 100 percent of the state salary well as to their spouses and beneficiaries, of the state of Austin, Texas 78711-2577 determined every even-numbered year for the next bien- of a district judge. Texas, school disrricrs and other entities. The defined nsum. The contribution rates ale based on a percentage The employee class includes all employees and benefit pension plans are administered by the Employ- Additional information for each defined contribution of the monthly gross compensation for each member. appointed officers of the state and excludes independent emsRetirement System of Texas (ERS) and the Teacher plan may be obtained from: Each plan's monthly contribution requirements are dis- contractors and their employees and employees cov- Retirement System of Texas (TRS), which are compo- closed in the table below. ered by TRS and JRS. Other employee class members nent units, and the Fire Fighters' Pension Commission- Statewide Coordinator, Optional Retirement Program include certified peace officers and custodial er (FPC), which is part of the primary government. The Texas Higher Education. Coordinating Board Required Contribution Rates officers. state is a participating employer in these plans with the P.O. Box 12788 In 2009, the 81st Legislature created exception of the FPC defined benefit pension plan. The Austin, Texas 78711-2788 •nst new plan provisions for members of the -*U CW.n- ans- aEIW. Css- 1, 2009, state is not an employer in the FPC plan, but makes ph t.ls Lus13tlasts onu Clas Legis5ath mass- employee class hired after Sept. Texas Guaranteed Student Loan Corporation with the exception of certified peace officers on-behalf contributions to the FPC plan. ERS 610% 60% 6.0 6-3% 80% 60*% P.O. Box 83100 and custodial officers. This resulted in dif- The state makes employer contributions to the LECOS' 0.0% N/A N/A 03% N/A N/A Round Rock, Texas 78683-3100 ferent requirements for benefit eligibility, defined contribution plan, Optional Retirement Pro- JRSi NIA" N/A N/A 6.0% N/A N/A N/A vesting and early service retirement eligibility gram (ORP), which benefits certain employees of insti- JRS2 60% N/A N/A 61D N/A DESCRIPTION OF PLANS AND with reduced benefits, dependent upon the tutions of higher education. This plan is administered TRS 6.0% N/A NIA 6.4% NIA N/A employee hire date. by the employers of institutions of higher education. FUNDING POLICY dass hired The state's contributions to these plans are autho- SMi. For members of the employee I " " rno. obu . .e rized by statute and may be amended by the l~egislature. Employees Retirement System of Texas on or before Aug. 31, 2009, the following pro- The state reports the pensions' financial activities in the The Board of Trustees of ERS is the administrator visions apply: other employee benefit trust funds column of the fidu- of four pension plans that provide a standard monthly The ERS audited financial statements reflect the Employees vest afier five years of service credit. ciary funds financial statements. The investments of the benefit in a life annuity at retirement and death and results of the actuarial valuations of the four plans it Employees may retire at age 60 with five years pension funds are included in Note 3. disability benefits for members. The Employees Retire- administers. The statements do not note any subsequent of service credit or at any age when the sum of The Texas Guaranteed Student Loan Corporation's ment System of Texas Plan (ERS Plan) is considered a legislative action that would negatively affect the certifi- age and service credit (including months) total (TGSLC) defined contribution pension plan is dis- cost-sharing, multiple-employer defined benefit plan cation of actuarial soundness of the plans. 80. dosed because the TGSI.C is a discrete component unit with a special funding situation. In addition to the state The ERS Plan, established by the Texas Govern- * The average monthly compensation is the aver- of the state, but the state is not considered an employer of Texas, employers of the ERS Plan include various mens Code, Chapters 811-815, covers elected class age of the highest 36 months of compensation. of the plan and does not contribute to the plan. component units of the state. The Employees Retire- members and employee class members. The monthly * The monthly standard annuity equals the statu- Audited financial statements for each defined ben- ment System and the Texas Treasury Safekeeping Trust benefit is determined by the years and months of service tory percentage of 2.3 percent of the average efit pension plan may be obtained from: Company; which are blended component units, and the multiplied by a statutorily determined percentage and monthly compensation multiplied by the num- Teacher's Retirement System and the State Bar of Texas, may vary by class. ber of years ofservice credit. Employees Retirement System of Texas which are discrete component units, are also employers The elected class members are vested after eight The minimum monthly standard annuity is PO. Box 13207 of the ElLS Plan. The Law Enforcement and Custodial yearsof service credit and may retire at age 50 with 12 $150; the maximum standard annuity is 100 Austin, Texas 78711-3207 Officer Supplemental Retirement Plan (LECOS) and yesesof service credit or atage 60 with eight years of percent of the average monthly compensation.

- kr ilie State N lexis 109 ensive Annual Financial Report 1-110 20;2 - Coniprehensive Annual Financial Report . F,>.1hQftj1,ofTCa, I ......

For members of the employee class hired on or after In 2009, the 81st Legislature created new plan pro- The minimum monthly standard annuity is action, the time required to amortize the ERS, LECOS Sept. 1, 2009, the following provisions apply: visions for LECOS members hired after Sept. I, 2009. $150; the maximum standard annuity is 100 or JRS2 plans' unfunded actuarial liabilities would be Employees vest after 10 years of service credit. This resulted in different requirements for benefit eligibil- percent of the average monthly compensation. increased to a period that exceeds 30 years by one or * Employees may retire at age 65 with 10 years ity, vesting and early service retirement eligibility with Annual actuarial valuations of the fund are per- more years. The statutes also apply if the amortization of service credit or at any age when the sum reduced benefits, dependent upon the employee hire date. formed to monitor the adequacy of the financing period already exceeds 30 years by one or more years. of age and service credit (including months) For members hired on or before Aug. 31, 2009, the arrangement. In 2011, the 82nd Legislature did not According to the actuarial valuations as of Aug. 31, equals or exceeds 80. following provisions apply: appropriate any state funding for the LECOS plan for 2012, contributions are insufficient to amortize the cur- * The standard retirement annuity is reduced by * Employees with 20 years of service may retire fiscal 2012. rent unfunded accrued liabilities of the ERS, LECOS five percent fur each year the member retires at age 50 or at any age when the sum of age JRSI is established bylexas Government Code, and JRS2 plans over any period of time. Therefore, the before the member reaches age 60, with a maxi- and service credit equals or exceeds 80. Chapter 831, and JRS2 is established by Texas Govern- 30 year funding objective is not being realized for any mum possible reduction of 25 percent. A member under the age of 50 may receive ment Code, Chapter 836. JRS covers judges, justices of the plans. In 2011, the 82nd Legislature reduced * The average monthly compensation is the aver- reduced benefits upon completing 20 years of and commissioners of the Supreme Court, the Court of the employer contribution rate for fiscal 2012 for ERS, age of the highest 48 months of compensation. service. Criminal Appeals, the Court of Appeals, district courts LECOS and JRS2, and reduced the member contribu- * The monthly standard annuity equals the statu- The average monthly compensation is the aver- and certain commissions to a court. Members prior to tion rate for the elected class-other. tory percentage of 2.3 percent of the average age of the highest 36 months of compensation. Sept. 1, 1985, participate in J RS I and all others partici- monthly compensation multiplied by the num- The monthly standard annuity equals the sratu- pate in JRS2. Teacher Retirement System of Texas ber of years of service credit. tory percentage of 2.3 percent from the ERS Plan Participants in both plans may retire at age 65 with The Board ofTrustees of TRS is the administrator Certified peace officers and custodial officers may plus an additional 0.5 percent from the LECOS 10 years of service with at least the last year being con- of one pension plan (TRS Plan). The TRS Plan, estab- retire at age 55 sish 10 years of service as a certified Plan of the average monthly compensation multi- sinuous and currently holding judicial office, or at age lished under Texas Government Code, Chapters 822- peace officer or custodial officer. The average monthly plied by the number of years of service credit. 65 with 12 years of service. Members of]RSI and JRS2 824, is considered a cost-sharing multiple-employer compensation is the average of the highest 36 months The minimum monthly standard annuity is may retire at any age with 20 years of service. Partici- defined benefit plan with a special funding situation. of compensation. The monthly standard annuity equals $150; the maximum standard annuity is 100 pants in both plans are eligible for reduced early service The state is required by statute to make contributions the statutory percentage of 2.3 percent of the average percent of the average monthly compensation. retirement benefits once they attain age 60 and com- to the TRS Plan. For fiscal 2012 the state made the monthly compensation multiplied by the number of For members hired on or after Sept. 1, 2009, the plete 10 years of service if the member currently holds majority of contributions to the TRS Plan. Aspecial years of service credit. following provisions apply: judicial office with at least the last year being continu- funding situation is created, which results in the stare A Partial Lump Sum Payment Option is available Employees may retire after 20 years of service at ous, or at age 60 with 12 years of service. reporting the TRS Plan as if it was the sole employer. to members of the employee class, the elected class and age 55 or at any age when the sum of age and The monthly benefit for members of both plans is The employers of the TRS Plan include the state of certified peace officers and custodial officers. A one- service credit equals or exceeds 80. equal to 50 percent of the salary for the position from Texas, TRS and 1,300 public schools, service centers, time partial lump sum of up to three years of standard A member under the age of 55 may receive which the member retired and is increased by 10 per- charter schools and community colleges. Employees of annuity at retirement can be taken and the annuity is reduced benefits upon completing 20 years of cent of final compensation if in office within one year TRS and state ofTexas colleges, universities and medi- reduced for life. service. of benefit commencement. cal schools are members of the TRS Plan, provided LECOS, established under Texas Government * The average monthly compensation is the aver- Member contributions forJRSl are made to the they are employed for one-half or more of the stan- Code, Section 814.107, provides a supplemental retire- age of the highest 48 months of compensation. general revenue fund, and the state is obligated to make dard work load and are not exempted from member- ment benefit to the ERS employee class member with The monthly standard annuity equals the statu- appropriations front the general revenue fund in an ship under Texas Government Code, Section 822.002. service rendered while a law enforcement officer (com- tory percentage of 2.3 percent from the ERS amount sufficient to pay benefits on a pay-as-you-go The commissioner of the Texas Education Agency missioned peace officer) or a custodial officer. Upon Plan plus an additional 0.5 percent from the basis. The contribution requirements are not actuarially may also elect to participate in the TRS Plan in lieu of meeting the qualification requirements under LECOS, [ECOS Plan of the average monthly compen- determined since the plan is not funded in advance. participation in the ERS Plan in the same manner and members are eligible for LECOS benefits in addition to sation multiplied by the number of years of State statutes prohibit benefit improvements or under the same conditions as other members of the those received under the ERS Plan. service credit. contribution reductions if, as a result of the particular TRS Plan.

1 1 2012 - CampreherisiveArtnual I'man0al Report ! For aw$tateofTp,_5 1_; 1112 201Z - Comprehensive Anpual Financial Seport - NftStawof%ýMl • . :..:•"-- .- •.-• zz !. •z.nzu 'z.12.fizn ..

Members qualify for early retirement with TRS offers to all service and eligible disability Retirement Systems' Membership reduced benefits if the member meets one of retirees several annuity payment options that reduce

EN. - U= Ja JWs Tag the following criteria: the standard annuity by application of age-related actu- - The member is age 55 with five years of arial reduction factors in order to continue payment etirees and Beneficiariesw Crenty 7 ReceivingBenefits 87.799 8,47 433 215 .331a747 service credit. to a beneficiary after the retiree's death. The available TeteniinawdEmepIlyees Enlised to - The member is less than age 60 and the options include 100, 75 and 50 percent joint and sur- nefitsBstNni Vt RneeiviegTlthe 90,190 7,129 4 143 80.956 Cuneni tetptoyees: sum of the member's age and years of cred- vivor annuities and five-year and 10-year guaranteed 37Afise 17 541 922,779v) ited service equals at least 80. period annuities. TostaAtemertes 3151495 353010 454 599 5335402 1 - The member is less than age 60 and the TRS also offers two other annuity payment options: member has 30 years of credited service. The Deferred Retirement Option Plan Grandfathered members who re-enter TRS on (DROP) DROP allowed members to freeze The TRS Plan provides retirement, disability annui- vice credit or any age below 50 with 30 years of or after Sept. I, 2007, qualify for early retire- their standard annuity and, instead of retiring, ties and death and survivor benefits. The benefit and service credit, provided the sum of the member's ment with reduced benefits if the member have a portion of the frozen standard annuity contribution provision of the TRS Plan are authorized age and years of credited service is less than 80 meets one of the following criteria: deposited into a DROP account, for up to five by state law and may be amended by the Legislature. and membership is maintained until retirement. - The member is age 55 with at least five years, while continuing to work for a TRS-affil- A member is vested after five years of service credit For members who established membership after years of credited service. iated employer. The plan was closed for new and is eligible to retire at a futrre date and receive a life- Sept. 1, 2007, the following provisions apply: - The member is less than age 55 and the participants effective Dec. 31, 2005. time monthly annuity. Members may retire at age 65 with five Years sum of the member's age and years of cred- A Partial Lump-Sum Cash Option (PLSO) For members who established membership before of service credit, or at age 60 if the sum of the ited service equals at least 80. PLSO reduces the standard monthly annuity Sept. 1, 2007, the following provisions apply: members age and years of service credit equals at - The member is less than age 50 and has 30 and provides a cash lump sum distribution. Members may retire at age 65 with five years of least 80 years. years of credited service. Members may participate in the PLSO if they service credit or when the sum of the member's * Grandfathbred members who re-enter TRS age and years of service credit equals at least on or after Sept. 1, 2007, may retire at age 65 Actuarial Methods and Assumptions 80 years and membership is maintained until with at least five years of service credit, or if retirement. the sum of the member's age and years of ser- guM mEnuI uUSI JRS TM

The standard life annuity benefit formula is 2.3 vice credit equals at least 80 and the member AcsuarialValuation Dote Aug.31. Aug. 31. Aug. 31. Aug. 31. Aug. 31, 2012 2012 2012 2012 2012 percent of the average of the five highest annual is at least age 55 with at least 20 years of ser- Aeurial Cot Method EntryAge Etry Age Etiry Age Entry Age . Enry Age salaries multiplied by the years of service credit. vice credit. No-mel NnIat N-l Nmel tNorma- * For members who established membership on * The standard life annuity benefit formula is 2.3 Level Level Level teen) Leerl Peemerl Open 13.11. Percent Pev.ei or before Aug. 31, 2005, known as "grandfa- percent of the average of the five highest annual Open Open Open Open thered" members, the three highest annual sala- salaries multiplied by the years of service credit. Rreaining A.oriinea Period .:Oyears 30 yIare 30iyea-s- 30years 30 yens. ries are used to calculate the annuity benefit. * For grandflthered members, the three highest Ases V.Iat.a.. •ethd 20% ofo.nker 20%etuntAes Meretr 20%of narket 5-year plan 90%of plus 8D0 of pies80)% of Sm. lhrd At normal retirement age, the minimum annual salaries are used to calculate the annuity espected espested M.Ar.e ivaslue. ý.Iuara monthly standard annuity is the greater of benefit. -e6an

$150 or the formula standard annuity. Total * At normal retirement age, the minimum A su)i.1Asseurnpins: 80% 8.0% 8.0% monthly standard annuity is the greater of Inuerins Rei of Retirn 8.I% SIM payments will not be less than accumulated 3-5% N/A 3.5% N/A Peyroll rowt . 3.5% contributions at retirement. $150 or the formula standard annuity. Tlotal Prejevted Salary Inc-eses 000-13.5% 0-0%-133% 3_5% 35% 4.25%-725% vIaudesInflatizn at 3.5% 3.5% 35% 3.5% 3.0% Members qualify for early retirement with payments will not be less than accumulated at.t.Ueivng Adjustmrenes • Ndne.tEmplgyen Nve- 35% Ena Nve 3.5%-Elented reduced benefits at age 55 with five years of set- contributions at retirement. IRSs • aru-

1 11 XQ - Comprehensive Annual Financial Report , ForftieStat,ýOfexa5 1 113 114 20Q - Comprehensive Annual Financial Report Rý_T. ýýZVIR=Z .2 .',•• .. :•..•.'..•&•;• ': 2•: .• • .- .'••: :.- t

are eligible for service retirement and meet ment Code, Chapter 830. Full-time faculty, librarians As of Aug. 31, 2012, ORP had 37,943 participants, of participating departments. Additional contributions the Rule of 90 (age and years of service credit and certain professionals and administrators employed The total participant contributions were $258.6 million may be made by a governing body to pay for grant- equal at ]east 90), are not participating in the in public higher education are eligible to elect ORP in and total employer contributions were $304 million. ing credit for service before the department began DROP plan and are nor retiring with disability lieu of the TRS Plan before the 91st day after becom- Additional information for ORP is included in the fis- participating in TESRS. Per Texas Government Code, benefits. ing eligible. It is a one-time irrevocable choice between cal 2012 ORP ParticipationReport Sumnmary published Section 865.0 15, the state is required to appropriate Contribution requirements are not actuarially deter- two distinct plans. ORP is administered by the benefits annually by the Texas Higher Education Coordinating a limited amount to make the fund actuarially sound. mined but are legally established each biennium. The offices at each employer. The Texas Higher Education Board. The appropriations may not exceed the amount of TRS Plan's monthly contribution requirements are dis- Coordinating Board develops policies, practices and one-third of the total of all contributions by governing closed on the "Required Contribution Rates" table. The procedures to provide greater uniformity in the admin- Fire Fighters'Pension Commissioner bodies in one year. Legislative appropriations to assist Texas Constitution requires the Legislature to establish istration of ORP. FPC is the administrator of the Texas Emergency with TESRS's administrative expenses for the past a member contribution rate of not less thao 6 percent ORP is a defined contribution pension plan in Services Retirement System (TESRS), a cost-sharing three fiscal years are: of the members annual compensation, and a state con- which each participant selects from a variety of invest- multiple-employer defined benefit pension plan estab- PiscalF 2012: $572.3 thousand tribution rate of not less than 6 percent but not greater ments offered by several insurance and investment lished to provide pension benefits for emergency ser- Fiscal 2011: $628 thousand than 10 percent of the aggregate annual compensation companies through annuity contracts or mutual fund vices personnel who serve without significant monetary Fiscal 2010: $502.9 thousand of all members of the TRS Plan during that giscalyear. investments. These types of investments are authorized remuneration. As of Aug. 31, 2012, there were 214 The member fire department contributions to the As required by state statute, the state rate is paid by the by Internal Revenue Code, Section 403(b). With the member fire departments participating in TESRS. The fund were $3.6 million for fiscal 2012. Contributions employer for compensation paid to new members dur- purchase of these individual contracts, the state has state is nor an employer of the TESRS plan. made were equal to the yearly statutorily required con- ing the first 90 days of employment, on amounts paid to effectively transferred the obligation for the payment The statutory authority for TESRS is found in tributions. employees above the statutory minimum amount, and on of benefits to the companies. Participants vest in ORP Texas Government Code, Chapters 861-865. The compensation paid from private or federal funds. Total after one year of participation. governing bodies of participating departments are Annual Pension Cost and employer contributions to the TRS Plan are a combina- The contributory percentages of participant salaries required to contribute at least the minimum pre- Net PensionObligation tion of state, public schools, federal and private funding. provided by each participant and the state were 6.65 per- scribed amount per month for each active member. The state's annual pension cost and net pension State stature prohibits benefit improvements or con- cent and 6 percent, respectively; for fiscal 2012. Institu- No contributions are required by individual members obligation or asset for fiscal 2012 is presented below. tribution reductions if, as a result of the particular action, tions and agencies authorized under state law to provide ...... the rime required to amortize the TRS Plan's unfunded ORP to their employees may supplement the state con- i ...... actuarial liabilities would be increased to a period that tribution at a rate of up to 2.5 percent of payroll. Annual Pension Cost and Net Pension Obligation/Asset would exceed 30 years by one or more years,or, if the Individual accounts are maintained at the insist- (Amounts inThousand)s amortization period already exceeds 30 years by one ance and investment companies selected by each ORP ERS LECOS JaSI JR52 mS ORP are or more years, the period would be increased by such participant. Separate financial statements for AxeI RequimrdContribution (ARC) S 704953 nS3057 S21,424 $10.716 S2'870976 I1terest on NetPension Obcmguiov(NPO) action. According to the actuarial valuation as of Aug. 31, not prepared because the state retains no liability for 59452 3053 53713 (400) 54,119 Adjust IARCivn, (4027) (2.92) (6,104) 300 (63q128) 2012, contributions are insufficient to amortize the cur- plan performance and has very limited administrative Ansnal PensionCost 7i7& 3 yi-185 21533 Sai X01.967 rent unfunded accrued liabilities of the TRS Plan over involvement. Empiyer Cntributioes Mad. (346.f56) 3S (26,464) M(4151) (2052.381) any period of time. Therefore, the 30 year funding objec- The employers of ORP are institutions of higher I-esease(D--)rnus in NMO 33302 35.821 (5A31 6.465 749.586 one educational state agency and several tive is not being realized. In 2011, the 82nd Legislature education, Nt PensionOblipafir/(Assee), reduced the employer contribution rate fir fiscal 2012. two-year college institutions that are not part of the Septemker1. 2011 743.151 38.169 71.408 (4997) 10551.481 state reporting entity. State entity participation in ORP Net PensionObliiaiions(Asset). August 31,2012i S I,II6.i73 $739W S659T7 $ 1,465 S i•.801,67 OptionalRetirement Program for fiscal 2012 resulted in participant contributions of The state's contributions to the Optional Retire- $226.7 million and employer contributions of $270.2 S* IMA,'s,,e l 6sr,.Ai -usPniuix-,, - -Mraax~ie,~r~e~,arxi.umnax ipt,,. ment Program (ORP) are authorized by Texas Govern- million. SfZ2 1f/.& fl.2Z wrszrn_ ------

Trend Information Included in the audited financial reports for ERS The second was established in accordance with Internal Three-Year Trend Information Trend information gives an indication of the and TRS are: Revenue Code, Section 401(k). All costs of administer- (Amountsin Thousands) progress made in accumulating sufficient assets to Schedules of funding progress that include his- ing and funding these programs are the responsibility torical trend information about the actuarially of plan participants. The assets of the two plans remain Sear Petaon otAPC Pen_ pay benefits when due. Ennot Cost(AP) Ccurtubuwd 01p•W/(A81M The table at left presents the three-year trend determined funded status of the plan from a the property of the contributing employees and are not

ERS information regarding annual pension cost and the long-term on-going plan perspective and the presented in the accompanying financial statements. 08131/12 8 719=178 482% 3 1.116,173 net pension obligations of the plans. progress made in accumulating sufficient assets The state makes no contributions to either plan, the 080111t 715.931 57.8% 743,151 634.439 63.0% -4034 3 to pay benefits when due assets do nor belong to the state and the state has no LECOS Schedules of employer contributions that liability related to the plans. 09131/12 Funded Status $ 35.818 D.0%* 733.990 include historical trend information about the The University of Texas System (UT) offers its 08131112 36953 65.6% 38,169 Information on the state's pension plans 1.4.141 81.4% 25,444 annual required contributions (ARC) of the own deferred compensation plan, created in accor- 01112l funded status for each plan as of Aug. 31, 2012, is presented in the table below. employer and the contributions made by the dance with Internal Revenue Code, Section 457(b). 08131110 $ 21,433 125.8% $ 65.977 08,131/12I UT are eligible to participate in UT's JR$2 22.601 119.1% 71,408 The schedule of funding progress, presented employers in relation to the ARC All employees 23,014 118.6% 73.745 as required supplementary information following plan and do not participate in the plan offered by the the notes to the financial statements, provides Texas GuaranteedStudent Loan Corporation state ofTexas. All investments, amounts, property and 39.1% S 1,460 00/31111 $ 10.616 08/31/11 11.512 103.7% (4,997) multi-year.trend information about whether The Texas Guaranteed Student Loan Corporation rights held under the deferred compensation trust 12166 95.4% (4.76j JM2 the actuarial value of plan assets are increasing (TGSLC), a discrete component unit of the state, main- fund are held for the exclusive benefit of participants or decreasing over time relative to the actuarial tains its own defined contribution retirement plan, the and beneficiaries at the fair market value of the plan 08131/12 S2,901967 732% $1 01167I S08131/110 2,740-W60 85.1% 1.051,481 accrued liability for benefits. TGSLC Money Purchase Pension Plan and Trust (the account for each participant. UT has no liability 2,667,179 86.1% 637.713 Plan). The Plan covers substantially all employees of the under the plan.

b 2s011,/s t11ýLnUsgn Vpp4nrre. ysmu l r 1/uInl LtoS pi- TGSLC. As of June 30, 2012, there were 700 partici- .n...... t /s s...... 31 / 1 ...... pants in the Plan. Employees do not contribute to the Plan; TGSLCs contributions to the Plan are generally based on 9 percent of gross annual salaries, net of for- Funded Status feitures. Total payroll and covered payroll was approxi- Postemployment Health Care (Amounts InThousands) mately $38.8 million and $37.6 million, respectively, and Life Insurance Benefits

ASurstit All-d in the Plan year ended June 30, 2012. Total TGSLC In addition to providing pension benefits, the state Va.nO nasitly lood Reto Payrud Cmed PeI.o contributions were approximately $3.2 million for the of Texas contributes to four plans that provide health A-ta (AAL) Date 41 M1/ N -l)W)WN a)//b) (("-vy) fiscal year ended Sept. 30, 2012. Plan amendments are care and life insurance benefits for retired employees,

I ER subject to the Plan's Board of Trustees' approval and the their spouses and beneficiaries. These other postemploy- 24272.5'14 $ 29377,069 S 3.104555 82.6% $ 5,676309 89.9% TGSI.C Board of Directors' ratification. ment benefits (OPEB) are authorized by statute and 08131/12 $ contributions are established by the General Appropria- 832A.51 5 0D154668 $ 183217 820% $ IA98979 122% JRS1 tions Act. The Texas Constitution does not allow the 08/31/12 $ 08131m1, $ 0 S 232922 S 232,922 0D% 8 2,20 /10587.4% Legislature to impose financial obligations for a period longer than two years. 3004,33 S 315.199 $ 143766 953% S 68,778 21.5% The state ofl'exas is a participating employer in TRS Deferred Compensation 08/31/12 $1 three different OPEB plans and is an on-behalf contrib- 18.326042 $ 1444272726 $26.101.184 8190. S35.444.569 73,6% The state of Texas offers two deferred compensa- I ...... tion plans to all state employees. One was established in utor to one plan. The financial statement recognition accordance with Internal Revenue Code, Section 457. and note disclosure requirements in GASB Statement

- Comprehensive Annual Financial Report . F,ý,u,,' tat* of Tcýý, 1 .012 - Comprehensive Annual Financial Report - For tlie State OfTems 20tz . -. flMM52 550.,

No. 45 , Accounting and FinancialReporting Iy Employers Chapter 1601. Retiree eligibility for insurance continu- Funded Status and FundingProgress for Postemrplhyvnent Benefits Other Than Pensions, were ation after employment is determined by the Legislature Required Contribution Rates - The funded status of the UT and A&M plans as of Retiree Health Care and Life Insurance applied separately for each plan. The following note dis- and is subject to change. Aug. 31, 2012, is disclosed below. Premium closures ace organized by OPEB plan administrator. For the Fýal Year Ended August 31,2012 Funding Policy Funded Status LITPlan at Plan University of Texas and The university system and member contribution Lnvelof Co•nag. t " FleaMasteranaener PierMeranm er (Amountslnnhousands) Texas A&M University Systems rates are determined annually by each system based on Rninec only $462 a $367 s 99 Plean toa The state ofTexas contributes to two single- the recommendations of the employee benefits office Rnlsltyeae 75 190) 552 284 Refiree/Childen 617 208 482 213 Aciari.alValaairn Date Dec.31,201 Seps.1, 2010 employer defined benefit retiree health care and life and consulting actuaries. The plan rates ate based on teiRre/Fa...ily 861 392 6&4 377 A..ai. lA-s•redLitbilily(AALI S 59563798 $ L554`690 insurance benefit plans: the UT System Employee the plan costs expected to be incurred, the funds appro- t Aesansi ueor PlanAs,.l 0 0 Plan -O• r,,W11r,,,ieathieml onle7.Thre1i .t pl.l 1abrer, Untfnded Actuarod Accrued Group Insurance Program (UT Plan) and A&M System priated for the plans and the funding policy established Liability(UAAL) t 5.956,798 S 1.5400 ...... ' ...... J Group Insurance Program (A&M Plan). The LIT Plan by the Legislature in connection with benefits provided PsFundedRnini(atrial v etfe is administered by the University of Texas System and through the plan. Amounts contributed by the state plan .s.,tsVAAL) nJo)% s.% Annual OPEB Cost and Net OPEB Obligation the A&M Plan is administered by the Texas A&M Uni- are currently based on pay-as-you-go financing require- C.,eredPayroll iacuseplano rs) $ 5309.413 $ 1313,538 The state's annual OPEB cost for the UT and versity System. ments determined during each legislative session. State A&M plans is calculated based on the employer annual LIAALS a Pcrreagnaof Cevered The University of Texas System (ULT)and the Texas contribution requirements are established and may be Payrell 112.2% 141.2% required contributions (ARC). The ARC is an amount A&M University System (A&M) each issue a publically amended by the Legislature. The three-year history of actuarially determined in accordance with the param- available financial report that includes financial state- employer contributions and annual OPEB costs is pre- Actuarial valuations of an ongoing plan involve eters of GASB 45. The ARC represents a level of fund- menus and required supplementary information. Those sented in the table below. estimates of the value of reported amounts and assump- ing that, if paid on an ongoing basis, is projected to reports may be obtained by writing to the systems at the tions about the probability of events far into the future. cover normal cost each year and amortize any unfunded following addresses: Amounts determined regarding the funded status of Three-Year Trend Information actuarial liabilities over a period no greater than 30 (AmountsIn Thousands) the plan and the annual required contributions of the years. The following table shows the components of the University of Texas System employer are subject to continual revision as actual entl bAnnual Persenteaetdf Nt asnnualOPEB cost for the UT and A&M plans for fos- 601 Colorado Street S ar Enslye tOE Ansnalnote nlEn results are compared with past expectations and new Enasing eanokbobnalr cast Castcantritted totniatine cal 2012. Austin, Texas 78701-2982 estinsates are made about the future. The schedule of rTPlan 8/31112 $ 142.737 $639.952 223% $2263.967 funding progress is presented as required supplementary 9/3 111 1242W0 595.169 20.9% 1.766,652 Annual OPEB Cost and information following the notes to the financial state- Texas A&M University System 8/31/10 117023 571.761 205% 1295,763 200 Technology Way Net OPEB Obligation ments. The schedule presents multi-year trend informa- A&MPlan (Amounts in Thousands) College Station, Texas 77845 8/3;/:2 . 63,131 $190209 332% S 603.879 tion about whether the actuarial value of plan assets is &31111 40409 174919 23.1% 476809 Plan Pln 01311I0 40.174 62,689 24.7% 342329 increasing or decreasing over time relative to the actuar- Plan Descriptions nnaal.RequiredContrbaivn.ARC 0 607527 $180,940 ial accrued liability for benefits. Since there are no plan 1r.st en NetOPE5 Obligadtn 123j666 34507 Each plan provides separate postemployment health For the fiscal year ended Aug. 31, 2012, the state Adjua-enl tn ARC (91541) (25547) assets for UT and A&M plans, the actuarial accrued Cmi 639952 1%,210 care and life insurance coverage to university system made monthly contributions for health care and life Annual OPEB liability for these two plans continues to increase. retirees, surviving spouses and beneficiaries. UT and insurance to the UT and A&M plans. Contribution EmployerContributions Made 1142.7371 163.1311 A&M are part of the state of Texas primary govern- rates for the state and retirees are presented on the Inta in Nor0PEB Obligation 497.215 127P69 ActuarialMethods and Assumptions •1366t652 476M09 ment. Employees of these systems are considered to following page. Costs are estimated by an actuary NttOPEB Obligatin, Seplember,1.2011 Projections of benefits for financial reporting pur- poses are based on the substantive plan (the plan as be state employees. Benefit provisions for the UT and for claims expected to be paid during the year. The Net OPEB Oblig1aton.Aug-st 31. 20112 $2263567 1003578 A&M plans are established and amended by the admin- retiree contributes any premium over and above state understood by the employer and plan members) and istering systems as allowed under Texas Insurance Code, contributions. include the types of benefits provided at the time of

CU _,2012 - Comprehensive Annual Financial Report 120 1, ýUQ - Comprehensive Annual Financl.Af Report- FotthýS[010,,ATW .2 - ttt2tr.7 :ttr:ts;aoztz

each valuation and the historical pattern of sharing of is funded by multiple employers, the GASB 45 special and refunds of contributions are recognized when due employers, provides a free basic level of coverage for benefit costs between the employer and plan members funding situation does not apply. and payable in accordance with the terms of the plan. eligible retirees and optional coverage for eligible retirees to that point. The actuarial methods and assumptions For cost-sharing multiple-employer defined ben- and their dependents. used in the ,UT and A&M plan valuations include tech- efit plans like SRHP, the amount of OPEB liability Funding Policy The state of Texas is not an employer in the TRS- niques designed to reduce short-term volatility in actu- or asset is equal to the difference between contribu- The Legislature sets and has the power to amend Care OPEB plan and is not legally required to continue arial accrued liabilities consistent with the long-term tions required and contributions made. Contractually annual state contributions to SR.HP. Currently, the state contributing benefits. A special funding situation is not perspective of the calculations. See the table below for required contributions to a cost-sharing muttiple- pays 100 percent of eligible retiree health insurance pre- created because costs are shared between the state and additional derail on the actuarial methods and assump- employer OPEB plan are not required to be based on miums and 50 percent ofdcpcndents' premiums. The the many participating non-state school district employ- tions used in the UT plan and A&M plan valuations. the plan ARC. retiree contributes any premium over and above state ers. The fiscal 2012 contributions to the TRS-Care Each employer has limited note disclosure require- contributions. The table below summarizes the maxi- OPEB plan are displayed below, Summary of Actuarial Methods ments under the cost-sharing multiple-employer provi- mum monthly state and retiree contributions toward and Assumptions sions of GASB 45. No disclosure of actuarial infor- the health and basic life premiums of eligible retirees. Schedule of Contributions from the mation as it relates to the entire plan is required on Employers and Other Contributing Pled Plan individual employer reports. Instead, the OPEB plan Required Contribution Rates - Entities For the FiscalYear Ended August31, 2012 Date Sept. 1, 20 it discloses all required actuarial calculations in the notes Aetueati Vrlati-son TDc.31, 26 10 Retiree Health Care and Life Insurance lAmountsInlhorsands) Actuated Cost Method EntryAte Entry Age to its financial statements and required supplementary Premium Nor-.e Nonsol information. ERS issues a publically available financial Forthe FiscalYear Ended August 31, 2012 Mothud Level Levet -tnonoattion Percent report that includes financial statements and required Frteo RepotsingEnoties S 154408 Pervent On BehalfFros State 2726)29 Open Open supplementary information for SRHP. That report may L-ttu1 en tesnituvaroarPean Meune On BehalfFroe ',kedl 0-veernrent 68j634 Anr•niititon Period 30 yeaon 30 yenn S495271 be obtained by writing to ERS at: teidt Only $41S $ JAnti ValuationMethod Markel Market Retiree/Sptons 689 262 Retirme/Childrvn 606 176 Aetuarial Anaumions: Employees Retirement System of Texas Retinel/imily 857 438 TRS issues a publically available financial report Projected Salary tncr•cer 4.75% to 7.75% 335% InestmetRate of Return 7% 7.3% P.O. Box 13207 that includes financial statements and required supple- Inctudes tnlationat 3.5% 3% Headh,Care Trend Rates 8%initial 10%initial Austin, Texas 78711-3207 Contractually required contributions to the plan are mentary information for TRS-Care. That report may be 5.3%ultimate 5%ultimate currently based on the annual pay-as-you-go expenses of obtained by writing to TRS at: Plan Description SRHP. In fiscal 2012 the state contributed $425 million Employees Retirement System of Texas Retirees of state agencies, institutions of higher edu- to SRHP, which equaled the required contribution as Teacher Retirement System of Texas The Employees Retirement System of Texas (ERS) cation (not part of UT and A&M) and other non-state established by the LIegislature. In fiscal 2011 and fiscal 1000 Red River Street administers a program that provides postemployrsent entities selected by the Legislature are eligible to receive 2010, the state contributed $394.2 million and $432.4 Austin, Texas 78701-2698 health care, life and dental insurance benefits to retirees OPEB through SRHP Retirees must meet certain age million, respectively. These contributions also equaled through the Texas Employees Group Benefits Program and service requirements and have at least 10 years of the contribution required by the Legislature. Plan Description as authorized by Texas Insurance Code, Chapter 155 1. service at retirement to participate in the plan. Surviv- Basic coverage includes participation in a major The State Retiree Health Plan (SRHP) is a cost-sharing ing spouses and dependents of retirees are also covered Teacher Retirement System of Texas medical group health insurance plan with deductibles multiple-employer defined benefit plan with 61 partici- by the plan. Benefit and contribution provisions of The Teacher Retirement System of Texas (TRS) based upon enrollment in Part A or Part B of Medicare. pating employers. SRHP are authorized by state law and may be amended administers a program that provides benefits to public Eligibility provisions of the TRS-Care plan are estab- In a cost-sharing multiple-employer plan without by the Legislature. school district retirees with at least 10 years of service. lished in Texas Insurance Code, Chapter 1575. a special funding situation, employers recognize their The financial statements of SRHP are reported The Texas Public School Retired Employees Group The financial statements for TRS-Care are reported annualcontractually required contributions to the using the accrualbasis of accounting. Contributions are Insurance Program (TRS-Care), a cost-sharing multiple- using the accrual basis of accounting. Contributions plan in the fund financial statements. Because SRHP recognized when due, pursuant to state law. Benefits employer defined benefir plan with 1,248 participating are recognized in the period in which amounts are due,

I '- , ' ý-20 Q - Comprehensive Annual Financial Report - For tbý State of llkas 'ý' ' ' 131 1122 2uQ - ComprehenSIve Annual FInaticial Report - Fcý 1hc'la1vdTL,,Aý r:7ar2..2zrr71..U-..~ .--. ~ - 2IT2ZZ.2Z.~ -~ ~.r3~U- -

pursuant to state law. Benefits and refunds of contribu- Certain reclassifications and eliminations are made Interfind reimbursements are repayments from tions are recognized when due and payable in accor- between the fund financial statements and the govern- funds responsible for payment of expenditures or dance with the terms of the plan. Interfund Activity and Transactions msen-wide financial statements. Resource flows between expenses to the funds that actually made the payment. the primary government and its discretely presented These reimbursements are reported in the appropriate Interfund activity refers to financial interactions component units are reported as revenues and expenses, expenditure/expense category in the fund responsible Funding Policy between funds and/or blended component units and is as if they were external transactions, on the fund finan- for the payment. Funding for free basic coverage is provided based restricted to internal events. Interfind transactions refer cial statements and the government-wide financial For the state of Texas, routine transfers are those on public school district payroll. The state and active to financial interactions with legally separate entities, transfers from unrestricted revenue collected in the gen- school employee contribution rates are I percent and i.e., discrete component units and other governments, statements. Transfers between the governmental or business-type activities and fiduciary funds are reported eral revenue fund to finance various programs accounted 0.65 percent of school district payroll, respectively, with and are restricted to external events. school districts also contributing 0.55 percent of pay- as transfers on the fund financial statements and are for in other funds in accordance with the General reclassified to.revenues and expenses, as if they were Appropriations Act, which is the primary budget docu- roll. Reciprocal InterfundActivity external transactions, on the government-wide financial ment for the state of Texas. Other transfers are legally TRS-Care retiree health care and life insurance ben- Interfund loans are reciprocal interflund activity authorized by statute to move resources from one fund eflts awefinanced on a pay-as-you-go basis. The expen- with a requirement for repayment. These loans are statements. from/due to amounts between the primary to another. The interfund receivables/payables include ditures are recognized when reimbursements are made reported as interfund rcceivables/payables and are classi- Due government and the discretely presented component loans for energy efficiency programs of approximately for claims paid by non-state entities or when premiums fied as either current or noncurrent. $38.3 million. There is also a $757.2 million receivable are paid. Inrerfund services are sales and purchases of goods units are reported separately from due from/due to amounts between funds in the fund financial state- for .ixas A&M System from the University of Texas Sys- and services for a price approximating their external ments and the government-wide financial statements. tem from permanent university funds. The earnings will Medicare Part D exchange value. This activity is reported as revenues in Due from/due to amounts between governmental or be used for bond payments. Significant transfers include In fiscal 2012 the administrators of each OPFB seller funds and expenditures or expenses in purchaser business-type activities and fiduciary funds are reported a $2.7 billion transfer from the property tax relief fund plan received payments from the federal government funds. Unpaid amounts are reported as receivables and funds in the fund and a $1.1 billion transfer from the lottery fund to the pursuant to the retiree drug subsidy provisions of Medi- payables. as due from/due to amounts between care Part D. On-behalf payments are recorded as reve- financial statements and are reclassified to receivables foundation school Find for educational programs. There finds/payables to fiduciary funds, as if is also a $1 billion transfer from the permanent school nues and expenses of each plan. The OPEB administra- NonreciprocalInterfund Activity from fiduciary they were external transactions, on the government- Rind to the available school fund. The detail of inter- tors reported the following amounts of Medicare Pare D Inerifund transfers are nonreciprocal interfund wide financial statements. fund activity and transactions by fund type and category payments from the federal government in fiscal 2012. activity. This activity refers to flows of assets with- as ofAug. 31, 2012, is presented in the following tables. out equivalent flows of assets in return and without a Medicare Part D Receipts requirement for repayment. In governmental funds, Forthe FiscalYear Ended August 31, 2012 transfers are reported as other financing sources or uses. Interfund Receivables/Payables (Amountsin Tnousands) In proprietary funds, transfers are reported after nonop- (Amounts in Thousands) UITPlan 5 9.757 crating revenues and expenses. The majority of transfers A&M Plan 3*834 8anest Nunsminnt 7ntu ERSSRHP 39.612 are legally authorized by statute or bond covenant to linterfd -nted etund Ihnetind Inhdatwd hnt.tffd TRS-C-r 71.576 FondYs."euloWsebi Psyalen Rensnbln Payrton R1untvnabla Pnyti $124.779 move amounts from one fund to another. Amounts not transferred at fiscal year-end are accrued as "due Genira Fund $ 3a86s $ 999 S 34.629 $ 2$73 1 389498 5 3A72 fromn/due to." Activity occurring within the same fund NomnnjorGoernnmental Funds 457 228 2,710 457 2938 4326 1.227 34*29 .5.593 38955 6,810 is eliminated. Additional eliminations are made and PmprintaryFun& Cslleges and Univesifies 22.390 25,794 734.790 766546 757.180 792,340 i transfers in and out are netted and presented in the NomsnaorEeorpn Funds 394 89 2.7 10 ____ 3.194 59 22.784 25*83 737,500 766.346 760294 792429 government-wide statement of activities as 'transfers- internal activities." To-t 3 27,110 $ 27,110 $772.129 $772,129 $799239 S799.239

11, 1' - 1W , J , 20ý2' - Comprehensive',tormAl Fimincial Report -FcoiheSrawofTws 112l4 cpmprehenslveý Annual Nci.aný.Ial Report&, Eog T ___ ~2

each fund's specific purpose as required by GASB 54. Due From/Due To For the general fund, special revenue funds, capital (Amounts;in Thousands) Classification of Fund Balances/ projects funds and nonmajor permanent funds, the DueFrom - DuTO Net Position specific purpose of the fund balance is determined by Oter Primary ca.npoanr Ont Primmy Couptueal Fued. G rrert Uni Fund. Gosrrnment unit The table below presents a summary of the Aug. the governmental function for which the funds are FUrd 31, 2012, governmental fund balances by fund type and restricted, committed, assigned or unassigned. The Cl-unmtnutal Funds Gcral Fund S 132.957 $ $ 89 $1.138033 $ S specific purpose. governmental function is assigned to an agency and all SlainHighway Fund 2.52115 4,1it9 451 The classifications of nonspendable, restricted, fund balances reported by the agency reflect that func- NnnmajrnGrf emsvi ntul Funds 73450 67974 458A22 0 89 1.210,567 o 0 committed, assigned and unassigned are the fund bal- tion. Parpricary Funds ance classifications according to GASB Statement No. If a fund reported by an agency is exclusively for CulIngesand hnnuiirali• 848.173 26,699 UmmaploymcnnTrust Fund 12.12 " 54, Fund Batice Reporting and Governmental Fund another governmental function and the amount is sig- latitry Fund 578 4.D95 NnnmajorEnturpris Funds 41267 3,165 Type Definitions. With the exception of nonspendable nificant, the balance is reclassified to the appropriate 1.636 InternalSOraicn Fund 21.332 o governmental function, 9248I62 0 I0 353S95 o fund balances, fund balances are presented based on iducitaryFunds unin andOtherFtntplaync aenefii Truat Fund, 11.737 12-.128 Private Patrp. Trust Funds 8 Agcuay Funds 9W0 27229 Governmental Fund Balances - 1,[0 1490365 d 0 Nonspendable, Restricted, Committed, Assigned and Unassigne 69 0 0I Di[scrtely Ptnssstnd Cuntinnur Units 0 0 0 (Amwnau inThousuands)

Toitl $13497527 S 0 $ 1.3955.27 89 MAJORFUNDS MAJORFUNDS aradadud1d) GeneralFund Unassignra: Nouuitndablc: GennrulGovernmnnt S 914,770 Iniennory S 199562 Educulion 180.155 Prrpaid simns 1 89 ainlyln Hencnfii 105 Lng-trum Rn•univabln 476,6330 Hualthand H-umasScvices (3213263) Internal Balances Transfers In/Out 5 1...1l8 1t.,.d. P -*:. 135050 S 677.791 (Amountsin Thousands) TPubspnnWaiun 79,747 Restiricedfor: Naaturl Rrsnuruois per the Government-wide lenentl Csnunmtnnt $ 783,12 nd Retreatiun 95914 RegulatorySemices lWrde In TraanaitdCi Eduatuin 342.918 10,166 Financial Statements $ 14194.644 Otic Oth. 351224 (Amounts inmousands) Healnthand HumanSrniucs FusdSrn. Funds Pies Fublic SaWltyand Canmntions 45A32 Sum Highiuy Fund Nuaral Reuraces and Reacalioun 240.799 Nunspcndable: GAmnasiail Bktwlus ta GovnmnnanulFunds $ 1,763.735 125971M PrepaidIteus 2097 UnenralFund $ 4.191.199 S 3.779-911 Cornitind in: - . 0 128068 NONCURRENTASSETS SuateIHighay Fund 433.409 4530685 GeuneralGOnumrennn S 19313315 PF•r nnn School Fund I D20,887 965245 Resrictindfor: Inetenal a1.inues-lReeninabls $ 29D46 S (29046) S 0 Edu•iation NonuajiorGovuranmntal Funds 1,9533•15 3,994,482 H.nlih and HumanSorvicus 809,789 Onucraltolemnrani $ 4,115 CURRENTLIABILITIES 7277 913 11248972 PublicSlelly and Catrnulidns 873I62 Public uaey andCannc-ions 79$87 Internal Balanrua-Payablms 0865968 S (965A681 S 0 Prnpriany Funds 330 Transana-rian 1022.7113 Culegcr,and Univnnitirs 5.582.,53 576.,26 Natunl Rnsur-un and Re-uiruun 138702= $ 11133.985 Ulmapioymnt TwistFund 87.350 26.102 ORrgalairySnv'icns 263.746 Cununined in: [Wioy Fund 1.155.523 $ 5283325 $ 201.935 Nonmjar Entcrprli Funds 68356 35286 Ausiiorndiv: S 201935 5.738.159 1,7931137 Getl OsininG-tann S 36065 Unassignid: Transfers - Internal Activities Fiduciary Funds Healihand HumanSninic, 6_205 T-raportaution $ 15110116) Pension and OdierEmployee per the Government-wide Natual Risronuss 941 O (51J086) Bua-fi Trsrs Funds 114S21 88396 165 RegulatorySeanices Pemauat SchoolFund Financial Statements Pnrivst-PFurosTrust Funds 198 $ 44D76 11421 . 88384 Nousispndable: (Amounts in Thousands) peroaneni Fund Principal $12J)41 1174 00tw Toti ....-...... 13.13.0993...... $13109993 Frepuidltams 6 I tuFuntnliAu iu Funds Rcstric-id fan GovernmnatualAllk'ifie $1.9_44.781) Fublic School Support 16.761345 016761,845 BuaiossO-TpnAclivileis S 3.944381 Concludedon ihrefnolnsti6 i~aoe

. -1 . . . I F In a nci A I A e port - Fcv tic ýAihl.tl Tclýalý I Capital projects fund balances are often reported by Of the $14.1 billion reported as unrestricted net E1 two agencies with different governmental functions. In position, $6.1 billion is for the economic stabilization 0NO fund balances or net position. The beginning balances these instances, the fund balance is reported in the ftenc- fund. The economic stabilization fund was authorized Restatement of Beginning Balances and all related restatements for the components of the 4 tion for the project. The function is determined by the by the Texas Constitution, Article Ill, Section 9g. In During fiscal 2012, certain accounting changes and state's financial reporting entity are included below and specific purpose reflected for each column in the combin- November of each year a transfer is made equal to 75 adjustments were made that required the restatement of discussed on thle following page. ing balance sheet - non-major capital projects funds. percent of the excess of the prior fiscal year collections The specific purpose for debt service funds is con- for natural gas and crude oil production taxes over Restatements to Fund Balances/Net Position sidered debt service. 1987 collections. The Legislature may appropriate, by a (Amountsin Thousands) Restrictions of net position are listed on the face of three-fifths vote of the members present in each house, the govemment-wide and proprietary statements of net amounts in the ESF for spending that does not exceed SOVESAFENTLFUNS AN At P-busltet 2a11n1. Rspslsd FPRi~taterieta AsRntlaWn position. Per GASB 54, balances reported as restricted the amount of any unanticipated deficit or revenue GOVERNMENTALFUNDS AND in the fund i'nancial statements plus the nonspend- decline during a biennium. The Legislature may also GOVERNMEENTALACTIVITIES Mejor Funda: able permanent fund corpus balances are reported as appropriate any amount from the ESF for any purpose Generl Fund S 7,184,566 $ 4310$791 S 0973,987 Soar of net position. All other only if approved by at least two-thirds of the members HighwayFund 751t539 303,745 1,135,294 restricted in the statement Pernaness SchbIl Fund 26,94725 _.8 26.9472-18 fund financial balances are reported as unrestricted in present in each house. Total MJstnFunds 340883.363 72066 34.956229 the statement of net position. Noneujor Funds: Specia RecenueFunds 4A02.166 (878.415) 3.123.745 Debt Se IerFunds 1.554996 (2252) 1'552,744 Capital Projci Funds 868.892 654) 868.838 Governmental Fund Balances - mieanceulFunds 75730in (15,7356) 741 553 TetalNonnajor Funde 7,183ý357 (896,477 62'86$8b1 Nonspendable, Restricted, Committed, Assigned and Unassigned (concluded) ToladGeessncnial Funds 42P166320 (891,611) 41 '4!,109 (Amountsin Thousands) Gocmnlmnn. Anvielidi Adjua..een.: FUNDS(cncluded) NONMAJORFUNDS NONMAJOR CapitalAs-ses 75.667,494 (438234) 75 '292fi SpecialR nueFunds CapitalPrujo.s Funds tnng-Tenstiubiilides (21.493.5741 915.423 420978,151) Nonspendablc: Nonspendshk: Detmerd Revenue 784,063 S 354 784063 Inventory In-enlory S 3 Isteral Sercien Fund 227.984 227.904 PsepaidItems 5 Tote Goernmentl Acticilies Adjusieos 55.185.967 477,189 55,6631 : $ 159 Rescileidfote Recsir-edtor. GeneutlGonnment $ t5.507 Tootl G-aenn tnnlAeticijes 97,252,687 (346,422) 96.9,265' GenerailGocenmeni S 483532 Educatine 309 101129 BUSINESS-TfPEACTIVITIES Education 1297.183 Celicathand I tInv Services Public Safetyand Covcl ions 32.141 Major Funds: Transpoersina Public Safety and Conneeions 2.148 1n0s922 Collegs and Uniersities 39,14.136 (17976) 39086,160 Naitral Resources ndRceusaion Ntucal R•.oer-s andRseceation 23.184 (812.922) i J I20234 $ 241,9221 UtnenpluoymenTrstiFend (8129221 S 2,469.125 Loonsy Fund 117985 117985 Pemonm Panda Corenitled eo: TooulMajor Funds 38.409,199 (17,976) 38.391 •23 N~oespendable: General Gocesnment S 41.637 EmployeeBmenlits 17 PesmanentFund Principal $ 745.211 NcrnoesurEnnerprise Funds 3,723S29 (363) 37249666 Public Safety and Con-ections 7$.30 $ 7452. 1 Nutiur Resource' andRceedon 209 Restriectdfoe, Toist BRuninn-e.tpeActieitien 42.134228 18339) 42.115,189 RegulatoryServices 753,688 NaeuralReceusees andReeretion S 003376 $ 332 TanalPrimary Covesncenl 139.386,915 (364.761) 139022,154 Aesignedan: G-nra Go.-rmcm FIDUCIARYFUNDS lFeeauio8ecnrte S 1t049 Education 0 7,676 980 enrstn and Othei Empl,,ee Bcefit Trust Funda 130.580910 304 130,581214 Transoalio External Investenet T-,s Funds 171 13.966,146 13,966.146 ALLGOVERNMENTAL FUNDS Priae-n PstnpoTr-s1 Funds 2.9469 11 2S46911 S 2ý208 Noncpenduable 913592.302 Ressefictd DebtSeence Funsd, 23366039 Total FudLicry Funds 147393967 304 147394271 Restrited fote Iommitted 6196312 Debt Service S 1,389.875 Assiennd 46284 Disecrtely PnseenidComponeni Units 888310 14,40) 883970 $ 1,389A75 tUnessitged 583.558 TecalFcnd utlanes- lleeenlase Funds $44,179-t95 Toal Repuing Etciiay $ 287,669.192 5 (368.8971 $ 287070'0 5

I sive Annual financial fleport, 1 127, Jal Financial Repo I - I - -~. o.OO..ty--•.o rv•:"r:"• -".":z".l =2• ,t Z'Z-•" "ZZ-

Investment Funds million. The protested taxes include sales, franchise, insur- Restatements by Activity As of Aug. 31, 2012, state agencies, public employee ance and other taxes. Although the outcome of these cases (Amounts in Thousands). retirement systems and institutions of higher education had cannot presently be determined, adverse ruling in some of E. Activities-Tyi. ActaitisFidcaiv entered into capital commitments with investment man- them could resuir in significant additional refunds. agers for future funding of investment funds. Investment A. Capital A-at Adjullinenta $(438234) S 125.448) $ $ 192 $S4635M)0) funds include hedge fund pools, private investment pools, UnpaidClaims and Lawsuits B. State HighwayFud "NoutuditionulAgreenotls 99.494 99494 public market funds and other alternative investments A variety of cases that may affect the state were filed C. ConduitDeb. 1001225 100,125 managed by external investment managers. As of Aug. 31, as of Aug. 31, 2012. These claims total $85.9 million D. Federal CDBG Disaster Gran (57122) 2012, the remaining commitment was $26.9 billion. and include a number of lawsuits and claims that may F. MiscellaneousAdjusoosot (50485) 7,109 304 (4,622) 448D94) be significant to individual state agencies. While the Total Rrstatunsn $L(3464221 $ l18339) $ 3Y14 $ (4.440) $L(368597) Construction and Other Commitments outcome of these cases cannot be determined, adverse As of'Aug. 31, 2012, TxDOT had contractual com- rulings could result in additional liabilities. Addition- mitments of approximately $6.1 billion for construction ally, TxDOT filed 800 cases exercising eminent domain Restatements are grouped into the following five E. These are miscellaneous restatements necessary to and comprehensive developments. These are not rec- for $256 million. errors in the prior period or categories: correct accounting ognized liabilities because the terms of the contracts or recognize changes in the application of accounting FederalAssistance A. These restatements are for adjustments to capital agreements were not met and benefits were not received principles and methodologies, including restate- The state receives federal financial assistance subject assets and accumulated depreciation or amorti- as of the end of the fiscal year. ments for finds reclassified to a different fund type, to review or audit by federal grantor agencies. Entitle- zation. The restatements include an amount of Additionally, TxDOT is party to several pass-through to improve consistency within the financial report- ment to this assistance is generally conditional upon $628.3 million to correct an overstatement of toll toll agreements with local entities. Under these agree- ing entity. compliance with the terms and conditions of grant projects related to nontraditional agreements of the ments, the local entities will finance, design and construct agreements and applicable federal regulations, includ- state highway fund. These toll projects are under certain roadway projects and may maintain them for a ing the expenditure of assistance for allowable purposes. the ownership of a local toll project entity under specified period of time. Upon completion of the proj- Any disallowance as a result of the audits may become state law and should not be reported as state's assets. ects, TxDOT will make payments (i.e., pass-through toll payments) to the entities based on traffic utilization of a liability of the state but is considered immaterial to its B. This restatement is to correct accounting errors Commitments and Contingencies the roadways and other payment requirements governed overall financial condition. other than those in capital assets pertinent to non- by the agreements. Motorists traveling these roadways The Texas Office of the Attorney General and the COMMITMENTS traditional agreements of the state highway projects. will not be required to pay a toll. Estimated payments Texas Health and Human Services Commission's Office are included as notes payable as of Inspector General investigate allegations of overpay- C. This restatement is to correct prior year bond issu- under the agreements Outstanding Loan Commitments each project is completed. Liabilities for uncompleted ments to Medicaid providers. Until investigations are ances ofa blended component unit of the state that The state makes loan commitments to political completed, the total anmount of overpayments to provid- were reported on the state's financial statements. agreements are not recognized. As of Aug. 31, 2012, the subdivisions for financing purposes. These loan com- amount of unrealized payables for uncompleted pass- ers is potentially subject to recovery (amounts associated These bonds were determined to be conduit debt in mitments are provided from remaining current bond with the "open case list") and may represent a corre- fiscal 2012 and only require a note disclosure. The through toll agreements was $541 million. In addition, proceeds, future bond proceeds and federal drawdowns. TxDOT has equity grant commitments of $553.6 mil- sponding potential liability for the federal share of these restatement includes $1 billion for revenue bonds The Texas Water Development Board had loan com- payments - about 60 to 65 percent of that total. payahle and $910 million for the associated loans lion to various local toll project entities. mitments totaling $577.2 million as of Aug. 31, 2012. An actual liability is realized only after a completed receivable, The Texas Department ofTransporration (TxDOT) CONTINGENCIES investigation substantiates an overpayment and the pro- of $6 billion with North D. This restatement is to correct the prior year accrued has an equity loan agreement Protested Tax Payments vider is notified of the results and given an opportunity expenditures related to the disaster grant portion of Texas Tollway Authority with a maximum amount of As of Aug. 31, 2012. pending litigation filed by to submit rebuttal or claims for offsets. The percent of the federal Community Development Block Grant $6 billion to be used for State Highway (SH) 161 Proj- taxpayers seeking refunds of state taxes totaled $203.8 total dollars on the open case list that are ultimately (CDBG). ect in Dallas.

1 2012 - Comprehensive Annitial Financial Report,- hýT Ma $t4W 0 F_30 , ;V12 - Comprehensive Annual Finatielal Report ý - __1 confirmed as overpayments cannot be reliably predicted. The debt would be one or more separate series of vari- require TRS to post collateral in the event that the fair payment to the Texas Department of Transportation The state estimates the amounts that may become pay- ous types of obligations for the purpose of paying the value surpasses a specified contractual threshold. As of (TxDOT) if a maximum posted speed of 80 mph or able to the federal government will be immaterial to its costs of the project prior to issuance of such obligations. Aug, 31, 2012, the aggregate fair value of all derivative 85 mph is authorizedwithin 180 days after the service overall financial condition. TxDOT is authorized to be reimbursed for such pay- instruments with these provisions was $82.4 million. commencement date for the facility and TxDOT elects ments for the project when the obligations are issued to If the collateral posting thresholds did not exist, TRS to waive increased revenue sharing that otherwise would GuaranteedDebt finance the project. would be required to post the aggregate amount of $3.4 be required. On Aug. 30, 2012, the Texas Transporta- In 1983, the voters of the state approved a consri- million in collateral to its counterparties. TRS posted tion Commission authorized and directed the imple- rutional amendment that provides for the guarantee by Arbitrage no collateral as of Aug. 31, 2012. mentation of the maximum speed limit of85 mph. the permanent school fund of up to a defined capacity Rebatable arbitrage is defined by Internal Rev- In addition, the Commission authorized and directed of $75.4 billion in school district bonds as of Aug. 31, enue Code, Section 148, as earnings on investments TxDOT to notify the developer ofTxDOT's election to 2012. Approval by the state of Texas attorney general purchased with the gross proceeds of a bond issue in waive increased revenue sharing and instead receive the is required for each.bond issuance. In the event of a excess of the amount that would have been earned if the additional concession payment amount of $100 mil- default by a school district, the permanent school fund investments were invested at a yield equal to the yield Subsequent Events lion. On Sept. 17, 2012, the TxDOT executive director will transfer to the paying agent/registrar an amount on the bond issue. The rebarable arbitrage must be paid provided the developer with sufficient documentation Primary Government necessary to pay the maturing or matured principal to the federal government. State agencies and institu- and the additional concession payment was received on and/or interest to bondholders. As of Aug. 31, 2012, tions of higher education responsible for investments Bonds and Commercial PaperIssued/Refunded Nov. 9, 2012. $53.6 billion in debt was guaranteed by the permanent from bond proceeds careftlly monitor their investments State agencies and institutions of higher education The Regional Transportation Council of the North school fund for outstanding bond issues in 800 school to restrict earnings to a yield less than the bond issue issued $1.6 billion in new bonds and commercial paper Central Texas Council of Governments allocated a por- districts in the state. Under state stature, payments and, therefore, limit any state arbitrage liability. The and $820.5 million in refunding bonds since Aug. 31, tion of the SH 121 concession funding to pay off the by the permanent school fund on such guarantees are state estimates that rebarable arbitrage liability, if any, 2012. This routine activity finances state facilities, hous- state infrastructure bank (SIB) loan balance related to recoverable from the state of Texas. The $53.6 billion will be immarerial to its overall financial condition. ing assistance programs, educational loans and refunds segments I through IV of the President George Bush represents the principal amount and does not reflect outstanding debt. Turnpike Authority. During the October 2012 meet- any subsequent accretions in value for compound inter- Derivativeswith ContingentFeatures ing, the Texas Transportation Commission concurred est bonds (zero coupon securities), nor does it include All of the Department of Housing and Commit- Other Subsequent Events with the allocation. The transfer of funds totaling interest on current interest bonds or variable rate notes. nity Affair's (TDHCA) derivative instruments include The Texas Workforce Commission transferred approximately $145 million from the SH 121 account The amount also excludes bonds that were refunded provisions that require posting collateral in the event $92.7 million of taxes to the unemployment trust fund to the SIB, representing the full repayment of the loan, and released from the bond guarantee program. From its credit rating falls below a specified level as issued in September 2012 in accordance with Texas Labor occurred on Feb. 15, 2013. the inception of the program through Aug. 31, 2012, by Moody's Investor Service and Standard & Poor's. If Code, Section 204.123. The taxes were originally none of the school districts with guaranteed debt have TDHCA fails to post eligible collateral, the derivative deposited to the employment and training investment Component Units defaulted on the guaranteed debt. instrument may be terminated by the counterparty. As holding fund, an account within the general revenue On Nov. 5, 2012, Texas Small Business Industrial TxDOT is proceeding with the development of the of Aug. 31, 2012, the aggregate fair value of all deriva- fund. Texas Labor Code, Section 204.061, defines a Development Corporation, a discrete component unit SH 99 (Grand Parkway) project. TxDOT expects to tive instruments with collateral provisions was $46.9 statutory floor for the unemployment trust find as of the state, notified bondholders of its intent to redeem pay expenditures in connection with the project prior million. If the posting requirements had been triggered, I percent of total taxable wages for the four quarters $7.8 million of its Floating Rate Demand Revenue to the issuance of obligations to finance the portion TDHCA would have been required to post eligible col- ended June 30, 2012. The transfer was required because Bonds on Dec. 5, 2012. of the project for which TxDOT has jurisdiction. The lateral equal to the aggregate fair value of the derivative the unemployment trust fund balance was below that On Nov. 19, 2012, the Texas State Affordable Grand Parkway Transportation Corporation, a blended instruments. TDHCA posted no collateral as of Aug. floor. Housing Corporation, a discrete component unit of component unit of the state, expects to incur debt, with 31,2012. The Facility Concession Agreement (FCA) for the the state, redeemed the remaining $21.4 million in the aggregate maximum atnount of project expenditures The Teacher Retirement System oflTexas (TRS) State Highway (SH) 130 Segments 5 and 6 facility pro- market rate bonds to close out the 2009 New Issue of $600 million being incurred prior to such issuance. is party to derivative instruments with provisions that vides for the developer to pay an additional concession Bond Program.

2P.Jý - Comprebensive Ann wal Financial Report 132 --53,ý,,ý,. ,AM2 - Comprehensivt Annual Financial IFIpport I "n4' WX ý11 I 1_1 1._: I 1'ý4.:L-_1.'MNNMX.__-_-,_ M=ýý

the general revenue fund to account for its risk financ- Bonds and Commercial Paper Issued/Refunded ing activities. Certain agencies are exempt from the (Amountsin Thousands) Risk Management SORM program or elect to purchase additional insur- staripti. it Punsaes The state of Texas is exposed to various risks of anrce coverage outside of the program. The University DepNrtmenmof Agingand Dalnabffliy GconoraObligsaln, Co-nrein1 Fena.er capitalrepmis and enoeAdonsfar of Texas System (UIT), Texas A&M University System Se~nds Pape, Nos-. Seri. -08 the SlaewSupponed Living Centers. loss related to property, general and employer liability, 09112112 (A&M) and Texas Department ofTransportation Deportmentof Housingand Residentil Mortgage Revenue 70 JD70 Proside fAndsPoerthc por.-hso oPnoegoge- net income, and personnel. The seate of Texas and its CornmunttyAffalas Boods.Series 2009 C4 bookedseessries go•sLood as timely (TxDOT) administer separate self-insured workers' pa1300rsof principalad in-,ress by employees are covered by numerous immunities and G-o-ereoer NarionlI MrteaogeAssoeiinon compensation programs. "OGinnieMaeet. defenses that limit some of these risks of loss, particu- Where applicable, certain agencies purchased fire MileldsoemnnState Unlenlity Reveoe PFinancingSystem Bonds. 4.710 10,14112 Refund Reveno, Bondsoseries 2002 te larly in liability actions brought against the state or its Series 2012A mdoeedebt servicepayments. employees. Remaining exposures are managed by self- and extended insurance coverage for buildings financed Revenue FiPnncingSystem Bonds, OIS 10)00112 Refund Semen red RefundingBSnds 2 through the issuance of bonds. Other risks are addressed Series 20120 Series 003 inotduoe debt omioe payments. insurance arrangements, contractual risk transfers, the Ro.en. RefundingBorns.Serio Refund Series2J2A forsavings. TeonsDeportment of Transplertlon 58"300 - 11(27/12 purchase ofcommercial insurance o" a combination of through a combination of interim financing and com- 2012A mercial coverage for fire and all other perils, as well as Re.mnoe Refondingltond,.Seies 225100 11(27/12 Refund Series2W09 for sings. these risk financing techniques. 2012R Estimates of liabilities for incurred but not reported coverage for medical malpractice, torts, named wind- GeneralObligation Bont. Series 818,635 12/18112 Fundvarious highweay improvemenl pmr s. storms, floods and other potential liabilities. 2012A claims are actuarially determined based on estimates of Fundvsridus highway improvementpevr.Ivr General OblugationBonds, Series 99.570 12/101/2 the ultimate cost ofsettling daims, using past experi- 2012B Health, Life and Dental TexasPubilo Flinaenr Authority Gnlersl ObligationConnerrial 90)00 0/0A /12 To fundidirec administratior,gr at review ence adjusted for current trends and any other factors PopeeNotes, CPRIT SeriesA andowaed opeen•los end theTexas Cancer Insurance coverage is provided to active state Registry Opeertiensof the Caneer Prevention that would modify past experience. Claims liabilities RosearchInsiuteuot Texas (CPRT). include specific, incremental claims adjustment expen- employees and their dependents by one of three heath General ObligationConmmercisl 6100 10104112 To fundprajoes /er fe Teno Dep-enos of Paper NoseS,Series 2001; SvereHeolib See-ive andthe Tres Himmeri.s plan administrators. All state employees not covered by Comnnussin.. ditures/expenses. In addition, estimated recoveries on unsettled claims, such as salvage and subrogation, are insurance plans provided by UT and A&M ore included Texas southern Unlnnenetsy Reveoue Bonds,Series A 2012-10 5SPO 09f27/12 Th eseotmrcmn. studenthoosing. in the Texas Employees Group Benefits Program (GBP) T-ns Stlae AffordableHousing MublifamilyHousing Mortgage 71.100 09r201/2 To cquireand rehbilitale ns propenies. evaluated in terms of their estimated realinable value corporation- Revena Bonds.Series2012 and deducted from the liability for unpaid claims. Unal- administered by the Employees Retirement System of Texas StatieUniversity Systen Revonue Finanring System Bonds,. 938549 01113/13 To fund various noemrslionand reoaionuo Texas (ERS). Public school employees and their depen- Serie, 2013 located claim adjustment expenditures/expenses are not dents are covered by the Texas Active School Employees Wait. Dnevlopenot Board GeneralObligalion Bonds, Series 29.385 (1/05/12 Proovdefinancos assinstre fPr teaoner'irally included in the liability for claims and judgments. 2012F srnoessrdAr-es Prenre8r(FDAl ) project There were no significant reductions in insurance Uniform Group Benefits Program (TRS-ActiveCare) General ObligationBords. Series 156•165 10/02/12 Prmridefaneoid as-iteeoe from AheTen o coverage in the past year. Also, in the past three years, administered by the Teacher Retirement System of Texas 20120 WaterDevelopment Fond (Dfnd) for wvoiresssi~lnreprsioOet. settlements have nor exceeded insurance coverage. (TRS). Risk of loss is retained with self-insured plans or GeneralObligation Bonds, Sories 42.470 021J2/13 Pro'ide fineacil aossisune from the Water transferred to the insurance carrier with health mainte- 2013A Infrastrousre Fund IWIF) fPr water assisiunceoroirs, Property and Liability nance organization (HMO) plans. Uanlversltyof ToeasSystem PenmssoroUniversity Fund Taxable 751300 10/02/12 To fi-re . mrietyof cpitll projeris and Commorjiol PuperNo.. SerienB erosipmeotperobuse. ao vriousntumneons. The Texas Labor Code, Chapter 412. identifies the RevenmsFinancig System S0.316 IoIta12 To fire ava.eey of apsial projeets and executive director of the State Office of Risk Manage- Texas Employee Group Benefits Program CommercialPaper Notes, SeriesA esuipmenl perbhaes el revsiss in aions. Claims for health, life, accidental death and dis- V.t1rans oandBoeard Geneal ObligationStateofTeas I001)100 fI/I12 To augmewotie Veterans'Housing Assistanci ment (SORM) as the state risk manager. SORM oper- uNodII. Vete'os BRndse ies 20128 ates as a full-service risk and insurance manager for memberment tAD&D), disability and dental insurance Toel Bond and Commereial coverages are established under the GBP These cover- Papertssoedl~fiefrsstd S21S9.715 the state and oversees all surety bond and property and liability insurance purchases by state agencies. ages are provided through a combination of insurance Diln•.ly oid•oned -hlui' SORM administers the statewide workers' compen- contracts, a self-funded health plan, a self-funded dental sation program. The state does not carry commercial indemnity plan, HMO contracts and dental health insurance for workers' compensation, but instead, uses maintenance organieations (DHMO) contracts.

I I 201Z - Comprehensive Annual Financial Report - Fortnýi State ofl'exa5 133 134 . - Comprehensive Annual Financial Report University of Texas System and Of the fiscal 2012 claims liability ending balance, organizations that raise and hold economic resources for the Comptroller direct access to services provided by the Texas A&M University System $194 million relates to long-term claims liabilities, the direct benefit of a government unit. Because of the Federal Reserve System. Separate financial statements UT and A&M provide health insurance, dental which are reported in Note 5. The remaining $593 mil- closeness of their relationships with the primary govern- may be obtained by contacting the Trust Company at insurance, vision insurance, life insurance, AD&D, lion relates to the state's health, life and dental insurance ment, some component units are blended as though 208 E. 10th St., 4th Floor, Austin, Texas 78701. long-term disability, short-term disability, long-term programs, which are reported as accounts payable. they are part of the primary government. Most compo- care and flexible-spending account coverages to all nens units, however, are discretely presented. None of Discretely PresentedComponent Units benefits-eligible employees. These insurance benefits are the component units for the stare of Texas meet the cri- The stare is financially accountable for the follow- provided through both self-funded and fully insured teria for major component unit presentation and those ing legally separate entities (component units); however, arrangements. presented are for informational purposes of interested the component units do not provide services entirely Contested Taxes parties. The component units are reported for the year or almost entirely to the state. The component units' Teacher Retirement System The state may assess a claim against one or multiple ended Aug. 31, 2012, unless indicated otherwise. financial data is discretely presented in the component TRS-AcriveCare is a health benefits program taxpayers for a tax liability. Taxpayers may petition for unit column of the state's government-wide financial that offers options ranging from catastrophic cover- a formal hearing before an independent administra- Blended Component Units statements. age with reduced premiums to a comprehensive plan tine law judge if they wish to challenge a tax liability The state is financially accountable for two material Texas Guaranteed Student Loan Corporation with near first-dollar coverage at higher premiums. assessed by the state. If the request for a determination blended component units. These component units are (TGSLC) is a public nonprofit corporation that guar- TRS-ActiveCare covers members currently employed hearing is received within a specified Time, the taxpayer reported as if they are part of the primary government antees loans made to eligible students under [he federal by public educational employers that participate in the does not have to pay the tax until a final decision is because they provide substantially all of their services guaranteed student loan program. All nine members plan. reached. As of Aug. 31, 2012, there was an estimated directly to the state. The component units' financial ofTGSLC's board are appointed by the governor with TRS-ActiveCare offers a choice of four preferred $1.3 billion of assessments filed that are currently in the data is blended in the appropriate funds within the the advice and consent of the Senate. The state of Texas provider organization plans statewide as well as HMO redetermination hearings process. Collectability of these financial statements. There are no other material blend- imposes its will on TGSLC through its application of plans in certain service areas. The risk associated with assessments is dependent upon the decisions of adminis- ed component units of the state. the Texas Sunset Act. TGSLC's liabilities are nor debts TRS-ActiveCare is retained by the plan's participants, trative law judges. These assessments are not recognized Employees Retirement System of Texas (ERS) is of the state. TGSI.C received a one-time appropria- and no risk is transferred to the plan's administrators, as tax revenue until the administrative hearing is final. a legally separate entity established by the Legislature tion of $1.5 million to fund initial startup operations. employers or the state. Therefore, these amounts are not included in the receiv- to administer benefits for officers and employees of the TGSLC is reported for the year ended Sept. 30, 2012. ables reported in the financial statements. state. ERS is governed by a six-member board of trust- Separate financial statements may be obtained by con- Changes in Claims Liability Balances ees. The governor, with the advice and consent of the tacting TGSLC at P.O. Box 83100, Round Rock, Texas The following table presents the changes in claims Senate, appoints three of the six members of the board 78683-3100. liability reported in various balance shees/statement of of trustees. The state of Texas has the ability to impose Teacher Retirement System of Texas (TRS) is a net position liability accounts during fiscal years ended its will upon ERS through its budget approval powers. legally separate entity established by the Legislature Aug. 31, 2011, and Aug. 31, 2012. Claims and judg- Component Units and Related Separate financial statements may be obtained by con- to administer retirement and disability annuities to ment amounts presented in Note 5 are also included in Organizations tatting ERS at P.O. Box 13207, Austin, Texas 78711. employees and beneficiaries of public school systems the table. Component units are legally separate organizarions Texas Treasury Safekeeping Trust Company and institutions of higher education. TRS is governed for which the elected officials of the primary govern- (Trust Company) is a legally separate entity established by a nine-member board of trustees, three of whom Changes in Claims Liability Balances ment are financially accountable. Component units by the Legislature. The Comptroller of Public Accounts are direct appointments of the governor. The remain- (Amountsin Thousands) can also be other organizations for which the nature is the single shareholder of the Trust Company and is ing trustees are appointed by the governor from lists and significance of their relationship with a primary charged with managing the Trust Company. The Trust prepared by various constituent groups. TRS is subject lul-n ft D--•~e Balanc government is such that exclusion would cause the Company is authorized to manage, disburse, transfer, to the budget approval powers of the Texas Legisla- 20a2 S760.167 2.726,971 t2s 682 $5787.456 reporting entity's financial statements to be misleading safekeep and invest funds and securities provided by ture, and therefore is fiscally dependent on the state of 20nt $76.t22 S2.736,829 S2.762.74 $760.167 1 or incomplete. In addition, component units can be statute or belonging to state and local entities and gives Texas. Separate financial statements may be obtained

IZ6, Comprehensive Anruuýl Financial Report forTne $rate Of3exas 135 COO henslV* Annual Financial Report,,,! by contactingTRS at 1000 Red River St., Austin, Texas boards. The governor can also remove any board mem- Texas Windstorm Insurance Association (Asso- assessment rates against reinsured health benefit plan 78701. ber at will. The OneStar Foundation Inc. performs all ciation) is a legally separate organization established issuers. Financial statements are presented on statu- State Bar of Texas is a public corporation and an administrative duties of the OneStar National Service to provide an adequate market for windstorm and hail tory accounting principles established by TDI, and are administrative agency of the judicial branch of gov- Commission Inc.,.as well as provides technical assis- insurance in the seacoast territory of Texas and serves as reported for the year ended Dec. 31, 2011. Financial ernment. The purpose of the State Bar is to ensure tance, education, information aod other support to the an insurer of last resort. The commissioner of the Texas statements may be obtained at 100 Great Meadow Rd., that public responsibilities of the legal profession are volunteer community. OneStar is reported for the year Department of Insurance (TDI) appoints the nine- Suite 704, Wethersfield, Connecticut 06109. effectively discharged. The annual budget for the State ended Dec. 31, 2011. The financial statements of One- member board of directors, and the board is responsible Texas Health Insurance Risk Pool (THIRP) is Bar of Texas must be reviewed and approved by thc Star can be obtained by contactintg OneStar at 9011 and accountable to the commissioner. The state of a legally separate entity that provides access to quality Supreme Court, thus making the State Bar of Texas Mountain Ridge Drive, Suite 100, Austin, Texas 78759. Texas has the ability to impose its will on the Associa- health care at a minimum cost to the public for those Fiscally dependent on the state of Texas. The State Bar Texas Low-Level Radioactive Waste Disposal tion through TDI commissioner approval of rates and unable to obtain traditional health care coverage. TDI is reported for the year ended May 31, 2012. Separate Compact Commission (Commission) is a legally sepa- maximum liability limits for windstorm and hail insur- approves all rates and rate schedules before they are financial statements may be obtained by contacting the rate organizarion established to promote the health, ance policies issued by the Association. The Association used. The nine-member board of directors is appointed State Bar at 1414 Colorado St., Austin, Texas 78701. safety and welfare of the citizens and environment of is reported for the year ended Dec. 31, 2011. Separate byTDrs commissioner. THIRP is reported for the Texas State Affordable Housing Corporation the states participating in the Texas Low-Level Radio- financial statements may be obtained by contacting the year ended Dec. 31, 2011. Financial statements may be (TSAHC) was incorporated under the Texas Non- active Waste Disposal Compact (Compact), known as Association at 5700 South Mopac, Building E, Suite obtained at 1701 Director's Blvd., Suite 120, Austin, profit Corporation Act and is legally separate from party states. There are currently three party states, Texas, 530, Austin, Texas 78749. Texas 78744. the state. Its purpose is to serve the housing needs of Maine and Vermont, with Texas serving as the host Surplus Lines Stamping Office of Texas (Stamp- Texas Boll Weevil Eradication Foundation Inc. low-income Texans, professional educators, firefighters parry state. The mission of the Commission is to: ing Office) is a legally separate nonprofit corporation (Foundation) is a legally separate entity that establishes and police officers who are first-time home buyers and Limit the number of radioactive waste disposal created by the Legislature to assist TDI in the regula- and implements a boll weevil eradication program for are not afforded housing finance options through con- facilities tion of surplus lines insurance. TDI's commissioner Texas. It is fiscally dependent on the Texas Department ventional lending channels. TSAHC operates under Effectively, efficiently and economically manage appoints the board. The Stamping Office performs its ofAgricultare (TDA) and governed by 21 board mem- the name Texas Star Mortgage to provide single and low-level radioactive waste fisnctions under a plan of operation approved by order bers. TDAs commissioner appoints five of the board multifamily loans to low-income Texans. Prior to any Encourage the reduction of the generation ofTDI. The Stamping Office assesses each surplus members. TDA approves the Foundation's budget, bonds being issued by TSAHC, the issuance must be thereof lines insurance agent a stamping fee for the admin- assessment fees and debt. The Foundation is reported reviewed by the Bond Review Board, which is com- Since Texas serves as the host party state for the istrative funding of the Stamping Office. The state for the year ended Dec. 31, 2011. Separate financial posed of the governor, lieutenant governor, speaker Compact. it is entitled to six voting members, whereas of Texas has the ability to impose its will upon the statements may be obtained by contacting TDA at P.O. of the House of Representatives and Comptroller of the other parry states are only entitled to one voting Stamping Office through the approval of the assess- Box 12847, Austin, Texas 78711-2847. Public Accounts. Separate financial statements may be member. The governor appoints the six members of the ment rate that funds its operations. The Stamping Texas Agricultural Finance Authority (TAFA) is a obtained by contacting TSAHC at PO. Box 12637, Commission serving on behalf ofliexas. As host state, Office is reported for the year ended Dec. 31, 2011. legally separate entity that provides financial assistance Austin, Texas 78711-2637. Texas has the authority to establish the disposal fees Separate financial statements may be obtained by con- for the expansion, development and diversi•ication of OneStar National Service Commission Inc. assessedat the facility for disposal of low-level radio- tacting the Stamping Office at P.O. Box 160170, Aus- agricultural businesses. TAFA primarily benefits the and OneStar Foundation (OneStar) are legally active waste generated in the party states. The Texas tin. Texas 78716-0170. citizens of Texas. If there are insufficient funds to pay separate nonprofit corporations that administer the Legislature, with the approval of the governor, also Texas Health Reinsurance System is a legally sepa- TAFA's bond obligations, the primary government is AnseriCorps*Texas program. They serve as the state's has the authority to revise the portion of the Compact rate entity that reinsures risks covered under the health obligated to transfer money from the stare treasury to liaison to and oversee Texas' participation in OneStar pertaining to the volume of waste the host state will dis- benefit plans of small employers' insurance carriers. TAFA in an amount sufficient to pay those obligations. programs for the Corporation for National and Com- pose of without the consent of the nonhost party states. TDI's commissioner appoints, supervises and controls The governor, with the advice and consent of the Sen- munity Service (a federal agency), as well as prepare a The financial statements of the Commission may be the nine-member board. The state of Texas has the ate, appoints seven of the nine members of the board of comprehensive three-year national service plan for the obtained by contacting the Commission at 333 Guada- ability to impose its will through TDI commissioner directors. The commissioner of TDA administers TAFA state. The governor appoints all members of OneStar's lupe St. #3-240, Austin, Texas 78701. approval of base reinsurance premium rates and the with the assistance of the board. Separate financial state-

1 201ý - Comprehensive Annual Financial Report - ForttieStg,ýofTekas 137 139 2042 - Coniprehenslve Annual Finaticlal Report - Pce thcSakoofTc,,aý ments may be obtained by contacting TDA at PO. Box contacting TREC at P.O. Box 12188, Austin, Texas tronic exchange of health information throughout the be obtained by contacting the Commission at PO. Box 12847, Austin, Texas 78711-2847. 78711-2188. stare to ensure information is available to health care 12428, Austin, Texas 78711. Texas Water Resources Finance Authority Texas Economic Development Corporation providers and to improve patient safety and quality of Film Texas Fund is a legally separate nonprofit (Authority) is a legally separate entity created by the (TED Corp), a nonprofit corporation, was created to care. The board of directors consists of II members organization created to support, encourage and promote Legislature as a governmental entity and body politic assist, promote, develop and advance economic develop- and is appointed by the governor, with the advice and the development of the film, television and multimedia and corporate for the purpose of increasing the avail- ment in the state of Texas. The Office of the Governor consent of the Senate. The state of Texas has the abil- industry in 'l'xas. The Film Texas Fund is closely related ability of financing for water-related projects. A board is the oversight agency for TED Corp, and has the ity to impose its will upon THSA through the ability to the Office of the Governor Texas Film Commission of directors, composed of the six members of the Texas ability to remove board members at will. The board of the governor to order the dissolution ofTHSA at (Commission). However, the Commission is not finan- Water Development Board (TWDB), governs the of directors is appointed by the governor. TED Corp's any time the governor declares the purposes of THSA cially accountable for the Film Texas Fund and the Film Authority. The members of the TWDB are appointed services primarily benefit the Texas citizenry. Separate are fulfilled or that THSA is inoperative or abandoned. Texas Fund supports its own mission in promoting the by the governor. TW'DB, through a sales and servicing financial statements may be obtained by contacting THSA is reported for the year ended Sept. 30, 2011. film industry in Texas. Due to the Film Texas Fund's agreement, wholly manages the Authority's operations. the Office of the Governor at P.O. Box 12428, Austin, THSA's financial statenrents may be obtained by con- close relationship with the Commission, omitting the Prior to any bonds being issued by the Authority, the Texas 78711. tacting THSA at 221 E. 9th St., Suite 201, Austin, Film Texas Fund would result in misleading financial issuance must be reviewed by the Bond Review Board, Texas Small Business Industrial Development Texas 78701. statements. The Film Texas Fund is reported for the year which is composed of the governor, lieutenant governor, Corporation (TSBIDC) was chartered to promote Beacon State Fund is a legally separate organiza- ended Dec. 31, 2011. Financial statements for the Film speaker of the House of Representatives and the Comp- economic development in the state of Texas. The Office tion established to assist the Governor's Commission for Texas Fund may be obtained by contacting the Office of troller of Public Accounts. Financial statements may of the Governor is the oversight agency for TSBIDC. Women (Commission) to promote issues affecting the the Governor at P.O. Box 13246, Austin, l1exas78711. be obtained by contacting TWDB at PO. Box 13231, The board of directors is appointed by the governor, women of Texas. Members of the board of trustees are Casa Verde Research Center, Sociedad Auonimo Austin, Texas 78711-3231. and all programs and expenditures ofTSBIDC must be appointed by the Office of the Governor or someone (Casa Verde) is a legally separate organization estab- Texas On-Site Wastewater Treatment Research approved on behalf of the state by the Texas Economic designated by the Office of the Governor. The Office of lished in Costa Rica to provide research opportunities Council (Council) was abolished effective Sept. 1, Development Bank. TSBIDC's services primarily bene- the Governor has fiscal oversight over the Beacon State for students and faculty ofTexas A&M University. Casa 2011. Its purpose was to award competitive grants and fit the Texas citizenry. Separate financial statements may Fund to ensure funds are expended properly and the Verde also provides services to outside organizations, contracts to support applied research, demonstration be obtained by contacting the Office of the Governor at public purpose is being accomplished. The Beacon State such as study abroad programs to corporations and projects and information transfer regarding on-site PO. Box 12428, Austin, Texas 78711. Fund increases public awareness through the distribu- research and education opportunities for Costa Rican wastewater treatment. Upon its abolishment, the Coun- Texas Disaster Relief Fund (TDRF), a nonprofit nion of information, media events and community out- universities. The board of Casa Verde is appointed by cil's activities and functions were absorbed by the Texas corporation, was established to help the Office of the reach programs. The Beacon State Fund is reported for executive management of Texas A&M University. The Commission on Environmental Quality. Governor provide disaster relief The services provided the year ended Dec. 31, 2011. Financial statements may executive management can also remove board mem- Texas Appraiser Licensing and Certification by TDRF assist the Office of the Governor in respond- be obtained by contacting the Commission at PO. Box bers at will and modify the budget of Casa Verde. Casa Board (TALCB) was statutorily created ai an inde- ing to the needs of the citizens before, during and after 12428, Austin, Texas 78711. \Wrde is reported for the year ended Sept. 30, 2011. pendent subdivision of the Texas Real Estate Com- a disaster in Texas. Based on TDRF's relationship with State Agency Council is a legally separate organiza- Separate financial statements may be obtained by con- mission (TREC) and is a legally separate entity from the Office of the Governor, omitting TDRF would tion established to assist the Governor's Commission tacting'lexas A&M University, External Reporting, at the primary government. The governor appoints the result in misleading financial statements. TDRF's for Women (Commission) by honoring women who 750 Agronomy Rd., Suite 3101 GSC, 6000TAMU, members of the board. TREC provides administrative financial statements may be obtained by contacting have made significant contributions to Texas through College Station, Texas77843-6000. support to TALCB, hut has no authority to approve or the Office of the Governor at P.O. Box 12428, Austin, their work in state government. The board of directors Representacion de TAMU en [a Repubfica Mexi- modify its budget or to set its fees.Although TALCB Texas 78711. is appointed by the director of the Commission. The cana, A.C. (Mexico Center) is a legally separate organi- is not fiscally dependent on TREC, to exclude it Texas Health Services Authority (THSA) is a director of the Commission is required to sign all con- zation established in Mexico City, Mexico, to serve as would result in the presentation of incomplete finan- legally separate entity created to assist the Office of the tracts and has check signing privileges. Expenses exceed- a central point of contact for the support and promo- cial statements. TALCB serves the real estate commu- Governor with the improvement of the Texas health ing $500 require the Commission director's signature. tion of Texas A&M University's international educa- nity in Texas. Financial statements can be obtained by care system. THSA promotes and coordinates the elec- Financial statements for the State Agency Council may tion, research and outreach activities. In addition, the

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Mexico Center provides services outside of Texas A&M responsible for the Texas 4-H programs. Although the of educational and other activities of Midwestern State resources. The program also pays rewards and death University, such as to Mexican government entities. state of Texas is not financially accountable for Texas University. It is governed by a board of trustees of no benefits authorized by Texas statute. The Texas Parks The executive management of Texas A&M University 4-H Inc., Texas 4-H Inc. is closely related to the Texas less than three members. This board appoints individu- and Wildlife Department's executive director appoints appoints the voting majority of the board of the Mexico A&M System. Failure to include the financial informa- als to fill vacancies on the board as they occur with the the members of the committee. Center. It can also remove hoard members at will and tion ofTexas 4-H Inc. would result in misleading finan- approval ofthe Midwestern State University board of Parks and Wildlife Foundation (Foundation) is approve and modif' the Mexico Center's budget. The cial statements. Separate financial statements may be regents, which is appointed by the governor. The Trust's a legally separate nonprofit organization established to Mexico Center is reported for the year ended Dec. 31, obtained by contacting Texas A&M University System, board of trustees serves under the direction of the board manage and conserve the natural and cultural resources 2011. Separate financial statements may be obtained by Office of Budgets and Accounting, 301 Tarrow, Suite of regents, which has the power by majority vote to of Texas. The Foundation provides private support to contacting Texas A&M University, External Reporting, 350, College Station, Texas 77840-7896. appoint or remove any or all of the trustees. the Texas Parks and Wildlife Department (Depart- at 750 Agronomy Rd., Suite 3101 GSC, 6000 TAMU, Charter School Finance Corporation is a non- ment), but the Department is not financially account- College Station, Texas 77843-6000. Related Organizations profit organization with the sole purpose of issuing able to the Foundation, nor is the Foundation fiscally National Biosecurity Foundation (Foundation) is Related organizations are legally separate, fiscally revenue bonds for authorized open-enrollment charter dependent on the Department. The Foundation is gov- a legally separate nonprofit corporation established to independent entities for which the state appoints a vot- schools for the acquisition, construction, repair or reno- erned by a group of trustees, the majority of whom are develop national, regional and local biosecurity coun- ing majority of the board, but the state is not financially vation of education facilities at those schools. The Texas appointed by the chairman of the Department. termeasures against unconventional weapons, includ- accountable for the entity. Public Finance Authority appoints the board ofdirec- River Authorities are political subdivisions created ing biological, chemical and radioactive weapons, and Life, Accident, Health and Hospital Service Isur-" tors in consultation with the commissioner of the Texas by Texas stature. The Texas Constitution, Article XVI, communicable diseases applicable to both military and ante Guaranty Association (Association) was created Education Agency. Section 59, authorizes the Legislature to create districts civilian populations. The board consists of initially three for the protection of persons against failure in the per- Texas State University System Foundation Inc. that conserve and develop natural resources of the state. directors, originally appointed by the deputy general formance of contractual obligations under life, accident (Foundation) is a nonprofit corporation with the purpose The conservation and development of the state's natural counsel of the Texas A&M University System (A&M). and health insurance policies and annuity contracts due of providing financial support for the universities and resources includes the control, storing, preservation and Additional directors may be elected by a majority of the to the impairment or insolvency of the member insurer colleges within the Texas State University System. The distribution for irrigation, power and all other useful existing directors of the Foundation. A&M can modify that issued the policies or contracts. TDI's commissioner Foundation provides funds for student scholarships and purposes of storm waters, flood waters and the waters of or approve the budget of the Foundation, as well as appoints the Association's nine-member board of directors. faculty awards and assists the chancellor in performing rivers and streams; the reclamation and irrigation of arid, veto, overrule or modify the decisions of the Founda- Texas Title Insurance Guaranty Association was his/her duties. The board of directors is comprised of all semiarid and other lands needing irrigation; the recla- tions hoard. The Foundation was dissolved at the end created for the purpose of providing funds for the pro- members of the Texas State University System board of mation of drainage of overflowed lands and other lands of fiscal 2012. Separate financial statements may be tection of holders of "covered claims," as defined in the regents, which is appointed by the governor. needing drainage; the conservation and development of obtained by contacting Texas A&M University System, Texas Insurance Code. This applies to all title insurance Texas Farm and Ranch Lands Conservation forests, water and hydro-electric power; the navigation of Office of Budgets and Accounting, 301 Tarrow, Suite written by title insurance companies authorized to do Council was established to advise and assist the com- inland and coastal waters; and the preservation and con- 350, College Station, Texas 77840-7896. business in Texas. The nine-member board of direcrors missioner of the General Land Office with the admin- servation of all such natural resources of the state. The Texas 4-H Inc. is a legally separate nonprofit is appointed by TDI's commissioner. istration of the Texas Farm and Ranch Lands Conserva- state of Trexasappoints the voting majority for the follow- organization established to prepare the youth of Texas Texas Mutual Insurance Company (Texas Mutual) tion Program and to select applicants to receive grants ing 16 river/water authorities: to meet the challenges of childhood, adolescence and operates as a domestic mutual insurance company pro- under the program. The governor appoints the mem- * Angelina and Neches River Authority adulthood through a coordinated, long-term, progres- viding workers' compensation insurance in the state of bers of the council. Braios River Authority sive series of educational experiences that enhance life Texas and also serves as the insurer of last resort. The Operation Game Thief Committee was estab- Central Colorado River Authority skills and develop social, emotional, physical and cogni- governor, with the advice and consent of the Senate, lished to administer the operation game thief program. Guadalupe-Blanco River Authority tive competencies. Texas 4-H Inc. serves as the central appoints five of the nine members of Texas Mutual's The program facilitates the apprehension and prosecu- Lavaca-Navidad River Authority organization for the subordinate organizations and board of directors. tion of persons who violate Texas laws intended to LLower Colorado River Authority affiliate organizations that comprise the 4-H program Midwestern State University Charitable Trust protect the state's natural or cultural resources and the Lower Neches Valley River Authority in Texas. Texas A&M AgriLife Extension Service is (Trust) is a nonprofit organization with the sole purpose public safety of persons using those natural or cultural * Nueces River Authority

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Red River Authority Nonexpendable funds are those required to b6 retained 0N .4E Sabine River Authority in perpetuity. San Jacinto River Authority Tobacco Settlement Taxes Receivable and Sulphur River Basin Authority The state of Texas settled a lawsuit against cer- Donor-Restricted Endowments Tax Refunds Payable (AmountsinThousandsl Trinity River Authority tain tobacco manufacturers in 1998. The settlement Taxes receivable and tax refunds payable, as reported I Donr- Upper Colorado River Authority included monetary and injunctive relief The settling in the general fund on the balance sheet - governmental SRestrtetd ofNet tia-pdadin Upper Guadalupe River Authority tobacco manufacturers agreed to remit annual payments Eadoanlent AppaedalIoa Nettiueittnu Rinds, are detailed by rue typein the following tables. Upper Neches Municipal Water Authority to the state. Estimates made at the time of the agree- TPendaaseaTea. 12-4.786 Expendable Term Endonaenns 35340 Exp-ndable ment projected that these payments could total $15.1 Taxes Receivable by Tax Type i...... $25370.126...... billion over the first 25 yearsof the agreement. The August 31,2012 (Amounts In Thousands) court-ordered annual payment amounts are subject to Wai The majority of the state's endowments are the adjustments based on the tobacco companies' domestic Deficit Fund Balances/Net Position results of donations made to institutions of higher Sates and U tax $1550.483 cigarette sales, the general consumer inflation rate, the Wtitr Vehile ard ManutacteurdHoasing 133.374 education. The Uniform Prudent Management of Proprietary Funds profitability of the tobacco companies and any other M-ur Fuels 7256 Funds Act, Texas Property Code, Chapter Oil and Natut tal Produeion 633207 Institutional 233.843 The Texas Prepaid Tuition Plans, a nonmajor court-ordered factors. A revenue accrual of $312.5 mil- t-F-ahise 163, provides general guidelines on how endowments Irrunte Ovtupatioe 275287 enterprise fund, reported a deficit of $620.8 million. lion is based on the payments received in December. OpCtraretnd Tabu-o 19.736 may appropriate Other 160,54 $474.7 million should be maintained. An institution The deficit is due to the difference between the present 2012. Tobacco settlement revenues were Tal T-a R-lYxestRecelale, $2,9384 for expenditures or accumulate as much as the instiru- value of actual and projected contract benefit payments in fiscal 2011 and $484 million in fiscal 2012. Cumula- tion determines prudent for the uses, benefits, purposes LiqaidityChtueitesttits: and of actual and projected contributions front account tive actual tobacco settlement revenues as of fiscal 2012 Cuamrl Tates Rte-eiable $2A02208 and duration of the endowment. Each institution sets Noanux- T 9esReceivable 136A52 holders and investment earnings on those contributions were $7.6 billion. the amounts and/or percentage of net appreciation on Ttal T.xs Ractinable $2.938 56 to the Texas Guasranteed Tuition Plan (Plan). The Plan endowment investments that are authorized for expen- *vT draeThRcc'rxen~rlu,4v 5 2.345400 was closed to new enrollment in 2003 when tuition was diture in its spending plan. S-al Highwy-'m 218,717 deregulated. Over the life of the Plan, actual Tuition and -uMa..taxeaats 73.135 TýToa- R-abke - Hahla Shet- o na Fuas S 3.110.S12i required fees for Texas public four-year colleges and uni- versities grew at a higher percentage rate than the Plan's Donor-Restricted Endowments investment return. The state of Tens has donor-restricted endow- Tax Refunds Payable by Tax Type ments with net appreciation of $2.1 billion on invest- August31,2012 (Amounts inThousandel Extraordinary and Special Items Discretely Presented Component Units ments available for authorization for expenditure by The state did not report extraordinary items in the TaxnTY Pisiablo The Texas Low-Level Radioactive Waste Disposal the governing board. Details for the amounts of the net current fiscal year. Extraordinary items are transactions Franhise $ 45S633 Compact Commission, a discrete component unit, appreciation on investments and how they are reported or other events that are both unusual in nature and Oil and NaturalCu - Prndactlon 272221 reported a deficit of $116.4 thousand. The deficit is due can be found in the "Donor-Restricted Endowments" Total Tar Refu,,d Payable S 725,477 infrequent in occurrence. to the fund having no assets or program revenues to off- table. True endowments require the principal to be The state did not report special items in the current set the operating expenditures. maintained inviolate and in perpetuity. Term endow- Texas franchise tax receivables represent balances fiscal year. Special items are significant transactions or ments allow the principal to be expended after the pas- due at Aug. 31, 2012, for business activity that occurred of the other events within the control of management that are sage of a stated period of time and all conditions in calendar year 2011. The franchise tax payments were either unusual in nature or infrequent in occurrence. endowment are met. Expendable funds are those funds due May 15, 2012; however, taxpayers were allowed to that may be expended for either a stated purpose or extend the filing date to November 2012. for a general purpose as per the endowment gift terms. Franchise taxes are considered earned when the underlying business activity occurs. There are no required

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estimated payments under this tax. Tax payments are due cost to the state was approximately $31.8 million for annually each May 15. The tax earned during the first 4,647 COBRA participants. eight months of calendar year 2012 is not due until May For the fully-insured health maintenance organiaation 2013. As a result, the taxes receivable and related revenue health insurance plans, the insurance carrier retains all pre- that are earned in this eight month period are not mea- miums and is liable for all claims and expenses. Premium surable and are not accrued at fiscal year-end. and expense information is not available for these plans.

Non-Health Care Related Termination Benefits There were no material non-health care related vol- Termination Benefits untary or involuntary termination benefits accepted in fiscal 2012. Health Care Related Termination Benefits Health care continuation under the Consolidated Omnibus Budget Reconciliation Act (COBRA) is pro- vided for both voluntary and involuntary terminations. their eli- COBRA members are allowed to remain in Segment Information gible insurance program for 18 months, or 29 months if disabled. Covered dependents are eligible to remain Primary Government in the program for 36 months. COBRA plan adminis- Segments are separately identifiable activities report- trators for the state include the Employees Retirement ed as or within enterprise funds for which revenue bonds System of Texas, the University of Texas System and the or other revenue-hacked debt instruments are outstand- Texas A&M University System. ing and for which related expenses, gains, losses, assets As part of sheAmerican Recovery and Reinvest- and liabilities can be identified. To qualify as a segment, ment Act (ARRA), employees involuntarily terminated an activity must also be subject to an external require- between Sept. 1, 2008, and May 31, 2010, are eligible ment to separately account for this revenue stream. for a 65 percent subsidy of COBRA premiums for The State of Texas David A. Gloier State Veter- up to a 15 month period. The administrators of the ans Home Program was created to provide long-term COBRA premium assistance program recover the subsi- skilled nursing care for veterans, spouses of veterans and dy as a credit on their quarterly employment tax return. gold star parents of veterans of the state of Texas. The For self-insured and fully-insured plans, the construction of the first four homes was funded by the insurance carrier performs the billing and collections issuance of revenue bonds, which required these homes' process for COBRA participants. If the plan is self- revenues, expenses, gains and losses, assets and liabili- insured, the insurance carrier then forwards the pre- ties to be separately accounted for and independently mium to the plan administrators, net of a 2 percent audited. Pursuant to the board exercising an option administrative fee, which is intended to cover costs redemption provision, the entire $21.8 million principal related to the billing and collection functions. The amount outstanding of the Veteran's Homes revenue plan administrators are responsible for any claims or bonds were redeemed on Aug. 1,2012, resulting in a administrative costs associated with COBRA partici- zero balance at fiscal year-end. Therefore, the condensed pants that exceed these payments. For fiscal 2012, the financial statements are not required or presented.

1 2012 - Comprehensive Annual FinancialReport - Fcýrzmý State of lems 145 1146 Z02 , Comprehensive Annual Financial Report - RxocStaiýn[Tokaý I STATEOF TEXAS Budgetary Comparison Schedule General Fund For the FiscalYear Ended August 31, 2012 (Amounts in Thousands)

Utaal orAanra Feral Bldgetaf Arvearre Budgetary tI Aval 04W Beat Baad. vadanv REVENUES T..s $ 35987,443 S35.003220 $38,4(0)047 S 2.797327 Fedaral 31238.619 38264.461 35.42452A (2.121v11) Lkaen-, F-, andPN irs 2439301 2068,937 _.775J37 166.10 In-,recsand Other In.ctment In-om. 25390 121A41 535.425 413,584 LandI.c..o 13.410 13.487 32942 185355 SeflennenlofCIa.irm 462.475 532.639 586.770 54.131 Salesne onodsand Se-si.es 1396373 2253.987 1,153496 (I .150191) Odter 3f127$48 .3213.744 3015(972 6n2.228 1-al R-a.-us 74039,44a 82(612,316 82,752,139 139.23

EXPENDITURES GeneralGoermnene 5,151.737 4.1837.962 7.825903 1358(159 Erlacadon 233.44016 230939,874 26,270.766 (23-30892) FrEploe. BenefOit 1233,167 4.312 1.665 2.647 'acbhr Rohem-n, Benefin 1.922,440 1222.44f0 1640,592 181048 Healthand H.-an Snenices 331,20295 34032.770 43 k396(12 (4$06.912) Pubic Safety and COnT•nionn 4291.172 5.444,594 4.479P95 965.499 "franvprnnatinn 178f,19 180.218 31269 148.949 Natnral Ren-uroe and Recarion 1366.919 1 42,196 1,547k67 94,523 RegulatrnySoeins 2582.295 349.930 .3,4354 6,476 Talil Erponddeitu 71281,36( 76.406690-M .7801)93 (4,3790603

Fxcess(Deficiency) of Revenues Over (Under) Expendinues 3358D89 62121326 1I,72046 !4139.980)

OTHERFINANCING SOURCES (USES) TransferIn 1!92.754 2(185,17 4091,199 2.805(582 TransferOur (60130357) (7337360) 15.779918) 1357042 Sale of CapirlaAasets 8.192 11P64 11,816 7.752 Inurnoe Recoverie` 2018 2,170 1.467 1703) AvailableBeginning BolaMnvs 1339A30 1339,639 1.339,639 Section Two TosalOther Financing S-..ces (Uses) (41412541 ;(33 •170) 471.03 43703;73

(continued) Exoess(Deficiency) of Rervonusand Other Finacing SouarcsOver (UInder)Exponditores Required andOther Finavcing Uvs S (483.165) S 2312,656 $ 2.443249 $ 1.3093 Supplementary Information OtherThan MD&A

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STATEOF TEXAS Note to Budgetary Comparison Perspective Differeencer. Certain revenues and Budgetary Comparison Schedule Schedule expenditures, including debt service and the Major Special Revenue Fund - State Highway Fund The budgetary comparison schedule presents disproportionate share portion of the Federal Forthe Rsual Year Ended August 31, 2012 (Amounts In Thousands) comparisons of the legally adopted budget with actual Medical Assistance program, are not budgeted RAcblAmunt Fakd data on a budgetary basis. Since accounting principles by the Legislature. The activity for these pro- BudgetaryAm-n Badilir Variant ortainal Fioul applied for purposes of dtveloping dafa on a budget- grams is excluded from the budgetary compari- REVENUES Touno S 410SW $ 413787 S2.1601,780 S2,118.993 ary basis differ significantly from those used to pres- son schedule. Federul 2,755.747 3.101 128 2.870276 (310.752) 1.,281,670 1-267.476 1,277,34; 9.65 ent financial statements in conformity with generally The beginning cash balances are included Intero-t and Other InseosmenrInoon 42.899 42,899 39.078 13221) accepted accounting principles (GAAP), a reconcilia- as other financing sources in the budgetary LaudIncuome 50524 5.024 9,650 4026 Setdtoteoof cwont 24.429 22 .460 tion of these differences is presented below. comparison schedule. The beginning fund bal- Sales of Goods and Serices 209200 218291 9064 209.2271 [0834 Other 3.741 4290 12A56) ances are not included as financing Total Rovenues 4340.769 6,193052 1.629.688 Reconciliation of Budgetary Basis to GAAP Basis sources on the GAAP financial state- EXPENDITURES August 31.2012 (Amounts inmThousands) 1 ments. General Gcoesnoent 21058 240190 17.169 6921 EmployeeUBefite 67.593 Stat Pobli WSfetyand Careotloons 579.129 711.959 647,566 64.393 Transponation 1,3203.75 not established for sources from 7.546.232 7505864 6.485,489 Fund Fand Regulatory 4220 4220 2347 ! capital leases. These financing Totaldtpendiores 8218238 8.546.139 7.192.772 1.393307 Exaeus.Ruen.esof ondOth"r Financing S-oures f1er Eupoonditutrand Other FinancingIlss - sources are not included in the Eno-s (1)rficoncy)of Ret eooeu A-u1s BudgetaryBsis S2.443249 Over (Uoder) Eupeodiumos (3.976,469) (3.782.77.5 (759.720) 3023055 budgetary comparison schedule. Basis of Aoounting Tiftlrences: OTHERFINANCING SOURCES JUSES) R-os.hbles; d DefeoredRenues (690018 Transfer 1o 2274370 2271223 433,404 (1,837,514) Py'ables I .35379 8*2350 Excess of Actual Budgetary Trasfer Out 14535,05) (453k85) Sale of Capid Asses 4321 4321 12310 7.797 IPorstoozdvaDiffctnoots: Basis Expenditures over Ieurutce Rovonrio 12046 12,47 159 (12M68) einningtCsh 1l3 es Reportedus Other FinuingvSourcs (1.339.569 (4,150.22) AsuilableBeginning BUluooes Final Budget 4.150.822 4,15.10.22 411505822 Other Re-e-ue Not BRgered 175.192 Total Other FinoaningSouroes (Uses) 4.143D23 (2296390) 6.442559 6.4395413 OdtrEstoditures NotBudgeted 1.151.777 10500 General fund - The $2.3 billion

Esoes- of Reoeous andOther Fieauting Souroes EntityDifferenne: variance in education was due to vasi- Over Euponditorcsawl Other FinaoningUses S 2.30090 S 20656038 t3383303 S 726h65 errsof Resnuers andOther Fina.-inog SoUreesOfte Esspeditars sodOther Fioanciug Ues for Other Actiities so 2.779 ous prior year educational programs in

E... of Rusro..sand Other Fiacing that year's budget primarily being spent SortocsOver Expoeditureo and Other in this fiscal year. The $4.8 billion Finanelng Uses - GAAPBuio 0169809874 -- 8 variance in health and human services is the result of increased expenditures The major reconciling items between the budget- made fromnthe excess of federal revenues received over ary comparison schedule actual and the GAAP financial estimates by agencies in this particular function. statements are: S Basis ofAccounting D•.ffereneer Revenues and Basis of Budgeting expenditures are reported on the cash basis of The state's budget is prepared on a cash basis. The accounting in the budgetary comparison sched- Texas Constitution limits appropriation bills to two ule but are reported on the modified accrual years. The Legislative Budget Board (LBB) is required basis on the GAAP financial statements. There- by statute to adopt an estimated rate of growth for the fore, deferred revenues, receivables and payables next biennium and calculate a limit on the amount of are included as reconciling items. state tax revenue, not dedicated by the Texas Constitu-

I , - 2012 - Comprehensive Annual Financial Report - ký the $tife 0 Texaýe, 1 149 1150 ",Z MI, 1 ClomprehensWi Annual Financial Aeport - es5sxzczz-zrzscvavrzc~zzt.ass .zrscz:z~.~zc~a~zssc&xss2zc3rzawwj -~ '3.. '-3.~* ~n.cz"'" ~UUWL~iZ44223tTZZt.t23 tion, that is available for spending in the next bien- trel is defined as the level at which the governing body using a measurement scale in order to docu- Assessed Conditions nium. Ifthe Legislature, by adoption of a resolution must approve any over-expendituze of appropriations or ment that the eligible infrastructure assets are TxDOT adopted a minimum condition level of approved by a record vote of a majority of the mem- transfers of appropriated amounts. Agencies are autho- being preserved approximately at (or above) the 80 percent for the interstate system, 75 percent for the bers of each house, finds that an emergency exists and rized limited transfer authority between strategies, not condition level established and disclosed by the non-interstate system and 80 percent for the Central identifies the nature of the emergency, the legislature to exceed 20 percent, by the General Appropriations government Texas Turnpike System based on TxMAP assessments. may provide appropriations in excess of the adopted Act. Transfers and expenditures are monitored against Estimate each year the annual amount needed The results of the condition assessments are presented limit. The Governor's Budget Office and [IBB initiate the original budget by the Comptroller's office to ensure to maintain and preserve the eligible infrasreuc- below. the process by submitting budget requests to the Leg- the agency's authorized budget is not exceeded. ture assets at the condition level established and islamre. At final passage of the General Appropriations The level of legal control for all agencies is docu- disclosed by the government ma n~maW Gertunata eWnditio cmtonifu 5-niits-h Act by the Legislature, it is sent to the Comptroller for mented in the Appropriation Summary Report, which Although bridges are an integral part of the high- (Mfinimum110%) (Mnkdn 75%) " r luo~nna80%) certification. If the Comptroller certifies that appropri- is available by request from the Comptroller's office. way system, the state elected to depreciate bridges. 2012 82.' 77.7% 86.27/ ated amounts ameavailable in the affected funds, the bill This separate document includes budget and actual Therefore, they are not reported using the modified 83.0% 783% 89.9% is sent to the governor. If not certified, the Legislature approach. 936% 77.9% 97.91% data by appropriation line item for each state agency. 81.4% 76.3% 90-5% 2008 may pass the bill with a four-fifths majority vote. The State agencies cannot exceed approved appropriations. a..nts...83.7% 79.0% 9t1.7% governor has the option of vetoing the total bill or spe- In certain emergency situations, the governor may Condition Assessments cific line-item appropriations, but does not have the authorize additional appropriations front deficiency and The Texas Department of Transportation (TxDOT) Estimated and Actual Costs authority to reduce a line item of appropriation. Upon emergency appropriation reserves. During fiscal 2012, performs yearly condition assessments through its for Maintenance approval by the governor, the bill becomes law and is $ 100,000 was transferred to the Texas Veteran's Com- Texas Maintenance Assessment Program (TxMAP). The table below provides a comparison between the budget authority for state agencies to spend state mission to provide additional fhnds for staffing needs Under this program, visual inspections are conducted TsDOT's estimate of maintenance expenditures funds. The Comptroller is responsible for controlling, in processing veteran's claims for disability benefits. on approximately 10 percent of the interstate system, required to maintain the highway system at or above the accounting and reporting expenditures in accordance Unexpended appropriations generally lapse 60 days after 5 percent of the non-interstate system (national, state adopted condition levels and the actual expenditures. with the expenditure budgets. the fiscal year unless they are encumbered during the and firm-to-market roadways) and 60-day "lapse" period. Other appropriations referred to 20 percent of the Central Texas Maintenance Cost Legal Level of Budgetary Control as "reappropriated unexpended balances" represent the Tatrnpike System toll roads. For each (AmsountsIn Thousands) The Texas Constitution requires the Comptroller continuation of a prior year'sbalances for completion of section of highway observed, 21 ele- Z012 2011 2010 210 20111 to submit a Biennial Ret'ete Estimate to the Legislature a program. ments separated into three highway INTERSTATEHIGHWAYS prior to each regular session. This document contains $ 191.442 a 604,8377 5680A56 8 594263 $ 502.128 components are assessed scores from $ 346326 $ 361,8-2 S 333253 $ 326,309 $ 438237 an itemized estimate of beginning cash balances, antici- 0 to 5 (0=NA, I=Failed, 2=Poor, Modified Approach to Reporting OTHERHIGHWAYS pated revenues based on laws then in effect and estimat- Infrastructure Assets 3=Fair, 4=Good, 5=Excellentl in Estimate $2224.9222$3282946 S3P005,713 $2767369 $2A455243 S ,I94,432 $ 517t04 $413,734 $1t519.110 $16M9.317 ed expenditures from prior appropriations. The Texas The state adopted the modified approach for order to determine the condition of Constitution also requires the Comptroller to submit reporting its highway system. Under the modified the highways, Each element within a TURNPIKESYSTEM eatloato supplementary revenue estimates at ansyspecial session Antua $ 10$)50 $ 1:.578 S 11371 $. 9,179 $ 6,910 approach, depreciation is not reported and certain pres- component and each component are On629 $ 1tt $ 63972 $ 7262 $ 5,111 of the Legislature and at other necessary times to show ervation and maintenance costs are expensed. weighted according to importance probable changes. The modified approach requires that the state: to determine the overall condition The level of legal control for the budget is estab- * Maintain an asset management system that of the highways. The overall score is converted to a per- Factors Affecting Condition Assessments lished at the strategy (line item) level by agency. For includes an up-to-date inventory of eligible centage measurement for reporting (1=20 percent, 2=40 TxDOl' continues to develop its methods for example, "Highway Patrol" and "Vehicle Inspection infrastructure assets percent, 3=60 percent, 4=80 percent, 5=100 percent). determining such estimates. As additional experi- Program" are two of the strategies for the Texas Depart- Perform condition assessments of the eligible ence is acquired in the estimation and reporting pro- ment of Public Safety. The legal level of budgetary con- infrastructure assets and summarize the results

141, - 0 ý 20 12, - :C0' roprehensive Arinual Financial ReportIEWWbe $taw Qr.16ýas _ý, Annual Fincitit4l, Report ? R,ý*4W,ýd`cexa, cesses, TxDOT intends to achieve a greater correla- performed by the general engineering consultant (GEC) The schedules of funding progress for the states pension plans for the three most recent actuarial valuations are inonbetween the estimated maintenance expenditures of the Central Texas Turnpike System. The fiscal 2012 presented below. needed to maintain the highway system at or above the inspection noted that overall the Central Texas Turnpike adopted condition levels and the condition level of the System was in excellent condition, achieving an overall Schedules of Funding Progress - Pension* highways. In comparing actual expenditures to esti- score of 95 percent. While the GEC inspection usesthe (Amounts in Thousands) Atuaria UARL mated expenditures, factors such as increases in traffic, same general criteria as TxMAP, both parties have dif- Actuarlut Actuarial vdalual Uhundiedd Fnded uer P"Cantuageot legislative mandates, budgetary constraints and environ- ferent areas of focus, timing and methodology that may vuatluat A-2t AAL Ratio harof ciamd PFqm M= mental effects (rainfall, drought, freeze, thaw, etc.) are contribute to a difference in scores. The evaluation coy- Data (01 3)- ta, 1-1/M3 1c0 M1-al/0l considered as they may have a major inspact on needed ers all 65 miles of the system rather than a 20 percent EmployeesRetirement System ofTexas (ERS) 00/31/12 $ 24"72714 $ 29,3277069 S 5.104555 82.6% $ 5,6763,09 89.9% funds and the condition of Texas roads, random sample. 09131/I 23.997,445 28-398213 4.400.68 84.5% 5,795.185 75.9% 0/131110 23,628"67 27.668276 4 140369 85.4% 5.930,141 68.1% Other Condition Assessments Schedules of Funding Progress /wEeuemonssodCustoediat Officr SupplemenualRotimeneo (I.FCOS) 08831112 S 832,451 $ 1015660 $ 1032117 820% $ 1.498.979 122% A separate annual inspection is performed on the The schedules of funding progress for the state's 08631111 830622 960,953 130.431 86.4% 1,475,432 8 8% 08/31/10 802.197 930.747 127A56 863% 1,507.950 Central Texas Turnpike System in accordance with Sec- other postemployment benefit (OPEB) plans for the 83% tion 707 of the Indenture Trust. Those inspections are three most recent actuarial valuations are presented in Judicial Retitemnet System Plan Oee ORS1) 01811312 $ 0 8 232922 $ 232,922 0% 8 220 10,587A% the table below. 00131111 0 245.777 245,775 0.0% -'0W 11.171.7% 08131/10 0 264,077 2640D77 0D% 2.227 9.341%

Judicial RelimIcnt System Plan Two(1RS21 2143% 08/31112 $ 300,433 S 315.199 $ 14.766 95.3% $ 68,778 233% Schedules of Funding Progress - OPEB* 08/31/11 283,936 300,163 163627 94.6% 69.655 (Amountsin Thousands) 08131/10 2.4,515 2813760 17245 93.0% .9,755 25.1% Actuarial UIULL fods as a Aatjust Ausesd s Tea hl Rtiu.meot Syaten M.TeusiTRSI "al Valuetf Uwuty Unhmtdid Funded Ctueaed Pcetusat5 06/31/12 S 183260D42 $144,427226 $26,101.184 81.9%. $35.444569 73.6% Valuaos dtus (hAil) OA Rut Paud tosamdPasma 08/31/I I 115.252228 139.3151M9 24 D62.262 82.7% 36.797J0 II 65A% ot.t (a) 03(b) M - (a) (ayI) M) l(b-lYe) 08)31/10 1112923,28 134.191.110 22.898582 82.9% 36,62184, 62.5% T SLrT SyssemErmployee Omap Inosuerco Progran U Plan) dAdeasstoo ui•ais th .ufl-IWanr f.er ecu.• 'uub•m•oepaid at 1213:110 s 0 8S5950798 $5.956.798 00% $5.309,413 1122% 2/131/9 0 5.676.868 5.676268 00% 5.026491 112.9% 2131/08 0 5.102.765 5.102.765 00% 4.820.3bi 105.9%

A&M Cam Health andLife Plan iA&M Plan) Significant Factors Affecting the There were no changes to actuarial assumptions and 09,01010 $S,61.854,M690 $ 18504690 00% $1.313,538 141.2% 091010:9 0 :.864320 64,32•0 00% 1315,292 1413.7% Comparability of Amounts Reported methods for TRS since the prior valuation. 09101308 0 1M258,563 I3,,563 01% 1,260,683 992q, Amounts reported in the schedule of funding prog- •Addrm rosluotJiqlses. u~aspunar• of venOIplalsues pras idd isNor ItI. ress for the following plans varied significantly from OPEB Plans the previous year to the current year due to changes in The University of Texas System (UT) and the Texas actuarial assumptions or benefit provisions. Significant A&M University System (A&M) opted to perform changes are summarized below and the effects of those actuarial valuations of their respective OPEB plans on changes are incorporated into the 2012 valuations, a biennial basis rather than on an annual basis starting with fiscal 2012. While a true actuarial valuation was Pension Plans not performed for either plan, the results of the prior The salary increase assumptions were modified actuarial valuations were rolled forward using standard since the prior valuations of the ERS, LECOS, JRSI actuarial techniques to obtain the current year OPEB and JRS2 pension plans to reflect no across-the-board plan obligations. salary increases.

I 20Q - Comprehensive Annual Financial Report - Section Two (continued) Other Supplementary Information Combining Financial .Statements and Schedules

1 2011. Comprehensive Annual Fi6andiVikeport'-'4ortne "I is 156 1,J12 ! camprehenswe Anpo'al'FjnanýIAI F'OPort Section Two (continued) Governmental Funds

ýýA)JZ - Comprehensive Annual Financial Report - For the Star,ýof Tevas 15 1158;,- 2012 - ComprehenglveýAnnuul Financial Report - Farftý,Ia[QofTý, STATEOF TEXAS STATEOF TEXAS Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and August 31,2012 (Amounts in Thousands) Changes in Fund Balances - Nonmajor Governmental Funds Forthe FiscalYear Ended August 31, 2012 (Amounts in Thousands) Specal Debt Capital Total E a servia• Frojects Psasel Naonavajl Funds Spacsal BO1t Capitol Total Funds Fan•s Frunds Funds Ra-s. Ser as PFlsl PFertanest Nratrmajar ASSEITS Fosts Funds Funds Fuads Funds Cash andCash Equiaalnnt" SI•21.70 $1 287M)t6 $691.533 $ 27,997 $33.28AO6 REVENUES Short-TermInvestmensa . 17266 93jt9 6A37 117PE2 Receivables: T•xes S 3,17746 $S3 $ $ $3,477,300 Fodetal 4-341 54M12 58.353 Acununta 64 888 2,145 41 3.138 Licauese.Feeo and PFmits 381.001 372.942 7533942 Tunes 73.135 73,135 Inlreml and Other Isneatst Income 83,627 9234 4.427 21-293 11"381 r•'d~al 1255 20,973 22)29 Land Income 4 II 15 InveatmontTrades 5.571 53571 Sales of Go& and Soeni 22458 104,102 186,560 Isrest and Dijidends 12271 212 28 12311 Other 39345 4 153756 55h()5 68.092 4280 778 73.450 DueFrom Other Funds Total Revenues 8575 435.988 188533 3730.1 4b50,156 ltntfund Rc-eivable . 457 457 ]nsentones 154 3 157 FrepsidI.t 5 5 EXPENDITURES Invest..nt. 14 7,738 729.947 737,749 General Governmem loans andContracts 1P31,177 I 231.177 233263 1258 27,421 2398 204340 1,133215 2,448 2905 1,139,166 OtherAssts 88 88 Educatton 11373 R.stautd: EmployeeBenofl. 112.73 Healthand HumanSe-ices 1 D38 1-142 990 3.270 Cash and Cah Eq.uialents 4.725 4.725 8t229 Loansand ContraLrs 789D64 709 304 Public Safety and Corect.ins 53872 22357 Transportaton 2D225 2.748 4.773 (tthcrAssets 88501 88101 Nurarsl Ronoucs and Recreation 52.443 60783 288 59.314 RegulutoryServicen 67074 67.O74 Total Assets $3307281 $1.409376 S698118 S771.169 36.186.744 Capitlu Oultay 22b32 6503621 053253 LIABILITIESAND FUND BALANCES [kin Sorviue: 496220 Liabilities: Pritnipal 4906422 Interest 159 681.527 681A6 Payaboes: Other Finscing Fran 109t6 I'8 21)04 $ 19,366 $ 46 S 633723 S 1.541 S A4A,76 Total Expenditures 1,564[W 1.182.961 713.872 6981 3.42A14 Invosttnr Trades 633 633 Faymoll 4.155 83 4238 Excess IDeficiency)of Revenues Due To OlherFoods 099 19,555 31,704 15,756 67974 Ctner(Lttndor)FEndituas 22424,485 (746.8731) (5223391 50D79 1,185352 IsterfundPayable 214" 98 2.938 etofetd Renuams 4,772 40 359.733 364.905 OTHERFINANCING SOURCES IUSES) Otter Liabilities 381 11)92 1.473 Transfer Is 1.139,302 842Ao09 1254 1953,305 Toad lsbilhihtes 32.413 230DI 456,493 17.9.0 526.837 Transfer sut (3.546.4101 t24n.410) ( IM.2•,1 (1t8393) 13.994.482) II291 77,435 238,617 Fund Batannes: Bondsand Notes lusued 149291 Bonds lou14dfur Refunding 37,940 37940 Nonspendahle 159 3 745211 745373 Premiumson Bonds Issund 14-381 14.381 Restlreted 2469.125 1.389275 2413922 352 4,10 274 Payment to Ecmr for Refunding (62.r26) Committed 8033376 7576 811D52 (62!086) Tend Other Foucing Souaes (Uses) (2.273362) 584,04• 14(91t74) ( ( 1.812.325) Assigned 2208 2200 TMndFund Balances 3.274X68 1.203.875 241.925 753239 5659907 NetChange in Fund Bnlnceos 151,123 (128r9 l2tt 12026.9731.686 TotalILiahilitic and FundBslanses S3,307281 31,409S76 $698618 $771,169 $60186,744 Fund Balaes, Sepember 1, 20 11 4,92.160 1554.996 868092 7572,09 7,1893,57 Restatomenta (878.41L" (2.252 t54t (15.756) (81c4,77) Fund Balances.Septeanber I, 201Isa Restated 3,123,745 552t7443 808238 741.553 609S2680

Fund BalasAugust 31. 2012 33.274.W68 $138032875 S 241.925 ¶ 753239 850659207

- ' :kýj,0ýCopeesv ntaFliW ffiooýri -'Ifbýlhe $rate of TexaSýý'm ý-"'7 ý59 1 Fil 667T ýOQ t ComPr*h4hSfV*,Aa6Ua1 Financial RePsort 0ý STATEOF TEXAS Combining Balance Sheet - Nonmajor Special Revenue Funds August31, 2312 dAmountsinThousands)

DtO

ftPngotn 7ee W.63t Ssyters uvulitail Thzfta bnnswtaPnn knu0M... Beneit Sdo Nonmajor Special Revenue Funds Fun Cainl hisen. Fund Fod Funr Taitsk ASSETS Cash undCash itivtuialeus 5 S tat S 79385 $766658 5 88090 S 287,136 51221270 Shrtu-ToemtIvstments 17257 9 17266 The Property Tax Relief Fund is outside the gen- The Water Development Funds receive proceeds Receklsa6s: Accoutsa eral revenue fund. The proceeds of the hind are from from the sale ofTexas Water Development bonds for auses 39 25 64 735135 73.135 allocations of the computation of motor vehicle sales the purpose of aiding and making funds available to Fedean 1JD55 1055 Irs- andDiidends Is 3JD22 34 9.197 12271 tax, collection of all tobacco products tax increases and various political subdivisions fur projects and other Due From Other Funds 533 65066 1.993 6W.392 Pupindlorses 154 154 calculated amounts from franchise taxes. The fund was authorized purposes. The funds also receive gifis or Prcpid [term, tsnassumurss 14 established with the intent of reducing school district grants for the purpose of assisting economically dis- 14 Laus -d Cuntrts 4$24 6.368 S1`31,177 property taxes. tressed areas. Monies in the funds are invested. Other Asset 84 88 Rrsitaced: Cash .. d CashEquivutrets 4.725 4,7•5 Ltans san Csrisats 769964 789J)64 The Texas Transportation Corporations issue The System Benefit Fund receives funds from a Other Assets n88OI 88J)01 bonds and notes - currently only conduit debt - to nonhypassable fee in an amount nor to exceed 65 cents Tss1 Assets S 18 S 638 $1.124512 S766,658 $227,625 $1.187.830 $3.307281 finance the cost of projects. The corporations act on per megawatt hour and interest earned. The funds are LUASILMESAND FUND BALANCES behalf of the Texas Department ofTransportation used to provide funding for programs to assist low- Liabilities: (TxDOT) in the promotion and development of trans- income electric customers. Payables: $ 467 S 762 S 1297U $ $ 5,167 $ 1966 * Payroit portation facilities by issuing private activity bonds for 4.155 4.155 DueTo Other Funds 662 237 899 projects developed under comprehensive development The Available School Fund receives distributions Itterfand Pa}sbie 24640 2.40 DeferredRevenues 4 ;350 422 4,772 agreements entered into by TxDOT. from the permanent school fund based on total return OtherULialhics 381 381 6 467 4264 of investment assets, allocations of motor fuel taxes and Total Luabilities 172970 4.35D 10362 32,A4I appropriations made by the Legislature. The fund is to Fund Baltnces: Nonsp.ndabe 159 150 223275 be used for the support of public schools. Resnicted I ,12OD62 1.125,738 2.49,125 Conusited 18 186 753,688 49A84 803.376 Assigned 171 2637 2.208 Total Fund Balantes 7533688 223275 1,177461 3274,69 S s $8 68s Tuat tiabilities andFund Buaas" S1.124512 $766,658 S227625 i1.187330 $321n7281

* Sinseter - jersucci .- uýss earAeses uisl- blsrduduanss uas out-1 its sal ne tmu 6e,,t•at ftt.e1 pbta Rstns Se-nenIT-us -1dr 'sketin ua au. TintsfltA As.. nu sit n.iusidi.untis p-nte. s-ttrse

1 2012 - Comprehensive Annual Financial Report - i;or uiýýState ot Te.ýýa5 161 162 201Z - Comprehensive Annual Financial Report fluLS- - ~ '~ / t20=LY~~~14. ZT~ZZ-~fl

STATEOF TEXAS STATEOF TEXAS Combining Statement of Revenues, Expenditures and Budgetary Comparison Schedule Changes in Fund Balances - Nonmajor Special Revenue Funds Nonmajor Special Revenue Funds For the FiscalYear EndedAugust 31,2012 (Amounts InThousands) For the FiscalYear Ended August 31, 2012 (Amountsin Thousands)

Oft:ee Propet TelaRFMlet FLnd WaterDevelopment Funds Nonroor Actual Actual

Fnoperty Texas Water systet Avaiaable Spesiat Amounts FHaulTo Aounta ReNtlTO ThuRelef TrntsportatiUo Bmetlhenmnt Beneit Sula Rbnms Budgetaryasounts Budgetiny Actual BudgetaryAmunts Budgetary Actual Fund Corposntons Funds Fund Fond Funds' Tatsl Odginal tnal Basis Vard. Original rFial Bush Venuane REVENUES 77 REVENUES Tu-es S 2,69969 S S $ S 7777131 S S 3,4 -W0 Tunes S2.190.124 $2.132930 S2/299,969 S 5671139 $ $ S $ Federal 76 4.265 4A.41 Federal! IBM6t 1016M 76 (9964) Licen-n, Fees and Pernies 2349.175 2911,1 .90) W0 Licunses.PSue and Permits Intere aid Other IconotnenlIncome 944 26.839 4.174 635 51 P35 83,627 laterestand Other Iaaeunta Income 8.870 693 968 275 23.528 23,528 26.582 310S4 Lund .conme 4 4 SalesoafGods endSeeaices 300 300 425 125 Sadesof Goodsand Sneriusa 294 2.164 2.458 Other other 1.591 1_15 36259 39945 3 JO0 300 1.96 (1 )041 TosalReaenes 2.19994 2.1333623 2700,937 567.314 30680 3 06,88 2913791 Tosa)Renues 2,700913 1.591 29204 513259 7777T966 3253,92 3988675 (731)1 EXPENDITURES EXPENDITURES Caaon:: General C.emtnte, Fdcut1ia 2.190.994 2.198994 2,198.994 GOn al Gouannemt 233263 233.263 EmployeeBenenit Education 1,1177555 16260 1.133.15 11.£73 Health andHuarn Serices EmployeeBeefias 11.873 Inlenihand Iumat- SO-nicee l1138 1JD38 Public Safetyand Connettions PublicSafety and Cornections 58f,72 58,672 Trasupnortti.. Transportation 2P25 N.lral Researoesand Rnoreclion 7,719 10,312 46900 365881 RegulatorySersices Natu•a lesoucesR,-- Randeatiou 49A01 31142 52.443 RnguoiaorySe-ices 67P74 67A74 Total Eupendiutrs 2,198 wA94 2.193,9w4 0 2,1989-94 7-719 10.312 46900 (365081 CapitalOocluy 2032 2b32 uchblServico: Excess ltt(icinca'i of Revenues IUnder isupetditures 0 (65,371) 2.704.937 27766.-19 29.169 260576 117.821) (4497) Intlorest 159 159 Oaer OtherFinancing Feea I J196 11390 0 2D125 OTHERFINANCING SOURCES (USES) Tutu!Espenditures 49.56f4 67174 1.I17-553 327.176 1,W41190 TranoferIn 539 539 Fa•s ()ficicne)' of Reen-us TratofrerOut 12.700,9371 (2.71O937t 1748111 (74$11) Over (Under) Fl14penditutrt 2.700913 (4.34) (20.3%6) 86,l5 (339.39891 (2,234) 2.424.485 Avaiable BegianingBalaua• 69216 69216 69216 Total Other Finncing Soue (Usos) 0 0 (7.7009371 (2009371 60216 69216 154356) 174272) OTHERFINANCING SOURCES (USES) TransforIn 540 1126•087 87.955 1109,582 .Eass(Deficiency) of Revenues and Other Financing Seru-t Over (Undr) Trasfer Out (2.700.937) (74.811) (598.976) (171.692) (3.5-46.416) Eupendthres and Other FLnancingU-s Bonds and Notes Issued 63676 895,15 149291 S 0 $ (65,371h L 0 $ 65371 $ 98385 L 95.792 5(2298771 $(118d669) Premiumson Bonds Issued 14.31 14381" Total Other FinancingSources I'Uss) (2,70•.937) 0 421911 16259 (2.273.362) ItcWWI fetoalcgcsrc-ratooird bceua-,edf6crsaill-ce- wrladtet-a, hesdsl,. 5 Tihe=ayi. odi e-Oses oscoiscc ,aa Matfoa-..ot diunnewlltrsao.o e -tanti u stcaJo Net Changein Fund Halances 24) (434) 130.951) 86.185 82322 14P25 1513.23 0 bocuaci-6ttunondcattltnseut. ,d,

Fund Ouuneos,Snptember1.2011 42 9101,14 1,151.199 667,503 74,332 1,198070 41002,160 Restatements (910.009) 66621 (35.027) (178.4153) Fund Balances.September 1.2011, .nRestated 4$ 605 l,151.199 06756W3 140953 1,163/;43 37.123.745

Fund Ballanc-sA.ugas 31.2012 $ - 18 S 171 $1,120249 $7539088 223273 Sl,17746a $3274968 eacnnscrun.r.ntaiceseeonlresoaaoOutdouclano lunludee Outdid artetaroct said ard tie eeroialretoato Ocels cr46 stnouctoenelinmnct Orsaraotrrensrneoe&attuat.fleat.tdatlotastnntecnalctiati9diosn.otdtutatterununlen.epersetatoa.

2012:ý- Comprehensive Antrival Financial Report 163 ,164 20Mj ComprehenslvLAonualFinaocialReportý,.,ýý Forthc Slat,,cli TcKý, I SysmwBm• -Fund AvolabhScc F-uUd OU8 NonmmnoSpecial It- .nf- Atual Actual Actual Aamolh ReaMTo Amont RFiTs Amounts RnalTe Ba40ay A.mas BudgeadrtyAta BudgearAyunmwt Budgtar Actual Budgyl Amount. Budgpw Actual itm Rnal Basis Varnce 8ioi,6g Fias Baci Vsaasc 6ogi F-h6l Basis Varianca

s s $ S $ $ 708,547 $7083.47 S $ 0 372.754 263099 3542 (2593557) 144262 144262 149385 4023 88470 88,470 95335 6S%65 9596 9396 4.174 (57422) 12380 908 640 (268) . 704 704 18.144 17.480 2.442 2.442 20 20 (32 112 1533258 153258 153.259 (599) 1380 -908 709,187 708279 461948 352293 119,635 (232,668)

426A96 157,01 110.101 47AM9 14099.949 1D99.949 1.117.55 (17 046) 7039 (78039) 589.706 15356 11.65 3.991 19994 (9,996 19.996 506 30W() 340 4.460 3 3 1 4,958 5336 5311 (375) 81,235 840197 69.724 14373 81235 84997 69.724 14373 1199949 1.99.949 .1)73355 (17606) r348.154 203.997 135.156 68256

72,625 6.761 63375 13.774 (!1198.%9) (1I9D9941) (400368) 680,675 (586-206) 146301 (153521) (163$22)

(049.455 1,778392 (820087 (757.5051 2920"6 292,"6 (688)9) (598976) 9193 (38.222) . (38222) 683.1323 683J23 93323 10,857 10257 30.257 122.58 122.758 122958 683.123 663J23 683,123 0 1,60.32 1,161,180 432768 1748,412) 122.756 122338 114642 (8.716)

8759.746 3752$94 179Tb58 $13,774 4612437 $ 87.139 0 24,408 8(57739) $)469.446) $271059 89832) $1)72336)

1 2012 - Comprehensive Annual Financial Report 165 FI-.6 2012 - Comprehensive Annual Financial Report - FOýthtý'Sja:ý-Of%,ý.),. L - -..- -- -~

STATEOF TEXAS Combining Balance Sheet - Nonmajor Debt Service Funds August 31,2012 (Amountsin Thousands)

lens Pus lens Tens Cllep Te. Then Psuie se Deptmtsntstol the StudentLut Desrnetstutof nu Aut•ority Ten•umtatton Itoseul Boeds flntere 1asportauuonP Aulltto Comnerstal State lHghway Debt Nonmajor Debt Service Funds andSnOg TlensMoutbil, 0.0.Bud Paw DebtSeviee Sentist Fed Fund Fus0 Funds Rns Funds buttS ASSETS Cushsed Cash Equolatensa $ 1PAW4 $1.118,51 $ 45 S 5,120 $145,466 $ 20 $12871006 The Texas College Student Loan Bonds Inter- The Texas Public Finance Authority G.O. Bond Sho.-Te-mIteasments 935169 93019 Recivbles: est and Sinking Fund receives deposits from the Texas Funds receive proceeds and accrued interest from the Acrasonts 355 533 888 opportunity plan fund for payment of current interest sale of general obligation bonds and provide the debt Federal 9.710 11263 20,973 In.s- .std Disidsds 212 212 and principal and establishment of a reserve, service requirements for those bonds. Invemunents 77788 7.788

Totel Asseus $111.168 Ot.128.794 $ 45 S 5.110 $156.729 $ 20 $1.409376 The Texas Department of Transportation Texas The Texas Public Finance Authority Commercial LIABILITIESAND FUNDtAN$CS Mobility Fund receives proceeds from the sale of Paper Funds receive deposits of any accrued interest Liabilities: Payobtes: general obligation bonds and the revenues dictated by on the sale of notes and pledged revenues necessary to Accounts $ 19 S 12 S 15 $ $ S 46 D.e ToOther Funds 19,555 statute to provide for the debt service requirements of make debt service payments. 19.55 tcrfenndRevenues 400 400 19 19.967 15 a 0 0 20D'O" those bonds. The bond proceeds provide a method of Total Lisbilitios financing for the construction, reconstruction, acquisi- The Texas Department of Transportation State FundBSutncs: Rosiric d 119.149 1.109.827 kb 5j120 156.729 2n 13.89A75 tion and expansion of state highway projects. The pro- Highway Debt Service Fund receives proceeds and Tout-Fund Bslauwes 1J14,14q 1,10827 30 5,120 156.729 20 1389.875

ceeds remain in the fund until transferred to the state accrued interest from the sale of revenue bonds and Toal Liabilitiesu d FundBatA-nos $119.168 $1.128.594 3 45 $ 5,120 S156.729 S 20 $1.409S76 highway fund. provides the debt service requirements for those bonds.

1 2011 ! Comprehensive Annual Financial Report,,. FbItlwýrateoiTems 167 1168 - ý012 - ComprehepsiveAnpualFinanclal Report - - ~u7.271t2Ttl.~. ___ - 712~t1S~<

STATEOF TEXAS Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds Forthe FiscalYear Ended August 31,2012 lAnmuntsin Thousands)

Tex. PubgC Tteas T.. TroutsPuSid H- aed Noottaln Deparb-11.1t a-, TnFunds .Uatd StartBNtoey nest Fuentd59 Toe MobHIty Q0o.Bond Pawe Service Fund FRed Fat• Raef Fatal Ronds Totubb REVENUES 23d.04 S 3,59 $ 271.29 S $ 54P12 * Licenss. Funsand Fenrni 372,942 372,942 Inlorst undOther Inusslmenl Inuomo 11233 7.131 26 3535 787 22 9034 Total Rentrl 403277 3SAS 27$16 0 22 433159

EXPINDITURES Curtnnt: General OunG.- -,l 1921 237 1258 Transportation 2,748 2.740 Debt Service: Principal 359.430 46.770 160.115 1391a1 114510 101,775 496,420 InlretsS 31.724 284360 89.83 164 2100386 74.10 681,527 Other rtesuing Fees 314 394 908 T11talEosundJisote 91.154 334.792 250819 14221 314.896 176979 1t182,861

Eceso (Deficienuy)uf Resenues Ote, IUnder)Expenditures (90.101) 68545 1247.134) 114,186) (287.(60. 17b.957• (746.873)

OTHERFINANJCING SOURCES (USES) TransfeeIs 104.135 2379683 14h29 287.582 198940 842669 Transfer Out (6.0W11) (19.981) . (1l (426) 121 (246.410) BSudeand Nuots Issued 9423 2.468 11991 RundsIssued SeeRefunding 37.1.10 37.940 Paymenttow ccmwfor Refunding (62.1M) TotalOther F-eontegSoutuces W-) 98.135 247,305 14-203 287352 176960 304j90-a

Net Changein Fund Balun.es 8934 1,281)223 (291 17 502 3 (1I2.869)

Fund Balance, September1.2011 1l1.115 59 5,103 158479 17 Reseateorete (2.252) (2.252) Fund Bul[ s. Septemer I, 20 11. . Restated HUB15 1260.223 59 5,103 15h227 17 1s52.44

FundBalances, Augusl 31 2012 5119.J49 1.100A27 $ 30 & 5,120 4 1565729 S 20 01,380,875

I - 21)1 ý - Comprehensive Annual Financial Report '- Forthe Wteý of 1exas 169 1170 2UI2 - Comprehensive Annual Financial Report . Foi the of TtýýAs STATEOF TEXAS Combining Balance Sheet - Nonmajor Capital Projects Funds August 31, 2012 (Amounts in Thousands)

TexasPubtc Texas To.a Pasa T.xas Depat of .andMANIte Fsaclities tell Jewtta TeastYot Admsinrlinlon Deparmsent C-simlslan Peit Nonmajor Capital Projects Funds PojeadFaxes Prect Funds PreiectFiund. Flext Runds AStTrS Cash sodCash Equivaleots $ 1-8l 0 13.899 $ 36920 ' t 14,733 S 7293 Accounts Receivable 2.145 The Texas Public Finance Authority Adminis- The Texas Youth Commission Project Funds are DueFrom Other Funds 3435 845 tration Project Funds utilize long-term financing for used to pay for minor construction and repairs of the Interfund Recesable Inventoies 3 various state construction, repair or renovation projects. Texas Youth Commission buildings and facilities. Taut As.. $ 1-803 13.899 S 42508 t 14.733 S 8238 Funds are also used to refinance purchases of equipment The Texas Health Agencies Project Funds are UABUUTIESAND FUND BALANCES by various state agencies. Liabilities: Paysbirs: used to pay for the cost of construction, repair and $ 58 $ 637 $ 1.173 t I1172 S 243 The Texas Parks and Wildlife Department Proj- remodeling for certain mental health facilities and other Pal tol 83 DueTo atherFund& ect Funds are used for the acquisition and development health related projects. ntterfuodPayable 20 78 of state park Doefsed Rovonues sites. Revenues from park entrance fees are Other liabilities 466 676 used for the repayments of long-term debt incurred. The Texas Department of Public Safety Project Tout Liabilidn Ihi 715 1,A39 ION Funds are used to finance construction of new Depart- FundBalan-es: on-spondable 3 The Texas Facilities Commission Project Funds ment of Public Safety buildings and crime lab facilities Rostricuwd 1639 13.184 40.869 13D35 8.495 Tlall Fund Balatoes 1,642 13.184 4()A69 133135 are used to administer the state's major and minor in various state locations. 8.495 building construction programs. TOtalLisbilhies and Fund Balances S 1.0.3 $ 134899 S 42508 S 14.733 0730 The Texas Department of Transportation Project The Texas Department of Criminal Justice Prison Funds are used for public road and highway develop- Project Funds are used for construction of regional ment, construction and improvement projects. The centers and for repairs and minor construction of cor- funds are also used to establish, acquire, operate, main- rectional facilities. tain and dispose of airports and air navigation facilities.

The Texas Historical Commission Project Funds are used to provide financial assistance to counties for the repair and renovation of courthouses.

I -, -, ,, Cum-prehýnsiv6AnnuýfFin4ncipl.fiýportb :'4 V> _,Ctarn, prehensi[ve Annual Financial Report LF0' 0CF'Al"cý*fTcu'. ' US ~2~:2zSd30lZ\x.~1GdUS~7Ž ,, ~,, 5- .~,v

STATEOF TEXAS Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Projects Funds Teno Torne other For the FiscalYear Ended August31,2012 (Amounts in Thousands) Tenm EhPortoon Dmpartmrent Tame Health Of of Histo~ris! """j"D TaemPubh Tosrn Cpeun Agnis puli se"a Twenswoultu hanselon RoaF Tares Parks Taxa Dartmeateofu hot PIOred Onhntl Wrwh Facullas Crtr Jtice ters youre PoectFse ,h P99adhd Prun jectdtFunass Tetal. Administrato Dequehmet cernselw. Prso PrajectFoids Pmredlresds PrOelumFeols PreactFrusis Projetftosta S 0.512 S 10302 $548934 $ 32306 S 13.226 $6S] 533 2.145 REVENUES 5 I13 4280 Itmter undOther Invcsctm t I..mo $ 14 S 222 $ 132 S 41 453 457 Sale, of Goodsand Scrsicot 3.142 Other 2 Toral Reoenues 14 113 3364 134 41 O 103112 $ 1002 $548934 S 33263 S 13226 $6986418 EXPENDITURES cuorenl:

GeneralGov-rent 13329 11.339 Edtucuion $ 483 $ 191 S 56.515 S 1.733 $ 1.598 $ 63,723 HOalhhand Huosn Soeric 83 Public Safety cndCoreeclinos 19277 31.764 31,764 NacurulRecoueces aed Recreatio 6,703 98 Capital Outlay 10,132 3336 8.933 53087 359.733 359,733 Total Expeodilums (129 1W9M5 15.175 281I0 5J)87 620I 483 . .. 191 448012 , '59H 456,493 Deficiencycf Ret'enues Under Enpeoditures (1.15) ((16302) {11`811) (281D763 (50461

3. OTHERFINANCING SOURCES (USES) LOTŽ9 !(iOs I !00922 31(0 . 1.629 241 •922 Te-fote In 1($112 4 5 5 10D29 t0)611 06.922 31610 11,628 241,025 TransferOut (2,173) (3, ( 1) (2) Bonds rndNo..s I(sued 1350 23.7M0( 13(001 (01(K0 555D TosulOther FinancingSources (Utes) 189 23.701 12994 9.998 5555 S 10312 $ (O002 $3.40,934 $ 33.265 S 13226 S698.418

Nc Changein FundBaLno (1(626) 6399 1,183 (I8078) 36

Food BSuces,.Sept beh1,(2011 3268 6285 39.686 31.113 7986 Eoesatenmeetr Fund Balancr. September1. 2011, as Restated 37268 6.285 39,686 31,113 7986

Fund Buaacs.August 31.2f012 $ I1642 S 13.1J4 $ 40369 $ 13035 5 8.495

I , - ,, , 2012 . Comprehensive Annual Financia!, Report ý for ttie $toý,'pfýrexa5 ', -pJ73 I 1174 1ý "()12 -- Comprehensive Annual Finan6al Reportý, , Fwotrtat,ýCATCý4ý ý I'• ..,: I"• =2_ I'- ,

Tox.. Tox.s lOthe Toces Dhlparbnt Oqo x T..as Nounojor H8a0m .0 of 600nd0ld Purlel ApOecd Puic so" Troansportatuon Conutl Fujns ProjectFLmds Projectftod Projec Funds ProelctFunds Tolal.

$ 125 8 1050 s 3310 $ 172 s 138 5 4,427 180.960 184.1102 4 129 162 184270 172 138

14253 27.421 2,44 2.448 10242 0242 24-03 237 22,357 b.783 14917 22032 565,456 4985 15243 650.0621 16,159 24325 565.456 19238 17928 710872

(160341 (24.713) 0381.0860 (196 (17,790) (522,3393

22 35 145 36 1,254 (2) (55) (180.960) (14) (42) (193263) 20) __ 21.035 77435 2P20 (,0) 180)461) 21 9•6 6 (104.574)

(1400{4) (2437430 (562,147) 2.900 (07.961 (626.913)

223.48 35.534 6633O01 29.727 29,424 868L892 10495 0432) 0 J017 ) (54) 663069 28.600 29424 24D43 3-324 868438

S 110029 S 000601 S 10922 S 31.10 8 11628 S 241.523

1, , , ý""'A"v, , ý,ýZý,,,Cpmpýri I siensiveAnýual Financial Report ýWfpl FF715ý 12 2.. tZ2C:t ~~&zizesŽu m.i-~s<. .,,mjjj: 22Z tL.' -

STATEOF TEXAS Combining Balance Sheet - Nonmajor Permanent Funds August31,2012 (Amouts inThousads)

Pesonstn N.UtaN am. .MFund R-.hn RUs".e ta ugb thetlvudty Permanemnt Fund Funds ratsa Nonmajor Permanent Funds ASSETS Cashand Cash Eqtaivaents n 11.144 $ 15.768 $ 1985 $ 279.'97 Shonr-TeemInvesetents . 1-298 5,%9 6,907 Reeivables: 41 The Permanent Health Fund for Higher Educa- The National Research University Fund was 41 tion was established hy the Legislature from a portion established by the Legislature to provide a dedicated, InsestmeotTrades 971 41106 5,571 huterestand Dieidends 6 22 20 of the money received in the settlement of The State of independent and equitable source of funding to enable Due From Other Funds 240 538 778 Investments 133j652 593.239 31756 729,947 Texas v The American Tobacco Co., er.al. The corpus emerging research universities to achieve natibnal prom- TotadAssets $147352 S619,138 $ 4,679 $771.169 of the account was designated by the Legislature to be inence as major research universities. The fund consists preserved. Distributions of earnings on the account are of appropriations and transfers under the Texas Consti- LtA ITI.$ ANDFUND BALANCtES Liabilities: to be transferred to other accounts and used for health tution and amounts provided by law, gifts, grants and Payables: Accounts $ 700 $ 304 $ 537 $ 1,541 care costs, tobacco education and enforcement. interest. The Texas Constitution required that balances InvestmeutTrades 140 493 633 Due To Other Funds 15,.756 15756 in the permanent higher education fund be transferred Total Liabilities W41 16553 537 17930 to the national research university fund on Jan. 1, 2010. Fund Buluoues: Funds are allocated to eligible universities based on an Nonspendable 138$36 602285 745;11 Retrited 352 352 equitable formula. Cuonitied 7,76 7,676 Tout Fund alalnoes 146.512 4,142 753239

Total Liabilitiesaent Fnd Balaours $147,352 $619.138 $ 4b479 $771.169

I - 1, . ,2012 - Comprehensive Annual Financial Report - for lmýState of rexas . ý I '-, , 177 1178 , - .102 - ComprehensiveAftnual Finanflal Report , RXthC2mYTewi;is STATEOF TEXAS Combining Statement of Revenues, Expenditures and Changes in Fund Beiances - Nonmajor Permanent Funds For theFiscal Year Ended August 31.2012 (Amounts in Thousands)

Petannt atttalt OHt HealthFuwd essamt Nonnt*W t. Higher UntunsIty Prmunent EduomnoW Fund Funs Total. REVENUES Interesl and Other Intettmert Incone $ 3913 S 13,1t2 $ 2.188 $ 21293 Lund Income 11 11 Other 153.756 15.756 Total Reenues 3,913 30 42190 37060

EXPENDITURES Caunt.: General Guovmerntm 1f4 1.794 2,798 Education 756 HElthund 2,149 2,905 Hu,._ Saerk.e MVE 990 NaturalResuotres WndRecreation 288 2M8 .303 1.794 2J149 6,9-8" Tt•al Expenditures

Ecess of RevenueOer E-pe-dioureu 075 29,154 50 3O079

OTHERFINANCINQ USES Transfer Out 12,1 115.76) 112t (18.393) Totul Otd.r Financing Us 0205)• 15,756) (12) 11 "93l 1

Net Chsoge io Fund Baluces (1.70(t) 03398 38 11 86

Fund B.u-s, September I.2E11 148U62 604943 4,104 757309 Retutements (15.756) _ I5,756) Fund ualut-cs.Septotbor 1, 2011. RtRestaed 140262 509.187 4.104 741553

FundBalncs.August 31.2012 $146512 $602.%95 S 4,142 0753239

I ý , Comprehensive Annw il Financial Rebort, ?*I thýýState of Texas :59 j U' l icalR p r Section Two (continued) Enterprise Funds

201, - Comprehensive Annual Financial Report - FormeSiateorlems 181 1 1182 2V2 - Comprehensive Annual Firtaricial Report - L22z "7212222222r~I z.I...ffi.231v ==Qi- ;:.r : ==ý-==ýZ===.-A =' := 2 .' ý'=ct

STATEOF TEXAS Combining Statement of Net Position - Nonmajor Enterprise Funds August 31,2012 (Amounts in Thousands)

Teeas Tenus Veterara Tens Darsarmturat Depaetteeant LandBoard Water rituing sad Trnesportatohe tLee Nonmajor Enterprise Funds tommaunfity Devlakpentet Turnpika "'oW"' BoardFuats Affairs rulul ASSETS The Texas Water Development Board Funds sale of bonds used to finance a portion of the costs of Corrost Actors: Caoh andCash Hquioanlnta 1219016 S 41260 $ 8St7 include water development funds, agricultaral water planning, designing, engineering, developing and con- Shen-Te Inrert enLnn 591 $88f 300254 Suafitis Lodting Collaeral 851156 conservation funds and water pollution control revolv- structing the initial phase of the Central Texas Turnpike Rensrictod: ing funds that receive proceeds from bonds issued by System. Cashand Cash Hquisalent 175,630 19.323 334,420 Sirn-Tnem,Itnests 60.26 743490 the Texas Water Development Board to provide assis- Loamssd Cont-ct.s 20.788 62.753 tance to political subdivisions. The Veterans Land Board Loan Program Funds Federal 1,713 4,157 Othr ntert-rgonsmmentsl 2001 receive proceeds from the sale of bonds Used to admin- Accounts 38 tort 3996 243752 The Texas Department of Homing and Com- ister, originate and service loans from land, housing and Int-rest and tividendc 29273 13348 203 19.948 InonctrsentTrotoc munity Affairs issues bonds to assist in financing the home improvement for those qualifying veterans. Other ItS Due From Other Foods 19 200 502 1664 purchase of homes or the construction of rental housing Intrrfrtd Rteniotble 130 15 of Criminal Justice Insti- |ntrories 224 for families with low to moderate incomes. loan pay- The Texas Depatment Frepaidttrrmr 8 19 ments and rentals provide the revenue for debt service nutional Division accounts for the proceeds of the UronsondContracts 122950 2.177 Othbr CurreotAc-ts 27 payments. institutional division's commissary operations and other TotalCurrent Assets A67127 2549j39 339.123 606,165

miscellaneous revenue. Nncurrent Assets: Rectnictnd: The Texas Department of Transportation Turn- Cabhand Cash Equivelrntq pike Authority, a division within the Texas Depart- The Texas Prepaid Tuition Plans offer programs iovestmernts 1351616 114.99 432223 Re-eioables ment of Transportation, receives proceeds from the that allow Texas families to lock in the cost of future Lrons and Contacts 1.101345 1998.908 Other 4350 college tuition and required fees at current prices. 4,189.845 46,823 Inse ts (387) Iterfund Rece.ivable 2.710 Other Re•l svbtns 450 Capital Asset: Non-Dcprciatbleor Non-Anuninah-e 2277JD14 3,_'M Dsprreiubleor Anrortizable.Net 127 337.799 62,491 Asters HAIdin Trust efe-rredCharges 8958 37 .147 Other No.-.rens As.t. 341 Tetot Norosmnt AScos 4.189.555 25T3094tf0 1.7/67."q0 2.401285

Tsta Acret 5156-182 2.764049 3,307D)32 35607.450

DEFERREDOUTFLOWS Drtsrod Outflow of Remcsores 46907 389.775 Total DeferredOutflow adRecsores 46907 0 389,775

1-1 jý ZG12 - ýCpmprehero;ive Annual NlFleportý- For uw State of Tm',s ,1 163 1 184 Com p re hejý sl ve Aon, U8 I IFI n a 4i IA I Re poi-t - Kv iKcSwQ of Týýxa, Z22Z2

STATEOF TEXAS Combining Statement of Net Position - Nonmajor Enterprise Funds (concluded) August 31, 2012 (Amounts in Thousands)

Teas Tea Tea vatranarta Depatlssseusa Teus D"tewarlsend. Depabatsndl LandBoasd Texas Ilarsarroj Wate Hoadingnod Trantiportallms Lopn CrimnalAd Ostrlas Prepaid EntPrt Bard belat Community Turnpk.a nww.n Trd..aPlnoa Fund. Thotal Affair AifutriNl IFund LIABILITIS Curnt LItbilirtren S 11669 $ 36.923 $ 206t975 Payable,: 892,142 $ 283 S 13151 $ 28282 96,53 181.709 IsuestmseoTrates 236337 766,410 Interest 9.432 2790 3/'64 3A41 81316 DoeTo Other Fonds 6654 516 262 83.341 Inerfsrudpaynble UnearnedRenenue 53241 17.156 1,056 212 5970 Obligaiuon•Secunities Lending 851056 200 EmployeesCompeasable Lease 503 I.581 222 31 0A GCneralObligation Bnds Payable 37928 82.167 3978 Resesue Bosds Payable 16990 1171D13 7288 1261194 126094 LiabilitiesPayable Pnot RestrictedAssets 279 2.587 2.985 OiherCurrent Liabilities 58 762 40314 62 41267 TotalCoros lIobilitiea 119,428 163A81 12324 W60.182 394 9,104 11D85 10,428 Nowurrent Liabilities: 245 272 Employees'Compensable Luea 417 44.6M2 2.115 172074 Nurosand Loans Payable 1 157,877 234 261 GeneralObligation Bonds Payahlo 1]031AIO 20)46228 51,199 57102726 43,820 2A72249 Re.enue Bonds Payable 889914 2243.40D 1.609.462 LiabilitiesPayable From Restrieed Assets Assts Held foe Xhclrs HedgingDeritatise Lrbility 46.907 389.775 34,137 34,137 Other NoncurrentLiabdiiea 713.93 1.404I44 04 3303336 Toul NHe.o.en..Liabilities 1921324 2 362,317 2,667339 2.438103 149919 1499819 3036A53 Total Liabilities 2W0.752 2526J198 2,679$63 2638.185 43.50 21.645 4255,313 NE4TPOSrTON (3871 Inoerred in Capinl Asts. Nero? RelatedDebt 127 5120.57 65.990 2.710 Restrictedfotr 45O Debt Retireroert 201984 7,247 V-tr-os LandBoard Hosning Progesro 693D150 283 381 2-181,178 Other 360 414 401.191 Unrestricted 3,01"5990 82647 (92,135) 23538 2,538 4605 Toal Net Position $1015.830 5 2843758 $ 427.169 $ 759040 341 643 1354233 59.199 13,482-34

51042 211643509 103019 16.154.483

436,682 0 0 0 436682 Cocludedos-hefnlloieg page

Firratitial Pe`port - I Comprehensive Annual Financial Report - ýý'4 , 185 106 ý 1 1. 20'Z - Comprehensive Annual STATEOF TEXAS Combining Statement of Revenues, Expenses and Changes in Net Position - Nonmajor Enterprise Funds For the FiscalYear EndedAugust 31, 2012 (Amounts in Thousands)

Teea Texa Dopl~arsantd Mnfl Texas LardBoard CriminaeltestIs. Texa neenspoetnloan Loan Deetlop"snl Proesrae Intlutsstlne Prepaid Entirpri. CAneftni Division TOtionPlans Funds Totaft BoardFunds Authorityn Ftods OPERATINGREVENUES Axiisy EAterpreses- Pledged S S Other Sales of Goodsandi Sorices 6359 Other Outerof Goodsansl Sexuices - Pledged $ 5,950 $ 541 $ ,107 $ 37314 750•9 28A76 3.025 1.412 2.113S to.:e:s sand]nvosmes Inme 691)54 97;280 145j519 Interestend Inoxstou noer roo - Ptedgrd 90260 31.992 441•7 FederalR-erue 4•335 750 594 77 62 3.165 Other Resreo.s 21.591 10.111 139593 99 89 TotalOperosiog Reenues 153,S57 85 SM 579 72345 96.693 181,709 OPERATINGEXPENSES 743 49 662 1,957 Cost of GoodsSold 119.995 Salaes and Wages "995 ) ,199 141991 Payull RelatedCosts 2,193 251971 2-197 1 Prufessional Feesand Sermics I jrS5 9.313 64.134 97 207 72 _82 Trover 206 52 73 167 495.561 4.134 ID04409 Mtalrds and Supplies 4,323 4.128 Coenmmnisssionand Uritides 52 92 Reports asdMsinoarrumce 245 15,155 (429) 522 51 439 1A29 Rentals and Lca-s 1642 67 2519}0 1J829877 Priesingand Repmdtuiion 44 20 2 3079036 Deprecoauionsod Amnodination 662 17266 4,479 4.74.376 Bad W" Ehpecns 2412 2.189.723 2.109323 ImeesrEaptrs. 102.454 99922 71,946 2338 2 835 ErmployeersPmipant Ieoefil Payment 436,62 Other Eapenscs 2,109 6 32-9 24003 10323 71395 Trot Opeer-ingExpensrs 1132n6 123.60 73.139 522 2.189774 27.977 11,607256 Opetraing Itoe- (teoe) 399851 1t276 12b67 9.722 9;21 2785.335 32.111 12.611b65

643 625 579.442

209231

41.978 .620926) 69,783 2A097277"

S 42,621 S (620926) S 70,909 $ 3,974 1"1*

I -J,','ý 'ýý ý ,ý, -- , 201Z-z'ý' ComprtlhiIInSlve Atinitual Financial Report i , A'a - "'187 ft Q1Z Trin Fliport - Fi MTcsý4 I ,-,k , ýj STATEOF TEXAS Combining Statement of Revenues, Expenses and Changes in Net Position - Nonmajor Enterprise Funds (concluded) For the Fisca YearEnded August 31,2012 (Amounts in Thousands)

Texas Vateruns T..s Dtpatttttntot LandRourd an-1 T- ST.M1un Loan T- OTMotsttnt N-nd Anfal- ASH-t Funds TultionPiams Ru.6 Tubb Bnod Furh NONOPERATINGREVENUES (EXPENSES) S 102.342 $ S S 102,342 Federul Revenue C .Wp069" $ $ 905 58000 8.353 72,362 0il11 . 35 104.571 Land Inco 13 776 285,368 andritest Intenstent Inome 62855 33,393 80268 Loan Preitum undFees on SecUili Lending', 310992 losesuini ActuvitiesExpense 251 13140 21.799 09077 Interest Enpense (142473) (1,274) 102'9,3 593190 30.878 737280 Bo.n-oe Rehatesand Agner Fees (123) OGinLstt-) -n Sale of Cupital Assets 14141 Settleurni uf 1l7ims 377 730D78 1.470 74.348 Other Expsns (74.946) 131) 13069 770 11,721 42.291 Total NonoperatingRevenues IEnpensa) 231,123 0 (135.4601 32.670 417 102 2,89 10292 2,383 3239 83,701 IncoenefLo-s) BsloreCapitlu Contributionsnnd 21 (122,793) 41 187 906 Truefee 270.974 16276 42,392 95 93 1WO3 9032 33 602 I'430 CAPITALCONTRIBUTIONS ANDTRANSFERS Is 294 004 16,319 Capitul Conilhution - Other 12 670 25 1JD36 1.962 TrunsferIn 2-336 2,566 55242 1001 81 57 224 Trnsler Out (7.8101 (22453) 06 393 22.869 Tutu)Capitul Contributionssod Trunsfees (5,474) 2,566 55257 (21 4M) 2,414 44 2740367 Changei Net Posiion 2655O0 18,942 167,3361 20,7352 I16OD63 160063 57 107n0 14,370 2.736 ti,927 Net Position, Sepember 1(20 11 2.750Y330 265916 495695 738288 91.314 178.456 26041 761914 Restments (390) Net Position. September1. 2011,us Reled 2.750,330 265316 494305 738,288 70192M6) 11279 4X37 424 34) Net Positio, August 31.2012 $30)15.830 $ 204,379 $ 427.169 S 7391340 Cencluuedtn rhefUoloing page

1 1 20Q - Comprehensive Annual Financial Report - 189 1190 2012 - Comprehensive Annual Financial Report - I STATEOF TEXAS Combining Statement of Cash Flows - Nonmajor Enterprise Funds For the FiscalYear EndedAugust 31, 2012 (Amounts in Thousands) Teaoa Teiau Test. Te.as Deparbnentto Departmenloa oeterans Separ.astat Water Housingand Trantsirtatim LandBoard CstrsIaat.hsfisa Tera Nonnelr ttnsetapnsesl Casirmsadty roa Pr~att PrepaiP BoardFunds Anti. Plans Fund Division 1ui11o 11a2a CASHFLOWS FROM OPERATING ACTIVITIES S S 84.684 S 21.257 Proceedsrf. Customors 35 S S $ 318 S 307-192 Prcueedofrom Gilis 76 768 879 Proceed,from bran Proorora 80015 4973463 13 Proc from Ausiliuries 675 117,441 IIS 15"J"4 Proceedsfrom Othr On dng Rvenurs (6.11d 49291 343 343 Puymernst. Suppliers for Goodoand Snerioes 11716) (10979) (54,396) (79.908) (7S78) (1,196) (892) (8921 PaymentsoroEmployees (143949) Payroens fur LouosProvided (1 .7751, (344,486) (132) (257) Paymentsfor Other opnraing Espenses '57) Net Cash Provided(Used) byOpenrorirg Activities (4631 1442'70 378 CASHFLOWS FROM NONCAPITAL FINANCING ACTIVITIES (74977) Proceedsfrom Debt Issuanoo 312,501 89915 14999) ((6636 1201 246.371 7 Proceds from T-rfs- frn.mOther Funds 139.774 IMI~ 53,758 169J.8 Proceedsfrom Geae Receipl, (21336 6P38 Prouondsfrom Ironsed Payables 41,628 ((280 221,737 Proceedsfrom Other Noncpital FinancingActivities Prymesosof Principulon IDb&Issuce 1104,165) (124103) (70,967) Paynemrsof nemr1 (1049411 (101265) (72.406) (4121 27 Paymentsof Other Costs - Debt Issunce (17321 5912 1299 68356 Paymcntr for Traofers s Other Fund, (192,902) (91.400) Pu monrs for Grasn Disbursroncs (76.163) (4.548) (275) (35286) 3 1.3b4 6 1D24 33197 Paymentsfor ]nterfundRoeivublos (611673) lesC.1b Proided (Used)by Nonoapirul 127644 (27430) 7062 254.34 FiranuingAdticises 260.701 (136294) 55756 ((5.705)

29973 (618-396) 63723 3,725029 CASHFLOWS FROM CAPITAL AND RELATED FINANCING ACTIVmES Proceodsfrom Sal. of CopirslA -sr 4 23 (363) 29.977 1618.396) 636.46 3.7244666 Proceedsfrom Pederal rmotsand CoentroL 968 Proceedsfrom Olhee Cupitol WrRelated Financing Actirities 13 S 42271 S (620626) S 70t908 $3.97967 Proc-edsfrom Copiral Conrribudio 3,117 Puyensnsfor Additios to CopiedAcross (59) (180) (1.914) (4.505) Poymrensof Prmsipdlon DabsLruance (22220) Payrnes for Capital L-osos Paymenrsof Islohss, DeonM ssountc (71278) (1388) Pay nsofOof crC on00 ebs Iss"ncee (32) Nt Cash Prouded IUsed)by Capitaland ReislodFin.ocrog Audvliis 0 (59) 172.8651 (24554)

CASHFLOWS FROM INVESTING ACTIvmES 75926 Proeeds fro Sae of [nvstenu 633.714 2619064 1983043 Procedu from Interest and Inuestent Income 149376 6).992 7382 8395 Proceod&from PrincipalPay-n.. o lo.se 383010 Payronts soAcquio Invessomots (6113447) 368.75•1 (367.778) (3287306) Payents for NonpeogrmmLoam Provided (8683)83h3 F284 -170) NetCash Proided IUsed) by tnoestingActioirres 144,795)(2326061 1120,668)

Nes Incrnse (fDeun-e in Cushs.d Cash Eqsiuilens 113723) (122372) (272.287) (16,57)

Cashond Coch Equivalnus. Septemblr e. 2011 122,739 339262 299h17 351477 Rrssasrnls Caohand C.h Equivalern. Septerber 1. 2011, . Restd 0 0 0

Csh nd Cash Equivalents,Augus 31, 2012 S 121016 N 216.890 $ 273.0 S 3347420

Iý11 ý 1 "2012 - Comprehensive Annual Financial Report - For tlie ýZatiýof TeXa5 ;,*ý 1,191 1192 -4 201Z .- Contiorrehensive Annual financial Report - STATEOF TEXAS Combining Statement of Cash Flows - Nonmajor Enterprise Funds (concluded) For the FiscalYear Ended August 31, 2012 (Amounts in Thousands) Texss Texs. Derrartmrento loras Texas Departmento Departen of Criminaltdanck T-u N-.1.~o Land soard Waft. Hotn8 misld Trsasportatiol I snsiuial Prefdab Fn TurtimPUls Foods nutms - n C-omnt Domiio Ins Prognurs Bard Funs Aflb. Authority Foes RECONILIATIONOF OPERATINGINCOME (LOSS) TO NETCASH :$ 102,925 $ 64D38 S 8.521 S 28],42. PROVIDED(USED) BY OPERATING ACTIVITIES 5787D0 675 SOpe'rotinoIonome tieros) S 39651 S 16276 S 126b7 S 90722. 251 642 21,754 91D54 (721J25) (146A93l 143.0) (370A23) Adjustrents noReconcile Opertling Incom (tea-) (17,28) (964) (13.170) (52.129) iIoNt Curh Provided(U1d) by Opertt0ngActiuities: (3632611 Dopuecialionand Amoninatiou 662 17266 4479 (1,139) (7.228) (8,424) BDdDeit Expense 2,412 46801 ______2 0,977) 156At,0 Oper.ting Income(os-) ondCash FlowColegnries Clos-ificalionDtl'rrener (506541 25493 71983 5 557406 Changesin Aswts and LiUbilities: DItcnem)oelrnua in Reeniosbln . 1,185 850 (9891 0 1,070) 5.911 15•56 273,700 (Inc D-.Ilocreu in Due From OtherFunds 406 307.740 DInnenusec=l in Invouories 41,12A ltnosnuoe1lureuc in l.oano sodContracts 63.683 222 222 13.662 (299.735) trmn0a•:)Dnmrea- in OLtherA to 554 (1555) (Incrmanot11c--u in PoepaidExpenns 146 (42) (2789.!t4) 4311 (41 (2.14.1 Iremt (Denrel in Payables (62) (8001 (17,998) (2131 (302503) IDnmreDrem in D.e ToOther Funds 86 (76.1031 Incrnue (Iereose)in UltnarnedRnenue 11.7771 (61A731 [nruase(DEcree) in Emrployes'Compenble Leae in BenefitsFtt-ultl Iscenu (Dectere 1.444 2,023 (12 D77) O 7005 159388 t.eaue (Deear) in Other Lubilities Totu)Adjustments (49.4451 42.500 16.423 1.•4 A48

105 105 NetCosh Frnnided(Used) by OperotingActivities S (9,594) S 58,776 S 29190 S (44270 960 '3 3.117 NONCASH(TRANSAC'rONS (26, (2.1791 Net Change inFi.r Valueof lnesttnentu $ (6481 S 6,557 $ S 2-5382 (26,725J Oiher S S $ S (415) (16) (11) (72060) ______(321

105 0 (42) (97,415)

18,696 3.192,456 4 5815199 39 34,749 791 203,124 35336 307-46 (18,9471 13.179975) (04750014) (7.4961 (815.7791 (212) 475230 (3"69) 1658A14)

0 (35.7471 U175 (440211)

0 273.953 62.904 1.4490632 I I 0 0 62985 1,449,631

0 0 S 2380206 $ 71560 $ I P099422

Conluded en thefollouing page

I - 012 - Comprehen5ive Annual Financial Report - Fortiw state rýt rex,,5 F1 94 ComprehensWe Annual Financial Report - .222 Y•70>3)3L. .22 02 2022

Texsu Oepsrtznsntof Texas Nonmasor tnsUtflmd Orkilv PEatsamss flm Plans Funds Tobtis

S 11279 S % (119-66) S 4,37 $ (246,34)

66 3-3 22S69 2 2,414

(566. 462-56

583 8699 45) (795) 135 135 (680) (165) (866) 77I45 (466) 219 ( (248) (4) 145 934 85 251 52)9 448) 36 325 29 (1,423) 106 (21 108 27.583 3263 63 (2466 W65 362-9 44 6(J.264

5 121184 (82977) $ 4681 6 _366130

$ 82,368 s $ 113639 $ s S (415)

I : X, 20ý27- Cbmprehýnsive Annual 06ancial Rep6rt. ý -4. - -,, 1w 1190 CoMprehonsfv*.Anriual hoaptial Ropckrt ýýMtOwWofTow,, a4 ýMý - -~ -. .~. :L.Žn 2.. ¾.. -'----*~--~(.'.'.---~~ocr2

STATEOF TEXAS Schedule of Net Position Colleges and Universities - Major Enterprise Fund August 31, 2012 (Amounts in housandls)

res, Tona rass of T.- ARM toO Stlat Colleges and Universities - Major Enterprise Fund Tenos Unoeestty tUhh""'ty Uaeslwy 58515 tslan S"Iste toastm ASSETS Asser Aset s

There are six universirv systems and five independent universities in Texas' primary government presented in a * CshundCash Pquvuennn S 2325376 S 753.737 t 334.509 5 331220 S 439913 Shon-Thon Inoesnments (975) 249,721 719 single-column as a major fund on the basic financial statements. Schedules were prepared to report the breakdown of Scuriiins LendmigCllatn,1- 511.401 the following universities: Restricted: Cash sodCosh Equiulents 224960 339064 139.151 42,7g0 M0AU01 Shhun-TermItvostments q9 I-acs sodConluts University of Texas System Roseevbles: F*eml 406.534 91,481 43245 44937 18519 Texas A&M University System Other Intorgonemmental 57.330 5.586 Texas Tech University System Acc-unL 1001938 M4.702 54295 17,144 96.122 Interest d D~iidends 56M949 6560 430 374 192 University of Houston System Gifts 91 5M7 27241 37,566 170)99 5,09 Inerment Trnd.s 197A57 10396 Texas State University System Other 272,144 4.408 3,415 50347 2,452 Out From Olher Funds 270.935 123221) 118.447 93,61 10130W University of North Texas System InrtefundReceiathlr 22,390 Texas Woman's University Inveutonies 8747125 24907 3,942 2019 4077 Prepuidhem- 35.131 27232 1059 Stephen F. Austin State University Loas ondCotracts 5037! 25.997 1,590 14A00 10.416 OtherCurren Auts 231,729 75219 451 380973 Texas Southern University TotIuCu-nn Asses 5.776,456 $.0593 772.172 845M42 809.42 Midwestern State University NonousnrmAnses: Texas State Technical College Restricted: Cash undCsh Equints-1 (90,4131. . . 46,410 9,618 16.87 Shor-T.m Inveslments Invstments 2606539839 758.817 409.41 141567 R-o:ciash.o 30090 1.692 L-sns.d ConLtr 73,155 4,137 14,914 1(7O Loans nd Conats 21959 3,382 7 Inmetnmnss 2.180b74 1,744977 814958 638184 90086 toerfundRecaivablc 734,790 Gifts Reeivable 119,%4 60513 44503 CapitalAssets: Nun-Otepmabl or No-A-motable 1.995.415 694))58 131;297 268,113 203.677 prpmcableor Amonrtble, Net 10,427,141 2934.427 (282056 00-336 10870182 ASSets(lkd isTrt 362 DfcerredCharges 4(3395 Other N-u-n t Assets 193.703 32 ToutaNoo. IntAsse.s 41,553-78 60944'072 2.732527 1916033 1,42.168

Taul AsSetS 47329$934 8,7500665 3.041A39 2b61,955 2351510

DEFERREDOUTFLOWS DeferredOutfio, of Rauossos 3U31184 72244 ______To-t) TDfenedOutflow af Re-urresc 334JD84 224-1 ()( 0 A

Ort - FbrmestareorTexas 197 F -98- 201Z - Comprehensive Annual Financial Report - U - -- '22 >I..ŽS12':.6

STATEOFTEXAS Schedule of Net Position Colleges and Universities - Major Enterprise Fund (concluded) August 31, 2012 (Amounts in Thousands)

Untuoettt ttteptenF. Unesiy T- Te tstxa Teast of Toxas Austin Touts Midstotmn TouxsStatt ALM Totoh systns State retlsloa. Wun-ss State South.. SaIta totd Teut SUfroest Sn~rslthly tnt',o rty Housto utat Unveorsity Untotloft, UnbvernO Otiolresrt Coatl- Totals Systar Suttuste Ssvshw LIABIUITES Conns Liabilhiis: $ 208997 $ 2685 5 48368 $ 22,235 S 9`391 $ 25.757 $ 4572,196 Psyables: 38.607 20.143` 20334 8240 336.789 A-cuts S 848215 S 376.865 S 43.111 $ 42351 0 50,760 511.401 PIaynoll 414.166 110951 55,736 40,415 279%6 OtherIoseegooemrental 16.715 37,989 4097 129810 26.130 12354) 11.194 916,722 Federal 29335 119 59,699 18.504 209.55 98.957 loororoent Trades 299,9W4 87350 17 17 Due To Other Foods 15.827 2374 2,952 586 2,970 319S13 20B93 12.422 7.751 280 11330 6700t4 Ittrfund Ptyabto 239426 620 524 200 5M06 69.446 Unesrned Rermnt 1236041 505.829 176A62 186,195 306D40 62 1161 11,794 9710 20`330 5290 1100 1,436,460 Obligtions/Scrurides •ending 51190I 464 657 147 58 73 65S04 Claimsnd Jadgents 12.761 2.311 13107 329 30!45 600 231w 085,627 Capital oan-Obligotions 1,406 637 158 375 23 348253 Employers Compenable Loate 317.132 9220 4.823 11,324 10459 8953 2.101 122 1.417 299.159 Notes andLo-au Poysble 607370 8000 27.159 25.123 85.817 26359 5927 6,692 1.289 14266 848.173 GOenedObligatios Bonds Payubli 22390 Reen.. Bonds Payable 1376050 119348 27A81 34306 40230 2215 847 666 201 257 23769 129.525 Funds Held for Others 32.935 34369 31.541 9509 4.345 979 20.897 17//65 7.855 119.45 ledging DuerivoliteLitbility 2244 7236 5.81 2`320 118,111 Other ComrentLiabilities 205))47 37j666 4366 1 902 3,114 29361 3,75.933 TotalCareres Liabiliies 6.131214 1298592 375929 352.414 470370 530975 165)t99 133b10 125.436 46911 10500 1.124326 Nencurnt Liabilities: InterfnodPryoble 743201 40P91 Claim and Jtdgents 26512 4257 14074 5 110 (170251 Capiut Iaot Obligutions 3598 2.733 155 69632 944 509 1.453 Employees'Cuorpesable Iae 156,199 93259 351177 12D630 10011 25.934 103025 IOD71 39963 4.155 28.146.152 NOtrsand LoansPayable 22.181 195325 313782 GOneralObligation Bonds fayablr 50)39 4066 19A50 56 1055S87 R -evereBands Payable 5.5080973 2222,470 520389 842,130 732.136 1328 26.876 .Aaets Held flr Others 775951 71.333 115.130 33,367 25002 5,640,708 NotOPEB Obligulian 2263S67 663978 734,790 HedgingDerivatite Liability 334084 13 35 tll1 26$26 Other Nonanuont Liabilitie 64207 233764 562 2324 Tatal N.se--nn Liabilities 92973773 3221 330 570.257 0610.0 744 b78 116b09 4$40 80493 31,271 116h33 15.170 3,470,382 737245 231.171 226.412 212.734 122,694 122.935 18.190233 Total Liabilities 10b0280987 4319.922 946,169 1213.444 1215240 362 955 49350 NETPOSITION 230 1.155 195.120 Inessed in CapitalAssts. 999•32 3391542 2843737 2859273 166350 1303724 56802966 Netof Relared Sobs 5265.136 1ý204223 862.710 450.13 518393 Reustritedfor. 139373797 504.941 418347 411309 2123761 2439114 67927.392 Eduotion 1,654,456 263085 285310 156605 74.822 Debt Retiment 5065 27939 55229 3.194 336327 Capital Projeets 235369 84,373 17351 2219 83956 FundsIeld as Permanenttnvostlncrs: 0 0 a 0 0 0 336,328 Nomexpendabte 14.308098 404,634 624,472 370,404 113,329 Espendable 5.705278 133994 37.769 42.725 13222 Conchled to, thef.alt,'img poge Urestric-ed 4901329 202.778 702.314 370316 329.446

Total NetPosition S319,34.931 $4232907 S250273 $01.448311 $ 1436262

MENýý nnual Financial Report ý For 1991 200 ýt)Q - Comprehensive At)rtyMFJnanclal Report - Fo, E4ýUalQcAToxa,, t .... ZZ7 -

STATEOF TEXAS Schedule of Revenues, Expenses and Changes in Net Position Colleges and Universities - Major Enterprise Fund For the FiscalYear Ended August31. 2012 (Amounts in Thousands)

Utnorstt Srp. E Unlver•aft T SUnoreslrt Trer• Trot ~Tax. AuTstn Tan Mldnostan TeoasState of A&,S&M at Stabs NMormtern Woman's Stade Sftrem Start Toubrdcat Tor.. Undorally Otdrrrali Houston undsvrSy Systar Unhrasmiy thdorot te•r tUjswsty CDraew Tutors Sysomasn tar Syrtt System Ssther OPERATINGREVENUES Tuition Revenue S $ 33,740 S 7k84 $ S Tuitio, Reevnuo- Pledged 4287 41637h 529.723 543.316 $ 23225 S 2.401 $ 3,198 S 8558 S 2280 S 5241 S 1.414-213 Discountssod Allowances (458,153) (2289N45) (92,619) (87,461) (1273701 29.963 5,178 80P36 7,116 3,995 6,432 709927 HonpitalRevenue - Pledged 9.050.488 I.717 )1A32 Discounts and Allornes 14.912.239) I.742 171 31365 Prolfssional Fees 925 247.385 387954 ProfessionalFees - Pledged 451 1384 2.709 59%9 254 4953 Discountsaod Allo.a-ces (23576471 (235.OO8 130 324 1 292 36 26999 AuxiliaryEotorpriss 996 252 25.794 Auxiliarylonterprises - Pledged 453.120 271,551 127,435 66.546 117,925 166.140 37962 62,470 46995 234011 16,447 2,70•382 Disiunts and Allowu-ces (13.784) (28A988 311.461 Other Sales of Goods and Services 21.1)9 39413 16.708 Other Sales of Goods and Setoicss- Pledged 387.130 216992 10385 37.866 23.826 7 223 84 19 582 3314 Dicounts and Allowonces 12021 2.737 2P134 427 2.574 180 586 3619A98 In.t-t andInresetn I-om 1.881 2934 782 2.462 673538 Intetml sodInnestmenti Iroome - Pledged 90 51.21 1.405 1,694 99o00 P'edodRSeenso 13945.59 412683 59848 66908 33.760 23580 49691 A.5 7987 3,748 2579 IX949393 Sta.. -rantRevenue 1.166 7529 9.51 1334 155s244 95 15131 142.843 Other Operttiog GrantRetenes 362.796 201983 1545335 6S59 2,244 OtherOperating Grant Reenue - Pledged 651957 239.10 3 5541 19298 9598 11149 39630 13.624 68 1278 281,22 Other Re-.oss 7A84 33506 108 271326 57,121 101,813 96563 35051 36,767 9234560 Other Rovenses - Pledged 102.414 249658 894 11,442 TosalOperating Re-nees lI.107.591 1952019 972096 63867-89 6154M9

11,195 2041 9.018 766,546 OPERATINGEXPENSES 7,1107 44548 • Cosxof c ,ds Sold 92,127 20259 11.783 2.467 309940 3 1.167 170 95 49D71 18.124 Salaries andWageu 6316379 1506.447 714,652 451292 18)963 1261 3.440 2,766 15123 4,710 338-201 Payroll RelaledCosts 1,508,504 318910 1231531 87,344 91226 39.198 807 61043 318554 ProfessionalFees sod Scrvicer 354.742 232,0M7 58959 57.522 47032 6.540 9241 12453 3900 209836 Travel 133.635 741151 23.961 13.92S 13D38 441 576 78247 152,05 95723. 76,750 629488 10.731)987 Matoriatuand Sapplies 15382.170 224.619 684139 38255 85,440 1.712 849.186 Commnnication and Ulilities 393.135 132.586 46907 46A3o 48J686 29g67.745 Repain sodMilonsoce 233DO2 96738 33.957 14912 19244 Rentals and Losses 130238 515381 14,316 24D37 6,566 1555 f66 179 921.977 Printingand Reprod.otion 339627 12265 5054 4,129 4"02 302.117 80,675 174.957 166980 819$45 809887 16382L388 Depreciarionand Atnoeiotion 1.1592J62 2359D12 113.594 78,676 699615 Bad946t Enpenso 29688 19611 1.169 29O 773.43 137996 283.770 263202 116S96 1179654 25,616.948 • Intert rxpenre 53 14 1,958 II S,chlushtips 381AM 1929D82 55.166 87991 114.173 Claims andJudgments 11,426 5296 1,113 16389 84 NetChange in Petlorv PEB Obligationo 497215 12711•9 348266 153,127 54,155 65279 30-V5 80315 9,133.022 OthertFopensos 851437 269815. 91 195 35.139 27.511 Total Operating Erponsos 135337911 3.4A9.439 153637910 I1894.123 988.127 53.947 27,X01 14,136 65 1.177 2ý531,612 516 4.923 2918 78 100362 OperotlngLoss (3229.201 115479203) (44398D4) (365.134) 1.737.37) 45917 59,532 102 6.409 172 535.500

46.436 10687 6966 36558 4.130 619 15926.936 31011 2,780 6903 5945582 266958 110975 56.438 435187 28218 43599 89737358

$764,154 8396945 0154577 S140,107 $95965 $126,160 8429A46372

Co prhesieAnuaFnncalReor f~te~aj0 exs 0 ý2.2 ý 2aT2 - Comprehensive Annual Financial Report . Aý,'tho rwcý of Tow. -I STATEOF TEXAS Schedule of Revenues, Expenses and Changes In Net Position Colleges and Universities - Major Enterprise Fund (concluded) For the FiscalYear Ended August 31,2012 (Amounts in Thousands)

unfeatty StephtenF teatety Teeas Te-as Unal6uy Tee.. of T.es AnSon T.e.ms MId tet TexasState of A&M Teah at State NorutTexas Wotasm Statt ste Sate TesbmlMal Tee.s Unieity gtd-tey Hoasto University Spyeem University ht*esly Univetarty Univetr-sty Couep Ta11 System System Stat•at S~ls sy astem NONOPERATINGREVENUES (EXPENSES) .S h,127 S 008 5 3.747 $ S $ 79673 S 0;279 Fedenal R•uenue S 338,058 $ 199,778 S 45246 $ 78356 5 103.779 310.109 89 .56 87270 82.526 40944 36.954 4.9520)77 Gifts 306605 99_08 81.,f87 31$65 (64211) (20.85) 1223731 (20.716) (12501" (22316) (1.155399) Gifts - Pledged 25371 20.400 4111 78.122 9050688 Land Income 6,398 (4.9122391 Internl andIuuesnmct Inoueot 35293.1 23 763579 36020 11.948 78,727 4.41I333 Inlenus andfeutonut-luerne - Pledged 2850)1 70.120 10.191 31(619 6335 Investing ActiniliesExpense (719D) (3925) (292833531) (slereslEnpense (268.856) (106367) (240161 (3803) (36,692) 1275 1.674 967 3 936 Burrowe Rebates andAgeno Fet- (2,185) 51.136 273562 373657 11,919 8258 13.185 1,1.8294 Gain (teas)on Sale of Capital Assets (14,735) 543 (1166) 1431) (273) (4.963j (9.6471 (3963) (61 161) Claimsand Judgmentu 167) 1255) 1.139 2-1751 Other R.e.enas 7.536 9(610 34351 4.721 226 1.166 4,969 721$32 Other Reeue-- - Pledged 17.798 7,477 (.323 48334 (691 (202) Other Expenses (28,862) (52.617) (38990) (221b) TotalNunepotating Revenues (Expenses) 3,98) .963 3229868 162.5n6 159.928 107.929 104 104 493D4 3,274 5053 38226 1399 6.526 2065-240 noeet (Io-s) SeornCapital Cottibcien,. 2,702 1.233 27 369 End.t-n. sod Transee 631.893 (1224.5521 (280.498) (209.306) (2653180) 16.934 1059 11058 210 2373 747607 894 699.4201 CAPITALCONTRIBUTIONS, ENDOWMENTS 39 744 4.654 46535 ANDTRANSFERS 559 734 20 I15&86 142307 CapitalConibtiuns - F-e&.1 15260 29 487979 97A39 110319 118,962 42013 46412 15.137.819 CapitalContribution - Odohr 213519 2.151 119663 4 3.116 Contributions,. Penmann nedTer End. rntnr 119971 5.400 661 8313 1,197 TruosferIn 2,441(267 1(484.545 4209867 339027 336.717 717 58 8,496 4-393 147307 TransfefO.,l (516,3111 (149421 (15037) (9092) (9.409) 390.157 84.468 85.570 896578 363796 67965 10253,144 TotalCapital Contributions, Eedowments and 66237 151241 159868 159640 7249 12933 2-263,539 Tnretfer 2272996 1.477.254 418.154 338252 331(659 3205 23762 2992 6918 53,191 837 8f)(1367 10976 1.13 2.402 3.439 1.413 11,64 281620 Change in Net Position 2,924M9 2523702 1379656 (323746 66 542 51656 .530 13262 11369 5273 12ft163 -236 16,543 7076 10523 6.214 2.974 6.452 7161632 Net Posiion, September 1,2011 2897346(9 3,977927 2.42066(7 1315996 (0652•0 205475 3.801 5.459 4,488 202) 2.466 436ý%3 Restatements (24 377) 2.358 (231) 4.430 7D78 2031 1,738 2,457 629 1,344 241A15 Net Pesiin. Septernbe I, 2011. .axRetaaed 2,710242 39803265 2.420/617 13157656 (0693720 4043 642 561 716 IH[ 1l0 65.550 49831 14,433 16340 14270 93748 9904 1626,945 Net Position,Augual31.2012 $319634.931 $4232.987 S2.558.273 $1.448511 $1 .136262 420 906 354 2,175 121 93744 1 2 2039 63978 153790 19.466 26h61 83S39 12.440 977.905 (9.308 624284

51,167 6.724 4077 ]1.773 8 907 1358283 7663181 169355 187,628 (95953 78265 140,670 21.731-281

1278.6211 (71316) (7731"9) (76991) (136212 (94258) (6393.462)

Concludedem thefidluoing page

41I.K. Comprehensive ý(nnuallFl rt - For the $tare ý,fT(,xaý,W ý,W 20* 1ý204 a A-houal Finl6r.141 Aajýprt , W, STATEOF TEXAS Schedule of Cash Flows Colleges and Universities - Major Enterprise Fund Fo, the FiscalYear Ended August 31,2012 (Amounts in Thousands)

UnImty To 7Sons Unlny Ts tounity Slocho F. Tech of State Austi Toos. Midwestern TenasStdt ot A&M of Teas To.s Uolfy n IUlowentyom LIlNo MomthTexas Woans Stane Southern Stane Tochds.I Systse unh0ei tndomttyuieaot'tty Otoooy Cooup Totals Sots- Syt- Sy-t-m CASHFLOWS FROM OPERATING ACTIVITIES Proceedsfrom Cu.omeos S 5,292226 S 235.480 $ 2390O0 S 37A07 $ 17,66 S 44415 S 20062 $ 22201 S $ 8,794 $ 2634ll S 8873100 ProceedshormTuiuun 00dFees 1,421,171 7579834 328,631 440,123 435D22 12284 !.)6 . 2205 6.722 M 14.702 2.4011310 792J)47 237311 123944 39273 10 2.112 726 130952 Proceedsfrom RotesachGrants and Coono.ts 1059s40 8,199 1383 148,142 35,682 117 :0 6,525 Prnoeedsfru loan Pmraogr 23779 133$)8 67.839 117J1b7 6.3)3 1806 798 1691 16 99 3,427,603 Proceedsfrom Ausliaurles 443995 Pmrocedsfrom Other Operating Revenes 507$89 68,850 931 (8.255 4.234 977 3,284 2,112 157 407,745 Payrmen.sa. Suppliers for G .oodond Sernion (4.159.886) (1,117.4261 (190.468) (210929) (2•50,011) (148) (105) (277) (76255) P)m)nn• lo Employ-er (7.794.276) (1 929D59) (842549) (5968/20) 1538.782) (21 ,587) (3.960) (7 .446) (79630) (3575) (3377) (521.419) 12,185) Payoentr for Loins Pronilod (108976) (9050) t785) (154.798, (35.895) Puyortsfor Othe OpararmngEpnse (228729) (234.9108) 110-36) (97.935) 15836 14.223) (379) (46) (1155 121035) Net Cah Usedby Opa ing Acrtoifes (I(990397) 1089(154)( (336,740) 2354927) 1299•)• (264) (606) 2997 94 19 202-56 CASHFLOWS FROM NONCAPITAL FINANCING ACTIVITIES 10208 85.471 1(995 1988) 41 (50)5 12. 110,158) (1.4.407) Proceedsfr Debt I[soaal 346.952 135.517 64.86 53.417 33.177 42.459 18391 18,612 9378 1431 1367 4.751 567 Proceost from GlFb Proceds fromFndomners 115.942 5.4W• $313 106 Pro.eds fhor Trnsoseo from OtherFunds 2229,33 1(319,169 3372309 339988 23019629 25 1236362) 153J1253 (58.697) (67,6131 (22.221) (80296) (£1.4.995) Proceedsfrom Lon P rams Proceedsfrom Groa Reeipts 210.854 45256 78.300 103,653 Proceedsfrom [lerfond Poyablos 71.4(5 Proedshfromthe" NonuapitaltFmurogActeiite 332045 9977 74.706 851 13 •289 Paymenersof Prnuipanon Debthisoanr•s (36450) Paymrnts of Intereo (37.145) 1,617 88 38 4999 7.196 244.391 Poymrenrof OfterCor.. of Debt 1-ssuee (122) 168$ 97 151 222 1360 ) Psymemntsfor(Trnsfero to Other Funds (239581) (14.314) (9933) (46.741) (3.706) 60,661 76,547 24.991 02275 5382.453 249.218 66,338 Pa.)..en.. or Grant Disbursn.nrnnn .1991 (8310 (9621 (976) (576.426) 15,656) 03,61) (1 Pa) m-.s for OtherNoocapiadL Us.n (5087) (64.4731 (12999) (860) (10.709) Net CashProoided by Noroapin1 2460867 64,177 59.647 75.905 29250 88545 5.4027.07 Pirna ,&..ng.Auititi 237799657 1,692.10 49M5 432,394 424.719 10,7x) 118052 950 8292 7029 8249 33560.612 CASHFLOWS FROM CAPITAL AuN RELATEDFINANCING ACTIVmES Proceedsfrom Sole of Capin.aAsets 3986 1574 148 7533479 355.720 133,646 139955 88099 117978 39,104.136 Poroceedsfrom Debt Issuance 912ý381 6915494 2633583 287,112 13378 130) 163 (19) (140) (63) (67) (17976) Prneondsfrom Slae0Grants sodControets 24,176 753.449 355993 133h27 139,815 889836 117911 39566.160 Proceedsfrom FedenralGrons andCentroos II Per, dfradom0ifts $764.154 $366.945 $S1.4577 $148,107 $95.965 $126.160 $42.646.772 Ptcedr from Other Cnpinand RclalodFinancing Aitiriio 40 114509 24D91 Proce-dofrom CapiedContribmions 242, 178 52p7n 50929 Proceedsfrom [nacrfundPFyables 4.711 Paymentsfer Addilins to Capl1. Aset ((662.436) (436.508) (156D24) (189343) (157.197) Paymnn of Prinuipalen Debt Issonan (691,981) (475D07) (219A75) (99,515) (4905)) Poymen.sfor CopiraiLeoses (416) (366) (21) Paytenns of lntrst on D(b1Isro.3 (26098D 1196367) (27.129) (38414) (17,722) Paymentsof Other Coston Debt Iouaner 18272) (2.182) (1,538) (143.803) (540, Paymentsfor InrerfaadReceian bles (3256) Net Cash Pravidod(Used) by Capital sod Reloed FinancingAclivities (1,473,125) (301,741) (88,7641 (18.491) (1870)51)

1 2012 - Comprehensive Annual Financial Report - FwMeSTireofTexAs 205 720-7--, ;)12 - Comptehensive Annual Financial Report ý ,, I'll, I n1~a91-'~tl46tct1Lrn2ztt22...... rr - - ~ --. ~ie.zzzz..

STATEOF TEXAS Schedule of Cash Flows Colleges and Universities - Major Enterprise Fund (concluded) Forthe FisnalYear EndedAugust 31. 2012 (Amounts InThonsands)

Un)smsit StephenF. Unbselnet Texas Tess. University T.es of Teas. Ausftl Texas MInteestse TexasState of ASN Teoh of State NorthTexas womants State Sotufrs State Teochnial Texas Seer" Uetlrety Houtwon Uoheesafty System Uleofvety Uonfvftey otosst" Uneesns" College Totals Sesoatr SOnst System Systrmr System CASHFLOWS FROM INVESTING ACTIVITIES S 123342 $ $ 5,716 S $ S 5.201 $ 5956312 PtoaodsfromnSalenoflnnostnnn S 9921,694 5 19603.39 5 389,701 $ 577,782 S 186963 256322 69.429 720D82 58,597 29ki8n 20.784 3689,6.3 Proeoedsfrom Interest and Innnrmenr Income 1.3703544 479682 55,726 13$70 3.493 703519 4034 3.718 47.511 1,672 9449 3.731.78 PaymentsIo Acqairn rnvestmnnsl (10924539) (1.720949) 14619471) (690.495) (190.722) 820I 30647 NetCar0 PF'anaded(Used) by nvestingActviities 897399 (69926) (16"44 i985431 (8376b) 52.130 22.598 29.740 1:919 8.320 9.935 I1,19246 532 1.477 20 1074 2.752 601,800 Net IncreasellSreerase) in Cash and Calh Eqnioairnls 2830534 231) 7 50377 61)233 (70.742) 1235,350) (39.481) (49.620) (17511) (35.961) (6,4534573) (471.779) (99.709) (101,4) ((104,439) 143.43B) (82340) (12504S95) Cashand Cash Equiealenls,September 1. 2011 2,176289 861)394 464.693 3235656 668243 (6,193) (9595) (213681 (3464601 (84.450t (529) (5.331) (8.103) (13.43) (854.53) Cashand Cash FqainalennA,AURS) 31,2012 $ 2593923 5 (0693.401 S 520D70 8 383589 0 53736) 126b698) (49947) (6137451 (606568) (27270) (96,675) (4.4459665) RECONCILIATIONOFOPERATING LO STONET CASH USEDBY OPERATING ACTIVITI•S 1,995

10.831 1.186 2,915 3053 4366 616.400 Operating L-s $ (32293720) $(I 5479420) $(4430M4) S(365.334) $(3736D37) 1908 222 131.671 2273566 65998 54972 863422 260575 78377n 53661,431 Adjustments..oRecncile OperatingLoss 2D062 20087 to NetCnsh Usedby OperaringActivities: 44,180 22201 8.814 2696)) 539.949 Depmeialon andAsmoniation I DI(5/22 235D12 1133594 728676 694615 71415 Bad Neb)Erpreso 249)415 2218 1,169 561 3f47 18 5-144 Operating Loss andCmh FlomCategonics (3363.9J) (oasnfiation Drffernnee (51.592) (84) (2) (69675) (273) (37,145) Changes in A-n andLiabiitior: 1l22) (Incron Decmo in Receieables (333302) 18.144 2382 23.786 (260i64) (2.527) (360 11.199) ((26) (962) (319D72) (Incra•') I), ~amoin Due From Other FundE 1.316) 1323 ((.363) (5661 (501)) (tnarease) D-crna in Ir..nlmrles (7557) (742) (449) 61 38) 1968) .(III) (2) (9.734) 104.946) (Incaease)D-eea in NhoneRe.eeiaahle 532 (650) (tnre) Dcamos in Loan sodCoon.r"s (3,13) (95))1 (3.735) 284)417 86.710 78218 89349 33.713 95965 6.495597 tInreot'o Deareasein Ofh6rAnets (43046) 586 (75892) I (l7rae) Dteneasein -repaidE penans (651)3) (63765) 19624 43703 tnamase([emrol in Fayable (798) 52.176 (2063) 1(.791 (11.177) 7 5.713 In _ease( bI ernaaeo in Deposi" (8 1)84) 23 45 19 55997 17915 3202 64.180 43 32.706 2.341591 Increar (oDterera.•)in Dua To Other Funds ((9'9I99 1"183 8.426 32792 Ina (D-ernalo)lea io UnearnedRevnoro 75.936 21.880 (1(457) 43M62 38.119 II e-na (laarnnao) in Employe.' Campensoble er 20.,11)8 1.267 (1,107) (544) 1093 3.868 358MI [nareas Dllcreaaelno Benefits Paya.ble 497214 12760 (1,708) (007 859 25.153 126 3359 (67,478 Inctrease(De-n) in Other Liabilities 7536 61)7 (2P06)) 311 (879) 1.444 . 88 3589 356068 Tota Adjus..rn,, ( 339323 458209 (045-64 11067 753393 23523 7274 (89,3091 ((4966) (11301 (.0559) (4917) (19929) (25274937 NetCash ULodby OperatingAcaiues $1(1.96397) $( UI891154) $)3383340) (254527) 0)299944) )936081 (23.410) (1063) (14036) (4920) (10,545) (I1h9101) (2)2)212) (10271 (253557) (35606) 179667) (796h) (3375) (33911 (501962) NO6NCASHTRANSACTIONS (825) (1.349) ((58369) Danarien of CapitalAsn 0 S (3256) $ 57245 $ 2D83 $ 11((63 527 Net Change in Fair Valauof Iteerments $ 1,50.117 $ 954134 $ 18561 S 16D97 S 0.118 Borowing UnderCaptal Loase Punrhase $ 2266 $ S 274 5 $ (5280)51 (24047) (180515) (383141 (5.633) 35863 (2204A)31 Other $ 126.311) $ 306.899 $ (915) $ S (93) ConclndeJdn rhefolloing page

I ;' 2012 - Comprehensive Annual Financial Report - ForjbeSzattýPfTexa5 ,, 3t 1'208 2WZk- Com'Prehonsive Annual FirrorICIA1Report 'jý U&ieety Stphen F. at Teens A.stn Tern Me.nte Teranr State NetbTexes Woane's Stata Soutem State TectWek Syster UnLvarnsty trn-eety Unnly Udtenyiy Caapno Totals

$ 39,414 $ 39!974 $ S 448 $ 141)72 $ 10M13 $12,783.40D 4,S20 4.567 5622 1,404 720 316 50 50 (68556) (52919) (566) (10,644) (14,1531 427902) (13074316) (24 J622) (8278) (4,144) (8,792) 339 t14973) 613.448

(79,708) 4.438 (6386) (18525) 1.149 (2,100) 4591377

386,694 (2.344 67 54 66,90 5.188 39,161 5012816

S 306986 $ 16,782 S 61(7 S348,65 S 8937 $ 37J(1 3 5,471(93

S(278,621) S(71.516) S(77-") $(76911) 8(36252) $ (942-58) $ (65S93,462)

49%31 14.433 1640 (4270 9.748 9904 1,626945

420 906 354 121 255.134

142 2,955 120) (104) (55A153)

(160)35) 121020 3044 3.403 (339) (6241 (308969) 555 (65) (I) 889 (378) (477) (72) (144) (6) I 336 (890S) (1(1) 1209 (528) 232 (4.908) (10250) (9) I (6(6/,01) 44 (0I 1l) 1(254 (9) (7053) (42.21) (151) (4271) 4074 (1323) (0A431 (75.114) 277 (50431 (622) 129 2,454 9.490 (5.454) 2765 (4937) 639 1(.478) 139963 (1021 205 516 13 (43 ) 21(28 624,440 (82) 12 (1281)) 52-06) (44) 4.594 (81(77) 21369 15.564 16423 8982 7,503 2,147,797

$226.698) $(49947) $(6137451 $)0.568) S(27270) $ (86,675) $ (4.4450165)

$ (502) $ $ $ 1.469 $ $ 40D52 $ 76,457 $ 1.718 $ 674 589 $ 324 $ .25 $ $ (.703,477 .S $ $ $ $ $ 5 $ 2543 $ (1,66 $ $ $ $ 445 $ 708 $ 282399

ý012 - Comprehensive Annual Financial Report - For toe StgQof Itims -21 --- 4).. - Collill prhesliveltl i aill Fi iia1 a l Reporti #- , - Fo!iith~l Iljof%. •m ý1• Section Two (continued) Fiduciary Funds (And Similar Component Units)

I 20Q - Comlirehensive Annual Financial Re6ort .- Futnestaaofrmjý*.,7 ý - 211 );z - Carnpreý,,anslv* Annual Finandal = - vrWx~z..z~t.* :tt~ZAZT .OT2~uOZ2r23T3W

STATEOFTEXAS Combining Statement of Fiduciary Net Position - Pension and Other Employee Benefit Trust Funds in Thousands) Pension and Other Employee Benefit Trust Funds August 31,2012 (Amounts Tesiarl LawEdi...t Jualll Ra.eRsws' Aetssusam S.E..S aswCuslodtia Rbtreianlb Retlietad nSytanTrust srisa o siapplameni Sysitas- Plan Reasraend The Teacher Retirement System Trust Account is to be deposited in the fund to pay insurance premiums, Accoun Account Rltetk teUFund 7ansTrust Frod Final ASSETS for the accumiularion of resources for pension benefit pay- to reimburse for claims paid by a non-state entity and Csh andCash Equivaentes $ 1,18t.154 S I1975 $ 229 SecuritiesLending Collateral 21-557D37 153345399 45,&48 18D17 The Teacher Retirement ments for qualified employees of public education in Texas. to pay administrative expenses. Inestuentsn: U.S.Govsemment 233,141 System of Texas, as trustee, administers the fund for 19.408991 6960539 92,134 Corporate Equity 22P026"9 6,390,862 218.941 86,448 29333 4 h97 The State Employees Retirement System public school retirees and their dependents. The public Carltoo Obligations 578596 302,437 10.377 Foreign Sesurities 25.959294 5.186590 177.963 70268 19,796 (S.E.R.S.) Trust Account is for the accumulation of school entities are not considered part of the reporting ExternallyManaged Insertraent 33.867.73.0 69505 27,4-4 Other 8.151 620 1A21944 354t10 13.779 17,737 resources for pension benefit payments to qualified state entity for the state of Texas. Reeianles: Federal employees or beneficiaries. inst., and Dividends 245,553 81089 2.810 1,110 46 127,122 57.480 601 687 1.151 The State Retiree Health Plan Trust accounts for InvestmentTrades 1I10241) 70.196 2.409 951 123 Other 446 The Law Enforcement and Custodial Officer the receipt of monies for postemployment health care, Dan Fram OtherFunds 2,583 75368 353L provides supplemen- life and dental insurance benefiis provided under the PrepaidIons 114 45 Supplement Retirement Fund PropenrtintatCmt,, N etAcumnulated tal retirement and death benefits for members of the Group Benefits Program. The Employees Retirement Depreciation rAmnrnltiatimn 29J)86 11A54 Employees Retirement System of Texas who completed System of Texas, as trustee, administers the fund for T-1s Asra 134453571 23324.757 790.930 316055 6hA I5 20 or more years of service or became occupationally retired employees of the state and other non-state enti- LIABILITIES Payabler: disabled or died while serving as commissioned law ties as specified by the Legislature. Accounts S 3122 S 18537 $ 446 S 152 5 142 Invesment Trades 521:30 140223 4.911 1900 192 enforcement officers of a state ageocy. Payrwl 340.4 The Deferred Compensation Trust Fund receives Annuities 691237 D. To lt.es Funds 77360 3273 157 45 Uneared Revenae 29909 559 142 The Judicial Retirement System - Plan Two Trust employee deferrals in accordance with Internal Revenue 2261 Emple"re' Cespensable Linue 5222 Fund accounts for receipt of monies for retirement and Code 457, appropriations by the stare for the adminis- ObligationslSectries Lending 21.535.537 15334259 45.843 10013 Other Liabilities 100663 death benefits for certain stare-paid judges and judicial tration of the deferred compensation plan, trust income, ToutaLiabilitins 23133J584 1.49-,113 51 257 20,142 476 officers. and fees. The state oflrexas is the only employer partici- NacrrosmoN pating in the plan. Held in Twit ftr tensionBenefit The Fire Fighters' Relief and Retirement Fund amdOther Purpses S 111.449907 $21.825,44 $7476b73 S295913 S 67939 accounts for the accumulation of resources for pension, The State Employee Cafeteria Plan Trust Fund death and disability benefits for fire fighters who serve receives salary reductibn payments and makes disburse- without monetary reward. ments for benefits included in a cafeteria plan, other than Employees Uniform Group Insurance Program The Judicial Retirement System - Plan One Fund coverages. The fund also receives appropriations by the accounts for appropriations received from the state's state for the administration of the cafeteria plan. general revenue fund for annuity and refund payments to eligible judicial employees. The Texa$aver Administrative Trust Fund receives deferrals, purchases qualified investments and pays The Retired School Employers Group Insurance expenses associated with administration of the deferred Trust receives contributions and other funds authorized compensation plan.

1 2011 - Comprehensive Annual Financial Report ý - for lt)e State of 1(,Xas 213 1 1214 ýOQ- Comprehensive Annual Financial paport - I STATEOF TEXAS Combining Statement of Changes in Fiduciary Net Position - Pension and Other Employee Benefit Trust Funds For the FiscalYear EndedAugust 31, 2012 (Amounts in Thousands) State Entpoyere Teacher La Esnone-,read JUinett faneRoteeN Joff RenteedSchoo Ratestate R.elrsenad E&ngldnen Deferred Cafeteria TelS$-l Retireent SEJLS. anrdCastrdlat tlt.rement Reinefand Syte,-plan Groupfnstawnc g.at Plan CMTIP@Mtlom Ptan Athnhdtisead. 009nreTheft Teat Offlct Suppleetr fiftee . PIan Fuendot Tra Fund A~ccount Fund OneFund Tnwt Trust TnrstFund TruzstFund Tested Acceont Sa1tti d Fond TwoTrust Fond ADDMTIONS 5 807A99 $ 27,742 S 2L34 5 7,914 $ 2.797 S 2P0,0706 Contibutios: 22.955 .321 MeomberConlributions $ 2.188020 $ 411006W 7287 $ 4,170 $ 3.891 Stut.Ccntributitno I,395sm5 347,121 (3) 4,150 265350O5 PremiumContibutions 28.742.813 FedenulConiributions 895'507 Ot..r Contribution, 795277 31i53919 40378337 738.187 7284 832t 3.891 3996340.6 109.579 1-ect-ment income: 9r1491 %99 From tovestingActivites: 9970 9970 Net Appreciadonin FairVutue of Investments 59720)6 1 096$531 33,945 34224 3j676 316 3 1 331,729 Intetestaoo .noestnre Incote 1923959 567,786 19374 70587 1.650 499.58 11i66 39 6.969 48 2550D21 To., InuesringIncome 7$95,975 6A64,639 53919 41i811 5.326 1.383919 eat o-estrogActisities Eapense 153283 5J63! 1.805 706 435 1090 1.446 Net Income frotm Itreting Actitities 7,742692 .609 M0 51,714 4.a105 4991 292 1.331 55 I .1737 250 7.732 Frm S-udtins Landing Activities: Seeodies tendingIncmeo 168D74 2,69. 93 36 40-140 Itess Securitiestending Enpente: Bomtwnr OnRtcbs* 28029 (3.490t (120) (47) 292 8690.43 149.719 2383 15.i44 2.901 160DOI.210 McangementFees 35A39 524 1t 7 Net Income fromSecurities Iending 5062 19 76 0

Total Net InvestmentIocom 7947298 1 !14,67u S I909 41,181 4.9i S 292 $ 107980 S1273724 S 1.276 $ 11,681 S S 299382 668356 Other Additions: ti0 3,134 OthMrReSens 1.968 268 1 2 691.237 15lPot 7)329 199.20 21261 99 45 66 1i2,128 Total OtherAdditions 06.879 71.597 I 0 2 734 19 31.442 219 7,702 12242514 2.444.454 50,194 49.501 8,784 22933.654 1080663 DEDUCTIONS Benefits 73725363 1,701,963 46A74 129803 3522 292 128j124 149,719 1.334 11,726 66 24565.898 Refunds nfCo.trihutioos 381-231 8O169 1219 179 Tmmfcr (.ut 73.345 15051 AdmtnistrativeEupen-s 30Y914 16tJS 029 220 19 Depreictio andAmot ation Expense tt18 ifi0 $ 0 S 741)04 5 0 $ 989 S 3,I8 S 2.835 S135.135312 Intst Espen. Other Espene 541 793 15 4 3

Total Mtd.utim 8213.412 1.822.W63 48937 13212 3,614

INCREASEDECREASE) INNET POSION 4 29.O2 621551 I0257 36289 5.170

NETPOSmIoN Net Pstiic, Septemrhe1. 2011 107.420.785 21 204M93 737,16 259,624 62.465 Sn.tateeots 304 Not Position, SeptemherI .201) at Restured 107.420.785 21i0424 3 737416 2594624 62769

Net PositionAugust 31,2012. S 1$144907 12168256M4 S 747.673 $ 295,913 $ 67.939

fTenm..ons,ffuoothr Enrplot) . Rtnorrt s fnot-neceni•ýo so- from-boer mrrrn of ptonn-rme w 1orro-er n tnud' usn-u-din thn mst" krndi.ngmar et.

, j,,ý ýý , 201ý - ComprehiiijiveAnnual Financial prvhens1v* Ann,UP 1 riýtapcl Al Report - Sub•Stain Juichi RodtedSchoo Stl.t ooreoret EMPoroneM Ron-o Deferre CafeterLa Tex~awa, So-thoD- Mao L- ble Det M.n tohw fhlu Plan Adminisnrathe RD.Fine Toni Toni TnIostFund Trns Fund T-1 Nod ToteR

S 176,751 $ 134,993 S S 94,072 S 2.4750062 2451,18 483A36 363243 363.348 60,634 80,336 148,970 1791P02 1.915 976,194 1033-353 6989665 0 9-51987 0 6984.324

7,1403.14 5.19n 329 12 19 27 2 529.133 S5.190 3_29 12 19 27 9,6.847 2113A1 19 27 9,454,986

r ~~-' h 170,99 24,372 3508 0 0) 6 5.190 328 12 9.56.957 19 27

485 76 606 3-306 2M,464 2017 1 14.821 26.464 21.17 0 485 76 6•6 118.127

26,464 040.60 6993293 497 961082 633 161,67976

26,164 1,186.702 696D85 920D93 11.492-1.9 470,698 88,3• 3.708 3014 437 447 57. 58355 2,620 12 12 6 194 15 2027 20 3,620

26,464 1,190.416 691)-293 452 045.79 596 12,113.878

6 (149.856) 0 45 13053 37 4 .354098

890070 944 1.915 2.798 1303$89,910 304 - 890,870 0 944 91ý5 2798 1303581314

s S 741094 $ 0 s 989 s 3,418 $ 2135 .L1il.1393112

- I 20Q o Comprehensive Annual Financial Report - fwoie$ýaacfTexas - , 2171 1218, . . , 412 -- ComprohensiveAnnual Firlonclal Report- For.thc 2aý,)f I I o2022z~r2tTtZ&Z~ 22r~~22nzz

STATEOF TEXAS Combining Statement of Fiduciary Net Position - Private-Purpose Trust Funds August31, 2012 (Amounts In Thousands)

Test Tobacco tIs.aanna Private-Purpose Trust Funds nttsstaa4•t togana tears Otlan Pe Trsto S.ot Aot- Cabotq"ra bsanattat• UAna tt• (Pdlidic R s and Ra-aro EmpsloyeeSerisce Sniobtat Fuoroa Subdtistatns) CustodialFund TnsdFond OptionFotd Plas TrnstFunds Tots The Tobacco Settlement Permnanent Trust (Politi- The Inmate Trust and Employee Service Option ASSETS for Cash andCash Equivalents $ $259.554 S176,11.9 S 6,391 S 21)89 $42,675 S 486,918 cal Subdivisions) holds the portion of the money Fund accounts offender commissary and medical Rri-iected Cas,and Cash received in the settlement of the State of Texas v. The accotnts along with the Texas Department of Criminal tIneistments

American Tobacco Co., et. al., designated for the exclu- Justice employee commissary, laundry and/or barber US., Gouvenment 18,947 1.232 2U,179 Corport FAquty 256.175 11tt264 267A39 sive benefit of other political subdivisions. Other politi- contributions. Carporate Obclgatiaas 2388 23188 1,783.154 3559908 15529 2,154 8t cal subdivisions include cities, counties and/or local Reeivables: hospital districts that are responsible for indigent health The Texas College Savings Plans receive money tnt red Dividenda 46 28 11 87 212 212 care. The fund is administered by the Comptroller's contributed by account holders, money acquired from Inestunsrt Trades 15553 692 15,745 Due From 0ttr,Funds 102 4.101 4.403 office - Treasury Fiscal. private sources and income from investment of deposits. 6 6 The plans Properiast Cust, Net may be used only to pay costs of program of Accumulated The Texan Insurance Companies Assets Account - administration and operations, make payments to state, Dupreciati-nar Auni_.aAon 843 843 3 58 .9 91292 7_ _3 Reserve and Custodial Fund holds assets in trust for private or independent institutions of higher education 2954)29 3 42 7 Tout Assets 25154.428 3580A47 17h-00 2.9,338 358.909 78.475 3.044.197 claims associated with insuraice company liquidations. and make refunds to account holders. LIABILITIES Most balances are normally held outside the Treasury. Payashinsa The Department of Insurance administers the fund. Other Private-Purpose Trust Funds account for I035 $ 8 27503 0 129 $17.187 $ 28A57 [nanssnsn Trades 1976 490 2,466 other assets held in a trustee capacity where principal 14 14 DUeTo OtherFunds 3 The Catastrophe Reserve Trust 5 8 Fund is a state and income benefit individuals, private organizations or I InearedRevetueun 373 18 391 fund created to provide relief to insurance companies other governments. Fundstt Id f., Oiheu 912"92 91292 Dlttr Liabitities 19 19 within the state in the event ofcertain' catasrophic Tisal t.iatlities 30D1 912Q3 0 2 _'AS I14 17224 150"47 losses. Certain property insurers authorized to transact NETPosmoN property insurance in Texas make payments to the fund. Hnldin Tru$1 tar individast, Oqagauzatinas and Other Governmenut 21051.47 259354 176r00 22733 357895 61251 2929.150

Taut Nri Pusi~in~ $251.4157 $259554 1176200 520333 3157.895 $61251 $2-292150

F_ , 7 iý, 2012 - Comprehensive Annual Financial Report 2191 1 220ý ZUQý- Comprehensive Ammi'al Financial Report - ýf I I .299zT222Y7IT2OEz~r~tre~' .z72z...... 455c..zrr-

STATEOF TEXAS Combining Statement of Changes in Fiduciary Net Position - Private-Purpose Trust Funds For the FiscalYear Ended August 31, 2012 (Amounts in Thousands)

Tab-us Csompsneds SnIllereul AssetsAussuet - I~sr otes PerrsrtarsTreast Rserve uad CalasPhbo hanst Truesmd Cullet. Prhats- Rezons lEarsolyeSei Savings 1Fu ndas ShAt*as30 Faund TrustFrnd Optiond Plans Titals ADDmONS Contributions: Rodo1.1Cuertibariou $ $ N $ $ $ 727 $ 7299 Ohe, Contributions 121453 121.453 TotalConuibutions 0 0 0 0 121,453 72199 128.752

lnv•eavrmt Inamt: From InuettingA hiite-: Net Appreiia nin FairValue of InvesImnts 32.878 27285 450 60021 ntrueestand Investtent Income 24.364 208 M20 1.7.10 1U89 27011 29JD15 TuI Iestrig I.cont 57W1'42 120 1847 W032 Iess ]nvastin ActietfiesExttnot 1420 1.420 Net nconre from Ineuting AcuIjittel 57042 208 120 27295 1 4"7 86,812

Total Net Ien ent t.or-r 57D42 -•08 120 0 27,595 1$47 969812

OthcrAdditiens: Sultntri of Claims 4964 4904 Odl., Re-.nu 111.793 46.164 143.079 304 3.115 305,353 Tota Other Addifihet 0 111303 46014 143020 094 0070 310299

TotalAdditions 520)42 1100016 460204 1430879 149A32 17225 525063

DMI3UCTIONS Bkeefies 95,151 500 95377 TransferOut 188 ]atgor•nsral Pay.eot 50 £M' 580k69 Administratiur Cpteses 20 386 304 6.773 Ltpnciatiao and Atemizati.t Eqs.u- 39 39 Selllcntnof Claim, 88,145 5.519 93 MA In-est Euptese 4 4 100330 Other Exponses 43.724 8 !43556 1262 56;63 Turd Deduatio-r 131,889 143356 95.337 16,71 443/,24

INCREASEIDECREASE) INNET POSITION 979 (19,8t8) 46276 323 530895 654 82239

RETPOOSlON Nor Positio. Septoember1. 2011 2103438 279.442 120.924 223510 3040 260597 2,46.911

NetPoition. Aug.,, 31,2012 $2051 A17 S259,554 $176299 S 220.33 $357095 $061231 12929,150

I 'ý- 2012.. Comprehensive Annual financial Report - 'A' o 221 222 Comprehensive Anotlal HoanCiAl ROPP"t ý ForIhi!ý31ol* of %wit Agency Funds

The Texas Public Finance Authority Bond The City, County, Metropolitan Transit Author- Escrow Account is used to hold funds for various ity (MTA) and Special Purpose District (SPD) Sales defeased or refunded bonds. Tax Trust Account is used to record the receipt of local sales and use tax collected by the Comptroller's office The Life, Ilealth, Accident and Casualty Insur- for each city, county, metropolitan transit authority and ance Companies Trust Account holds cash or securi- special purpose district authorizing the collection. ties deposited with the state by insurance companies as required by law, Other Agency Funds account for other resources held by the state in an agent capacity for individuals, The Texas Workers' Compensation Self.Insur- private organizations or other governments. ance Fund is med to deposit certified self-insurer secu- riry deposits. These deposits may be applied to the self- insurer's incurred liabilities for compensation.

20 Q,".' Comprehiýsive ,Annuiý(Fimmcii = 224ýý,,ý' 20, a -ý'6"'(qWpr e h 0 n s MviA it n u a1, on a " T;I a I'R a Po rt IIVSWý of"Wi STATEOF TEXAS STATEOF TEXAS Combining Statement of Fiduciary Net Position - Combining Statement of Changes in Assets and Liabilities - Agency Funds Agency Funds August31, 2012 (Amounts InThousands) For the Fiscal YearEnded August 31,2012 (Amountsin Thousands)

Life,health, inl 1ee BAuustn TeamPublic Ad=aldsnsaea Tes. CityCounty, 8Eatasnlsseet1,2011 Addiltit 0..1 AMMO~l31,2012 Hran Cassy WIsut ITAand Texas Public Fiane Authority A- Eatsftsy CaLPassualns SP1SEtes Buod EaaeowasAccount 0D1• easndE•asna CompaepsTrit Sen r•rsusn T" Trust Fursdaoish Account AounMt Fund Account Total. ASSETS ASSETS Cash sd Cash EquioMosts $ 149 0 $ I 148 Cash andCash Equivalents $ 148 0 317 0 8980 $791.M22 $269,567 $1070.134 I:sseests 359304 144.142 215.%2 Ints.unenus: In-ent and DividendsRu ivsble 1391 - 55 1236 LT.S,Go crofem- 215.562 42 215J,04 TutalAs $ 361344 $ 0 $ 144298 $ 2169W6 Curp te Equity 127209 177289 If0 Obligutina to Corportt LIABILITIES RepurchaseAgreumsnts 32.313 32313 Funds IheldOur Otdrs S 361244 $ S 144298 $ 216..46 Othr 591170 59870 S Renceivables: Totel Liabilitics S 361244 $ 0 144298 $ 216.946 Inee and Di idends 1236 I 236 Accuounts• 7,979 7929 Life.Health, AcddmstsanddCasualty Othue Iutueguuuensncntsl 2358 2358 InauranceCompanles Trust Accunt D From Other Fund. 9(0 900 Other Asmses 1095,984 5350866 111,103 1342,153 ASSETS Cah andCash iquislcntu S 278 5 317 5 278 S 317 TotulAssts $2160946 $101196301 $544f46 $791,322 $661,431 $3310146 OTdhrAStus 1092,4341 394325 390.971 10950984 TrtuI Ass-tS 1 2172308 S 3049842 S 391249 0 1P96,301 LIABILITIES Payables: LIABILITES Acceunts $ 0 0 $ $ 205 $ 205 Funds Held for Defers S 1D92,708 $ 394042 S 391,249 S Ig63011 Other tntergeuemneesul 791,322 791.322 Teea Liabilities S 1092.708 S 394842 $ .191249 $ 1] 96.3•1 De To Other Fund, 27229 " 7729 Funds Feld Or Otitets 216P946 1 9,301 544A246 633,.96 2.401375 Tes Workers'Coupen sastie Other Liubilitinc II II Setf-lsusuena Fund

Toutl Lihbilities $216946 $1 D96.301 S5.414046 0791322 S661.431 333101246 ASSETS Cash andCash Equtcalcs S 101)20 $ 131269 $ 14,109 $ 89,g) Other Assets 563.466 535300 563,466 535.066 Tosl Ascst S 573,483 0 548,135 577.375 S 3441246

LIABILITIES AccounlePayshle $ S 2N41 S 21241 S Furds Held fur Others 573.486 3049 32A89 544w46 Toal Liabilities S 573486 $ 51290M 343S0 S 544146

City,Counr, MTAand SPDSales TaxTrust Account

ASSETS Cash andCash Equivalents S 726981 S 7U29206 S 73764.865 S 791.322 TwaltAssets $ 726,981 $ 7A29206 $ 7.764.865 $ 791322

LIABILITIES Puyuble Accounts S S 6 %99380 $ 6 9A)380 S Other.lergnsemreutul 726.901 791,322 726.981 791.322 * Funds Held foeOthers 0356.187 ,187356, To.tl Lisbililics S 726,981 S 161146,89 $ 1,9782548 • $ 791,322

C-eluded thefollowingigjte

I "ý' 2012ý- Comprehensive Annual Financial Report , 4ý - "A 225 1226 Compreh"sive4npualli'linan(jal Reportý,- F01IN.1%',o'1'fTQx11- 1$11, .!.•.:

STATEOF TEXAS Combining Statement of Changes in Assets and Liabilities - Agency Funds (concluded) For the Fiscal YearEnded August 31,2012 (Amounts in Thousands)

Sstember1. 2011 Additios Dedufofns August31.2012 Other Agency Funds

ASSETS Cu altsodaGsh Fm.tlunlunts $ 617.117 S 10.307t.53 S 10355,t03 S 269567 223.179 250396 206P591 269.524 Rceivables: Accuonts 7233 9305 8559 7979 Other Intergoscrnmenal 918 1.440 2,358 DueFrom OhaerFunds 738 1.766 1A04 900 lorcofundRecuieable MOM 122P61 Other ASis 76564 49.183 14.644 111.103 T.ad Assets S 927.749 S 10.741,704 S 111950022 S 661,431

LtABILITIES Pl'subles: S 229 S 757.924 $ 757948 S 205 DuoTo OCdorFunds 2900 920,598 899357 275229 InterfundPayable t 1214904 121.994 FundsHeld or Others 924.523 10542,t148 10710385 633986 Other Liabilities 9 19 17 II Tetal Liabilities S 927.749 S 1222058" 8 12,00486M1 0 661431

Totals- AllAgency Funds

ASSETS Cosh sndCath Fquioalents S 13543545 S 18.150.145 S 189.34356 S 1)70334 5849883 290,96 350.193 483D86 R•.eivnb/es: In.rest and Disidends 1.391 155 1236 Accoums 7233 9.1115 8,559 7979 OtherInlurgoverntrmonl 918 1.440 25t58 Due From Other Funds 738 1.766 1A04 900 InerfundReceivable 122ph1 12'061 Otr Assets 1.732.460 9781774 469181 1.742.153 Tatul Asseta $ 3.682.168 S 19.513987 $ 199060109 S 3315046

UABIMTIES Puyables: Acc-u ts $ 229 S 7459.345 $ 7.459369 S 205 Other ntuergoerontnrat 726981 791522 726981 791322 DueTo Other Funds 2988 920598 89%157 27229 InsrarundPayable 1212.1"4 121994 FundasIld IaI Others 2.951.961 19374.126 19934208 2,499279 Other[Aahrlitios 9 19 17 II Total Liabiiliis S 3.8•2.168 S 28,.67.404 S 29139-526 S 3310 46

14W ý-Am 20 1 Comprehensive Annývikl-Finonciai Reportý,ý'Oýw, the Evmrý' Section Two (concluded) Discretely Presented Component Units

1 2012 - Comprehensive Annual Financial Report - 1230 012 - Comprehensive Annual FinarICIAl Report - STATEOF TEXAS Combining Statement of Net Position ý Component Units August 31, 2012 (Amounts in Thousands)l Teast Teras Teasa Low-Leta Gunsmrastd T-atar Stat. Onasts" Radiarsoat T..a Studient Retirem'ent Loan S'ystm Slit. tar Allorlabta Natat Wantnolspssi tWinsatorms .1 Housng st'rll compact tnsaranna Discretely Presented Component Units Carsnatton ofTeass Tenas Caaratiss Co-rwaton Commission Anssocation ASSMET Curent Assets: Cash andCash Equiatlents $ 52049 $174,147 S 1864 $ 4,408 $ 793 5 $374629 A statement of net position and a statement of activities were prepared to report the breakdown of the following Sho-TrTerm In-snrnis 694.744 19122 •05 1P0064 discretely presented component units: Rcstori-d: Cash and Cah Equ~ilents 28,908 Loanssnd C()ntress 1£D12 R-eceivbles: Texas Guaranteed Student Loan Corporation Federat 32,740 go Other tnsernotemmrnrta Teacher Retirement System of Texas Accounts 87,442 1,711 265 21,103. Intresl and Dividonds 7P23 go 426 State Bar of Texas Otter Texas State Affordable Housing Corporation tntonrodes 681 Pnpsid Ites 753 31 34JD98 OneStar National Service Commission Loars sndContreis* Other Csrret Attest 1,778 27 Texas Low-Level Radioactive Waste Disposal Compact Commission Toat]Cmsrc Assots 789234 261A.69 415K31 37A55 9nt 0 529.894 Texas Windstorm Insurance Association No-errn, Assets: Surplus Lines Stamping Office of Texas testrieted: 249,7539.339 Texas Health Reinsurance System Loanssnd Cons-"is Loans aod Cootroots Texas Health Insurance Risk Pool [nsestmrnts I J351 Texas Boll Weevil Eradication Foundation Inc. Oihcr Recesvables Oter N.o.orrrs Assets 9-599 521 Texas Agricultural Finance Authority Capital Assets: Non-Dopreeitbstor N-A ntzoblhe 5A36 330 232 Texas Water Resources Finance Authority Depreciableor Amortiable, Net 379At 9952 1374 99 TeoalNsncurnsm Asters 42.917 0 tW282 271.1,4S 1 0 62 Texas On-Site Wastewater Treatment Research Council Texas Appraiser Licensing and Certification Board T.sa A-sss 832.15t 261,t0 52.113 308,403 904 0 530.514 Texas Economic Development Corporation C.,nttnedso. hef"lowng p8e Texas Small Business Industrial Development Corporation Texas Disaster Relief Fund Texas Health Services Authority Beacon State Fund State Agency Council Film Texas Fund Casa Verde Research Center, Sociedad Anonimo Representacion de TAMU en la Republica Mexicana, A.C. (Mexico Center) National Biosecurity Foundation Texas 4-H Inc.

I . ýOQ - Comprehensive Annual Financial Report -,fvitji,!5tatý:ofTeaý_*_ 2311, 1232 ComprehenOve Annual Financial Ritport STATEOF TEXAS STATEOF TEXAS Combining Statement of Net Position - Component Units (continued) Combining Statement of Net Position - Component Units (continued) August 31,2012 (Amounts in Thousands)? August 31, 2012 (Amounts inThousands)' Texam Texals B~ase Tans Qo-SH, Guaranted statb Dleas.t Rfndinacie tesas SmlUS Lines Tas • Tessn Turs lTrnms Whatmeaiti Student Rldreserel StatsBaa Aftardlat Natkial WasteOm, ta Wia storms Stam r aOt Beealrt T aus He art Butw es il agr iulte u ral Wate Reassesses Treabtesm LMan at IeUtisng Seriest Cserst bsuran offea Rebtouas- humsrus Eradicato Fiancet Rea-cs Rsehab Corporatio iTeadsi TMaus Coatetles commission Conmrnleron Association otTeass System RiskPsol FouadatsoIns. Authrity dttdtty Caunatilr LIBILITIES ASSETS CrreTnt Liabilities: C-m A-L• Payable,: Cobhand Caut Equivalents S 913 S 570 $ 35,173 $ 85.397 $ 515b7 $ 1-w S Account' S 6,421 $215377 $ 2ý223 $ 168 $ 70 $ 27 S102.783 Shom-TennI noestmcnrs 4.753 23010 32-16 SPayrdll 122 Rsturicred: Federal 30PM0 Cabh andCash Equivalents tIterrOt 2,312 Loot and Comtrrt Due To Ponta.y novernment Retneivoabl: Une•ned Revenue IOD53 723 159589 3000 Capital Lease Obligutions 54 Other Interg-omerental 2,754 Eroployeos'Copenuatble Loe 2;138 85 509 Accoatnts 204 62.128 2J199 Notes sodLoans Payable 72 Interest andDividends 33 134 Retenae Bonds Payable 25353 Other 9 6 Fund, Held for Odhetn 2h7 Inventories 3,171 83 Other Cunr Liabililies __ _ f3 3287312 212264 Prepaidrems 147 2 Total Current t.iubililtis 38505 215584 793 116 474,35 I.tans and Contrues 191 639 Other C-rt Attet- It 53962 571 120501~ 97.174 1204 3455•7 0 NauturmonLiabifitis: Tatot CurrentA ts Capital Lea.e Obligations 56 Jimplapyn' C-pnteohab Lesoe 1,167 56 9l.) Nonteotn Anr-t Nts rnd Lors Payable 4543 Reatoted: Revenae Bonds Payable 233A6 ItesntmenTs Other Noncurent Liabihiries 241310 4702 ILo.s andCootracts 242,477 56 9619 243.111 0 0 0 L*oata•td Coraaucs 3478 5333 Invesutnents TotalLiabitities 2809•82 21530.O 143D77 271 •58 793 116 4743135 Other Reccivablrs 1,53 Other Nonncaet Assets 43 NETPOSITION CapitolAs.,,t: Incas-d in Capital Assets,Net of Related Debt 42,917 10,171 8M4 4,615 Nan-Depreciableor Non-Amaonimabe Restuictedfor tepret-iableor Areoniazble, Net 3.140 II 2928 Education 140,847 Taota Nlrcune Assots 3.183 0 2D 4581 3478 7.15 0 Othe6 46P29 27M42 163 ttnnstricand 307.405 27$65 8329 (52) (116) 51284 9.145 571 120.321 101.755 19342 423352 0 C-nttrttIn the Mulo-ingpge TmatcNet Position S551.169 S 40)29 S 380316 $ 36,835 $ ItI $ (11i) _ 55.879

C.atiatedar thefoloaiag page •Anreaosrepasrat asnt SAg. 31, Otlstuadettonoha•sU. indiosatc is Nor 19.

1 2012 - Comprehensive Annual Financial Report - Ar me State of Tvxas 233 1234 201Z - Comprehensive Annual Financial Report - 2025712....' - rzTzr 231200920.2::2'z2fl27LoetC20202022. ..7t.C.§23Z~A.ZZt12..Z~hTC2 0020

STATEOF TEXAS STATEOF TEXAS Combining Statement of Net Position - Component Units (continued) Combining Statement of Net Position - Component Units (continued) August 31, 2012 (Amountsin Thousands)" August 31, 2012 (Amountsin Thousands)' Tes- Qr-Sltd Te.s Teaso SurplusLht Teas Teas Tern Turn Werarsmati A-aida Tens HSmlBsusons Teams Teas Sturspiro HealtH TerseHealth BoltW-e1 AOgitisoloalWater Reasscea Treossernt Lleashs and Erseostm Irdoordal DHIsute leacn Shote st-eoadl Beinsuraneu hourone Erdkadloon Far Hears Research Cel'a•rfainnl. Daveloainate Development Relief Sen"Iea State Atusry SysAe RiskPsol FoundationIhs. Au.ldsty Authorety C-1e1l Board corsgesan CourgSron Fond Authority Feod Cosusud LIABILITIES ASSETS Curr Liabihities: Currnr Assess: Puyables: Cushand Csh Equivatnlts $ 562 S 193 S 82626 60766 S$ 179 H 9 Accounts $ 12 $ 21 $ 1,180 $ 514 $ 48 S Shor-.Trur fnvtroenret 20 Payroll 37 477 14 Rcstisoed: Fnderd Cash u.d Cush Equivolens sntereol 244 Ltars andCo.rt-ss D•e To Psisory Coersnet Reoeivables: Uniauod RIevesu 78212 Federal Capital LeaseObligasirs other Inergserrnmenral rnpoloyees'Cotpeosable [euoe 61 935 to Acururts to Noes asdLours Payable 500 9998 Ionoest erd Dividinds 23 Revenue Bonds Payable Other Funds Held for Others lnvsntories Other Corsnt Liabilities 70 550 40.99 Prepsid sems 207 5 Tro.1Curreo Liabilities i8 571 120321 2J711 9070 A A Leors andCrosrIoss 776 OtherCuarotn Assess No.esrut Liabilitios: Tesel CurrenlAssess 565 2.190 111)66 606 1.105 179 70 CapitalLease Obligations Frmptoyees,Compensatbl Leare Is Noresreno Asses.: Notes sadLour Ptyable 39969 Resriated: Revenue Boods Payable lnversmnws Other Noncuerne Liabilities Loans andConrses Total Nroreuor ULabilides 0 0 0 39.969 IS 0 0 Loansand Contra1s 9876

Total Liabilities i88 571 120321 42539 9085 0 0 Osher Rtceivables OtherN.o-rrens Assets NETPOSITION CapitalAssets: Inveasedin CapitolAsSets. Net of RelatedDebt 3,140 1,423 Ne-lopriable or No-Ameori-blo Restrictdfore Depreciableor Arsonioable,Nes Ioo 5 19 Edsuroior Total Nerruner Assets 101) 5 9876 0 19 0 0 Other llno.raicd 5.t17 572J93 102-7 42032 TslA-sss 663 2q185 20942 686 1.124 179 30

TotalNtes PossitirS 8957 $ 0 S 0 $ 59,11b S 9-257 142J052 H 0 Conrinoedss shefllosinepsage

Csentituedorthefollosing pege * sornsrsr~sor~tssofoog.31.2OtsI2,trousturl~ ~tn e er 55.

I Comprehensive Annual Financial Report ! ýFor [tie 5tatevfTexds 1ý11- 235 Z)12-. C niprehensive Annual Fjoancial Report - Fcýthcýlulý.-4TCAs ----- ~,..tTht lllTTTa

STATEOF TEXAS STATEOF TEXAS Combining Statement of Net Position - Component Units (continued) Combining Statement of Net Position - Component Units (continued) August 31, 2012 (Amounts in Thousands)- August 31, 2012 (AmountsinThousands)'

Ta Tn. SmaltBuleman TMi E-.bmk bulotrial Dia.tW looknosmot hohsrant 05mb health Bao State Him Cas Vdant Nathmnd B-dM Slatw La7 Sea. Researh lIdMo Bltasaooty T0 Carpan".r C-oandubn Frond Aufthoty Fund Coars Fund Catier Centre Foooitara 4-HI- Totals LIABULITIES ASSETS Curosn Liabilities: CurrnitAs.ns: Payables: Cash .d Cosh Rqoisualint 4 9 2 $ 38 1 5 16 S 776029 •Sbots.Toio tiorotlneolS S 41 $ Oh 0 77 0 S 870/524 93 REsnrled: Fnddend Cashand Coh Fuaiolents 30.900 Loans andContract, 052J8 DoeTo Proaty C.oornmse Re~iivsblns: Federal Unr:ood Rcveom 1.509 36420 Copilo Ilose Obligations OlherIntergosemmenlal 2.761 A.,.nls Employees'Coopenooble Louse 63 1749063 Nowoand LoansPoypblo Intr-s andOtividnds 8,619 Other Revenue Bonds Ppyablo 13 34 63 FundsHeld forOther Investories 3855 Otthr Corros List ilkisi5 PrepaidItems 35327 Total Currenlt Lilitie 197 50 00 0 1,105 0 5 Loansand Conlruoss 1.606 Other Curront Asto NasiorrentLibilhtins: Total CurrentAssess 4 16 72 0 16 193%912 CapItl looseObligations EimptoyersuComtsnsabli L•eso 33 No--.mo A-ss: Nowoand LoarsPaoybti Resuoited: Invesmrem~s Rtvcnoo Bonds P•pabl : 201100 249.753 OtherNonousnt Liabilities Loses andCoonuxts 9.339 Total No•unrsno Liabilities 33 0 20110 0 0 0 0 Louis andContro K10087 tooestoments 3233 Total tisolblties 230 86 2D80 0 13105 D 5 Other Receiiubles 11653 Other Nonsurrcs Assets 36 10211 NETPoSmTION Capital Assets: tIvostedin CapitolAsseti Net of Relatd S•lo [IO Non-Deprsmiablnso Non-Amortizabl 4 Rssric-d fo- Depeciablt o., A sioblh, Ner 649 94 615232 Eiduoetion Tots No•o-osmi Assess 0 689 94 0 0 3541"30 Other 335 Ilnreissod 21)99 862 606 19 179 25 TotalAssets 4 705 16b 0 16 2,305.642 Cosclusldedo shefoloowio page Tout NetPosi,ton S 435 S 299 $ 862 S 686 S i9 S 179 L 25 Corninoedott teheolowisn page •Arosorsonrdnslbog= sI*u•3.2012.oomlsrrmhoi•,ridaled i.O tOlO1.

17ý 2012 t, Comprehensive Annual Financial Report - For ýhe $tat;ýof Imas 237 ý 412 - Comprehensive Annual Financial Report - 22. 222 222327222271222$t.innlla22A: :2122

STATEOF TEXAS STATEOF TEXAS Combining Statement of Net Position - Component Units (concluded) Combining Statement of Activities - Component Units August 31, 2012 (Amounts in Thousands)t For the FRsalYear Ended August31,2012 (Amountsin Thousands)* Sonrs teaw-tang State Gutanrd Teacher 0oSotar Radlrractlo Fis CatestV* NatlanM Lonant Osflrrsosm~t Statr Bar Affordable Nastius WastsDisposai SRtoa rt Hums,;aln ges ar CrogonqSt Torus Rso Monsloens Olissr-sutt Ts-a Corporaton Funed carst. Cnwo Fousndation 4-11tre Tstrts StR•so Trus Copratstsuo Crmtssiesso Colnrnstnntro LIABILITIES EXPENSES Canvct Liabilities: Snlariesand Wages o 42,445 S 1.762 $ 16,755 $ 1.503 $ 1.116 Poyables: Paymll RelatedCosts 13_17 333 4,544 285 Professiont Feensasd Sei-ces 12,[81 547 2.953 31t7 559 49 S S S S $ S 329070 Trasel Po)yll 16 759 1300 7,143 63 123 28 Itodsals andSupplies 1,318 0,B76 3R 301146 I ,2R5 2 Interts 3D59 Coonmuniosmieand Utilities 1.054 34 896 De To Pmi y Goernment 89 Repnirsand Main.race 509 3 Unernetd Rueenue 249686 Rentals andLeoter 61 1438 39 230 1 Capital Lea.n Obligations 54 Printingand Reprodactior 335 21092 EmployeesCompretsable Lent, 3,701 Claims asdJudgrneru 576 Notes andLo-ns Payable 9570 BadDebt Enpetse Reenue RondsPayable 2.sP53 Cost of GoodsSold 577 rundsHeld for Others 257 Slprrciationand A-rizatirn 4079 966 667 Other Curttns tibilitiets A6 124.160 Other Pionucin5 Fnee 42 Toss!Corretm 1.iubilries 0 17 6 0 0 005.514 Public AssistancePayments 21,932 11"25 EPsployootl'unicipot BenefitPairme-n 1091956 Nonu•tt Liabilities: Direst otrerst inspro Capital Lease Oblisations 56 InterestSEopens - Other 6 10J62 Employes' Cotpens..ble turns 2,184 Other EIpenoe 62.871 6 3.452 2.181 131 32 Note and Loans Payable 44.512 Total Expenses 066ft2 194.183" 44559 15522 14"45 116 Severn Bonds Psyable 253.W66 Other NoncUrrentLisbilisims 603 50 246,665 PROGRAMREVENUES TotalNon•unt Liabilities 0 00 50 0 0 547,203 Chargesfor Srnvicer I 26 1,750;218 39,70 2353 Op-rating Grantsand Contributinon 253 396 105 6.153 11.981 14355 Total Liabilities 0 620 56 0 0 1,452,797 ToranPoogras Resnues 4b6923 14334 254,422 1.750.3230 14355 Net ProgramRe-etnurs tEprnses) 88360 !40 1,464 V11.ig) NETPOSITION Ioo.med in Capital Asse, Nei of Related Debt 631-10 GENERALREVENUES Restrictedfoee U restricted InterumentEarnings 790672 I'm's Educntion 140,947 Odor GrenualRenenses 684 other 74,169 Gain In Sale of Capital Assets 10 0 Unrestricted 4 85 11tS 16 5745'09 Total GeneralRenerns 199 5 684

Total Net Position $ 4 S 835 ItS S A $ 16 $ 852,045 Changein NetPosition 79072 (142.1a62 1.469 0"0f) (116)

Net Psition. September1. 2011 471.497 188.191 36307 37-39 IA! * uoarsrrnonrredarntanO.3t.002.srbrsonnnni'rirrnostedisbo.elt. Restatements 206 101 'trtibrlbasstiruenodonnrthrirneuoorsrttmtit.tns -cnnposnrtrs'5. Net Posilion.September 1,2011 , m Restated 471,497 108,191 36-567 37339 0 0 IOI Net Pnsitio,.August 31.2012 5 551.160 S 461129 S 30•0t6 $ 36.835 (116)

- WArnssnprted to the neste-,6d Aug Into31.2012.ssrtrIrhoesm iae0.4u Wan 19.

I, , 4& ý 2012ý,-_CoMprehenSiýi Annual Firrianciiii'Report ý39 I ýM , , _, WTZ , Coerýpsrehenslve Annual Financial Report - for ktallafel IoA, 'Iý 'iý' I= =S:; = itý _-ý: "I=.,.-_- 1.

STATEOF TEXAS Combining Statement of Activities - Component Units (condudedj For the FiscalYear Ended August31, 2012 (AmountsIn Thousands? Texas Tens Q.-Ste Tea. Ts Tess Tena Teas Tex.s Wales April- Tea SmatBuness Teas Texas ltaestasle L a end Ecxeanat btwwskt Saslee le.0a WhndstDem StaplusUIM Health Te Reia, Rawthe AWelstdsna R-satsa Sermts teturas SlaeinigOffie a.srvanau Itasten Faxafdaltn ut F-n Research CD'astbaUss Dintiseut Weielkpselnt Reet Assautaun OfTemas Spystem RiskPasd xu BSasrd Crperatian Co t'ams Fund EXPENSES Sulaniesaud Wages 5 843 S 14,34 $ 133)4 $ S 364 5 6S42 S 438 $ 2 S $ $ $ $ 273 PayrollRelated CostS 215 2398 391 42 38 Proeesionul Fes, andSenices 12351 964 32 67 475 I 194 Trawel 24 262. 13 4 3 324 13 32 33 44 7340 3 Materialssed Supplies 220 8 37 Cusiaeuicatiin 7 13. 10 352 and [(Uhise 44 953 Repaiesand Maintenance (4) 957 2S3 75 732 Rentalkand Ieaaas 109 73 20 Printingand Repeoduclian I 17 Claimsand Judgments 304 t22) Bad DebtExpeese C.xifltlacde Sold 675 237 1,401 Depreciation and AmOrtiation 215 Other Financing Free 221 4364 PublicAsiisi.anc Payments 54 6mpIcYeelPaeaiiipasBesfit Pay)-nse 67 41 Diese ltntam.t Exponse 13273 Inmiest Expense-Other 284.775 ]69 48 305367 3.988 96 12 Other Eapcnsas 230 928 199 753 8 303939 2 A08 46 3381g89 34.546 850 4378 Total Expenses 230 2.235 328 828 5-06 567

PROGRAMREVENUES 321954 31953 47 309352 34,302 963 Chargut for Sonices I910 61 583 291 35 ] 9257 14932 1,928 Opratinig O[testSand Contibutiotas 1246 461 24 322245 !,988 48 318.6439 49.234 963 1.92S TuludProgram Reveanus 0 [A10 1307 48' 24 5s3 i3A06 3828) 8 0 34,M8 W 2.6%) Net ProgramReonaer IEospense) 1210) (4253 42 (359) (32) 16

GENERALREVENUES 184 191 Unstriatcd luovstricotEatmings 1 3 Other erat Raceanus 726 7.10 Oaiu onSale of CapitalA-unts 0 0 0 0 918 T9F 0, TotalGeneral Rcoenues 0 726 1 3 6 0

18.306 3820i 0 0 15,9W6 304 (2.553 Change In Nti Poslicin (210) 30t 43 (3563 (32) 16

41352 9.777 43330 9,53 44.02 NetPosition, September 3.2011 210 134 2.084 1218 718 1,164 (4)79) Resttemus 52 1.161) 37.473 9.777 0 0 43310 9,53 44.702 Nei Position,Sepmber 1,2011..s Restated 210 134 265 I2 713 3

j55979 5 8.957 $ 0 $ 0 5 59.136 S 10257 421152 Net Position.Augu-l 31.20112 $ 0 L 435 _ 2)19 S 862 S 686 j 19

Conushadon thejlha ingpage •Asasso eseasix x dhrA.31 2012 sakeatei iwdexeda Natei1

I - ZOIZ - Comprehensive Annual Financial Report - J,ýQrjjjý! State of re.xit$ 241 1242 ý 1 2012 - Comptehetinsive' Annuai FinancW Report - RwlhelweMTNý5 B-Sn State Rnh Cas Verde Stat" Agay Ta.- Rmsminr Muenco Slnseumty Tenas Fund Counci Fund cete Canton Foundation 4-,4Inc. Tntals

$ S $ 1 173 S S $ $ 97,754 50 214 13 1 21 33 I 31.369 1 1 56 2 90h65 26 2 52 11202 2996 1 20 13 5,404 1 7 4588 6 2.459 576 682 127 704 46 27 8925 9 14 3 63 II I 38608 1.491,956 108 12,141 6 2 7 09 63 665193 53 5 i 454 367 38 64 2"X02(6

1l1 IN) 60 2.4644.20 79 I _____ 451 171 314.417 147 0 451 3(111 0 80 2375937 1361 16 !26363,)

(661 L)I 1.414 735 0 0 0 0 0 0 0 (4,162

94 141 0) (3) (39) 16 t 150251

(327) 162 36 888.310 85 29 5 415 14 65 26 5 85 176 36 0 83.870

_L 179 S 75 S 4 S ti5 S 110 s 0 S 16 5 85244A5

rehensivi;t Annual Financial fteport, ;ý'4;6rlfie iratiý QfTe)ca!ýý, FU4-2 , IS, - -i Annual Fýnsor.WýRopoiff- Section Three Statistical Section

2 - Comprehensive Annual Financial Report - Fbt tile ýtite Of IC.XA5 ý41Z - ComprehenglVe Annual Financial Report , 7.vssI M,Iv - . L,1 . ý= 1T .....

State of Texas Statistical Section

This section presents detailed information as a context for understanding what the information in the financial statements, note disclosures, required supplementary information and other supplementary information says about the state's overall financial health.

Contents Pages

Financial Trends Information ...... 249 - 255 These schedules contain trend information intended to help the reader understand how the state's financial position has changed over time.

Revenue Capacity Inform ation ...... 256- 258 These schedules contain information intended to help the reader assess the state's most significant revenue source - state tax collections.

Debt Capacity Inform ation ...... 259-263 These schedules present information intended to assist users in understanding and assessing the state's current levels of outstanding debt and the ability to issue additional debt.

Demographic and Economic Information ...... 264-266 These schedules provide demographic and economic indicators intended to help the reader understand the socio-economic ensironment Within which the state's financial activities take place.

O perating Inform ation ...... 267 -269 These schedules provide contextual information about the state's operations and resources intended to assist readers in using financial statement information to understand and assess the state's economic condition.

Sources: UnIms otherwise noted, the iformfn ion in these schedules is derived hornthe Tons Comprehensive Annual Financial Report dasharbor for sherelevant yerse.

201Z - Comprehensive Annual Firiiýn-cialReport , Pýý`dfe Stne of Texas ,,, 247 F2-491S;ý ý- ý#12 - Cor"fý'ehenslve Annual Fýpzmcjal Report 14ýWtorthc liatad Tw,ý*-_ STATEOF TEXAS STATEOF TEXAS Statistical Section - Financial Trends Information Statistical Section - Financial Trends Information Net Position by Component Changes in Net Position Last Ten Fiscal Years Last Ten Fiscal Years (AmountsIn Millions) (Amountsin Thousands)

2103 2004 20 210 21117 2003 2004 200 201 2007 GOVERNMUI8IALACTIVITIES GOVERNMENTALACTIVITIES: InvestdioCapiUtlAsso.NetofRelatedNDe S 49254 S 51,407 S 53815 S 55,473 S 56,430 Fopenses Rotriated 203,46 22-213 24,110 25,993 29)347 GeneralGonimtena S 2026241 $ 2234,369 S 226.793 $ 2681,117 S 7355-30 Untntsrielod 28) 541 3.753 8696 12565 Education 15935.961 16204938 16293751 18123550 21313.526 Tots GovernmentalAcivities Net Position 70072 74d 1o S 76 90.162 96336 22"4 62336 50.4• 56,718 61.171 Teacher RePrementState Contitautians 2,435.727 2269,667 20'83530 1932325 2017430 BUSIN8SS-8YPEACTIVITIES Heallhand Human Scnetons 243742,714 25360580 27302,426 28408315 304086`484 Invested in CapitalAssets. Net of Related Debt 5.737 6.464 6253 6871 " 7343 inblti Safetyand Cotrretions 4207,1156 4030.120 4086.450 31184.923 5,035,761 Reltoit.d 15.168 174628 20,581 224812 25,815 Tmaopott~don 3.62.159 3476342 3.766.301 4.452.154 4.252,129 Urnettiowtcd 6,167 5305 70n76 0D56 9,741 aturmlReoturts and Reeafion 835.139 842.08 1 D70`401 9.1.178 1.217201 Total Busioes-Type ActivitiesNIt Position 270D72 294897 33.9)M 37.739 42 99 RvgulatorySennioes 324.267 375951 249.420 202067 314266 Indieot Interst on long-Ttn Debt 366A47 338J693 417,854 54,121 229354 PRIMARYGOVERNMENT Total Enpenses 54,459455 54961,712 57627,650 62,338.468 67482201 Invested in Capital A-s.. Net f Reloted Debt 54,901 5774171 60P68 62,44 63,781 Restrietd 36004 39.441 44,591 48505 55.162 PrmgrnmRenueses lnrestricted 6.139 6546 10429 16.752 22306 Chargesfor Seevices: Totl PrimaryGovernmen Net Position $ 97A144 $1040)58 s$i5588 S127.901 $141249 General Government 1,378.735 10695,987 002588 1.199924 1.141278 Education 48S676 520,621 594,702 62o224 394.971 liotployeeBlenefita 112 171 97 120 116 TeacherReotrtmnot State Contbafions 93,694 26.61l 208 2 2010 20) 2512 I earth and IfatntanSeni-co, 021.773 983177 1,124`402 1.177.925 20596.79 GOVERNMINTALACTIVITIES Flbtic Safcy and Cotonctiona 148.420 164.959 463067 44141103 823,602 •Transp,•mtration 1oosted in CapitalAssls,.Net ofRelated Debt 582083 $ 59.720 S 60.744 S 61917 " 63,458 974.627 10,16,309 13421073 1,3733339 15303169 R eti 31.358 32,663 20.136 32P14 330,117 Rneatsicved II .105 3479 802S 3Id22 4297 Natatl Resoasces and Recreation 4374134 473,608 716981 570472 714,687 Rguialatry Setoivot 92475 212.919 5`4469 5963705 6(4,199 TItal Govnrtnenlnl AclivitiotNot Position 1012671 954862 144.905 97253 101.772 Operating Grants and Contributions 22.801.211 245014350 26.667,482 28979226 29995,409 CapitalGrants and Contributions 2370,634 25773.764 3253051 23805106 1 423,686 BUSINES-TrPEACTIVITIES Total SogrammResonan 29,7119•87 32.1991,65 35499.452 37A62,738 39.305D67 Investedin CapitolAssets., Net of Related Debt 7.385 755 7,933 9243 9,713 Restricle 24,882 18.744 22.209 24-375 273539 Ttl Govermental Aetivities Unrest.ucted 94885 80619 7203 8316 9953 Net FlnogtmnLopense (24.747.958) !22,7362.47! (22.128.198) (24,473.730) (28377v.14) Total kasines-Ipe Actities Net Position 42.152 35018 37.372 42.134 46405 General R-.enues PRIMARYGOVERNMENT Tacos: Inveptedin CapitalAssets.Net of RelatedDelM 65393 67:%75 680677 71,160 73.171 Sales ard Use 14,349,358 15640)85 16260689 18.475.176 20M30,164 Restriotn4 56240 51.407 485145 56389 61356 olotorVehicle and NtsoolaoatudIlotuing 2.795211 2,665258 24897031 3D546456 3,1383498 U nmstricd 20.990 12P98 15355 114838 140511 lnta" Fuels 23790936 2,931,753 2,915.68 3053,476 3,149J043 Total PrimnryGoemamnt Net Position $1420B23 $13006 S132277 $139387 $148577 Feanthise 1,532.120 11,57,141 22033578 26532,730 3273D50 Oil and Natural GotsFoduction 1331275 1918.989 2.409276 3.441638 2692032 lnsttanoo tceupation 1.179353 1,192229 1213,627 123.846 1.368340 noatno2.101. oat dtTnsanaoialetsW Cigaretteand Iobneoo 583,159 540.404 596369 147D0 13X5,712 Other 1.405325 1.426026 1.435.701 1358073 1 b4,750 UntoathicntdInvestment 1arnings 239.198 211239 327316 760-207 941938 FderalJobs ad ftnthTa .lie l Funds 354.535 354335 Settlementof Claims 563.196 523318 885,975 583,787 538436 Gan on Sale of Capital Assets 63.59 31.189 8.461 2.762 3942 Other General Reveuses 787406 723.157 8229652 1D71.679 1,627,330 CapitalContributlons 8608 944 107 1,449 309 Transfers (31069.4417) 267,137) (296,197) 13-13,639) (3383910) Total General Renenues. Ce•tibutitns and Toansfers 25050244 264873930 29010A65 3224460A 360102•54

Chang,in Net Position-Governmental Actinities 302-386 411112883 6482.467 8324.360 8222.900

2012 - Comprehensive Annual Financial Report - For ttie Stat,ýof rexas [ -250 ýIJQ - Comprehensive Annual Finaricial Report _---Z -=-=.Z 2 t22 -- ' - -"- "23 -_z. zz ' - 1z tT223222§2ZZ~, zzutzrl%1,-,

STATEOF TEXAS Statistical Section - Financial Trends Information Changes in Net Position (concluded) Last Ten Fiscal Years (Amounts in Thousands)

206 00 2010 2111t 522 2003 2011 200 20M 200 BUSINESS-TYPEACTIVITIES: Expenses,

29659'822 S 3`05,2317 $ 3.451968 S 4037A05 $ 3.116.737 Ge..l Geoli rnn S 235058 $ 1867.64 $ 142.142 S 162599 1386,628 24986D76 24952.375 27344.876 28.643283 25.7324.127 13340.97 13538233 14.716.405 15982582 17.165f02 Employeel.imitoo Ben-fim nos 86.195 2027277252457 324,477 423.492 517912 615.692 1,761,759 1h67.325 22M.408 23262,638 2,390.178 Tuchor Rntinmont StateConbuut,.ns 761240 813.133 K'09$45 32.426P46 38,124.80 41.407,191 4498750285 44,737457 lnitli andIluman Sontuns 2964.169 21030596 1540,459 1,253,431 13104A09 5)20897 6026.15 6231347 5539.155 5294.730 Public Safety and Cornnotions 66.419 69.828 71.-08 73,775 753305 4,478,109 40D25326 4.146.987 43.77.794 4,44M62 160937 223275 346 16,339 125910 1,451,450 19673915 1559,708 1,474,975 3,94659 Natural ,Rsourenssod Ruorontion 157,062 1449815 264.707 264241 263/I53 39 1905 445.938 447557 4086.15 410124 Regullatoy Seruices 570059 525440 755314 797030 7151,48 I.otury 2.1635670 2,426645 25Wý241 2987J084 2j6913210 73947298 80313.924 87978213 92,740;57 88593914 Ttaiallispeansc 19,464,504 19208,472 20D909.48 271273984 221b42,762

Program Revenuos ChiargsforServices: 1,171,997 1`10388 984.639 10)19521 1n3b3382 GeneralGovnrm-nt 50o69 44,1 M 27,947 37245 42.713 621.291 474349 460.719 632584 460.475 55.49,390 5,8453956 6962679 7284371 8262.639 107 109 135 100 134 limplyto Benefits 584.309 758355 550624 "nr•'hr RotiremealSlain C"onributinns 823,910 8619648 939579 I P12.315 1.825.195 1.782.7f4 2.101.440 1.91•599 IIrlhh and I Iunan Services 13603341 1.783907 1 965.403 19629504 13653242 33.511 1 354. 17 336.134 330.198 342,782 tjhlicj Sofelyand Coneutions 71A94 756004 77521 79q032 82.77q 1 3765935 1,920. 390391347 1,999•595 232249355 Trnspodfiun 39.162 14 13 16,757 661.657 574f032 4n757551 587423 699A72 Natural Rnsou..s and Recretion 3P02 3911 22.,06 33.716 41D0.4 635089 646955 687346 666.158 710309 3.13I1532 3A46641 39663414 3.775491 3.774948 2550)0072 32.410.929 43.1483227 47220.463 4235962331 Operating Grantsand Contributions 6344537 6.356243 80J86.139 731(0099 9001,427 2583507 2915631 2,453,163 2538.949 47378 Capital Grantsand Conlributlons 162,991 2729.17 211326 155541 197731 35.7245971 41.869356 52353.485 570)63531 5(1244497 Total Ptogras Rennues 17.4013365 38.668532 23.538.859 21289960 240531.149

Tolal Businoss-TypoeAchiuies (38.122327b 38J0443168) (35524.7291 t55943,726) (389689173 Not II4grmmReenue lAxpense) (2.D62.7359) (519.%40) 1,449011 16$76 1.388387

Geoeral Renus, tLlnlsuiuledInoestment F.omings 2860-0 193347 68.423 55,150 245977 21 MU055 21 D26`034 19558,426 21,751249 245349W00 Settlementof Claims 5 4 20 94 283 3384 3S97 2 .36 99 29624725 31013387 3.5W0663 Gain on Sal fCapiW Asses 6,431 276 13363 3900.148 3.15594 I 3140,2346 5,108.153 3.1155332 others0- nl venuei.. 3295235 134,474 126957 911017 266322 43712,183 3.303.17U 3.809.109 3.9986D73 4574.184 Capital Contrbutlons I1318 2,715 133 39A74 1364 49D36033 1ý3335396 2.157374 3D69364 3327498 Contributions to Permanent andTerm Eodowments 235.997 255.182 145919 123,939 184,153 1.446228 1395330 I ",620 1.379.621 13528.111 Special laten 138.01) 1318.813) 1,454,187 156461 1394,122 13551,420 1.4286413 EatrardlnnsrItteos 36532 (13.401) S60.162 1,744,40•0 19676,452 1.8023.1 1954.752 Transfers 3D69.447 2.867.137 2966,197 3513 639 3583.910 1D41 " 178.470 5757642 334.621 645913 Toal GeneralRot eueos. Contoituijons. 555.476 555,626 9259676 5843105 620998 Special ltins. E.\orondinaryItems and 99 7.163 T-ftons 3.7M.550 3.479,458 3314`080 3,749091 3,776995 1,392.565 1.769051 2`017383 1 533427 19680,352 W653 1 7•54 30$45 144, 119 930 Change in Net Position- Basiness-TyKpActivtes 1,6379815 29593518 4362091 3.76.5967 5.165386 (3909529) (42601)14) (4.4919627) (4.179988) (3,944,781) Changein NefPasiton - Primary ormmnn 0 1.943201 $76D50201 $119644558 12.190327 $03 386286 40308236 20,165,480 34.6485353 38942270 43548920

25859109 (4,678988) (876375) 235.544 4965.911

Concludedon thefillSbing pge

2012 - Comprehensive Annual Financial Repon 1 1, Now -51 12-52 ýWZ - Comprehensive Annual Financial - , I I .215.1002210.2.7 ... ..1l0li74AY1 27.30•

STATEOF TEXAS Statistical Section - Financial Trends Information Fund Balances - Governmental Funds Last Ten Fiscal Years (Amounts In Millions)

20M 200 21010 2111 2012 2113 101 05 2007 10 21 S 10 2118 2018 GENERALFUND Re.srod $ 1042 S 1.183 $ 1.75, S 648 S 23138 $ 2.471 $ 33B0U 5,460 S 177112 $ 180543 $ 16320 $ 150.406 S 149663 UlnresoJ (2326) (135621 286 5.673 86098 8.184 5586 2.950 s.-19,716 W.135.452 209413292 22226-90 22667J43 Totl GCna.! Fond $11204)1 (377) S 2032 $ 73021- 100736 $10055 0 802b6 $ 8410

ALLOTHER GOVERNMENTAL FUNDS 1,467,15 4.508.112 7,826,452 6 055,938 5.117.829 Rnsaoad 020,405 721.91 £24275 525,990 $2W054 $27957 5250386 020.193 80.07 83.498 87.120 86.02. 91.313 U.arosasod 164280 220S881 206922 2099"0 215.845 Special Reenoue 1256 1309 1.4n0 910 1,847 4953 53323 3343 247010 304377 353A41 423,140 34.150 Cupila Projects 14 15 7 (11) 124) (1111 (21041 Onoannt 453 492 546 575 632 564 477 1 20 2.634.446 2000Ž273 2.681,627 2.783.798 3027.943 Total All 0lhr GovernmentaIFunds $22213 523b66 $26281 $27.491 $313522 $33350 $31275 S32360 23,390264 Ž8313333 3bŽ61374 31936.14 31016.186

2012" 2012 43.106 42,147 47,377 49.17 50996 GENERALFUND 8.7050756 9:907144 10931371 11671.987 9253.972 Nonspoadublo S 501 5 678 Roslrictod 1393 1,764 Committed 4,185 53283 1D58.134 10D272897 2.107,474 22375.581 2794246 Assigned 29 44 07ý365 90.469 93734 95336 102,533 Unnssignnd 1077 1M5 46958 66375 73,12 74S77 853819 TolaluGeCnl Fund $ 7,185 S 89A64 42,964 46009Ž 44.973 43374 411,W4 3,672,423 3.720099 3,739.165 3311362 4,191.387 4M00300 ,6131383 3Ž923594 14.103Ž43 1235430063 ALLOTHER GOVERNMENTAL FUNDS Nonsp-ndabln 245.962 95989 305369 281341 259.750 $122-54 $12915 Resuinced 2206i 21297 18.13248 17.957509 290110J529 3207.'02 31 ,40125 Committd 758 IP13 Assigned 2 2 Unsigned (738) 1311) (4.677Ž0161 1103559S271 (2,6499132 131.6w 223939 Total All Oftr,Gostmmenol Funds $-4382 S35316

190.974 129.445 134,195 86Ž05 133680 n amstobhecangsl hno ' audo-iniiand bnol1ASBSa1--vNa. 54 was.Olplenann, 6 14,691 1394 1Ž15 378 liolausaifanto, -d sI.Oan.lan Ianae li.- ilfon pnas.l.d.o9tngiooog isfta12011. 26W966 I M43 nan:na2Mo.2I- .oaloo..namoo--.. 270Ž787 156.903 2416I3 222060 248.225 3045 167692 120,404 136377 126971 136,800 (150D26)

3909329 4268014 4,491.627 4.179$89 3.940781

4-389231 4 6(90" 66 5904Ž96 4.6200155 4.464.907

(287,78Ž) _(5365761) 2.154264 4Ž751,423 41688946

S 2998.124 $110344949) $ 1.478,489 $ 7.149967 $ 9,554.757

1 2QIZ - Comprehensive Annual Financial Report - fý,r the $tqeLf rexas E254_201Z - Comprehensive Annual Fina"cled Report or

STATEOF TEXAS STATEOF TEXAS Statistical Section - Financial Trends Information Statistical Section - Revenue Capacity Information Changes in Fund Balances - Governmental Funds Taxable Sales by Industry Last Ten Fiscal Years* For the Calendar Years 2002 through 2011* (Amounts In Millions) (Amounts in Millions)

2 204 2111 21 2008 2009 2010 2011 2012 NAIC0-ndtry 2110 2003 200 200 210 2117 21103 009 2010 2011 REVENUEStBYOgAUCE Tat Collections S25939 527,976 $29930 S33267 $360670 $41256 $37,654 $35.968 $39h32 S44.171 Agrisutmte, Foresty, Fishing,Huating S 127 S 108 $ 105 S 137 S 149 $ 147 S 152 $ 132 0 138 S 146 Fndnes Funds 23`D17 24382 25.51 28212 26,967 289656 35369 42.483 44907 38.219 Mining. Quaoyiag. Oil & Gas Extractino 2.862 3.342 3j997 5 329 8.143 11,351 15.9.0 10038 13.361 21 .02 91122 102!17 Licnnes. Feeoand Permits 2921 3.332 3,590 4.011 4,324 4522 4433 4533 4.661 53076 Utilities 4.801 5282 53485 7.543 9305 9.881 9576 90491 9-71 11583 13.144 14.,10 11,013 10.47 129645 2.118 2.435 3317 3.218 4374 (368) (19571 2.171 396h9 3204 Connssmeinn 6057 710t3 8971 Intenrstand Other Iaestenon,Innme Manafacnaing Land Insore 298 482 544 462 422 650 330 384 551 432 17,653 16.319 17543 20.733 24,136 27,021 27.145 22,423 23256 280089 Seolensemnof Claims 563 523 883 583 539 555 555 614 593 61i WhnlesaulTrnde 14919 17324 1911O 21,634 253144 26.063 28512 22223 22.55 27281 Sales of Goods andSerices 1.131 1.109 1.445 1.503 2A97 21161 1962 1816 2,125 1.360 Retail frndo 999,90 102215 108078 116007 127389 135050 138266 130.657 134900l 140985 Other RItonues 1.464 1.754 1~gt 2.159 2.730 2351K 3.192 3.439 3087 39868 Tnaon~tpnaseWshair 630 1208 1390) 1,317 19805 1.832 2.9(t7 2.166 1933 3,249 Total Rev.n., 57451 61,993 67378 74J015 78,923 79924 81928 917368 99,165 97,461 23.884 . 23.900 24904 26579 29308 30!933 33.905 32.753 33321 34.492 Finance.Insurance 1,955 1994 1919 1.913 2099 23183 2900 2937 2423 2099 EXPENDITURESIn FUNCTION Real Estato.Reotal. Leasing 5366 5.569 59820 6.832 8.102 9962 9.397 7,348 7;391 8942 Professnnanl.Scientifie. Technical Ser. 5.147 4912 3.181 6282 71109 7,657 8.400 7.760 70683 896 GcneralGnronent 1961 2.191 2.151 2,530 2,15 6208 3 025 33352 3,981 3065 Education 15927 16"%20 16.204 10,025 21317 24976 247941 27331 289.639 25.715 Managementof Campanios.Enterprises 1.649 1,930 1,972 2100 802 525 804 322 303 372 Employn Benrefils 12 12 12 13 14 14 13 15 14 14 Admit Shayst9ine MSgmRonedialin S(et 6.827 71150 7554 7,995 8,692 94334 9,986 9-068 9563 110W40 337 371 450 473281 TeacherRetiremetnt Stun Cannibhatins "71 1.729 1.A30 1954 1 4l EducatinonlheSerces 211 294 341 379 406 428 513 547 601 623 743 757 790 812 866 Healthand Human Services 24069 23`039 27.92 20.761 30.855 32355 37.988 41367 4469 44.709 HealthCa. SsncialAssissanco 422 3.985 Public Safety and Cornrctions 49O67 3987 3,952 4,939 4$97 4.864 53902 0106 5415 5.114 Ans. Elnensinrmoon,Recresion 2,316 2.710 2985 2.875 3019 3215 3.481 3.S37 3,633 Aceommodation,Feod Seniea 22.931 23.653 253438 275313 29.750 31.92 33967 337246 -14M6O 37,120 Teansponation 3D065 2770 3246 3 909 3.702 3.895 3,399 3,474 37647 3.788 Naroon Resouceossod Recreation 787 044 1039 930 1.172 1.420 1606 1366 1518 1,619 1therSrt'ieos aacrptPublit .hdmln) 59892 61083 6295 60924 7.452 79889 80187 7248 7.632 8358 19A81 1,692 2072 13560 1474 13468 1141 19662 1.676 1339 311 371 345 294 317 393 434 438 407 412 Pulhic Admsintsnurias RegulatoryServices Nanelasstfiahlo Deb, SeriCe: 5 9 A 6 6 4 4 4 4 6 flthor Principal W7 211 306 393 437 415 596 731 592 560 3.263 155h 40 221 98 57 19 56 66 133 532698 360 335 375 238 370 428 513 720 757 725 Teal T..able Sales $0292958 1234365 $248.953 02739'665171061 0330073 S3490)6 $31"334 0834539 Other Financing Fees 2 14 15 15 41 16 8 b.25% 625% 6.25% 6.23% CapitalOush. 23654 2.930 37315 3938 4368 4.404 3.738 3.939 3.737 3526 DirectSales Tat Rato 625% a25% 625% b.25% 6.25% 6.25q '4910 3357 03.972 09978 7.588 83.799 90410 90.446 90.918 T-1a Es trndisotn 54201

Fccetss([ficienny) of Retonues KroF al atlassa.,1a0- -it.caal a -1d 1 fsii .t l akda- - .....I-. Over Undert)Expenditures 3230 71183 8072 101143 9 145 2336 119711 958 3.719 6.343

OTHERFINANCING SOURCES (USES) Transeo In 5,793 6,984 7488 7343 7.765 139832 9337 11.465 6.138 7278 Tronsler Oat (10937) (11842) 11224) 112,133) (1268871 (17.777) 114033 (15987) (10,144) (1149) sandsand No-e Issued 383 87 1242 1.440 3,471 2988 1940 3.908 1366 338 Bends tsundfor Refunding 164 58 209 72 249 515 271 385 547 38 Payn-n to Escaowfor Refunding (164) (69) (2081 (721 (263) (559) (309) (214) (580) (621 Preoiums anBonds Issude 126 [0s 33 48 85 14 Sale of CapitalAswses 21 50 37 17 29 22 16 14 9 31 In s in ObligationsUnder Capital Le.-es 4 3 10 3 3 nasuranceRneoeeries 7 2 1I 18 3 12 2 TotalOther Finan'iog Snanen (IUa) (4.736) 14732) 13,481) 139,23 (1100•) (7631 (23•27 4561 (2564) 139671

NETCHANGE IN FUND BALANCES SI 4086012351 S 5340 $ 60420 S 7537 S t1357 $14.198)1 502 S 1.155 S 2930

5EBTSERVICE AS A PERCENTAGE OF NONCAPITALEXPENDITURES 1.4% 10% 12% 1.1% 13% 12% 1.4% 1.7% 13% 1.5%

N-i n~sossnrndlohlsrhnn.1-*- bI ieaness.doa ,c.caeialo1 ietns.sonsst anostisR..12 - fi-Wdtt-.- 4anisaket34'

20Q - CorrfOifeOinsive Annual FiriBrIcial Report - FoillZmeofTe4eis,ý,W, 1,256 -•.. .. : ": . . 2'• =•. ...3 .. . .. ZL. r .2.. . 21; .Ll

STATEOF TEXAS STATEOF TEXAS Statistical Section - Revenue Capacity Information Statistical Section - Revenue Capacity Information State Tax Collections and Retail Sales Texas Gross State Product by Industry Last Ten Fiscal Years Last Ten Years* (Amounts in Millions,Except Per Capita StateTaxCollections and Percentage Data) (Amounts in Millions,Except Percentage Data)

StateaTaxColtections PerCapita, 200-.12" NAIlC industr 2004 20115 2D0 2m7 20m 2am 2010 211t 2012

m 2004 2110 21101 2010 2011 2012 Agricultore,Fomstry andslnhing 5 0.345 1 9,71 S 8.493 $ 7290 S 8.724 S 7.717 S 6.145 S 9.762 $ 9089 $ 9.470 T"%Collection• $25939 $279176 $299810 53367 $36,670 $41.25 $37,654 $35968 $39.632 $44.171 % Change 19.0 18.3 (141)) (14.2) 19.7 (113 (20.4) 58.9 13 (4.21

Pecontage Tax Collecion Mining and Natural Change From Prior Year 32% 7.9% .. 6% 13.5% H.3% 12-1% (0.77% 14.7)% 10.5% 113% Renources 59195 692-6 83,554 97,471 111,471 145,122 86.498 970106 1180529 1379622 % Change 309f 15.8 20.6 1b.7 14.4 30:2 (404) 122 222 161) ResidiemPopulation 21.9 22.3 22.7 233 23.8 241 24.7 25.1 25. 26.0 Cuorlction 45.445 47.418 3503 56.117 59905 60976 57.747 55955 57.970 60.965 Percentage PopulationChange 9i Change 790 4.3 11.9 5. 5.1 3.3 (5.3) (3.11 3.6 52 Proa PriorYear 1.6% 1.6% ].8% 2.6% 1.9% 2.0% 21D% 1.9% 1.7% 1.6% Manufactuting 91.171 131971 137,612 158.139 173041 151287 13892. 173.194 192DN5 201242 State Tax Collections % Change 1.6 344 4.3 14.0 9.4 112.6) (02) 24.7 10.9 4.8 PerCapita S 1.104 $ 1255 $ 1.314 $ 1,454 $ 1,541 S 1.705 S 1524 S 1.429 $ 1,548 S 1699 Trde. Transporlan andUtiltiis 161.431 170950 10ID79 196.465 210.414 217974 207200 217.670 2,299114 241,974 'nr o Oonp,'r Ollawngt'i eneral renna•,.0 ac raporalpcio~e . Titooale sdntof to::ral noioeand 5 Change 3.7 5.7 6.1 8.5 7.1 3.6 (4.9) 5.0 5.6 5.2 0.oun: Tarnalltntanfigran..rntamthntno.1In a nnTorannnaaaiualnn Rnns.&ornanoptatrafi•s rnarrrrobtht .T. Dosannmoaatcaronommne.aalUrnnrnaotnrand atBanaurrriromkAnIa l alnadrnn oesi.adlonmof•edononoslntarbagns arn thudalolgy.inalfia nlantora• prrc ndia anrndn•inion I 1tenionoornnnagnn. Infoerution 37.676 405086 42216 43910 47.646 45,452 43.9W 42,g0 44,900 47,435 % Change 0.0 7.7 4.0 4.0 .5 (4.6) 3.9) (3.0) 3.9 5.6

FinancialAlinic 15339.401135.190 142.816 151970 163502 181.704 101212 193232 199,589 2049 66 % Chang. 352 13 5.6 6.4 7-3 114 103) 6.6 3.2 26

Professionaland Total Retail Sales Business Seoricos g00165 07,564 97D03 107X06 120"4 130.796 124057 133,997 144966 156.173 Last Ten Years* % Change 2.8 9.4 10.0 103 12.9 02 (4.7) 7.5 .09 8.0 (Amounts in Millions) Educationaland Hea01hSercaian 53,447 57.783 59376 63322 67928 73.1M0 79255 85.408 90M01 94269 R.nal Pearrt % Change 5.7 8.1 2.0 0.0 7.1 7.7 8.4 7.0 5.4 4.7 Y" gain Chango-

2003 $306,342 5.4% HoupilalilyS-r icn• 29.409 30911 32.182 35093 37.519 37&06 38,142 40,777 43,511 46-701 2004 $340,303 I1,1% %Chartge 2.9 5.1 6.4 6.5 7.2 008 09 6.9 6.7 6.9 2005 $364,700 7.2% 2006 $38f7•03 43% Othar PrivaleSor'icec 20,633 21321 223499 235932 25,470 27231 27.856 29.470 31.20 32.713 26617 $394,04 3.8% %Chang, 0.7 33 5.5 59 69 6.9 23 5.0 5.9 4.8 21610 $435256 . 10.2% 21019 $309,524 (1031) Go .~ent, 2010 "410.449 2.8% itluding Shools 969675 101,130 107943 113,754 122229 130070 158.137 1435967 146.146 147,174 2011 $433,901 0.9%$ 20:2 $1217.400 7.3% % Change 5.9 4.6 6.7 5.4 7.4 6.4 6.2 4.2 15 0.7 TOTAL $024309 S903901 0960.556 SID54,411 $1,147.351 $1209273 $1,129.540 $1.222.899 S1308,127 S1,3800104 %Change 5. 96 7-2 0.9 0.8 5.4 16L6) 3 70 5

4.arnnlin Ia Oirn041 at sou r-oll aol rhnrereantai (banjo TOTAl. 914.092 9t4924 9602556 1f16,ý15 14T71,592 1 D77,144 10572h75 1,113,104 1,149.908 i,1860.•0 raclraladnonnhn tim ballot fisal 0011i. (In 21N)5Chained tollarsl 9aa:n Trr•n•oproll ontPabticAuaOro, '1, Change 2.4 .5 0.4 4.9 5.4 0.5 ( I) 52 33 32

asno and mo©cxanplc nooOzoooioo bnt~ravaioalabln. Onrtburnu~ita Indan ltstsyoaUnn n•=oanot' nanr: IrS.taBnaof EornokucntrrAant,ix2(O.2olaand TeaasCanoolrtmrrl~crPbAcaanpaorgalo ohraal o¢02O

25"lZhe U .B uo cmmc.tayt Ciomprelh• isensive Annuo•aldgepinanldal ifg~.TeReport n in- d daýa chhawo~agýpio,

I , Z012 - Comprehensive Annual Financial Report - tt, V1. .125 ...... M -.. _=._..'____._.___'"-:. .

STATEOF TEXAS STATEOF TEXAS Statistical Section - Debt Capacity Information Statistical Section - Debt Capacity Information Legal Debt Margin Information Ratio of Outstanding Debt by Type Last Ten Fiscal Years Last Ten Fiscal Years (Amounts InThousands, Except Percentage Data) (Amounts in Millions,Except Percentage Data and Per Capita)

2 214 2110 2006 2007 G 1ersrsentActivities Bisbress-TypeAcsbflesg Generial Genera Total Peessetags De" semi" L.imit $1318.449 $134-4627 S1.05937 S1318.628 S I b64,884 Obligation R .eenes Notessand Capital Oblilogan Renleet Notesand Capital Primary otPeettul Per 8s80Year Bends Bonds Luax Leases Deeds eBads Le Leasse Gernment bs Capita Total Net DebtService Applicablnto Limit 626.1t5 622973 620989 545325 605_518 2003 $39,85 $739 )03 $52 $2.599 $9277 $1589 $23 $17907 27% 808 Legal Debt Sen ite Margin $ 692264 S 722)194 $ 784.948 A 972903 S I D59,36 2004 3.116 679 116 48 2,719 90944 1920 12 19.454 2.8% 8965 Total Net Debt SemiceApplicable to Limit usePer-tentge of Debt St ice Litoil 4735% 4693% 44.2% 33.9% 36A% 2005 3972 682 262 44 2151 113749 1.614 14 21,102 25% 921

200 4.479 1.152 331 15 2.739 12,370 1,741 12 22M47 2.8% 975

20B 200 2010 2011 29012 20D7 . 6.757 2731 216 It 2,775 12.304 2.029 14 26.137 3.0% 11194

DobsSemite Limit- S 1.773P89 S1.795.118 $1.759S56 $1.782305 S 1.908372 2008 801 3.445 340 t0 2308 13370 2.437 14 30.305 32% 1250 1,15098 Total Net DebtSemice Applicableto Limit 1.464D78 1,443.705 t318.t75 1329298 009 9.745 3287 150 8 2.927 . 15.488 2348 13 33.966 3.7% 1367

LegalDebt Serite Margin A 322r5-1 $ 331(0Wo j 316.111 $ 464.130 $ 579374 2010 10.06 596210 761 15 2944 17043 3,103 14 39586 4 1% 13.63

Total Net DebtSoreice Applicable to theLimit 2011 11520 5.456 1150 14 295 18,767 2006 29 41989 4,1. I024 .s P.rentage of.b•bt Stmite tir1it 81 8% 81.6% 82.00 74.0% 697% 2012 11014 4277 1381 12 3230 19033 2J)75 22 41.344 3.8% 1.584

LegalDebt Serne MarginCalculation fe Flsoal 2012 -, 2W 121. -- fi- -

interu0od ZenerlR1etenue fiOsal2200 $34014,030 U.ntesuictedGenerl IeotenueStieal 2011 38213.158 LUoctnoicdGeneral Retonue fiscal 2012 42287.113

Debt Scmiec Limit 1,908,572

DebtSmie. Applicable tolmi: DebtSemice on OutstandingDebt Payable from Geenel Ronenue(OR8 5105350 Plus: EstimatedDebt Semiceon Authoriwedbut UniosuedDebt PayableFrom DR 818.748

Total Net Debt See'ice Applicable toLitnit 1.32929q LegalDebt Semice Margin $ 579374

tar abchee eanp dimst f yeat.easl So--• T-.u B- R-w. Boar

11* :'w I 'ýIqlexQ ".. CarrtprehenýROAnniiil Financial Report Tk2S9 I I ;i4o '-, V 20fi-'. Compreh-einsive Annual Finaiii1ol Report !, ý-' STATEOF TEXAS STATEOF TEXAS Statistical Section - Debt Capacity Information Statistical Section - Debt Capacity Information Ratios of General Bonded Debt Outstanding Pledged Revenue Bond Coverage Last Ten Fiscal Years" Last Ten Fiscal Years (Amounts in Millions.Except Percentage Data and General Bonded Debt Per Capita) (Amounts in Thousands, Except RatioData)

211 2104Si 2S 2007 m 2009 210 2011 2012 a 2ma4 2 2 20107 Bonded bobt Illonota Obligation Bo-d6Only) $5394 55835 $6087 $73218 $9,532 $10.768 S12.672 S13D29 $14.476 $14344 GOVERNMENTALACTIVITIES PIdgod Reonoa Bond Amount $ 93.942 $ 101.178 $ 150.19 $ 815111 $ 5363926 P-ntaae BondedDebt 11.772 3753 15,540 1,452 6.881 -79 Cngn F..m PiornY-r 0-5% 0.9% 163% 6.4% 32.1% 13.0% 17.7% 2.8% 11.1% 0-5% NatAvailablo Revenue 5 82.170 0 98,653 5 134.379 S 79559 S 11i. 4153) Tao ColJctiuns 25939 27.976 29930 33.67 36,670 41256 37654 35.68 39.632 44.171 DiebtSoice - S 74:106 S 771158 S 04D17 S 61)36 Petcenla•e Boded Debt 1. PoniJpal 0 1(00)77 TaxColections 22-3% 20.9% 22.8% 21.3% 260% 26.1% 33.7% 36.3% 365% 32.9% 37,478 33314 26.115 25,764 66422

ResidentPopulation 21.9 22.3 22.7 233 23.8 242 24.7 25.1 25.6 26.0 TotalDebt Sotnian S 111584 S 110,372 $ 110202 S 11192$ $ 170099

General booded Debt Cocerage Rabio 0.7 0.9 12 0.7 (635i PtoCapita S 264 $ 262 $ 299 $ 310 $ 401 $ 445 $ 513 S 519 $ 565 $ 5.5 BUSINESS-TYPEACTIVITIES PledgedRnvnnue Bond Amount 06,401)6.0 $7049,189 S86369686 $9088941 S 9969.477 tbog•nlandsbytbellb Ooe~tlueof:onmitonlyns OpIr tino Espcndturos 536.191 885294 839699 364f43 1.4573i67 OndddO1-ote olntnseotolula ndtt. IntteoI-e.,Oaot.uxx.onmso. Rog ayxt&Oie~.s u--rt.teInttx1.6 , nA ol.onn. o.uceaxoteeyo-oodoots 9 NetAcuilablB Renenue $3065359 $0,163995 07329987 $8,724,798 $ 8,411910

DebtSO'icn - $ 490032 S 440036 S 532,128 $ 623346 Principal 683.150 371•983 492366 50.3,958 537.104 560W359

TotalDebt Sesion S 862015 $ 932,402 $ 1036086 $1160,450 $ 1243509

Ct-rat. Ratio 6.9 6.6 7.3 75 6.8

COMPONENTUNITS" PledgedRBvunue Bond Am-nn $ 16215 S 11,781 $ 13.24 $ 13,7014 $ 13P34 Operrafig Expnoditnt 349 225 264 91

NetAvailoble Revens 5 16315 $ 11iA32 $ 13-99 S 13440 S 12.943

Debt Soenio- $ 5,485 Principal $ 12.130 . I I D50 1 $ 5940 In•rnal 5.463 2937 3628 4940 5P51

Tetal Dabt Sen'in $ 17593 $ 13,987 $ 35628 S 10.7811 S 10336

Coneage Ratio 0.9 09 3.7 1.2 1.2

Total Combined Coterage Ratio 60 5.9 6.7 6.9 5.1

-Can- noon) eonrototnndio.odtatectnekdneutlng2.1.alen t -eb-.11 i.o)M8 -I 2M. N-o:Thie td - i•ftaldlo-da tvnnan.-opotox ie x-1.. nminteaonn,.ahitopedgedovneood .. ahteo •,, cwo.lg ttndtunt tludc €tpiol etley e"pndw.t.", noot. 2W0312- .oae- xefltalonouixand .o,•.O.synteen

1 2012 - Comprehensive Annual Financial Report - For tn-ýState cýfTmas 261 1262 412 - Comprehensive Annual Financial Report . I STATEOF TEXAS Statistical Section - Demographic and Economic Information Texas Nonfarm Employment Detail: Number of Jobs Calendar Years 2003-2012"

EmnploymentbyIndustry MM0 2M8 32M W206 2W8 2001 2M On1e 2D11 2D12 GOODS-PRODUCING Naura Resourcesand Mining 146,60 1533642 16600 1(5,775 20741(7 $ 6,7489.0 $ 6.56.10,10 $ 5522A453 $ 6M85973 $ 6.619,706 552006 544267 566.750 605.308 648.130 Mnluflacturing 7,447,496 7233.759 6D83604 6.729036 6,075344 599.7350 613.117 Durable, 560,375 559983 570.183 S (599DW6) S (597J649) $ (5632311 $ (643D67) $ 544362 Noandurables 338992 3.0.483 326,650 324,175 321(M8

Totul.OGnds-.reducirg 1.597.967 (1587.675 1.7151*08 1.789.692 112250 8 156,490 S 168.785 $ 161,750 S 170A650 (629583

118203 152L25 147501 263.708 210.694 SERVICE-PROVIDING Trad, Tmmpnaioea niUdUtlities S 230133 $ .10851, $ 316286 £ 425458 $ 3816144 WheleusleTrade 458,458 463.100 477267 497.83 51,8392 RetailTrade 1069,350 1(083942 1.1098(92 1.132325 1,161.175 (31) 41.9) (.8) 015) 1,4 Ten-pcratiodn -ndOWhan-hcuing 339,533 350.66 361274 374,729 387.571 Utifilica 48.392 47294 45.709 44.,46 45,538 lnfunaicn 2233,725 224375 2231083 221592 220.983 S10225,735 $10.70•6325 S 11.514.734 $12264956 $13595957 FinanciulActiiees 11(6983563 8.481 872 9.3)29(11 9.896234 10516,772 Financeand [n-u-ee 417a233 425.442 436.342 451.125 461.742 ReelEiurue rnd Rcen.l endLeasing 168275 169983 173.142 177)067 182225 9(1,47292Ž$) 2S$2133 4 2311923 $ 2.978,722 S 3J179,185 Frofessienuland 1u1.ne.- Senuices F-Nef-ssInnal.Sceneifie and Technicl 451,433 467975 493267 522,542 358.158 Mnegrneent.Adrnieiulraive undSuppefl 6073167 632,633 66M.400 718275 744.142 S 420,487 S 455.540 S 482,474 S 6.38223 S 637203 Fdctional andHe.alh Ser'icer 136,142 14A75 553866 820.323 703,116 792065 827258 Eductional Services,Pnruae 132,183 140592 143.117 HealthCan. nd Serial Assisranee 986.442 (9(3225 l M3,150 1(172.658 1.107225 560283 9 979,153 $ (.073863 $ 1.185.590 $ 1,43U02b8 S 1,464,461 Leiure and IIspiruliry 6583,50 850325 9568333 979.792 OtherSerices 355,392 353225 347817 347933 355306 (1-5) 2.) 2.0 2.0 2.1 FederalCrvilin 1(0.442 180.618 181(908 185.358 186,417 Slu- 3421)08 3402M0 348633 352217 357283 1.167.408 S 10.971 S 62'397 $ 63j667 $ 97397 S 42,905 1,124267 1.134A092 1.152.375 1.189,642 552 (651 ](332:38 0 754 T7al. Serie-Pe.,iding 7.772.950 7908.217 8.1090684 8,W.758 602,966 S 100419 $ 61346 $ 62.335 $ 6259 S 42,151 Tetal Nnnfarn EupeL'menr 9,370917 9L4513992 9,738.667 1(963.766 (0,392.652

0 5090 $ 78293 S 42.762 $ 38,588 S 29S49

3.610 16,926 5.194 I11.760 10943 Saideber.raaree.",fnnyaeaaueruau* ulerhratrrs

$ 8.700 $ 95.719 S 47-956 S "70.348 $ 41),792

12 0.6 1(3 1.4 .0

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264 ýU'2 - CompirehensiVe I . 2012 - ComprehensiviAnnoal Financial Report - FortneS t,ýOT04as 2041 Annual Financial Report 2ZZ2.2s~2tn>...... ~ZAZ1ŽŽ

STATEOF TEXAS Statistical Section - Demographic and Economic Information Texas and U.S. Selected Statistics Last Ten Calendar Years*

2M1 2910 o0111 2012t TOtPeronal Ibn PenCapita bra.-

Percent Percent Percent Perm Percet P-t 2300D58 202308 206383 235A92 259216 Ye- T-ean Chang . S.. Cttgg T-as Cange U.S Chlng Tha. ChaMge U.S. Chess 673542 597275 563A225 558.7558 578.124 303 22077 :.6% 291,116 0.9% 652,610- 3.9% 9,378,150 3.5% 29,560 2.2% 32-14 23% 607,E00 536383 517.150 539.,08 556988 22,43 1.7% 2933158 0.9% 696,796 b.8% 91937275 631% 31 I,48 53.% 331128 501% 2005 316,767 3015A67 295.183 295,70 297703 22J397 2.0% 2-69460 0.9% 756-618 8.6% 10,49563 )1 5.5% 33JW7 6.4% 35-170 4.6% 2016 23,426 23% 299282 1.0% 824-281 8.9% I1268.1A) 735% 35.187 6.5% 37,650 6.4% 1t28 .467 1-637833 }F5182.541 I16A29228 1.692031 2U07 23,191 2.0% 302227 0.9% 884.119 7.3% I1612;275 5.7% 371)06 5.2% 39,15 4.7% 2008 24371 2.0% 304.948 0.9% 962.992 8.9% 12,60.150 4.6% 6.8% 40560 3.7% 24357 2.0% 3.07,50 0.9% 97630 (5.7)% 11,930-00 (4.31% 3o515 (7.6)% 38.717 (5.10% 2010 25.305 1.8% 310064 0.8% 652137 63% 12.373.525 3.7% 38.143 43% 39906 2.9% 321157 499275 496A83 512.142 5269695 2011 25.729 1.7% 312 •76 0.7% 1D30.750 6.8% 12.991200 5.0% 40063 5,D% 41-11S 42% 1., 74.375 1.141367 1.13669W8 1.159,175 1.182,692 26.107 1.5%315,311 0.9% 10831,448 4.9% 13.423,740 33% 41523 3A% 42.573 2.4% 392552 371938 3701154 382.744 393214 47.307 47262 481296 49 2.3 51.684 * Pnnrnyna.n..nrrbrnrcrnr.r.rnn 217217 204,208 195be8 195.153 193228 6 Nrn.brnaOgloI2najak.r.,gkarcaarn..r.1r1r .aran9rrriaarcnOrnO.n Iarrrnprrnnlloynar. 1 461713 452f33 454.400 462J500 464327 ScarceOS Onrnorrtl...ancrrooc.lnar.OS.Brnnaarl6ncrao.r.ndTrnarCrrrorclkrrlPrblirhcoooce 1 185,300 175358 1706958 175600 185286

586575 563042 566$08 593.367 593.114 7495113 688933 701.192 753.875 791294 141-692 150,709 155$M 164,092 173,186 Texas and U.S. Employment and 1.131258 1.115.7133 12211513 12.592ý17 1292.101 PD05.967 1136679 1•M5.317 I M8.225 1 D43,750 1M1l.510 Unemployment Rates 360.875 3•.125 381241 3601317 Last Ten Calendar Years* 191.142 197058 209.650 261.175 199k58 (Thousandsof Jobs and Percent) 362.142 368083 374,650 366.425 361,183 (lantgn 12231A2 1.251,33 1 _7 1.75 1247300 1220.527 Unerrloyrnent Employment PercentageRat. 177761694 865,5123 i7157307 T925.368 9,101 D30 Pea- Percen Yean T.-a Ch.ne U5 Chtiang Texas U1. 10,605J161 10.302.936 101339.548 102554796 10,793061 233 9.370 129.996 (0335., 6.7% 60% 9597 1,4% 131,419 1.1% 611% 53% 2005 9.40 2.6% (733695 :.7% 53% 5.1% 2366 10 66 33% 136092 1.11% 4.9% 4.6% 10395 33% 137;588 1.1% 4A% 4.6% 2008 20% 136.794 (0,61% 4.9% 5.8% 2009 tO 307 (213 2010 )* :307189 (4A51% 73% 93% (0340 033% 129,536 (1.74% 8.2% 9.6% 20111 10-55 2.1% 131359 7.9% 8.9% 2011- 1.3/93 23% 133241 i4% 6.9% 8.1%

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1 2011 - Comprehensive Annual Financial Report - FulnýýStat,ý&Te,,oi 265 1466 2012 - CorriprehensIve Annual Financial Report - FýAttic.ýjjjv&Tcý.15 - I STATEOF TEXAS STATEOF TEXAS Statistical Section - Operating Information Statistical Section - Operating Information Full-Time Equivalent Employees by Function Capital Asset Statistics by Function Last Ten Fiscal Years Last Eight Fiscal Years*

20M3 204 200 220 O 2008 2009 2010 2011 2012 FRodin. 2005 205 2007 2 2 2010 2011 2012 FUNCTION GENERALGOVERNMENT Gened aGovenrnen 13,07 13134 3435 12.99 13,438 13.155 13,720 13.801 13092 12935 Edwaaion 133.57 134.456 140,367 144636 146944 152,12 156,375 159918 161,636 1610670 NanterofTeras Failities Coamiasion Fsployce B.netita 315 .102 292 294 302 31 325 34 33.1 334 Owned Facilities 71 75 75 137 137 133 133 131 13420D38 1333.113 1342060 Torcher Retirement StatsContlbabona 441 440 451 444 445 454 476 496 514 515 Stare Rutl PropearyInvntory in Acres 2.446AI8 2.423037 1322.123 1325319 1329071 Slealdhand I tImanSenti-en 52:!38 49288 40389 409P97 50,910 53.161 56067 581071 58,717 57.790 EDUCATION Public Safety and Coerntio.ns 532531 51.473 51,397 51.544 5009 506340 52,105 53209 51,771 52.310 Traptorte 14.717 140l78 14351 14.744 14.748 14,148 13257 120692 12313 12,436 Natmberof School Districta Nataral Reaouraes ad Rereation 829q 79901 8D53 80J18 8,014 8264 8,484 80046 8388 7.855 'lndependent an.IdClntnt t0P57 1933 1031 I031 1P31 1030 1029 1244 RegulatoryServices 3782 3,779 30862 3069 3028 30891 4048 4052 3.942 3241 Nuhber of Stadents 4383.871 4.50572 4376933 4071493 4,749371 4047044 4,9330617 4978.120 Total FrEa 260,087 274040 20.017 2850665 2093818 295.845 304-917 311229 311,11 309.,7m Number of Higher Edacation Insriturions 145 145 145 145 145 148 148 148

Percentage Chage 1.3% (2.0,% 22% 1.7% 139 22% 3.1% 2.1% 0.1% (0.6)% HEALTHAND HUMAN SERVICES Number of State Mertal HealthFailities 39 39 39 . 39 39 39 39 39 Nunbteraf Stare IIospitals I0 10 t0 II 11 II It It

PUBISUAFTTYAND M CURRCTIONh5 Namber of State Pfisons- Texas epanmentof Criminal Jusic only 106 106 106 I12 113 112 111 11 Number of Availbhlle ds Csptilty) 155,277 156520 156852 160.622 159036 159.771 163.144 1620357 Namber of AalbhoeitdVShicula State PwarnlUnits 1095 1,195 1281 1281 1494 l 11 I.572 1.791

TRANSPORTATION Centerliae Miles of Highways** 79/45 79096 79049 79975 R)tODn 79903 79,903 80233 Numberof Bridges** 32421 33322 32996 33.118 33393 33079 33683 34.337

NATURALRESOURCES AND RECREATION Numberof Slate PauksManaged 117 112 115 93 93 93 93 94 Numberof Park Acresge 610319 609,716n 1020992 605,470 614.90 604,799 621491 6240A)2

* Priorno., am 066jcr 0o•tkt Nao*orathridaysnrtobedarnaaradh•ntdteaa (m~aTroncetdmntatdiaereerratoatts oaeeslettumbsroeohndsrmteante ay aetooedrdrr *NmbsrofhridgseraerOn. tiectadlrao•h nedbyrathndteaT•ctalt. o ~~lz•a••cu•of•s~mbdc cut ndet~ndbig

267 I 201a - CorriprehensiveAnnual Financial Report 1408 -- Z0f2 - Compreheftsive Annpta! Financial Report - Fo; OV 24!,ý of Tpx4l , , ý I STATEOF TEXAS Statistical Section - Operating Information Operating Indicators by Function Last Eight Fiscal Years

Function 2005 2M MO 20M 20M 2010 211 2712

GENERALGOVERNMENTIREGULATORY SERVICES NuerbsofTs IfetemesPero-erd 3,79640 3,9040659 4251.103 49q54.947 4,471082 45-4272 49642A95 4820,459 Noluherolf.icwesesloeoed 1,494993 1,554.754 1,1106$19 1.243.30 1,31O914 .1,314903 1332,146 1A22,788

EDUCATION Avege Daily SchoolAtovndancel(ADA) 41199.15 4205.729 4260•406 4326.176 4,420,134 4,50.950 4.592-226 4.633.541 Pecoe. of Study0n1 PsosiegTAKS To-(l 62% 67% 70% 72% 74% 77% 76% N/A TexaslHigher Education oEnolnmntie 1,184373 1-121.582 12289897 1-264216 1,066,436 1.646081 1,5091D8 1.48 58 I Higher EducationDegrees Awarded* 165526 188258 193321 198298 209,96 224.498 2.368b65 NIA

HEALTHAND HUMAN SERVICES Number.of MedioaidCleentlSe ved*** 2.779373 2273,786 2A32214 2077203 31.02,731 32969439 3,541-26 3.652.574 Numberof TANFClients Ser-d ... 219D45 172276 145038 125"09 113,786 121290 116386 107274 Numoereoflmme nieadons 6.38135 11.617902 12827A17 12.771928 12.734534 14.412427 12258.819 1355935087

PULIUCSAFETY AND CORRECTIONS Nobcer of New Prison Popu..lie 73515 74.170 73525 74.283 72.738 725315 73906 74232 NUumberof PrisonPopulation Released 69446 71214 72032 72,02 726.21 71,063 70916 772316 AveesgeDaily Prison Population 151.448 151.7.4 152305 155.508 155.432 154A515 155330 1".933 Aolhoied Numberof Troepers Perilling Texos Highwasy, 1962 19628 14k89 1509 1925 1.814 1594 1,791

TRANSPORTATION Number fConsuesviosCooreact P-eeed forl.•tieg 989 11175 877 694 710 1.169 944 750 Numberof I.e Miles Reosioleg Roadway Surface Imperonneeels:- By Contoam 18554 15911 13,197 8462 15,671 16,160 145749 18,693 - ViaSae Soreoos 7518 6.406 5.984 6.544 5910 6.71A 8389 9A43 NumbereofVchivlcsRegislered 10.624.460 209f09906621,4325773 24359319 24607.246 21.570202 21.939,786 22.618.153

NATURALRESOURCES AND RECREATION Numberof State Parks Visits(in Milions) 5.2 5.0 4.9 43 45 4.4 4.3 4.3 Numberof Paki, and Wildlife Lirenes Issued... 2.626.957 2623225 29503)45 2992.695 2.9320O2 2.749536 2973.967 2.891267

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1 M2 - Comprehensive Annual FinancialReport - Pot 269 Texas Comptroller of Public Accounts Publication #96-471. Printed February 2013.

Foradditional copies of this report or to unsubscribe, write: Texas Comptroller of Public Accounts FiscalManagement 111E. 17th Street Austin, Texas78774-0100

Anelectronic version of this report may be found online at www.window.state.tx.us/finances/pubs/cafr/ Texas A&M University System Texas Engineering Experiment Station Nuclear Science Center License No. R-83 Docket No. 50-128

Responses to Request for Additional Information Chapter 15 - Financial Qualifications

As required by Title 10 of the Code of FederalRegulations (10 CFR) Section 40.33 (0(2), "[aipplicantsto renew or extend the term of an operating license for a nonpower reactorshall include the financial information that is required in an applicationfor an initial license." To comply with this requirement,please provide an update to the supplemental information provided by your letters dated August 30 and December 9,2010, for the proposedrenewal of the facility operation license for the Texas EngineeringExperiment Station! Texas A&M University System (TEES/TAMUS), Nuclear Science Center (NSC), TRIGA-type research reactor (NSCR). In some cases, the responsesprovided in the August 30, and December 9, 2010, letters may not have changed (e.g., RAIs 4. (b), 4. (c) and 4. (d)). In that case, please indication in your response "no change, no additionalinformation is necessary," and the NRC staff will consideryour responseprovided in the August 30, and December 9, 2010, submittals to remain current.

2. Pursuantto 10 CFR 50.3369(2), "the applicantshall submit estimatesfor total annual operating costs for each of the firstfive years of operations of the facility. "Since the information included in the application is now out of date, please provide the following additionalinformation: a. The estimated operatingcosts for eachfor each of the fiscal years (FY) 2015 through

2019 (the firstfive-year periodafter the projected license renewal date).

NSC Response:

Operating Cost 2015 2016 2017 2018 2019 Salaries $893k $902k $911k $920k $930k Wages $100k $101k $102k $103k $104k Fringe/Benefits $147k $148k $150k $151k $153k Routine Expenses $160k $162k $163k $165k $166k Facility Upgrades $60k $61k $61k $62k $62k Total $1,350k $1,374k $1,387k $1,401k $1,415k b. The NSC's primary source(s) offunding to cover the operatingcosts for the above FY

NSC Response:

Funding Sources 2015 2016 2017 2018 2019 TEES Allocation $150k $150k $150k $150k $150k TAMU Allocation $50k $50k $50k $50k $50k Academic Grants $600k $612k $620k $625k $634k Commercial $550k $562k $567k $576k $581k Total $1,350k $1,374k $1,387k $1,401k $1,415k Texas A&M University System Texas Engineering Experiment Station Nuclear Science Center License No. R-83 Docket No. 50-128

Responses to Request for Additional Information

As required by Title 10 of the Code of FederalRegulations (10 CFR) Section 40.33(l)(2), "[a]pplicantsto renew or extend the term of an operating licensefor a nonpower reactor shall include the financial information that is requiredin an applicationfor an initiallicense." To comply with this requirement,please provide an update to the supplemental information provided by your letters dated August 30 and December 9,2010,for the proposedrenewal of the facility operation licensefor the Texas EngineeringExperiment Station! Texas A&M University System (TEES/TAMUS), Nuclear Science Center (NSC), TRIGA-type research reactor (NSCR). In some cases, the responsesprovided in the August 30, and December 9, 2010, letters may not have changed (e.g., RAIs 4. (b), 4. (c) and 4. (d)). In that case, please indicationin your response "no change, no additionalinformation is necessary, "and the NRC staff will consideryour response provided in the August 30, and December 9, 2010, submittals to remain current.

3. The application indicates that the cost to decommission the NSCR will be $8,938,000 in 2010 dollars, based on informationprovided in NUREG--1307, Rev. 13, "Report on Waste Burial Charges," NUREG/CR-1 756, "Technology, Safety, and Costs of DecommissioningReference Nuclear Research and Test Reactors,"and the BLS Inflation Calculatorfor 2010. Since certain information is needed regardingthe eventual decommission of the NSC facility, the NRC staff requests that TEES/TAMUT update the application to include the following information:

(a) Pursuantto 10 CFR 50. 75(d)(2), develop a current cost estimate in 2014 dollars to meet the NRC's radiologicalrelease criteriafor decommissioningthe NSCR for unrestricteduse; describe the basis on how the cost estimate was developed,- show costs in current dollar amounts, specifically broken down into the categories of labor, waste disposal, other items (such as energy, equipment, and supplies);anda contingencyfactor of at least 25 percent.

The NSC estimates the 2014 Decommission costs for the NSC reactor to be:

Category Cost Labor $1,487,000 Energy $470,000 Burial $6,593,000 Sub-total $8,550,000 25% Contingency $2,138,000 Total $10,688,000

Details on how these numbers where calculated are shown in (d) below. (b) Provide a statement of the decommissioning method to be used (e.g., DECON, or other method).

The Nuclear Science Center will employ the DECON method.

(c) To comply with 10 CFR 50.75(d)(2)(iii), the applicantmust "provide a description of the means of adjusting the cost estimate and associatedfunding level periodically over the life of the facility. " Since the application does not provide this information,please update the application to include a full description of the method to be used as the means of adjusting the cost estimate and associatedfunding level periodicallyover the life of the facility.

The NSC will follow the guidance provided in up-to-date revisions of USNRC UNREG/CR- 1756 and NUREG-1307, updating values to current BLS information to allow use of the general equation:

Estimate Cost (Yr X) = [1986 $ Cost] *(ALx + BEx +CBx)

The NSC will utilize regional data when available and calculate burial costs from the most recent Atlantic Compact value for PWR for direct disposal. Once new information is available for a LLW site those burial numbers will be used to calculate disposal costs.

(d)Provide a numerical example showing how the 2014 decommissioning cost estimate will be updatedperiodically in the future.

Our numerical example is the attached detailed method used to calculate our 2014 decommissioning cost. The same approach will be used for future decommissioning cost estimations. 2014 Cost for Decommissioning the Texas A&M University System Texas Engineering Experiment Station, Nuclear Science Center Reactor (NSCR)

References: 1. U.S. Nuclear Regulatory Commission, NUREG/CR- 1756 2. U.S. Nuclear Regulatory Commission, NUREG-1307, Rev. 15 3. BLS Inflation Calculator, http://data.bls.gov/cgi-bin/cpicalc.pl

Introduction

The estimated cost of decommissioning the Nuclear Science Center Reactor can be made by following guidance in above referenced US Nuclear Regulatory Commission NUREGs.

1982 Cost of Decommissioning

The USNRC NUREG/CR- 1756 estimates the cost to decommission the reference research reactor using the DECON method to be $846,000 in 1982 dollars. This estimate does not including fuel shipping or demolition costs. The NSC works under the assumption that the government will cover the cost of the final fuel shipment and that the facilities will not be demolished.

2008 Cost of Decommissioning

In November 2008, the USNRC updated NUREG-1307, Rev. 13 reporting changes in decommissioning waste disposal cost at low-level waste burial sites. This NUREG reports estimations for the reference PWR and BWR reactors. The NSC will use data for the PWR reactor in developing its decommissioning cost estimates. In this document the USNRC states that "a relatively simple equation can be used to determine the minimum decommissioning fund requirement in year 2008 or previous-year dollars." That equation is:

Estimate Cost (Yr X) = [1986 $ Cost] *(ALx + BEx +CBx) ...... (Eqn.1)

Where the coefficients A, B, and C are the fraction of the total in Year x for labor, energy and burial respectively and whose sums to one. Lx, Ex, and Bx are the cost adjustments (1986 to the latest month of Year X for which data is available) for labor, energy and burial respectively.

According to NUREG-1307 the best estimates for the values of the three coefficients are:

A=0.65 B=0.13 C=0.22

For the year 2008 NUREG-1307 suggests that the values for the three cost adjustments to be: L(2008) = 2.15 (Table 3.2, South Region) E(2008) = 2.746 (Section 3.2) B(2008) = 24.231 (Table 2.1, Generic Site, Direct Disposal, Worse Cost Scenario)

To determine the 2008 decommission cost for the TAMU NSC reactor the following equation must be solved:

Estimated Cost (2008) = [1986 $ Cost] * (0.65*2.15 + 0.13*2.746 + 0.22*24.231) ...... (Eqn. 2)

The only unknown is the 1986 cost of decommission for the NRC reactor. However, the CPI inflation calculator found at http://data.bls.gov/cgi-bin/cpicalc.pl can be use to escalate the 1982 decommission cost of $846,000 to 1986 dollars. Using the calculator the 1986 cost of decommission the NSC reactor is $965,400.

Solving equation 2, the cost of decommission the NSC reactor in 2008 dollars is $7,052,500. In defining our decommissioning costs the NSC believes it has taken the most conservative approach to represent the decommission cost (without contingency) as of January 2008.

Jan 2014 Cost of Decommissioning

To determine the decommissioning cost in 2014 dollars the method outlined in NUREG-1307 is used.

Estimated Cost (2014) [1986 $ Cost]* (AL2014 + BE 2014 + CB 2014) ...... (Eqn. 3)

The values for the three coefficients remain the same as above: A = 0.65. B = 0.13, C = 0.22

Determination of Labor Cost Adjustment, L20 14 :

Following the directions given in section 3.1 and appendix c of NUREG- 1307, Rev. 15 the following table is constructed:

Table 1 - Regional Labor Cost Adjustment

Region Base L 20 10 Qtr 3 2013 ECI L 20 14 = (1.98 * 119.7)/100 (Dec 2005) (Dec 2005 = 100) South 1.98 119.7 2.37 Notes: Last re-indexed in ECI from BLS table, Series ID: 2005 CIU2010000000201

Determination of Energy Cost Adjustment. E2014:

From Section 3.2, for the reference PWR reactor,

Ex = 0.58Px + 0.42Fx ...... (Eqn. 4) where E is a weighted average of two components, industrial electricity, P, and light fuel oil, F for a year x. To determine the adjustment from January 1986 to January 2014 we need BLS data for both of those months. These values are taken from the tables and entered in Table 2.

Table 2 Industrial Electricity Light Fuel Oils Time Period P P2014 = F F2014 = 199.9/112.3 294.8/45.6 Jan 1986 112.3 1.780 45.6 6.465 Nov 2013 199.9 294.8 Notes: P and F values from BLS tables. P from Series Id: WPU0543, F from Series Id: WPU0573

To solve for E 20 14 , use Eqn. 4 and data from Table 2:

E2014 = 0.58(1.780) + 0.42(6.465) = 3.748

Determination of Burial Cost Adiustment, B9 0 14

The NSC will use the most up-to-date value for direct disposal by a PWR at the Generic LLW Disposal Site (See Table 1, Section 2, page 4, NUREG-1307-Rev 15). For 2012 that value is 30.581. The NSC was unable to secure updated values for the Atlantic Compact so we have escalated the 2012 value from 30.581 to 31.04 using the BLS Inflation Calculator.

Final Determination of Jan 2014 Decommissioning Costs

Following the guideline ofNUREG-1307 rev. 13 the NSC determined the 2008 cost for decommissioning the NSC reactor to be $7,052,500. Applying what was learned and following the guideline of NUREG-1307 rev. 15 the three cost adjustments to go from 1986 to 2014 were determined:

Labor, L20 14 = 2.37 (South Region) Energy, E20 14 = 3.748 Burial, B 20 14 = 31.04

And, by knowing the three coefficients values to be: A = 0.65, B = 0.13, C = 0.22, we can substitute the known values in Eqn. 3 to get the estimated Jan 2014 Decommissioning Costs for the NSC reactor.

Estimated Cost (2014) = [965,400]* (0.65*2.37 + 0.13 *3.748 + 0.22*31.04) ...... Eqn.5

= $8,550,000

With 25% contingency the total estimated decommissioning cost is $10,688,000. Texas A&M University System Texas Engineering Experiment Station Nuclear Science Center License No. R-83 Docket No. 50-128

Responses to Request for Additional Information Chapter 15 - Financial Qualifications

As requiredby Title 10 of the Code of FederalRegulations (10 CFR) Section 40.330(f)(2), "[a]pplicantsto renew or extend the term of an operating license for a nonpower reactor shall include the financial information that is required in an applicationfor an initial license." To comply with this requirement,please provide an update to the supplemental information provided by your letters dated August 30 and December 9,2010,for the proposed renewal of the facility operation license for the Texas EngineeringExperiment Station/ Texas A&M University System (TEES/TAMUS), Nuclear Science Center (NSC), TRIGA-type research reactor (NSCR). In some cases, the responses provided in the August 30, and December 9, 2010, letters may not have changed (e.g., RAIs 4. (b), 4. (c) and 4. (d)). In that case, please indication in your response "no change, no additionalinformation is necessary, "and the NRC staff will consideryour responseprovided in the August 30, and December 9, 2010, submittals to remain current.

4. The application states that TEES/TAMUS is a state agency and will be able to obtain the fundingfor decommissioning when necessary to decommission the facility. Based on this statement, the NRC staff infers that TEES/TAMUS intends to use a statement of intent (SO1) to provide decommissioningfunding assurance. Where the applicantintends to use a SO1 as the method to provide decommissioningfunding assurance, as providedfor by 10 CFR 50. 75(e) (1) (iv), the NRC staff must find that the applicant "... is a Federal,State, or local government licensee... " To make this finding, the applicant must state that it is a State government organization and that the decommissioningfunding obligations of the applicant are backed by the State government, and also provide corroboratingdocumentation. Further,the applicantmust provide documentation verifying that the signator of the SO1 is authorizedto execute said document that binds the applicant. This document may be a governing body resolution, management directives, or otherform thatprovides an equivalent level of assurance. As the application does not include all the above information, please submit the following:

a. An updated SOI, which includes: the date ofsubmittal of the SO1," the current (2014) cost estimate for decommissioning; a statement thatfunds for decommissioning will be obtained when necessary; typed name and title of the signator,and original signature of the signator; and the signator'soath or affirmation attesting to the information.

Attached is our reply to RAI 4(a). b. Documentation that corroboratesthe statement in the applicationthat TEES/TAMU is a State agency and State of Texas government licensee under 10 CFR 50. 75(e)(2)(iv).

Our reply to RAI 4(b) is identical to that provided in our letter dated December 9, 2010. No change, no additional information is necessary. c. A statement as to whether the decommissioningfunding obligationsfor the NSCR (through TEES/TAMUS) are backed by the State of Texas government. The applicationmust also present information that corroboratesthis statement. For example, the documentation may be a copy of or complete citation to a state statute that expressly provides that obligations,or at least the decommissioning finding obligations,of the applicantare obligations backed or supported by the fullfaith and credit of the State of Texas, or an opinion of the applicant'sGeneral Counsel with citation to statues, regulations,and/or case law that obligations, or at least with respect to the decommissioningfunding obligations,of the applicant are obligations back or supported by the fullfaith and credit of the State of Texas.

Our reply to RAI 4(c) is identical to that provided in our letter dated December 9, 2010. No change, no additional information is necessary. d. Documentation verifying that the signator of the SO1 is authorized to execute such a document that binds the applicantfinancially. For example, provide a copy of the TEES/TA MUS governing board or equivalent resolution that shows that the signator of the SO1 has been authorizedby TEES/TAMUS to bind TEES/TAMUS financially, at least with respect to funding the decommissioning of the NSCR, or provide a copy of an official State of Texas delegation of authorityshowing that the signator of the SO1 is authorized to bind TEES/TAMUS financially, at least with respect to funding the decommissioning of the NSCR.

Our reply to RAI 4(d) is identical to that provided in our letter dated December 9, 2010. No change, no additional information is necessary. Mailing Address: TEXAS A&M ENGINEERING Delivery Address: 3577 TAMU 241 Zachry Engineering Center College Station, TX 77843-3577 3577 TAMU College Station, TX 77843-3577

Texas A&M Engineering Experiment Station The Texas A&M University System

U.S. Nuclear Regulatory Commission Document Control Desk Washington, D.C. 20555

Subject: Statement of Intent NRC RAI 4, Docket No. 50-128, License No. R-83

Statement of Intent

As Deputy Director of the Texas A&M Engineering Experiment Station (TEES), a State of Texas Government organization, I exercise express authority and responsibility to request as necessary from the Texas Legislature, external and TEES direct cost funds for decommissioning activities associated with operations authorized by U.S. Nuclear Regulatory Commission License No. R-83. The 2014 cost estimate for decommissioning is $10.7M. This authority is established by Texas Government Code, Title 3, Subtitle C, Chapter 322, Section 322.007, and Texas Government Code, Title 2, Subtitle B, Chapter 316, Section 316.002. Within this authority, I intend to request that funds be made available when necessary to decommission the TEES Nuclear Science Center under the R-83 license located on the Texas A&M University campus at 1095 Nuclear Science Road, College Station, Texas. I would request and seek to obtain these funds as sufficiently in advance of decommissioning as possible to prevent delay on required activities. Copies of the applicable Texas Government Codes are enclosed, as well as delegation of authority from the Texas A&M University System, as evidence that I am authorized to represent the Texas A&M Engineering Experiment Station in this transaction.

Sincerely,

DrDimitris C. Lagoudas Deputy Director

I certify under penalty of perjury that the following is true and correct.

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